BELL SOUTH AUSTRALIA PTY LTD v MATRIX TELECOMMUNICATIONS LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL GLEESON CJ, SAMUELS JA and WADDELL AJA 23 November 1990, 8 February 1991 [1991] NSWCA 23 Contracts "liabilities" CONTRACT — agreements for sale of shares in companies carrying on a radio paging business — issue as to meaning and effect of the defined term "liabilities' — HELD — the trial judge erred in his conclusion as to the construction of the agreements — no question of general principle involved. Gleeson CJ This is an appeal from a decision of Brownie J in the Commercial Division. The respondent, the plaintiff at first instance, claimed successfully that it had been underpaid by the appellant following a sale by the respondent to the appellant of the whole of the issued shares in the capital of a company named Voicecall Telecommunications Pty Ltd ("Communications"). In order to explain the nature of the dispute between the parties concerning the appropriate amount to be paid as the purchase price of the shares it will be necessary to say something about the kind of business carried on by Communications. Before doing so, however, it is convenient to outline the transaction between the appellant and the respondent. In August 1988 Communications, and another company named Page Alert Pty Ltd ("Page"), both carried on similar businesses which have been described as radio paging businesses. The nature of those businesses was explained in a statement of Mr GM Lorentz in the following terms: "(3) (Communications) conducted a business of radio paging, by which messages and information for subscribers to the service were received by (Communications) and relayed to subscribers by frequency modulation radio transmissions, being received by subscribers through paging devices. These paging devices were sometimes rented from (Conlmunications) or a company associated with (Communications) or they were purchased outright by subscribers. (4) (Page) is a company which prior to August 1988..carried on a business similar to (Communications). (5) The terms on which subscribers to the (Communications) services obtained the benefit of those services were set out in a standard form of contract. (6) In accordance with CL3 of the Terms and Conditions, subscribers contracted to pay to the company f ees quarterly in advance. Almost invariably the terms as to payment were for a period of 3 months in advance. The company had the policy of billing customers from the first of the month following the customer entering into a contract with the company, in most cases on a quarterly basis and then billing the customer quarterly. In some of the cases the customer was charged for the period between the date of the contract and the first of the following month. 2 UNREPORTED JUDGMENTS (7) There was no obligation on the company under the terms and conditions of its contract to make a refund to subscribers in the event that they terminated their subscription before the expiry of the current (prepaid) quarter.... (9) The costs incurred by the company for providing the service for its subscribers were not uniformly directly related to the number of subscribers. There were costs incurred which related to the infrastructure of the company and for the administration of the company's business which were not variable according to the number of subscribers to the company's service.... There were also further costs which did not increase directly in proportion with the number of subscribers.... The company employed operators to take the telephone messages and then relay them to subscribers. These operators were employed in three shifts so that the company could provide a 24 hour service 7 days a week and a minimum of two operators had to be in attendance at all times.... (10) A substantial part of the expenses incurred by the company was incurred in securing new subscriptions to the company's services and these are contained in the sales and marketing expenses set out in the management accounts... The company policy was that in order to place an alpha numeric pager on the system which had an average service fee of $35 per month or $420 per annum, the cost incurred for sales and marketing should not exceed the sum of $250 per such a pager put on the system. The average length a client would stay on the system was approximately 36 months." It was the practice of billing quarterly in advance that has given rise to the present dispute. I shall return below to further details of that practice, and its accounting consequences, and the significance of the practice for the contract entered into between the appellant and the respondent. On 26 August 1988 two deeds were entered into. By one such deed, entitled "Agreement for the Sale of Business", Communications contracted to purchase the business of Page. The other deed was described as a "Share Sale Deed". By that deed the respondent contracted to sell to the appellant the whole of the shares and the capital of Communications for a price which amounted to $30 million subject to a series of adjustments to be made in accordance with the provisions of the deed. The dispute between the parties relates to the operation of those provisions concerning adjustment of the purchase price. It seems reasonable to infer that the contractual scheme under which there was to be what might be described as a progressive refinement of the purchase price to be paid for the shares in Communications was decided upon as a result of a combination of two circumstances. On the one hand, presumably the respondent wanted to receive payment of a substantial part of the purchase price as soon as possible. On the other hand, although the appellant had, prior to 26 August 1988, received reports from accountants relating to various aspects of the businesses of Communications and Page, there were evidently aspects of the financial affairs of both companies that required further examination before their net worth could be financially established. I do not mean to suggest that the agreement was that the shares in Communication would be sold for a price equal to the net tangible assets of the company. The basic purchase price was agreed upon as a matter of commercial negotiation. However, the adjustments to be made to the base price were related to matters affecting the net assets of Communications and Page and the deed provided for progressive adjustments over a period of time which would allow for the supply of further information to the appellant and its accounting advisers. UELL SOUTH AUSTRALIA PTY LTD v MATRIX TELECOMMUNICATIONS LTD (Gleeso& CJ) The Share Sale Deed provided for a payment of $3 million upon execution of the deed. That amount was to be invested at interest for the benefit of the appellant and the respondent. The deed further provided for a "Completion Date" which, in the events that happened, was 30 September 1988. On that day the deposit of $3 million together with half of the accrued interest was to be paid to the respondent. Additionally the appellant was to pay to the respondent $24 million plus or minus the amount referred to as "The First Adjustment Sum" or "FAS". This adjustment was to be made by reference to certain internal accounts of Communications and Page made up as at 31 August 1988. Those internal accounts, which were unaudited, were referred to as "the Management Accounts". The FAS was an amount equal to the cash plus prepaid expenses plus the trading stock plus the debtors less the liabilities of Communications and Page all as at 31 August 1988. It was stipulated that the management accounts of Communications and Page were to be in accordance with generally accepted accounting principles and practices. Certain other presently irrelevant items were also to be taken into account. There was to be a Second Adjustment Date, a specified time later, following determination of a "Second Adjustment Sum" or "SAS". The SAS was to be worked out according to an elaborate formula, not all of the details of which are relevant.Essentially, the formula was aimed at correcting or updating the FAS in the light of an audit that was to be undertaken by a chartered accountant at the cost of the appellant pursuant to certain provisions of the deed that will be referred to below. Two particular items that entered into the adjustment were "Prepaid Expenses" and "Liabilities". Part of the formula for calculating the SAS required the deduction from prepaid expenses of Communications and Page as at the Completion Date of prepaid expenses of Communications and Page as at 31 August 1988 calculated in the same manner as the FAS. Similarly, the formula called for the ascertainment of the difference between liabilities of Communications and Page Alert as at the Completion Date and the same liabilities as at 31 August 1988 calculated in the same manner as the FAS. There is an issue between the parties as to the intended scope of this correction or updating of information relevant to the net worth of Communications and Page as at 31 August 1988 and 30 September 1988 respectively. Subject to the resolution of that dispute, however, the scheme of the deed was for a review of matters relating to such net worth, and, in particular, of prepaid expenses and liabilities, following the audit contemplated by the deed, and a second adjustment to the purchase price. There was to be a "Final Adjustment Date", which was to be the first business date following the expiration of six months after the Completion Date. On that date the appellant was to pay the respondent $3 million plus or minus certain adjustments which were to reflect matters that had been subsequently ascertained as requiring adjustment, not having been the subject of adjustment in either the FAS or the SAS. The relevant provisions of the Deed relating to the matter of audit were in the following terms: "(1) In consideration of, and in full payment for the Shares, the Purchaser shall, subject to the adjustments provided herein, pay to (Communications) on the terms set forth in this Deed the sunt of $30,000,000 (the Consideration'). (2) The parties irrevocably appoint the Chartered Accountant to conduct the Audit. The Chartered Accountant shall act as an expert and not as an arbitrator. The Audit shall be made in accordance with the statements of accounting 4 UNREPORTED JUDGMENTS standards promulgated by the Australian Society of Accountants in Australia ("ASAA") and the Institute of Chartered Accountants from time to time and in accordance with the statements of Accounting Standards promulgated by the ASAA and the Institute of Chartered Accountants from time to time and generally accepted accounting principles and practices in Australia. (3) The parties irrevocably appoint the Chartered Accountant to determine the Consideration Adjustment based upon the results of the Audit and its independent review and investigation of the Company, Communications and Page Alert including, without limitation, the review of the Records of Communication, the Company, VC and Page Alert and a consideration of the written representations of the Executive Directors of each of such companies. The Chartered Accountant shall act as an expert and not as an arbitrator. All adjustments that the Chartered Accountant requires the Company, Communications and Page Alert to make to the Financial statements of the Company, Communications and Page Alert as a result of the Audit to ensure that such financial statements are in accordance with the statements of accounting standards promulgated by ASAA and in accordance with the Statements of Accounting Standards promulgated by the ASAA and generally accepted accounting principles and practices in Australia shall be taken into account by the Chartered Accountant in full in making its determination of the Consideration Adjustment." As has been mentioned above, one of the matters calling for possible adjustment was the matter of liabilities. The deed contained the following definition of liability: "Liability" includes all liabilities, damages, claims, obligations, commitments, leases, costs, charges and expenses of every description whatsoever, whether actual, accrued, contingent or prospective and whether liquidated or unliquidated, known or unknown, matured or unmatured in each case referable to the period up to the Completion Date." The deed also contained a definition of the expression "Excluded Liabilities" which was as follows: "Excluded Liabilities" means those Liabilities included in the calculation of the First Adjustment Sum or the Second Adjustment Sum (as the case may be) and those Liabilities for which adjustment has been made pursuant to CL3, in each case to the extent only of the amount of such Liabilities so included or adjusted for;" The relevant concept of exclusion involved in the use of the term "excluded liabilities" seems to be that if certain liabilities had been included, along the way, in the calculation of an Adjustment Sum then they would be excluded from later consideration. CLS of the Share Sale Deed contained the following provision concerning liabilities: "(1) Except for the Excluded Liabilities, which shall either be paid on the Completion Date or assumed and discharged by the Purchaser from and after the Completion Date in the ordinary course of business, the Purchaser shall not assume nor be responsible for any Liability of Communications or Page Alert or any Liability which (whether directly or indirectly) arises out of or in connection with or in relation to the conduct of the business of the Company and the Business or either of them prior to the Completion Date, all of which Liabilities shall be assumed and promptly discharged by Communications from and after the Completion Date. UELL SOUTH AUSTRALIA PTY LTD v MATRIX TELECOMMUNICATIONS LTD (GleesoB CJ) (2) Communications shall indemnify and hold each of the Purchaser and the Company harmless from and against all Liabilities (other than the Excluded Liabilities) of Communications and Page Alert and those which arise out of or relate to the conduct of the business of the Company prior to the Completion Date and from and against all damages, costs and expenses incurred by the Purchaser or the Company as a result of or in respect of (whether directly or indirectly) any such Liabilities." The primary issue between the parties relates to the calculation of the Second Adjustment Sum. It turns in particular upon the concept of "liabilities". In short, the respondent claimed, and Brownie J accepted, that the amount paid by the appellant to the respondent was approximately $1.5 million less than should have been paid. The appellant claimed that this amount represented liabilities that the appellant was entitled to deduct in the course of calculating the Second Adjustment Sum. There appears to be no dispute between the parties as to the precise amount of money involved in this issue, or as to the facts relevant to the issue, which simply turns upon the construction of the Share Sale Deed. If the issue is resolved in favour of the respondent then that is the end of the matter. However, the respondent has filed a Notice of Contention. The first part of the Notice of Contention raises an additional argument which if accepted would nullify the effect of the appellant's argument about the construction of the Deed. The second part of the Notice of Contention raises a somewhat different issue. By it the respondent argues that, even if the appellant be correct in relation to the deduction to be made on account of liabilities, there would fall to be made in favour of the respondent a countervailing adjustment in relation to the matter of prepaid expenses. The precise amount of that countervailing adjustment is not a matter of agreement between the parties, and its calculation is not made possible by the evidence so far adduced. Brownie J made some very brief remarks at the conclusion of his reasons for judgment indicating that if he had reached a different conclusion on the matter of liabilities he would then have found in favour of the respondent on the matter of prepaid expenses, and would have referred to a Master the matter of determining the extent of the necessary adjustment. Senior Counsel for the respondent also sought on the appeal, for the first time, to raise waiver or estoppel as an answer to the appellant's primary claim. I do not consider that the respondent should be entitled to raise those issues. It is apparent from the nature of the argument that if they had been raised at the trial the course of evidence might well have been different. Substantial factual questions, of a kind that were not fully litigated, are involved. The first matter to be considered is the issue relating to liabilities. The issue, in short, is whether an amount of approximately $1.5 million, described by all the accountants as "unearned income" constitutes a "liability" within the meaning of the relevant deed. The quantum of the amount was not in issue, and it was common ground that it represented prepayments from subscribers pursuant to the system of billing described above. The Management Accounts of Communications and Page did not recognise this sum as a liability. However, when the chartered accountants appointed pursuant to the provisions of the deed to calculate the adjustment sums came to prepare their accounts, as the deed required, in accordance with established accounting principles, they identified the amount as a liability. It is to be noted that, although the ultimate issue is one of law relating to the true construction of the deed, the overwhelming weight of accounting opinion as it was put before the court was that, at least from the point 6 UNREPORTED JUDGMENTS of view of an accountant, this unearned income constituted a liability. This was not only the view of the accountants who calculated the adjustment figures under the deed, and of the expert witness called by the appellant. It was also the opinion of the expert accountant called by the respondent. The accountants all pointed to the fact that the relevant accounting standards defined the concept of "liability" as future disposition of economic benefits that a reporting entity is presently obliged to make to other entities as a result of past transactions or other past events. The generally held accounting view, as it was put before the court, was that deposits and prepayments received for goods or services to be provided, sometimes called "unearned revenue", are regarded as liabilities because the reporting entity will be required to dispose of economic benefits in the future in satisfaction of a present obligation to those parties who have paid in advance. Rent or premiums received in advanced are commonly given as instances of this form of liability. There is, it may be observed, nothing surprising about this notion. If person is engaged in carrying on a business of providing services, that person may undertake contractual obligations to provide future services in consideration for a present payment. Insofar as that payment represents the price of an obligation to perform services at a future time then any attempt to measure the net worth of the person at a time after the payment had been received but before the services had been provided would produce a misleading result if the amount of the payment were treated as an asset and the obligation to provide the services at some time in the future were ignored. Where confusion is likely to arise is in the somewhat shorthand manner of expression by which accountants identify "unearned income" as a "liability". From the point of view of a lawyer it would more accurate to say that an amount has been received in circumstances where there is an obligation to perform future services, and a precise legal description of the nature of the liability that exists requires closer analysis of the contractual arrangements between the parties and consideration of whether, for example, in the event of failure to perform the services, there would be an obligation to make a refund of a certain amount of money, or an exposure to a claim for general damages, or some other form of obligation. This does not mean that the accountants are wrong. It simply means that, from a lawyer's point of view, their manner of expressing their conclusion is somewhat elliptical. What is of particular importance for present purposes, however, bearing in mind the provisions of the deed which place so much emphasis upon the observance of generally accepted accounting standards, is not merely that the accountants are at one in their view that in the circumstances of the present there existed liability, but, also, that they agree upon how the extent of that liability is to be quantified. Whilst the appellant in its argument took considerable comfort from the unanimous opinion of the accountants, its primary submission was appropriately addressed to the definition of "liability" in the deed. In that respect, so it was argued, there was no difficulty at all in bringing the facts of the case within the relevant definition. The definition included all obligations and commitments of every description whatsoever, whether actual, accrued, contingent or prospective and whether liquidated or unliquidated, known or unknown, matured or unmatured. Those words, it was submitted, are certainly wide enough to cover the situation that existed in relation to the contractual commitment of the companies in respect of which the prepayments in question had been received. In my view that submission is correct. UELL SOUTH AUSTRALIA PTY LTD v MATRIX TELECOMMUNICATIONS LTD (Gleeso" CJ) The respondent argued that the appellants submissions proved too much. Many of the contracts, it was observed, had periods of up to two years to run. The prepayments in question were only for periods of approximately a quarter. If the liability to provide services under the contracts in question were the source of the obligation or commitment in question, then the obligation or commitment was one for the whole of the remaining term of the contract with the relevant subscriber. Yet, it was pointed out, no one was suggesting that a value should be put upon such obligation or commitment. It seems to me that the answer to that argument lies in the matter concerning the method of putting a value upon the relevant liability, once one is found to exist, to which reference will be made shortly. The respondent also relied upon the concluding words of the definition of "liability". It was pointed out that the only liabilities which fell within the definition were those "referable to the period up to the Completion Date". That is true. However, if an obligation or commitment existed under a contract entered into during the period up to the Completion Date, then in my view such an obligation or commitment was "referable to" that period. It seems to have been a related, although not identical, consideration, that led Brownie J to resolve this issue in favour of the respondent. His Honour regarded the arguments as finely balanced, but ultimately rejected the appellant's argument principally by reason of the provisions of CLS of the Share Sale Deed. Those provisions are set out above. They constitute an important aspect of the allocation of rights and liabilities between the parties to the deed. However, as the appellant pointed out, although the language is somewhat complicated the idea is essentially simple. What CLS relevantly provides is that the vendor will assume and bear liabilities except to the extent to which they have either been deducted from the purchase price, or discharged already. The issue in the present case is whether what are said to be liabilities of a certain kind are to be deducted from the purchase price. CLS does not really touch that question. General considerations of fairness were called in aid by both parties. The respondent pointed out, correctly, that the fact that the Management Accounts did not treat unearned income as a liability was well known to both parties at the time of the execution of the deed. As the appellant observed, however, this does not really aid the interpretation of the deed. It simply makes it surprising that the matter is not dealt with more specifically, one way or the other. Ultimately it still leaves to be performed the task of interpreting the language of the deed. Furthermore, the appellant urged that, having taken over the businesses in question, the appellant was going to have to earn the unearned income, and therefore it might seem surprising that it was also going to have to pay for it. The last mentioned consideration gives rise to the question of quantification of the liability in question, and raises what I consider to be the true importance of the accounting evidence in the case. The question whether there is, in the circumstances, an obligation or commitment within the meaning of the definition of "liability" in the deed is a question to be decided by lawyers, not accountants. However, once it is decided that there is such a liability, then in my view the provisions of the deed make it quite plain that the extent of the liability is to be determined according to generally accepted accounting principles. The evidence, from both sides, makes it perfectly clear that according to generally accepted accounting principles there was, in the circumstances of the present case, a liability which accountants would quantify in an amount of approximately $1.5 8 UNREPORTED JUDGMENTS million. This relieves the lawyers of the task, which might otherwise prove difficult, of working out the extent in money terms of the relevant contractual obligations or commitments. For those reasons I consider that the appellant has made good its challenge to the decision of Brownie J on the primary issue in the appeal. As was noted above, the respondent filed a Notice of Contention that raised two issues. The first issue was an argumentative response to the appellant's case on the meaning of the term "liability". Shortly stated, the argument was to the effect that, the deed, on its true construction, required consistency of accounting approach in the calculation of various adjustment sums, and that it was not open to the appellant, or the chartered accountants engaged by the appellant, to depart from the approach taken in the preparation of the Management Accounts in matters of accounting principle. On this approach to the matter, the purpose of the adjustments was to enable the parties to deal with matters of fact brought to light by the investigations of the chartered accountants brought in to review the matter, rather than to correct errors of principle that might have been made in the preparation of the Management Accounts. It was not open to the chartered accountants to make a decision, in the course of making various sequential adjustments, that an approach of principle that had earlier been taken was erroneous. This argument seems to me to attribute too narrow a scope to the purpose of the elaborate provisions of the deed relating to the matter of adjustment of figures. I see no reason why, if an error of principle were established, it need not be taken into account in making an adjustment. Indeed, the emphasis placed upon the importance of complying with generally accepted accounting standards reinforces this conclusion. I cannot accept that the parties placed a higher value upon consistency than upon adherence to correct accounting principles. The second matter raised by the Notice of Contention is of a different order. Although the amount of money involved has not been quantified, it seems to be common ground that it is substantial. It relates to what have been described as "prepaid expenses". These also, as has been noted above, were matters to be taken into account in adjustments, along with the question of liabilities. The respondent argued before Brownie J that if, contrary to its primary contention, the amount of money described as "unearned income" were to be treated as a liability, then there should also have been taken into account an important countervailing factor of the following kind. It was pointed out above that the appellant submitted that it seemed unfair that the appellant, which would have to earn the unearned income, would also have to pay for it. In this regard the respondent observed that, as a matter of fact, such a proposition was only partly true. For reasons canvassed at length in the evidence, to a very considerable extent the income in question was not completely "unearned" because both Communications and Page had incurred a great deal of expenditure which was properly referable to the derivation of that income. This was the point of departure between the expert accountants who gave evidence at the trial. There was no dispute, as a matter of fact, that, from a commercial point of view, a substantial part of the cost to Communications and Page of "earning" the revenue earlier described as prepayments had in fact been incurred before the payments were received. The respondent asserted, and the appellant denied, that accounting principles both permitted and required that this matter be taken into account in the respondent's favour by the making of an adjustment on account of "prepaid expenses". UELL SOUTH AUSTRALIA PTY LTD v MATRIX TELECOMMUNICATIONS LTD (Gleeso& CJ) Brownie J dealt with this matter quite shortly. He said, at the conclusion of his reasons for judgment: "In para2A of the Amended Summons a claim is made for 'a declaration that in calculating the Second Adjustment Sum referred to in the Share Sale Deed, there should have been brought to account an increment equal to the value of the prepaid expenses of the Company, additional to those the subject of the items included within the sum of $78,405 specified in the Determination of Coopers and Lybrand dated 3 April 1989, being prepaid expenses matching the unearned income" referred to in the said Determination.' The determination of this issue involves making a choice between the evidence of the two expert witnesses, Messrs Herring and Westworth. I regard them both as impressive witnesses, and I cannot choose between them on any matter relating to demeanour. However, I regard the views of Mr Herring as the more satisfying and persuasive: if it is appropriate to treat unearned income as an item to be placed on the liabilities" of a balance sheet, in the context of the sale of a business for a consideration calculated by reference to the assets and liabilities shown in that balance sheet, it is also appropriate to bring to account the expenses incurred by the business before the balance date, which "match" the unearned income. Had the question arisen, I would therefore have made the declaration sought in para2A of the Amended Summons and, subject to whatever submissions might be made on the subject, my inclination is to refer the question of the quantification of the relevant sum of money either to a Master or to a Referee." It will be observed that, although his Honour expressed a preference for one particular view on the subject, he made no order in relation to the matter because, on the view he had taken as to the primary issue in the case, the question did not arise. However, he said that had the question arisen he would have made a declaration in terms of para2A of the Amended Summons. The principal point of contention between Mr Herring and Mr Westworth may be summarised as follows. Mr Herring said that accounting principles and practice, in the circumstances of the present case, require that there should be treated as "prepaid expenses" sales and marketing expenses incurred prior to balance date in selling pager service and rental contracts, including advertising, commissions and salary and wages costs, which he said were clearly and properly related to the future derivation of contract income over the usual contract period. Mr Westworth pointed out that the relevant Statement on Accounting Practice recommended that expenditure should be carried forward at balance date to one or more future accounting periods only where it was material in amount, did not relate solely to revenue which had already been brought to account, and could be clearly related to the revenue earning capability of the business in future. Expenditure not meeting those tests should be treated as expense of the current period. The same recommendation also specifically provided that promotional expenditure, such as salaries or commissions of sales staff, advertising, costs of market surveys and of display material is usually incurred so frequently and regularly that it is inappropriate to carry it forward. Mr Herring responded to the last observation by pointing out that the recommendations were prepared for use in relation to reporting in respect of an ongoing business, rather than undertaking the task of valuing a business at a particular date for the purpose of sale or purchase. 10 UNREPORTED JUDGMENTS I see no reason to depart from the conclusion of Brownie J to the effect that, in principle, the evidence of Mr Herring should be accepted. However, it does appear that a significant number of quite important questions might arise for determination in the translation of that general approach to a particular conclusion in relation to actual expenses of one kind or another in the present case. Brownie J did not make any final decision on the question whether it was appropriate to refer the matter to a Master. Having read the evidence of Messrs Herring and Westworth, I am far from satisfied that his Honour has resolved all the questions which it would be appropriate to determine before the matter was sent to a Master or Referee. Rather than taking it upon itself to make a declaration in terms of para2A and then referring the matter, it seems to me that the appropriate course for this Court to take is to express its general agreement with the conclusion reached on the point by Brownie J, but to remit the question raised by para2A in order that further consideration may be given to the declarations and orders to be made. The last point did not arise by way of a cross appeal, and until the issue in question is finally resolved it is difficult to express a view as to the appropriate order for costs of the proceedings to date before Brownie J, and any further proceedings in relation to the matter. Such costs should be left to the ultimate determination of Brownie J in the light of the ultimate outcome. As to the costs of the present appeal, the appellant has been substantially successful, but the respondent has made good a point raised by the Notice of Contention. In the circumstances I consider that the Court should make the following orders. The appeal should be allowed, and the declaration and order made by Brownie J set aside. The matter should be remitted to the Commercial Division to deal further with the question of the declaration sought in para2A of the Amended Summons in conformity with the decision of this Court and to deal further with the question of the costs of the action including the costs of the first hearing before Brownie J. The respondent should pay two-thirds of the appellant's costs of this appeal. In that respect the respondent, if otherwise entitled, should have a certificate under the Suitors Fund Act. Samuels JA I agree with the Chief Justice. Waddell AJA I agree with the Chief Justice. ORDERS Appeal allowed. Declaration and order of Brownie J set aside. Matter remitted to Commercial Division to deal further with the question of the declaration sought in para2A of the Amended Summons in conformity with the decision of this Court and to deal further with the question of the costs of the action including the costs of the first hearing before Brownie J. Respondent to pay two-thirds of appellant's costs of the appeal. Respondent, if otherwise entitled, to have a certificate under the Suitors Fund Act. Counsel for the Appellant - DE Jackson QC / NC Hutley Counsel for the Respondent - RA Conti QC / AH Slater Solicitors for the Appellant - Minter Ellison URELL SOUTH AUSTRALIA PTY LTD v MATRIX TELECOMMUNICATIONS LTD (Waddell AJA) Solicitors for the Respondent - Maxwell Osborne Eyers and Miller