Is there a common interest between the Media Ocean group, Pivotel and the resellers?
69 Mr McHugh readily accepted that the Media Ocean group, Pivotel and the resellers all have in interest in the money "flowing down the line". He maintained, however, that their interests were not common, but potentially adverse, both commercially and legally. He largely focussed on the circumstance where the advice sought, and disclosed, by the Media Ocean group related to whether Optus was entitled to withhold payment from Vodafone for past calls to the Media Ocean numbers. He conceded that if the answer given was that Optus was not entitled to withhold payment, then their interests were the same. But he contrasted this with the position if the advice was that Optus could withhold payment. He then said, adopting Giles J's words in Ampolex, "each had its or their individual interest in advice…, advice which might guide it or them in what was done or not done vis-à-vis the others or other". He maintained that there had to be a common interest in the topic of the advice, regardless of its content or direction.
70 Specifically, Mr McHugh's submission was that Pivotel, the Media Ocean group and the resellers could not have a common interest in advice about Optus's entitlement to withhold payment because, if the outcome of the advice was that it could, their interests were potentially adverse in that, just like in Ampolex, they all might do different things. As he put it:
[W]hen one looks at the commercial relationships between the parties, it's easy to see that they were potentially adverse because all these resellers who have been carrying traffic and who haven't been paid may well put their hand out and say to [the Media Ocean group], "Well, we want money for the traffic that's already run".
71 Fundamentally, Mr Kunc relied on the terms of the agreements between the Media Ocean group entities and Pivotel and the resellers. He argued that two conclusions followed from those terms. First, communications fell within the confidentiality clauses in the agreements. Alternatively, even if they did not, the fact the agreements contained a confidentiality clause was evidence from which the existence of a relationship of confidentiality could be inferred (along with other relevant factors such as the subject matter, e.g. legal advice, the timing, e.g. close to litigation, and the fact that the various entities were working together or "in an alliance" against Optus). As I said earlier, Mr Kunc approached his task as needing to show the existence of a duty of confidentiality. Secondly, he submitted that the terms of the agreements with the resellers clearly showed that the resellers had no right to payment unless the Media Ocean group was paid for traffic. Therefore, there was no potential for conflict arising from non-payment to the resellers.
72 Mr Kunc pointed to the confidentiality clause in clause 6 of the agreement between Pivotel and Media Ocean dated 4 June 2007 and signed by Mr Charlesworth and Mr Sakker, under which Media Ocean obtained the Media Ocean numbers from Pivotel (then Globalstar Australia Pty Ltd). That agreement imposed obligations of confidentiality in relation to "the Confidential Information", defined as information disclosed or communicated (subject to exceptions not presently relevant) "for or in connection with the performance of this Agreement, and includes the provisions of this Agreement…"
73 Mr Kunc also relied on the "financial settlements" clause, contained in a schedule to the agreement:
1.1 [Pivotel] shall pay to Media Ocean an Interim Payment for each calendar month (or part thereof) of this Agreement equal to 80% of the Media Ocean Share per Measured Minute. The Interim Payment will be paid within 45 days of the end of the calendar month during which the Traffic occurred.
1.2 Upon receiving payment from Interconnect Carriers [in this context, Vodafone] in respect of Paid Minutes, [Pivotel] shall account to Media Ocean for the full Media Ocean Share in respect of those Paid Minutes less the Interim Payment paid in accordance with paragraph 1.1.
74 This demonstrated, he submitted, the common interest Pivotel and the Media Ocean group had in the outcome of the principal proceedings and the fact that "they're very much all very interested in getting this traffic flowing, and getting the money down the line, which is the subject of the proceedings". His point, to which he returned when dealing with the relationships with the resellers, was that each person further down the line - here the Media Ocean group itself - did not get paid for traffic unless the person further up the line was paid - in this case Pivotel. Therefore there was no prospect of conflict or litigation between Pivotel, the Media Ocean group and the resellers.
75 He argued that clause 1.1 guaranteed an interim payment (the details of how it is calculated are not presently relevant) within 45 days, but that under clause 1.2 Pivotel had no obligation to make full payment (with credit for the interim payment) unless Optus paid Vodafone, who paid Pivotel.
76 The Media Ocean group also tendered an unsigned agreement naming the parties to it as Sound Advertising and Hometown, dated 10 May 2008. Mr Mattock gave evidence in his affidavit that this was a copy of the agreement between them "which sets out the payment relationship between those entities", and said that the source of his belief that this was the case was, relevantly, Mr Charlesworth's affidavit of 5 June 2009. In Mr Charlesworth's affidavit of 5 June 2009, he gives evidence that Sound Advertising has a written agreement with Hometown. Mr Kunc said from the bar table that, in fact, the agreement was never signed.
77 The agreement that was tendered has a confidentiality clause, which appears on its face to be broadly similar in scope to the one in the agreement with Pivotel, as it obliges the parties to keep "the terms and nature of this Agreement in strictest confidence and … any information relating to this Agreement" (clause 12.1).
78 The payments clause of the agreement provides, in clause 5.3, that:
The Company [Sound Advertising] shall pay to the Contractor [Hometown] its share of revenue as stated in the Schedules herein and subject to the receipt by the Company of payments from the Network Provider in respect of the calls made in such a month.
[Emphasis added.]
79 Mr Kunc submitted that "the Network Provider" was, in context, a reference to Pivotel and Mr McHugh conceded that it would at least include Pivotel. Mr Kunc argued that the effect of the proviso that the obligation to pay was "subject to the receipt by the Company of payments from the Network Provider" was that, on any view, there was no obligation for Sound Advertising to pay the reseller Hometown unless it received payment, and as a result, no sensible possibility of conflict between them over the question of Optus's entitlement to withhold payment. At least one difficulty about relying on this agreement for any purpose was that it was unsigned and there was other evidence that Hometown was not paid (at least not always) in accordance with its terms.
80 Schedule One to the Hometown agreement provided that:
Payments shall be made by to [scil. the] company to contractor no later than 45 days past the end of the previous month (example: April month is paid by June 15th).
81 Mr Charlesworth said, however:
The arrangements between Sound Advertising and its Resellers are that they do not get paid until payment is received from Pivotel. Although the contract with Hometown Telecom has a term that requires payment at set dates, the practice adopted by Sound Advertising was to make payment when payment was received or when I was aware that payment was imminent. The only time that full payment has been made to Hometown where Sound Advertising or Media Ocean had not received full payment for the traffic was for November 2008 traffic. This was done to keep a good working relationship with Hometown, given that it generates a large amount of traffic.
Since December 2008, Sound Advertising has only to Hometown Telecom paid a proportion of the traffic generated by Hometown. Hometown has never made a demand on Sound Advertising for payment of the unpaid traffic. Given that the other Resellers have generated a very small proportion of traffic, I have arranged for full payment to those Resellers. That amount paid in March 2009 to the Resellers other than Hometown was only $7, 763.
82 Mr McHugh submitted that it could be inferred from this that Mr Charlesworth was "acutely conscious" that Hometown might make a demand for payment, and that there was a potential adverse relationship at the time of the various emails (December 2008 to early 2009) if the advice was that there was no action against Optus - and so, even if this was not in fact the advice, they could not be said to have a common interest in this question. Just like in Ampolex they might have "their individual interest in advice … advice which might guide it or them in what was done or not done vis-à-vis the others or other".
83 An agreement between Mediatel and the reseller Baycall was also tendered, signed by Kenneth Ting, director of Baycall, and Bill Vickery, director of Mediatel, and dated 17 June 2008. It was in the same terms as the agreement said to govern the relationship between Sound Advertising and Hometown.
84 Mr McHugh submitted that, in fact, the agreements were not so clear about the obligations of Sound Advertising and Mediatel to make payments to the resellers that it could be said there was no potential conflict. He pointed out that clause 5.1 of the two agreements provided that:
The Company [Sound Advertising or Mediatel] will pay to the Contractor [Hometown or Baycall] at the rate per minute of call traffic registered by the Network Provider [relevantly, Pivotel] from call originating countries listed in Schedule 1 to any number assigned to the Contractor by the Company according the payment schedule…
85 Schedule One to the Baycall agreement provided that:
Payments are made 60 days from end of month, after Mediatel has received payment.
86 Mr McHugh submitted that, even though this appeared to make the obligation to pay Baycall contingent on Mediatel being paid, where Optus has stopped making payments, Baycall will still have performed its function of directing calls overseas and there was a potential dispute in those circumstances with respect to calls already made.
87 Mr McHugh also relied on Mr Charlesworth's later affidavit of 3 November 2009. There Mr Charlesworth explains, as I indicated above, that his initial idea of blocking Optus customers from calling the Media Ocean numbers on 22 December 2008 was not in response to Optus' first text message to its customers, but rather in response to Optus's disputing its liability to pay Vodafone. He said:
I was concerned about the exposure to my business if payment was not made on the disputed traffic and immediately thought that the best way to limit any loss or damage to the business was to block the traffic. This is because I understood that Vodafone did not have to pay Pivotel (who in turn paid Media Ocean) unless payment was received from the originating carrier. At that time, I had not made a final decision to block the traffic.
88 He went on:
In addition to my concerns regarding the payment dispute I was also very concerned about my reputation being disparaged and I was particularly concerned that Pivotel might cut Media Ocean off because of pressure from Vodafone. Because of this I wanted to assure Mr Sakker [a director of Pivotel] that I did not have any previous dealings with Vodafone.
89 Mr McHugh submitted that all this went to show that Mr Charlesworth first blocked calls by Optus mobile customers because of a concern about his reputation and about his relationships with Pivotel and the resellers.
90 Mr McHugh also tendered two emails from the Media Ocean group's discovery which, he said, provided additional support for his argument about the potentially adverse interests - although they related only to the resellers, not Pivotel. The emails were admitted provisionally over objection.
91 The first was an email from Richard Burns, Mediatel's financial officer, to Mr Vickery and Geoff Maidens, director of Mediatel, and copied to a Gareth Robson, whose identity was not explained, dated 5 December 2008, a little less than three weeks before Optus's first text message to its customers.
92 In the email Mr Burns says that an inquiry from a prospective client - perhaps a reseller - which appears to have referred, broadly speaking, to an issue in the UK similar to the blocking of the Media Ocean numbers by Optus in Australia, has led him to look at the contract with Baycall. He says:
I think we need to tidy up a couple for [scil. of] clauses to make it crystal clear.
93 He then proposes amendments to clauses dealing with "suspension of service" and "termination" and, most importantly, to clause 5.3:
The Company shall become liable for payment under Clause 5.1 upon receipt of payment from the Network Provider. In the event that the Network Provider does not make payment for the traffic, the Company will not be liable to the Contractor for that traffic.
94 He then says:
I believe that these conditions are already understood by our clients - so there should be no issue in getting acceptance. I think the current contract does address the position, but it is not clear. We don't want to be in a position where the client demands payment for traffic for which we have not been paid.
[Emphasis added.]
95 In line with his submissions about the other evidence, Mr McHugh said this email again shows, following Ampolex, that once advice was received, depending on its content, the parties may find themselves in a position of conflict, that is to say, in an adverse relationship. He said the email indicated that within Mediatel there was a concern about facing a client demanding payment for traffic which had already flowed, so their interests are diverse.
96 Mr Kunc argued that the email was irrelevant since there was no disputed document where the question on which advice had been sought and in which there was said to be a common interest had anything to do with the mutual contractual obligations of the Media Ocean group and the resellers. I agree that the email is probably irrelevant.
97 Broadly speaking, the disputed communications are concerned with two subjects. One is Optus's decision to charge its customers at international (and not MTAS) rates for calls to the Media Ocean numbers. The question for consideration here is whether the Media Ocean group and Pivotel have a common interest in this subject. The other is the Media Ocean group's decision to block access to Optus customers where the question is whether the group has a common interest with the resellers.
98 The proper way to approach these questions, in my view, is by focussing on the objective nature of the legal and commercial relationship between the parties. This seems to accord with the approach Giles J took in Ampolex. For this reason I think that the evidence about the attitudes of the players is of doubtful relevance.
99 Turning first to the contract with Pivotel, the "financial settlements clause" does not seem to me to bar a demand by Media Ocean on Pivotel in the event of non-payment by Optus. Clause 1.1 is not expressly conditional on Pivotel receiving payment from Interconnect Carriers (read Vodafone). Whether the qualification that appears in clause 1.2 applies equally to clause 1.1 is, at best, moot. For this reason it seems to me there is a potential for conflict between Pivotel and the Media Ocean group in the subject question. Their interest in the outcome of the litigation is only common in the event that the Media Ocean group is successful and that is not enough.
100 The issue of common interest with the resellers largely arises in the context of advice on the subject of Media Ocean's blocking. The advice appears to have been of a strategic nature arising in the context of the litigation which, at the time of the relevant communications is either on foot or in contemplation. Mr McHugh submitted that the interests of the parties on this question were also potentially adverse:
It s not hard to see how the parties might be in dispute about that, because one person might take the view that they would prefer to have the traffic run - and take the chance that they won't get paid, because they take the view that Optus is liable and ultimately they'll have to pay, and they'd rather have the minutes run. Whereas somebody being more conservative might take the view: I don't want the traffic to run at all, because I don't want to be exposed downstream. Someone with a greater appetite for risk might say, I want the minutes to run so that I can then, you know, I can say to you that you say to Pivotel and Pivotel says to Vodafone and Vodafone says to Optus, these minutes ran. Because at this stage, the one thing that Optus wasn't doing was actually blocking the calls. They were refusing to pay, but the traffic was still running.
101 I do not think that this is the correct way to approach the question of common interest. I think Mr Kunc is right and the issue should be considered in the light of the legal relationships.
102 But in my opinion the position with respect to the two resellers is not the same. In the case of Hometown Mr Charlesworth referred in his affidavit to Sound Advertising having a written agreement a copy of which, he said, was exhibited to his affidavit but I simply do not know whether what was tendered was a copy of what appeared in the exhibit, as exhibits to his affidavit did not come before me. As I mentioned earlier, there was in any case no signed agreement. Mr Charlesworth also gave evidence that payments were not in all cases made in accordance with the terms of the agreement. In any event, assuming the unsigned contract that was tendered was the agreement to which Mr Charlesworth was referring in his affidavit, there is some room for ambiguity raised, at least, by the terms of the schedule under which payments are to be made by a certain time each month and there is no express qualification (such as appears in the Baycall agreement) that payments are subject to Sound Advertising being paid.
103 In the circumstances there is clearly a potential for conflict between Hometown and Sound Advertising.
104 In the case of Baycall a signed copy of the agreement with Mediatel was in evidence. I must say (despite Mr Burns's concern to make the position even clearer) that in this case I can see no potential for conflict in the case of non-payment by Optus. Clause 5.3 makes payments to Baycall subject to the receipt by Mediatel of payments from Pivotel and the ambiguity which arises from the payment schedule in the unsigned Hometown contract is missing here. Unlike the schedule in the Hometown contract the schedule to the Baycall contract provides that payments are made 60 days from the end of the month "after Mediatel has received payment".
105 This means that Baycall's fortunes are inextricably tied to Mediatel's. For this reason I am of the opinion that there is a common interest between them in the outcome of the litigation (no matter which way it goes) and also in the specific question of advice about Media Ocean blocking. As the advice is given in the context of the litigation then in contemplation, it seems to me to be quite artificial to separate it from the subject matter of the litigation.