Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd

Background Facts 2 Kooee is a reseller of telecommunications services to retail customers. The facts giving rise to the present application concern, in general terms, the provision of telecommunication services by Primus Telecommunications Pty Ltd("Primus") to Kooee. During the relevant period, Kooee obtained those services from Primus pursuant to a contract described as the Virtual Service Provider Agreement ("VSPA"). Under cl 6 of the VSPA, Kooee was not entitled to enter into any resale agreement with any third party for the supply and resale of telecommunications services competing directly with a Primus Product which Primus might have been able to supply unless Kooee first made an offer to Primus to acquire those services for resale being an offer which Primus could choose to accept or reject. 3 Kooee says that is in fact what transpired. It found a better deal (referred to in the reasons for decision of Marshall J as the "Digiplus offer"), which it put to Primus and which Primus chose not to match. As a result, the parties terminated their contractual obligations under the VSPA and recorded those termination arrangements in a document described as a "Separation Deed". A dispute arose as to the proper construction of the Separation Deed. As a result, Primus commenced proceedings in the Supreme Court of New South Wales seeking to resolve that dispute and, in particular, seeking to recover amounts it said were owing to it under the Separation Deed. Primus was successful in part and obtained a money judgment in its favour of $2,647,832. On appeal to the New South Wales Court of Appeal, the amount of the judgment in favour of Primus was reduced to $1,391,040. 4 While the judgment on appeal was reserved, Primus commenced separate proceedings in this Court alleging, under s 52 of the Trade Practices Act 1974 (Cth), that it was misled by Kooee into entering the Separation Deed because the so-called better deal said by Kooee to exist and which it put to Primus did not in fact exist ("the s 52 claim"). Therefore, so Primus contends, but for this misleading and deceptive conduct, the VSPA would have continued and Primus would have been entitled to receive more than it received under the Separation Deed. The other aspects of Primus' claim in the Federal Court may be put to one side for present purposes.

Court below and the Anshun principles 5 In the Federal Court, Kooee applied for summary judgment on the basis that the s 52 claim arises out of substantially the same transactions and operative facts as the contract claim heard and determined by the NSW Supreme Court, and therefore could and should have been brought in that earlier action. Accordingly, Kooee contended that, consistent with the principles in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, Primus should be estopped from pursuing these Federal Court proceedings and the proceedings should be dismissed. 6 Anshun estoppel is, as the name implies, an equitable doctrine that bars the bringing of a subsequent claim if the new claim relied on was so relevant to the subject matter of the earlier proceeding that it would have been unreasonable not to rely on it in that proceeding: Anshun at 602-603. In deciding whether Anshun applies, a court must consider whether the same or substantially the same facts will arise for consideration in the new proceeding as arose in the earlier proceeding. In the present case, Marshall J found these proceedings were related to the NSW Supreme Court Proceedings but that the relevant facts in each claim were not substantially the same because the focus of the Federal Court proceedings was on the conduct of Kooee prior to entry into the Separation Deed rather than on the terms of that Deed: Primus at [25], [27]. 7 Another relevant factor a court must consider in this context is whether the new claim could have been raised in the earlier proceedings in the exercise of reasonable diligence. In the present proceedings, Marshall J appeared to suggest, if not conclude, that the claim could have been brought in the NSW Supreme Court Proceedings by way of amendment: Primus at [22]-[26]. It will be necessary to return to consider this aspect later in these reasons for decision. 8 Finally, a court must consider whether the new proceedings give rise to a risk of conflicting judgments; if so, this is a factor in favour of the application of Anshun: at 603-604. Here, Marshall J found that no such risk existed because the NSW Supreme Court judgments focused on the rights of the parties under the Separation Deed while the Federal Court proceedings focus on the six month period leading up to the termination of the VSPA: Primus at [28]-[29]. 9 For those reasons, the primary judge dismissed the motion for summary judgment, concluding that it was not unreasonable for Primus not to rely upon the s 52 claim in the NSW Supreme Court Proceedings: Anshun at 602. Marshall J went on to point out that it "would still be open to Kooee to advance its submissions based on the Anshun principle at the trial of the proceeding when the issues will be more clearly defined": Primus at [30].

Current application 10 By an amended notice of motion, Kooee contends that the judge erred in dismissing its motion on three principal bases: 1. that Primus knew or should have known of the facts giving rise to its s 52 claim whilst the NSW Supreme Court Proceedings were on foot, and the judge having so found that as a matter of fact, there were no special circumstances to except this case from the general Anshun rule ("the Knowledge Factor"); 2. there is a risk that a judgment on the s 52 claim would be contradictory, in the Anshun sense, with the NSW Supreme Court judgments to the extent that any judgment in the Federal Court would invalidate the Separation Deed, an agreement which the NSW Supreme Court judgments treated as a valid basis for the money judgment award ("the Contradictory Judgments Factor"); and 3. the relevant facts of the s 52 claim are substantially the same as those litigated in the NSW Supreme Court proceedings ("Substantially Same Facts"). Kooee contends that a failure to correct these errors by way of immediate interlocutory appeal will result in substantial injustice because it will be required to incur the substantial costs and expenses of a lengthy trial which could otherwise be avoided. Each of these points is without merit.

Knowledge Factor 11 It is true that in paragraph [26] of his reasons for decision, Marshall J appears to make a finding that "the subject matter of the current claims could have been raised in the New South Wales Supreme Court at first instance." However, when one turns to the material upon which this finding is said to be based, it is by no means clear that such a finding would be open. The solicitor's letter referred to states only that Primus was unaware of the facts giving rise to the s 52 claim prior to the filing of proceedings in the New South Wales Supreme Court and that when it did become aware of the relevant facts, it promptly instituted the Federal Court proceedings. 12 That evidence is consistent with a number of findings of fact. On the one hand, it is, as the judge noted, consistent with a finding "that Primus became aware of the potential availability of the current claims during the currency of the New South Wales Supreme Court trial but took no action to seek to amend its application in that Court to encompass these issues": Primus at [25]. On the other hand, it is also consistent with a finding that Primus only became aware of the facts shortly before instituting the Federal Court proceedings - that is, well after the trial and judgment at first instance. Although this factual question might have been resolved, that does not appear to have occurred. 13 In those circumstances, I am not prepared to accept that paragraph [26] of his Honour's reasons for decision was intended to make a definitive finding that "the subject matter of the current claims could have been raised in the New South Wales Supreme Court proceedings at first instance. Indeed, one possibility that was pointed out by the Respondent's counsel was that perhaps some words had been inadvertently omitted. Looking at the relevant sentence, which reads "Based in large part on the inadequacy of the response of Primus' solicitor when asked why he did not raise the current issues earlier, the subject matter of the current claims could have been raised in the New South Wales Supreme Court at first instance," it is clear that the dependent clause beginning with "based" does not fit well as a modifier for the verb phrase "could have been raised." Far more natural would be the sentence: "Based in large part on the inadequacy of the response of Primus' solicitor when asked why he did not raise the current issues earlier, ["I find that" or "I consider it open for me to find that" or "It is clear that"] the subject matter of the current claims could have been raised in the New South Wales Supreme Court at first instance," in which the dependent clause modifies a verb phrase describing the consideration or conclusion of the judge, not the ability of Primus to raise the s 52 claim 14 In light of the state of the evidence and the fact that the judge went on to emphasise separate and independent grounds for dismissing the motion, I am inclined to the latter view. In any event, however, the ambiguity suggests the need for further ventilation of the facts at the trial level; an interlocutory appeal on this point on the present state of the evidence would be pointless.

Contradictory Judgments Factor 15 Primus submitted that no such risk existed. I agree. Kooee's submission that there was a risk of contradictory judgments confused that issue with the doctrine of election. The former deals with the problem of one court saying, for example, that "P, having been hit by a negligently operated vehicle, is entitled to X," while another court, looking at the same transaction might say "P is entitled to half X." That was essentially the case in Anshun, where the issue was whether the Port of Melbourne Authority should recover 90%, as was held in the first action, or 100%, as was claimed in the subsequent action. 16 The doctrine of election, on the other hand, deals with remedies. Relevantly, a party claiming fraudulent inducement (which is effectively what Primus now claims) has two choices: it may seek rescission of the contract, or it may seek to keep the benefit of the contract, such as it is, and sue for damages. For example, if one is deceived into buying a defective car, one may seek to have the contract voided and the purchase money returned in full, or one may keep the car and sue for damages (i.e. the difference between the value of the car as promised and the actual fair market value of the car received). Here, Primus sued in the New South Wales Supreme Court on the contract (i.e. the Separation Deed) and received a money judgment. Accordingly, it has made an election and cannot now seek to have the Separation Deed declared void. (Counsel for Primus quite properly conceded this point in oral submissions.) At the same time, however, there is nothing conflicting in the claim, now advanced by Primus in the Federal Court, that but for the misleading conduct of Kooee, it would have received additional moneys beyond those it received under the Separation Deed. Accordingly, Marshall J did not err in concluding that there is no risk of conflicting or contradictory judgments.

Substantially Same Facts 17 As to the final issue - the substantial similarity of the relevant facts, or lack thereof - in my view the judge was correct in concluding that while in a broad sense the transactions at issue in the New South Wales Supreme Court and in the Federal Court proceedings are overlapping, if not the same, the relevant facts in each case are quite different. In the present proceedings, the crucial question will be, as the judge noted, whether the Digiplus offer was a genuine offer and the services appurtenant thereto were actually available to Kooee. There is no suggestion that the facts relevant to the genuineness of the Digiplus offer were ventilated more than peripherally, if at all, in the New South Wales Supreme Court. In other words, although the same transactions may be at issue in both New South Wales Supreme Court and in the Federal Court proceedings, it cannot be said that substantially the same facts are at issue. For this reason as well, it cannot be said that the judge's decision is attended with such doubt as to warrant granting an extension of time for leave to appeal an interlocutory judgment.

Other matters 18 My conclusion that neither an extension of time nor leave to appeal should be granted should not be taken as a conclusion that Kooee's Anshun point is wholly without merit. As Marshall J, it was and remains open to Kooee to advance its submissions at trial when the issues are more clearly defined. It may well come to light at that point that, for example, Primus was well aware of its s 52 claim but sat on its hands in an attempt to secure to itself another opportunity to recover the amounts it said it was owed in the event that its preferred construction of the Separation Deed was not accepted. It may also be that the facts in issue at trial are substantially the same as the facts that were ventilated in the New South Wales Supreme Court, or that Primus asks the Court to make a finding that would necessarily conflict with the judgments in the New South Wales Supreme Court. If any of those cases prevail, the Court might yet conclude that Primus should prevail on the Anshun point. Moreover, even if it fails in the trial court, Primus would still be entitled to make its argument on appeal, with the benefit of a full trial and the evidence at that trial. As a result, these reasons should be understood to reflect no more than my view that, at this stage of the proceedings, Kooee has failed to demonstrate that the judge's decision is attended by sufficient doubt as to warrant the extraordinary step of granting leave to appeal from an interlocutory judgment: see Décor Corporation Pty Ltd v Dart Industries Inc (1981) 33 FCR 397 at 398-399. 19 Even if the application for leave to appeal from the interlocutory judgment had been filed within time, for the reasons set out above, leave to appeal would not have been granted. There was, of course, also an application for an extension of time to make such an application. It goes without saying that no extension of time should be granted because the application for leave to appeal is futile.

ORDERS 20 For those reasons, the amended notice of motion should be dismissed and Kooee should be ordered to pay Primus' costs of and incidental to the motion and the amended notice of motion. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.

Associate: Dated: 25 August 2008 Counsel for the Applicant: AJ Meagher SC with Mr JG Duncan

Counsel for the Respondent: RM Garrett QC with D Priestley