Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd

IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY GENERAL DIVISION VID 150 of 2011

BETWEEN: KOOEE COMMUNICATIONS PTY LTD ACN 001 341 331

AND: PRIMUS TELECOMMUNICATIONS PTY LTD ACN 071 191 396

JUDGES: GILMOUR, JAGOT AND NICHOLAS JJ DATE: 9 September 2011 PLACE: MELBOURNE

THE APPEAL 1 In this appeal the appellant, Kooee Communications Pty Ltd (Kooee), contends that the primary judge erred in finding that Kooee had engaged in misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) by which the respondent, Primus Telecommunications Pty Ltd (Primus), suffered loss and damage. Kooee also contends that the primary judge should have found that Primus was estopped from claiming damages for misleading and deceptive conduct in accordance with the principles established in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 (Anshun). The primary judge's reasons for judgment are set out in Primus Telecommunications Pty Ltd v Kooee Communications Pty Ltd [2011] FCA 8 (the primary judgment). 2 At the time of the alleged misleading and deceptive conduct Kooee and Primus were parties to an agreement known as the virtual service provider agreement (the VSPA). By this agreement Primus provided telephony and internet services to Kooee which, in effect, were able to be marketed to Kooee's customers as Kooee's services. The VSPA regulated Kooee's right to obtain the same services from a third party supplier. Before it could enter into a purchase agreement with a third party supplier for the supply of these services (known as carriage services), Kooee was bound first to make Primus an offer (known as a purchase offer) for it to supply the carriage services to Kooee on terms on which Kooee would be prepared to acquire them. If Primus did not accept the purchase offer within 30 days the offer would lapse, and Kooee was then free to enter into an agreement for the purchase of carriage services from a third party supplier provided that the terms were no more favourable to the third party supplier than those which had been offered to Primus in the purchase offer. 3 Kooee made Primus a purchase offer on 19 October 2004 (the Kooee purchase offer). It did so by a covering letter from Kooee attaching a letter from Digiplus Pty Ltd (DigiPlus) by which DigiPlus offered to supply carriage services to Kooee (the attachment constituting what is known as the DigiPlus offer). Primus did not accept the Kooee purchase offer. Thereafter, Kooee and Primus negotiated the termination of the VSPA and entered into another agreement, known as the separation deed, to regulate the termination of the VSPA. In its amended statement of claim Primus contended that Kooee had engaged in misleading and deceptive conduct in various respects which may be summarised as follows: (1) At the time Kooee made the purchase offer, supply of the carriage services in term 1 of the DigiPlus offer was not in fact available to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer (para 24 of the amended statement of claim). (2) At the time Kooee made the purchase offer, Kooee had reasonable grounds to believe that supply of the carriage services in term 1 of the DigiPlus offer would not in fact be available in the relevantly immediate future to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer (para 25 of the amended statement of claim). (3) At a time after Kooee made the purchase offer but before execution of the separation deed, supply of the carriage services in term 1 of the DigiPlus offer became no longer available to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer, and Kooee did not tell Primus of this change in circumstances (para 27 of the amended statement of claim). (4) In communicating the purchase offer to Primus, Kooee implicitly represented that supply of the carriage services in term 1 of the DigiPlus offer would be available in the relevantly immediate future to Kooee on the terms set out in terms 7 and 8 of the DigiPlus offer, which implied representation was false, misleading and deceptive, and which Kooee did not have reasonable grounds for making (paras 29 to 31 of the amended statement of claim). 4 Primus also alleged that in reliance on this misleading and deceptive conduct Primus acted to its detriment by negotiating and executing the separation deed (para 32 of the amended statement of claim). 5 The primary judge dealt with Primus' claims of misleading and deceptive conduct at [28] to [53] of the primary judgment. His Honour concluded that: (1) At the time B Digital Ltd (DigiPlus's parent company, referred to as B Digital) made the Digiplus offer, the terms of the offer were not capable of being executed and thus the Kooee purchase offer was not a genuine offer (at [46] and [49]). (2) At the time B Digital made the Digiplus offer to Kooee the board of B Digital was not aware of the offer, and the managing director of B Digital became aware of the offer only the day before it was made - thus the Digiplus offer was not a genuine offer capable of execution on the terms offered (at [49]). (3) At the time B Digital made the Digiplus offer Kooee knew that B Digital was not prepared at any time to proceed with the offer on the stated terms (specifically the 82/18% revenue split, explained below), but misled Primus into believing that the offer "was intended to be taken up as an immediate supply offer, not a conditional future offer, and that if Primus could not match the offer the VSPA would terminate" (at [48]). (4) Even if the DigiPlus offer was a conditional offer, subsequent events involved further misleading and deceptive conduct. Primus' rights under the VSPA constituted an "ongoing first right of refusal", meaning that "if [the] terms [of the Digiplus offer] did change, Primus would then have needed to be provided with a further purchase offer under the VSPA" and that Kooee's failure to "inform Primus about any changes to the terms that were on offer… amounted to misleading and deceptive conduct" (at [50]). (5) Primus relied on the misleading and deceptive conduct which led it to enter into the separation deed (at [53]). (6) Primus suffered loss and damage by reason of Kooee's misleading and deceptive conduct, being the loss of revenue which Primus would have received under the VSPA had the VSPA not been "prematurely terminated" (at [63] to [77]). 6 The primary judge also rejected Kooee's argument that Primus was estopped from bringing the proceeding on the basis of the principles established in Anshun (at [57] to [62]). The primary judge did not deal with Primus' other claims for common law misrepresentation and breach of contract. Primus has not filed a notice of contention. Accordingly, the appeal is to be determined on the basis of the grounds set out in Kooee's notice of appeal, which concern only the issues of misleading and deceptive conduct and Anshun estoppel. 7 Primus submitted that the primary judge's "key factual findings" cannot properly be considered to be "glaringly improbable" or contrary to "compelling inferences" and, therefore, are not to be disturbed by an appellate court mindful of the limits on appellate review (Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 (Fox v Percy) at [29] and Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 at [4] and [76]). However, and as Kooee pointed out, the difficulty for Primus is that the primary judge's conclusions commencing at [46] of the primary judgment are conclusions said to be drawn "in reliance on the factual background discussed above" (also at [46]). The discussion above in the primary judgment does not contain findings of fact. Rather, it contains a recital of some uncontentious facts - including the provisions of the VSPA (at [3] to [10]), the making of the Kooee purchase offer (at [12]), and the nature of Primus' claims (at [14] to [27]) - as well as a recital of competing contentions, allegations and submissions, and some evidence on which the parties relied to support the drawing of competing factual inferences (at [29] to [45]). Thus, there are no "key factual findings" founding the primary judge's conclusions. Accordingly, while the primary judge's description of the applicable legal principles at [29], [36], [46], [47], [48] and [51] is orthodox and not subject to challenge in the appeal, this Court is bound to give judgment on the facts and the law as applicable to those facts. In so doing it must weigh the conflicting evidence and draw its own inferences and conclusions, albeit mindful that it has not seen or heard the witnesses (Fox v Percy at [25] to [29] and the cases cited therein).

The VSPA 8 It is first necessary to identify the relevant provisions of the VSPA. The VSPA established the legal and commercial context within which Kooee and Primus dealt with each other in the relevant period. The VSPA was entered into on 21 July 2000. By subsequent amendment its term was extended until 1 August 2006. At the time the VSPA was entered into, Kooee was known as Newcastle Broadcasting & Television Corporation Pty Limited (NBTC). To avoid confusion, the name Kooee is substituted for NBTC in the provisions of the VSPA recited below. 9 Under cl 4.1 of the VSPA, Primus was bound to offer certain Primus products to Kooee for the purpose of resale to Kooee's customers during the term of the VSPA at rates set out in Sch 5. Those rates were subsequently amended so that Kooee obtained 10% of the Resale Revenues, defined by reference to Resale Billings (also a defined term). To implement the supply and resale arrangement, cl 14.2 provided that Primus would establish a subsidiary company (which became known as Kooee Telecom Pty Ltd) to do all things necessary to implement the VSPA. 10 By cl 4.4 Primus agreed that, during the term of the VSPA, it would not enter into a similar resale agreement in the SPT Area (defined, in effect, as Kooee's area of operations) on terms more favourable than those offered to Kooee without first making Kooee a new supply offer on those more favourable terms which Kooee could then accept or reject. Clause 4.6 provided as follows: For the avoidance of any doubt the Parties agree that [Kooee] will be under no obligation to accept any Supply Offer or resell Primus Products at any rate set by Primus. 11 Clause 6 is a key provision of the VSPA for the purpose of this appeal. It provided as follows: 6.1 [Kooee's] Purchase Offers Neither [Kooee] or any [Kooee] Related Body Corporate controlled by [Kooee's] ultimate holding company will (as reseller) enter into any resale agreement with any third party (as supplier) for the supply and resale of any Carriage Service competing directly with any Primus Product, which Primus (as supplier) may be able to supply unless [Kooee] first makes to Primus an offer (the "Purchase Offer") to acquire for resale such Carriage Service setting out the type, specifications, price and conditions for and upon which [Kooee] or its Related Body Corporate controlled by [Kooee's] ultimate holding company would be prepared to acquire and resell the Carriage Service and such Purchase Offer is not accepted by Primus within thirty (30) days after Primus has received it. 6.2 Acceptance of Purchase Offer Within thirty (30) days of receiving any [Kooee] Purchase Offer, Primus may accept that Purchase Offer at the price and upon the terms, specifications and conditions as detailed therein whereupon the Parties will be deemed to have entered into an agreement for Primus's sale or supply for resale of the specified Carriage Service at the price and upon Primus's standard terms and conditions as varied by any terms detailed in the accepted purchase offer. 6.3 Alternate suppliers If [a Kooee] Purchase Offer is not accepted by Primus within thirty (30) days of Primus receiving it then the Purchase Offer will lapse and [Kooee] may enter into an agreement to purchase for resale the Carriage Service specified in the Purchase Offer referred to in Clause 6.1 from a third party supplier, provided always that neither [Kooee] nor any [Kooee] Related Body Corporate controlled by [Kooee's] ultimate holding company will purchase for resale the Carriage Service specified in the Purchase Offer elsewhere at a price or on terms more favourable to a third party supplier than was specified in the Purchase Offer without first having made to Primus a new Purchase Offer setting out the new more favourable price or terms. 6.4 Proviso Nothing in this Part gives either Party a right to unilaterally vary or renegotiate any prices, rates or charges referred to in this agreement. 6.5 Sale of [Kooee] shares or customer base If: (a) any shares in [Kooee]; (b) any asset owned or controlled by [Kooee]; or (c) all or any part of [Kooee's] Customer base (including without limitation [Kooee] Customer Information), is or are to be sold or transferred to another person, [Kooee] will ensure that Primus is first given an opportunity to negotiate and make such an offer for such shares, asset or such part of [Kooee's] Customer base (as applicable). 12 By cl 7.1 Primus granted to Kooee the right to resell the Primus Products (as defined) to [Kooee] Customers (also as defined) anywhere in Australia. 13 Clause 7.5 was in these terms: 7.5 Ownership and use of [Kooee] Customer Information To the extent to which [Kooee] sells or re-sells Primus Products or Primus provides Services to [Kooee] Customers then those [Kooee] Customers will (as between the Parties) be regarded as being customers of [Kooee] and not Primus customers unless otherwise expressly agreed in this or other agreements and the Parties agree that: (a) except as required for the purposes [of] this agreement and during the Term, [Kooee] will be the only Party to communicate with or otherwise attempt to contact or sell or solicit directly to [Kooee] Customers; (b) except as required for the purposes of this agreement and during the Term, when dealing with [Kooee] Customers seeking Primus Products or Services offered by [Kooee], Primus will not solicit [Kooee] Customers or refer [Kooee] Customers to any of Primus's directly supplied products or services; (c) Primus will not at any time, using or relying on [Kooee] Customer Information, communicate directly with or otherwise attempt to contact or sell to or solicit directly to [Kooee] Customers except as required for the purposes of this agreement or unless otherwise agreed by [Kooee]; (d) subject to this agreement, following the expiration or sooner determination of this agreement Primus will not attempt to contact any person or company which to Primus's knowledge is or has been within the previous 12 months [a Kooee] Customer to offer to supply directly to them Primus Products or Services; (e) Primus will be entitled to count the numbers of the [Kooee] Customers to which [Kooee] may be reselling Primus Products or which may be receiving Primus Services; and (f) all [Kooee] Customer Information held by either Party will remain the property of [Kooee] and copies of same will be supplied by Primus to [Kooee] upon [Kooee's] request and following expiration or prior termination of this agreement copies of same may only be retained and used by Primus for purposes as required by Law; and the effect of this clause will not merge upon termination or expiration of this agreement and Primus agrees that its compliance with this clause 7.5 may at any reasonable time be audited by an independent auditor with appropriate expertise at the expense of [Kooee] provided that such auditor is subject to Primus' standard confidentiality undertaking. 14 Clause 24.3 provided: 24.3 Transition on Termination On termination of this agreement Primus will, if requested at [Kooee's] expense assist [Kooee] in transferring responsibility for providing the products and services supplied under this agreement either to an alternative supplier or to [Kooee] itself and this will include making arrangements for: (a) the novation or assignment of any licenses, bank accounts and any other necessary and relevant third party agreements from Primus or the Primus Subsidiary to [Kooee's] alternative service provider or to [Kooee] itself; (b) offering to sell to [Kooee's] alternative service provider or [Kooee] itself at fair market value any information which was used by Primus directly in the supply of the Primus Products or Services; (c) the transfer of the [Kooee] Customer Information, any rights Primus may have to the [Kooee] Trading Name and trade marks and other data relevant to the [Kooee] Customers to [Kooee's] alternative service provider or to [Kooee] itself; and (d) access to all material, regardless of the manner of storage, held by Primus and to which [Kooee] is entitled under this agreement. 15 By cl 26.5 the parties agreed that: Each Party must do all things and execute all documents necessary to give full effect to this agreement. 16 As noted, the VSPA was amended. The amendment took place through an exchange of letters dated 14 April and 2 May 2003. The exchange of letters discloses that, by this time, Kooee and Primus had different interpretations of Kooee's revenue share entitlement under the VSPA which the amendments were intended to (but, in the event, did not) resolve.

Corporate structures and personnel 17 It is also necessary to record some facts about corporate structures and personnel. 18 Kooee was a wholly owned subsidiary of SP Telemedia Limited, a public company sometimes known as SOT or, more commonly, as SPT. SPT and Kooee were involved in a joint venture with WIN Corporation Pty Ltd (WIN Television). For that purpose another company (Kooee Pty Ltd) had been established in which each of Kooee and WIN Television was a 50% shareholder. The revenue which Kooee earned under the VSPA with Primus was subject to the joint venture arrangement between Kooee and WIN Television. Michael Simmons was the general manager of Kooee and of SPT. 19 Primus' chief executive officer and managing director was Greg Wilson. Douglas McCutchan was Primus' chief financial officer. Gerald Miller was Primus' general counsel. 20 B Digital (sometimes known as BBB) is a public company which owns all of the shares in DigiPlus. Two individuals, Nick Kotzohambos and Mike Robinson, held the majority of the shares (about 53%) in B Digital. The Seven Network held 38% of the shares in B Digital and had a representative on the B Digital board. Peter George was the chief executive officer of B Digital. Mr Kotzohambos was a director of both B Digital and DigiPlus.

Leading up to the Kooee purchase offer and SPT share sale offer 21 As early as the latter part of 2002, Kooee was considering alternatives to the provision of carriage services by Primus. Mr Simmons informed Mr Wilson to this effect and, thereafter, approached a number of carriers for proposals. Mr Simmons considered that the relationship with Primus had become "seriously strained" by late 2003. 22 By 24 December 2003, SPT had obtained initial advice from Pitt Capital Partners (PCP) about SPT's interest in merging the business of Kooee with that of B Digital, which required the replacement of Primus as the provider of carriage services to Kooee with B Digital. One of the principles of any merger which PCP identified was that SPT should end up with control of B Digital. According to PCP's initial advice, the proposal which "at first blush seems to work best is to effect a transaction which replaces Primus with B Digital, sells use of the KOOEE brand… and allows B Digital to achieve incremental earnings of $10 million from the Kooee business." 23 On 3 August 2004 Mr Simmons, as general manager of Kooee, received advice from Sparke Helmore, solicitors. Mr Simmons had sought advice on whether and on what basis the VSPA continued between Kooee and Primus, whether Primus was in breach of the VSPA, and, if so, whether Kooee might terminate the VSPA. As part of the background material set out in this advice, Sparke Helmore recorded that although the amendments to the VSPA were intended to resolve the dispute between Kooee and Primus about Kooee's revenue share the dispute continued, with Primus withholding from Kooee about $500,000 which Kooee believed was payable to it under Kooee's interpretation of the VSPA. Although Sparke Helmore considered Primus to be in breach of the VSPA, it concluded that there were risks to Kooee in any attempt to terminate the VSPA. 24 On 9 August 2004 Kooee obtained a second opinion on the same matters from Baker & McKenzie, solicitors. As part of this advice Baker & McKenzie also addressed "options which may facilitate a possible merger of the Kooee and B Digital business… in circumstances where that merger may not be viable if current arrangements between Kooee and Primus were to continue." In so doing, Baker & McKenzie noted that the purchase offer and share sale provisions in cls 6.1 and 6.5 of the VSPA "would seem to have potential in this regard". Mr Simmons obtained further advice from Baker & McKenzie on these provisions on 24 August 2004. At the same time, Mr Simmons of Kooee was in communication with Mr Miller of Primus (and had been since about June 2003) as part of an ongoing attempt to resolve the dispute between Kooee and Primus about the interpretation and operation of the VSPA. On 13 September 2004, Mr Miller sent Mr Simmons what Mr Miller considered to be a final draft of a proposed new VSPA; however, Mr Simmons did not consider that it satisfactorily addressed the issue of bad debts, which Mr Simmons said (in an email of 14 September 2004) he wished to discuss with Mr Miller. In late September 2004, Mr Simmons and Mr Miller met. Mr Miller provided to Mr Simmons a draft of the proposed new VSPA, which Primus at least considered ready for execution. 25 On 29 September 2004 a presentation was made to SPT's board involving Mr Simmons and PCP. The presentation identified two options, the second of which was entitled "Kooee in B Digital". This option, the presentation noted, "assumes the Primus deal [that is, the VSPA] is breakable". The presentation concluded that the "[s]ale of Kooee for B Digital shares is worth proceeding with on the basis of profitability and strategic value to SOT", noting as one of the assumptions that "Primus services are able to be replaced by B Digital without breaching current agreement". 26 On 13 October 2004, Baker & McKenzie sent Mr Simmons an email relating to the sale of Kooee to B Digital. This email recorded Baker & McKenzie's understanding that the steps involved would be: an offer by Kooee to Primus under the VSPA to buy the shares in Kooee; if Primus did not take up that offer, a sale of shares on equivalent terms to B Digital followed by (first) an offer by B Digital to provide carriage services to Kooee on "commercially attractive terms" and (second) a purchase offer by Kooee to Primus to provide carriage services to Kooee on those same terms; and if Primus did not take up that offer, entry into an agreement between Kooee and B Digital for B Digital to provide carriage services to Kooee. 27 It is apparent from this email that, although cl 6.1 of the VSPA referred to "any third party (as supplier)", Baker & McKenzie believed that reference to be ambiguous, with the consequence that it was not clear that Kooee could take carriage services from B Digital after B Digital had acquired the shares in Kooee (with the consequence that Kooee would be a wholly owned subsidiary of B Digital) without cl 6.1 being engaged. Baker & McKenzie said that it was adopting a "conservative approach" in this regard. It may be said at this point that it was common ground in the appeal that this approach was conservative as the parties agreed that, on acquiring all of the shares in Kooee, B Digital could not be considered to be a "third party" supplier within the meaning of cl 6.1 of the VSPA. In accordance with this conservative approach Baker & McKenzie recommended that, to avoid any allegation that the offer from B Digital to Kooee for the provisions of carriage services was not bona fide, the offer should be on arm's-length commercial terms. The email also recorded that Kooee would acquire the carriage services from B Digital and then resupply those services at a marked-up price to the joint venture vehicle between Kooee and WIN Television (namely, Kooee Pty Ltd), which raised as an issue the fiduciary obligations of Kooee to WIN Television as its joint venture partner. 28 On 15 October 2004, Mr Simmons' secretary sent to Mr Simmons a draft letter from Mr Kotzohambos. It is apparent from the evidence that Mr Kotzohambos did not prepare this draft letter. In all likelihood the first draft was prepared by Kooee's solicitors, Baker & McKenzie. Mr Simmons forwarded the draft to PCP for review. As Primus emphasised this fact, it should be noted that the draft misspelt Mr Kotzohambos' name, supporting the acknowledged position that he did not prepare it. 29 Also on 15 October 2004, PCP sent an email to Mr Simmons. This email recorded that the proposed process for the sale of Kooee to B Digital was envisaged to involve the following steps: 1 Supply offer offered to SPT - Kooee received from BBB today. 2 Kooee would then offer Primus the first right to supply carriage services on the same terms and notify Primus (as required under the [VSPA]) via formal letter (Primus have 30 days to accept or reject offer). 3 If Primus fail [sic] to accept, Kooee would be in a position to accept the BBB offer. 4 Kooee would notify Primus of its first right to make an offer for the shares of Kooee (as required under the [VSPA]) via formal letter (Primus to be provided a reasonable time to negotiate and reach agreement, currently proposed as 30 days). 5 Kooee obtain [sic] alternative offers from interested parties. 6 SPT management and board to decided [sic] on preferred offer and commences [sic] sale process. 30 PCP noted that in order for the supply offer to Kooee to be acceptable it would have to be on more favourable terms than Kooee currently received from Primus, meaning there would need to be a margin above the 10% Primus provided. PCP provided a table showing the effect of different margins on the value of Kooee and on the margin that would be achieved by B Digital (recognising that Kooee had obligations to its joint venture partner WIN Television). In short, assuming all additional margins were payable to the joint venture, Kooee's value to B Digital decreased. PCP said that to achieve the $100-120 million offer value: …a purchaser needs to be satisfied it is able to acquire Kooee unencumbered by the Primus agreement and unrestricted in its ability to achieve the margin uplift originally proposed by SPT management of a minimum of 25%, over and above the approximate 10% currently being achieved by the joint venture. 31 On 18 October 2004, a letter signed by Mr Kotzohambos as director of DigiPlus was faxed to Mr Simmons as general manager of SPT. This letter contained changes from the first version of 15 October 2004. The most significant (but not the only) changes were the insertion of requirements for the approval of the DigiPlus board of directors and the completion of due diligence.

The Kooee purchase offer 32 On 19 October 2004, Mr Simmons as general manager of Kooee sent a letter to Mr Wilson as managing director of Primus. This letter (the Kooee purchase offer and a "Purchase Offer" within the meaning of cl 6.1 of the VSPA) said: SUPPLY OF CARRIAGE SERVICES Kooee Communications Pty Limited (Kooee) has received an offer from B Digital Limited for the supply and resale of BBB carriage services by Kooee. The BBB offer is attached. In accordance with the [VSPA] between Primus and Kooee, Kooee hereby makes Primus a Purchase Offer to acquire from Primus for resale the carriage services described in the BBB Offer on the terms contained in the BBB offer. Acceptance of the Purchase Offer by Primus must be in writing and addressed to the attention of myself. If Primus has not accepted the Purchase Offer within 30 days of the date of this letter, it will lapse and Kooee may enter into an agreement with BBB for the supply of BBB carriage services on the terms set out in the BBB Offer. If you have any questions in relation to this letter or wish to discuss any of the above, please do not hesitate to contact me directly at the number below. As you will appreciate, the BBB Offer is confidential and therefore we ask you to take all steps to ensure that the BBB Offer remains confidential. 33 The attached document was not an offer from B Digital but a letter from DigiPlus signed by Mr Kotzohambos as a director of DigiPlus (being the DigiPlus offer as defined above). The top of the document shows that it was faxed by DigiPlus on 19 October 2004, although the first page is dated 13 October 2004 and the subsequent pages 19 October 2004. The document was addressed to Mr Simmons as general manager of SPT. It was in identical terms to the draft letter faxed to Mr Simmons on 18 October 2004 as described above. It continued as follows: KOOEE RESALE SERVICE AGREEMENT Further to our discussions last week I now write to you to outline our proposals on the possibility of Digiplus Pty Limited providing alternative and competitive services to Kooee Communications Pty Limited to that [sic] previously received. You will recall that during the middle of last year we discussed with you the opportunity of DigiPlus providing telecommunications products and services to Kooee Communications on a wholesale basis for resale by Kooee. Whilst at that time we did believe we provided a competitive and compelling offer, we understand your reasons for continuing with the current Primus arrangement. As I explained to you last week, DigiPlus has expanded considerably since we had the original discussions concerning the Kooee Communications business last year. This has resulted from the B Digital Limited acquisition of DigiPlus and the addition of competitive mobile products to the DigiPlus suite. Accordingly, based on our understanding of the Kooee business from our previous discussions, we now believe we are in a position to propose to Kooee a more competitive and compelling wholesale agreement for the resale of DigiPlus products under the Kooee name and brand. The main terms and conditions of our proposal would be as follows: 1) DigiPlus to offer Kooee for resale to Kooee customers the full suite of DigiPlus products and services, including: (a) All fixed line telephony services, including local, long distance, international, service & equipment and all fixed line value added services (b) Mobile telephony services (c) Dial Up Internet access services (d) Broadband Data and Internet access services (e) Phone Card/Calling Card services (in foreseeable future) (f) Prepaid telecommunications products and services (in foreseeable future) […] 7) In consideration of the DigiPlus services rendered, DigiPlus shall be entitled to retain 82% of the revenue earned by Kooee through the resale of the DigiPlus products. DigiPlus acknowledges that Kooee shall be entitled to record 100% of the revenue billed to Kooee customers and will pay DigiPlus 82% of that revenue. This means that Kooee earns an effective 18% margin. 8) DigiPlus will wear the risk of cash collection and bad debts, such that Kooee does not incur any bad debt loss. In this manner Kooee will be guaranteed an 18% revenue share of all revenue billed by DigiPlus on behalf of Kooee. […] I believe the above proposal is worthy of your consideration. DigiPlus is in a position to negotiate and formalise an agreement and commence the provision of services to Kooee as soon as possible thereafter. Accordingly, this proposal is not capable of forming a binding agreement until we negotiate a formal agreement approved by the Digiplus [sic] board of directors, we comply with all applicable regulatory requirements (including the Listing Rules) and Digiplus [sic] completes all material due diligence (including on Kooee's revenue levels). I look forward to your feedback on this proposal.

The SPT share sale offer 34 During a meeting held on 29 October 2004, Mr Simmons gave a letter to Mr Wilson (the managing director of Primus). The letter was dated 18 October 2004 (but had not been sent on that date) and was on SPT letterhead signed by Mr Simmons as general manager of SPT. The letter referred to discussions between Mr Simmons and Mr Wilson "last Friday" (15 October 2004, before Kooee sent Primus the Kooee purchase offer and the DigiPlus offer on 19 October 2004) about the consideration by SPT's directors and management of options "in relation to the future conduct of the Kooee business". The letter (referred to below as the SPT share sale offer) continued: As advised, these deliberations have arisen mainly due to two recent events, namely: (a) Recent customer losses and conflicts with Primus over the payment of Kooee revenue share; and (b) My meeting with your Chairman, Mr Paul Singh, when we did discuss a direct investment by SOT in Primus Australia. It has now been decided to seek offers from interested third parties in relation to the sale of all the share capital of [Kooee], currently held by SOT. As you are aware, under the [VSPA] between Primus and Kooee, in the event that any shares in Kooee are to be sold, Kooee must ensure that Primus is first given an opportunity to negotiate and make an offer in relation to the sale of the shares. The directors of SOT have appointed Pitt Capital Partners (PCP) as financial advisors to manage and evaluate any proposed transaction with Primus or any other third party. PCP and SOT directors have agreed on a 30 day period, commencing on the date of this letter, to negotiate and enter into an agreement with SOT for the purchase of Kooee. […] 35 On 19 November 2004 (at the end of the 30-day period under cl 6.2 of the VSPA as it related to the Kooee purchase offer), Mr Miller of Primus faxed a letter to Mr Simmons of Kooee. This letter referred to the Kooee purchase offer and the attached DigiPlus offer, and to a conversation that morning between Mr Wilson of Primus and Denis Ledbury (the managing director of SPT). Mr Miller said in the letter that Primus believed all issues between it and Kooee in relation to the VSPA to have been negotiated and resolved in March/April 2003 with the exception of the terms concerning revenue payable to Kooee, which required "drafting refinement". Mr Miller further stated that the issue of Kooee's revenue share had been resolved recently and that Primus had been led to believe that "all terms were concluded", that the proposed new VSPA would be executed by Kooee, and that as a result "Primus expected the [VSPA] to run the term and probably the option". The letter continued: Your letter dated 19 October 2004 attaching a proposed alternative offer from Digiplus cuts across the agreement in place between Primus and Kooee… our agreement was that the right of refusal mechanism would apply only during the term in circumstances where an additional service not being provided by Primus would be sourced… However, the purported offer from Digiplus, and your purported Purchase Offer, do not comply with the requirements of our agreement. Primus therefore does not accept that your letter dated 19 October 2004 is in an appropriate form requiring a response from Primus. 36 Primus did not maintain in the proceeding that the Kooee purchase offer did not comply with cl 6.1 of the VSPA. On its face, that clause is not limited to additional services not provided by Primus to Kooee.

After the making of the Kooee purchase offer and SPT share sale offer 37 Primus did not accept the Kooee purchase offer or the SPT share sale offer. 38 On 22 November 2004, Mr Simmons responded to the letter from Primus of 19 November 2004. Mr Simmons' letter sought particulars from Primus supporting its statements that the Kooee purchase offer and proposed DigiPlus offer cut across the VSPA and that the right of refusal mechanism applied only to additional services not provided by Primus. The letter said that Kooee was not aware of any basis for these statements, particularly in light of cls 4.6, 6.1 and 6.3 of the VSPA. The letter also said that: In making the Purchase Offer to Primus, we believe that we have complied in all respects with the [VSPA]. We further believe, by reason of Primus' failure to accept the Purchase Offer within the timeframe required by the [VSPA], that Kooee is now free to proceed with the offer from DigiPlus. … Unless I receive information supporting your statements by the close of business on Wednesday 24th November, we will assume that Kooee is free to enter into an agreement to purchase for resale the Carriage Service specified in the Purchase Offer. 39 On the same day, 22 November 2004, Kooee (through its solicitors, Baker & McKenzie) sought the advice of counsel about the operation of cls 6.1 to 6.3 and 6.5 of the VSPA and whether or not the Kooee purchase offer and SPT share sale offer complied with the provisions of the VSPA. 40 On 23 November 2004, Hal Lloyd of Baker & McKenzie sent an email to Michael Firmin of PCP and Mr Simmons. The email attached a draft heads of agreement in respect of the dealings between SPT, Kooee and B Digital. The email noted that annexure 1 to the draft agreement (known as the Anzac heads of agreement) was in terms almost identical to those of the DigiPlus offer, although "the last paragraph has been amended to take account of the possible Primus issues". The draft agreement provided for DigiPlus to provide products and services to Kooee on the terms and conditions in annexure 1. Annexure 1 set out the paragraphs numbered 1 to 9 in the DigiPlus offer (with immaterial amendments) and replaced paragraph 10 (which in the DigiPlus offer read, "[i]n consideration of the above Kooee will transfer all of its existing customers to Digiplus [sic] and will be obligated to resell DigiPlus products and services exclusively in the future") with an alternative paragraph 10 which read (between square brackets) "[i]n consideration of the above, as soon as it is permitted to do so without breaching its existing contract for the provision of carriage services, Kooee must use Digiplus [sic] carriage services in respect of all its existing and future customers." On the version of the draft Anzac heads of agreement in evidence, an unknown person has crossed through paragraph 8 of annexure 1 (which reproduced paragraph 8 of the DigiPlus offer) in handwriting. The paragraph read: DigiPlus will wear the risk of cash collection and bad debts, such that Kooee does not incur any bad debt loss. In this manner Kooee is guaranteed an 18% revenue share of all revenue billed by DigiPlus on behalf of Kooee. 41 On 24 November 2004, Mr Miller of Primus faxed a letter to Mr Simmons responding to Mr Simmons' letter of 22 November 2004. This response repeated Primus' position and alleged that it would be a "gross breach of the contract to attempt to remove any part of the Primus supply". The letter also said that Primus believed Kooee had "not made an appropriate purchase offer and therefore may not proceed with the offer from Digiplus". The letter stated that, as a result, "Kooee cannot assume that Kooee is free to enter into an agreement to purchase for resale the carriage services specified in the offer". The letter asserted that, at the very least, Kooee had failed to "set out in the purchase offer the type, specifications, price and conditions for and upon which it would be prepared to acquire and resell the Carriage Service in order for Primus to properly assess the Offer." 42 On the same day, 24 November 2004, but not in response to Mr Miller's letter, Mr Simmons sent a letter to Mr Miller about Primus denying Kooee access to certain elements of the "Primus Network and services". Mr Simmons said this was a "serious breach" of the VSPA and that Kooee required immediate reinstatement of access. 43 Another draft of the Anzac heads of agreement was distributed on 27 November 2004 (a Saturday). The version of this draft in evidence contains a handwritten amendment to cl 2(b) concerning arrangements with WIN Television as Kooee's joint venture partner. 44 Also on Saturday, 27 November 2004, Mr Simmons sent an email to Mr Kotzohambos as follows: I confirm to you that if the Anzac Heads of Agreement dated 27th November is executed principally in the form supplied & the subject of that heads does not proceed which may require B Digital to supply services to Kooee at 18% as proposed in that agreement that Kooee will at that time agree to a change in the terms of supply so that the applicable rate & terms will be 10% & no less favourable than thos[e] currently applying to the Primus agreement which you will be able to discover as part of your due diligence. 45 On the following day, 28 November 2004, the Anzac heads of agreement was executed. The parties were SPT, Kooee, B Digital and DigiPlus. Mr Kotzohambos signed the Anzac heads of agreement as the authorised representative of B Digital and DigiPlus. Clause 2 of the Anzac heads of agreement provided that: (a) Subject to clause 2(b) and Completion: (i) Digiplus agrees to provide to Kooee the products and services on the terms and conditions described in Annexure 1; and (ii) Kooee agrees to purchase from Digiplus those products and services on the terms and conditions described in Annexure 1. (b) The obligations in clause 2(a) are conditional on Kooee JV consenting to the receipt of Digiplus products and services by Kooee JV on terms no more favourable to the Kooee JV than the terms on which such products and services are currently provided to Kooee JV. 46 The "Kooee JV" is the joint venture between Kooee and WIN Television. Clause 2(b) reflects the fact that the Kooee JV received a 10% revenue share under the VSPA, whereas annexure 1 to the Anzac heads of agreement was in terms materially the same as paragraphs 1 to 7 of the DigiPlus offer and so provided Kooee with an 18% revenue share. The significance of Kooee's obligations under the Kooee JV in this regard is discussed below. Paragraph 8 of the DigiPlus offer (which was contained in the initial draft of annexure 1 of the Anzac heads of agreement as set out above) had been deleted from the executed agreement. Paragraph 9 was in the same form as the amended paragraph 10 of the draft (namely, "[i]n consideration of the above, as soon as it is permitted to do so without breaching its existing contract for the provision of carriage services, Kooee must use Digiplus carriage services in respect of all its existing and future customers"). Paragraph 10 was a new provision providing for an initial term of three years with an option for renewal of two years. It should be recalled that, while paragraph 8 of the DigiPlus offer (which related to Kooee's entitlement to 18% of billed revenue and its protection against "bad debt loss") had been deleted from earlier drafts of the Anzac heads of agreement and did not appear in the executed version, paragraphs 7 and 9 of the DigiPlus offer remained. As noted, paragraph 7 said (and appeared in annexure 1 of the Anzac heads of agreement) as follows: 7 In consideration of the DigiPlus services rendered, DigiPlus shall be entitled to retain 82% of the revenue earned by Kooee through the resale of the DigiPlus products. DigiPlus acknowledges that Kooee shall be entitled to record 100% of the revenue billed to Kooee customers and will pay DigiPlus 82% of that revenue. This means that Kooee earns an effective 18% margin. 47 Paragraph 9 (which became paragraph 8 of the executed Anzac heads of agreement) was in these terms: 8 The revenue share proposed to Kooee shall apply to total billing by Digiplus in the Kooee name for all products and services, both consumer and corporate, as well as government customers. 48 Clause 4 of the Anzac heads of agreement provided for B Digital to acquire all of SPT's shares in Kooee. By cl 5, completion of the sale of shares in Kooee (defined as Completion and thus a condition precedent to cl 2) was to occur at a nominated time after satisfaction of the conditions in cl 6. The conditions in cl 6 included obtaining the approval of B Digital's shareholders and the consent of the Kooee JV as set out in cl 2(b). 49 The effect of the Anzac heads of agreement was therefore that, after completion, SPT would own 30% of B Digital. Both DigiPlus and Kooee would be wholly owned subsidiaries of B Digital. The joint venture between Kooee and WIN Television would remain (with each being a 50% shareholder in the joint venture vehicle Kooee Pty Ltd). 50 On 29 November 2004, SPT and B Digital issued a public announcement to the effect that the two companies had "signed a binding Heads of Agreement to enter into a number of transactions that would form the basis of a strategic alliance" involving, amongst other things, the sale of Kooee to B Digital and, in consideration therefor, the issue of shares in B Digital to SPT equal to 30% of B Digital's ultimate share capital (the largest single shareholding in B Digital). Mr Miller of Primus became aware of the public announcement and so of the existence of the Anzac heads of agreement on 30 November 2004. 51 On 30 November 2004, Baker & McKenzie sent a memorandum to Mr Simmons (amongst others) reviewing the status of the Kooee purchase offer made to Primus. This memorandum noted that cl 2(b) of the Anzac heads of agreement provided that the supply by DigiPlus to Kooee was conditional on the Kooee JV consenting to receive no more than it currently received (that is, a 10% revenue share rather than the 18% share provided for in annexure 1 of the Anzac heads of agreement). Baker & McKenzie said that "[a]rguably, the effect of this condition precedent is to offer DigiPlus more favourable supply terms than were offered to Primus, with the result that clause 6.3 of the VSPA will be breached." As explained by Baker & McKenzie: because the provision of DigiPlus services to Kooee is conditional on completion (at which time both DigiPlus and Kooee will be wholly owned subsidiaries of B Digital) and on Kooee JV consenting to the continuation of the current revenue sharing arrangements, the effect is to favour DigiPlus over Primus because only intra-group supply will be subject to 82/18 revenue sharing; all supply outside the B Digital Group will still be on a 90/10 revenue sharing basis (i.e. the same as is currently offered by Primus). 52 On 9 December 2004, Mr Simmons responded to the letter from Mr Miller of Primus of 24 November 2004. This response said that "Kooee maintains that the Purchase Offer made to Primus complies in all respects with the requirements of the [VSPA] and that Kooee is now free to enter into an agreement to purchase for resale the carriage services specified in the Purchase Offer." The response also reiterated that Kooee did not understand the basis for Primus' contentions about the operation of the VSPA. In respect of the terms, price and conditions of the DigiPlus offer, the response said that "…the offer from Digiplus [sic] contains substantially all the material commercial terms that are contained in the [VSPA]", and that "[t]he differences between the two lie only in the superiority of the commercial offer made by Digiplus [sic]" in relation to "the rates (expressed as a percentage of resale billings) at which the carriage services are to be provided to Kooee" and "the risk of cash collections and treatment of bad debts". The response invited Mr Miller to contact Mr Simmons to reach an "amicable solution". 53 On 5 January 2005, Mr Lloyd of Baker & McKenzie sent an email to Mr Simmons (amongst others) about the terms of a draft letter to be sent by the Kooee JV accepting the terms of supply by B Digital. Mr Lloyd said that the letter was intended to serve two purposes. First, it was to serve as the consent of the Kooee JV under the joint venture agreement to change service provider. Second, it was to serve as the consent of the Kooee JV for the purpose of satisfying the condition in cl 2(b) of the Anzac heads of agreement. Mr Lloyd noted that the draft letter did not, on its face, disclose that the Kooee JV understood that Kooee would obtain a revenue share of 18% while the Kooee JV would continue to obtain a revenue share of only 10%. Mr Simmons sent an email back, also on 5 January 2005, as follows: The 82/18 issue only arises if we need to rely on this to exit the Primus arrangement. This may not be the case & could be resolved in the next few days. That being the case the 82/18 letter can be withdrawn & that arrangement will have never existed as [Kooee] will be a wholly owned sub of B [Digital]. 54 On 10 January 2005, Mr Simmons and George Papadopoulos for Kooee Pty Ltd (that is, the Kooee and WIN Television joint venture vehicle) signed a letter recording the change in service provider from Primus to B Digital on identical terms to those offered by Primus save that (amongst other things) Kooee would not be responsible for "bad debts or accounts not collected", so that the Kooee JV would receive 10% of net revenue rather than the 10% of gross revenue before bad debts it had been receiving from Primus. 55 On 13 January 2005 Clayton Utz, solicitors for B Digital and DigiPlus, distributed a draft DigiPlus virtual service provider agreement for comment. Mr Lloyd of Baker & McKenzie advised Mr Simmons that as drafted the proposal would not work for Kooee "because it would not be consistent with the Purchase Offer to Primus to have the agreement effectively reverting on notice to a 90/10 deal". Mr Lloyd noted further that, if such a term had formed part of the Kooee purchase offer, "Primus would have accepted it". Mr Lloyd stated that "[t]he minimum period of notice we think might pass muster is 6 months." Paul Evans, the chief financial officer of B Digital, queried the rate of 18% in Sch 5, noting that he thought the rate was to be 10%. Clayton Utz responded that: It will be 10% in the agreement between Kooee JV and Kooee. The Anzac [heads of agreement] reflects 18% for this agreement. My understanding is that this is the basis on which SPT satisfied the Primus first right of refusal. The figure is ultimately only relevant for any period prior to closing as after closing it is a transfer price between two wholly owned companies. However, the arrangements between Kooee and Kooee JV are important as this involves WIN profit leakage. 56 Mr Simmons informed Mr Evans that the 82/18% revenue split applied only if either "[t]he transaction proceeds & B [Digital] owns [Kooee] the agreement then lapses", or if the transaction did not proceed, in which case the agreement could "be cancelled on 6 months['] notice & re negotiated or otherwise". In the latter case, Mr Simmons observed that "[t]he continuation for 6 months at 82/18 would be a fair reflection of the value of the customers signed & 18% would represent approx 50% of the GP on the customers". Mr Simmons also noted that there "will be a separate agreement between [Kooee] & Kooee JV at 90/10", and that "[t]herefore [Kooee] retains the balance". 57 On 14 January 2005, Mr Lloyd of Baker & McKenzie also forwarded a document called "Primus outcome matrix" to Mr Simmons (amongst others). The covering email said that the attached matrix was "a brief summary of the likely legal risks faced in a number of outcome scenarios that might result from negotiations with Primus." Five outcomes were noted with next steps and legal risks identified for each, including the following: (5) Outcome 1 ("Primus does not agree to cooperate"): a next step was said to be "[r]etain 82/18 deal with Digiplus", and a legal risk that the VSPA "either remains on foot or Primus purports to terminate for breach". (6) Outcome 2 ("Primus agrees to orderly transfer of customers only (but otherwise reserves rights)"): a next step was said to be "[r]etain 82/18 deal with Digiplus" and the same legal risk was identified as for outcome 1. (7) Outcome 3 ("Primus agrees to orderly transfer of customers and termination of [the VSPA]"): a next step was said to be "[r]etain 82/18 deal with Digiplus or amend to 90/10 deal after termination of VSPA", and a legal risk that a claim by Primus was "still possible with the 82/18" deal but was more likely "if deal amended to a 90/10 deal". (8) Outcome 4 ("Primus agrees to orderly transfer of customers, termination of [VSPA] and release of all claims (but without disclosing 90/10 deal)"): a next step was said to be "[r]etain 82/18 deal with Digiplus or perhaps amend to 90/10 deal after termination of VSPA", and a legal risk that there was "[n]o basis for claim by Primus because of release unless Primus claims misrepresentation [sic] into giving release by withholding advice of (what might be claimed to be) a pre-existing intention to change to a 90/10 deal." (9) Outcome 5 ("Primus agrees to orderly transfer of customers, termination of [VSPA] and release of all claims" and "permits purchase of carriage services at any price (eg 90/10)"): a next step was said to be "[a]mend [VSPA] with DigiPlus to 90/10", and a legal risk was said to be "[n]o basis for claim by Primus". 58 On 1 March 2005, DigiPlus and Kooee entered into a virtual service provider agreement (the DigiPlus VSPA). By cl 4.1 DigiPlus agreed to supply its products to Kooee for resale to Kooee customers at the rates specified in Sch 5. The rates in Sch 5 were 18% of all Resale Billings (as defined) to be paid to Kooee as its revenue share. By cl 23 either party was able to terminate the agreement on various bases including on not less than 6 months' written notice at any time prior to completion of the Anzac heads of agreement. 59 On 2 March 2005, Mr Simmons and Mr Kotzohambos on behalf of Kooee and DigiPlus respectively signed a letter agreement, cl 1 of which provided as follows: If the Digiplus VSPA is terminated under cl 23.1 of the Digiplus VSPA before Kooee becomes a wholly owned subsidiary of B Digital Limited, and Digiplus is able to reasonably demonstrate that Digiplus has made a loss in connection with the supply of telecommunication and related services under the Digiplus VSPA, then Kooee will pay the amount of that loss to DigiPlus, provided that such payments may not result in Kooee retaining less revenue from the supply of telecommunication services to its customers under the Digiplus VSPA than it would have retained had Primus Telecommunications Pty Ltd continued to supply services to Kooee under the Virtual Services Provider Agreement dated 21 July 2000. 60 On 20 April 2005 Kooee, B Digital, SPT, Primus and Kooee Telecom Pty Ltd (the Primus subsidiary established under the VSPA) entered into the separation deed. The recitals to the separation deed record (in part) as follows: […] B Under the VSPA, Primus through [Kooee Telecom Pty Ltd] provides certain Carriage Services, Primus Products (as defined in the VSPA) and other services to Kooee. C Kooee and Primus have had disagreements as to certain matters in connection with the provision of those services and as to the amounts payable by Primus to Kooee under the terms of the VSPA. D Kooee wishes to be free to obtain Carriage Services and associated customer services for its customers from another party on any terms it chooses. E SP Telemedia Limited, Kooee's parent company, is proposing to sell all the shares in Kooee to B Digital. F In order to resolve all disputes and all possible Claims between Kooee on the one hand and Primus on the other hand and to facilitate the sale of Kooee, without any admission of liability, the parties have agreed to terminate the VSPA and release each other from all Claims under or in connection with the VSPA or otherwise, on the terms of this Deed. 61 The separation deed provided for Kooee to retain all moneys paid by customers after the Termination Time (a defined term subsequently varied by agreement between the parties as the process of separation was not completed by 20 May 2005 as initially anticipated). It also provided for a Transition Period during which Kooee would procure all of its customers to be transferred to another carriage service provider and Primus would provide to Kooee the nominated information to enable this to occur. After the Termination Time, Primus was also free from any obligation to Kooee's customers, Kooee indemnifying Primus in that regard. Schedule 1 to the separation deed set out the information and services to be provided by Primus for the migration of Kooee's customers to the new carriage service provider, including the format for the information transfer. Clause 6 of the separation deed specified Kooee's obligation to pay Primus' out-of-pocket expenses for the provision of the information and services in Sch 1. 62 The Anzac heads of agreement was completed and Kooee became a wholly owned subsidiary of B Digital.

At the time the Kooee purchase offer was made 63 As noted, one aspect of Primus' case is its contention that at the time Kooee made the Kooee purchase offer the supply of the carriage services in term 1 of the DigiPlus offer was not in fact available to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer. Alternatively, Primus contended that at the time Kooee made the purchase offer Kooee had reasonable grounds to believe that supply of the carriage services in term 1 of the DigiPlus offer would not in fact be available "in the relevantly immediate future" to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer. 64 Primus identified six factors said to support factual findings to this effect, being: (1) Baker & McKenzie, Kooee's solicitors, prepared the first draft of the DigiPlus offer without any apparent input from DigiPlus. (2) Mr Simmons' secretary distributed the first draft of the DigiPlus offer including, it appears, to Mr Kotzohambos (its ostensible author). (3) There is no evidence of any commercial analysis of the DigiPlus offer by DigiPlus. (4) There is no evidence from either Mr Kotzohambos or Baker & McKenzie as to the genuineness of the DigiPlus offer. (5) B Digital's board did not know about the DigiPlus offer and Mr George, the chief executive officer of B Digital, did not know about the DigiPlus offer until a day or so before it was made. (6) To proceed with the DigiPlus offer Kooee needed to obtain the consent of the Kooee JV to accept a 10% revenue share when Kooee would be receiving an 18% share. 65 Factors (1) to (5) above relate to Primus' submission that the DigiPlus offer was not what Primus described as a "genuine offer" of "commercial substance". Factor (6) appears to relate to the capacity of Kooee to take up the DigiPlus offer in the event that it was in fact genuine. 66 Before dealing with each of the factors said to support the factual findings urged by Primus and disputed by Kooee, it is necessary to reiterate the context within which Kooee sent and Primus received the documents on 19 October 2004 (being the Kooee purchase offer and the DigiPlus offer). 67 The context is set by the VSPA. Under the VSPA, Kooee was under no obligation to continue to accept Primus' products and services (cl 4.6). Clause 6, however, regulated Kooee's dealings with third parties. Under that clause Kooee was not free to enter into an agreement with a third party for supply of carriage services competing with those offered by Primus unless Kooee had first offered to acquire such services from Primus. Primus could determine whether or not to accept Kooee's purchase offer. If it did not Kooee was then free to enter into an agreement with the third party supplier, albeit on terms no more favourable to the third party supplier than had been offered to Primus. Although Primus sought to rely on cl 6.4 ("[n]othing in this Part gives either Party a right to unilaterally vary or renegotiate any prices, rates or charges referred to in this agreement") to support the view that cl 6 could be engaged only if Kooee had available to it a genuine commercial offer to provide the relevant services, cl 6 was not to that effect. Under cl 6 the only relevant offer was Kooee's purchase offer to Primus. The existence or terms of any offer by a third party to Kooee was not referred to in cl 6 and was relevant only to the extent that the clause precluded Kooee from entering into an agreement with a third party supplier unless it had first made a purchase offer to Primus, and further precluded Kooee from entering into such an agreement on terms more favourable to the third party supplier than those offered to Primus. If Primus did not accept a purchase offer the effect was not to terminate the VSPA. The VSPA would remain on foot. By this method cl 6 enabled Kooee, provided only that it complied with the clause, to obtain third party supply on better terms than it could obtain from Primus for any one or more (or all) of the services provided by Primus. If, having complied with cl 6, Kooee obtained all services from a third party supplier then the VSPA, whilst continuing in force, would be of little practical utility. 68 Despite the limited requirements of cl 6 of the VSPA, Kooee chose to provide Primus with a purchase offer in a form that attached the DigiPlus offer. Primus said that this had to be understood as part of a strategy by Kooee to ensure that Primus understood that the offer was real in the sense that if Primus did not match the offer Kooee would transfer its customers to DigiPlus, resulting in the loss of that revenue to Primus. Primus also said that this was necessary for Kooee because Kooee knew that, for the merger between SPT and B Digital to proceed, Kooee's customers had to be able to be transferred in an orderly manner from Primus to DigiPlus. Without such an orderly transfer the value of Kooee would be diminished and SPT would be unable to obtain sufficient shares in B Digital in consideration for the sale of the shares in Kooee to obtain the largest single shareholding in B Digital. Primus described this overall strategy as one of deceit in that, as Primus put it, the DigiPlus offer was a contrivance of Mr Simmons intended to enable Kooee to terminate the VSPA with Primus. Thus, the offer was never "intended to be carried through in the event there was no sale of Kooee by SPT." Once it had achieved termination of the VSPA, Kooee could negotiate with Primus for the orderly transfer of its customers to DigiPlus - a transfer which, according to Primus, was not provided for in the VSPA or, at least, was not provided for to the same extent it ultimately was in the separation deed. 69 There are a number of difficulties with this thesis of an overall strategy of deceit by Kooee. One difficulty is that the VSPA did not bind Kooee to accept any services from Primus (cl 4.6). Another is that by cl 6 Kooee was entitled to make a purchase offer in relation to all services offered by Primus. If Primus chose not to match the offer Kooee would then be free to obtain the services from a third party supplier. While the VSPA would continue, in that event it would serve little practical purpose other than by virtue of the provisions relating to the transfer of customers. Contrary to Primus' submission, the VSPA contained provisions that Kooee could enforce to assist in the orderly transfer of customers, including cls 7.5 and 26.5. Primus' implicit suggestion that but for termination of the VSPA and negotiation of the separation deed Primus could and would have obstructed the transfer of customers is both unattractive and unpersuasive in the light of these clauses and, presumably, Primus' own interest in not having any continued responsibilities to Kooee customers or exposure to bad debts which, as the evidence discloses, was a serious problem in the Kooee business. A further difficulty is that the thesis of an overall strategy of deceit appears to assume that there was something wrong or improper about Mr Simmons' desire to see Kooee's commercial relationship with Primus brought to an end and the VSPA terminated. Both were legitimate commercial purposes for Mr Simmons to wish to achieve. Once this is accepted, the pejorative characterisation of the DigiPlus offer as a "device" intended to achieve an ulterior object falls away. Kooee was entitled to use cl 6 for any legitimate commercial purpose, including obtaining all carriage services from someone other than Primus and, thereby, enabling termination of the VSPA to be negotiated. 70 Other difficulties in this aspect of Primus' case are also apparent. The submission that the DigiPlus offer was never "intended to be carried through in the event there was no sale of Kooee by SPT" requires consideration of the circumstances prevailing at the time the DigiPlus offer was made. Mr Simmons gave evidence in this regard. Mr Kotzohambos did not. According to Primus, Mr Kotzohambos should be considered to be in the camp of Kooee. As Primus alleged that the DigiPlus offer was not genuine, it submitted that Kooee's failure to call Mr Kotzohambos (as well as relevant people from Baker & McKenzie and PCP) should give rise to an inference (based on Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8) that their evidence could not have assisted Kooee's case. Primus' submission should not be accepted. Primus bore the onus of proof. Primus could have required Mr Kotzohambos (and others) to give evidence. The fact that Primus' failure to call Mr Kotzohambos to give evidence may be ascribed to its perception that he was in Kooee's camp may be sufficient to prevent an inference being drawn against Primus. Accepting that no inference was to be drawn against Primus, it does not follow that an inference must be drawn in Primus' favour. This is the point of the discussion in Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 343 and New Broken Hill Consolidated Ltd v Gillespie [1999] NSWCA 109 at [5] on which Primus purported to rely. 71 The fact (if it be the fact) that Mr Kotzohambos (and the other potential witnesses referred to by Primus) might be seen as being in Kooee's camp does not oblige the Court to draw an inference adverse to Kooee. Nor do we consider it appropriate to draw any such inference in the circumstances of this case, particularly in light of Mr Simmons having been called by Kooee to give evidence about the fact in issue. 72 In any event, as it was Kooee that communicated its purchase offer and the DigiPlus offer to Primus, the relevant intention is that of Kooee. DigiPlus' intention is relevant only to the extent that Kooee knew or ought to have known about that intention. Mr Simmons gave evidence in his affidavit that he regularly met with participants in the telecommunications industry, including Mr Kotzohambos and Mr Robinson, who had become the two largest shareholders in B Digital through a reverse takeover by DigiPlus. Mr Simmons said he contacted Mr Kotzohambos and Mr Robinson to discuss the possibility of B Digital replacing Primus as Kooee's service provider, which led to a series of discussions in late 2003 and through the first part of 2004. According to Mr Simmons, he was in regular contact with Mr Kotzohambos and Mr Robinson leading up to his presentation to the SPT board on 29 September 2004 and thereafter. After the board meeting, Mr Simmons requested that Mr Kotzohambos and Mr Robinson make a formal offer as the next stage in negotiations, and the terms of the offer were discussed as it was being developed. 73 In cross-examination, Mr Simmons agreed that he wanted to end Kooee's commercial relationship with Primus either by terminating the VSPA or leaving it an "empty shell" (which would have been the effect of Kooee obtaining all services from a provider other than Primus). As noted, this was a legitimate commercial object for Mr Simmons. He agreed, as was necessarily the case, that for the agreement as proposed between B Digital and SPT to proceed Kooee had to be free to obtain services other than from Primus, specifically from B Digital or DigiPlus. Mr Simmons said that his negotiations were with DigiPlus and the two biggest shareholders in B Digital (being Mr Kotzohambos and Mr Robinson) rather than B Digital employees such as Mr Evans, its chief financial officer. Mr Simmons recalled that Mr George, B Digital's managing director, became aware of the transactions provided for in the Anzac heads of agreement only a day or perhaps a week before - but in any event "on the cusp" of - the deal being announced on 29 November 2004. Mr Simmons believed that the B Digital board had not considered the proposals contained in the Anzac heads of agreement by the end of October 2004, but noted that Mr Kotzohambos was on the B Digital board and that to the best of his recollection Seven Network (a 38% shareholder in B Digital with a representative on the B Digital board) also knew of the proposed transactions. Mr Simmons also said that Mr Kotzohambos and Mr Robinson were "running" DigiPlus. 74 As to the DigiPlus offer, Mr Simmons agreed that it had been drafted for him by Baker & McKenzie in the first instance and that the draft did not originate from DigiPlus. Mr Simmons confirmed in cross-examination that he had a number of discussions with Mr Kotzohambos about the proposed offer. Mr Simmons agreed that PCP were aware of the offer. He also said that Mr Kotzohambos amended the offer, the main amendment being the requirement for B Digital board approval (a change which, as noted, was reflected in the second version of the draft DigiPlus offer). Mr Simmons also gave this evidence: See, the position is with respect to these letters, I suggest, Mr Simmons, was that Mr Kotzohambos didn't care what was put on his letterhead for you to use as long as it didn't bind him. That's right, isn't it? I don't know that I can speak for Kotzohambos. I'm talking about the discussions you had with [him], if you had any. Did you have discussions with him? Yes. Yes. And he wasn't concerned at all in doing what you wanted, as long as it didn't bind DigiPlus; that's right, isn't it? He - at that point in time, yes. Yes. This was your contrivance to get out of the Primus agreement. It was not a genuine offer by DigiPlus at all, was it? I believe that it was an offer that was capable of being delivered. Now, answer my question. This was your contrivance to get out of the Primus contract, wasn't it? It was a means by which we could terminate the Primus contract. That you contrived? Well, it was part of an overall transaction. And that he was allowed - he was allowing you to do on his letterhead because it imposed no obligation on DigiPlus. That's right. That was your discussion, wasn't it? At that time there was no obligation because he made it subject to director's approval. At a later date, there was an obligation. This didn't reflect an offer at all, did it, at that point, in terms of the discussion you had with Mr Kotzohambos? I believe it did. There was an intent to proceed with DigiPlus. […] MR GARRATT: You discussed with Mr Kotzohambos - in providing you with a DigiPlus in the form that you wanted for the purposes of you, that is, Kooee, getting out of the Primus contract, didn't you? It was to enable Kooee to terminate the Primus contract. Yes. And that's what this was about, wasn't it - providing this letter - in terms of the discussion - providing you with something to get out of the Primus contract? But also - it was - but also, to form a new agreement with DigiPlus. And his discussion with you was he would help you with that end as long as it imposed no obligation on DigiPlus at that time? My understanding at that time is he had not informed his board of the discussions, being the B Digital directors, whereas the DigiPlus representative directors, I understood, were aware. And so he hadn't obtained B Digital board approval, is my understanding. He may have discussed it, but my understanding is he had not. And the discussion simply was that these terms weren't binding, that is, the terms we set out in the letter - terms 7, 8 and 9; that's right, isn't it? They couldn't be - so the discussion was, and you knew - they couldn't be binding until DigiPlus approved them? Correct. 75 Mr Simmons also gave evidence in cross-examination about his email to Mr Kotzohambos on 27 November 2004. His evidence was as follows: I suggest to you that you had a conversation with Mr Kotzohambos as the time for signing these heads of agreement approached? I remember the conversation. Nick rang me. He rang you? Yes. And what did he say? Well, don't read it. Just tell me what he says from your recollection? No, I'm - he said to me - it was on the eve of signing the heads of agreement. Yes? "I have a concern, if margins shift on our products in the future, I'll be locked into an 18 per cent deal providing - and we may not make profits in the future that will enable us to provide 18 per cent. I need the ability to claw it back". Claw it back to the Primus deal? Well, I said to him it can be no less than what we are currently receiving because, otherwise, we wouldn't be interested in the transaction, and we also have obligations to WIN Television as our joint venture partner. It cannot be anything less than 10 per cent. This was the first time, I suggest to you, that B Digital or DigiPlus - that both parties to this agreement - were being asked by Kooee or SPT, to your knowledge, to give a commitment about the supply of carriage services, isn't it? No, I wouldn't agree to that, but on the eve of signing this, Nick did have the concern that the products may be loss-making in the future. You - he was saying he wouldn't sign unless he got a commitment from you. That's right, isn't it? I don't know that they were his exact words, but he did say - he did raise the concern and my opinion from the conversation was that he was having second thoughts on proceeding. […] … And did he ask you to put that commitment in to the heads of agreement itself, to change the text? No, I don't think so. But he said he wouldn't sign it in that form unless some clarification of the commitment was given by you by way of email? Yes. I'm not sure whether he proposed that or whether I proposed that to try and get the deal done. I've - I have a feeling that I may have said to him, "Sign the heads of agreement and I'll give you the comfort in an email." It was on the eve of signing that document and we were very keen to proceed. […] The arrangement you had with B Digital and/or DigiPlus was that - up to this point was that any supply of carriage services at the 18 per cent gross revenue rate was not to commence until the sale of Kooee to B Digital had taken place. That's what the arrangement had been to this point, wasn't it? I don't have any great recollection of when we thought timing would occur. I have a feeling that we were - we were working on migrating customers before the transaction had concluded. So my feeling is we were contemplating migrating before - or working on migrating before it completed or settled. But his concern to you was that he executes this agreement and completion doesn't take place, he may have an exposure that he wants to be able to get out of? Correct. And that exposure arose because he was being asked to do something that wasn't otherwise to happen until completion of the purchase of Kooee had taken place? I'm not sure that I understand that. I'll go through it in stages. He is - the commitment you are giving is that if the heads of agreement are executed and the heads doesn't proceed - that means Kooee isn't, in fact, ultimately bought? Yes. And B Digital is required to supply services under this new arrangement then there'll be this capping. See that? Yes. 76 Mr Simmons reiterated this evidence when it was put to him that the 90/10% revenue split had "always" been part of his agreement with Mr Kotzohambos. Mr Simmons said this was not the case as follows: Nick Kotzohambos called me on the eve of signing the heads of agreement to ask for the rollback. Prior to that, we'd always acted on the assumption the transaction would proceed and, therefore, 18 per cent would be paid because it would be a wholly owned subsidiary. In other words, prior to that, the agreement had always been on the basis that DigiPlus would only be providing services from the point of time when the shares in Kooee had been acquired by B Digital? Yes, it was contemplated that that would occur after the heads of agreement. And it was only when it became that that might not be the case that the rollback agreement was entered into? It was when Nick Kotzohambos suddenly thought, "What if it doesn't proceed and the products become less profitable and we have to pay 18 per cent". 77 Mr Simmons also dealt with the proposition that the DigiPlus offer was not intended to proceed unless the transaction between SPT and B Digital proceeded. Mr Simmons gave this evidence in cross-examination: What Mr Kotzohambos was concerned about was the exposure that B Digital might have if the merger wasn't completed and B Digital had to supply services on the 18 per cent basis. That's right, isn't it? Yes. And you said to him, "Well, if it happens that the merger doesn't - isn't completed and B Digital has to supply services, then you may decrease the margin below from 18 per cent downwards, but not below the point of 10 per cent as you've set out in that email"? Yes. In terms of the discussions you had with Mr Kotzohambos up to this point, B Digital wasn't to start providing services to Kooee until the merger had been completed? No. You'd had discussions with - HIS HONOUR: You're agreeing with the proposition? No, I'm not agreeing with the proposition. I see? We were - we did discuss migration of customers once the heads were signed but before settlement occurred because there was always the competitive risk of Primus having Kooee customers but knowing there was a termination. So migration was something we were discussing. Kooee never put an offer to Primus in the terms that you set out in this email to Mr Kotzohambos, did it? No. Namely, that Primus would have to pay an 18 per cent rate but if circumstances transpired as you've set out in that email the rate could be reduced to 10 per cent. No such offer was ever put to Kooee, was it? To Primus. To Primus? No. 78 As Mr Simmons said in re-examination, Kooee was confident the transaction between SPT and B Digital would proceed so that Kooee would become a wholly owned subsidiary of B Digital. As a result, he had not considered whether the DigiPlus offer would be available to Kooee if the transaction between SPT and B Digital did not proceed until Mr Kotzohambos' call on 27 November 2004, just before the Anzac heads of agreement was to be signed. In Mr Simmons' words: I was confident that the transaction would proceed, so I did not contemplate whether it would or would not apply. I was very confident the transaction would proceed because of Seven Network's desire to exit the company, because of the financial benefits that would come to Kotzohambos and Robinson from the transaction and the structure that had been put in place. We were very confident that the transaction would proceed, so there was not much or any contemplation or discussion about what would happen if it did not proceed prior to November, so I do not know - it is not something that I contemplated it not proceeding because of the confidence around the - what we were doing. 79 Mr Simmons also gave this evidence: But no offer was ever put to Primus in terms that the new payment terms in respect of the services to which the DigiPlus offer related would only apply from the date when SPT sold its shares in Kooee to B Digital; no such offer was ever made, was it, to Primus? No, the offer was silent on timing, yes. 80 Mr Simmons confirmed that the 82/18% revenue split between DigiPlus and Kooee was: certainly implemented in accordance with this in that B Digital paid 18 per cent revenue share to Kooee Communications and Kooee Communications paid 10 per cent to WIN. 81 As to the letter agreement of 2 March 2005, Mr Simmons gave evidence as follows: How did this letter come about? My recollection is it was something that came from Clayton Utz and Michael Reede - by this point in time, Nick Kotzohambos had largely - had mainly stepped out of the negotiations and commercial arrangements around closure of the transaction. And Peter George, Paul Evans and Michael Reede were mainly involved with most negotiations. Nick Kotzohambos is not somebody who's comfortable with these types of things, and Reede, George and Evans were more skilled. My recollection is that it came from one of those three and Nick Kotzohambos was prepared to sign the letter. As were you? As was I. Yes. And you understood what it was about, didn't you? I haven't read it for some time, but I believe it meant a roll back. A roll back: fair description? Yes, if DigiPlus could prove that it was losing money, there would be the opportunity to roll the 18 per cent back - To the level of the Primus agreement? To - yes, to no less than Primus, but it could be anything between 18 and - Ten? - 10, depending upon the extent of loss-making, if any. In effect, it was giving effect to the same sort of arrangement or something like it that you had previously agreed with Mr Kotzohambos in your email exchange back in November, wasn't it? That's my recollection. The purpose of the letter was to provide the protection should product margins change in the future that B Digital could - had some assurance that it could negotiate - renegotiate the commercial terms of supply to Kooee Communications. 82 When asked why the reversion to a 90/10% deal was in a side letter of 2 March 2005 rather than the principal agreement (being the DigiPlus VSPA of 1 March 2005), Mr Simmons said: At the time of offering the 90/10 deal, I was of a view that, given time between the heads of agreement and settlement, I could commercially put Kooee back into a better position and have the 18 per cent adopted. 83 In respect of the Kooee JV, Mr Simmons acknowledged that the transaction with B Digital was premised on the Kooee joint venture vehicle (Kooee Pty Ltd) continuing to obtain only a 10% revenue share from Kooee and that, if Kooee were to obtain a greater share, the consent of WIN Television and Kooee Pty Ltd was required. Mr Simmons said that this consent was ultimately obtained at some time after 27 April 2005. 84 Primus did not suggest that Mr Simmons' evidence should not be accepted. To the contrary, its case was based on the premise that Mr Simmons' evidence was true and disclosed the facts necessary to find the overall strategy of deceit identified. Properly understood, however, Mr Simmons' evidence creates further difficulties for Primus' first contention that at the time Kooee made the Kooee purchase offer the supply of the carriage services in term 1 of the DigiPlus offer was not in fact available to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer. 85 Dealing with each of the six factors on which Primus relied, the fact that Baker & McKenzie as Kooee's solicitors drafted the first version of the DigiPlus offer (point (1)) is immaterial. The commercial context disclosed by Mr Simmons' evidence is one in which DigiPlus and Kooee had a common objective - enabling Kooee to obtain carriage services from DigiPlus rather than Primus - as part of a broader arrangement to be implemented between their respective parent companies, B Digital and SPT. In that context, Baker & McKenzie drafting the initial version of the DigiPlus offer does not suggest that the DigiPlus offer was not genuine. Moreover, while Mr Simmons believed that cl 6 of the VSPA between Kooee and Primus would not apply if DigiPlus and Kooee became related companies Baker & McKenzie, Kooee's advisers, took a more conservative view. The fact that they did so also does not suggest any lack of genuineness in the DigiPlus offer. Nor, for the reasons already given, was it in any way improper for Mr Simmons to hope that the DigiPlus offer would not be matched by Primus, thus enabling Kooee to free itself from any ongoing commercial relationship with Primus. The fact that Mr Simmons wished to achieve that objective in no way undermines (and, in fact, is consistent with) the other fact, obvious from the evidence, that Kooee genuinely wished to obtain its carriage services from DigiPlus. For the same reasons, the involvement of Mr Simmons' secretary in distributing the first draft of the DigiPlus offer (point (2) above) is beside the point. 86 As to point (3), the lack of evidence of DigiPlus' commercial analysis of the DigiPlus offer is equally immaterial. Mr Simmons gave evidence of numerous discussions with Mr Kotzohambos to settle the terms of the offer. Moreover, it is apparent that Mr Kotzohambos must have had a detailed knowledge of the overall transaction proposed between SPT and B Digital. The suggestion, inherent in Primus' submissions, that Mr Kotzohambos - a major shareholder in and director of B Digital and the person involved in the negotiations with Mr Simmons on behalf of DigiPlus and who signed the DigiPlus offer - had no knowledge of or interest in the details of the DigiPlus offer and thus allowed Mr Simmons to use the DigiPlus letterhead for Mr Simmons' own ends, is untenable. As to Mr Kotzohambos and others not being called by Kooee (point (4)), the conclusions above apply. Those matters do not support the drawing of any inference in favour of Primus in the face of Mr Simmons' evidence. 87 As to point (5), Primus' apparent concern that the DigiPlus offer could not be genuine because the B Digital board had not considered the offer or the overall transaction with SPT until shortly before the Anzac heads of agreement was signed and Mr George, B Digital's chief executive officer, also did not know about the transaction until a day or week beforehand is also misconceived. Digiplus was a wholly owned subsidiary of B Digital. According to the evidence Mr Kotzohambos and Mr Robinson, who were effectively "running" DigiPlus, were the major shareholders in B Digital, of which Mr Kotzohambos was also a director. Both men were involved in the negotiations with SPT concerning the transactions contemplated by the Anzac heads of agreement. Moreover, and as noted above, the other major shareholder in B Digital, Seven Network (which had a representative on the B Digital board), was also likely to have known about the proposed transaction. In these circumstances the state of knowledge of the B Digital board (gauged by whether it had received a formal report on the proposed transaction) and of B Digital's chief executive officer reveals nothing to suggest that the DigiPlus offer was other than genuine. 88 Primus' other apparent concern about Kooee's obligations to its joint venture partner WIN Television (point (6)) is also misplaced. It was no concern of Primus' that Kooee might have to make arrangements with WIN Television in order to change service providers and take advantage of the 18% revenue share offered by DigiPlus by not remitting the whole of that share to the Kooee JV. 89 It should also be said here that the deletion of paragraph 8 of the DigiPlus offer from the executed version of the Anzac heads of agreement, and its omission from the DigiPlus VSPA, is immaterial. Primus did not seek to rely on that deletion, presumably for the good reason that the guarantee that Kooee would receive an 18% revenue share and would not carry the risk of bad debts was achieved through other terms of the documents, specifically terms 7 and 8 as they appear in annexure 1 to the Anzac heads of agreement and the definition of Resale Billings in the DigiPlus VSPA. 90 What then is the basis for Primus' contention that at the time Kooee made the Kooee purchase offer the supply of the carriage services in term 1 of the DigiPlus offer was not in fact available to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer? 91 The answer cannot be that it was only intended by Kooee and DigiPlus that the services would be provided on the terms proposed in the event that the transaction between SPT and B Digital proceeded. Mr Simmons' evidence is clear. He never considered that the transaction between SPT and B Digital might not proceed until it was first raised by Mr Kotzohambos on 27 November 2004, more than a month after the DigiPlus offer had been sent. 92 Nor can the answer be that Kooee had to obtain the consent of its joint venture partner, WIN Television, before accepting the supply of carriage services on the terms set out in the DigiPlus offer. Any breach of fiduciary obligations would have been a matter between Kooee and WIN Television. In any event, the terms of the DigiPlus offer were "available" to Kooee irrespective of Kooee's obligations as a joint venture partner to WIN Television. The issue as between Kooee and WIN Television was Kooee's desire to remit only the equivalent of a 10% revenue share to the joint venture, rather than the whole 18% revenue share DigiPlus had agreed to provide to Kooee. Nothing in Kooee's fiduciary obligations made the DigiPlus offer unavailable to Kooee. 93 Nor can the answer be that the DigiPlus offer was a mere sham. Although Primus avoided this description, this was in truth its case. The evidence, however, discloses that the DigiPlus offer was no such thing; far from it, the DigiPlus offer was an important part of an overall transaction between SPT and B Digital (as provided for in the Anzac heads of agreement) which Kooee had always believed would proceed. As noted, Mr Simmons' evidence was that the alternative was not even considered until 27 November 2004. 94 It is presumably true that Kooee wanted Primus to believe that the DigiPlus offer was a real offer of commercial substance in order to engender the belief in Primus that, if Primus did not match the offer, Kooee would transfer is customers to DigiPlus. But the substance of this belief precisely reflects what Kooee in fact believed and intended: that is, that the transaction between SPT and B Digital would proceed and that DigiPlus would provide the services to Kooee as set out in the terms of the DigiPlus offer. 95 Further, nothing in the Kooee purchase offer or the DigiPlus offer could have been understood as conveying anything false about either the transaction between SPT and B Digital or the position of WIN Television whether expressly, impliedly or by reason of silence. As to the former, the Kooee purchase offer operated by cross-reference to the DigiPlus offer and thus could convey nothing about the terms on which Kooee would be willing to acquire services from Primus other than the terms of the DigiPlus offer. On its face the DigiPlus offer was an offer to negotiate to provide services on the terms indicated, with any binding agreement to be subject to DigiPlus completing its due diligence, complying with all regulatory requirements, and obtaining approval from its board. The DigiPlus offer was thus conditional on its face. But conditionality does not mean that the offer was not real or not genuine. It means only that what was communicated to Primus was the offer as received and subject to the conditions identified. It must also be remembered that by 15 October 2004 (before the date of the Kooee purchase offer), Primus was aware that Kooee was considering making the SPT share sale offer as a result of the discussions between Mr Simmons and Mr Wilson. As to the latter, there was no basis for any belief by Primus that it should have been told that Kooee had to reach an agreement with WIN Television before it could retain part of the 18% revenue share for itself rather than remitting the total amount to the joint venture. Precisely the same issue would have confronted Kooee if Primus had matched the DigiPlus offer. Neither the DigiPlus offer nor the Kooee purchase offer conveys anything about what Kooee might have to do to ensure compliance with its obligations to WIN Television. 96 For these reasons, Primus' contention that at the time Kooee made the Kooee Purchase offer the supply of the carriage services in term 1 of the DigiPlus offer was not in fact available to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer cannot be accepted. Insofar as Primus' case of misleading and deceptive conduct depends on a factual finding to this effect, it cannot succeed. 97 As to Primus' alternative contention that at the time Kooee made the purchase offer, Kooee had reasonable grounds to believe that supply of the carriage services in term 1 of the DigiPlus offer would not in fact be available in the relevantly immediate future to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer, the contention itself requires examination. The source of the words "in the relevantly immediate future" is unclear. So too is their meaning. The Kooee purchase offer did not use those or equivalent words. Nor did the DigiPlus offer. The Kooee purchase offer contained no suggestion about timing, and said only that if Primus did not accept the purchase offer within 30 days Kooee "may enter into an agreement" with B Digital (in fact, DigiPlus). Insofar as the DigiPlus offer said that DigiPlus was in a position to negotiate and formalise an agreement and commence the provision of carriage services to Kooee "as soon as possible thereafter", the following paragraph disclosed that the formalisation of the agreement (and thus the provision of the services) had to follow DigiPlus board approval, due diligence, and compliance with all regulatory requirements. The "relevantly immediate future" therefore could not mean any time prior to the completion of all of these conditions precedent. 98 No one from Primus gave evidence identifying what was meant by the "relevantly immediate future". Mr Wilson, Primus' managing director at the time, did not give evidence at all (a matter discussed further below in the context of the alleged implied representation). Mr Miller, Primus' general counsel at the time, gave evidence that on reading the documents sent by Kooee on 19 October 2004 he believed it was obvious that they "may create a circumstance under which the VSPA could be terminated and Kooee could commence to receive a full suite of carriage services from another provider." It was not until later, in November or December 2004, that Mr Miller said he believed that if Primus was not prepared to match the offer and could not successfully challenge its validity then "the VSPA would soon come to an end". Whether "soon" means the same as in the "relevantly immediate future" remains unclear. Either way, Primus' references to "soon" or the "relevantly immediate future" can mean only what the DigiPlus offer itself conveyed: that the provision of the carriage services on the terms detailed was not available until the conditions in the DigiPlus offer had been satisfied. 99 In any event, the discussion above also discloses that at the time it made the purchase offer Kooee did not have reasonable grounds to believe that the supply of the carriage services in term 1 of the DigiPlus offer would not in fact be available to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer either "in the relevantly immediate future" or otherwise. To the contrary, the grounds identified by Mr Simmons for his confidence that the transaction between SPT and B Digital would proceed, so that he never contemplated otherwise before 27 November 2004 (when Mr Kotzohambos first raised the question in a telephone call), provided Kooee with a high degree of comfort that the carriage services would be provided by DigiPlus and would be available to Kooee in accordance with the terms of the DigiPlus offer. For these reasons, Primus' alternative contention about misleading and deceptive conduct at the time of the making of the Kooee purchase offer also cannot succeed.

After the Kooee purchase offer was made 100 Primus' third contention of misleading and deceptive conduct by Kooee was that, at a time after Kooee made the purchase offer but before execution of the separation deed, supply of the carriage services in term 1 of the DigiPlus offer became no longer available to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer and Kooee did not tell Primus of this change in circumstances. This contention depends on the premise that, in the circumstances, it was misleading and deceptive for Kooee not to inform Primus of the email of 27 November 2004 from Mr Simmons to Mr Kotzohambos and the letter agreement of 2 March 2005 between DigiPlus and Kooee, as well as the effect of those documents. 101 The first observation that is necessary is that, insofar as Primus relied on the communications from Baker & McKenzie (specifically, the memorandum of 30 November 2004, the email from Mr Lloyd about the draft DigiPlus VSPA of 13 January 2005, and the "Primus outcome matrix" sent by Mr Lloyd on 14 January 2005), none of those communications can determine the relevant question. The memorandum of 30 November 2004 correctly assumed that any supply by DigiPlus would be at the agreed 82/18% revenue split but was concerned with the condition precedent in respect of the consent of WIN Television. That issue has been dealt with and dismissed above. The email from Mr Lloyd of 13 January 2005 (to the effect that the draft DigiPlus VSPA would not be consistent with the Kooee purchase offer to Primus) recommended at least a 6-month notice period before there could be any reversion from the 82/18% revenue split to a 90/10% revenue split. In the event, the DigiPlus VSPA as executed on 1 March 2005 provided for the 82/18% revenue split and the capacity to terminate the VSPA on 6 months' notice if, relevantly, this occurred before completion of the Anzac heads of agreement (that is, the sale of Kooee to B Digital so that Kooee became a wholly owned subsidiary of B Digital in common with DigiPlus). The letter agreement of 2 March 2005 operated only in the event of such termination and then in accordance with its terms. In other words, the DigiPlus VSPA and letter agreement reflected the advice contained in Mr Lloyd's email of 13 January 2005. The "Primus outcome matrix" identified perceived legal risks associated with options available to Kooee. Amending the 82/18% revenue split agreed on by DigiPlus and Kooee to a 90/10% revenue split was one option (as the use of the word "perhaps" in outcome 4 discloses). The reference in outcome 4 to "withholding advice of (what might be claimed to be) a pre-existing intention to change to a 90/10% deal" does not prove the existence of any such intention. If anything it proves the contrary. Had there been such an intention then the 90/10% revenue split would not have been a mere option that "perhaps" might be adopted. Nor would the so-called "pre-existing intention" merely be "what might be claimed" by Primus. In any event, and as noted, all three communications from Baker & McKenzie were communicated to Kooee. Of themselves, they can have no effect on the question whether, in the circumstances, it was misleading and deceptive conduct for Kooee not to inform Primus of the email of 27 November 2004 from Mr Simmons to Mr Kotzohambos and the letter agreement of 2 March 2005 between DigiPlus and Kooee. 102 The second observation that is necessary is that the reasoning above must also apply to Primus' reliance on Mr Simmons' apparent view that, once Kooee became a wholly owned subsidiary of B Digital (in common with DigiPlus), cl 6 of the VSPA would become irrelevant because DigiPlus would not be a third party supplier. Primus appeared to place weight on Mr Simmons' email of 5 January 2005 (stating that the 82/18% revenue split issue would only arise if Kooee needed to rely on it to exit the VSPA) as supportive of its case. Properly analysed, it is not. The email is not consistent with any intention to mislead on Mr Simmons' part. It does no more than disclose Mr Simmons' view (which Primus accepted in this appeal to be correct) that cl 6 of the VSPA would not apply to any supply agreement between Kooee and DigiPlus if both were wholly owned subsidiaries of B Digital, as this would not involve supply by a third party. Once this is accepted, it can be seen that Mr Simmons' email accurately reflected the fact that the agreed 82/18% revenue split was only relevant if required to "exit the Primus arrangement" (that is, to no longer obtain carriage services from Primus and, if possible, negotiate a termination of the VSPA). Ending Kooee's commercial relationship with Primus, as noted, was a legitimate commercial objective for Mr Simmons to hold, and the use of cl 6 to achieve that objective was in no way improper (indeed, that was one purpose of cl 6). Nothing in Mr Simmons' recognition of the limited relevance of the 82/18% revenue share split indicates that the DigiPlus offer was not genuine in the sense of being a real commercial offer. To take up the DigiPlus offer, Kooee had to "exit the Primus arrangement". The totality of Mr Simmons' communications discloses his intention that Kooee should "exit the Primus arrangement" and take up the DigiPlus offer. 103 The third observation that is necessary is that, as pleaded, Primus' contention assumes that the effect of the email of 27 November 2004 from Mr Simmons to Mr Kotzohambos and the letter agreement of 2 March 2005 between DigiPlus and Kooee was that "supply of the carriage services in term 1 of the DigiPlus offer became no longer available to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer". This assumption is not supported by the terms of either document. It was common ground that the email of 27 November 2004 was intended to convey to Mr Kotzohambos that if the Anzac heads of agreement was executed but the sale of Kooee to B Digital did not take place as contemplated by that agreement (so that Kooee did not become B Digital's wholly owned subsidiary) then, at that time, Kooee would agree to change the revenue split between it and DigiPlus from 82/18% to 90/10%. The letter agreement of 2 March 2005 dealt with the same subject - that is, the situation if Kooee were not sold to B Digital and so did not become a wholly owned subsidiary in common with DigiPlus. The letter agreement provided that, in that event - which would entail the DigiPlus VSPA being terminated under cl 23.1 (that is, on not less than 6 months' notice given before completion of the Anzac heads of agreement, completion requiring Kooee to be sold to B Digital) - Kooee should provide a payment back to DigiPlus for demonstrated loss provided the payment did not result in Kooee receiving less than it would have received under the VSPA with Primus. 104 Neither document had the effect of making the supply of the carriage services in term 1 of the DigiPlus offer no longer available to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer. To the contrary, both documents demonstrated that the supply of carriage services by DigiPlus to Kooee was intended and likely to be available on the terms set out in the DigiPlus offer. Both documents were concerned with contingencies. The principal contingency with which they were concerned was the circumstance of the sale of Kooee shares by SPT to B Digital not taking place (and thus the Anzac heads of agreement not being completed). In that event, Kooee would not become a wholly owned subsidiary of B Digital. The documents concerned the consequences of that contingency should it eventuate. The documents thus contemplated that DigiPlus would be supplying the carriage services to Kooee in accordance with the DigiPlus offer on the expectation that the sale of Kooee shares by SPT to B Digital would be completed but recognised that, for some reason or other, completion might not occur. They provided for consequences in that event as specified (in the 27 November 2004 email a 90/10% revenue split, and in the 2 March 2005 letter agreement a more complex arrangement). 105 It is not clear how documents to this effect - which provided for consequences only if a contingency arose - could mean that the supply of the carriage services in term 1 of the DigiPlus offer was no longer available to Kooee on the terms set out in terms 7 or 8 of the DigiPlus offer. As noted, the documents assumed that services would be available on the agreed basis unless the contingency eventuated. Primus' case as pleaded, accordingly, is unsustainable. 106 Primus' case as argued differed from its case as pleaded. In essence, its case as argued was that it was simply misleading and deceptive conduct for Kooee not to tell Primus about the 27 November 2004 email and the 2 March 2005 letter agreement in all of the circumstances. When the circumstances are analysed, however, it is apparent that the contention lacks substance. 107 Insofar as cl 6 of the VSPA forms a relevant part of the circumstances, the clause provides no support for Primus' contention. As noted, cl 6.1 precluded Kooee from entering into an agreement with a third party supplier unless Kooee first made a purchase offer to Primus. If Primus did not accept the offer then Kooee was free to enter into such an agreement provided (pursuant to cl 6.3) that the terms were no more favourable to the third party supplier than those offered to Primus. Kooee made a purchase offer on 19 October 2004 which Primus declined to accept. By the time of the 27 November 2004 email and 2 March 2005 letter agreement, the Kooee purchase offer had lapsed. If the 27 November 2004 email and 2 March 2005 letter agreement constituted an agreement with a third party supplier on more favourable terms than had been offered to Primus in the Kooee purchase offer, then entry into such an agreement would have constituted a breach of cl 6.3. Primus would have had rights against Kooee for breach of contract in that event. Nothing in cl 6 of the VSPA, however, required Kooee to give Primus notice of the fact that Kooee had breached the VSPA. Nor could it be concluded that Primus held a reasonable expectation that it would be notified by Kooee that it had entered into an agreement in breach of cl 6.3 of the VSPA. As Mr Miller acknowledged, given the history of dealings between Primus and Kooee any such notification would have been unlikely. In the absence of any such obligation or reasonable expectation, it is difficult to see how Kooee's not notifying Primus of the existence of the documents and any agreements to which they gave effect could be misleading or deceptive in all the circumstances. 108 In any event, it is doubtful that either document constituted an agreement within the meaning of cl 6.3 of the VSPA on terms more favourable to DigiPlus than had been offered to Primus in the Kooee purchase offer. The email of 27 November 2004 was not an agreement at all. It was an agreement to agree in the event of a contingency occurring and at the time the contingency occurs. The letter agreement of 2 March 2005 was an agreement. But it was an agreement that applied if the DigiPlus VSPA were terminated on 6 months' notice because of the contingency of Kooee not being sold to B Digital (that is, the Anzac heads of agreement not being completed). The contingency (Kooee not being sold to B Digital ) did not occur and, as Mr Simmons said, the DigiPlus offer (through the DigiPlus VSPA) was implemented as between DigiPlus and Kooee, with DigiPlus paying the 18% revenue share to Kooee and Kooee paying 10% to the Kooee JV. On what basis then, it must be asked, was it misleading and deceptive of Kooee not to notify Primus about these documents? Primus could not have had any reasonable expectation of such notice. How could it, when the first document was a mere agreement to agree if the sale of Kooee to B Digital did not occur and the second document was an agreement providing for consequences if the DigiPlus VSPA (which was an agreement within the meaning of cl 6.3 of the VSPA) were terminated because the sale of Kooee to B Digital did not occur? Neither constituted an agreement to purchase carriage services on terms more favourable than those which had been offered to Primus. Primus had declined to purchase the shares in Kooee as offered to it by the SPT share sale offer. Accordingly, no such arrangements in the event of an equivalent contingency could have been offered to Primus. 109 The Kooee purchase offer and SPT share sale offer both having lapsed, there is no other apparent basis upon which Primus could reasonably have expected Kooee to notify it of the documents in question. As discussed, no such expectation could be based on the VSPA. Nor could it be based on the terms of the Kooee purchase offer or the DigiPlus offer. Primus otherwise referred to the fact that, before the Kooee purchase offer was made, Primus believed that Kooee would execute the proposed new VSPA that Mr Miller had been negotiating with Mr Simmons. But that belief could not have extended beyond the making of the Kooee purchase offer and thus cannot be relevant to this aspect of Primus' case. Primus submitted that it could reasonably be expected to be told of the "cessation of the basis - if there ever was one - for the purchase offer, rather than being allowed to terminate the VSPA on the contrary assumption". This submission conflates the Kooee purchase offer to Primus with the DigiPlus offer to Kooee. As discussed, the Kooee purchase offer to Primus had lapsed before the so-called change of circumstances of which Primus said it should have been notified. Be that as it may, there was no "cessation of the basis" of the DigiPlus offer to Kooee. The DigiPlus offer continued and was reasonably expected by Kooee to be implemented (as, indeed, it was). The documents on which Primus relied, as analysed above, did nothing more than provide for consequences in the event of a contingency (Kooee not being sold to B Digital) which Kooee did not believe would eventuate (and which, in fact, never eventuated). The submission that Mr Kotzohambos was "never prepared to expose B Digital to the uncommerciality of the terms" of the DigiPlus offer is contrary to the evidence. Mr Kotzohambos signed the DigiPlus offer providing for those terms. He signed the Anzac heads of agreement providing for those terms. He signed the DigiPlus VSPA providing for those terms. DigiPlus in fact implemented those terms. Primus' case fails to recognise that the mere fact that Mr Kotzohambos also covered a contingency which, on the evidence, was never expected to occur does not in any way undermine the commercial substance of the DigiPlus offer. Primus' submission that the documents constituted a "side agreement" which "avoided the terms" of the DigiPlus offer does not withstand scrutiny. For the reasons already given, the email of 27 November 2004 and the letter agreement of 2 March 2005 did no such thing. Primus thus proceeded on the correct assumptions at all times, being assumptions that were consistent with those made by Kooee. 110 It follows that the third aspect of Primus' case of misleading and deceptive conduct also cannot be sustained.

The implied representation 111 The fourth and final aspect of Primus' case of misleading and deceptive conduct was its contention that, in communicating the purchase offer to Primus, Kooee implicitly represented that supply of carriage services in term 1 of the DigiPlus offer would be available in the relevantly immediate future to Kooee on the terms set out in terms 7 and 8 of the DigiPlus offer, which implied representation was false, misleading and deceptive, and which Kooee did not have reasonable grounds for making. 112 In common with the other claims of misleading and deceptive conduct, this contention also confronts a number of difficulties. The first is that no one from Primus gave evidence that the Kooee purchase offer was understood by them to convey any such representation. As noted, Mr Wilson, Primus' managing director, did not give evidence at all. Mr Miller, Primus' general counsel, gave evidence but did not say that he was ever of this understanding. Mr Miller did say, in addition to the evidence set out above, that he assumed Primus would lose the Kooee customers from the time he saw the Kooee purchase offer because Primus would not match the DigiPlus offer and had no interest in the SPT share sale offer. That, however, does not equate to evidence that the Kooee purchase offer conveyed the alleged implied representation to Mr Miller. Plainly, if Primus chose (as it did) not to accept the Kooee purchase offer, which related to all of the carriage services being provided by Primus to Kooee, then Mr Miller's expectation that Primus would lose the Kooee customers would necessarily depend on the assumption that Kooee and B Digital would conclude an agreement on the terms set out in the DigiPlus offer. As discussed, on the face of the DigiPlus offer, any such agreement was subject to conditions including DigiPlus conducting due diligence and obtaining board approval. Also as discussed, whatever the "relevantly immediate future" might mean, if that notion was in anyone's mind at Primus (and there is no evidence it was) its meaning must have been informed by the actual text of the DigiPlus offer. 113 The second difficulty is that if the meaning of the "relevantly immediate future" is confined by the actual terms of the DigiPlus offer then the representation said to have been implied was not false, misleading or deceptive (and, it might be said, did not become so, although Primus' case as pleaded did not extend so far). On this basis, the supply of carriage services would be available to Kooee from DigiPlus on the terms set out in the DigiPlus offer in the "relevantly immediate future", being the time when the conditions set out in that offer were satisfied. Kooee certainly believed they would be so available. And, as previously observed, they were in fact made available on the terms set out in the DigiPlus offer. Moreover, and for the same reasons set out above, the documents of 27 November 2004 and 2 March 2005 (Mr Simmons' email and the letter agreement) did not make the alleged implied representation false. 114 It should also be said, for completeness, this is not a case in which there is any engagement of the principle that silence may be misleading and deceptive if it can be characterised as a half-truth. It is not a matter where, by reason of a reasonable expectation that the true position would be disclosed, a person in Primus' position would have assumed the matter not disclosed did not exist (as explained in Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 at 113). As explained above, there was no "half truth" in this case; nor was there any reasonable expectation on the part of Primus that Kooee would disclose to Primus that it and DigiPlus had dealt with a contingency (the non-completion of the Anzac heads of agreement and thus Kooee not becoming a wholly owned subsidiary of B Digital) which was first raised after the Kooee purchase offer had already lapsed, which Kooee did not believe would arise, and which in fact never arose. 115 For these reasons the fourth and final aspect of Primus' claim of misleading and deceptive conduct also cannot be accepted.

The reliance question 116 Given the above conclusions, the question of reliance does not strictly arise. Be that as it may, it is necessary to record that if Kooee had engaged in any misleading or deceptive conduct as claimed, Primus' case on reliance is also confounded by the evidence. 117 It may be acknowledged that the primary judge (at [53]) found reliance based on the evidence of Mr Miller and Mr McCutchan. In the primary judge's words: Kooee alleges that the only evidence Primus relies upon is from Mr Miller who said, "If Primus had never received the purchase offer from Kooee, I would not have advised Primus to negotiate an orderly and consensual termination of the VSPA". Kooee states that Mr Miller's role was to give legal advice and commercial decisions were referred to commercial officers, usually the Chief Executive Officer. The Chief Financial Officer for Primus gave evidence that he oversaw the financial aspects of the VSPA and assessed the financial implications of the purchase offer. In his opinion, the reason for Primus entering into the Separation Deed was because it could not match the DigiPlus offer. He was not challenged on that belief. I am satisfied that Primus did rely on the contravening conduct which led it to enter into the Separation Deed. 118 Mr Miller's evidence to the above effect is to be found in his affidavit of 16 July 2009. Mr McCutchan's evidence is to be found in his affidavit of 17 July 2009. Both, however, gave other evidence which must also be taken into account. 119 Mr Miller, in cross-examination, agreed that the question whether Primus would accept the Kooee purchase offer was a "commercial decision". He agreed that this commercial decision was made by other people, saying that although he was responsible for "guiding the response" (presumably giving legal advice thereon) and the commercial decision was "probably obvious to [him]", it "wasn't made by [him]". The people involved in that commercial decision were Mr Wilson, Primus' chief executive officer and managing director, assisted by Mr McCutchan as chief financial officer. 120 Mr Miller also agreed that, while he had no clear recollection of what he thought when he saw the SPT share sale offer, it would have been logical for him to have appreciated that one of the parties with whom SPT might want to negotiate for a sale of the Kooee shares would be B Digital. Mr Miller did know, however, that Primus had no interest in acquiring the Kooee shares - another commercial decision made not by Mr Miller but by Mr Wilson. Mr Miller could not recall appreciating, but accepted that he would likely have done so, that if B Digital did acquire the Kooee shares then DigiPlus and Kooee would both be wholly owned subsidiaries of B Digital. Moreover, he agreed that once such a sale of shares went through Primus could do nothing to stop the transfer of Kooee's customers from Primus to DigiPlus. Mr Miller accepted that once such a share sale was completed, DigiPlus would no longer be a third party supplier for the purposes of the VSPA (though he could not recall whether he appreciated this at the time he saw the SPT share sale offer). Mr Miller accepted that while he could not recall what he thought at that time, it would "make perfect sense" if he had appreciated that because Primus was going to lose the Kooee customers by reason of the SPT share sale, in which Primus had no interest, Primus should start making arrangements for the transfer of those customers. While Mr Miller also said that Primus would not have wanted to accelerate the transfer, it did not want to be left with only some of the Kooee customers. Mr Miller's views on Primus' "eagerness" to co-operate (or lack thereof) also need to be understood in the context of Primus' obligations under the VSPA, particularly cls 7.5 and 26.5 as discussed above. Most telling is Mr Miller's agreement to the following proposition: Well, let me say - put this to you so that it's clear. I suggest to you that by the beginning of December - so the first week of December - Primus management had made a decision that there was nothing they could do to stop the loss of these Kooee customers because Kooee was being sold to B Digital which was the holding company and DigiPlus? I cannot say yes or no to that question, but it's quite likely that there was that decision. 121 It will be recalled that the sale of Kooee to B Digital became known via the public announcement made by SPT and B Digital on 29 November 2004. Mr Miller's evidence that the Kooee purchase offer had not thereby become irrelevant in his mind (on which Primus relied) cannot sustain a finding of reliance in the face of Mr Miller's evidence that he was not the decision-maker in relation to either the non-acceptance of the Kooee purchase offer or Primus' entry into the separation deed, and that it was quite likely that the actual decision-makers were relying on the sale of Kooee to B Digital announced on 29 November 2004. This acknowledgement has to be weighed with Mr McCutchan's evidence. Mr McCutchan was Primus' chief financial officer. It is true that he was not cross-examined about the statement in his affidavit cited by the primary judge at [53] of the primary judgment. It may be inferred that this was so because in the preceding paragraph Mr McCutchan said this: It was not my decision to agree to terminate the VSPA by consent, but I ultimately accepted that Primus' interests may be best served by entering into an orderly separation agreement rather than allow separation to degenerate into wide ranging conflict and litigation. In particular, Primus had at that time considerable bad debt exposure in the Kooee Debtors Ledger and, as CFO, I wanted to avoid writing-off these debts. 122 In other words, on the evidence, neither Mr Miller nor Mr McCutchan made the commercial decision to terminate the VSPA and enter into the separation deed. Mr Miller may be inferred to have given some legal advice to Mr Wilson about the Kooee purchase offer (and presumably the SPT share sale offer). While Mr Miller could not remember what he thought on seeing the SPT share sale offer, he not only considered it perfectly logical that he would have recognised that the Kooee customers would be lost to Primus on the Kooee shares being sold to an entity like B Digital; he also accepted that, after it became aware of the agreement between SPT and B Digital (through the public announcement on 29 November 2004), the Primus management quite likely made a decision "that there was nothing they could do to stop the loss of these Kooee customers because Kooee was being sold to B Digital which was the holding company" of DigiPlus. This evidence negates any possible reliance by Primus on the so-called misleading and deceptive conduct of Kooee as a reason for negotiating and entering into the separation deed by which, amongst other things, the VSPA was terminated. 123 Further, the fact that Mr Wilson was not called by Primus (although he was available to be called, albeit a former employee by the time of the hearing) creates a fundamental evidentiary difficulty for Primus' case on reliance. On the evidence, Mr Wilson made the commercial decision for Primus to enter into the separation deed and terminate the VSPA. If there was actual reliance, Mr Wilson could give direct evidence of it. On the evidence of Mr Miller, Primus must be inferred to have relied on its awareness after 29 November 2004 of the agreement between SPT and B Digital as the reason for entering into the separation deed and terminating the VSPA. On the evidence of Mr McCutchan, it was in Primus' interests to do so because it did not wish to be left holding the Kooee bad debtors. 124 This is not a case in which reliance might be presumed merely because Primus entered into the separation deed and terminated the VSPA. In the circumstances it was in Primus' own interests to do so, as Mr McCutchan's evidence discloses. Nor is it a case in which, as Primus submitted, no reliance evidence was necessary because it was a matter for Kooee to "disentangle the various contributing factors" (citing Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 (Henville v Walker) at [148]). This is not a case in which Primus established a breach of duty closely followed by damage. Primus entered into the separation deed on 20 April 2005 many months after Primus became aware of the fundamental fact of importance - that SPT had agreed to sell the shares in Kooee to B Digital (so that Kooee would become a wholly owned subsidiary of B Digital in common with DigiPlus) and that, accordingly, Kooee could take carriage services from DigiPlus without regard to cl 6 of the VSPA even if the VSPA continued in force and effect. Confronted with that reality, it is hardly surprising that Mr McCutchan considered it in Primus' interests not to be left holding the Kooee bad debts. What would be surprising - and required evidence to establish - is that anything to do with the lapsed Kooee purchase offer or the terms upon which DigiPlus could make services available to Kooee had any part at all to play in Primus' decision-making after the public announcement of the agreement between SPT and B Digital on 29 November 2004. 125 For these reasons, neither the practical common-sense approach to causation which is required (Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 at 525) nor the principle that the impugned conduct need only be one of the causes of the actions in question and not the or the decisive cause (Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413; [1999] HCA 25 at [118]; Henville v Walker at [14] and [106] to [109], and Gould v Vaggelas (1984) 157 CLR 215 at 251 to 252) assists Primus on the facts which must be found on the evidence in this case. It must be found, consistent with the overall effect of the evidence of Mr Miller and Mr McCutchan, that Primus' management decided to enter into the separation deed and terminate the VSPA because they knew that, faced with the SPT sale of the shares in Kooee to B Digital, it was inevitable that Primus would lose the Kooee customers and it was in Primus' interests that the separation be orderly and consensual. 126 Accordingly, even if Primus had established any aspect of its case of misleading and deceptive conduct (which it has not), it could not have succeeded because it failed to prove any reliance on the conduct in question. 127 It necessarily follows that the required orders are that the appeal be allowed with costs, the orders of the primary judge in Primus' favour be set aside, and orders be made in lieu thereof dismissing Primus' application with costs.

Damages 128 Kooee also appealed against the order for damages. Although it is not necessary to deal with these issues they are addressed (albeit briefly) below. 129 Kooee's first argument was that the primary judge, having found that "it is probable that both Primus and Kooee may not have continued to advertise their services in the same way post Separation Deed" (at [72]), should have accepted the quantification of damages assessed on the basis of this factual assumption (described as scenario 2). Instead, the primary judge preferred scenario 1 (which assumed that Primus and Kooee would have continued to advertise their services in the same way post-separation deed) because scenario 2 did not take account of what the primary judge described as "any incoming customers during this period", given that his Honour considered it "probable that new customers would have signed up to the Primus/Kooee services, due to residual marketing and promotional advertising that already existed in the market place, as well as word of mouth sign-ups through family and friendship connections." 130 While Primus submitted that the primary judge was entitled to make that estimate, there was, as Kooee submitted, no evidence supporting the existence of the matters on which the estimate was expressed to be based, let alone of the quantum those matters might have involved had they existed. While there was cross-examination of Kooee's expert to the effect that he had not taken the matters into account, no evidence was put to him to suggest that they actually existed. On this basis, the inexactitude which is necessarily involved in any assessment of damages cannot protect the primary judge's conclusion from appellate intervention. Having found that the facts underlying one scenario (scenario 2) were probable, there was no basis in the evidence for adopting the competing scenario (scenario 1) on the basis of unproven assumptions. 131 Kooee's second argument was that the primary judge should have deducted an amount shown in Primus' management accounts as a profit due to the Kooee business. The primary judge did not do so on the basis that (at [73]): I am not satisfied that this figure should be discounted for the profit allegedly made by Primus in respect of the VSPA business in the sum of $456,468. The Court has no evidence before it, whether if any or all [sic], of the actual profits were received by Primus. 132 The problem is that the figure of $456,468 appeared in Primus' own management accounts as a profit due to the Kooee business. Primus' expert agreed that if this was a profit earned by Primus, it had to be deducted from any damages. He also agreed that the only reason he had not deducted that amount was because Primus had instructed him not to. Other than that, Primus, which bore the onus of proving its loss, called no evidence to support a finding that (despite the entry in its own business records) it had not in fact received the amount shown. On this basis the necessary result was for the amount of $456,468 to be deducted from the damages awarded to Kooee. 133 Kooee's third and final argument regarding damages was that there should be a 50% deduction overall for the contingency that the VSPA might not have run its full term irrespective of the alleged misleading and deceptive conduct. The primary judge (at [77]) was not satisfied that there should be any such deduction. As Kooee submitted, the primary judge thereby treated it as 100% certain that the VSPA would run its full term. On the basis of the findings above about the effect of the Anzac heads of agreement, the overwhelming inference is that the VSPA would have been terminated in any event. On this basis no damages would be payable. However, this is in substance another way of recognising that Primus did not rely on any alleged misleading or deceptive conduct. If the effect of the Anzac heads of agreement is capable of being put to one side (itself a highly artificial exercise which, in truth, underpinned Primus' case), then the evidence nevertheless shows a real likelihood that the VSPA would not have run its term. Primus and Kooee were in dispute about the agreement from the time Mr Wilson took over as managing director of Primus. The amendment to the VSPA in May 2003 did not resolve the dispute. Mr Simmons did not trust Mr Wilson. In these circumstances a deduction for the contingency that the VSPA would not run its term was required. The 50% deduction claimed by Kooee was modest given the evidence and should have been made.

Anshun estoppel 134 The final issue on appeal was Anshun estoppel. The primary judge was satisfied that no Anshun estoppel arose against Primus for the reasons given in the primary judgment at [57] to [62]. In reaching this conclusion, the primary judge referred to his interlocutory decision to the same effect in Primus Telecommunications Pty Ltd v Kooee Communications Pty Ltd [2008] FCA 1027 (the interlocutory decision). 135 The dispute between the parties having been fully heard and determined on its merits at first instance and on appeal, the application of an Anshun estoppel at this stage has little to commend it. Be that as it may, a number of observations can be made. It is true, as Kooee submitted, that: - (i) Primus knew about the Baker & McKenzie "Primus outcome matrix" as a result of discovery in the proceedings in the Supreme Court of New South Wales in July 2006, (ii) when Mr Miller saw that document a few weeks before the hearing in the Supreme Court of New South Wales, it suggested to Mr Miller that Primus had probably been misled, (iii) Primus may be inferred to have decided to proceed with that hearing, in which Primus sued on the separation deed because it thought it had good prospects of success until the matter went to appeal (see Primus Telecommunications Pty Limited v Kooee Communications Pty Limited [2007] NSWSC 91 for the first instance decision and Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5 for the appeal decision), (iv) the quantification of debtors probably would have been different had the proceedings in the Supreme Court of New South Wales not been prosecuted separately from the question of misleading and deceptive conduct, (v) Primus undoubtedly could have raised the issue of the alleged misleading and deceptive conduct before the Supreme Court of New South Wales, and (vi) it would have been far more efficient had Primus done so. These facts notwithstanding, the question remains whether it was unreasonable for Primus not to have raised the issue in the Supreme Court of New South Wales as it was of such relevance to the subject-matter of those proceedings (see the interlocutory decision at [6] to [8] and [11] to [12] and the cases cited therein by the primary judge). 136 Recognising, as did the primary judge at [12] of the interlocutory decision, that a finding of relevant unreasonableness is not to be made lightly, the same conclusion as that reached by the primary judge commends itself on appeal. This is not a case in which it can be said that Primus should have raised the present claims in the earlier proceedings in the sense that it was unreasonable for it not to have done so. It is not a case where inconsistent judgments would result. It is, as the primary judge said at [61] of the primary judgment, not a "clear case for the invocation of the [Anshun] principle". 137 Accordingly, and on the basis of the principles identified by the primary judge (which were not challenged in this appeal), Primus was entitled to bring and maintain this proceeding. It was not estopped from so doing by the principles in Anshun and it was not an abuse of process for Primus to do so.

CONCLUSIONS 138 Primus has not established that Kooee engaged in any misleading and deceptive conduct or, if it did, that Primus in any way acted in reliance on that conduct. It follows that the appeal must be allowed with costs. I certify that the preceding one hundred and thirty-eight (138) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Gilmour, Jagot and Nicholas.