Primus Telecommunications Pty Ltd v CCP Australian Airships Limited [2003] VSC 120

Primus Telecommunications Pty Ltd v CCP Australian Airships Limited [2003] VSC 120 - VSC 2003 case summary — Zoe

[164]

"1.0 CCP grants the advertiser an exclusive licence within Australia to use the Airship for advertising and promotional purposes for the duration of, and on the terms of, this agreement. 1.1 The parties agree that upon the execution of this agreement, the agreement executed by the parties on or around 25 February 2000 shall be immediately terminated. ... 3.0 This agreement commences on the date when it is executed. The licence granted under this agreement shall commence on 1 September 2000 and subject to this agreement shall continue for 12 calendar months. In addition the Advertiser shall be entitled to a two week test period prior to commencement of the licence in which to rest all functions and operations of the Airship. 3.1 Without limiting clause 7, if for any reason the Airship does not commence operation by 1 September 2000 CCP shall credit the Advertiser the amount of the licence fees due for the period during which the Airship is not in operation (the 'Delay Period') and extend the licence period by a period being the Delay Period. 3.2 That CCP during the months of August, September and October 2000 proposes to fly a minimum of 160 hours per calendar month, being a total of 66 hours in addition to the standard 138 hours per month. These additional hours flown during August, September and October 2000 will be at no charge to the advertiser. 3.3 During the months September and October 2000 prior to and after the Olympic and Para Olympic games it is proposed to fly in Sydney. 3.4 CCP represents that: (a) it owns the Airship and has the unfettered right to grant a licence to use the Airship on the terms of this agreement. ... 4.0 CCP will supply the Airship for a period of twelve months which includes flying time of 1656 hours for the sum of $3,250,008.00. 4.1 A non-refundable deposit of $400,000.00 shall be paid upon signing of this agreement. These monies ('deposit') shall be offset against the monthly payments during the months of May, June, July and August 2001. 4.2 The monthly payment of $270,834.00 shall be payable 14 days in advance. The final four months (May, June, July, August 2001) shall be $170,834.00 per month. ... 7.0 If the Airship does not fly in accordance with the Flight Schedule for a period exceeding 4 weeks in aggregate the Advertiser may terminate this agreement by notice to CCP without prejudice to its other rights, except where clause 7.1 applies. 7.1 CCP will not be liable or be deemed in default under this contract on account arising out of any causes such as: directives from CASA, war, armed hostilities, riots, fires, floods, unsuitable weather, earthquakes or governmental acts. ... 8.3 During the Sydney 2000 Olympic games, CCP may, outside the hours specified in the Flight Schedule, carry SOCOG security staff for the purpose specified by that staff."

[251]

"We are instructed that your summation of events as outlined in your letter dated 30 January last appears to take no account of several important backgrounds [sic] facts. These are as follows: 1. When the original negotiations were held, it was understood and agreed by the persons then representing Primus that CCP at that time did not have sufficient capital to construct the airship but would use its best endeavours to seek the necessary funding from third party investors. 2. Primus executed the Licence Agreement so as to assist CCP in demonstrating to would be investors that a customer, and therefore revenue base, existed for the project. 3. The deposit was paid on a non-refundable basis with Primus's knowledge and consent that those funds would be used to assist CCP's objectives of procuring the necessary equity investment to build the airship. By making the deposit non-fundable, Primus was fully aware that the funds provided were therefor, effectively, risk capital in the venture. As previously advised, our client and its directors have made all reasonable efforts (and are continuing to do so) towards raising the necessary equity capital to construct and put into service the airship. It became apparent to our client during the course of those efforts that alterations to the licensing arrangement, such as an extension to the term, would be necessary to attract the required funding. You will recall that our client's approaches to you last year in relation to those matters were rejected out of hand, and since that time our client has been seeking alternative licence arrangements. Having regard to the foregoing, our client and its directors have acted appropriately at all times in relation to this matter and deny any wrongdoing or liability such as that you have alleged. Any proceedings that you issue will be strenuously denied. We respectfully suggest that the best way forward in this matter is for the parties to work cooperatively towards a commercial solution for all concerned."

[367]

The main representation found against CCP was that made at the meeting on 16 February 2000, namely, that the airship would be available to be used by Primus for promotional purposes during the Sydney Olympics. This representation was found to be misleading and deceptive because, although it was with respect to future matters, it impliedly represented that CCP had the means to make good the promise or because it did not contain any qualification of the statement or disclose the risk of non-fulfilment, when CCP had no funds to pay for the construction of the airship and no likelihood of that position changing in the immediate future. Each of Palmer, Cahill and Walsh knew at the time of the meeting that CCP did not have the funds to pay for the construction of the airship. Each of them knew that the airship would not be constructed unless CCP raised the necessary funds and at the very least both Cahill and Walsh knew in a general way that Primus' deposit of $400,000 was required to be paid to US-LTA. Palmer obviously knew exactly what the situation was with respect to Olma and it would be surprising if he had not explained this to his fellow directors, Cahill and Walsh. Nevertheless, it seems to me that both Palmer and Cahill, for the reasons discussed above, knew that, despite the brokers' enthusiasm for the project and their positive indications that the funds could be raised, there was no likelihood that this could be achieved in time to enable construction of the airship to be completed in time for the Olympics. Even though Walsh did not speak to Jones and Messenger himself, he would no doubt have been told what they were saying. But even if he were not told or even if he were told only the positive side of the brokers' advice, Walsh knew from his own activities that many unsuccessful approaches had already been made to potential investors. He was involved in the preparation of the business plans and he would, therefore, have also been aware that the question of what equity the investors were to receive in return for their much needed funds was still unresolved.

At a glance

Court

Decision date

Before

Source

Judgment (405 paragraphs)

Parties

Cases Cited (12)