Global Network Services Pty Ltd v Legion Telecall Pty Ltd [2001] NSWCA 279 (28 August 2001)

Last Updated: 25 September 2001

NEW SOUTH WALES COURT OF APPEAL

CITATION: GLOBAL NETWORK SERVICES PTY LTD v LEGION TELECALL PTY LTD [2001] NSWCA 279

FILE NUMBER(S):

41036/99

HEARING DATE(S): 27, 28 March 2001

JUDGMENT DATE: 28/08/2001

PARTIES:

GLOBAL NETWORK SERVICES PTY LTD v LEGION TELECALL PTY LTD

JUDGMENT OF: Mason P Meagher JA Beazley JA

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S):

LOWER COURT JUDICIAL OFFICER: Rolfe J

COUNSEL:

Appellant: P L Brereton SC / M Meek

Respondent: W H Nicholas QC / J Stevenson

SOLICITORS:

Appellant: Michael Saunders & Associates

Respondent: Michell Sillar

CATCHWORDS:

Contract - Breach - Construction of term - psychic telephone services - contract between Service Bureau and Call Processing Centre to direct all calls through call processing centre - whether duty absolute or duty to use best endeavours - whether failure to secure third parties' business for call processing centre amounted to breach of term - Assessment of Damages. (ND)

LEGISLATION CITED:

DECISION:

Appeal and cross appeal dismissed with costs

JUDGMENT:

THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 41036/99

MASON P

MEAGHER JA

BEAZLEY JA

Tuesday 28 August 2001

GLOBAL NETWORK SERVICES PTY LTD v

LEGION TELECALL PTY LTD

This appeal involves a contract (the Contract) made between Global Network Services Pty Ltd (Global) and Legion Telecall Pty Ltd (Legion) on 30 November 1994. Both Global and Legion are part of the Telstra's 190 InfoCall Services for psychic related services. In November 1994 Legion was arranging to become InfoCall's Service Bureau for the 190 premium services providing psychic services. It was also setting itself up as a service provider under the name "Psychic Live" with five 190 telephone lines. Global also proposed to function as a service provider trading as "Psychic Hotline" (later "Psychic Express"). Through the Contract Legion engaged Global to operate the Call Processing Centre (CPC) for its "Psychic Live" services.

In clause 1(k) of the Contract, Legion agreed:

"to direct all 190 Psychic and Psychic-related call processing requests through Global's Psychic Call Centre, with the exception of the current one-off Athena Starwoman - Woman's Day Star Cards Promotion."

Apart from Global and Legion, there were at least three others within the market of psychic service providers - Athena Starwoman, Mystic Meg and Suzanne Myles (the 190 Other lines). The 190 Other Lines needed to contract with Legion to obtain a 190 number. They would also need a CPC. Legion contracted with the three psychic service providers, but the 190 Other Lines chose not to use Global as their CPC.

The central question in the appeal is whether Legion's failure to direct call requests to the Other 190 lines through Global constituted a breach of clause 1(k).

At trial, the parties agreed that 1,125,447 minutes of 190 Other Lines psychic and psychic-related calls were received by Legion and not directed to Global. Rolfe J found for Global on all issues of contract and breach. Clause 1(k) was not limited to the role that Global would play in the Psychic Live and Psychic Express services. It extended to the 190 Other Lines, imposing an absolute duty on Legion to direct the callers wanting to speak to Athena Starwoman, Mystic Meg and Suzanne Myles through Global's CPC. The Judge assessed damages on a "lost opportunity" basis, concluding that what Global had lost was a 10% chance of having received and taken advantage of the calls on the 190 Other lines, thereby entitling Global to only 10% of its total claim.

Held, by Meagher JA, Beazley JA concurring, Mason P dissenting,

1. Clause 1(k) is unambiguous, wide and comprehensive. Legion's contractual obligation was to direct all requests to the appellant, not to use best endeavours. Rolfe J's interpretation at first instance should stand.

2. The only calls for which the appellant would be entitled to damages would be those where the caller would have been deflected to the appellant's service providers. Rolfe J's assessment of damages should stand.

(Per Mason P)

Discussion of whether Legion's compliance with an absolute construction of clause 1(k) would result in unlawful third line forcing under Part IV of the Trade Practices Act. Kizbeau Pty Ltd v W G & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281 (cited).

Discussion of whether clause 1(k) is qualified by an implied term in the Contract that in obtaining the consent of a third party, the relevant duty on Legion is to use best endeavours or due diligence. Egan v Ross (1928) 29 SR(NSW) 382 (referred); Butts v O'Dwyer [1952] HCA 74; (1952) 87 CLR 267; Dougan v Ley [1946] HCA 3; (1946) 71 CLR 142; Pejovic v Malinic (1959) 60 SR(NSW) 184 (cited).

ORDERS (By Majority)

1. Appeal dismissed with costs.

2. Cross-Appeal dismissed with costs.

THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 41036/99

MASON P

MEAGHER JA

BEAZLEY JA

Tuesday 28 August 2001

GLOBAL NETWORK SERVICES PTY LTD v

LEGION TELECALL PTY LTD

JUDGMENT

1 MASON P: This appeal and cross-appeal challenge a judgment that the respondent pay to the appellant $169,658.16 for breach of contract. Legion contends in its cross-appeal that there should have been a verdict for the defendant, alternatively that no substantial damages should have been awarded. Global contends in its appeal that the damages should have been $1,054,902.

2 Legion was found to have breached a written contract made on 30 November 1994. It is called Agreement for 190 Info Call Services (the Contract).

The players in the telephone psychic services market

3 In June 1994 Telstra launched InfoCall, a telephone information service provided by recorded messages or a live operator. The information is supplied by private companies known as Service Providers or Information Providers. Telstra provides the network and billing facilities. InfoCall services have ten digits commencing with 190. They are advertised in one of the early pages of the Sydney White Pages. Callers dialling one of these numbers pay a minimum of 15 cents for the message introduction. Calls that proceed beyond the message introduction are charged in accordance with the tariff for the particular service called. In the case of a timed fee tariff there is the initial message introduction fee plus a charge for the duration of the call.

4 There are layers of involvement in the InfoCall system, at least as regards the group of 190 phone numbers referred to in the evidence as the telephone psychic services market. Some players occupy more than one rung on the ladder. The situation can be depicted thus:

190 InfoCall Services for psychic related services

Carrier - Telecom Australia/Telstra

- supplies Service Bureau with batches of 190 numbers

- charges callers according to Service Providers' tariffs

Service Bureau - Legion

- licensed by Carrier and provided with

batches of 190 numbers

- provides range of services using computer equipment to transfer calls automatically from an incoming caller to a designated Call Processing Centre

- contracts with Call Processing Centre and/or Service Provider

Call Processing Centre (CPC) - sometimes referred to as "operator

bureau"

- operators answer calls

- message introduction ("preamble") which may be recorded or live

- capable of responding to calls to multiple Service Providers and to provide differentiated message for each Service Provider

- caller who chooses to proceed beyond message introduction is directed to selected Service Provider whereupon the call will be charged at the rate per minute specified in the tariff

Service Provider - trades under names such as Psychic

Live, Psychic Express, Mystic Meg Live Psychic

- has one or more telephone numbers advertised in the White Pages and elsewhere, usually disclosing tariff per minute

- may arrange advertising and promotion per medium of the media

- psychics may be located at a central office or operate from their own homes with calls being automatically switched through to them as they are available

- a "cluster of `soothsayers'" (per Meagher JA) provide individual psychic information to a caller

- sometimes the same psychic works for multiple Service Providers, rostering on at different times for different Providers

Caller - rings advertised number to obtain

access to Service Provider of choice

- directed via CPC

- billed by Telstra at the rate of 15 cents for message introduction plus tariff charge per minute if chooses to go beyond message introduction.

5 In November 1994 Legion was arranging to become InfoCall's Service Bureau for the 190 premium services providing psychic and psychic related services. Legion was also setting itself up as a service provider (under the name "Psychic Live") with five 190 telephone lines and through the Contract it engaged Global to operate the CPC for those services.

6 When the Contract was being negotiated, Global was also proposing to function as a service provider trading as "Psychic Hotline". (Later the name was switched to "Psychic Express".) In this role it would acquire a batch of 19 telephone lines with the 190 prefix. Under the Contract, Global also assumed the role of CPC for Legion's "Psychic Live" services.

7 Psychic Live and Psychic Express advertised only one of their telephone lines in the White Pages. Their other lines were advertised in different venues, thereby enabling the impact of a particular promotion to be measured. The technology allowed multiple lines to be channelled through a single CPC and for a single CPC to offer differentiated services on account of different service providers and different telephone lines.

8 Psychic Live (Legion) and Psychic Express (Global) did not exhaust the market of psychic service providers. At least three others were in that market or proposing to enter it. Their trade names were Athena Starwoman, Mystic Meg and Suzanne Myles. Judging by the higher tariff the former two business charged, it may be inferred that there was significant goodwill attached to these businesses stemming from earlier promotions in the print and television media. These three service providers were referred to in the evidence as "the 190 Other Lines" to distinguish them from Psychic Live and Psychic Express with their existing associations with Global and Legion.

9 The 190 Other Lines needed to contract with the Service Bureau (Legion) if they wanted a 190 number. They would also need a CPC. However, there was nothing to stop them setting up their own CPC in-house, contracting directly with a CPC of their choosing or arranging through the Service Bureau (Legion) for access to a CPC. Subject to any constraints stemming from Part IV of the Trade Practices Act, Legion was free to persuade them to use a nominated CPC or to contract to do so itself.

10 The 190 Other Lines chose not to use Global's CPC in circumstances detailed below. Legion's failure to procure this was the breach of contract that gave rise to almost the entirety of the verdict.

The construction issues summarised

11 According to Legion, the Contract dealt exclusively with those arrangements for live psychic readings as the parties themselves would decide from time to time to channel through the call processing centre to be established and maintained by Global. An ongoing and developing relationship was envisaged, but not one that would involve outside service providers such as the three which became "the 190 Other Lines".

12 On the other hand, Global maintains that cl 1(k) of the Contract embodied a wider promise by Legion to channel revenue-producing calls through Global's call processing centre even if the outside service provider wanted no involvement with Legion other than as provider of access to the 190 InfoCall system. In clause 1(k) Legion agreed to:

... direct all 190 Psychic and Psychic related call processing requests through Global's Psychic Call Centre, with the exception of the current one-off Athena Starwoman - Woman's Day Star Cards Promotion.

13 The learned trial judge found in Global's favour on this critical question. Subject to defences of variation, abandonment and the like which were all rejected, this meant that Legion's breach of contract was established in relation to the 190 Other Lines, because the three service providers chose not to engage Global as their call processing centre.

The Contract

14 The Contract was prepared without assistance of lawyers or a great deal of checking to ensure consistency of language. The variants relating to "Service" (see below) are the clearest example, but there are other indicators of sloppy drafting, including the numbering of the clauses, and instances of repetition and overlap.

15 The Contract recited that it was "for the provision of a live Psychic reading premium rate service on the 190 Infocall network". The greater part regulates the manner in which the two parties would provide and promote their own live psychic reading services using InfoCall 190 numbers.

16 The Contract recognises that both Legion and Global were in the market or about to enter the market as service providers (see eg the recognition of the print and television media "identified as exclusive to" Legion and Global respectively in Schedule 1). Much of the Contract is involved with regulating the manner in which the two parties as service providers would use the CPC that was to be established and maintained by Global. Thus, Global undertook that its operators (ie the persons employed to answer calls) were employed in sufficient numbers, adequately trained and paid and restrained from disclosing confidential information referable to the "Service" (cl 3(a),(l),(m)).

17 As previously indicated, Legion was or was about to become the Service Bureau licensed by Telstra to operate the 190 InfoCall system. One function of the Contract was to ensure that Legion gave Global access to an unspecified number of 190 telephone lines, thereby enabling Global to participate in the "Service" as a service provider as well as a call processing centre.

18 The Contract appears to use "service" and "Service" indiscriminately, usually prefaced by the definite article. With presently irrelevant exceptions, the reader is directed to Schedule 1 for clarification. The relevant portions of that Schedule stipulate:

SERVICE Psychic Hotline. This service is operated by live operators, with Legion out switching call traffic to the operator bureau.

BRANDING The Service name may, from time to time, change as both parties see fit. Legion and Global to keep each other notified of any change of name of the Service.

PROMOTION Promotion of the service to be pursued

SERVICES independently by Global and Legion under the following exclusives and other means as referred in 1(f) and 2(k)....

19 The occasional use of the plural "(S)ervices" and "service(s)" reflects the parties' contemplation that the original Psychic Hotline "branding" might change and bifurcate as the parties developed and expanded their relationship. This indeed happened shortly after the Contract was made, with Global deciding to market its services as Psychic Express and Legion marketing its services as Psychic Live.

20 The parties declared that they were not in partnership (cl 8(b)). Nevertheless, they clearly envisaged an ongoing and developing relationship. There were to be regular management meetings and sharing of information especially as regards promotional activities. The Contract endeavoured to protect and regulate intellectual property rights. Each party agreed to explore promotional opportunities through branches of the media other than those specified in Schedule 1 (cll 1(f), 3(j)).

21 In one or two places the parties divided a relevant portion of a market exclusively (see eg Schedule 1, Promotion of Services). In cl 2(c) Global agreed "to work for Legion on an exclusive basis on the services detailed in Schedule 1 in Australia" and not to "offer it's [sic] Psychic Centre capability to any other Service Provider".

22 The financial relationship was addressed in clause 4 and the Revenue portion of Schedule 1. Revenue was payable by Legion to Global. It was defined as "all the revenue calculated by Legion as being due from Telecom Australia using the call logging equipment for each number allocated to the service(s) and for the period as specified in Schedule 1" (cl 4(a)). Clause 4(a) further stipulated that:

Calls are charged to the callers at A$3.00/ minute. Legion is paid A$2.45 cents per minute and the share of the revenue between Global and Legion is calculated from the A$2.45 cents per minute. However, the call charges are subject to change and hence the amount retained by Legion and subsequently Global will be subject to this change.

23 The Revenue section of Schedule 1 divided the revenue as follows:

1) On the basis of Legion pursuing independent promotional opportunities using Global solely as Call Centre the revenue deal would be as follows:

Min/Month Global Legion

0-20,000 $1.45 0.51

20,0001-40,000 $1.35 0.61

40,001-80,000 $1.25 0.71

80,001-100,000 $1.20 0.71 100,001-> $1.15 0.81

....

2) On the basis of Global pursuing independent promotional opportunities using Legion solely as Service Bureau, the revenue deal would be as follows:

Min/Month Global Legion

0-20,000 $1.45 0.51

20,0001-40,000 $1.50 0.46

40,001-80,000 $1.55 0.41

80,001-100,000 $1.60 0.36 100,001-> $1.64 0.32

....

Thus, if Legion pursued independent promotional opportunities it derived a larger percentage of revenue, save for the first bracket of time.

24 In performance of the Contract, Legion distributed the revenue for Psychic Live in accordance with Part 1 and the revenue for Psychic Express in accordance with Part 2 (Black 116).

25 The Contract was of indefinite duration, terminable for breach after failure to rectify notified defaults (cl 5).

26 Clause 1(k) went outside the scope of the Contract thus far described. It did not fit neatly, at least on Global's interpretation of that clause. Nevertheless, its express terms provide strong support for that interpretation. The ambit of clause 1(k) and the scope of the obligation it imposed on Legion are the key issues in this appeal.

Legion's dealings with Athena, Mystic Meg and Myles

27 When the Contract was made (30 November 1994) Legion had not entered into any other relevant contractual obligations. However, at various dates in 1995 Legion contracted with the three psychic service providers, Athena Starwoman, Mystic Meg and Suzanne Myles, to provide them with 190 telephone lines. It is admitted on the pleadings that, from 30 November 1994, Legion received psychic and psychic-related call processing requests on the 190 Other Lines and that Legion did not direct these callers through Global's CPC. Whether or not Legion was thereby in breach of cl 1 (k) of the Contract is the central issue in this appeal.

28 A schedule of agreed calculations (Black 395) gives details of the duration of 190 psychic-related calls through Legion's system from December 1994 onwards. This schedule shows Athena Starwoman coming "on line" in January 1995, Suzanne Myles in February 1995 and Mystic Meg in November 1995. These matters are not in dispute. Since, however the circumstances in which the 190 Other Lines attached themselves to Legion's system is relevant to other issues I shall set out some detail.

29 Athena Starwoman was a well known psychic conducting business in Australia prior to November 1994. Legion was negotiating with "her" to supply 190 lines, and Global expressed interest in doing her call processing work. Legion's representative, Mr Maxted said he would see what he could do about procuring that result (Black 16). Global's Mr Lovell had no existing connection with Athena and he understood that if Athena was not prepared to proceed down that track, then that would be the end of the matter (Black 16). He recognised that Athena was a competitor of Global in the market for live psychic readings. In a fax dated 21 November 1994 Athena Starwoman told Legion that it would be "unwise" to link up with the Australian Psychics Association. Indeed she was "most apprehensive about lending [her] name to them" (Blue 496). (The Association's head, Mr Turnbull, was a director of Psychic Hotline Pty Ltd a company associated with Global, which had initially planned to trade as "Psychic Hotline".) The fax made it clear that Athena Starwoman was intent on developing her own system ("the best psychic readers line of all") using "high quality psychic readers". On 25 January 1995 Athena contracted through her company with Legion to become part of the 190 InfoCall network. Under the contract she promised to "ensure that she remains exclusive to Legion" (Blue 326). However, there was no promise about using Global's CPC, because Athena was clearly unwilling to make such a promise (see Black 133, Blue 383). Legion directed psychic calls on Athena's 190 numbers through Athena Starwoman's own CPC (Black 89).

30 Mystic Meg is an English-based service. It was unknown to Global at the time the Contract was made. On 7 December 1994 "she" was negotiating with Legion with a view to acquiring a 190 line. A facsimile sought more information concerning the Australian Psychics Association:

... with reference concerning their credibility. Obviously the concern we have is that the people who operate under Meg's name are genuine professionals endorsed by a responsible organisation, as we can not afford to have inferior people operating under Meg's name. (Blue 498)

31 By early 1995 there were tensions between Legion and Global about the operation of Global's CPC (Blue 13, 100-106). There had been technical problems, disagreements about advertising programs and complaints by Legion about the number and competence of Global's staff. Legion was unhappy that some of Global's psychics were working from home and logging on to different systems at different times. Global in turn was aware that Athena Starwoman had opted not to use its CPC (Blue 76, Black 14). Global representatives were asserting that Legion was advertising psychic services and not running the calls through Global's CPC (Blue 13, 185) and that this involved a breach of clause 1(k) of the Contract (Blue 13, 407). Legion responded by pointing out that it had tried to persuade Athena Starwoman to use Global's CPC, but to no avail (Blue 105). These and further disagreements prompted Legion to propose renegotiation of the financial arrangement between the parties (Blue 405).

32 In April 1995 a representative of Legion told Global's representatives that Legion had signed up the Mystic Meg service from England. There is an unresolved dispute between the witnesses as to whether Global was offered Mystic Meg "to process exclusively" if Global agreed to give Legion exclusivity (Blue 212. Cf 402). It was at this stage that Global's representatives drew Legion's attention to cl 1(k) and Global's interpretation of that existing agreement. According to Rolfe J, the negotiations about exclusivity did not progress to a binding variation of contract. This finding is challenged by Legion in the appeal.

33 Legion did not procure Suzanne Myles or Mystic Meg to use Global's CPC. Those two service providers used a common CPC established or procured by Suzanne Myles and functioning in Melbourne (Black 88-9, 131).

34 In December 1995 Legion re-directed certain calls on (Global's) Psychic Express Service to Mystic Meg. This breach was admitted at trial and damages were agreed at $4,896.

The issues at trial and the trial judge's reasons on the main issues

35 On Global's claim, the issues at trial were (1) the construction of cl 1(k) of the Contract; (2) whether (as Legion contended) the Contract had been subsequently varied, repudiated, or abandoned so as to supersede any exclusivity obligation; and (3) assessment of damages.

36 His Honour found for Global on all issues of contract and breach. He assessed damages on a "lost opportunity" basis, concluding that what Global had lost was a 10% chance of having received and taken advantage of the calls on the 190 Other Lines, so that Global was awarded only 10% of its total claim (of $1,054,902.18).

37 There was a cross claim by Legion, asserting (1) that Global had breached obligations to maintain service operating hours and ensure that there were sufficient operators available to cover the service; and (2) that Global had impermissibly promoted related services through service bureaus other than Legion without offering Legion first option for those services. Rolfe J dismissed the cross-claim, finding that Global had not breached the Contract. (Legion has not challenged this order in its cross appeal.)

38 Rolfe J held that cl 1(k) was not limited to the role that Global would play with respect to the Psychic Live and Psychic Express services. It extended to the 190 Other Lines, imposing an absolute duty on Legion to direct the callers wanting to speak to Athena Starwoman, Mystic Meg and Suzanne Myles through Global's CPC. His reasons were stated as follows:

102. It is obvious that the poor drafting of the Agreement leads to difficulties in its ultimate construction and, I have no doubt, different minds may differ as to the correct or, perhaps I should say, the appropriate construction. I have come to the conclusion that the construction for which Mr Brereton [for Global] contends is to be preferred for the following reasons:-

(i) The mutually known factual matrix against the background of which the Agreement was entered into was the desire by Global for an exclusive agreement and the willingness of Legion to give that, save for the exception to which it was committed.

(ii) There was no suggestion of other contractual obligations on Legion for providing for psychic and psychic-related services at that time, so that there was no other contractual reason why Legion could not provide exclusivity.

(iii) Clause 1(k) is unambiguous in its terms. It provides that "all" stated call requests would be directed through Global's Call Centre, save for only one exception. The use of the word "all" and the provision of the exception points powerfully to the result I favour.

(iv) Clause 1(k) differs from the obligation cast on Global by clause 2(c), because whilst Global agrees to work for Legion on an exclusive basis for the services detailed in Schedule 1 and to give Legion first option for related services, there is no obligation on Legion to take up the option, so that another service bureau could do so. Thus, there is no obligation on Global to direct "all" its related services through Legion, which adds to the strength of the word "all", supported by the exception, in clause 1(k).

(v) The Agreement, read as a whole, is one for the provision of services by Legion to Global and by Global to Legion for which each will receive remuneration. Save, possibly for the division of payments, there is no suggestion that any other party will acquire any rights (except in the case of an assignment or sale).

(vi) The "Revenue Deals" should be construed in the way for which Mr Brereton contended. They follow the obligation to make payment in clause 4(a). The word "solely" will not, in my opinion, do the work of creating exclusivity for which Mr Stevenson submitted. It is, to paraphrase Mr Brereton's submission which I have set out, intended to govern the function of "Call Centre" and "Service Bureau" as a separate contractual activity from pursuing independent promotional opportunities.

(vii) To give clause 1(k) a more restricted meaning would be to relegate it to stating the contractual obligations of the parties but, in doing so, to write out the word "all". There is no justification for taking this step.

39 Legion's submissions that the Contract was varied, repudiated by Global or abandoned were rejected (§§105-125). So too was Legion's argument that the Contract was terminable on reasonable notice (§§126-130).

40 The parties were agreed at trial that 1,125,447 minutes of 190 Other Lines psychic and psychic related calls were received by Legion and not directed to Global. Global's claim for damages was for the remuneration to which it would have been entitled had those calls been directed through Global's CPC. Global claimed its revenue share in respect of these 190 Other Line calls at the rate provided for in Pt 1 of the Revenue Schedule until 31 March 1995 and thereafter in accordance with an agreed variation thereof. Global accepted that Pt 1 was applicable because Athena, Mystic Meg and Myles lines were not promoted by it. This amounted to an agreed sum of $1,054,902.18. ($15,764.53 of that sum stems from two minor and different breaches of contract. Legion had directed Psychic Express callers to Mystic Meg after 15 December 1995 (Red 111) and damages for this breach were agreed at $4,896. It was also agreed that Legion was obliged to pay Global a bad debt retention levy of $10,868.53 (Red 118).)

41 Global never alleged that Legion's breach of cl 1(k) consisted of any failure to use best endeavours to procure the three service providers to use Global's CPC. At trial, as on appeal, Global contended that it was irrelevant that the owners of the 190 Other Lines may have been unwilling to use the Global CPC. Legion was obliged to bring about the result that the calls were directed through Global (see Red 46). It was sufficient that Legion made arrangements with the three service providers to give them access to a 190 Line without procuring them to use Global's CPC.

42 When he addressed Global's damages claim, Rolfe J commenced by restating the conclusion that Global was "entitled to damages sufficient to put it in the position it would have been had Legion directed calls on those lines, being specifically those to Athena Starwoman, Mystic Meg and Myles, to Global" (§136). This led him to address Legion's submission which had posed the question "What would have happened if Legion had attempted to do so?" (§136). The onus lay on Global to prove its damages (§138).

43 The judge accepted that Global had the necessary capacity to handle an increased volume of calls (for the 190 Other Lines) (§143). He held (at §147) that:

... Legion was obliged to direct all calls to Global operators. However, this would have led to two potential difficulties so far as the 190 Other Lines were concerned. Firstly, there would, I am satisfied by the evidence, have been a very real probability that Athena Starwoman, Mystic Meg and Myles would have terminated their arrangements with Legion. Secondly, [Global's] submission overlooked the fact that a critical aspect of the revenue raising was that callers would remain on the line. The proper inference from the evidence is that the callers, or indeed the vast majority of them, were seeking to speak to a person of their choice. They were not simply seeking to speak to any operator. This observation is not overcome by the fact that a person ringing Psychic Live or Psychic Express may receive one of a number of operators, because such people were content to have the service operating under one or other of those names. But it does not follow, and indeed the evidence is to the contrary, that a person telephoning, for example, Psychic Express or Psychic Live would be prepared to accept a service provided by, for example, Athena Starwoman or Mystic Meg and the converse position must be so. I am satisfied that the evidence supports this.

44 Proceeding from these findings, Rolfe J assessed Global's damages on the basis of a loss of opportunity to have received and taken advantage of the 190 Other Lines calls that Legion channelled through the CPCs nominated by the owners of the 190 Other Lines. His Honour referred to Malec v J C Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638, Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 and Tszyu v Fightvision Pty Ltd [1999] NSWCA 323; (1999) 47 NSWLR 473 and then continued as follows:

160. In my opinion, these authorities set forth the proper approach to the assessment of the damages with which I am now dealing. The evidence does not establish that had Legion directed the 190 Other Line calls to Global, Global would have derived anything like the full financial advantage it claims from them. Rather, I am satisfied that had this been done Athena Starwoman, Mystic Meg and Myles would have terminated their arrangements with Legion, so that there would have been no calls on the 190 Other Lines to be directed to Global operators. Further, I am satisfied that most, if not all, the callers would, in all probability, not have accepted other services than those to which they were seeking to be connected. However, there are two qualifications in this. The first is that it would have taken some little time for Athena Starwoman, Mystic Meg and Myles to terminate their respective arrangements with Legion. The second is that there is the possibility that some callers would have accepted the Global operators. I am not prepared, using the example in Malec, to conclude that these possibilities were so remote that no assessment could be made of the lost opportunity by virtue of the breach of contract. On the other hand, I am by no means satisfied that the situation would have continued for long and, of course, once Athena Starwoman, Mystic Meg and Myles ceased their contractual arrangements with Legion, there would have been little possibility that callers to them would have accepted Global operators because they could not have been directed to them. I say "little" in recognition of the fact that there was still advertising material available, which may have led to calls, which may, in turn, have led to some callers accepting Global operators. None-the-less, Global is entitled to be recompensed, on the principles to which I have referred, for the loss of the opportunity.

45 His Honour awarded 10% of the value of the calls actually logged to the three competitor service providers.

The submissions in the Court of Appeal

46 The competing submissions advanced in the Court of Appeal as to the construction of cl 1(k) and the damages flowing from its breach overlap at several points. They also reveal tensions between the absolute nature of the promise as construed by the learned trial judge and the approach he adopted in assessing damages for breach of that promise.

47 In the main, the parties propounded extreme and absolute positions on these two issues. The upshot was that comparatively little attention was given to the middle ground. It was left to the Court to raise the possibility of an interpretation lying between the two extremes. Neither party embraced it, but this does not force the Court to proceed as if only two choices were open on the issue. "Judges are more than mere selectors between rival views - they are entitled to and do think for themselves" (Saif Ali v Sydney Mitchell & Co [1980] AC 198 at 212 per Lord Wilberforce, cited by Brennan CJ in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 366).

48 Global submitted that the trial judge had been correct in construing cl 1(k) literally, ie as not confined to the services offered by Legion (Psychic Live) and Global (Psychic Express). (It will be seen that I accept Global on this ambit issue.)

49 Equally important is the issue of the scope of Legion's obligations under a clause with such ambit.

50 Global accepted that Legion was not obliged to sign on Athena and the others or to offer them a 190 line. But if it did so, Global submitted that it was obliged under cl 1(k) to ensure that Global was the assigned CPC. Callers using the 190 Other Lines had to be directed through Global's CPC, thereby earning revenue for Global under the Contract.

51 Global accepted that it would have to deal fairly and honestly with callers wanting to contact Athena's psychics. Global could not misappropriate Athena's customers by switching or siphoning them unbeknown to Psychic Live or Psychic Express. Accordingly, it would have been up to Global to create a recorded preamble that announced that the caller had reached Athena Starwoman and invited the caller to be transferred to a live psychic at Athena's announced rate per minute. At the caller's option Global would then divert the caller to a psychic approved by Athena. Likewise with the other two service providers. It seems to me that this would necessarily have involved the cooperation and participation of the service providers. I do not understand Global to suggest otherwise.

52 Within these constraints, Global submitted that it was up to Legion to ensure that it complied with cl 1(k) as regards Athena and the others. However, little attention was directed in submissions as to how the essential cooperation of Athena and others would be obtained and as to whether Legion failed to do what was required of it in that regard. In the final analysis, Global submitted that it simply did not matter whether Athena's cooperation would or could have been obtained. (It will be seen that this is the major difficulty I have in accepting Global's position both as regards the scope of cl 1(k) and damages.)

53 Global submitted that damages were to be assessed by assuming that the callers who in fact were channelled by Legion to Athena via Athena's chosen CPC would have been (a) channelled through Global's CPC and (b) would have remained on the line for the period they in fact spent talking to Athena's psychic. Damages were to be calculated accordingly, applying Part 1 of the agreed revenue-sharing arrangement. Likewise with Mystic Meg and Suzanne Myles.

54 According to Global, Legion's promise was an absolute one in the sense described by Latham CJ in Scanlan's New Neon Ltd v Tooheys Ltd [1943] HCA 43; (1943) 67 CLR 169 at 200 where he said:

Prima facie a promisor takes the risk of an event happening which prevents him from performing his promise. If he fails to perform it, he must pay damages...

55 Global also cited In re De Garis and Lowe's Lease [1924] VLR 38 at 41 where McArthur J applied the general rule stated in Anson on Contracts (15th ed) pp368-9 that:

if the promisor makes his promise unconditionally, he takes the risk of being held liable, even though performance should become impossible by circumstances beyond his control.

56 Legion's position was said to be equivalent to that of a vendor who contracts to sell the same specific item twice: it is no defence to an action for damages on one of the contracts that performance was rendered impossible due to the performance of the other contract.

57 Since the Contract was entered into before Legion had concluded its arrangements with any other service providers, it was submitted that it lay within Legion's power to ensure that Athena and the others used Global's CPC. This may have forced Legion to negotiate what to it were unfavourable contracts with these service providers, but that was said to be Legion's problem and resulted solely from the obligation previously assumed in cl 1(k). If Legion could not channel Athena's callers through Global's CPC because of its arrangements with Athena, then Legion was bound to pay Global damages in lieu. Because Legion had bound itself to confer the full benefit on Global and not just the chance or opportunity of earning the full benefit, the damages should have represented Global's full loss of revenue foregone. Global submitted that the primary judge erred in discounting the formula-produced figure by 90%: it should not have been reduced at all.

58 Global acknowledged that each party to the Contract had an implied duty to do all things necessary on its part to give the other the benefit of the contractual promise (Secured Income Real Estate (Australia) Ltd v St Martin's Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596). Nevertheless, Global submitted that Legion's obligation went beyond requiring it to use best endeavours to procure Athena to use Global's CPC. It was no defence to Legion that Athena would not have wanted to use Global (CA Tr pp 4, 20, 23).

59 Alternatively, Global attacked the judge's findings that the owners of the 190 Other Lines would have withdrawn from the 190 market rather than use Global as their CPC. Alternatively, Global attacked the trial judge's assessment of the lost chance at 10 percent as being too pessimistic.

60 Legion took an absolute stance on the opposite heights.

61 As to the ambit of cl 1(k), it submitted that the clause was confined to "the Service" contemplated by the parties, ie Psychic Hotline, which became Psychic Express and Psychic Live. This submission was strongly supported by argument demonstrating why it would have been commercial madness for Legion to have committed itself absolutely to procure Athena and the others to use their competitor Global as their CPC. Furthermore, it was out of the control of both parties to force Athena and the others to use Global's CPC. The trial judge's findings made in the context of assessing damages were pressed into service on the issue of construction. Since cl 1(k) said nothing relevant to Athena and the others, there should be a verdict for Legion on the damages claim (except for $15,764.53: see par 40 above).

62 Because it suited its argument as to the ambit of cl 1(k), Legion also spurned suggestions from the Bench that an alternative interpretation as to the nature of its obligation under clause might be that the promise "to direct" all calls on 190 Other Lines through Global was really a promise by Legion to use its best endeavours to do so (CA Tr pp58, 59, 61, 65). Legion pointed out that the parties had used "best endeavours" in the Contract when they wanted to create such an obligation (cl 1(b)). It also reminded the Court that Global had never run its case on the basis that cl 1(k) was subject to an implied term that the owners of the 190 Other Lines should be agreeable to use the Global CPC (CA Tr p98).

63 There was another example of Legion invoking an extreme consequence in an attempt to modify the literal terms of the clause. This related to the manner in which Legion/Global might act towards Athena and the others if the clause was to be given the wider ambit contended for by Global. Legion argued (at least for a time (CA Tr pp51-2): cf CA Tr pp56-7, but see at p64) that such a promise could only be performed by the other service provider's callers being told, by operators at Global's CPC, that they had reached Psychic Express or Psychic Live and then being invited to speak to a psychic from one of those stables. I shall explain later why this is a fallacious assumption.

64 Legion maintained that any obligation to direct 190 Other Line calls through Global did not extend to requiring the callers to opt to stay on line. And it supported the trial judge's conclusions as to the probability that many callers wanting to reach Athena, Mystic Meg or Myles would switch off as soon as they realised that they were being shunted to Psychic Live or Psychic Express psychics.

65 Legion's principal stance on damages was the submission that Global had failed to prove any loss stemming from the breach. That is because there was no evidentiary basis for the assumption that callers diverted, for example, from Athena to Psychic Express would have stayed on the line talking to Psychic Express psychics for the length of time they in fact spoke to Athena's psychics. Legion relies upon the material that I have already summarised in relation to Legion's post-Contract dealings with Athena, Mystic Meg and Suzanne Myles. In all of these circumstances, Legion submits that it is highly improbable that Global would have generated any income from the calls it claims Legion was obliged to direct to it. When regard is had to the distribution of the calls received over the period of Global's claim, the trial judge's percentage of 10% applied to the damages claim was excessive.

66 It became apparent during argument that Legion's submission proceeded on the assumption that some form of deception would be involved in what Legion was contemplating, for example Athena callers being directed to Psychic Express psychics without Athena's permission. It would appear that the trial judge may to have proceeded on the same basis in his findings referable to damages. Perhaps that reflects the way the case was run below. But it was certainly not the way that Global pressed its case in this Court. Global made it clear in this Court that it was not suggesting that its call processing centre could or would have represented that it acted for Athena without her knowledge and permission. Nor would Global have misdirected Athena callers to Psychic Live or Psychic Express psychics.

67 Other issues were agitated on appeal. Global submitted that Rolfe J erred in not allowing an amendment to claim an account of profits or equitable compensation stemming from the contractual breach. Legion complained about the rejection of certain of its defences.

What would have happened if Legion had attempted to perform cl 1(k) as construed by Global?

68 This hypothetical question is relevant to both the construction and damages issues.

69 Rolfe J considered the question in the context of damages. The findings in §§147 and 160 of his judgment are set out above. In short, he was satisfied that:

(1) Athena Starwoman and the others would have terminated their 190 arrangements with Legion rather than let Global continue to operate as their CPC; and

(2) the vast majority of callers wanting to speak to their psychic of choice (eg Athena Starwoman) would not have been content to be switched to Psychic Express or Psychic Live psychics.

70 These findings led His Honour to discount by 90% the figure derived from applying the revenue-sharing formula to the actual income stream received by Legion from Telstra with respect to the 190 Other Lines.

71 Each party attacked the findings in some respects. They also challenged their relevance in some respects.

72 Global's primary position was that the findings were irrelevant. The first finding was irrelevant because Legion's promise was so absolute that it simply did not matter that Athena and the others would not have wanted to use Global as their CPC: all that mattered was that (1) Legion had promised unconditionally to bring this about it, and (2) Legion gave Athena and the others a 190 line. The second finding was said to be irrelevant because there was no question of Athena's callers being diverted to Psychic Express or Psychic Live psychics. Global submitted that damages were to be assessed on the assumption that the callers who chose to use Athena's psychics in 1995-96 would have acted in the same way if their calls had been channelled through a Global CPC.

73 Alternatively, Global challenged the first finding on the facts, submitting that it was not based on evidence or was against the weight of the evidence. Global also submitted that there was insufficient reasoning supporting the ultimate 10% assessment.

74 Legion generally supported the conclusion that Athena and the others would have taken great umbrage at being shunted to Global's CPC. However, Legion alternatively submitted that the first finding was either irrelevant or did not go far enough. It contended that the judge should have held that Athena would have declined to enter into any arrangement to acquire access to a 190 number if it had been a condition of the arrangement that the service provider must use Global as its CPC. At least, Global had not established otherwise.

75 Legion went a step further and submitted that any attempt by Legion to have procured such a result by making choice of Global a condition of the offer of a 190 line would have constituted third line forcing in contravention of the Trade Practices Act. It followed that Global's interpretation of cl 1(k) amounted to a suggestion that, on its proper construction, the Contract obliged Legion to engage in unlawful activity. For that reason alone, Global's construction should be rejected.

76 There is an unstated assumption in the first finding, ie that Athena would have been entitled to terminate the arrangement with Legion upon discovery that Global was the CPC allocated by Legion. This in turn appears to be based on the further assumption that Global would be shunting Athena callers to Psychic Live/Psychic Express behind Athena's back. I say this, because it explains his Honour's clear inference that Athena would have been able to terminate on the spot upon discovery of the misappropriation of clientele. The second finding (as to the assumed reaction of Athena callers finding themselves shunted to a Psychic Live/Psychic Express psychic) seems to be similarly hypothesised.

77 In my view this reasoning proceeds on a false hypothesis. There is an alternative, consistent with Global acting in good faith. Global advanced it unreservedly in the hearing of the appeal. There is no need to assume that Global would have operated the CPC in an unfair or dishonest manner, misrepresenting a non-existent association with other service providers or misleading callers. There would have been no proper basis for it to filch Athena Starwoman customers. The technology of running a CPC allowed competing service providers to be looked after according to their several requirements. This is what Global did for Psychic Live and Psychic Express. As Global pointed out, it was open to its CPC to greet an Athena Starwoman caller with a recorded preamble telling her or him that Athena had been reached and inviting the caller to speak live to an Athena psychic. Of course, this scenario required the participation and co-operation of Athena - a huge problem for Global's case - but it is a different problem from the one raised by Legion in its attempt to bring down cl 1(k) by heaping too much weight on its shoulders.

78 There was ample evidence that the owners of the 190 Other Lines were unwilling to use Global as their CPC. The post-contract history that I have already summarised shows that these three service providers were unwilling to trust their clientele to the risk of loss to competitors, which is what they feared could happen had Global been used. Athena and Mystic Meg considered and rejected Legion's proposals that they use Global. The rocky history of the dealings between the parties to this appeal show that fears of misappropriating clientele through diversion of calls were not fanciful in this competitive industry. A fortiori because many individual psychics were happy to work for multiple service providers, often concurrently.

79 Global insists that the matter should be viewed on the basis that Global/Legion had the technological capacity to ensure that callers wanting to speak to Athena's psychics would hear a recorded message telling them that they could do so, would be offered the opportunity to do so at Athena's rates and, if they elected to do so, would be switched to Athena's psychics. I have already indicated that I accept this approach, in preference to Legion's fantastic scenario involving callers either being deceived into thinking that they were speaking to Athena's psychics or being invited by operators at the Global CPC to choose Mystic Live or Mystic Express psychics in preference to their initial choice of Athena Starwoman. But the problem remains for Global that this was a competitive industry, in which there were levels of distrust and in which service providers would and did have legitimate grounds of fearing a CPC operator with divided loyalties.

80 After all, the very fact that Global and Legion attempted to address these issues in their own Contract, with apparently limited success, speaks volumes. In their own Contract, Global and Legion went to some pains to preserve confidentiality of information. Global promised not to offer Psychic Centre capability to any other service provider (cl 2(c)). It should not be forgotten that Athena and Mystic Meg had their established clientele and that Athena in particular was apparently able to charge her services at a higher rate than the rates offered by Global and Legion.

81 Global's expressed willingness to lend its CPC to competitors is barely to the point. It is clear to me that Athena was unimpressed by and distrustful of such an offer, coming as it was from a service provider associated with the Australian Psychics Association. Her expressed concerns and similar concerns expressed by Mystic Meg about ensuring that only approved psychics be used to service her clientele were, in my view, genuine and weighty. When the parties entered into the Contract they each knew that Athena's consent to use Global could not be assumed. Global had experience in the relevant market before it entered into the Contract (CA Tr p107). Global's Mr Lovell frankly and correctly acknowledged that he knew, prior to the Contract, that Athena's consent to using Global's CPC was essential and that, if it were not forthcoming that would be the end of the matter (Black 16).

82 Global accepted that its CPC could not misrepresent a connection with Athena and the others if none truly existed (CA Tr pp125, 130). But it contended that it was never necessary for Global to establish the probability that Athena and the others would have opted to use Global's CPC (CA Tr pp128,131). It reiterated its submission as to the absolute nature of Legion's obligation and sought to build upon it the submission that damages for breach were to be calculated without the need to hypothesise what would or might have happened if Legion had set about performing the contract according to Global's interpretation of it. Herein lie the essential difficulties with Global's position qua damages. After all, Legion's promise (according to Global) was to do something ("direct all ... requests"), not primarily to pay a money sum calculated on the assumption that this had happened.

83 Global contended that Athena and the others would have come on board if the price was right, and that it was up to Legion to offer the other service providers a large enough share of the revenue generated by the 190 Other Line calls to get them to agree to use the Global CPC. I doubt that this raises the correct question. At most, the submission is circular if this consideration is invoked as part of the matrix of facts against which to construe cl 1(k) with the absolute tenor contended for by Global.

84 There is also the problem of Part IV of the Trade Practices Act. For Legion to have offered Athena a 190 line on condition that Athena used Global as its CPC would almost certainly have involved a serious abuse of monopoly power and unlawful third line forcing. As I shall later demonstrate, this causes one to pause before accepting Global's interpretation. It would also be relevant to any damages issue because "ordinarily when a court assesses damages, it acts on the basis that the law will be or ought to have been obeyed" (Kizbeau Pty Ltd v W G & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281 at 296).

85 All of these matters persuade me that the probabilities firmly establish that Legion was not able to and would not have been able to procure the three owners of the 190 Other Lines to use Global as their CPC on terms acceptable to those owners. In a hypothetical sense, Rolfe J was correct to conclude that there was a "very real probability that Athena Starwoman, Mystic Meg and Myles would have terminated their arrangements with Legion" (§147) had such arrangements been entered into. However, the evidence takes the matter a step further. The reality is that the three service providers would not have gone into the venture in the first place on the basis hypothesised by Global.

86 I share Global's difficulty with his Honour's second finding about the likely conduct of callers. I certainly agree with so much of the finding that concludes that many psychic seekers are particular about whom they consult. However, the second finding also proceeds on the false assumption that Global was willing to operate its CPC on behalf of Athena and the others on a basis that would have been obviously unacceptable to those service providers and would have involved unlawful attempts by Global to lure away their customers. Once again, the better conclusion is that Athena and the others would not have gone into the arrangement in the first place because they would not have wanted to do anything to prejudice their client pool.

The construction of clause 1(k)

87 The principal component of Global's claim is based on the contention that cl 1(k) obliged Legion to direct to Global all calls received in relation to the 190 Other Lines. In other words (excepting the one-off promotion referred to in cl 1(k)), all 190 calls to Athena Starwoman, Suzanne Myles and Mystic Meg were to be channelled through Global's call processing centre, thereby generating revenue for Global in accordance with the Part 1 of the revenue-sharing formula agreed between Legion and Global.

88 In the appeal, it was common ground that Legion could not have compelled a service provider to whom it was about to offer a batch of 190 lines to use Global as its CPC. It seems to me that this reflects a proper understanding of the impact of Part IV of the Trade Practices Act and of the realities of the particular market.

89 For convenience, cl 1(k) should be set out again. It provides that Legion:

Agrees to direct all 190 Psychic and Psychic related call processing requests through Global's Psychic Call Centre, with the exception of the current one-off Athena Starwoman - Woman's Day Star Cards Promotion.

90 I have already suggested that it is helpful to distinguish the ambit of cl 1(k) from the nature of the obligation assumed by Legion under cl 1(k). The ambit issue asks whether cl 1(k) was concerned only with the service described as "Psychic Hotline" that came to be offered by the parties as service providers under the names "Psychic Express" (Global) and "Psychic Live" (Legion). The nature of the obligation issue asks what was expected of Legion in relation to third party service providers who might acquire 190 lines.

(a) The ambit issue

91 Rolfe J summarised the arguments relating to the ambit issue at §§77-101 of his judgment. These arguments were repeated before us.

92 I respectfully agree with his Honour's conclusions on the ambit issue and with his reasoning (set out at par 38 above). The language of cl 1(k) is clear in its universality ("all 109 Psychic and Psychic related call processing requests"); and the exception for the current one-off Athena promotion makes no sense if the general ambit of the provision is limited to the "Psychic Hotline" services intended to be provided by the parties.

93 Legion's arguments in this Court mirrored those below. Legion sought to construe cl 1(k) as if words such as "for the Service" were added after "call processing requests". Reliance was placed on the preponderance of clauses in the Contract which confined themselves to "the Service" contemplated by the parties. The submission is not lacking force and it gains strength from the sloppiness in drafting of the Contract overall. However, that sloppiness cuts both ways, because it offers a reason why a sub-clause such as (k) might be found in cl 1 and not elsewhere in the Contract where the parties addressed exclusivity issues. At the end of the day, the absence to reference to "the Service" in cl 1(k) assists Global more than Legion. A fortiori, because of the other textual arguments favouring Global as to the ambit of (k).

94 A major plank in Legion's argument was the submission that the wider ambit meant that Legion would be driven to put through Global's CPC calls intended for Global's competitors in circumstances where Global would be enabled to divert them to one of Global's psychics. I have already indicated why this assumption is false.

95 At trial, Global's compensation was calculated by reference to Part 1 of the revenue-sharing formula, ie on the basis of treating the revenue generated by the 190 Other Lines as being the product of "Legion pursuing independent promotional opportunities". Legion submits that neither arm of the revenue-sharing provision in the schedule fits well with Global's approach to the ambit of cl 1(k) because Legion's dealings with Athena and the others are not easily seen as a promotion opportunity. I agree that it is not easy to fit Global's construction, but it is not impossible to do so. This Contract does not fit well in many respects, so lack of consistency ceases to surprise.

96 Legion's strongest argument is that cl 1(k) makes little commercial sense given that the parties must have been aware that Legion would lack both legal and practical capacity to compel Athena and the others to use Global's CPC. However, for the reasons given, I conclude on balance that the ambit of cl 1(k) extends to "all ... call processing requests".

97 This conclusion throws into sharper focus the issue relating to the nature of Legion's obligation with respect to third party service providers. To that I now turn.

(b) The nature of Legion's obligation

98 An obligation "to direct" call processing requests from callers to 190 numbers belonging to Legion and Global is one thing. But what does the duty mean as regards Athena Starwoman and others whose consent and cooperation were essential for this to happen? Without that consent and cooperation Global would not have had the information to greet the caller or the access to the psychics approved by the service provider whom the caller was seeking to contact.

99 At trial and on appeal Legion resisted Global's argument as to the ambit of cl 1(k) by pointing to the role of Athena and the owners of the 190 Other Lines as competitors of Global/Legion in their functions as service providers. They had clients of their own and psychics of their own. They promoted their services through magazines and other media outlets. They needed to deal with Legion to obtain 190 telephone numbers, but the post-Contract history which I have recounted above shows them anxious to monitor their own operators and psychics, to choose their own CPC, and to ensure that their clientele was not diverted by fair means or foul in favour of other service providers such as Psychic Live and Psychic Express.

100 The appellant and the respondent understood the market they were entering when they negotiated and signed the Contract. The exception to cl 1(k) and the portions of the schedule dealing with "Promotion of Services" and "Revenue" evidence this mutual awareness. Global does not suggest otherwise. The arrangements embodied in the Contract itself must have reinforced Global's awareness that a service provider had legitimate reasons to need to stipulate details as to the size, functioning and confidentiality of its chosen CPC.

101 The parties, Global in particular, must also have been aware that Legion's capacity to get third parties to use Global's CPC depended upon persuasion, not coercion. This was the reality of the market. Mr Lovell acknowledged it expressly (see par 29 above). It was also Legion's statutory duty having regard to the prohibitions on third line forcing to be found in s47(6) and (7) of the Trade Practices Act, given that Legion and Global were separate corporations.

102 In this context of this poorly drafted Contract I cannot read cl 1(k) as having the absolute, unlawful and commercially inconvenient result contended for by Global (contrast Pagnan SpA v Tradax Ocean Transportation SA [1987] 3 All ER 565. See discussion by Yates and Carter, "Expert Licenses, Standard of Duty and Force Majeure" (1988) 1 JCL 57). The absolute construction contended for by Global involves the parties to the Contract promising in effect that one will act in a grossly uncommercial way that would involve unlawful activity on Legion's part and complicity on Global's part. Unless driven to such an outcome by intractable language, such a construction should be rejected having regard to the principle that, where the words of a contract are capable of two meanings, one lawful and the other unlawful, the former construction should be preferred (Lewison, The Interpretation of Contracts 2nd ed §6.09).

103 I am not suggesting the Legion had no duty to use its best endeavours to procure Athena and the others to use Global's CPC. Quite the reverse. The facts (summarised above at pars 29-33) point strongly towards the conclusion that, notwithstanding Legion's attempts at persuasion directed at least two of the service providers, none were willing to use Global's CPC. So too were the findings of the trial judge on the damages issue, albeit refracted (in my opinion) through the erroneous assumption upon which they were based. But it is unnecessary for me to reach any conclusion on this matter because of the way this aspect of the case has been conducted to date. Global never pleaded such a duty and never proved its breach. The measure of damages flowing from a breach of such a lesser obligation would have raised difficult and different issues (cf Trietel, The Law of Contract 10th ed 1999 pp61-2).

104 In his work on Breach of Contract, 2nd ed, 1991, Professor Carter suggests that the expressed absoluteness of a contractual obligation, of which Latham CJ spoke in Scanlan, is a presumption. The promisor who is alleged to have failed to perform must point to something in the contract or some external rule of law to escape the secondary obligation to pay damages for non-performance (at p39). Professor Carter suggests five grounds of possible exculpation: construction of the contract, the doctrine of frustration, the existence of an implied term, the presence of an exclusion clause and the application of a statutory rule or provision. The first category deals with cases where substantial compliance may constitute due performance: I do not see any role for this in the present case. The fifth category would be relevant if one were driven to a construction of cl 1(k) that involved an illegal promise: I have touched on this in relation to third line forcing, and indicated why that consideration (taken with others) persuades me to read down the absoluteness of the promise as expressed. This leads to Professor Carter's third category.

105 The third category (implied terms) is explained as follows by Professor Carter (footnotes omitted):

[247] Implied terms. Implied terms usually operate to create contractual obligations. Frequently the term itself will state the standard of duty applicable to the obligation created. For example, an employee may be subject to an implied term requiring the exercise of proper or reasonable care in performance. Again, a bailee impliedly agrees to exercise reasonable care over the goods the subject of the bailment. Again, where the transfer of a lease requires a Minister's consent, the court will imply a term subjecting the transferor to an implied obligation to apply for consent an to use best endeavours to obtain the consent. These terms, implied on the basis of the parties' presumed intention, do not impose a standard of absolute liability.

Sometimes a term is implied, not for the purpose of creating and defining a contractual obligation or duty, but, instead, simply for the purpose of qualifying an otherwise absolute or strict obligation. For example, in Robinson v Davidson the defendant promised the plaintiff that his wife would perform at a musical entertainment to be staged by the plaintiff. Owing to illness which incapacitated the defendant's wife, she was unable to perform. The defendant was held to be excused by the wife's illness and Kelly CB based his decision on the ground that the defendant's obligation was qualified by an implied term. Although this type of approach serves to control the presumption of absoluteness, the implied term seems rather fictional and in Robinson v Davidson itself Bramwell B preferred to base his decision in favour of the defendant on the ground that the obligation was not absolute in character; the standard of duty was, as a matter of construction, a qualified standard.

Similarly, the term of co-operation, so frequently implied in contracts, serves to qualify what might otherwise be an absolute obligation or duty. Thus, where the co-operation of a promisee is required to enable the promisor to perform, the promisor's obligation is not absolute and the promisor cannot be regarded as failing to perform if the promisee's refusal to co-operate prevents performance. Lord Blackburn's statement in Mackay v Dick indicates the promisor's standard of duty is such as to relieve the promisor from the obligation to perform if the promisee does not co-operate.

106 Later (at [260]) Professor Carter explains that, where a contract cannot be performed without the consent or approval of a third party, or the issue of a licence, one of the parties will usually be subject to an express or implied obligation to obtain the consent, approval or licence. If nothing is said on the standard of duty, the usual approach has been to imply a duty requiring the exercise of care, due diligence and best endeavours.

107 The clearest example of this phenomenon is a contract for sale of land where performance requires a Minister's consent. In Egan v Ross (1928) 29 SR(NSW) 382 at 387 Harvey CJ in Eq explained that the implication of such a best endeavours proviso may be necessary in order to save an apparently absolute promise from a plea of illegality. He cited an earlier decision of his (Duncan v Mell 14 SR(NSW) 333 at 339) where he had said:

Where a contract for the sale of such an interest is made, and nothing is said about the subject of the Minister's consent, it appears to me it must be implied in such contract that if things are left as they are at that date and the consent of the Minister is refused, the contract would go off. Prima facie it would be the duty of the vendor under such circumstances to procure the consent, that being necessary to complete his power to transfer; but if he does not obtain it, it seems to me it must be implied that the contract goes off....

108 This decision and its reasoning were approved in Butts v O'Dwyer [1952] HCA 74; (1952) 87 CLR 267. See also Dougan v Ley [1946] HCA 3; (1946) 71 CLR 142 and Pejovic v Malinic (1959) 60 SR(NSW) 184.

109 This reasoning provides further support for my conclusion that Global has failed to establish a breach of cl 1(k) on its true construction. The clause never embodied a guarantee of the business of Athena and the others. Legion's failure to procure their adoption of Global's CPC was not in itself a breach, because the clause did not have the absolute nature which Global had necessarily to contend for.

110 In these circumstances the remaining issues fall away. The appeal should be dismissed with costs and the cross appeal upheld with costs. The substantive verdict in Global's favour must be reduced to $15,764.53.

111 The parties did not advance submissions as to the costs of trial. This leaves the Court with the duty of doing its best on the available material. Rolfe J ordered Legion to pay 90% of Global's costs of the proceedings. That was in circumstances where Global recovered a substantial verdict (albeit significantly less than it was claiming) and where Legion's cross claim failed entirely. A great deal of evidence was given at trial in relation to the issues of failed and unanswered calls and call failures and Legion failed to establish these alleged breaches. As to Global's claim, it has now failed entirely, save for a portion that seems to have occupied little or no time at trial and which was ultimately not in issue (see judgment §163). On my rough estimation at least half of the time and expense at trial was devoted to Global's claim, although a not insignificant part of it concerned defences of variation, abandonment and repudiation upon which Legion failed at trial. Some of these defences were reagitated on appeal, but it has not been necessary for me to address them. Doing the best I can I would order Global to pay 30% of Legion's costs of the proceedings at first instance. If either party wishes to challenge this assessment, it may submit written submissions within 14 days whereupon the other may respond within 14 days and the matter will be decided on the papers.

112 I propose the following orders:

1. Appeal dismissed with costs.

2. Cross appeal upheld with costs.

3. Vary the judgment ordered on 3 December 1999 (Red 144) by substituting $15,764.53 in lieu of $169,658.16.

4. In lieu of order 4 made on 3 December 1999 order the plaintiff to pay 30% of the defendant's costs of the proceedings at first instance subject to liberty to apply in accordance with par 111 of my reasons.

113 MEAGHER JA: In this appeal I have read in draft form the judgment of Mason P. Although it contains a careful statement of all relevant facts, I regret that I cannot agree with the legal conclusions at which it arrives.

114 The contract between the parties now in dispute is the agreement executed by them on 30 November 1994. By clause 1 (k) of that agreement the respondent promised:

"to direct all 190 Psychic and Psychic-related call processing requests through Global's Psychic Call Centre, with the exception of the current one-off Athena Starwoman - Woman's Day Star Cards Promotion".

That clause is perfectly unambiguous. It is also wide and comprehensive. With respect, I should adopt Rolfe J's interpretation of that clause at first instance.

115 It will be noted that Legion's contractual obligation was to direct all requests to the appellant, not to use its best endeavours to do so, not to do so if and when other parties consented, not to do so if it thought it commercially sensible to do so, not to do so substantially.

116 The bit which in my view constituted a clear breach of that obligation is admitted: during the currency of the agreement the respondent received 1,125,447 minutes of psychic and psychic-related calls which it did not direct through Global.

117 As Rolfe J said, if one disregards peripheral matters, that only leaves one issue, the amount of damages to which the appellant is entitled. Prima facie this should be the value of the benefit which the appellant expected to receive under the agreement (Commonwealth v Amann Aviation Pty Limited [1991] HCA 54; (1991) 174 CLR 64), viz. what the appellant would have gained in money or money's worth if the respondent had performed its obligations (Lavarack v Woods of Colchester Ltd [1967] 1 QB 278).

118 However, in my view, this is not the equivalent of the value of the 1,125,447 minutes to which I have referred. If a caller were minded to telephone a service provider (say, Athena), the respondent's obligation was to direct that call through the appellant, not to the appellant. Moreover, the appellant's Call Processing Centre was capable of directing such a call to the service provider wanted; it did not have to go through one of the appellant's own service providers. And one may add to that, as the President points out, the fact that one could not assume that the appellant would take the opportunity to steal that caller's custom.

119 In these circumstances, the only calls for which the appellant would be entitled would be those where, for some reason, the caller would have been (without impropriety) deflected to the appellant's service providers.

120 Rolfe J found that this would be only 10% of the calls. I should have thought this finding a tad miserable, but in an exercise akin to apportionment, a special sanctity surrounds a trial judge's finding.

121 I should therefore dismiss the appeal with costs. I should also dismiss the cross-appeal with costs.

122 BEAZLEY JA: I agree with Meagher JA.

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LAST UPDATED: 24/09/2001