ispONE Pty Ltd v Telstra Corporation Limited [2013] FCA 823 | Case summary

REASONS FOR JUDGMENT 1 ispONE Pty Ltd ("ispONE") seeks an interlocutory injunction to restrain Telstra Corporation Limited ("Telstra") from taking certain steps leading to the termination of supply of particular services to ispONE. The application was made on 12 August 2013 for hearing at 2.15 pm that afternoon in circumstances in which Telstra had indicated its intention to terminate its supply of services to ispONE at 4.00 pm that afternoon. An interim injunction was granted before 4.00 pm on the limited basis of permitting the application to be heard the following day and to enable the parties to seek to have their underlying dispute mediated by a Registrar of the Court. The application for interlocutory relief was ultimately not heard until well after ordinary Court hours and concluded late in the evening on 13 August 2013. The urgency of deciding the application has necessitated the preparation of briefer reasons than might otherwise have been desirable. 2 ispONE is a wholesaler of telecommunications services which it provides to retailers throughout Australia. It obtains its telecommunications from major carriers such as Telstra and Optus and provides services as a wholesaler to retailers who package and market the services to end customers. ispONE has had successful commercial dealings with Telstra since 2005 until the dealings which have given rise to the current dispute. 3 On 18 May 2005 ispONE and Telstra entered into a Customer Relationship Agreement for the provision of fixed services in ispONE's wholesale business. ispONE has commercial relationships with approximately one hundred retailers to whom it has been supplying fixed services which are supplied to it by Telstra. Those fixed service internet service providers have approximately 70,000 people who are the end user consumers of the fixed services supplied to it by Telstra to obtain telephone and internet services in their homes and businesses. ispONE also has had a commercial relationship with Telstra pursuant to the Customer Relationship Agreement for the provision of pre-paid mobile and broadband telephony services since late 2012. In particular, ispONE has commercial relations with two retailers (namely Kogan and Medion) to whom it supplies pre-paid services obtained through Telstra which are on-sold to approximately 210,000 people as end consumers using the pre-paid services supplied to ispONE by Telstra to obtain telephone and internet service via their mobile phones. 4 On 21 November 2012 ispONE and Telstra entered into a Variation Agreement to the Customer Relationship Agreement after some months of negotiations. Telstra currently charges ispONE substantially more than ispONE recoups from retailers to whom it sells the services. The submissions for the applicant candidly conceded that "ispONE is losing money as it is charged approximately $6.5 million per month by Telstra, but is recouping only $4.55 million from the retailers to whom it sells these pre-paid services". Telstra, for its part, contends that it is entitled to be paid amounts which ispONE has failed to pay and that, in consequence, Telstra was entitled to have issued breach notices under the agreements between the parties and that it may now terminate the Customer Relationship Agreement and terminate the supply of services contemplated by the agreement with ispONE. 5 The principles relevant to the grant of an interlocutory injunction were summarised by Jessup J in Elco Food Co Pty Ltd v Oliana Foods Pty Ltd [2012] FCA 410 at [15]: "The approach which the court should take on an application for an interlocutory injunction is that identified by the High Court in Australian Broadcasting Corporation v O'Neill, as explained by the Full Court in Samsung Electronics Co. Limited v Apple Inc. An applicant for such an injunction must establish a prima facie case in the sense of "a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial". How strong the probability needed to be depends on "the nature of the rights [the moving party] asserts and the practical consequences likely to flow from the order he seeks". The critical integer in the test (approved in O'Neill) explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd is "the need for the court to assess the strength of the probability of ultimate success on the part of the plaintiff". Whether, in the absence of an injunction, a plaintiff will suffer irreparable harm or whether, to the contrary, damages would be an adequate remedy, are considerations to be weighed in the balance at the discretionary level of the court's adjudication on the interlocutory application. At that level - ... the Court is required to assess and compare the prejudice and hardship likely to be suffered by the defendant, third persons and the public generally if an injunction is granted, with that which is likely to be suffered by the plaintiff if no injunction is granted. In determining this question, the Court must make an assessment of the likelihood that the final relief (if granted) will adequately compensate the plaintiff for the continuing breaches which will have occurred between the date of the interlocutory hearing and the date when final relief might be expected to be granted. The question whether the plaintiff has made out a prima facie case, and whether the balance of convenience favours the grant of an injunction, are related inquiries. The apparent strength of the parties' cases will often be an important consideration to be weighed in the balance ." (Citations omitted) In this application ispONE contends that it has a prima facie case on four causes of action, namely, (a) that Telstra has acted in breach of the provisions of the Customer Relationship Agreement as varied by the Variation Agreement, (b) that Telstra has engaged in conduct that was misleading and deceptive or likely to mislead and deceive, in contravention of s 18 of the Australian Consumer Law, (c) that Telstra is estopped from claiming the charges it is seeking and from terminating the Customer Relationship Agreement as varied by the Variation Agreement, and (d) that Telstra has engaged in unconscionable conduct in breach of s 21(1) of the Australian Consumer Law. 6 The breach of contract claim depends upon the basis of the obligation assumed by ispONE to pay for charges provided by Telstra. The relevant provisions are found in an annexure to the Variation Agreement headed "CRA 84-Telstra Wholesale Pre-Paid Mobile Services Schedule" ("CRA 84"). Under clause 6.1 of CRA 84 Telstra agreed to make available the "Retail Plans" in what is described as the "TW Pre-Paid Platform". The "Retail Plans" are defined in clause 2.1 of Part A to mean the plans found in Part B of CRA 84. ispONE's obligation is to pay the charges in Part C described in clause 1.1 as follows: "ispONE must pay: (a) the PAYG Wholesale Charges set out in paragraph 2 of this Part C; (b) the Included Volume Plan Wholesale Charges set out in paragraph 3 of this Part C; (c) the Included Value Plan Wholesale Charges set out in paragraph 4 of this Part C; (d) the miscellaneous Charges set out in paragraph 5 of this Part C; (e) any amounts determined under paragraphs 6 or 7 of this Part C; (f) the Porting Charges set out in paragraph 8 of this Part C, (as applicable)." Telstra had been charging ispONE until 8 March 2013 under clause 1.1(a) whereas ispONE maintains that the applicable charge was that determined under clauses 1.1(b) and (c). 7 An important aspect of the dispute between the parties under this claim depends upon what makes one of the sub-paragraphs in paragraph 1.1 "applicable". Telstra contended that the parties had previously agreed to the rate under clause 1.1(a) or, at best for ispONE, that the agreement required ispONE to choose, or to make an election about, which sub-clause was to apply. ispONE contends that it has at least an arguable case that Telstra had not made available the retail plans made payable under clauses 1.1(b) and (c) because the charges were not made under those sub-clauses. 8 Telstra contends that what made clause 1.1(a) the applicable basis for ispONE's obligation to pay the charges was to be found in the agreement in email correspondence between the parties on 8 October 2012 before CRA 84 was entered into. On that day Mr Steve Bauer, the Product Manager-Mobile, for Telstra Wholesale, sent an email to Mr Zac Swindells, Managing Director of ispONE, writing: "We are entering the data the [sic] for the retail pricing plans for Aldi and Kogan soon. Can you please confirm that all pricing plans will have the wholesale PAYG rate behind them?" Later that morning Mr Swindells replied by email stating: "Please take this email as confirmation that all retail rate plans will be mapped to Wholesale PAYG rates." The decision for the PAYG wholesale charges to apply at that stage of the dealings between Telstra and IspONE may have been prudent at that time because of the basis upon which charges were made for users electing to "pay as you go" rather than some other basis such as pre-payment for future services. Counsel for Telstra submitted that it made sense at that stage in ispONE choosing the wholesale PAYG rate because it did not then know the sort of usage that the ultimate end user would in fact utilise in the services that Kogan and Medion (via Aldi) would provide. 9 The case for ispONE is, in essence, that upon entering into the CRA 84 Telstra ought to have applied the charges under clause 1.1(b) or (c) and not what has turned out to be the higher rate under clause 1.1(a). It seeks to establish a prima facie case of a serious issue to be tried by reference to the absence of any requirement in clause 1.1 of Part C of CRA 84 for ispONE to make any election about which provision to apply and relies also upon the course of dealings between the parties both before and after entering into CRA 84. 10 Mr Swindells swore an affidavit in which he observed that the October email was approximately six weeks before finalisation of the Variation Agreement. Between those two events there had been discussions about reviewing and varying the pricing rates applied by Telstra. Those dealings and communications began with ispONE seeking from Telstra rates as favourable as it claimed to have from Optus. In 2011 ispONE had secured through a subsidiary an arrangement with Optus for the provision of pre-paid services. That subsidiary had been providing pre-paid services direct to end users from around December 2011. By August 2012 ispONE had secured agreements with Kogan and Aldi to supply them with pre-paid services. The provision of services to the Aldi customers was with Medion Australia Pty Ltd. In August 2012 Mr Swindells met with Mr Paul Zahra, Sales Manager at Telstra, and Ms Joanne Blair, Senior Account Manager at Telstra, and discussed the agreements which the subsidiary had secured with Kogan and Aldi for the supply of the pre-paid services. 11 Mr Swindells informed the Telstra representatives at that August meeting that ispONE would be prepared to enter an arrangement with Telstra for the provision of pre-paid services instead of giving the business to Optus provided that ispONE received pricing for the provision of such services at rates competitive with those obtained by the subsidiary from Optus. Specifically Mr Swindells said that the rates offered by Optus to the subsidiary were: (a) 8 cents per minute for calls billed in 1 second increments; (b) 8 cents per SMS; (c) for data bolt ons - 500MB - $4.75; 2 GB - $14.75; 4 GB - $19.50; 6 GB - $23.75; (d) Optus were providing $20.00 commission per active sign-up of an end user. Mr Swindells' evidence was that a week after the meeting he received a call from Mr Zahra in which the latter said "I have good news for you, we can give you access to the platforms and we can give you the pricing you requested" (the first alleged representation relied upon). Mr Swindells apparently replied "Brilliant but I have to call Aldi to ensure that they are interested, but I can't say why they wouldn't be, because the Telstra name would add a lot of weight to the offer". There then followed further discussions and correspondence concerning the details of pricing including a document received on 23 August 2012 which Mr Swindells identified as not being competitive with the Optus pricing which he had conveyed to Telstra at the earlier meeting. Mr Swindells then phoned Ms Blair stating, amongst other things, that the data pricing was "nowhere near the Optus Pricing" and Ms Blair undertook to get back to him with revised pricing. 12 Not long after that Mr Swindells had another meeting with Mr Zahra and Ms Blair at which Mr Zahra said: "It was a battle to get the pricing per minute for SMS to the level you wanted. We know where we need to go to with data pricing, but data is a really sensitive subject internally and we might have to leave this one sit for a little while and fight that battle in a month once the issue dies down with the commercial guys at Telstra. Trust me Zac, this is the best way for it to work so we can get the pricing. I know how it works internally, trust me and I'll get it done before launch" (the second alleged representation relied upon). The Variation Agreement, including CRA 84, was, therefore, entered into on 21 November 2012 in circumstances where ispONE was seeking the Optus rate from Telstra which the latter had not expressly agreed to provide but where the basis of the negotiations between ispONE and senior personnel within Telstra had included statements that might appear to give reassurance to ispONE that the pricing it sought would be secured. 13 On 18 December 2012 Mr Zahra sent an email to Mr Swindells stating that Telstra "will conduct an informal review based on the first full month of usage data" and that if the data was unreliable that Telstra would "need to wait for a larger sample to be available" (the third alleged representation relied upon). On 22 February 2013 Mr Zahra sent an email to Mr Swindells with a diagram described as "ispONE Deal Map" being Telstra's view "of the issues and opportunities that are on the go at present". The diagram clearly indicated where the respective priorities of ispONE and Telstra were aligned and where they were not. One matter upon which the objectives were aligned was a request by ispONE for compensation which was described as something which Telstra "will consider when it has the details". One of the ispONE priorities not aligned with the objectives of Telstra was in respect of data pricing for bolt on (being a pre-set limit of data that an end user can use without incurring any additional cost until the included data has been depleted). On 4 March 2013 Mr Zahra wrote to Mr Swindells indicating that Telstra had been discussing ispONE's requested changes but had not been able to present any options as yet although he indicated that several key meetings had been planned for the following week. These communications support ispONE's claim that it had received reassurance that it would have available better pricing than it had been charged by Telstrar. 14 In any event, CRA 84 had in fact been entered into, and the terms of that agreement did provide for the availability of plans payable at rates other than those under clause 1.1(a). On 8 March 2013 a meeting was held which lead to a significant change to Telstra's rating of the data charges for the pre-paid services it was charging ispONE from 9 March 2013 for the Included Volume Plans and from 1 April 2013 for the Included Value Plans. A result of the re-rating was that ispONE was credited with some $19 million as the difference between the PAYG data rates and the included plan data rates. Mr Swindells' affidavit described the conversation at the meeting on 8 March 2013: "On 8 March 2013, I attended a meeting Paul Zahra and Patrick McGuire and the issue of the pricing review was discussed. By this date, approximately $850,000 had been invoiced by Telstra to ispONE for the Prepaid Services, although under the payment of terms under which ispONE was operating consistent with the trading terms which had consisted for the previous 8 years, only $78,296 had been paid. Following up on the discussion with I had had with Glen Osborne on 6 March, I was advised at that meeting by Mr Zahra and Mr McGuire that ispONE was not achieving the best price for its use of the Prepaid Services as it had not elected to use any of the included plans. Mr Zahra and Mr McGuire said to me that it was for ispONE to elect which of the three pricing schedules under CRA84 it wished to apply to the provision of the pre-paid services. I have never previously been advised of any need for there to be an 'election' by ispONE and CRA 84 does not specify any such requirement for an election. At that meeting I said to Mr Zahra and Mr McGuire that of course ispONE wished for the included plans to apply if that was the best costing plan currently available rather than just the Pay as you go (PAYG) pricing plans which were the rates which had been applied in the December 2012 to February 2013 invoices. The PAYG pricing plans were far more expensive than the Included Plans, although the rates of the Included Plans were still not competitive to the Optus Pricing and which were the subject of [the statements which had been made by Telstra in August and December 2012]". It seems to me that there is clearly an arguable case that the terms of CRA-84 and the communications between ispONE and Telstra before and after its execution required Telstra to apply more favourable rates than it had required ispONE to pay up to 8 March 2013. The terms of the CRA 84 provided for different rates and there is no express requirement that an election or choice is required to make any one of the rates applicable. The 8 October 2012 email exchange was before contract and arguably not conclusive of future application of the terms of clause 1.1(a) upon commencement of operation. The success of this claim would reduce ispONE's indebtedness to Telstra by $5.788 million. 15 The second cause of action relied upon by ispONE is based upon s 18(1) of the Australian Consumer Law which provides: "A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive". The matters relied upon for this claim are essentially the statements made by Mr Zahra to which reference has already been made and referred to as the three alleged representations. If established at trial the statements made by Mr Zahra to Mr Swindells may amount to representations that Telstra would make available the Optus pricing which Mr Swindells had communicated to Mr Zahra and Ms Blair at their first meeting in August. The subsequent telephone conversation from Mr Zahra a week after the meeting is capable of being a representation that the Optus pricing would be available to ispONE if Telstra was given the business. The evidence is not all in one direction but it does establish a prima facie case of a serious question to be tried. Each alleged representation may be seen as a representation as to a future matter also coming within the terms of s 4 of the Australian Consumer Law. 16 There was some dispute between the parties about the quantum of this claim if successful. In supplementary submissions filed on behalf of Telstra on 13 August 2013 it was contended that the misrepresentation claim was mutually exclusive of the claim based upon breach of contract. Those submissions identified the quantum of the breach of contract claim as $5.788 million and the misrepresentation claim as $5.894 million. The basis for seeing the misrepresentation claim as mutually exclusive of the contract claim depended upon a reading of an exhibit filed on behalf of ispONE. Counsel for ispONE, however, explained that Telstra's supplementary submission involved a misreading of the exhibit. In my view that is correct and that the quantum of ispONE's claim on the basis of misrepresentation is in the order of $11.6 million. The evidence identifies the amount ispONE claims under the contract claim to be $5.788 million and the claim under the misrepresentation basis to be an amount exceeding $5.788 million by a further $5.894 million. Counsel for Telstra also contended that the misrepresentation claim was recent invention and first raised on 9 August 2013 in a solicitor's letter of that date. Counsel for ispONE asserted that it was disputed that the misrepresentation claim had only been raised for the first time on 9 August 2013, however, I think little turns upon whether or not the claim was first made on 9 August 2013. The claim is, in effect, that ispONE was entitled to be charged amounts comparable to the Optus pricing rate which Mr Swindells had conveyed to Mr Zahra in August 2012. Mr Swindells maintains that he had been seeking those rates and that statements had been made amounting to representations to that effect. It is at least arguable that the claim of ispONE has consistently been that it should be charged the Optus pricing rate even if it be the case that its formulation as a cause of action based upon misrepresentation was only first conveyed formally on 9 August 2012. 17 The third cause of action relied upon by ispONE is that Telstra is estopped from relying upon any strict contractual rights it may have by reason of the statements which Mr Zahra had made and upon which Mr Swindells relied on behalf of ispONE. Little was said in separate support of this ground and for present purposes may be seen as largely dependent upon success on the two previous causes of action. 18 The fourth cause of action relied upon by ispONE depends upon s 21(1) of the Australian Consumer Law which provides: "A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a person (other than a listed public company; (b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable." ispONE's claim of unconscionable conduct is, in part, that for Telstra to rely upon the terms of the CRA 84 as it has purported to do, in particular to terminate the contract and to demand payment as it has, is unconscionable conduct within the meaning of the section. 19 Olex Focas Pty Ltd v Skodaexport Co Ltd [1998] 3 VR 380 was a decision in which injunctive relief was granted in the context of dealings between commercial parties under the then s 51AA of the Trade Practices Act 1974 (Cth). At 404 Batt J said: "Even if one is acting within one's rights one may still engage in unconscionable conduct. It must therefore follow that even if one believes, wrongly, that one is acting within one's rights, one can thereby engage in unconscionable conduct. To my mind the first defendant's conduct based on its legal rights, or on its perception of its legal rights, so far as that conduct relates to the mobilisation or procurement advance guarantees is, according to ordinary human standards, quite against conscience. I am bound to say that I regard it as unconscionable. At the least there is a serious question, and that is all I need to find that its conduct is shown to be unconscientious and unconscionable in demanding the full amount of guarantees securing advances, the greater part of which had been repaid." (Citations omitted) A question which arises in this context is whether a finding of unconscionable conduct in breach of s 21 requires a finding of moral turpitude. I was informed that the issue may be the subject of a decision due to be handed down by the Full Federal Court on Thursday in the appeal from ACCC v Lux Distributors Pty Ltd [2013] FCA 47. Counsel for ispONE contended that in the circumstances I should proceed in considering the application for interlocutory relief on the basis that there is no need for any finding of moral turpitude for a contravention of s 21(1). 20 Whether or not a finding of unconscionable conduct under s 21(1) requires a finding of moral turpitude is not something which I need, or should, consider in the present application. Section 22 of the Australian Consumer Law identifies some of the matters to which the Court may have regard for the purpose of determining whether a person has contravened s 21 in connection with the supply or possible supply of goods or services. They are, it seems to me, for present purposes to be sufficiently wide to encompass an arguable case in favour of ispONE. IspONE relies in particular upon: the relative strengths of the bargaining positions of Telstra and ispONE in favour of the former and to the detriment of the latter (s 22(1)(a)); alleged undue pressure or tactics by Telstra (s 22(1)(d)); the amount which ispONE could have obtained to acquire identical or equivalent services (s 22(1)(e)); the parties' respective conduct in complying with the Customer Relationship Agreement as varied by the Variation Agreement (ss 22(j)(iii) and (iv)), and the extent that the parties have acted or not acted in good faith (s 22(1)(l)). 21 In that regard amongst the consequences to ispONE of Telstra's termination of the provision of services under the Customer Relationship Agreement (as varied) is that ispONE will almost certainly cease operations and that its customers will very likely suffer significant disruption and interference to its services. I accept that Telstra's insistence on the moneys now claimed have been made under threat of termination of the Customer Relationship Agreement as varied despite the statements which Mr Zahra had made before and after the contract was entered into in November 2012 and despite knowing that the current agreement between ispONE and Telstra for pre-paid services is from the former's point of view commercially untenable and entirely uncommercial. Telstra's claim for payment of sums on and before 8 March 2013 may need to be viewed in the context that it had accepted the re-rating of some of the invoices which in turn resulted in a credit of some $19 million from Telstra to ispONE (albeit only from 9 March 2013 for Included Volume Plans and only from 1 April 2013 for Included Value Plans). Telstra has recently insisted upon billing and payment by ispONE on a pre-payment model despite many years of satisfactory dealings between the parties where Telstra's billing was made after provision of services. ispONE has, I accept, made several attempts in good faith to resolve disputes between the parties given its resources and financial and commercial demands. 22 It is next then relevant to consider the balance of convenience. The balance of convenience, in my view, favours the granting of the injunction sought by ispONE. It is common ground that ispONE will have to cease trading if it is not able to continue to provide its proprietary platform which is essential for Kogan and Medion to provide the pre-paid services to end customers. As against that there is the possibility that Telstra may be required to provide services for an amount which, if it succeeds, it may not fully be able to recover against ispONE. I am, of course, reluctant to make an order which will have the effect of requiring Telstra to continue to provide future services without adequate compensation in circumstances in which there may have a risk that, if successful, it may not be able to recover what it may hereafter be found to be entitled to receive for those future services. The extent of that damage may, however, be reduced in part by the Court conducting the trial with expedition and by imposing strict requirements upon ispONE to articulate fully and precisely its claim so as not to expose Telstra to additional risks as may be occasioned by the length of time that may otherwise be required for preparation of a case where issues have not been closely confined and precisely identified. 23 A failure to grant an injunction is likely also to affect some 210,000 people who are the end users of the pre-paid services from Aldi (via Medion) and Kogan. Each of Kogan, Medion and Aldi would also be significantly and potentially adversely affected by termination of supply through ispONE. In addition some 70,000 people, who are the end users of fixed services from internet service providers supplied by ispONE, would also be potentially significantly and adversely affected by its inability to carry on that part of its business which, although not arising from its dealing under CRA 84, would nonetheless cease as it was compelled to cease its business operations. In that context there are some 100 internet service providers supplied by ispONE which would be significantly and adversely affected in their business operations and they, like Kogan, Medion and Aldi, may face adverse impact on reputation, through complaints, via difficulty in providing customer service and the possibility of financial loss and damage. 24 In contrast, Telstra has sought to put in place transition planning to deal with, and to minimise, the impact and loss of the termination of supply through ispONE. The transition plan is premised on a number of assumptions which pre-supposes some disruption and which, in any event, may not be met. It is also not clear from the material whether the transition plans would, in any event, cause some cost to Telstra that it would incur if it were required to continue to provide services to ispONE pending trial of the dispute between the parties. There has been, in other words, no comparative evaluation of the net cost to Telstra of being required to maintain the arrangement with ispONE pending a trial and the implementation of its transition plan. 25 Counsel for Telstra provided a list of enquiries which would need to be made to prepare the trial. The list of items did not indicate the time required for the matters to be undertaken and, of course, did not have the benefit of the precise identification by ispONE of its case so as to confine the facts and issues upon which Telstra needed to make enquiries and response. During the course of the application, for example, counsel for Telstra submitted that it was essential to subpoena the pricing policy of Optus to meet the case it thought ispONE was maintaining. However, on closer analysis the case of ispONE did not depend upon whether the Optus pricing policy was in fact as Mr Swindells had asserted but, rather, whether what he had claimed had been the policy was what ispONE had agreed to be that which Telstra would, in effect, match. Many of the enquiries which might reasonably be thought to be necessary may readily appear not to be so if ispONE's claim were fully put in detailed submissions upon the material it has filed. A condition to that effect is something which I would require for the injunction to be granted and was mooted during the course of argument. In the end it seems to me that on those issues the balance of convenience points in favour of maintaining the arrangement and putting in place procedures for a speedy hearing in the interests of all the parties. 26 The matters which have given me more concern is whether the usual undertaking as to damages which ispONE has proffered is effective and whether the disputed amount, or some other amount, should be paid into Court as a condition of the injunction. The giving of the usual undertaking to pay the damages that may be occasioned by the grant of an injunction if ultimately unsuccessful at trial is an important consideration in deciding whether to grant the injunction: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 623; Varley v Varley [2006] NSWSC 1025 at [57], [64]-[67]; ICF Spry Equitable Remedies (8th ed) 483. Counsel for ispONE has proffered the usual undertaking as to damages but counsel for Telstra has contended that it was ineffective because ispONE was insolvent and not able to meet its debts to Telstra. A conversation between Mr Anthony Watson (a lawyer for ispONE and Mr Mal Cooke (a lawyer for Telstra) was relied upon by Telstra to show that ispONE had insufficient funds or assets to meet its obligations. The financial information of ispONE filed in the application does not support that conclusion. A confidential exhibit filed for ispONE was of the profit and loss statement for the year ended 30 June 2013 and the balance sheet for the same period. Each showed comparative figures for the years ending 30 June 2012 and 30 June 2013 although those for the former were the final figures whilst those for the latter were draft. The profit and loss statement for ispONE for the year ended 30 June 2013 showed a substantial increase of about 20% in wholesale revenue for 2013 from the 2012 figures. There was, however, a decrease in gross profit referrable to a disproportionate increase in the cost of sales with a net loss for the 2013 financial year. In any event, the quantum of the loss for the 2013 year, and the difference between the loss for that year as compared to that for the 2012 year, is substantially less than the increase in the total cost of goods over the two years in question. The balance sheet also showed a substantial increase in liabilities as between the 2012 and 2013 years. That increase was largely referrable to the increases in trade and other payables and to what was described in the accounts as financial liabilities. Together they account for most of the difference in the increase in the total current liabilities as between the two years. The figure revealed as the total equity in the company as at 2013 is a negative amount of a not insubstantial sum. It is probable that the increased costs for the 2013 year and their disproportion compared with increased revenue is explicable by the present dispute with Telstra. 27 The financial details of ispONE may not show that it is able to pay the amount of $30 million anticipated to be payable by September but that is hardly surprising. The figures are historical and, fundamentally, do not include expected receivables for the corresponding period to September. It is true that they do not establish an ability to pay $11 million but its current trading terms do enable it to make payments from amounts it can confidently expect to receive if it can continue to trade. The figures revealed in the confidential exhibit give some independent support for the statement in the affidavit of Mr Swindells when he said: "I believe that if the Telstra services are correctly calculated and charged according to the Optus Pricing and necessary credits are provided, ispONE is trading profitably and can pay all its debts as and when they are due". Mr Swindells also said that there were approximately $6.5 million of trade creditors to be collected by ispONE but that most of that money was not payable until the end of August 2013 when both Kogan and Medion would pay ispONE in accordance with their usual trading terms. Receipt of sums in that amount would increase the current assets of the company as appearing in the 30 June 2013 balance sheet to convert the total equity from a negative amount to a positive amount. Such calculation, of course, is not a satisfactory basis to determine the solvency of a company on sound accounting principles but may in part explain why the managing director of ispONE may be confident to say on oath what he does about the trading profitability of a company which he may be assumed to know quite well. On the other hand Telstra contended that by the end of September it would be owed on its calculation some $30 million. The total payments Telstra seeks under three breach notices was around $9.4 million. The total amount outstanding in the disputed amount was identified by Telstra as $11.8 million to which a further $8.6 million was said to be billed but not yet due for payment and a further charge of about $11 million is expected for the July usage which is to be invoiced in August and to be payable by September. The fact is, however, that the amount presently due for payment is the $11.8 million outstanding and is due for payment and which is in dispute between the parties. IspONE's claims against that would, if successful, reduce the amount due to Telstra on that account to $1.38 million. 28 Prima facie ispONE is not entitled to an injunction to restrain the termination of an ongoing agreement with Telstra if the injunction has the consequence of forcing Telstra to continue to deal against its will unless ispONE pays moneys owing between them or that amount is paid into Court. In Telstra Corporation Ltd v First Netcom Pty Ltd (1997) 78 FCR 132 ("First Netcom") the Full Court said at 137: "Thus it may be said that where a person seeks an injunction to restrain the termination of an ongoing agreement with the consequence that the party so enjoined is forced to continue to deal against his or her will, the party seeking the injunction will, prima facie, be required to pay to the party enjoined any moneys owing between them or, if there is dispute as to whether monies are owing, to pay the amount in dispute into Court, in addition to the normal undertaking as to damages. Such an order was, for example, made by Gummow J in Businessworld Computers Pty Limited v Australian Telecommunications Commission, a case not unlike the present case, save that the amounts in dispute between the telecommunication supplier and the party seeking to restrain it from terminating the provision of services was substantially less than in the present case. In making its order the Court will, naturally, have regard to the circumstances of the particular case. So, if there is a dispute between the parties as to the amount owing, the court might determine that the appropriate order was, as in Businessworld, not that the totality of the amount owing should be paid into court, but rather that some lesser sum (in addition to an undertaking to pay further accounts) be paid into Court so that the Court's order not work injustice. In determining the extent of the amount which should be paid into Court (if any), the Court must, of necessity, have regard to the financial circumstances of the applicant for injunctive relief. Where the applicant is comfortably solvent, so that there would be no concern that the respondent be forced to continue to do business, and incur perhaps ever greater indebtedness, and ultimately be left lamenting for amounts unpaid, the Court, as a matter of discretion, might refrain from ordering payment into court. But it will almost invariably be relevant to the way the Court exercises its discretion to have evidence as to the financial situation of the Applicant, unless all amounts owing are paid to the respondent, paid into Court, or security for the amount provided. Thus the failure to direct attention to the need for First Netcom to do equity as a condition of the grant of the mandatory injunctive relief and the related failure to treat the question of the solvency of First Netcom as a matter requiring immediate examination rather than full litigation in the future, both involved, in our view, errors of principle. Before granting interlocutory relief in the form of a mandatory injunction it was incumbent upon the learned primary judge to determine what provision should be made to secure the position of Telstra should trading continue between the parties and, to the extent that the whole amount owing was not paid or secured, the financial situation of First Netcom was a matter of the greatest significance. This was particularly so in the present case when such evidence as there was before his Honour as to the capacity of First Netcom to pay indicated that that company had a share capital of only four dollars and that in respect of the 1995 fiscal year it had a net deficiency of assets of $615,471, after excluding intangible assets of $617,886". There are clear similarities between the decision in First Netcom and the current application. In that case the Judge at first instance granted an injunction concluding that the balance of convenience required the granting of an injunction because the discontinuance of the service otherwise provided by Telstra would caused First Netcom to go out of business. In First Netcom, as in this application, an undertaking as to damages was proffered with Telstra seeking to have that undertaking secured and his Honour standing over that application to be dealt with when further evidence was available. 29 The judgment in First Netcom makes clear that it will be a rare case in which a party will not be required to do equity by paying disputed amounts, or having disputed amounts paid into Court, where it is seeking an injunction which will have the effect of requiring the other party to the dispute to continue to provide services against its will. The error of the primary Judge, corrected by the Full Court, was not in considering that the Court had jurisdiction to grant an injunction without requiring the payment of the debt either to the other party or to the Court, but, rather, in his Honour's failures to direct attention to do equity as a condition of the grant by the mandatory injunction and the related failure to treat the question of the solvency of First Netcom as a matter requiring immediate examination rather than full litigation into the future: at 137. 30 In Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499, a decision referred to with apparent approval in First Netcom, Gummow J had decided that what was to be ordered in that case as the payment into Court was not the totality of the amount owing, but a some lesser sum so that the Court's order would not work an injustice. What makes the present application a rare case requiring consideration of these matters is not just that ispONE may be insolvent and would otherwise go out of business if the injunction is not granted, but that those consequences flow from the inextricable link between ispONE's financial position and the facts and circumstances in dispute between the parties. The business model adopted by ispONE necessarily assumed that it would acquire services from Telstra to be on-sold, not at a loss, but at a profit. IspONE has even since before contracting with Telstra through the Variation Agreement in November 2012, and as known to Telstra, sought a pricing structure that would secure a margin for profit. It is the dispute between these parties, and only the dispute between these parties, that gives rise to the possibility of ispONE not being able to pay the amounts in dispute. It is that line of business which has had the negative impact upon its cashflow and balance sheet. IspONE, however, still continues to receive funds from its customers and has offered to pay amounts into Court and to pay Telstra amounts, albeit that it is unable to pay the full amount in dispute. On 12 August 2013 ispONE offered and paid a sum of $300,000. into Court. On 13 August 2013 it offered to pay a further $200,000. into Court to provide some security to Telstra in the event of ispONE failing in its proceeding. It has also offered either to pay or to give an irrevocable direction that there be paid into Court or to Telstra amounts of some $4 million payable to ispONE by its customers at the end of August. These amounts are less than that in dispute but go a considerable distance to protecting Telstra from any increase in its potential loss from the provision of future service. It may be appropriate that there be put in place some arrangement whereby the future service provided by Telstra in consequence of an injunction be payable from any moneys presently available to ispONE from its customers so that there be a clear link between the continuing provision of service by Telstra and its receipt in discharge of such corresponding future obligations which may be created in ispONE. Such additional funds as may then be available to the Court or to Telstra on account of any debt may provide such security as the law may allow in the event that Telstra is otherwise successful in the proceeding against ispONE. 31 The Court has indicated an ability to give the parties a hearing of their dispute to commence this week or next week. There may be practical difficulties in Telstra being able to accommodate so rapid a timetable including the potential unavailability of senior counsel. The urgency in determining the dispute between the parties in the circumstances which have arisen must take precedence over the unavailability of counsel although some time may need to be allowed to enable replacement counsel to be fully briefed. The position of ispONE is different. It has filed all of its material and has expressed an ability to commence its case immediately. I will direct, therefore, that it puts its case fully in writing by tomorrow morning as an additional safeguard for Telstra so that there can be no doubt about the case it must meet and the basis upon which it must do so. The material filed for ispONE will stand as its evidence in trial subject, of course, to any re-examination following from cross-examination of its witnesses and any response that may be required as a result of the evidence given on behalf of Telstra. The latter will be at liberty to cross-examine ispONE's witnesses and to lead oral evidence on the issues identified in the full submissions to be filed on behalf of ispONE. 32 Accordingly I will make the following orders:

Until trial or further order, the Respondent be restrained from: (a) acting on any of the Breach Notices as defined in paragraph 67 of the Affidavit of Zac Swindells affirmed on 12 August 2013; (b) terminating the Customer Relationship Agreement between the applicant and the respondent dated 18 May 2005, as varied by the Variation Agreement dated 21 November 2012; (c) terminating the supply of services contemplated by the CRA to the Applicant including but not limited to the Service as defined in CRA-84 - Telstra Wholesale Pre-Paid Mobile Service Schedule.
The proceeding be listed for directions at 10:15am on 15 August 2013.
The applicant file and serve by 9:30am on 15 August 2013 full written submissions in support of its claims against the respondent for final relief upon the assumption that the applicant's evidence-in-chief be the materials filed in the proceeding.
Costs be reserved.
Liberty to apply. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Pagone .

ispONE Pty Ltd v Telstra Corporation Limited

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