Telstra Corp Ltd v AAPT Ltd (Formerly known as AAP Telecommunications Pty Ltd) [1997] FCA 859 (2 September 1997)

Last Updated: 21 September 1998

FEDERAL COURT OF AUSTRALIA

Injunctions - interlocutory injunctions - considerations upon which a court exercises discretion - whether injunction could lie to restrain a carrier of telecommunications services from making representations with respect to several aspects of the conduct of the business of a telecommunications service provider - form of injunction - whether form of injunction granted might take into account the dealings of the telecommunications carrier with regulatory authorities.

Practice and procedure - considerations affecting application for leave to appeal.

Trade Practices Act 1974

Telecommunications Act 1991

ICI Australia Operations Pty Ltd v Trade Practices Commission [1992] FCA 474; (1992) 38 FCR 248 - cited

Mikasa (NSW) Pty Ltd v Festival Stores [1972] HCA 69; (1972) 127 CLR 617 - considered

Colbeam Palmer Ltd v Stock Affiliates Pty Ltd [1968] HCA 50; (1968) 122 CLR 25 - considered

TELSTRA CORPORATION LIMITED v AAPT LIMITED (FORMERLY KNOWN AS AAP TELECOMMUNICATIONS PTY LIMITED)

No. NG 449 of 1997

JUDGES: LOCKHART, BEAUMONT, HILL JJ

DATE: 2 SEPTEMBER 1997

PLACE: SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 449 of 1997

ON APPEAL FROM A SINGLE JUDGE OF

THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	TELSTRA CORPORATION LIMITED Applicant
AND:	AAPT LIMITED (formerly known as AAP TELECOMMUNICATIONS PTY LIMITED) Respondent
JUDGES:	LOCKHART, BEAUMONT, HILL JJ
DATE OF ORDER:	2 SEPTEMBER 1997
WHERE MADE:	SYDNEY

ORDERS:

1. Leave to appeal granted.

2. Appeal allowed in part.

3. Vary the orders made at first instance by setting aside order 1 and substituting the following:

UPON the applicant by its counsel undertaking that it will pay to any party adversely affected by the interlocutory injunction such compensation (if any) as the Court thinks just, in such manner as the Court directs, the Court orders that:

1. Until final hearing or further order the respondent, by itself or by its employees or agents, be restrained from making in trade or commerce any of the following representations:

(i) that the applicant is only interested in those parts of customers' bills which relate to telephone calls;

(ii) that the applicant is not interested in the non-profitable rental component of customers' bills;

(iii) that the applicant has a right to return a customer to the respondent because the applicant does not profit from the rental component of customers' bills;

(iv) when other companies had had difficulty paying money due to the respondent that customers had subsequently received large bills from those companies;

(v) that the applicant is not able to pay amounts due to the respondent because it is experiencing financial difficulties;

(vi) that the applicant is not solvent;

(vii) that the applicant is going, or has gone, out of business.

2. Until final hearing or further order, the respondent, by itself or by its employees or agents, be restrained from making in trade or commerce any of the following representations:

(i) that the applicant has been using the respondent's facilities and not paying for such use;

(ii) that the applicant has not been paying bills due to the respondent unless accompanied by a statement to the effect that the applicant disputes that the amount (or any amount) claimed by the respondent is owed by the applicant.

4. Appeal otherwise dismissed.

5. No order as to the costs of the appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 449 of 1997

ON APPEAL FROM A SINGLE JUDGE OF

THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	TELSTRA CORPORATION LIMITED Applicant
AND:	AAPT LIMITED (formerly known as AAP TELECOMMUNICATIONS PTY LIMITED) Respondent

JUDGES:	LOCKHART, BEAUMONT, HILL JJ
DATE:	2 SEPTEMBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

THE COURT

The present applicant, Telstra Corporation Limited ("Telstra"), a major carrier of telecommunications services, seeks leave to appeal from the grant by a Judge of the Court of an interlocutory injunction on the application of the present respondent, AAPT Limited ("AAPT").

AAPT is a provider of telecommunications services and uses Telstra's network and infrastructure in this way: a "third party" customer contracts with the service provider but, in fact, uses Telstra's network, paying a "packaged" (wholesale) tariff that is lower than is otherwise available to Telstra's "direct" customers. Telstra renders its account to the service provider which, in turn, renders an account to the third party customer. AAPT thus renders Telstra services to its customers, of whom there are some 60,000.

The background to the present application is as follows. In June of this year, AAPT instituted proceedings in the Court claiming that Telstra had engaged in misleading and deceptive conduct, contrary to s 52 of the Trade Practices Act 1974 . The conduct impugned was the making of representations, said to be false, in respect of AAPT's performance of its business activities in several aspects and the making of false representations that AAPT was not solvent and was going out of business. A claim of defamation was also made. AAPT sought, inter alia, permanent injunctions restraining Telstra from making these representations. These claims are disputed by Telstra. It appears that it will be some time before the matter is ready for final hearing. Accordingly, AAPT moved the Court for an interlocutory injunction, temporarily restraining Telstra from making representations that:

"(i) AAPT is only interested in those parts of customers' bills which relate to telephone calls;

(ii) AAPT is not interested in the non-profitable rental component of customers' bills;

(iii) AAPT has a right to return a customer to Telstra because AAPT does not profit from the rental component of customers' bills;

(iv) AAPT has been using Telstra's facilities and not paying for such use;

(v) when other companies had had difficulty paying money due to Telstra, that customers had subsequently received large bills from those companies;

(vi) AAPT has not been paying bills due to Telstra;

(vii) AAPT is not able to pay amounts due to Telstra because it is experiencing financial difficulties;

(vii) AAPT is not solvent;

(ix) AAPT is going, or has gone, out of business."

The learned primary Judge granted this interim relief substantially as sought. His Honour, after noting that AAPT gave the usual undertaking as to damages, made an order in the following terms:

"[U]ntil further order the respondent, its board of directors, executives, officers and employees be restrained from making the following representations to the applicant's past and present customers, members of the public making enquiries or showing interest in the supply of telecommunications services, whether to recruit or attempt to recruit them and their custom to the respondent or otherwise, and to the media or other people or bodies in public or likely to come to public attention including in any advertising, promotional or sales material whether written or oral ..."

Representations (i) to (ix), above, were then stated.

THE REASONS AT FIRST INSTANCE

For present purposes, his Honour's reasons for holding that there was a serious question to be tried at the final hearing, and for holding that the balance of convenience favoured the granting of the interim injunction, may be summarised as follows:

* Although "in some cases there was disagreement about the actual words used ... generally there was no dispute by Telstra that the representations had been made". Indeed, Telstra contended that the representations "were basically or wholly true".

* As to alleged misrepresentations (i), (ii) and (iii), above, there was a seriously triable question of misleading conduct. "Even if the intrinsic facts [there] asserted were true, that would not limit their capacity to be misleading or deceptive when placed in a particular context by Telstra". In any event, the representations by a retail competitor of AAPT "are much more than a recitation of accepted facts, as they purport to outline AAPT's interests, policy and future intentions, which would ostensibly be known only to AAPT itself". The balance of convenience favoured the grant of a "suitable" injunction since, without it, AAPT "stands to lose existing customers and possibly a large slice of its business to Telstra."

* As to alleged misrepresentations (iv) and (vi), although AAPT admitted that Telstra has "rendered bills which it has not paid in full", this alone does not "accurately reflect the complete picture" as it does not take into account "AAPT's strident denial of any indebtedness on the basis of its [substantial] defence and cross-claim". By its cross-claim, AAPT claimed damages "in the order of $300 million", in answer to Telstra's claim that AAPT owes it $99 million for calls made by AAPT's customers from June 1994 to February 1997. The causes of action relied on in the cross-claim include breaches of contract, contravention of s 52 of the Trade Practices Act 1991 , unauthorised use of confidential information, discrimination in breach of ss 183 and 184 of the Telecommunications Act , unconscionable conduct, and misuse of market power in contravention of s 46 of the Trade Practices Act. AAPT claims that Telstra has embarked on a campaign to win AAPT's customers over or back to Telstra direct, primarily perhaps as a means of increasing its own share of the direct retail market but also, possibly, as a means of forcing AAPT to pay its alleged debt to Telstra and withdraw its cross-claim, or even to propel AAPT out of the telecommunications service industry altogether by removing or reducing its customer base to the advantage of Telstra.

* As to AAPT's defence, on the evidence at this stage, there is "a substantial billing dispute which has not been satisfactorily resolved". There is thus "a serious question to be tried as to whether these representations are misleading and deceptive." As to the balance of convenience, in considering whether a "limited" injunction was justified, his Honour posed the following questions:

"To what extent should the Court enter such a volatile market place at all? Should talk about existing litigation ever, or in this case for a particular reason, be regulated or banned? Should Telstra be prevented from discussing this litigation or its relationship with AAPT with, say, parliamentary committees, industry or regulatory bodies, or the executive government? Should every single executive or employee of Telstra be enjoined?"

* As to alleged misrepresentation (v), although there was "very little evidence ... to prove either that large bills were received by customers of service providers after disputes with Telstra", there is a serious question to be tried as to whether this representation contravened s 52 of the Trade Practices Act. The factors going to the balance of convenience were the same as for alleged misrepresentations (i), (ii) and (iii) .

* As to alleged misrepresentations (vii), (viii) and (ix), Telstra admitted that there is a serious question to be tried here. On the balance of convenience, "no damage can flow to Telstra and considerable damage to AAPT can be avoided if such ... statement[s] [are] prevented until admitted or proved at law".

TELSTRA'S APPLICATION FOR LEAVE TO APPEAL

On behalf of Telstra, it is submitted that leave to appeal should be granted because (a) in all the circumstances the primary Judge's judgment is attended by sufficient doubt to warrant it being reconsidered by the Full Court; and (b) substantial injustice would result if leave were refused supposing the decision were wrong. (See Decor Corporation Pty Ltd v Dart Industries [1991] FCA 655; (1991) 33 FCR 397 at 398-400 and Jarrett v Seymour (1993) 46 FCR 557 at 559-560).

It is submitted that the Court should be particularly ready to grant leave to appeal in the present case where substantive rights, rather than points of practice, are in issue. (See Decor at 400 and Jarrett at 560).

On the question of the balance of convenience it is submitted by Telstra that the primary Judge's order (especially in respect of pars (iv) and (vi)) prevents Telstra from providing information to the public generally as to Telstra's views on its prospects and the likely outcome of its dispute with AAPT, in relation to Telstra's claim for outstanding monies owed to it by AAPT, notwithstanding that the dispute is constantly in the public domain.

SHOULD LEAVE TO APPEAL BE GRANTED?

In accordance with the practice frequently adopted by the Court in applications for leave to appeal from interlocutory orders, we permitted counsel for both parties to address us, not only on that application, but on the grounds of appeal sought to be advanced, assuming, for the purposes of the argument, that leave to appeal had been granted. With the benefit of a full appellate argument, we come to the conclusion, for the reasons we give below, that in some respects but not in others, the judgment was attended by sufficient doubt to warrant it being reconsidered; and that, in those respects, substantial injustice would result if leave were to be refused. We propose to grant leave to appeal accordingly.

CONCLUSIONS ON THE APPEAL

It will be convenient first to consider the case sought to be made in respect of the alleged misrepresentations in turn.

* As to the alleged misrepresentations (i) - (iii)

In its written submissions, Telstra alleged that there was no serious question to be tried whether such representations were made at all. But Telstra accepted, in those submissions, that there was at least some evidence to this effect. That argument, therefore, cannot be accepted, even if the credibility of this evidence were disputed. Questions of credit are not appropriate for resolution in interlocutory applications. It was further argued for Telstra that no injunction should have been granted on this account because the representations were accepted to have been made on only one occasion - in January 1997, but there was no evidence that there might be a recurrence. In our view, it was open to his Honour to decide that the conduct alleged warranted the grant of interim relief. In the absence of any relevant error of principle here, there is no warrant for appellate intervention.

It was also suggested by Telstra in its written submissions that there was no serious question to be tried on the issue whether the alleged representations were likely to mislead or deceive. Reference was made, in particular, to the terms of the contract between AAPT and its customers. We were taken to the evidence. It appears that, in making any final determination in this area, the trial Court will need to take into account the proper context in which these oral representations were alleged to have been made, in order to decide whether, in all the circumstances, Telstra's conduct in this connection is, or is not, likely to mislead. But having considered the material before the primary Judge, we are of the view that no ground has been made out here for interfering with his Honour's conclusion that a serious issue arose as to whether the statements alleged to have been made were likely to mislead.

Apart from some aspects of the form of the order, to be dealt with below, we would dismiss the appeal in this respect.

* As to alleged misrepresentations (iv) and (vi)

These specific grounds of appeal were emphasised in oral argument by Senior Counsel for Telstra. Again, we were taken to the evidence.

In our opinion, there is no substance in the contention that no serious question arises in this area. We agree with AAPT's submission that the essential feature of these alleged representations is that AAPT had been using Telstra's facilities, but not paying accounts that were properly due to Telstra. This interpretation of the statements attributed to Telstra staff is, we think, open on the material before his Honour.

Yet the dispute between the parties as to the amount properly due to Telstra, as Senior Counsel for AAPT noted, remains unresolved and still to be adjudicated. In those circumstances, we can perceive no error of principle in the approach taken by the primary Judge on this aspect.

However, in our view, there is considerable force in the other submissions, advanced by Senior Counsel for Telstra, going to the balance of convenience and, consequentially, to the form of any injunction in this connection. We agree (and the contrary is, quite correctly, not now asserted on behalf of AAPT) that any injunction should not inhibit Telstra from making the statements complained of provided that Telstra also accompanies them with a statement to the effect that AAPT disputes that the amount (or any amount) claimed by Telstra is owed by AAPT. We propose to vary the injunction accordingly.

* As to alleged misrepresentation (v)

Although, as his Honour noted, there was very little evidence adduced on this issue, it does not follow that a seriously triable question did not present itself. Again, having been taken to the material, we are not persuaded that it was not open to his Honour so to conclude.

Telstra also relies upon directives it gave to its "front-line" staff in this connection, contending that this removed any threat of recurrence. But his Honour did take this into account. No error of principle has been shown.

We dismiss this aspect of the appeal.

* As to alleged misrepresentations (vii) - (ix)

The position here is, in principle, in all material respects, the same as in the case of alleged misrepresentation (v) above.

THE FORM OF INJUNCTION GRANTED

It will be recalled that his Honour expressed the intention to grant a "limited" injunction, mentioning at that point a concern that a restraint that was too widely cast might improperly inhibit Telstra in, for instance, its legitimate dealings with Government. Accordingly, as has been seen, the primary Judge decided to depart from the usual terms of restraint ordered in such a matter.

On behalf of Telstra, it is now submitted that the terms of the interlocutory injunction were too broad, and uncertain and ambiguous in their operation (see ICI Australia Operations Pty Ltd v Trade Practices Commission [1992] FCA 474; (1992) 38 FCR 248) in these particular respects: (a) it purported to restrain not only Telstra but also persons who were not parties to the proceeding, namely Telstra's directors, executives, officers and employees; (b) the phrase "past and present customers" is very wide and could catch representations to, say, government departments and regulatory authorities other than in their capacity as past or present customers; (c) the operation and meaning of the words "whether to recruit or attempt to recruit them and their custom to the respondent or otherwise" are unclear; (d) the operation and meaning of the words "other people or bodies in public", "in public" and "likely to come to public attention" are equally not clear; (e) the operation of the words "including in any advertising, promotional or sales material" is uncertain.

In our view, there is considerable force in these contentions. But it does not follow that there should be no restraint at all. It was appropriate that the usual form of restraint be ordered here, subject to the proviso that, in accordance with the requirements of s 52, the conduct be "in trade or commerce" (cf Mikasa (NSW) Pty Ltd v Festival Stores [1972] HCA 69; (1972) 127 CLR 617 at 631-632).

We propose further to vary the existing injunction by making it clear that the Court's order restrains Telstra in making the representations in question whether a representation is made by Telstra itself, or by its employees or agents (cf Colbeam Palmer Ltd v Stock Affiliates Pty Ltd [1968] HCA 50; (1968) 122 CLR 25 at 47 - 48).

COSTS

His Honour reserved costs before him. We would not disturb this order. With respect to the costs of the appeal, each party has enjoyed partial success before us. In these circumstances, it is appropriate that there be no order made for the costs of the appeal.

ORDERS

We make the following orders:

1. Leave to appeal granted.

2. Appeal allowed in part.

3. Vary the orders made at first instance by setting aside order 1 and substituting the following:

UPON the applicant by its counsel undertaking that it will pay to any party adversely affected by the interlocutory injunction such compensation (if any) as the Court thinks just, in such manner as the Court directs, the Court orders that:

1. Until final hearing or further order the respondent, by itself or by its employees or agents, be restrained from making in trade or commerce any of the following representations:

(i) that the applicant is only interested in those parts of customers' bills which relate to telephone calls;

(ii) that the applicant is not interested in the non-profitable rental component of customers' bills;

(iii) that the applicant has a right to return a customer to the respondent because the applicant does not profit from the rental component of customers' bills;

(iv) when other companies had had difficulty paying money due to the respondent that customers had subsequently received large bills from those companies;

(v) that the applicant is not able to pay amounts due to the respondent because it is experiencing financial difficulties;

(vi) that the applicant is not solvent;

(vii) that the applicant is going, or has gone, out of business.

2. Until final hearing or further order, the respondent, by itself or by its employees or agents, be restrained from making in trade or commerce any of the following representations:

(i) that the applicant has been using the respondent's facilities and not paying for such use;

(ii) that the applicant has not been paying bills due to the respondent

unless accompanied by a statement to the effect that the applicant disputes that the amount (or any amount) claimed by respondent is owed by the applicant.

4. Appeal otherwise dismissed.

5. No order as to the costs of the appeal.

I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of the Full Court

Associate:

Dated: 2 September 1997

Counsel for the Applicant:	T F Bathurst QC with C Hodgekiss
Solicitor for the Applicant:	Mallesons Stephen Jacques
Counsel for the Respondent:	P G Hely QC with S G Finch
Solicitor for the Respondent:	Clayton Utz
Date of Hearing:	25-26 August 1997
Date of Judgment:	2 September 1997