Conclusions Thus Far
131 Global was entitled, upon a proper construction of the Agreement, to the exclusivity for which it contended. There was no variation of the Agreement in the way for which Legion contended. The questions, which arise therefrom, are the damages to which it is entitled. Further questions will arise as to whether, in consequence of any alleged breaches by Global, Legion is entitled to damages.
132 Damages For The Failure To Provide All Calls To Global
Global submitted that its damages are the amount of remuneration to which it would have been entitled had Legion directed all 190 psychic and psychic-related call processing requests through its psychic call centre, other than the current one-off Athena Starwoman - Woman's Day Star Cards Promotion. It submitted that the damages should be calculated to March 1996 because Legion could not, as it purported to do, have lawfully terminated the Agreement on 15 December 1995, but was required to give three months' notice from that date, for the reasons to which I have just referred, thus meaning that it could not have terminated in the absence of breach before 15 March 1996. This submission was supported by submissions that no notice pursuant to clause 5(b) was given to Global, so that Legion was not entitled to terminate for breach; that in those circumstances, for the reasons earlier submitted, the Agreement was terminable on three months' notice; and, alternatively, it was terminable on reasonable notice which, in the circumstances, was three months.
133 The submissions continued that had Legion honoured its contractual obligations, Global would have been entitled to its revenue share in respect of the calls not directed to it at the rate provided for in Part 1 of the Revenue Schedule, until 31 March 1995, and thereafter as varied by the correspondence of March 1995. Global accepted that as Athena, Mystic Meg and Myles lines were not promoted by it, Part 1 of the Revenue Schedule was applicable and, further, that the correspondence of March 1995 effected a variation, with effect from 1 April 1995, of the Revenue Share Deal, although not of exclusivity. The relevant figures are set forth in the letter of 16 March 1995.
134 The submissions continued that certain calls to Athena, Mystic Meg and Myles were on $5 and $3.95 lines, and that the Agreement did not directly address calls at such charge rates. Reference was then made to clause 4(a), which dealt firstly with calls at $3 per minute and concluded:-
"However, the call charges are subject to change and hence the amount retained by Legion and subsequently Global will be subject to this change."
135 The submission was that the changes to $5 and $3.95 per minute meant that the call charges had been changed, as contemplated in that sentence, and that, consequentially on that change, there was to be a change in the amount retained by Legion and subsequently Global; and that the clear intention evidenced by this sentence was that in the event of call charges being changed the amounts to be distributed to Legion and Global would alter proportionately in accordance with the original division of call charges. There seemed to be no significant difference in the submissions on this point, save that Mr Stevenson submitted that there was only an agreement to enter into a further agreement.
136 Mr Stevenson submitted that in considering damages, on the basis that the construction of the Agreement for which he contended was not accepted, it was necessary, firstly, to have regard to the fact that Legion only failed to direct the relevant calls on the 190 Other Lines amounting to 1,125,447 minutes. The submission continued that on the construction of the Agreement, which I consider is correct, Global is entitled to damages sufficient to put it in the position it would have been had Legion directed calls on those lines, being specifically those to Athena Starwoman, Mystic Meg and Myles, to Global, and the submission posed the question rhetorically as to what would have happened if Legion had attempted to do so. The evidence was that Athena Starwoman, Mystic Meg and Myles were competitors of Global and had their own call processing centres. Further, it established that Athena Starwoman had been approached by Legion with the suggestion that Global's psychics be used, a matter she considered to be "unwise" and about which she would be "most apprehensive" to lend her name. Legion also approached Mystic Meg and, when she ultimately commenced operations in November 1995, she used Myles as her call processor.
137 From this the submission ran that it is obvious that these people would have become aware if Legion had put their calls through to Global operators, and that it is "inconceivable" that they would have "been prepared to tolerate that conduct" and that if Legion had persisted in it they would have terminated their arrangements with it pursuant to their contractual arrangements with Legion.
138 Mr Stevenson submitted that the onus is on Global, as is obviously correct, to prove the quantum of its damages, and that it had not adduced any evidence to establish that any of these persons, all of whom were Global competitors, would have allowed calls intended for their services to be directed to Global. He submitted the evidence was to the contrary and the probabilities favour the view, which was otherwise established by the evidence, that these people would have rejected Global as the call centre.
139 There was evidence, to which Mr Stevenson's written submissions referred, that callers would have realised they were being connected to operators other than those of their choice and that:-
"In all these circumstances it is highly improbable that Global would have generated any income from the calls it claims Legion was obliged to direct to it."
140 Mr Stevenson further submitted that Global's case assumed an inability to handle the vastly increased number of calls without any increase in overhead costs, "merely because the operators logged on to the Psychic Express and Psychic Live service were not fully occupied". The submission referred to the evidence of Ms Ramzan that Global's "business rule" was that its operators would log on to only one service at any given time, because otherwise "not all services could be dealt with adequately". The submission was that Global had not demonstrated that it could have engaged sufficient operators to meet "such an extraordinary increase in demand", and that Global is merely asking the Court to either infer "or, more accurately, to speculate" that it could have done so. These submissions concluded that Global suffered no loss, let alone the amount claimed.
141 Mr Stevenson's submissions then turned to calls charged at $5 per minute and, I shall assume, these were also intended to cover any calls at $3.95 per minute. He submitted that Global's contention that it was entitled to the benefit of an increase in call charges "is inconsistent with clause 4(a) … which, properly construed, requires there to be further agreement between Global and Legion, in the event of an increase in call charge", and that absent any such agreement Global had no entitlement to any increase. I do not agree with this submission. In my opinion, the concluding sentence of clause 4(a) does not require a further agreement. It provides the agreement of the parties as to what shall happen in the event of a change in call charges and provides that the amounts to be retained "will be subject to this change". It is not difficult to imagine a more expanded method of stating what was intended. However, a fair reading of the provision is that in the event of a change in call charges, whether upwards or downwards, Legion is to be paid a percentage, on those adjusted figures, that $2.45 bears to $3, and the share of the revenue to be divided is to be calculated on the basis of the changed figure, but by reference to the percentages appearing in the revenue provision of Schedule 1 and the subsequent correspondence.
142 Mr Stevenson continued that if, contrary to that submission, Global was entitled to increased revenue, such increase should be such amount as would give Global the same proportion of the charge rate had there been no increase "and not a 'proportionate share of any increase'".
143 Mr Brereton submitted that there was no justification for discounting the amount of damages to which Global was entitled based on insufficient capacity to cope with the increased level of calls. He submitted Global had ample capacity and relied on the evidence of Ms Ramzan to this effect. In my opinion the evidence does establish that Global had the necessary capacity to handle an increased volume of calls.
144 Mr Brereton then turned to consider whether the other people would have agreed to Global's handling their calls, and the submission that it was improbable that they would have. He submitted this completely misunderstood the approach to damages in contract, as distinct from tort, the question being simply what would have happened had the Agreement been performed, this not being a case where one had to question whether the calls would have been made at all.
145 To this point I do not discern any great difference between the submissions.
146 Mr Brereton then submitted that the question "becomes simply, what would Global have earnt had they been directed to Global", and that the question as to whether Athena Starwoman, Mystic Meg or Myles would have allowed calls intended for their services to be directed to Global does not arise and that it was for Legion, if it decided to process such calls, to ensure that it was able to direct them to Global to perform its contractual obligations to Global.
147 In my opinion there are two issues involved in these various submissions. Firstly, for the reasons I have sought to explain, I am of the opinion that Legion was obliged to direct all calls to Global operators. However, this would have led to two potential difficulties so far as the 190 Other Lines were concerned. Firstly, there would, I am satisfied by the evidence, have been a very real probability that Athena Starwoman, Mystic Meg and Myles would have terminated their arrangements with Legion. Secondly, the submission overlooked the fact that a critical aspect of the revenue raising was that callers would remain on the line. The proper inference from the evidence is that the callers, or indeed the vast majority of them, were seeking to speak to a person of their choice. They were not simply seeking to speak to any operator. This observation is not overcome by the fact that a person ringing Psychic Live or Psychic Express may receive one of a number of operators, because such people were content to have the service operating under one or other of those names. But it does not follow, and indeed the evidence is to the contrary, that a person telephoning, for example, Psychic Express or Psychic Live would be prepared to accept a service provided by, for example, Athena Starwoman or Mystic Meg, and the converse position must be so. I am satisfied that the evidence supports this.
148 The total amount claimed by Global for this breach is $1,054,902.18, which includes $4,896 for calls on Psychic Express directed to Mystic Meg. In my view the proper way to approach this claim, having regard to the difficulties confronting Global in relation to Athena Starwoman, Mystic Meg and Myles remaining with Legion and callers being prepared to accept Global's operators, is on the basis of damages for loss of opportunity to have received and taken advantage of such calls. The issue, in the context of a tortious claim, was considered by the High Court in Malec v J.C. Hutton Pty Limited (1990) 169 CLR 638, particularly at pp.642-645 in the joint judgment of Deane, Gaudron and McHugh JJ. It was considered in the context of a claim for damages under the Trade Practices Act in Sellars v Adelaide Petroleum NL & Ors (1994) 179 CLR 332.
149 In the joint judgment of Mason CJ, Dawson, Toohey and Gaudron JJ, their Honours said, at pp.339-340:-
"The primary question is whether, in the circumstances of this case, the loss of an opportunity to obtain a commercial advantage or benefit amounts to 'loss or damage' within s.82(1). Is it necessary for the applicant to prove on the balance of probabilities that a benefit would have been derived from the opportunity had it not been lost and, if so, the extent of that benefit? Or is it sufficient for the applicant to show, not on a balance of probabilities, but by reference to the degree of possibilities and probabilities, that there was some prospects of deriving a benefit from the opportunity had it not been lost and, if so, then to ascertain the value of the opportunity or benefit by reference to such possibilities and probabilities? The question whether the applicant has sustained loss or damage is necessarily related to the ascertainment or measurement of that loss or damage."
150 At p.349 their Honours said:-
"In the realm of contract law, the loss of a chance to win a prize in a competition resulting from breach of a contract to provide the chance is compensable, notwithstanding that, on the balance of probabilities, it is more likely than not that the plaintiff would not win the competition. As the contract contained a promise to provide the chance, the breach of the contract resulted in the loss of the chance and that loss was for relevant purposes an actual loss, in the sense in which Dixon and McTiernan JJ used that expression in Fink v Fink . And where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat an award of damages. The damages will then be ascertained by reference to the degree of probabilities, or possibilities, inherent in the plaintiff's succeeding had the plaintiff been given the chance which the contract promised.
This approach is not confined to contracts relating to games of chance, sporting contests or other competitions. Fink v Fink concerned a contract to provide an opportunity for a reconciliation, breach of which was held to entitle the wife to damages. And there can be no doubt that a contract to provide a commercial advantage or opportunity, if breached, enables the innocent party to bring an action for damages for the loss of that advantage or opportunity. So, in The Commonwealth v Amann Aviation Pty Limited , Mason CJ and Dawson J, Brennan J and Deane J concluded that a lost commercial advantage or opportunity was a compensable loss, even though there was a less than fifty per cent likelihood that the commercial advantage would be realised. Damages for breach of contract were assessed by reference to the probabilities or possibilities of what would have happened."
151 At p.350, after referring to Malec, their Honours said:-
"Neither in logic nor in the nature of things is there any reason for confining the approach taken in Malec concerning the proof of future possibilities and past hypothetical situations to the assessment of damages for personal injuries. The reasons which commended the adoption of that approach in assessments of that kind apply with equal force to the assessment of damages for loss of a commercial opportunity, as the judgments in Amann acknowledge."
152 At p.355 their Honours said:-
"Notwithstanding the observations of this Court in Norwest , we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, or contravention of s.52(1) should be ascertained by reference to the Court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognised in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind.
On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable." (Their Honours' emphasis.)
153 Their Honours considered that this approach resulted in fair compensation, whereas "the all or nothing outcome produced by the civil standard of proof would result in the vast majority of cases in over-compensation or under-compensation to an applicant who has been deprived of a commercial opportunity".
154 The matter, so far as I am aware, was most recently considered by the Court of Appeal in Tszyu v Fightvision Pty Limited & Anor (1990) NSWCA 323 (13 September 1999). A boxing fight promoter sought damages from, inter alios, a boxer, on the basis that but for his breach of contract he would have continued to fight in circumstances where the fight promoter would have derived income. The Court was necessarily confronted with the question as to what would have occurred but for the breach by the boxer of his contract, which involved considerations such as the number of fights in which he would have been engaged, the profits to be derived from them, the amount to which the promoter would have been entitled from them, and the inherent vicissitudes and contingencies that the underlying circumstances would have transpired necessary to enable the boxer to have engaged in such fights before crowds and in circumstances where other income would have been derived, which would support the damages claimed.
155 Their Honours noted that in that case causation did not arise. In my opinion, in the present case causation does not arise because the failure to direct the calls was the breach of contract and, in so far as there was any loss, it was caused by that failure.
156 At paragraphs 140 and 141 the Court of Appeal said:-
"140 It would have been erroneous to apply a balance of probabilities test to the programme and the earnings, treating as certain the past hypothetical events of promotion or co-operation by Fightvision of bouts in which Mr Tszyu participated and earnings from those bouts as put forward in the evidence of Mr Mordey if satisfied on the balance of probabilities that those events would have occurred. That would have then been unfair to the defendants, because it would have treated as certain a prediction of events with a 51% probability of occurring. It would equally have been unfair to Fightvision to have ignored the events altogether, and so awarded no damages, if the prediction of their occurrence was given only a 49% probability. The correct approach, given the causation of loss was not in issue and the task was to assess the damages for loss of the commercial opportunity of promoting or co-promoting fights in which Mr Tszyu participated, was according to the degree of possibility or probability of such bouts occurring and bringing earnings as claimed.
141 It is not essential, however, in making an assessment of damages of this kind, to express a percentage possibility or probability of the occurrence of the events necessary for the claimed lost profits, here the number of fights and the amounts of earnings."
157 In my opinion paragraph 141 was said in the context of the particular findings at first instance in that case. I do not consider that their Honours were suggesting that the application of a percentage amount, which is a conventional approach to the problem, was not permissible.
158 Their Honours quoted with approval from the decision in Norris v Blake (No 2) (1997) 41 NSWLR 49, at p.67:-
"Where a valuation of a loss has to be made and the extent of the loss depends upon an uncertain event, which has not occurred by the time the evaluation is made, such evaluation must be made by reference to the chance of the event occurring, and not by reference to whether or not the occurrence was or is probable."
159 At paragraph 144 they continued:-
"So where there is controversy over the validity of a hypothetical exercise of earning capacity, or hypothetical events necessary for claimed lost profits, being the hypothesis for which the plaintiff contends, to say that it is more probable than not that something less than that for which the plaintiff contends would have occurred may be a way of allowing for imponderables or chances and coming to the degree of probability of that for which the plaintiff contends. In substance, that is what was done in Norris v Blake (No 2) , although with further allowance for the particular prospect of greater success."
160 In my opinion, these authorities set forth the proper approach to the assessment of the damages with which I am now dealing. The evidence does not establish that had Legion directed the 190 Other Line calls to Global, Global would have derived anything like the full financial advantage it claims from them. Rather, I am satisfied that had this been done Athena Starwoman, Mystic Meg and Myles would have terminated their arrangements with Legion, so that there would have been no calls on the 190 Other Lines to be directed to Global operators. Further, I am satisfied that most, if not all, the callers would, in all probability, not have accepted other services than those to which they were seeking to be connected. However, there are two qualifications in this. The first is that it would have taken some little time for Athena Starwoman, Mystic Meg and Myles to terminate their respective arrangements with Legion. The second is that there is the possibility that some callers would have accepted the Global operators. I am not prepared, using the example in Malec, to conclude that these possibilities were so remote that no assessment could be made of the lost opportunity by virtue of the breach of contract. On the other hand, I am by no means satisfied that the situation would have continued for long and, of course, once Athena Starwoman, Mystic Meg and Myles ceased their contractual arrangements with Legion, there would have been little possibility that callers to them would have accepted Global operators because they could not have been directed to them. I say "little" in recognition of the fact that there was still advertising material available, which may have led to calls, which may, in turn, have led to some callers accepting Global operators. None-the-less, Global is entitled to be recompensed, on the principles to which I have referred, for the loss of the opportunity.
161 The Schedule, on the basis of which the damages have been calculated, could be used as some guide to the amount. The amounts claimed for the months of January, February, March and April 1995 respectively are $32,524.40, $40,049.92, $45,947.53 and $51,384.98 of which Global claims an entitlement to $7,590.75, $16,566.60, $15,589.05, $19,824.15 and $17,309. These figures total approximately $76,880.
162 I have taken this figures as a check against the percentage of the claim of $1,050,006 (i.e. $1,054,902.18 less $4,896), which, in my opinion, would be appropriate. In my view the percentage is 10% and, accordingly, the amount of damages to which Global is entitled, under this head, is $105,000.
163 It was not in issue that, in addition to this amount, Legion was obliged to pay Global the bad debt retention levy of $10,868.53 and $4,896 for Legion's admitted re-direction of calls on the Psychic Express service to Mystic Meg. In the result I consider that Global is entitled to damages in the sum of $120,764.53.
164 The assessment I have made also takes account of the view expressed by Mr Lovell, paragraph 65 above, that such obligation of exclusivity as Global might have had was discharged by July 1995, when read with his re-examination on this point.