FEDERAL COURT OF AUSTRALIA Mobileworld Operating Pty Ltd v Telstra Corporation Limited [2005] FCA 1365 PRACTICE & PROCEDURE – applicant exclusive dealer of mobile phone services for respondent – respondent claims that commissions paid to applicant exceeded "cap" as specified in written dealership agreement – notice issued by respondent requiring repayment of alleged overpayment – applicant claims respondent gave oral assurance in pre-contractual negotiations that "cap" would not be enforced – applicant further claims amount of overpayment miscalculated – application for interlocutory injunction restraining respondent from requiring applicant to pay amount of alleged overpayment or treating failure to pay as grounds for termination of dealership agreement – claim in promissory estoppel – claim for breach of contract – whether either claim gives rise to a serious question to be tried – whether balance of convenience favours grant of interlocutory relief – whether discretionary factors operate to prevent such relief being granted American Cyanamid Co v Ethicon Ltd [1975] AC 396 referred to Anaconda Nickel Ltd v Edensor Nominees Pty Ltd (2004) 50 ACSR 679 referred to Australian Broadcasting Corporation v Lenah Game Meats Pty Limited (2001) 208 CLR 199 referred to Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 57 ALJ 425 referred to Axxess Australia Pty Ltd v Primus Telecommunications (Aust) Pty Ltd [2000] VSC 64 referred to Beecham Group Limited v Bristol Laboratories Pty Limited (1968) 118 CLR 618 referred to Bingham v 7-Eleven Stores Pty Ltd [2003] QCA 402 referred to Brikom Investments Ltd v Carr [1979] 1 QB 467 referred to Buchanan Group Pty Ltd v Sorgetti [2002] FCA 1646 referred to Bullock v The Federated Furnishing Trades Society of Australasia (No 1) (1985) 5 FCR 464 applied Bunbury Foods Proprietary Limited v National Bank of Australasia Limited (1984) 153 CLR 491 referred to Castlemaine Tooheys Limited v South Australia (1986) 161 CLR 148 referred to Commonwealth v Verwayen (1990) 170 CLR 394 referred to Epitoma Pty Ltd v Australasian Meat Industry Employees Union (1984) 3 FCR 55 referred to Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1998] 3 VR 812 referred to Fletcher v Foodlink Ltd (1995) 60 FCR 262 referred to Foran v Wight (1989) 168 CLR 385 referred to Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 referred to Liristis Holdings Pty Ltd v Q-Corp Marine Pty Ltd [2001] NSWSC 418 referred to McHattan v Australian Specialised Vehicle Systems Pty Ltd (1996) 34 IPR 537 referred to Mobileworld Communications Pty Ltd v Q & Q Global Enterprise Pty Ltd (2003) 59 IPR 107 referred to Mobileworld Operating Pty Ltd v Telstra Corporation Limited [2005] FCA 292 referred to Moonlighting International Pty Ltd v International Lighting Pty Ltd [2000] FCA 41 referred to Patrick Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1 referred to Philips Electronics NV v Remington Products Australia Pty Ltd (1997) 39 IPR 283 referred to Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729 referred to Siskina v Distos Compania Naviera SA [1979] AC 210 referred to State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 (CA) discussed Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 58 ALJ 283 referred to Walton Stores (Interstate) Limited v Maher (1988) 164 CLR 387 discussed S Jacobs, M McCarthy and D Neggo, Injunctions: Law and Practice (Thomson, 2005) ICF Spry, The Principles of Equitable Remedies (6th ed, LBC Information Services, 2001) RP Meagher, JD Heydon, MJ Leeming, Meagher Gummow and Lehane's Equity Doctrines and Remedies (4th ed, Butterworths LexisNexis, 2002) MOBILEWORLD OPERATING PTY LTD (ACN 090 451 433) v TELSTRA CORPORATION LIMITED (ACN 051 775 556), DAVID KENNETH HUNTER MOFFATT and EDWARD NOEL PRETTY VID 620 OF 2004 WEINBERG J 23 SEPTEMBER 2005 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 620 OF 2004 BETWEEN: MOBILEWORLD OPERATING PTY LTD (ACN 090 451 433) APPLICANT AND: TELSTRA CORPORATION LIMITED (ACN 051 775 556) FIRST RESPONDENT DAVID KENNETH MOFFATT SECOND RESPONDENT EDWARD NOEL PRETTY THIRD RESPONDENT JUDGE: WEINBERG J DATE OF ORDER: 23 SEPTEMBER 2005 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The applicant's notice of motion filed on 10 May 2005 be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 620 OF 2004 BETWEEN: MOBILEWORLD OPERATING PTY LTD (ACN 090 451 433) APPLICANT AND: TELSTRA CORPORATION LIMITED (ACN 051 775 556) FIRST RESPONDENT DAVID KENNETH MOFFATT SECOND RESPONDENT EDWARD NOEL PRETTY THIRD RESPONDENT JUDGE: WEINBERG J DATE: 23 SEPTEMBER 2005 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 By notice of motion dated 10 May 2005, the applicant, Mobileworld Operating Pty Ltd, seeks injunctive relief, on an interlocutory basis, against the first respondent, Telstra Corporation Limited ("Telstra"). Somewhat unusually in a case of this type each party has filed voluminous affidavit material. Almost every issue, factual and legal, has been hotly contested. Neither side has been prepared to make any worthwhile concession. Perhaps the only matter on which the parties agree is the test for granting an interlocutory injunction. 2 This proceeding has already had an extensive history. It was commenced in May 2004, and was docketed to Crennan J. Her Honour delivered a lengthy judgment regarding the form of the pleadings earlier this year: see Mobileworld Operating Pty Ltd v Telstra Corporation Limited [2005] FCA 292. The matter came before me as duty judge when interlocutory relief was sought. the background facts 3 Mobileworld Operating Pty Ltd carries on business as "an exclusive Telstra dealer", selling mobile phone connections to Telstra's mobile telecommunications network, and also selling related telephone products and services. It trades under the name "Crazy John's". For convenience, I will refer to it by that name hereafter in these reasons for judgment. 4 Crazy John's has been an exclusive Telstra dealer since 1991. From that time until 1 December 1999, the business was conducted by various corporate entities, all of them effectively controlled by John Ilhan, and his family interests. At one point it was proposed to float Crazy John's business on the Australian Stock Exchange. However, that did not occur. 5 Crazy John's currently supplies telecommunications products and services throughout Australia. There are three main divisions of the business. These are: the retail business which currently operates 96 retail outlets throughout Australia; a corporate sales division which services the business and government sector; and a customer care division, which is a national call centre, operated from the head office premises in South Melbourne. 6 Crazy John's operates thirty-three retail outlets in Victoria; sixteen in Queensland; twenty-six in New South Wales; seven in South Australia; four in the Australian Capital Territory; eight in Western Australia; and two in Tasmania. 7 The major focus of Crazy John's business is the retail supply of mobile phones, and connecting its customers to Telstra's mobile phone network. In addition to connecting customers to that network, it also provides mobile phone hardware (including handsets and accessories), fixed line communications products, business telephone systems and support and after sales service. It currently has about 550 employees. Revenues for the financial year ending 30 June 2005 are projected to be approximately $160 million. 8 Although there are hundreds of Telstra dealers, less than ten key national dealers sell Telstra products exclusively. In 2003, Crazy John's was named as Telstra's National Dealer of the Year. In 2004, it was named Australian Mobile Phone Retailer of the Year. 9 At present, Crazy John's has approximately 350,000 mobile phone services in operation, all through the Telstra network. It estimates that these connections will generate mobile phone revenue for Telstra during the current financial year of about $270 million. It relies exclusively upon Telstra to supply its customers with mobile phone services, and access to Telstra's mobile phone network. 10 Crazy John's has two main sources of revenue. The first is generated by the sale of mobile phone handsets and associated products through its retail outlets, the corporate division and the call centre. The second consists of various payments that it receives from Telstra. These include what are described as "trailing commissions", paid under a "dealership agreement" currently in place between Crazy John's and Telstra. The "trailing commissions" comprise a percentage of the revenue received by Telstra from customers signed up by Crazy John's to Telstra's mobile phone network. Telstra also makes incentive payments to Crazy John's under the dealership agreement, and various promotional agreements, for signing customers to Telstra's mobile phone and fixed line services. Telstra also makes contributions to Crazy John's administration, advertising and marketing expenses. These contributions are made, in part, pursuant to the current dealership agreement, and a series of earlier dealership agreements that go back over ten years. They are also made pursuant to various one-off, or stand alone, agreements that are described as "promotional agreements". The events leading up to december 2002 11 From December 1999 onwards, Crazy John's and Telstra entered into a series of different dealership agreements. Brendan Fleiter, a key figure in this proceeding, and Crazy John's Managing Director, was involved in negotiating each of those agreements. Mr Fleiter joined Crazy John's in either late 1996 or early 1997, having previously been a solicitor in private practice. He had regularly acted for Crazy John's prior to taking on a position with the company. 12 On 22 February 2002, Crazy John's and Telstra entered into a dealership agreement. That agreement ("the 2002 Agreement") immediately preceded the dealership agreement currently in force. Regrettably, at least from the time that the 2002 Agreement was entered into, there were many disputes between the parties. 13 In May 2002, Crazy John's instituted proceedings against Telstra in the Supreme Court of Victoria. It claimed to be owed significant amounts of money by way of commission. By that stage relations between Crazy John's and Telstra had soured to the point that personal animosity had become rife among the senior figures in both companies. They simply did not trust each other. 14 Between October and December 2002, Mr Fleiter had a number of meetings with representatives of Telstra in an effort to sort out the differences between them. In December 2002, Telstra announced a major internal restructure. Edward Pretty (generally known as Ted), one of Telstra's senior executives, was appointed Group Managing Director of its new Consumer and Marketing business unit. Mr Pretty was put in charge of dealership arrangements. According to Mr Fleiter, in early December 2002 Telstra arranged for a meeting to be held between senior executives of both companies to see whether there was a way forward. 15 Ultimately a meeting was called for 18 December 2002 with a view to negotiating a new dealership agreement. What occurred at that meeting is vigorously disputed, and central to the issues presently before the Court. Before setting out each party's version of what took place at the meeting, it is necessary to explain briefly why that issue is of such importance. 16 The current dealership agreement is dated 10 January 2003, and will be referred to hereafter as "the 2003 Agreement". Mr Pretty signed on behalf of Telstra, and Mr Ilhan on behalf of Crazy John's. In its terms, the 2003 Agreement allows Telstra to recover any "overpayments" of remuneration made to Crazy John's above what will be described as a "cap" on such remuneration. However, Crazy John's claims that during the course of the meeting, on 18 December 2002, Mr Pretty gave an assurance that the "cap" would not be enforced. Crazy John's claims that it relied upon this assurance in entering into the 2003 Agreement, and that Telstra's later attempt to resile from it gives rise to a cause of action in promissory estoppel. 17 Telstra baldly denies that any such assurance was given. Moreover, it claims that even if an assurance was provided, Crazy John's cannot possibly make out a claim in promissory estoppel. General principles governing interlocutory injunctions 18 Before turning to the particular claims that are said to justify the grant of interlocutory relief, it may be useful set out, in general terms, the principles applicable to the grant of such relief. In substance, the court must be satisfied that there is both a serious question to be tried in the principal proceeding, and that the balance of convenience favours the grant of an injunction. The leading authorities are: Beecham Group Limited v Bristol Laboratories Pty Limited (1968) 118 CLR 618 ("Beecham"); American Cyanamid Co v Ethicon Ltd [1975] AC 396 ("American Cyanamid"); Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 57 ALJ 425; Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 58 ALJ 283; Epitoma Pty Ltd v Australasian Meat Industry Employees Union (1984) 3 FCR 55; and Patrick Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1 ("Patrick Stevedores"). 19 In Castlemaine Tooheys Limited v South Australia (1986) 161 CLR 148 ("Castlemaine Tooheys") Mason CJ spoke of a third requirement. His Honour indicated that the plaintiff had also to show that "irreparable injury" would be suffered, for which damages would not be adequate compensation, unless an injunction were granted. In other words, in his Honour's view, it might not be sufficient merely to show that, on balance, the plaintiff faced greater prejudice if denied an injunction than the defendant did if one were granted (the balance of convenience). Irreparable harm would also have to be demonstrated. Typically, however, the question of irreparable harm is treated either as part of the balance of convenience test, or put to one side until the court determines whether damages would be an adequate remedy, and therefore refuses final injunctive relief. 20 It is clear that the two issues, whether there is a serious question to be tried, and whether the balance of convenience favours the grant of interlocutory relief, need not be considered in isolation from each other. Thus, an apparently strong claim may lead a court more readily to grant an injunction when the balance of convenience is fairly even. A more doubtful claim, which nevertheless raises "a serious question be tried", may still attract interlocutory relief if there is a marked balance of convenience in favour of that claim: see Bullock v The Federated Furnishing Trades Society of Australasia (No 1) (1985) 5 FCR 464 at 472 ("Bullock"). 21 The threshold for "a serious question to be tried" is not particularly onerous. According to a leading text, it will be met if the claim is neither frivolous nor vexatious. See S Jacobs, M McCarthy and D Neggo, Injunctions: Law and Practice (2005) at [1.120]. The same text suggests that "a serious question" does not mean "any serious question", but rather one that relates to the granting of a form of final relief, the substance of which, relevantly, would be rendered nugatory by the course of action threatened and sought to be prevented: See Fletcher v Foodlink Ltd (1995) 60 FCR 262 at 265. 22 In RP Meagher, JD Heydon, MJ Leeming, Meagher, Gummow and Lehane's Equity Doctrines and Remedies (4th ed, 2002) ("Meagher, Gummow and Lehane") it is suggested that will be "a very rare case where [the requirement that there be demonstrated a serious question to be tried] cannot be fulfilled". If the applicant has shown that there is a serious question to be tried, the Court should next address itself to the adequacy of damages. If the plaintiff eventually succeeds, will damages be an adequate remedy? If, on the other hand, the defendant eventually succeeds, will the applicant's undertaking as to damages be adequate protection for the defendant's interests? Where it appears that damages would not be an adequate remedy, the court should only then consider the balance of convenience. This approach treats the adequacy of damages as conceptually distinct from, and logically anterior to, the balance of convenience. In that regard, it seems to accord with the views of Mason CJ in Castlemaine Tooheys referred to above. 23 Sometimes, on an application for interlocutory relief, a court is sufficiently able, on the evidence before it, to reach a conclusion as to particular facts or matters in dispute. However, it must be remembered that any such conclusion will be provisional, and by no means necessarily the same as that which is subsequently reached at the final hearing. The degree to which a court is prepared to investigate disputes of fact depends on their difficulty and on the other circumstances in question, and particularly on the extent of urgency or prospective hardship involved: ICF Spry, The Principles of Equitable Remedies (6th ed, 2001) ("Spry") at 466. 24 In American Cyanamid, at 409, it was said that a court was: "…not justified in embarking upon anything resembling a trial of the action upon conflicting affidavits in order to evaluate the strength of either party's case." Spry suggests that this reluctance to embark upon fact finding, in interlocutory applications, may be unduly inflexible, and should be regarded as simply stating a common position, to be departed from to the extent that the proper exercise of equitable discretions so requires. 25 Where a case involves complex issues of fact, requiring detailed argument and mature consideration in order to determine issues of liability, then on an interlocutory application for injunctive relief, the function of a court is not to reach a final conclusion but rather to ask whether the applicant's case is without serious prospect of success: Philips Electronics NV v Remington Products Australia Pty Ltd (1997) 39 IPR 283 at 291 and Buchanan Group Pty Ltd v Sorgetti [2002] FCA 1646 per Heerey J [7] and [8]. 26 A similar approach is warranted in relation to disputes regarding questions of law. The willingness of a court to determine those questions, at an interlocutory stage, depends upon their difficulty, and upon the balance of convenience, regard being had both to the consequences of granting or refusing relief and also to all other relevant circumstances. It may, on occasion, be appropriate for a court to finally determine a question of law at the interlocutory stage, rather than permit the applicant to simply raise a serious question about the existence of its rights. The court may consider whether the question of law is novel or difficult, and whether it is capable of being sensibly resolved on the state of the evidence at the interlocutory hearing. If the urgency of the matter renders it impossible to give proper consideration to the question, it should not be finally determined: Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535. 27 It is in the light of these general principles that I propose to summarise the evidence led by both sides in relation to the two causes of action upon which Crazy John's relies for interlocutory relief. the EVIDENCE IN RELATION TO THE PROMISSORY ESTOPPEL CLAIM Mr Fleiter's version of what occurred at the 18 December 2002 meeting 28 One of the few matters on which there is any common ground is that a meeting took place between the parties at Telstra's offices in Sydney on 18 December 2002. At that meeting, Crazy John's was represented by its Chairman, Barry Hamilton, and by Mr Ilhan, and Mr Fleiter. Telstra was represented by one of its then Group Managing Directors, David Thodey, by its former Chief of Retail and Distribution in its Consumer and Marketing business unit, Greg Willis, and by Mr Pretty. It seems that Mr Ilhan had met Mr Pretty on several previous occasions. However, neither Mr Hamilton nor Mr Fleiter had ever made his acquaintance. 29 Mr Fleiter's evidence as to what took place at the meeting is set out in considerable detail in his affidavit of 10 May 2005. He said as follows: "56. Once the introductions were concluded, Mr Pretty started speaking in a very angry and loud voice. He was waving a letter from Crazy John's in his hand. He said "I'm not putting up with this fucking crap", referring to the letter. He said that he was a qualified lawyer, that he understood how the legal system worked and that if we wanted to engage in litigation with Telstra, Telstra would crush us. He did not show us the letter, but I could see that it was a letter dated 15 October 2002 which had been sent by Mr Ilhan to Mr Thodey explaining why Crazy John's was at that time engaged in litigation with Telstra in the Supreme Court for Telstra's continuous failure to honour its obligations under the 2002 agreement. Now shown to me marked "BWF-11" is a copy of Crazy John's letter dated 15 October 2002. 57. In response, Mr Ilhan asked what he (Mr Pretty) would do if he was in the same circumstances as Crazy John's. Mr Ilhan then summarised the factors that had led to Crazy John's decision to commence legal action. Mr Pretty appeared to me to calm down on hearing this and said that he wanted to move forward from the past difficulties in a productive manner. Mr Ilhan then said to Mr Pretty that he would withdraw the proceedings by making a phone call "right now" if Mr Pretty was happy to move forward with the new dealership arrangement. I said that Mr Macdonald and I had been in discussions recently in an attempt to agree on a new dealership agreement. Mr Pretty said that that's the way he would like to move things and that he wanted to move forward, particularly in the Sydney market where Telstra's mobile phone market share had severely declined during 2002. At about this point, Mr Thodey left the meeting. 58 Mr Pretty then stood up, walked across to the whiteboard and asked Mr Ilhan to outline the terms of the new dealership agreement that had been negotiated. I responded to Mr Pretty's request of Mr Ilhan by summarising the proposed terms to Mr Pretty." 30 Mr Fleiter then outlined the discussion that followed. A number of the matters dealt with in his affidavit are said to be commercially sensitive. It is agreed between the parties that these matters should not be publicly disclosed. These include the various percentages of "Net Billings" discussed at that meeting on the basis of which the trailing commissions were to be calculated. Broadly speaking, "Net Billings" was a concept introduced for the first time between the parties in the 2002 Agreement, and differed from a "Net Receipts" concept that Telstra had traditionally used to determine trailing commissions. Put simply, "Net Billings" means the revenue derived by Telstra from those customers signed up by Crazy John's in using Telstra's mobile phone network. 31 Under the 2002 Agreement, there was a straight trailing commission referable to Net Billings. That figure is confidential, and I will refer to it as "X%". The figure that ultimately appeared in the 2003 Agreement as the "cap" on Crazy John's remuneration was the same percentage of Net Billings, but designed to ensure that a combination of trailing commissions and other payments did not exceed "X%" of Net Billings. 32 In substance, the trailing commission payable under the 2002 Agreement was reduced from X% of Net Billings to a significantly lower percentage in the 2003 Agreement. However, in return, Crazy John's would receive various upfront administration fees, cooperative advertising contributions and SIO growth bonuses, together with incentive payments under promotion agreements. 33 Mr Fleiter's account of what was said regarding the proposed reduction in the trailing commission payable was as follows. He claimed that he raised with Mr Pretty the fact that, as matters stood, Crazy John's was being asked to significantly reduce its trailing commission on the basis that it would receive "additional remuneration components", each of which had previously been negotiated. He said that he discussed these additional components with Mr Pretty, and explained what they included. 34 According to Mr Fleiter, Mr Pretty then asked for details regarding the remuneration arrangements under the 2002 Agreement. He wanted to know the date that that agreement was due to expire, and was told August 2005. Mr Pretty then suggested, for the first time, the possibility that, at least in relation to the period post-August 2005, any trailing commissions to be paid under a new dealership agreement should be set somewhere between the figure X%, and the much lower figure now proposed. In other words, the new lower figure would only apply until August 2005. An intermediate figure would apply thereafter. 35 Mr Fleiter said that Mr Pretty then scribbled down the remuneration components on a whiteboard. He wrote underneath these components, in what was described as a semi-legible form, "capped at X%". Mr Fleiter said that this was the first time throughout the lengthy negotiations that had taken place throughout 2002 that anyone had mentioned "capping" Crazy John's remuneration. 36 Mr Fleiter then claimed that Mr Pretty told the meeting that the reason that the remuneration structure in any new dealership agreement would have to be capped at "X%" was for "internal purposes". Mr Fleiter said that he responded by saying that there was no point in Crazy John's entering into a new remuneration arrangement which capped remuneration at the same rate that it received under the 2002 Agreement, "yet at the same time gave us a considerable risk by reducing our trailing commission from X% of Net Billings to a far lower percentage of Net Billings". 37 Implicit in what Mr Fleiter said was the proposition that any capping arrangement was unacceptable because it made little economic sense from Crazy John's point of view. Once a cap was introduced, Crazy John's could be no better off than under the 2002 Agreement. And there was a risk that it might be worse off. 38 Mr Fleiter said because Mr Pretty's handwriting on the whiteboard was virtually illegible, he rewrote some of it in a legible form. He said that he wrote the words "capped @ X%" in his own handwriting, but not because he accepted the idea of a cap. He did so merely so that Mr Pretty's handwriting could be read. According to Mr Fleiter, those present at the meeting then discussed each component of the new remuneration structure separately. Whenever Mr Pretty indicated that a particular component was acceptable, Mr Fleiter ticked the relevant line referring to that component. 39 Mr Fleiter drew attention to the fact that when he reached the notation "capped @ X%", he did not place a tick next to that component. Instead he circled those words. He said that this was because he insisted throughout that any cap on remuneration would be unworkable, as well as unacceptable to Crazy John's. He said that Mr Hamilton supported his position, telling Mr Pretty that Crazy John's would be taking a risk by reducing a fixed trailing commission from "X%" to the lower figure now proposed. According to Mr Fleiter, Mr Ilhan then made it abundantly clear that, as far as Crazy John's was concerned, any cap on remuneration would be totally unacceptable. 40 According to Mr Fleiter, Mr Pretty then said to Mr Ilhan: "look I need it for internal purposes but what I really need is you guys to get out there and get the numbers because we are getting smashed in Sydney". 41 Paragraph 62 of Mr Fleiter's affidavit sets out what he says happened next. That paragraph is of critical importance. It reads: "Mr Pretty then asked us how many stores we currently had in Sydney. I replied "eight". He then asked how many stores we could have open in Sydney by the end of 2003, and I said plenty more if we had the right incentive. Mr Pretty then said that what he needed was to have at least 12 retail stores operating in Sydney by the end of 2003 if he was to sign off on the remuneration arrangement which Mr Macdonald and I negotiated. He said he wanted the agreement to specify that we would have 12 stores in NSW by the end of 2003 and that if we failed to do so he could get out of the dealership agreement. Mr Ilhansaid that he would agree to a term to that effect being inserted in the dealership agreement. Mr Pretty then said: "look, I still need the cap for internal purposes, but I might enforce it, I might not - I just want you to get out there and perform". I said that Crazy John'scouldn't live with a cap. Mr Pretty then said "OK", but he needed the cap for "internal purposes" and that he would not enforce the cap but wanted us to perform. Mr Ilhan then said as long as the cap Mr Pretty wanted would not be enforced, Crazy John's would agree to it being included in the agreement." (emphasis added) 42 Mr Fleiter said that within a few days of the meeting, Telstra's solicitors, Mallesons Stephen Jaques ("Mallesons"), prepared a draft of a new dealership agreement. He said that the draft had to be revised a number of times because of the way in which it dealt with the "cap". According to Mr Fleiter, the various drafts did not reflect the understanding reached between the parties, on 18 December 2002, because they did not make it clear that Telstra would have a "discretion" not to enforce the "cap". By implication, Mr Fleiter expected that discretion to be exercised in Crazy John's favour, in accordance with Mr Pretty's assurance. 43 As previously indicated, the various drafts resulted in a final version of the 2003 Agreement that was signed on 10 January 2003. Mr Willis' version of what occurred at the 18 December 2002 meeting 44 Mr Willis' version of what occurred at the 18 December 2002 meeting differed starkly from that of Mr Fleiter. 45 According to Mr Willis, he attended the meeting at short notice at Mr Pretty's request. The meeting had been convened to enable Mr Pretty, who was replacing Mr Thodey, to meet the Crazy John's executives, and discuss the future relationship between Crazy John's and Telstra. Mr Willis said that Mr Pretty began the discussion by stating that the relationship was not working, and was being hindered by continual allegations, legal actions and disputes raised by Crazy John's. He said that this was not the type of relationship that Telstra was prepared to have with their dealers. 46 Contrary to Mr Fleiter's account, Mr Willis said that he could not recall Mr Pretty saying words to the effect that Telstra would "crush" Crazy John's. He did, however, recall Mr Ilhan stating that he was keen to move to a new dealership agreement with Telstra that would apply beyond the end of the existing agreement, and through to 2007. Mr Ilhan said that if that were to happen, the litigation could be disposed of immediately. 47 According to Mr Willis, there was then discussion about a new remuneration structure for Crazy John's. Mr Pretty said that the existing straight trailing commission structure was unsatisfactory, and that remuneration under a new dealership agreement had to focus upon, and reward, Crazy John's for expanding the business, particularly in strategic locations like Sydney. 48 Mr Willis then explained the whiteboard printout, a copy of which was tendered in evidence. He said the writing on the left hand side appeared to be that of Mr Pretty. The figure "X" referred to the trailing commission of "X%" of Net Billings payable under the 2002 Agreement. There were then references to upfront payments, and other components of a new remuneration structure. According to Mr Willis, Mr Pretty said that whilst trailing commissions under the new agreement would be reduced from "X%" to a lower percentage of Net Billings, Crazy John's would be able to make the equivalent amount through upfront payments, and other components, provided that it expanded the business. 49 Mr Willis said that he could recall Mr Pretty insisting that Crazy John's remuneration had to be capped at "X%" of Net Billings. The point had been made so forcefully that the cap had been referred to twice on the whiteboard. Mr Pretty stated that Telstra required a cap because it would not give Crazy John's "an open-ended remuneration structure" under any new dealership agreement that would go beyond August 2005. Mr Pretty made it plain that he was not prepared to give Crazy John's a better deal, under a new agreement, than Telstra had provided under the 2002 Agreement. 50 According to Mr Willis, Mr Ilhan then said that Crazy John's was Telstra's number one dealer and was going to grow the business. He could not understand why, despite that fact, Telstra wanted to cap Crazy John's remuneration. Mr Ilhan insisted that there should be no cap. At that stage, Mr Fleiter referred to the new shops that Crazy John's planned to open. Mr Pretty said that Crazy John's should proceed with its plans, targeting the competition, and that under the new structure it would be rewarded for growth. 51 Mr Willis then referred specifically to Mr Fleiter's evidence. He said: "(j) In his Affidavit, Mr Fleiter refers to Mr Pretty saying that he needed the remuneration in the proposed new Dealership Agreement to be capped at [X%] for "internal purposes". I do not recall Mr Pretty saying words to this effect. (k) In his Affidavit Mr Fleiter says that Mr Pretty said (in relation to the cap) "I might enforce it, I might not". Mr Pretty did not say words to this effect. (l) In his affidavit, Mr Fleiter says that Mr Pretty said that he would not enforce the cap but wanted Crazy John's to perform. Mr Pretty did not say words to the effect that he would not enforce the cap or that it would not be enforced. To the contrary, Mr Pretty said that the remuneration was to be capped at [X%] of Net Billings. Mr Pretty did, however, say that he wanted Crazy John's to perform. He also said that the better the performance, the greater the reward under the proposed remuneration structure." The events following the 18 December meeting 52 Mr Fleiter claimed that he spoke to Mr Willis on a number of occasions in 2003, and reminded him of Mr Pretty's assurance that the cap would not be enforced. According to Mr Fleiter, Mr Willis remained coy about whether any such assurance had been given. 53 Mr Fleiter said that Mr Willis told him at one stage that there was no point in them arguing about whether the cap would be enforced as Mr Willis had no authority to determine that matter. According to Mr Fleiter, Mr Willis told him that he should write to Mr Pretty if he had any concerns. Mr Fleiter said that Mr Willis added that the letter should not be one that "slotted" Mr Pretty, and that if the issue of the cap was to be resolved "everybody needed a way out". 54 It is common ground that Mr Willis wrote to Mr Fleiter on 25 August 2003 informing him that Telstra intended to enforce the cap, pursuant to its rights under the 2003 Agreement. Mr Willis went on to say, in that letter, that Telstra estimated that Crazy John's would exceed the cap by approximately $12 million for the period January to December 2003. 55 Mr Willis' recollection of his discussions with Mr Fleiter throughout 2003, and in particular in the period leading up to the letter of 25 August 2003, differed significantly from that of Mr Fleiter. He agreed that Mr Fleiter had continually maintained that Mr Pretty had said at the meeting of 18 December that the cap would not be enforced. However, according to Mr Willis, he never at any stage acquiesced in any such statements. Indeed, he maintained that he constantly told Mr Fleiter that Telstra was simply enforcing its contractual rights. He also told Mr Fleiter that Telstra denied that Mr Pretty had given any assurance whatsoever about not enforcing the cap. 56 Mr Willis strongly denied having told Mr Fleiter that he should not write a letter that "slotted" Mr Pretty. He said that it was not his normal practice to use that term. He added that he had no reason whatever to protect Mr Pretty. He said that he had simply told Mr Fleiter that any letter setting out Crazy John's concerns regarding enforcement of the cap should do no more than set out the facts, and avoid attacks on individuals. the EVIDENCE IN RELATION TO THE breach of contract claim Matters not significantly in dispute 57 On 30 October 2003, after Telstra had indicated that it proposed to enforce the cap, Mr Fleiter flew to Sydney to meet Mr Willis in order to discuss how best to resolve the dispute between the parties. Over the next few weeks, Mr Fleiter put forward several suggestions. At the same time, he gave notice that Crazy John's required an audit of Telstra's obligations, in accordance with Sch 6 of the 2003 Agreement. 58 On 4 February 2004, Mr Fleiter had lunch in Sydney with Mr Willis. Mr Hamilton was also present. Mr Willis told Mr Fleiter that Telstra intended to serve a notice to repay in relation to an alleged overpayment (being the amount exceeding the cap) of Crazy John's remuneration during 2003. Mr Willis said that the amount in question would come to about $18 million. Mr Fleiter replied that if Telstra embarked upon that course, there would be legal proceedings between them. 59 According to Mr Fleiter, Mr Willis responded by saying that the $18 million was not "the big issue", but rather the need to bring Crazy John's remuneration into line with that of other dealers. Mr Willis said that if Crazy John's was prepared to negotiate yet another dealership agreement, Telstra's claim for overpayment could be sorted out. Mr Fleiter claimed that Mr Willis told him that if Mr Pretty had remained in charge of the relationship (it appears that he had not), the difficulties between the parties would not have reached the point they had. Mr Fleiter's attack upon the reliability of Telstra's recording system 60 On 13 February 2004, Telstra faxed to Crazy John's a letter of demand which stated that it had calculated that it had overpaid Crazy John's an amount of $21,283,642.61 during 2002 and 2003 ("the 2004 Demand"). The letter stated that Telstra required repayment of that sum "as soon as possible", that the letter "constituted a formal notice" and that "non payment will constitute a material breach under the Dealership Agreement, so this is a matter that needs to be resolved very quickly". 61 After reading the 2004 Demand, Mr Fleiter telephoned Mr Willis and denied that Crazy John's was indebted to Telstra. He demanded that the letter be withdrawn. He described Telstra's conduct as "outrageous", and claimed that it amounted to "commercial thuggery". 62 Mr Fleiter said that the 2004 Demand had attached to it two spreadsheets which purported to show the calculations made by Telstra. He claimed, both at the time, and in evidence before me, that the calculations were erroneous. He put forward two separate reasons. The first was that the calculations included "Strategic Co-operative Advertising Contributions" that were not payable under Sch 5 of the 2003 Agreement, and should not therefore have been included by Telstra in calculating the cap (even assuming the cap to be enforceable) for the purposes of issuing the 2004 Demand. The second was that the calculations included "program incentive payments" that were payable under stand alone promotion agreements. In effect, the spreadsheets erroneously included payments that had not been made during the 2003 Contract Year, and were not therefore relevant to the 2004 Contract Year, which was the subject of the 2004 Demand. In addition, Mr Fleiter claimed that only 50% of the program incentives were remuneration payable under Sch 5 of the 2004 Agreement. 63 Mr Fleiter claimed that, in addition to these defects in the 2004 Demand, the evidence showed that Telstra was quite unable to accurately determine "Net Billings" in any month, that it was unable to accurately determine Crazy John's services in operation base ("SIO"), and that it included in the 2004 Demand other sums that did not relate to the 2003 Contract Year. 64 In short, Mr Fleiter's evidence, before me, was said to demonstrate that there was no proper basis upon which Telstra, acting in good faith, could have formed the opinion that it was owed, under the terms of the 2002 and 2003 Agreements, $21,283,642.61. Indeed, Mr Fleiter went further and claimed that there was no evidence that Telstra was owed anything by Crazy John's. 65 Mr Fleiter went on to say that on 1 December 2004 he received from Peter Jamieson, the Head of Finance and Pricing for Telstra Consumer and Marketing, a letter to which was attached yet another spreadsheet. That spreadsheet purported to show the calculations of an amount up to the end of October 2004 that Telstra estimated was the current "overpayment". The amount claimed was $12,102,198.05. According to Mr Fleiter the spreadsheet was in the same format as those that had accompanied the 2004 Demand. He maintained that spreadsheet suffered from precisely the same defects. 66 Thereafter, between December 2004 and April 2005, Crazy John's and its solicitors wrote numerous letters to Telstra identifying what it claimed were significant errors in Telstra's calculation of the purported "overpayments". 67 On 2 May 2005, a letter ("the 2005 Demand") was hand delivered to Mr Fleiter by Rohan Bardwell, the Telstra Accounts Manager responsible for Crazy John's, demanding that Crazy John's repay to Telstra the sum of $12,640,377.17. This was now the amount alleged by Telstra to have been "overpaid" during the previous year under the terms of the 2003 Agreement. 68 On the following day, Mr Fleiter wrote to Telstra denying that Crazy John's was indebted to Telstra in the amount the subject of the 2005 Demand, or indeed indebted to it in any sum at all. In that letter he sought a written undertaking from Telstra that until thirty days after the hearing and determination of this proceeding, it would not seek to require Crazy John's to pay Telstra any alleged overpayment notified under the 2005 Demand, or to rely upon any failure to pay the $12,640,377.17 as constituting a default, or as grounds for termination by Telstra of the 2003 Agreement. 69 On 9 May 2005, Mallesons wrote to Crazy John's solicitors, Corrs Chambers Westgarth, advising that Telstra would not agree to give the undertakings requested in Mr Fleiter's letter. Shortly thereafter, this application for interlocutory relief was filed. Telstra's evidence in response 70 Telstra led evidence from Enrico Russo, its Business Relationship Manager, Channels Commissions Group, in its Consumer and Marketing business unit. In that role, he was involved in developing, implementing and managing systems and processes for remunerating Telstra's mobile dealers. He had responsibility for calculating the overpayment amount for 2004 notified by Telstra to Crazy John's on 2 May 2005. He had previously carried out the same role in respect of the 2002 and 2003 Contract Years. The overpayment claimed in relation to that earlier period had been subsequently paid by Crazy John's, albeit under protest. It was Mr Russo who prepared the spreadsheets that were the subject of Mr Fleiter's criticisms. 71 Mr Russo identified two principal types of payments that Telstra had made to Crazy John's from 2002 to the present. These were: · remuneration under the dealership agreements, including administration fees, program incentives, trailing commissions, cooperative advertising contributions and SIO growth payments; and · payments under other arrangements related to the mobile dealership agreements, principally rebates paid by Telstra for mobile phone handsets provided to customers by Crazy John's. 72 Mr Russo said that he had reviewed Telstra's records of the payments made to Crazy John's since 1 January 2002. He noted that Telstra had paid approximately $51 million in the 2002 Contract Year, $123 million in the 2003 Contract Year, $135 million in the 2004 Contract Year and $49 million in the period 1 January 2005 to 31 April 2005. He estimated that Telstra would end up paying Crazy John's more than $145 million for the 2005 Contract Year. 73 Mr Russo compared the payments made to Crazy John's with those made by Telstra to two of its other dealers. Although the actual figures are commercially sensitive, it is apparent that Telstra pays Crazy John's significantly more than other dealers. In addition, Telstra pays Crazy John's substantially more for each service on its SIO base. 74 As previously noted, Mr Russo calculated the 2004 overpayment as being $12,640,377.17. He explained how he had arrived at that figure. He said that he had relied on information from a database and billing system operated by Telstra called "MICA". He said that MICA is an acronym for "Mobile Integrated Customer Accounts". It records, stores, and manages information relating to customers connected to Telstra's mobile phone network, and also calculates the amounts Telstra bills to its customers. It records all customer activity, including the details of each customer connected to its mobile phone network, the activation, deactivation and reactivation of a service, the dealer who activated or contracted the service, and a customer's usage of the service, including calls made and SMS and picture messages sent. 75 Mr Russo considered and dealt with each of Mr Fleiter's criticisms of MICA's accuracy and reliability. He rejected those criticisms and explained why in his view they were misconceived. In particular, he dealt with various adjustments made to the 2004 overpayment amount for "late landing" payments, and Mr Fleiter's claim that MICA was deficient in failing to pick-up a number of unrecorded connections. He said that on the information provided by Crazy John's, he was not satisfied that any of the approximately 18,000 claimed unrecorded connections had been arranged or procured by Crazy John's. He pointed out that Crazy John's list of unrecorded connections contained only the service number of each of the connections that Telstra had allegedly failed to record. In order to determine whether any of those connections had been arranged or procured by Crazy John's, additional information would have to be provided, including the customer's name, the date the customer was connected, and the details of the customer's plan. All of that information was in the possession of Crazy John's, and ought to be contained in each customer's signed application form. Under the 2003 Agreement, Crazy John's was required to retain those forms. 76 Mr Russo also rejected Mr Fleiter's reliance upon the Service Activity Statements ("SARs") provided to Crazy John's by Telstra as the basis for its claim relating to the alleged unrecorded connections. He said that the SARs did not contain all of the connections that Telstra had recorded as being on Crazy John's SIO base. He claimed that Crazy John's had been aware of this since at least March 2004. 77 Mr Russo noted that Crazy John's relied, in part, in relation to this aspect of its case, upon the audit to which I previously referred in [57] of these reasons for judgment. He pointed out that such discrepancies as the audit had turned up were few in number, amounting to no more than 2.6% of the services on the SIO base. He rejected Mr Fleiter's contention that the audit had identified "substantial and material deficiencies in Telstra's records and reconciliation of the SIO data". Crazy John's causes of action in support of interlocutory relief 78 Crazy John's claims for final relief range across a broad spectrum. There are more than a dozen separate causes of action relied upon in its statement of claim. As summarised in its written submissions before me, they include various claims for breach of contract, contraventions of a number of provisions of the Trade Practices Act1974 (Cth), promissory estoppel, and challenges to the validity of both the 2004 and 2005 Demands. 79 However, it must be noted that on the application for interlocutory relief Crazy John's elected to rely only upon the claim for promissory estoppel, as outlined at [28] to [43] above, and the claim for breach of contract, as set out at [57] to [69] above. 80 The claim for promissory estoppel is based entirely upon Mr Fleiter's claim that Mr Pretty gave an assurance at the 18 December 2002 meeting that the cap would not be enforced. 81 The claim for breach of contract involves a challenge to the validity of the 2005 Demand. Crazy John's asserts that Telstra failed to meet its obligations under the 2003 Agreement when it sent that demand because it had no proper basis for claiming any overpayment. That was because Telstra had no accurate and reliable account and record keeping system, and could not properly calculate "Net Billings". The promissory estoppel claim Crazy John's submissions 82 Crazy John's submitted that, on the basis of Mr Fleiter's evidence, it could be concluded that it had acted, or abstained from acting, in reliance on the assumption or expectation induced by Telstra that it would not enforce the cap. As examples of such reliance, Crazy John's had agreed to terminate the 2002 Agreement, discontinued its Supreme Court proceedings against Telstra, and entered into the 2003 Agreement (which reduced the percentage of trailing commission payable on Net Billings). Crazy John's claimed that it would be unconscionable, in all the circumstances, for Telstra to now resile from Mr Pretty's assurance, and for it now to enforce the cap. 83 Crazy John's referred to, and relied upon, the well-known observations of Brennan J in Walton Stores (Interstate) Limited v Maher (1988) 164 CLR 387 ("Walton Stores"). There his Honour stated at 428-9: "It is necessary for the plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs." 84 Crazy John's submitted that these principles have been cited with approval by the High Court on a number of occasions, for example in Foran v Wight (1989) 168 CLR 385 at 410-3, and in Commonwealth v Verwayen (1990) 170 CLR 394 at 444-6. It submitted that Mr Fleiter's evidence, if accepted, would establish each of the elements necessary to give rise to "a claim in promissory estoppel". 85 Crazy John's correctly anticipated that Telstra would rely upon cl 11 of the 2003 Agreement in answer to its promissory estoppel claim. Clause 11 contained an "entire agreement" provision. However, Crazy John's submitted that it was well established that clauses of this type could not operate to override principles of equitable estoppel. It referred to Brikom Investments Ltd v Carr [1979] 1 QB 467 where Lord Denning MR said at 480: "The cases are legion in which such a clause is of no effect in the face of an express promise or representation on which the other side has relied (see J. Evans & Son (Portsmouth) Ltd. v. Andrea Merzario Ltd. [1976] 1 W.L.R. 1078) at any rate when the circumstances are such that it would not be fair or reasonable to allow the landlord to rely on it". Telstra's factual submissions regarding promissory estoppel 86 Telstra submitted that Crazy John's claim, based upon promissory estoppel, was misconceived both in fact, and in law. 87 Telstra began by pointing to the terms of the 2003 Agreement. It submitted that the 2003 Agreement made it plain that Crazy John's was liable to immediately repay Telstra the $12 million overpaid in 2004. 88 Clauses 1.1 and 1.2 of the 2003 Agreement are as follows: "1.1 Notwithstanding anything to the contrary in this Agreement, the remuneration payable to the Dealer under this Schedule 5 in each Contract Year ... will, subject to paragraph 1.2, be no greater than [X%] of Net Billings …". 1.2 Within 6 months of the end of each Contract Year, Telstra will calculate the remuneration paid to the Dealer under this Schedule … in respect of that Contract Year. If the remuneration paid to the Dealer under this Schedule 5 is: (a) more than [X%] of Net Billings in respect of that Contract Year, the difference between the remuneration paid and [X%] of Net Billings in respect of that Contract Year will be an overpayment for the purposes of paragraph 5 if Telstra has notified the Dealer of that overpayment within 6 months of the end of that Contract Year. If Telstra has not notified the Dealer of that overpayment within 6 months of the end of that Contract Year, paragraph 5 will not apply and the Dealer will be entitled to retain the difference between the remuneration paid and [X%] of Net Billings in respect of that Contract Year; …". (emphasis added) Telstra noted that the obligation to refund the overpayment was contained in par 5 of Sch 5. 89 Telstra noted that Crazy John's had founded its application for relief, in relation to promissory estoppel, on Mr Pretty's alleged assurance at the meeting on 18 December 2002. It submitted that even at a factual level, this claim did not raise a serious question to be tried. 90 According to Telstra, it was clear from Mr Willis' evidence that Mr Pretty had made it plain to Messrs Ilhan, Hamilton and Fleiter that Crazy John's remuneration under the new dealership agreement had to be capped at "X%" of Net Billings. Mr Ilhan had resisted Mr Pretty's proposal. However, Mr Pretty had insisted on the cap, and according to Mr Willis, at no stage said that Telstra would not enforce it. 91 Telstra submitted that its claim that the parties had agreed that Crazy John's remuneration would be capped was supported by such contemporaneous documents as existed. These included the whiteboard printout, and an email dated 20 December 2002 sent by Craig Macdonald of Telstra, who had been negotiating and drafting the new dealership agreement with Crazy John's, to David Kirton, a member of Telstra's Finance Group. Although Mr Macdonald was not at the 18 December 2002 meeting, the email made it plain that a cap fixed at "X%" of Net Billings would be imposed. Significantly, it did not mention any willingness on the part of Mr Pretty to forego enforcement of the cap. 92 Telstra also relied upon the negotiation of the final terms of the 2003 Agreement. It submitted that it was significant that Mr Fleiter had not disclosed in his affidavit the important role played by Edward Woodward, a member of the Victorian Bar, in the drafting and negotiation of that agreement. Both Mr Fleiter and Mr Woodward were experienced commercial lawyers. Although they had ample opportunity to do so, neither of them sought to negotiate for Crazy John's a term that was consistent with a representation that the cap would not be enforced. It was submitted that this was simply because no such assurance had been given. 93 Telstra set out, in considerable detail, an argument as to why I should conclude, from the various drafts produced, that Mr Pretty never at any stage said anything to the effect that the cap would not be enforced. 94 Telstra submitted that it was significant that both Mr Pretty and Mr Fleiter wrote "capped at "X%"" on the whiteboard. 95 Telstra went further. It submitted that even if there was a serious question to be tried regarding whether Mr Pretty gave any assurance regarding non-enforcement of the cap, there was still no serious question to be tried with regard to any issue of reliance. Alternatively, if Crazy John's had relied upon any such assurance, there was no reasonable basis for doing so. 96 Telstra submitted that it was significant that the only variation to the operation of the cap that Mr Fleiter sought, after 31 December 2002, was to impose what Telstra described as a "drop-dead" date for its operation in each Contract Year. This would ensure that once the time for recovery of any overpayment had passed, Telstra would lose its contractual right to recover that sum. Telstra had agreed to the imposition of a six-month period within which to notify Crazy John's of any overpayment, and to demand its return. It was forcefully submitted that the very inclusion of a clause of this type in the 2003 Agreement was utterly inconsistent with Crazy John's promissory estoppel case. 97 Telstra noted that cl 1.2 of that Agreement was expressed in mandatory terms. Telstra was required to calculate the total remuneration paid to Crazy John's for the relevant Contract Year within six-months (ie by 30 June). That created a positive obligation on Telstra's part. It certainly did not confer any discretion. 98 As anticipated by Crazy John's, Telstra also relied upon cl 11 (the "entire agreement" clause). It was Mr Woodward who included that clause in the draft that he initially prepared on 11 December 2002. It was Crazy John's, and not Telstra, that insisted that no representation made outside the terms of the formal contract would be of any legal effect. Neither Mr Fleiter nor Mr Woodward sought to amend cl 11 at any time. This included the period immediately after the 18 December 2002 meeting. Telstra submitted that the only rational explanation for this conduct was that it reflected the true factual position – that Mr Pretty did not give any assurance of the type alleged. 99 Telstra also submitted that it was of some significance that Crazy John's did not formulate any claim based upon promissory estoppel when this application was originally filed in this Court. It was not until 12 May 2005, when the Further Amended Statement of Claim was filed, that promissory estoppel first saw the light of day. 100 Telstra acknowledged that Mr Woodward's evidence, if accepted, might tend to rebut any suggestion of recent invention on Mr Fleiter's part. In that regard, Mr Woodward said that he could recall Mr Fleiter explaining to him, in late December 2002, or early January 2003, that Mr Pretty had required the new dealership agreement to include a provision that capped Crazy John's remuneration at "X%" of Net Billings, but that he had also told Mr Fleiter that the cap would not be enforced. Indeed, according to Mr Woodward, Mr Fleiter actually referred to the cap as "the Clayton's cap". 101 However, Telstra submitted that Mr Woodward's evidence was extremely damaging to Crazy John's case on reliance. Mr Woodward stated that he had expressed concern to Mr Fleiter about the fact that Mr Pretty's assurance was not in writing. He said that he warned Mr Fleiter that there was a risk that circumstances at Telstra might change, and despite the assurance, either Mr Pretty or Telstra might still seek to enforce the cap. He said that he asked Mr Fleiter whether it would be possible to obtain a side letter, or some other written confirmation of the fact that the assurance had been given. However, Mr Fleiter replied that Mr Pretty would not agree because he needed the written agreement to show the "X%" cap in order "to get the necessary approvals within Telstra". Mr Woodward added that Mr Fleiter also told him that he understood that there was a risk that Telstra would enforce the cap, but, "as a commercial matter", Crazy John's was prepared to take that risk, and rely upon Mr Pretty's assurance that he would not do so. 102 Telstra submitted that this evidence showed that Mr Fleiter was well aware that Mr Pretty had no authority whatever to provide any assurance of the type alleged, and that Crazy John's could not, therefore, have relied upon it. That is, even assuming that the assurance had been given in the first place. 103 Telstra also relied upon Mr Fleiter's conduct after being informed on 25 August 2003 that Telstra proposed to enforce the cap. It submitted that if there were any substance in Crazy John's claim, it was extraordinary that Mr Fleiter did not at that stage dispute Telstra's right to cap Crazy John's remuneration. Telstra reminded me that Mr Fleiter wrote on 12 September 2003: "…we were surprised that Telstra … proposed to cap our remuneration without any consultation or indication from Ted as to why". 104 The complaint was about a lack of consultation. No mention whatever was made of any assurance on the part of Mr Pretty that the cap would not be enforced. Importantly, Mr Fleiter never took the matter up directly with Mr Pretty. 105 It followed, Telstra submitted, that I ought not be satisfied that there was a serious question to be tried in relation to the promissory estoppel claim. Crazy John's reply on factual matters relating to promissory estoppel 106 Crazy John's responded to Telstra's attacks upon Mr Fleiter's evidence with a detailed attack of its own upon the credibility of Mr Willis. 107 Crazy John's argued that Mr Fleiter's evidence should be preferred to that of Mr Willis. It relied, in part in support of that submission, upon the evidence of Mr Woodward. 108 Mr Woodward did not attend the meeting of 18 December 2002. However, as previously indicated, he played a significant role in the drafting of the proposed new dealership agreement. 109 Mr Woodward said at [23] of his affidavit, sworn on 14 June 2005: "I recall discussing with Mr Fleiter at some point on or after 23 December 2002 and before 9 January 2003 (and possible on more than one occasion) the negotiations leading to the introduction of the "cap" provision in schedule 5 to the dealership agreement. I do not recall the detail of the discussion or discussions nor the precise words used. However, as best as I can recall it, the substance of the discussion or discussions was as follows: (a) Mr Fleiter explained to me that in the course of negotiations in late December 2002, Mr Pretty of Telstra had required that the dealership agreement include a provision that capped Crazy John's remuneration at [X%] of net billings, but that he had said he would not enforce it. (b) From time to time in our discussions Mr Fleiter referred to it as "the Clayton's cap". (c) I expressed concern about the fact that Mr Pretty's assurance in this regard was not in writing. (d) I said that there was a risk that, despite Mr Pretty's assurance, circumstances at Telstra may change and Mr Pretty or Telstra would seek to enforce the cap. (e) I asked Mr Fleiter about whether it would be possible to get a side letter or some other written confirmation of the assurance. (f) Mr Fleiter said that Mr Pretty would not agree to this because he needed the written agreement to show the [X%] cap to get the necessary approvals within Telstra. (g) Mr Fleiter said that he understood there was a risk but, as a commercial matter, Crazy John's would rely on Mr Pretty's assurance." (emphasis added) 110 Crazy John's relied upon Mr Woodward's evidence to rebut any suggestion that Mr Fleiter's account of the meeting on 18 December 2002 had been a recent invention. 111 Crazy John's recognised that Mr Fleiter's evidence was vulnerable to attack because of his failure to mention, in his letter to Mr Willis of 12 September 2003, Mr Pretty's alleged assurance. 112 Mr Fleiter said, in that letter: "h The cap was proposed by Ted at our meeting with Ted and yourself in December 2002. It had not arisen prior to that time and in that same meeting he clearly said to us that he may enforce it or he may not. Ted's handwritten notes on the whiteboard from that meeting reflect this statement. He wanted to operate at least 12 outlets in Sydney; we now have 20; h You will understand why we were surprised that Telstra has now apparently proposed to cap our remuneration without any consultation or indication from Ted as to why. You will be aware that Schedule 5 of the Agreement contemplates a conscious decision to be made on the part of Telstra rather than the automatic imposition of the cap;" (emphasis added) 113 Mr Fleiter's explained that he had not mentioned Mr Pretty's assurance in his letter because of Mr Willis' warning to him that he should not "slot" Mr Pretty. 114 Crazy John's also attacked the credibility of another Telstra witness, Dean Lockwood. Mr Lockwood is a solicitor presently employed by Rotstein & Associates. He was formerly employed by Mallesons. Mr Lockwood was the solicitor acting on behalf of Telstra who was principally involved in the negotiation and drafting of the 2003 Agreement. 115 Mr Lockwood did not attend the meeting of 18 December 2002. However, he did attend a later meeting with Mr Fleiter on 30 December 2002. His evidence regarding that meeting was of some importance. He claimed that Mr Fleiter made no mention whatever of any dissatisfaction with the drafting of the clause containing the cap as it stood pursuant to a draft prepared on 27 December 2002. 116 Mr Lockwood also said that Mr Fleiter made no mention in their discussions of any assurance having been given regarding non-enforcement of the cap. Nor did he say anything about the need for the cap to be structured in such a way that its enforcement would be "optional", and not "mandatory". These were all matters that Mr Fleiter, in his affidavit, claimed he had discussed with Mr Lockwood at their meeting. Accordingly, if Mr Lockwood was to be believed, Mr Fleiter was, to put it charitably, seriously mistaken. 117 Crazy John's submitted that Mr Lockwood's evidence should not be given any credence. He had stated that Mr Woodward was present at the meeting on 30 December 2002. Mr Woodward, on the other hand, swore that he did not attend that meeting. Indeed, he said that he was not even in Melbourne on that day, but rather away on vacation. He produced apparently incontrovertible evidence in support of that claim. If Mr Woodward's evidence is to be accepted, Mr Lockwood's recollection of events must itself be somewhat suspect. 118 In summary, Crazy John's submitted that Telstra's factual attack upon its promissory estoppel case was based upon evidence that was entirely implausible. It asked, rhetorically, "why would Crazy John's agree to substitute for a guaranteed commission of "X%" of Net Billings (under the 2002 Agreement) a much lower rate of commission which would, at its highest, only equal "X%" if "Crazy John's performed""? It submitted that that no sensible businessman would ever have freely agreed to such a deal. It further submitted that the only credible version of what took place in late December 2002 was that Crazy John's agreed to the change in remuneration in reliance upon Mr Pretty's assurance that the cap would not be enforced. Telstra's submissions on legal matters relating to promissory estoppel 119 Telstra put forward another argument as to why Crazy John's had not established that there was a serious question to be tried in relation to its promissory estoppel claim. It argued that even if Mr Pretty had given the alleged assurance, and Crazy John's had relied upon that assurance, a promissory estoppel could not, as a matter of law, arise. 120 Telstra referred in that regard to the principle that interlocutory relief by way of injunction will only be granted in aid of some legal or equitable right that the court has jurisdiction to enforce by way of final judgment. It drew attention to the decision of the High Court in Australian Broadcasting Corporation v Lenah Game Meats Pty Limited (2001) 208 CLR 199 ("Lenah Meats") at 217 per Gleeson CJ and at 240-241 per Gummow and Hayne JJ. 121 These passages in Lenah Meats were themselves based upon a well-known dictum of Lord Diplock in Siskina v Distos Compania Naviera SA [1979] AC 210 at 256 ("Siskina"). His Lordship said: "… the High Court has no power to grant an interlocutory injunction except in protection or assertion of some legal or equitable right which it has jurisdiction to enforce by final judgment …". 122 Spry has described this statement of principle in Siskina as "unduly restrictive". Nonetheless, it seems to have been approved, at least by Gummow and Hayne JJ, in Lenah Meats. Their Honours said at 241: "The basic proposition remains that where interlocutory injunctive relief is sought in a Judicature system court, it is necessary to identify the legal (which may be statutory) or equitable rights which are to be determined at trial and in respect of which there is sought final relief which may or may not be injunctive in nature." (footnotes omitted) 123 In Lenah Meats, the claim for an injunction was rejected because there was no legal or equitable right to attract interim relief that went in aid of final relief. A similar approach to injunctive relief was taken in Patrick Stevedores at [31] and [35]. 124 Telstra submitted, on the basis on Lenah Meats, that Crazy John's could not obtain interlocutory relief, based upon its promissory estoppel claim because that could not give rise to final injunctive relief. 125 Telstra developed that submission by noting that promissory estoppel claim would inevitably fail because any assurance that Mr Pretty might have given, even assuming that such an assurance was given, could not give rise to a promissory estoppel. That was because it "was not a representation as to the legal rights that would apply between the parties", as required by Waltons Stores. Telstra submitted that even on Crazy John's own case, neither Mr Fleiter nor Mr Woodward had viewed anything that Mr Pretty might have said as a representation of that kind. More specifically, neither had relied upon any such assurance as affecting the legal rights that would apply between the parties. 126 Telstra argued that in order to give rise to a promissory estoppel, a representation must go to a promise that the legal relations between the parties would be altered in a particular way, by reference to that promise. In other words, the promise itself had to affect legal rights, and the parties themselves had to understand that the promise was intended to do so. 127 In support of this submission Telstra referred to two passages in the judgment of Brennan J in Waltons Stores. His Honour said at 421: "… it is important to observe that [promissory estoppel] has no application to an assumption or expectation induced by a promise which is not intended by the promisor and understood by the promisee to affect their legal relations." 128 His Honour went on to say at 424: "A non-contractual promise can give rise to an equitable estoppel only when the promisor induces the promisee to assume or expect that the promise is intended to affect their legal relations and he knows or intends that the promisee will act or abstain from acting in reliance on the promise, and when the promisee does so act or abstain from acting and the promisee would suffer detriment by his action or inaction if the promisor were not to fulfil the promise." 129 Brennan J then summarised the overall position regarding promissory estoppel in the manner set out in the passage that appears at [83] of these reasons for judgment. Crazy John's submissions in reply 130 Crazy John's rejected Telstra's submission that Mr Fleiter's evidence regarding Mr Pretty's assurance, even if accepted, could not give rise to a promissory estoppel. It submitted that it is well established that a statement made by one party to another, during pre-contractual negotiations, to the effect that "if you enter this contract, I will not enforce that clause" is capable of giving rise to such an estoppel. 131 Crazy John's referred, in support of that contention, to a passage in the judgment of McHugh JA in State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 (CA) ("State Rail") where his Honour said at 193: "… I see no reason why the doctrine should be confined to the case of an existing contractual relationships. The rationale of this branch of equitable estoppel is that it is unconscionable for a person to resile from a promise that he will not exercise a right if to do so will place the promisee, who has acted on the promise, at a material disadvantage. It may be just as unconscionable to exercise a right acquired after a promise that any such right would not be exercised if or when acquired. Indeed the case for applying the doctrine of promissory estoppel seems particularly strong when the promisee is induced to confer the right on the promisor by the promise that the right will only be acted on in special circumstances or at a particular time or place or in a particular way." 132 Crazy John's acknowledged that McHugh JA had been in dissent in State Rail. However, it submitted that his Honour's reasoning on this point had never been doubted, and was plainly correct. 133 Crazy John's also referred to Anaconda Nickel Ltd v Edensor Nominees Pty Ltd (2004) 50 ACSR 679 at [20]-[21] and [38]-[40]. In that case the Victorian Court of Appeal held that an estoppel had been established on the basis of a pre-contractual representation that was inconsistent with a right later inserted into a fully negotiated contract. Buchanan JA (with whom Eames JA and Coldrey AJA agreed) said at [40]: "It was submitted on behalf of the appellant that it was not unconscionable for Anaconda not to make good Forrest's promise to complete the purchase of the shares. The promise was made in the course of commercial dealings between well-advised corporations, each concerned to advance its own interests. I regard unconscionability as the underlying principle informing the elements of estoppel, rather than a discrete ingredient which is additional to those elements. Anaconda effectively quarantined the prize nickel assets of Centaur by creating in Gutnick and trading on a belief that completion of the purchase would take place. The injustice in allowing Anaconda to depart from the parties' common assumption sprang from the creation of the assumption by Anaconda and the foregoing by the respondents of any other remedy to meet Centaur's deteriorating position." (footnotes omitted) 134 Crazy John's noted that on 11 March 2005, the High Court refused special leave to appeal from this decision on the basis that "no point of principle would emerge". 135 Crazy John's submitted that Telstra's contention that, as a matter of law, the very fact that the 2003 Agreement provided for a cap on its remuneration meant that nothing said by Mr Pretty could possibly be understood as having caused Crazy John's to alter its legal position, was not correct. It submitted, to the contrary, that any assurance that the cap would not be enforced went squarely to the parties' legal position. The breach of contract claim Crazy John's submissions regarding breach of contract 136 Crazy John's submitted that at the trial of this matter, it would become apparent that the 2005 Demand was invalid, and that Telstra was not entitled to recover any "overpayment". It submitted that a notice of demand that materially overstates a debt must be regarded as "misleading or deceptive", and must therefore be invalid. 137 Crazy John's stressed that its case was not simply that the amount of the 2005 Demand was wrong, but rather that Telstra was seeking to use the alleged overpayment as a means to exert pressure on it to negotiate a new dealership agreement, on less favourable terms. Telstra's submissions regarding breach of contract 138 Turning to the various allegations that Mr Fleiter made regarding the calculation of both the 2003 and 2004 overpayment amounts, and his general allegations about the inability of Telstra's accounting systems to record and calculate Net Billings in respect of connections signed up by Crazy John's, Telstra submitted that these had been comprehensively dealt with by Mr Russo. 139 Telstra submitted that in light of Mr Russo's evidence as to how he calculated the 2004 overpayment, and the manner in which he dealt with all of the matters raised by Mr Fleiter in his previous correspondence, the Court could not be satisfied that the notice provided to Crazy John's in May 2005 overstated the amount owing by Crazy John's to Telstra, or that it was in any way fraudulent, or deceptive, or provided any ground whatsoever for the grant of the injunction sought. 140 According to Telstra, the statement of the overpayment sum was accurate and properly calculated. Even if there were grounds for disputing the amount, that would afford no basis for the grant of injunctive relief. Crazy John's reply 141 Crazy John's submitted that Mr Russo's evidence fell short of establishing that Telstra had no reasonable basis for believing that the overpayment amount was accurate, and had been properly calculated. Crazy John's referred again to the audit. It also relied upon an affidavit of Timothy Rumbold, its Chief Financial Officer, who took issue with many of the claims made by Mr Russo. Mr Rumbold identified what he said were a series of flaws in Mr Russo's reasoning. These included, for example, Mr Russo's use of figures from different periods in his attempts to show error in Mr Fleiter's evidence. conclusion – is there a serious question to be tried? The promissory estoppel claim 142 When determining whether there is a serious question to be tried, a court must have regard to all of the evidence before it, including such evidence as bears upon the availability and strength of any defences: Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729. 143 Telstra submitted that Mr Fleiter's letter of 12 September 2003 could not be reconciled with his evidence before me concerning Mr Pretty's alleged assurance. I must say that, on its face, that submission seems compelling. However, as indicated above, Crazy John's invited me to accept Mr Fleiter's explanation that when he wrote the letter he was conscious of Mr Willis' request to him to avoid "slotting" Mr Pretty. It was for that reason, Mr Fleiter claimed, that in his letter he did not set out accurately, or in full, what Mr Pretty had actually said. 144 Both sides addressed me at length, and in extraordinary detail, as to whose evidence should be preferred. Each side made some telling points. In the end, both sides acknowledged that this issue would have to be resolved, to some degree, by a process of inference. 145 At one point during the course of argument I indicated to the parties that I considered that this aspect of the proceeding was going nowhere. It was simply not possible, in my view, to make any sensible finding as to whether Mr Fleiter's version of events was to be preferred to that of Mr Willis. Neither witness had been cross-examined. A number of other persons who had been present at the meeting had not given evidence. Yet I was being asked on incomplete and unsatisfactory material to make definitive findings as to credibility. 146 In the end, all that can be said is that Mr Fleiter has maintained, in [62] of his affidavit, that at the 18 December 2002 meeting, Mr Pretty gave an assurance that the cap would not be enforced. Whatever difficulties there may ultimately be in accepting Mr Fleiter's account, there is nothing in the evidence before me that demonstrates incontrovertibly that it is false. 147 I am conscious of the competing contentions of the parties. I note in particular Crazy John's submission that Mr Fleiter must be telling the truth. Why else would Crazy John's enter into an agreement on less favourable terms than had previously existed unless the representation alleged was made? 148 However, I note also Telstra's response to that submission. Telstra says that, viewed in its entirety, the 2003 Agreement was, in fact, no less favourable than its predecessor. For one thing, it gave Crazy John's an extra two years' business as a Telstra dealer. For another, the evidence showed that Crazy John's profits under the 2003 Agreement were substantially greater than those under the 2002 Agreement. 149 Unwilling to leave any stone unturned, Crazy John's replies that any increase in its profits under the 2003 Agreement resulted from its own expansion of its business. It says that its increased profits had nothing to do with any "more favourable" terms under the current dealership agreement. 150 The debate before me was intense, and at times, a little heated. However, I remain of the view, as expressed to the parties, that on this interlocutory application, the factual disputes between them really lead nowhere. 151 In the end, I have little more than the affidavits of Mr Fleiter and Mr Willis to go on. These affidavits were prepared some two and a half years after the meeting in question. They involve details of a discussion of which no contemporaneous records were made, apart from a whiteboard printout which both sides claimed, with some justification, supported their case. 152 The rest is inference, to be drawn from discussions, meetings and correspondence that took place long after the critical meeting. I have no evidence from Mr Ilhan, or Mr Pretty. I do not have the benefit of having seen any witness cross-examined. 153 The task of resolving credibility issues is difficult enough when a court has the advantage of seeing and hearing witnesses give their evidence. It becomes all that much more difficult when the court is able to do little more than place two affidavits side by side, and compare them, particularly when each of them has carefully drawn, and no doubt gone over by lawyers with a fine tooth comb. 154 As previously indicated, Telstra submitted that Mr Fleiter's evidence defied credulity and did not give rise to a serious question to be tried. I am unable to accept that submission. Nor can I accept Telstra's further submission that Mr Willis' account of what occurred at the meeting is so plainly plausible that it must be preferred. I cannot properly make a judgment of that kind on the evidence as it stands. 155 It follows that I am not persuaded by Telstra's submission, at this interlocutory stage, that Mr Pretty could not have given an assurance that the cap would not be enforced. 156 That, however, is not the end of the matter. As Bullock makes clear, the fact that there is a serious question to be tried does not mean that interlocutory relief should be granted. Before turning to questions of irreparable harm and balance of convenience, a view must be formed, as to the strength of any serious question to be tried. The stronger an applicant's case appears to be, the less onerous will be the applicant's task in relation to these other questions. 157 In assessing the strength of Crazy John's factual case regarding promissory estoppel, I am conscious of Mr Fleiter's background as a commercial lawyer, and his experience in business. This makes it difficult for me to accept, at face value, his evidence that Crazy John's entered into an arrangement of this magnitude, involving as it did payments of many millions of dollars, over several years, based upon nothing more than an assurance during the course of a discussion with a complete stranger, that a "cap", which was to be included in a formal agreement, would not be enforced. 158 I accept that Mr Woodward's evidence provides some support for Mr Fleiter's belief that such an assurance was given. However, Mr Woodward's statement that within days of the meeting he warned Mr Fleiter not to enter into any agreement involving a cap without getting a written confirmation of the assurance, and Mr Fleiter's reply that he would take a risk "as a commercial matter" hardly assists Crazy John's in its promissory estoppel claim, at least in relation to reliance. 159 To be fair, there are also difficulties with the evidence of Mr Willis and Mr Lockwood. These matters were fully canvassed on behalf of Crazy John's, and I have taken them into account. 160 In summary, although I am persuaded that Crazy John's claim in promissory estoppel raises a serious question to be tried, at least at a factual level, it seems to me, on the limited material before this Court, that its case is not particularly strong. 161 I turn now to the issue whether the claim in promissory estoppel gives rise to a serious question to be tried, or whether as Telstra contends, it is foredoomed, as a matter of law, to fail. This has nothing to do with the strength, or otherwise, of the evidence in support of Crazy John's case. The legal issues raised are complex. Nonetheless, the context in which the debate before me is being conducted must be borne in mind. The only issue to be determined, on this interlocutory application, is whether this claim is sufficiently arguable, as a matter of law, to enable Crazy John's to ground its application for interlocutory relief upon it. 162 Seen in that context, I am unable to accept Telstra's submission that the promissory estoppel claim is necessarily foredoomed to fail. The very fact that the legal elements of the claim, as formulated, are grounded upon the judgment of McHugh JA in State Rail (whether dissenting or not), is in my view, sufficient justification for concluding that the claim is tenable. 163 I am equally unable to accept Telstra's submission that the promissory estoppel claim must fail, as a matter of law, because Crazy John's cannot conceivably demonstrate any reliance upon Mr Pretty's alleged assurance. It is true, as Telstra submitted, that Mr Woodward's evidence, however helpful it may be to Crazy John's on the issue of whether that assurance was given, does little to assist its case on reliance. On one view of his evidence, Mr Woodward seems to be saying that Mr Fleiter told him that he did not regard Mr Pretty as having made a statement that in any way affected Telstra's legal rights. Indeed, on Crazy John's own case, Mr Pretty's reference to needing the cap "for internal purposes" (and the suggestion implicit in that statement that he was deceiving his superiors at Telstra by including the cap in the agreement, though he had no intention of enforcing it) is the very opposite of an assurance that Telstra would not enforce its legal rights. This makes Crazy John's case on reliance somewhat tenuous, at best. 164 However, Telstra's preferred interpretation of Mr Woodward's evidence is not the only view that can be taken of what he had to say. It must be remembered that Mr Fleiter and Mr Woodward were discussing the risk that Telstra might actually seek to enforce the cap when Mr Fleiter observed that this was a risk that Crazy John's might have to take. As Crazy John's submitted, almost every case of promissory estoppel arises in such a context. There is always a risk that a promisor will seek to resile from a promise. A common-sense recognition of that fact is not, of itself, inconsistent with reliance upon that promise. 165 In short, I am not persuaded that any of Telstra's so-called "knock out" points, whether based on matters of fact, or matters of law, establish that Crazy John's claim in promissory estoppel must fail, and therefore does not give rise to a serious question to be tried. The breach of contract claim 166 As previously indicated, Telstra submitted that Crazy John's challenge to the accuracy of its record keeping system, and its resulting claim for breach of contract, did not give rise to any serious question to be tried. 167 Specifically, Telstra submitted that the breach of contract claim, as pleaded, might give rise to a claim for damages, but could not give rise to a claim for final injunctive relief. It submitted that, as a matter of law, injunctive relief would not be granted unless Crazy John's could establish, at trial, that Telstra did not act bona fide when it issued the 2005 Demand. In effect, Telstra argued that nothing short of actual dishonesty on its part would suffice in order to set aside the 2005 Demand, and prevent it from acting upon that notice. 168 Telstra relied upon two cases, Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1998] 3 VR 812 ("Varnsdorf") and Bunbury Foods Proprietary Limited v National Bank of Australasia Limited (1984) 153 CLR 491 ("Bunbury Foods"),in support of this proposition. 169 Telstra submitted that Mr Fleiter's allegations regarding its alleged inability to calculate correctly both the 2003 and 2004 overpayment amounts, and his broader attack upon the reliability of its accounting systems, had been comprehensively answered by Mr Russo. It submitted that whatever might be said about Mr Russo's evidence, even taking into account Mr Rumbold's criticisms, it could not possibly be found that Mr Russo had acted dishonestly, or even in bad faith, when he sent 2005 Demand. 170 Crazy John's challenged the relevance of Varnsdorf and Bunbury Foods to the present case. Its argument is conveniently summarised its supplementary submissions, filed on 19 July 2005, in reply to Telstra's oral submissions. That argument is as follows: "3. The reliance on those cases is misplaced. First, in neither of them was there an on-going trading relationship that one party was threatening to terminate. Such an implicit threat forms part of the basis of the relief sought here. Crazy John's seeks an interlocutory and permanent injunction against Telstra preventing it from "treating … any failure by the Applicant to pay … the alleged overpayment … as grounds for termination": application, para 2(b). 4. There is a material difference between an attempt to enforce a security (which might simply affect the identity of the person by whom any loss is borne pending the resolution of any dispute – as in Varnsdorf) and a threat to exercise a right of termination if a sum is not paid, regardless of whether there is any dispute as to it. That circumstance takes this case outside the field of discourse of Varnsdorf and Bunbury Foods. 5. Secondly, both Varnsdorf and Bunbury Foods involved recourse to security for debts. In Varnsdorf the security was a stand-by letter of credit issued by a third-party bank. In Bunbury Foods the security was a debenture over the debtor's property. Here, there is no "security". Telstra merely has a right to set off any and all money due to it by Crazy John's. 6. There is nothing in the context of the 2003 Agreement suggesting that this right of set off is anything other than a mechanism to ensure Telstra ultimately receives payment of any sum actually due. The word "due" in the 2003 Agreement is not coloured by the existence of any security providing a right to receive payment on demand such as the Letter of Credit in Varnsdorf. 7. Even if an asserted right to set-off debts is a form of security, it is not a form of security to which the principle discussed in Varnsdorf applies. The reason is that rights to secured property, letters of credit, and performance bonds are well-established forms of security the very purpose of which is to show "which party was to be out of pocket pending resolution of any dispute": Varnsdorf at 821.40 per Charles JA. This case is clearly distinguishable from the "security" cases like Varnsdorf and Bunbury Foods. 8. Insofar as any right of setoff is concerned, in paragraph 72F of the Second Further Amended Statement of Claim, Crazy John's has asserted that Telstra did not have the requisite good faith in making the demand in the 2005 Notice." 171 Crazy John's submitted that there was unchallenged evidence that the audit that was currently being undertaken of Telstra's systems had exposed flaws in those systems. Moreover, Crazy John's had repeatedly warned Telstra of the significant errors and deficiencies in its calculations, but its warnings had been ignored. 172 As previously indicated, Crazy John's added that this case should not be viewed as simply an accounting dispute. The primary issue, so far as it was concerned, was its entitlement to an injunction restraining Telstra from treating the non-payment of the sum demanded in the 2005 notice as a default, leading to termination forthwith of the 2003 Agreement. 173 Crazy John's submitted that it was by no means uncommon for an injunction to issue to prevent the termination of an ongoing relationship of the type that existed in this case. It referred, for example, to Moonlighting International Pty Ltd v International Lighting Pty Ltd [2000] FCA 41 at [20]-[26] per Finkelstein J; Liristis Holdings Pty Ltd v Q-Corp Marine Pty Ltd [2001] NSWSC 418 per Hamilton J; Axxess Australia Pty Ltd v Primus Telecommunications (Aust) Pty Ltd [2000] VSC 64 at [32]-[37] per Warren J; Bingham v 7-Eleven Stores Pty Ltd [2003] QCA 402 at [6]-[8] per Williams JA. 174 In my view, Crazy John's is correct in submitting that Varnsdorf is not directly in point. That case concerned the status of irrevocable standby letters of credit, and whether recourse to security was available before determination of liability under contract. The passage in the judgment of Charles JA at 823, upon which Telstra particularly relied, and which spoke of the need for evidence that Varnsdorf did "not have an honest belief" in the validity of its demands as a necessary precondition to the grant of injunctive relief, must be viewed in the light of the particular facts of that case. 175 The same may be said of Bunbury Foods. That case concerned the validity of a notice calling up a debt payable on demand. The case concerned a debenture granted to a bank. There is nothing in the case that sheds any great light upon the point presently in issue. 176 The starting point regarding Crazy John's reliance upon this issue in support of its claim for interlocutory relief is that it is a claim arising out of a contractual dispute. Telstra has sent a notice demanding repayment of an amount that it says was overpaid. Crazy John's disputes that amount. Indeed, it claims that Telstra is owed nothing. It argues that Telstra's accounting system is deficient, that Telstra is, and has at all times been aware of that fact, and that the notice should therefore be regarded as invalid. 177 I am unable to accept Telstra's submission that injunctive relief cannot, as a matter of course, be granted in such a case. However, as discussed above, the strength of Crazy John's case in its challenge to the validity of the 2005 Demand, and therefore its case of breach of contract, is an important consideration in determining whether to grant such relief on an interlocutory basis. In ordinary circumstances, a breach of contract of the type alleged will sound only in damages, at least where no irreparable harm can be shown. The position may be different where dishonesty can be established. 178 In my view, the evidence in support of Crazy John's claim, as it stands, cannot be described as terribly strong. Absent any real evidence of lack of bona fides, the claim is simply one of breach of contract. I cannot see why such a claim, even if made good, would warrant the grant of injunctive relief. 179 I am conscious Crazy John's claim that Telstra is simply using the alleged overpayment as a pretext for terminating the 2003 Agreement. Crazy John's says that this is being done so that Telstra can force it into yet another dealership agreement on still less favourable terms. Nonetheless, whatever failings there may be in Telstra's accounting systems (and the evidence suggests that there may be such failings), I do not think that the evidence as it stands warrants the grant of interlocutory relief. Crazy John's would have to demonstrate that it would suffer irreparable harm without such relief, or at least that the balance of convenience is markedly in its favour. It has not done so. irreparable harm 180 Mason CJ in Castlemaine Tooheys, and the learned authors of Meagher, Gummow and Lehane, suggest that separate consideration needs to be given, on an application for an interlocutory injunction, to whether the applicant would suffer irreparable harm if no such injunction were granted, but the applicant were successful in a final hearing. If damages are an adequate remedy, no irreparable harm will be suffered. As previously mentioned, whether or not this is indeed a separate requirement for the grant of interlocutory relief is a matter of some contention. I propose to deal with this issue within the ambit of my discussion of the balance of convenience. balance of convenience 181 Even assuming that a serious question to be tried has been established, a court will always have discretion as to whether to grant an interlocutory injunction. In exercising that discretion, the court will weigh the extent of any impending prejudice or inconvenience to the applicant against the extent of any hardship that the grant of an injunction may cause the respondent. 182 The relevant principles governing the exercise of this discretion, and the operation of the balance of convenience test, are set out in leading equity texts, including Spry at 590-592, and Meagher, Gummow and Lehane at 774-795. These matters are also considered in Beecham at 623, and 625-6, and Mobileworld Communications Pty Ltd v Q & Q Global Enterprise Pty Ltd (2003) 59 IPR 107, at [26] and [30]-[36]. 183 The purpose of an interlocutory injunction is to preserve the status quo pending the trial of a proceeding. Sometimes the courts are not prepared to preserve the status quo if that will result in some countervailing disadvantages which more than equal the desirability of continuity. As previously noted, it is occasionally said that where an interlocutory injunction is sought, the applicant must establish that if that relief were not granted, irreparable injury would result. However, this requirement is not always separately stipulated. Crazy John's primary submission regarding balance of convenience 184 Crazy John's submitted that the balance of convenience strongly favoured the grant of interlocutory relief. It argued that the status quo would best be preserved by the grant of the injunction sought, rather than by Crazy John's having to pay Telstra the more than $12 million which was the subject of the 2005 Demand. 185 According to Mr Fleiter, payment of a sum of that magnitude would frustrate the expansion of Crazy John's business throughout Australia. Moreover, when added to the more than $21 million already paid under protest, Crazy John's would have close to $34 million tied up in this dispute. He claimed that it was obvious that this would have a severe and detrimental impact upon Crazy John's business. 186 Mr Fleiter noted, in that context, that Telstra's reported sales revenue for the half-year to 31 December 2004 was $11.275 billion. Net profit for that period came to $2.337 billion. He sought to contrast Telstra's massive profit with the relatively modest revenue generated by Crazy John's. 187 Crazy John's noted that there was no suggestion that it would be unable to pay Telstra the amount of the alleged overpayment, together with costs, if it were ultimately unsuccessful in this litigation. The evidence showed that under the 2003 Agreement, Telstra paid Crazy John's approximately $12 million per month. Under the terms of that agreement, if Telstra were successful in resisting Crazy John's claim in this proceeding, it would be entitled to withhold cash payments. Telstra would thereby, within a matter of weeks, recoup any amount equivalent to the amount claimed under the 2005 Demand. 188 In short, Crazy John's submitted that, pending the trial of this proceeding, it was entitled to interlocutory relief because Telstra should be prevented from treating any failure to pay the amount sought under the 2005 Demand as a ground of default under the 2003 Agreement. It submitted that an order restraining Telstra from using its unwarranted demand as a ground of default would best preserve the subject matter of the dispute. Such an order would best maintain the status quo pending the determination of the rights of the parties. Telstra's submission regarding balance of convenience 189 Telstra submitted that interlocutory relief should be refused because Crazy John's had failed to adduce any evidence of irreparable harm for which damages would not be adequate compensation. 190 Telstra noted the thrust of Mr Fleiter's argument on the related issues of irreparable harm, and balance of convenience. In substance, he claimed that if injunctive relief were not granted, and Crazy John's were "forced" to pay the more than $12 million demanded pending the trial of this matter, it might lose the opportunity to continue developing its business by acquiring other dealers. Telstra submitted that even if there were evidence to support that claim, it would not amount to evidence of irreparable harm. Plainly, it would be harm for which damages would provide adequate compensation. 191 However, Telstra went further and challenged the factual basis for Mr Fleiter's claim. It relied upon the evidence of Stephen Eyears, a senior member of its Customer and Sales Service in its Consumer and Marketing group. He said that on 4 April 2005, he attended a meeting at Crazy John's head office in Melbourne. Both Mr Ilhan and Mr Fleiter were present. According to Mr Eyears, Mr Ilhan said during the course of the meeting that he was not interested in buying other dealers. He said that this was no part of his business model. 192 Mr Eyears went on to say that since 1 January 2004, there had only been five acquisitions by dealers of other Telstra mobile phone dealers. This was despite there being over 150 Telstra mobile phone dealers throughout Australia. None of these acquisitions had been by Crazy John's. 193 Mr Eyears also referred to a discussion that he had had with a Telstra dealer that was interested in selling its dealership business. He noted that Telstra, as was its right, had made it plain to that dealer that it would not consent to the sale of that business to Crazy John's. He said that he knew of no other Telstra dealers who wished to sell their business to Crazy John's. 194 Telstra noted Mr Fleiter's claim that a payment of more than $12 million would impose a strain on Crazy John's working capital. However, it submitted that this claim was lacking in specificity, and offered no probative assistance to the Court. There was, it submitted, simply no evidence that would allow a finding of serious, let alone irreparable, harm. 195 Finally, on the question of balance of convenience, Telstra noted that there was evidence that it had made payments to Crazy John's totalling $135 million (including $60 million under the 2003 Agreement), in the 2004 Contract Year. There was further evidence that Crazy John's was receiving an average of more than $12 million per month pursuant to the 2003 Agreement, in addition to revenue of many millions of dollars from sources outside that agreement, in the 2005 year. It was likely that Crazy John's would achieve revenue under the 2003 Agreement (before any claim for overpayment was made) in the order of $65 million in the 2005 year. 196 It followed, Telstra submitted, that Crazy John's could only be regarded as a large, and financially sound organisation. Its dispute with Telstra was simply about money. There was no reason why the 2003 Agreement should not, at this stage, be enforced according to its terms. If Crazy John's made good its claims at trial, it would recover damages, as compensation for any loss sustained, together with interest. However, no case for the grant of interlocutory relief had been made out. Crazy John's reply on balance of convenience 197 Crazy John's replied by noting that Telstra did not suggest that it would suffer any particular prejudice if an injunction were granted. That was hardly surprising. Telstra had a market value (at least at that stage, and before the recent decline of its share price) some two hundred times greater than that of Crazy John's. The fact that Telstra makes significant monthly payments to Crazy John's was said to be irrelevant. 198 As regards the payments made to Crazy John's, these were said to be revenue figures, and to have nothing to do with either its working capital requirements, or its profitability. 199 Crazy John's reiterated that if it were required to pay the more than $12 million now demanded, that sum, coupled with the earlier payment of more than $21 million, would amount to approximately 10% of its market value. That would seriously impede its capacity to grow. It would also impede its capacity to enjoy what described as the full benefit of the 2003 Agreement for the balance of its term. 200 Crazy John's submitted that the extent of any such damage would be difficult to calculate, and would inevitably involve a significant measure of speculation. Telstra, on the other hand, could be compensated precisely if it were to succeed at trial simply by a monetary award, and interest on any sum due. Telstra would also have the ability to set off any such sum against a single month's payment to Crazy John's. Conclusion regrading balance of convenience 201 Telstra's ultimate submission was that Crazy John's application for interlocutory relief should be dismissed because it had not shown that it would suffer irreparable harm, or that the balance of convenience favoured the grant of such relief. In considering these matters, I proceed upon the assumption that if interlocutory relief is refused, Crazy John's will be compelled, as a matter of practical reality, to meet the 2005 Demand, pending the trial of this matter. The alternative is that Telstra will terminate the 2003 Agreement forthwith. 202 In a case of this complexity, a trial cannot sensibly be expected to take place until at least well into 2006. 203 It is important to emphasise that Crazy John's does not say that it cannot make the $12 million payment. Indeed, the evidence makes it clear that the money is available, having been secured through arrangements Crazy John's has made with its bank. If it turns out that Telstra's claim for overpayment ought not to have been made, Crazy John's will, eventually, recover the full amount paid, together with interest. It will also recover the more than $21 million dollars paid, under protest, pursuant to the 2004 Demand. It may also recover damages for lost opportunities in relation to those funds. There is no doubt that Telstra has the ability to repay these sums, together with any damages that might be awarded. In that sense, and to a considerable degree, damages are adequate remedy. 204 As indicated, Crazy John's argued that if it were required to pay the more than $12 million demanded, it would be deprived of the opportunity to use that money in expanding its business. Mr Fleiter, in his evidence, suggested that Crazy John's might be prevented, for example, from acquiring other dealerships. 205 That evidence has to be weighed against other evidence relating to Crazy John's financing facilities. Crazy John's obtains its working capital and guarantee facilities from National Australia Bank Limited ("NAB"). A condition of one of the facilities is that funds be set aside to cover the overpayment amount. That suggests that even if the injunction were granted, Crazy John's would still be required to set the overpayment amount aside, and could not use the funds for business expansion. 206 There was some evidence that the NAB may be willing to review this particular condition, with a view to releasing some or all of these funds, should the application before me be successful. However, I regard that evidence as tenuous. It consisted of a diary note (described by Telstra as "reconstructed") of multiple conversations prepared by Mr Fleiter. Telstra characterised the note, perhaps not unfairly, as a "document created specifically for the purposes of the affidavit". 207 Nonetheless, I accept that it is possible that Crazy John's will be disadvantaged by having to meet the borrowing costs of the NAB facility out of its own funds. In the context of this case, those costs are not great. Moreover, they would be recoverable in the event that Crazy John's succeeds in its claim for damages against Telstra. 208 I also accept that it is possible that Crazy John's will be further disadvantaged by having to draw down upon this facility, pending trial. This may reduce Crazy John's ability to borrow further, in the interim. 209 On the evidence before me, I consider Mr Fleiter's contention that Crazy John's wishes to use the overpayment amount for the purpose of acquiring other dealerships to be somewhat improbable. There is very little evidence to suggest that Crazy John's is serious about embarking upon such a course, and Telstra has made it plain that it will not cooperate in any such endeavour. 210 I also have doubts about Mr Fleiter's claim that the payment of the just over $12 million at this time would impose a significant strain on Crazy John's "working capital". The NAB facility provides at least a partial answer to that claim. It must also be remembered that Telstra's annual payments to Crazy John's vastly exceed the amount of the overpayment claimed. 211 On the other hand, if Telstra is prevented, by the grant of interlocutory relief, from proceeding on its notice of demand, it will have been deprived, for all time, of the opportunity, freely negotiated, and evidenced in a carefully drawn, and formal agreement, to use the threat of immediate termination of that agreement as a vehicle for recovering at once what it claims to be a significant overpayment. Telstra will certainly thereby suffer some prejudice. That prejudice will not be great, and it will unquestionably not be irreparable. However, it should not be ignored entirely. 212 As with many cases of this type, there is no perfect solution. If the general aim is to preserve the status quo pending the trial of this proceeding, and interlocutory relief is available to assist in achieving that aim, it is still no easy matter to determine how best to bring about that result: McHattan v Australian Specialised Vehicle Systems Pty Ltd (1996) 34 IPR 537 per Drummond J. 213 In the end, I must determine this application in accordance with established principles. Crazy John's, having sought interlocutory relief, has the onus of persuading the Court that such relief should be granted. I have indicated that I am satisfied, despite Telstra's vigorous protestations, that there are serious questions to be tried. However, in my view, Crazy John's has not shown an "apparently strong claim", in the sense described in Bullock, in relation to either of the causes of action relied upon. 214 In the end, there is little to choose between the parties on the issue of balance of convenience. As previously indicated, Telstra can call in aid a carefully drafted formal agreement, executed by two large, and commercially sophisticated business entities, each of which had the benefit of highly competent legal advice at the relevant time. When the courts speak of "preserving the status quo", they do not mean freezing the situation in every respect until the trial. Sometimes, all else being equal, keeping intact the formal arrangements into which the parties have entered, until some reason is shown for departing from those arrangements, best preserves the status quo. That may mean that regular payments will continue to be made under those arrangements until the trial of the matter. The continuation of such payments is not a departure from the status quo, but rather an affirmation of it. The present case seems to me to fall within that category. It follows that Crazy John's has not discharged the onus of persuading me that the balance of convenience favours the grant of interlocutory relief. 215 It goes without saying that the fact that Telstra happens to be a much larger, and wealthier company than Crazy John's, a matter continually emphasised by Mr Fleiter, does not, of itself, lead to the conclusion that the balance of convenience favours the grant of interlocutory relief. Otherwise every financial imbalance of significance between parties to a dispute would give rise to a presumption that the balance of convenience favoured the smaller, and less well off entity, rather than its better resourced opponent. It is not altogether clear whether Crazy John's relied upon such a contention. If it did, it cited no authority to support it. The proposition is contrary to principle, and must be rejected. discretionary factors Telstra's submissions regarding discretionary factors 216 Finally, Telstra relied upon several discretionary factors that it claimed justified the refusal of the injunction sought. These turned largely upon the conduct of Crazy John's. Telstra argued that, in the context of a detailed and lengthy affidavit, Mr Fleiter had been less than candid by failing to disclose the significant role played by Mr Woodward in relation to drafting of the 2003 Agreement. Telstra also claimed that Mr Fleiter had failed to disclose that it was Crazy John's, and not Telstra, that had been pressing for a new agreement to be negotiated. Finally, Telstra noted that Crazy John's had sought relief from the Court in circumstances where it had refused to entertain a reasonable proposal regarding repayment of the overpayment amount. Telstra had offered to set off that amount over time by deducting $3 million per month from payments to be made to Crazy John's in July, August, September and October 2005. Had Crazy John's accepted that offer, pending the trial of this matter, any hardship would have been significantly alleviated. Crazy John's reply on discretionary factors 217 Crazy John's submitted that there were no discretionary factors militating against the grant of injunctive relief. In fact, the evidence showed that Telstra was simply engaged in a campaign designed to damage a vigorous competitor in the retail market for mobile phones in Australia. Not only had Telstra made the two demands for the alleged overpayment amounts, but it had also determined to prevent Crazy John's from expanding by acquiring other businesses. Still more telling was the fact that, on 30 June 2005, Telstra had served a notice terminating the 2003 Agreement at the expiration of two years from the date of the notice which, of course, Telstra was entitled to do under the terms of that agreement. 218 Crazy John's had made it clear that it could be ready for trial by October 2005. Telstra, on the other hand, said it would not be ready for trial for anything up to a year. If Telstra were serious about that claim, it would result in an unacceptable delay. It would also result in still further prejudice to Crazy John's. Conclusion regarding discretionary factors 219 In my view, Telstra has not shown that there are any discretionary factors that would warrant a refusal of interlocutory relief, if such relief were otherwise justified. orders 220 For the reasons set out above, the application for interlocutory injunctive relief is refused. It follows that the notice of motion dated 10 May 2005 will be dismissed. I propose to hear the parties in relation to the costs of this application. I certify that the preceding two-hundred and twenty (220) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg. Associate: Dated: 23 September 2005 Counsel for the Applicant: Mr D. Shavin QC with Mr S.M. Anderson Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the Respondent: Mr N.J. Young QC with Mr M.D. Wyles Solicitor for the Respondent: Mallesons Stephen Jaques Date of Hearing: 16 June 2005 and 19 July 2005 Date of Judgment: 23 September 2005