Media Ocean Limited v Optus Mobile Pty Limited (No 4) [2009] FCA 488

FEDERAL COURT OF AUSTRALIA

Media Ocean Limited v Optus Mobile Pty Limited (No 4) [2009] FCA 488

MEDIA OCEAN LIMITED and MEDIATEL AUSTRALIA PTY LIMITED v OPTUS MOBILE PTY LIMITED

NSD 242 of 2009

PERRAM J

13 MAY 2009

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 242 of 2009

BETWEEN: MEDIA OCEAN LIMITED

First Applicant

MEDIATEL AUSTRALIA PTY LIMITED

Second Applicant

AND: OPTUS MOBILE PTY LIMITED

Respondent

JUDGE: PERRAM J

DATE OF ORDER: 13 MAY 2009

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. Paragraphs 21, 21A, 23 and 24 of the further amended statement of claim be struck out but that leave be granted to the applicants to replead those paragraphs in accordance with his Honour's reasons. 2. The applicants file and serve a second further amended statement of claim by 1 pm on Thursday 14 May 2004. 3. The applicants file and serve an affidavit explaining the need for expedition by 6 pm on Thursday 14 May 2009, and post a copy of that document in eCourt. 4. The respondent post in eCourt any submissions on expedition by 10 am on Friday 15 May 2009. 5. Costs be costs in the cause. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 242 of 2009

BETWEEN: MEDIA OCEAN LIMITED

First Applicant

MEDIATEL AUSTRALIA PTY LIMITED

Second Applicant

AND: OPTUS MOBILE PTY LIMITED

Respondent

JUDGE: PERRAM J

DATE: 13 MAY 2009

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The respondent ("Optus") applies to strike out paragraphs 21 to 25 of the further amended statement of claim. It is useful to begin with the complaints about paragraph 21A. That paragraph provides (particulars omitted): By reason of the preceding paragraph, at all material times up to 15 January 2009, Optus has impliedly represented to Plan Customers that Optus would apply the definition of "international call" and "international voice call" in the Post Paid Agreements, the Pre-paid Agreements, the SME Agreements and the Business Agreements consistently. 2 The words "would apply the definition" direct attention to paragraph 21 which is in these terms: Further or in the alternative to paragraphs 13 to 20 above, at all material times up to 15 January 2009, the Post Paid Agreements, the Pre-paid Agreements, the SME Agreements and the Business Agreements all contained the same definition of "international call" or "international voice call", namely the terms "international call" or "international voice call". 3 The answers to the particulars which have been provided make plain that the various agreements do not contain a definition of the expressions "international calls" or "international voice calls". Optus submitted that in those circumstances, there could hardly be an implied representation about the application of such a definition as alleged by paragraph 21A. 4 This submission is, I think, sound. Mr Kunç SC, who appeared with Mr Bova for the applicants, accepted that what paragraphs 21 and 21A were seeking to allege was that there was an implied representation that Optus would apply the terms "international call" and "international voice call" consistently between different classes of customers. In that circumstance, the appropriate course is to strike out paragraphs 21 and 21A and to grant leave to replead them so that they refer not to a "definition" but to a "term". 5 Mr McHugh SC, who appeared with Mr Potts for Optus, also submitted that there was a difficulty with the word "apply" in that a definition is not something which is susceptible to discretionary application. While there is force in that criticism, I think an allegation that Optus applied the terms differently is sufficiently clear to discharge the function served by a pleading, namely, putting the opposite side on notice of the case it has to meet. 6 It is then useful to turn to paragraph 21C. It provides (particulars omitted): Contrary to the representation pleaded in paragraph 21A above, Optus did not and continues not to apply the definition of "international call" and "international voice call" in the Post Paid Agreements, the Pre-paid Agreements, the SME Agreements and the Business Agreements consistently. 7 Mr McHugh's submission was that this could not render the representation as to non-differential treatment misleading or deceptive. Paragraph 21C does not, in terms, allege misleading or deceptive conduct. However, the matters referred to in paragraph 21C, amongst others, are said to constitute misleading and deceptive conduct in paragraph 23. The representation referred to in paragraph 21A was a representation as to future conduct, as the pleading in paragraph 21B shows, and the critical inquiry is, therefore, whether the representation was made with reasonable grounds rather than whether the representation ultimately turned out to be true. It follows that Mr McHugh's point is correct – paragraph 21C does not falsify paragraph 21B. 8 However, paragraph 21C is also picked up by paragraph 21D(a) which, by reason of paragraph 23A, results in paragraph 21C also alleging unconscionable conduct. Mr McHugh's objection, well-founded as it is in relation to misleading and deceptive conduct, does not operate in relation to unconscionability. 9 The proper course in those circumstances is not to strike out paragraph 21C itself but to strike out the reference to paragraph 21C in paragraph 23. Textually this cannot be achieved by the application of a blue pencil. I will, therefore, strike out paragraph 23 in its entirety but grant leave to replead it without the reference to paragraph 21C. 10 Optus submitted that the unconscionability claim in paragraph 23A could not, in any event, be permitted to go forward. That claim has four elements: first, it repeats the claim based on the representation as to the uniform application of the terms "international calls" and "international voice calls" (paragraph 21D(a)); secondly, it pleads the non-uniform application of those terms (paragraph 21D(a) and paragraph 21C); thirdly, it pleads a representation to customers that the terms would be approached in the same way (paragraph 21D(b)); fourthly, it pleads the differential treatment of customers. 11 At the pleading level, I accept that those allegations are arguably sufficient to constitute unconscionable conduct. It may well be unconscionable to treat customers who are relevantly similar in ways which are different vis-à-vis those customers. It is less clear that it is unconscionable vis-à-vis the applicants. However, Mr Kunç put the case on the basis that, as a trade competitor of Optus, his clients were entitled to restrain Optus' unconscionable conduct towards its own customers. He called in aid of that submission an analogy with the approach in trade competitor cases to s 52 of the Trade Practices Act 1974 (Cth) and passing off: see Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526. On that basis, it seems to me that the unconscionability claim may proceed. 12 However, Optus also submitted that there were difficulties with the loss and damage pleaded in paragraph 24. As explicated by particulars that loss and damage claim was as follows: The Applicants receive income by reference to the number of minutes Plan Customers use the Media Ocean Services. The Respondent's conduct has resulted in Plan Customers who were using or would have used the Media Ocean Services not doing so. But for the Respondent's conduct, Plan Customers who were using the Media Ocean Services would have continued to do so and other Plan Customers would have commenced using the Media Ocean Services, thereby resulting in a continued growth in the Applicants' business. Accordingly, the Applicants have suffered both a loss in income and have been deprived of additional income which they contend they would have earned as a result of foreseeable growth in the use by Plan Customers of the Media Ocean Services. 13 Assuming that the conduct of Optus was unconscionable in the sense discussed above leads to some difficulties at the level of causation. The measure of the applicants' loss should be the difference between its position but for the unconscionable conduct and its current position. This requires the positing of a counterfactual in which the unconscionable behaviour did not occur. Granted that the unconscionable behaviour is constituted by discriminatory treatment in the present case, the counterfactual would require the positing of a uniform approach to the terms "international calls" and "international voice calls". But a uniform approach does not tell one whether the particular customers who were charged the higher rate would have been charged a lower rate or vice versa – that is, all the customers might have been uniformly charged either the international rate or the local rate. If it be the latter then loss was suffered; if the former then it was averted. The pleading addresses this question obliquely by assuming that the allegation that the paying customers who have left the applicant's services (or who have not joined them) have done so because of a higher rate imposed. I would be prepared to read the particulars to paragraph 24 in that fashion. I do not think that, so understood, there is a pleading issue. 14 Nor am I prepared to strike out this claim because the process of calculation is to be left to expert evidence. The substance of the loss claimed is made clear: it is the loss of revenue from those who have ceased using the applicants' services and those who have never taken up such services. The precise manner in which such losses are actually proved is a matter for evidence; the applicants have signalled what is to be proved. 15 A more serious difficulty, however, afflicts the claim based on the representation as to consistent treatment in paragraph 21A. Had that representation not been made (the appropriate counterfactual) what would have occurred? This involves asking what would have occurred if Optus had not represented that it would approach the terms "international calls" and "international voice calls" uniformly. The applicants claim the lost revenue from those customers who, confronted with higher rates, have either ceased using the applicants' services or have never taken them up in the first place. But what would those customers have done if they had not been told that Optus would treat international calls and international voice calls uniformly? The answer is known – what caused the customers not to use the applicants' services was the fact that Optus charged them the higher rate. That fact occurs in the counterfactual scenario as well. What this means is that the cause of the applicants' loss is not the making of the representation about the uniform treatment but, instead, the actual way it charged customers. 16 The fallacy of this part of the applicants' claim is the assumption that an expectation measure of damages is appropriate in the context of a claim for misrepresentation under s 52, an assumption which, in the context of non-contractual misrepresentations, is not warranted: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 503-504 [16]-[17] per Gaudron J (with whom Gummow J agreed at 525 [90]), 512-513 [41]-[42] per McHugh, Hayne and Callinan JJ. The applicants in a non-contractual misrepresentation case are entitled to damages to put them in the position they would have been in had the representation as to consistent treatment not been made. What they seek instead is damages to put them in the position they would have been in had the representation been true. Such a claim is not maintainable under s 52. 17 The loss and damage claim as pleaded in relation to misleading and deceptive conduct is clearly not maintainable. Accordingly I will strike out paragraph 24 and grant leave to replead the paragraph in terms which do not connect it to the claim based upon s 52. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.