New South Wales Court of Appeal CITATION : Vodafone Pacific Ltd & Ors v Mobile Innovations Ltd [2004] NSWCA 15 HEARING DATE(S) : 20, 21, 22, 23 October 2003 JUDGMENT DATE : 20 February 2004 JUDGMENT OF : Sheller JA at 1; Giles JA at 2; Ipp JA at 342 DECISION : (1) appeal and cross-appeal each allowed in part; (2) Set aside the declarations in orders 1 to 5, orders 6, 7, 9 and 10 and the judgment made and given on 16 April 2003; (3) Stand the proceedings over to 12 March 2004 at 9.15 for directions; (4) Appellant/cross-respondent pay 25 per cent of the respondent/cross-appellant's costs of the trial; respondent/cross-appellant pay 80 per cent of the appellants'/cross-respondents' costs of the appeal and cross-appeal, and have a certificate under the Suitors Fund Act if otherwise qualified. CATCHWORDS : Agency contract - engagement by service provider of agent to acquire by direct marketing and manage subscribers to its mobile telephone network - agent conducting Mobile Direct Marketing Operation - construction of provision precluding service provider from dealing with other service providers conducting competitive Mobile Direct Marketing Operation - whether "only" in definition of Mobile Direct Marketing Operation confined preclusion - construction of provision by which service provider set target level for acquisition of subscribers - whether could set target level of nil - whether required target level other than nil - whether terms implied as to good faith and reasonableness in setting target levels - content of implied terms found by judge - whether implication of terms as found precluded by contrary intent in contract - whether implication of terms a process of construction - whether misuse of power in setting target levels - finding of breach in failing to set target levels upheld but other findings of breach overturned - whether loss through failing to set target levels at all proved - whether breaches of other provisions of contract - whether damages for those breaches proved - whether contractual entitlement to payment under other provisions of contract. Transfer contract - agreement by service provider to transfer customers to agent to be managed under agency contract - whether mutual abandonment. Abu Dhabi National Tanker Co v Product Star Shipping Ltd ("The Product Star") (No 2) (1993) 1 Ll R 397; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349; Australian Broadcasting Commission v Australian Performing Rights Association (1972) 129 CLR 99; Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104; Biotechnology Austrlia Pty Ltd v Pace (1988) 15 NSWLR 130; Breen v Williams (1996) 186 CLR 71; Burger King Corporation v Hungry Jack's Pty Ltd (2001) NSWCA 187; Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468; Butt v McDonald (1896) 7 QLJ 68; Chilcotin Pty Ltd v Cenelage Pty Ltd [1999] NSWCA 11; Byrne v Australian Airlines Ltd (1995) 185 CLR 410; Codelfa Construction Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; Coulton v Holcombe (1986) 162 CLR 1; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; The Eastern Extension Australasia and China Telegraph Co Ltd v The Commonwealth (1908) 6 CLR 647; Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10; CASES CITED : Federal Commissioner of Taxation v Ryan (2000) 201 CLR 109; Ferrcom Pty Ltd v Commercial Union Assurance Company of Australia Ltd (1993) 176 CLR 332; Godfrey Constructions Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529; Hart v MacDonald (1910) 10 CLR 417; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310; Howard Smith Ltd v Ampol Ltd (1974) AC 821; Lister v Romford Ice and Cold Storage Ltd (1957) AC 555; Mackay v Dick (1881) 6 App Cas 251; Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631; Paragon Finance Plc v Staunton (2002) 2 All ER 248; Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359; TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130; Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429; Water Board v Moustakas (1988) 180 CLR 491; Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598; Vodafone Pacific Ltd - First Appellant/First Cross-Respondent PARTIES : Vodafone Network Pty Ltd - Second Appellant/Second Cross-Respondent Vodafone Pty Ltd - Third Appellant/Third Cross-Respondent Mobile Innovations Ltd - Respondent/Cross-Appellant FILE NUMBER(S) : CA 40322/03 COUNSEL : T F Bathurst QC & T D Castle - First, Second and Third Appellants/First, Second and Third Cross-Respondents F M Douglas QC & V F Kerr - Respondent/Cross-Appellant SOLICITORS : Henry Davis York - First, Second and Third Appellants/First, Second and Third Cross-Respondents Deacons - Respondent/Cross-Appellant LOWER COURT Supreme Court JURISDICTION : LOWER COURT SC 50123/01 FILE NUMBER(S) : LOWER COURT Einstein J JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40322/03 SC 50123/01 SHELLER JA GILES JA IPP JA Friday 20 February 2004 VODAFONE PACIFIC LTD & ORS v MOBILE INNOVATIONS LTD Judgment 1 SHELLER JA: I have had the privilege of reading in draft the judgment of Giles JA with which I entirely agree. The orders should be as his Honour proposes. 2 GILES JA: This is an appeal and cross-appeal from decisions in proceedings brought by Mobile Innovations Ltd ("Mobile") against Vodafone Pacific Ltd, Vodafone Network Pty Ltd and Vodafone Pty Ltd (collectively, "Vodafone"). Mobile sued on an Agent Service Provider Agreement dated 2 October 1998 as varied by amending agreements in May 1999 and again in August 2000 ("the ASP Agreement"), an Additional Customer Management Agreement dated in March 2000 ("the ACM Agreement") and a Website Agreement also dated in March 2000. 3 From at least the early 1990's Vodafone Pacific Ltd owned and operated a public mobile telecommunications network in Australia. In April 2000 it transferred the network to its subsidiary Vodafone Network Pty Ltd, which thereafter operated the network. From April 1998 its subsidiary Vodafone Pty Ltd acquired and managed subscribers for the operator of the network. In the language of the industry, Vodafone Pacific Ltd and then Vodafone Network Pty Ltd was a carrier and Vodafone Pty Ltd was a service provider. 4 From a time in 1994 Mobile purchased mobile telecommunications services from Vodafone Pacific Ltd and resold the services. Subscribers acquired and managed by Mobile were connected to the Vodafone network, but were Mobile's customers. In October 1998 that arrangement came to an end. Mobile sold its customer base to Vodafone Pacific Ltd for approximately $20 million. By the ASP Agreement Vodafone Pacific Ltd engaged Mobile as agent to acquire by direct marketing new subscribers to the Vodafone network on a postpaid basis (that is, subscribers billed after mobile phone use as distinct from those who prepaid) and to provide management services to the existing subscribers Mobile had acquired and the new subscribers it thereafter acquired. 5 By the ACM Agreement, in a letter from Vodafone Pty Ltd dated 16 March 2000 signed by Mobile on 20 March 2000, it was agreed that Vodafone Pty Ltd would provide 30,000 customers to Mobile by 30 June 2000, to be managed by Mobile under the ASP Agreement. 6 By the Website Agreement evidenced by a letter from Vodafone Pty Ltd dated 8 March 2000 it was agreed that Mobile would develop and administer Vodafone Pty Ltd's E-commerce platform and that Vodafone Pty Ltd would pay the development, hosting and communication costs. 7 In its summons filed on 27 August 2001, as subsequently amended, Mobile claimed declaratory and injunctive relief under the ASP Agreement and damages for breaches of the ASP Agreement, the ACM Agreement and the Website Agreement. 8 The proceedings were heard over nineteen days in February and March 2003. The principal judgment was published on 27 March 2003, and a supplementary judgment on outstanding issues was published on 15 April 2003. The judge made orders - (a) declaring the proper construction of the ASP Agreement (orders 1 to 5); (b) restraining the engagement of two organisations to acquire subscribers by direct marketing (orders 6 and 7); and (c) giving judgment for $14,219,100 as damages for breaches of the ASP Agreement ($11,518,100), the ACM Agreement ($2,467,000) and the Website Agreement ($234,000) (orders 8 and 9). 9 By its appeal Vodafone seeks to have the declarations, the restraining orders and all but $933,000 of the judgment set aside. The components of the judgment sum in issue, using the parties' labels, are - Claim 1 ACM Agreement dispute $2,467,000 Claim 4 June 2001 quarter dispute $312,000 Claim 5 September 2001 quarter dispute $1,145,000 Claim 6 December 2001 quarter dispute $2,253,000 Claim 7 March 2002 quarter dispute $1,595,000 June 2002 quarter dispute $1,451,000 September 2002 quarter dispute $1,391,000 December 2002 quarter dispute $1,354,000 March 2003 quarter dispute $1,318,000 Claims 6 and 7 Retention damages $100 $13,286,100 10 As its label indicates, for claim 1 Mobile sued on the ACM Agreement. For claims 4 to 7 Mobile sued on the ASP Agreement. The declarations as to the proper construction of the ASP Agreement in orders 1 to 3 related to claims 6 and 7, while the declarations as to its proper construction in orders 4 and 5 related to the restraining orders 6 and 7. The components of the judgment sum not in issue are $699,000 for claim 2, the V.Mobile dispute, and $234,000 for claim 11, the Website dispute. For claim 2 Mobile sued on the ASP Agreement and, as its label indicates, for claim 11 it sued on the Website Agreement. 11 By its cross-appeal Mobile seeks to have declaration in order 5 reformulated in part and the restraining orders 6 and 7 wholly reformulated. It seeks to have the judgment sum increased by additional damages of $369,504 plus interest under claims 5, 6 and 7; independently of that increase in the judgment sum, it seeks to preserve a judgment in its favour for part of claims 5, 6 and 7 by way of contractual entitlement rather than damages. 12 At the trial the three Vodafone companies were generally referred to collectively as Vodafone. The declarations and the restraining orders were made and the judgment was given against all three Vodafone companies. The practice of collective reference to Vodafone was followed in the appeal and cross-appeal. 13 It was and is convenient to refer collectively to Vodafone unless there be reason to do otherwise. On the judge's holdings, however, the orders should have distinguished between the three Vodafone companies. Both amending agreements treated Vodafone Network Pty Ltd rather than Vodafone Pacific Ltd as the Vodafone party to the ASP Agreement. The judge noted the defendants' pleading that the ASP Agreement had been novated from Vodafone Pacific Ltd to Vodafone Network Pty Ltd on or about 31 March 1999, alternatively that Mobile was estopped from denying that such novation had occurred in or about May 1999, and said that "[u]ltimately the issue was not litigated" (para 22; see also para 9). Only one or other of Vodafone Pacific Ltd and Vodafone Network Pty Ltd could be restrained from breach of the ASP Agreement or liable in damages for its breach. Only Vodafone Pty Ltd could be liable in damages for breach of the ACM Agreement and the Website Agreement. 14 Vodafone permitted the orders to be made without differentiation. The Court should nonetheless not have made orders or given judgments against parties not shown to have been subject to them. The matter having been raised, Vodafone eschewed any complaint in the appeal that the orders failed to distinguish between the three Vodafone companies. Whatever its reasons for that stance, I do not think the Court can be quiescent. The integrity of its processes must be maintained, and it should not make unfounded orders. The restraining orders (6 and 7) and their related declarations (4 and 5) 15 The declarations and orders were concerned with the exclusivity conferred by Vodafone upon Mobile under the ASP Agreement and breach of contract by entry into agreements with X4 Pty Ltd ("X4") and Housing Industry Association Ltd ("Housing Industry"). The judge made these declarations and orders - "4. Upon the proper construction of the ASP Agreement, the word 'solely' in the definition of 'Mobile Direct Marketing Operation', qualifies the words 'acquisition of subscribers' namely by 'remote selling, being an acquisition technique relying 'solely' on responses to advertisements effected by means of orders received centrally by telephone, fax, email or the Internet in response to advertisements placed in the press, magazines or catalogues or direct mail. 5. On its proper construction, the ASP Agreement: (a) prevents each Defendant itself from appointing or dealing, directly or indirectly with a Service Provider which conducts a Mobile Direct Marketing Operation in competition with the Plaintiff; (b) obliges each Defendant to procure that no Group Member appoints or deals directly or indirectly, with a Service Provider which conducts a Mobile Direct Marketing Operation in competition with the Plaintiff; (c) precludes each Defendant when acting partly through or in conjunction with its agents, from conducting a Mobile Direct Marketing Operation in competition with the Plaintiff; (d) does not preclude any Defendant when only acting itself , from conducting a Mobile Direct Marketing Operation in competition with the Plaintiff. 6. While the ASP Agreement is on foot, the defendants, by their directors, employees and agents, are restrained from acquiring post-paid subscribers to mobile telecommunication services by X4 Pty Limited placing advertisements in the press, magazines, catalogues or direct mail and receiving customer orders by telephone, fax, email or the Internet. 7. While the ASP Agreement is on foot, the defendants, by their directors, employees and agents, are restrained from acquiring post-paid subscribers to mobile telecommunication services by Housing Industry Association Limited placing advertisements in the press, magazines, catalogues or direct mail and receiving customer orders by telephone, fax, email or the Internet." 16 The engagement of Mobile as agent was made in cl 2.1 of the ASP Agreement (in which Mobile was referred to as MI) - " 2.1 Appointment Vodafone appoints MI, and MI accepts appointment, as Vodafone Billing Services' non-exclusive agent service provider during the Term, through the Territory and through the Authorised Channels solely for the purposes of: (a) performing the Acquisition Services for the purposes of acquiring New Subscribers for and on behalf of Vodafone Billing Services from MI's Mobile Direct Marketing Operation; and (b) to provide Management Services to New Subscribers and Existing Subscribers, on condition that MI complies with Clause 6.3." 17 Clause 2.4 provided - " 2.4 Acknowledgement concerning limitation on appointment Notwithstanding any other provision in this Agreement, this Agreement concerns only the parties' relationship with respect to the acquisition and management of Subscribers on a postpaid basis. The provision of prepaid mobile telecommunications services to subscribers may be dealt with in a separate agreement." 18 Clause 2.5 provided - " 2.5 Acknowledgement concerning agency MI acknowledges that each of the functions described in Clause 2.1 are performed by it as agent for a disclosed principal, Vodafone Billing Services, and subject to the terms of this Agreement." 19 Compliance by Mobile with cl 6.3 was not in issue. Vodafone Billing Services was Vodafone Billing Services Pty Ltd, it seems another service provider in the Vodafone group, for which Mobile was to act as agent. 20 The Term was ten years from 30 September 1998, the Territory was Australia and Authorised Channel meant any direct marketing channel. Acquisition Services and Management Services in substance meant acquiring and connecting new subscribers to the mobile telephone services made available by Vodafone on a postpaid basis, invoicing and collecting the relevant charges from the existing and new subscribers, dealing with disconnections, what was described as "customer care", and other activities described in Vodafone's operations manual. Mobile Direct Marketing Operation meant - " … the acquisition of subscribers to mobile telecommunications services solely by means of remote selling specifically where advertisements were placed in press, magazines and catalogues or direct mail and customer orders are received centrally by telephone, fax, email or the Internet or as may be agreed between the parties from time to time". [emphasis added: the "solely" was the subject of the declaration in order 4.] 21 Mobile committed its Mobile Direct Marketing Operation exclusively to Vodafone. Although cl 2.1 described Mobile as "non-exclusive agent service provider", Vodafone conferred a measure of exclusivity upon Mobile. 22 Mobile's commitment was by cl 2.2, read with cl .2.6 - " 2.2 Exclusivity of Mobile Direct Marketing Operation MI will devote the Mobile Direct Marketing Operation part of its business exclusively to Vodafone and Vodafone Billing Services for the purposes of its appointment under Clause 2.1. For the avoidance of doubt, during the term MI will not deal, and will procure that none of its Related Bodies Corporate deal, directly or indirectly with any other mobile network carrier or operator in respect of analogue or digital mobile phone services." " 2.6 MI's other business activities Vodafone expressly acknowledges that MI's Mobile Direct Marketing Operation may form only part of MI's business. For the avoidance of doubt and subject to Clauses 2.2, 4 and 6, nothing in this Agreement restricts or is intended to restrict the conduct of that part of MI's business outside the Mobile Direct Marketing Operation ( the Non-ASP Activities )." 23 Vodafone's conferral of exclusivity was by cl 2.7, subject to a presently irrelevant exception in cl 2.8 concerning dealing with credit card and charge card issuers, read with cl 2.3 - " 2.7 Persons with whom Vodafone may not deal Vodafone will not, and will procure that no Group Member will, during the Term appoint, or deal with, either directly or indirectly, any new Service Provider, or any existing Service Provider which is a Group Member, which conducts a Mobile Direct Marketing Operation in competition with MI." " 2.3 Acknowledgement concerning non-exclusivity Subject to any specific provision of this Agreement to the contrary (including Clauses 2.7 and 2.8), MI acknowledges that any Group Member may do or authorise any person to do any of the following at any time: (a) market, promote, distribute or sell the Mobile Services; or (b) anything which MI is obliged or authorised to do under this Agreement, including where such activities are in competition with the performance of MI's obligations or the conduct by MI of activities authorised, under this Agreement." 24 Group Member meant a member of the Vodafone group. Service Provider meant "a person who acquires, manages and supports principally post-pay mobile telephone service subscribers for a period as determined by their subscriber contract". 25 The evidence going to breach of contract, contrary to the exclusivity conferred by Vodafone upon Mobile, was not extensive. 26 By an agreement with X4 dated 30 June 2000 Vodafone Pty Ltd appointed X4 as a dealer authorised to introduce potential users of the Vodafone network. Under the agreement X4 could only conduct the business of promoting and selling connections of postpaid mobile services, and only at the customer's or potential customer's premises or at a specified location, being a shop in Sydney. By an agreement with Housing Industry dated 3 September 2002 Vodafone Pty Ltd made a similar appointment, the agreement being silent as to how Housing Industry could or would acquire subscribers. 27 In July 2001 X4 advertised Vodafone mobile telecommunication services, stating the address of its shop, giving a map of the shop's location and describing it as a "show room"; the advertisement had a box stating "free delivery to your door 1300 30888 call X4 connection centre now". 28 In November 2002 Housing Industry advertised Vodafone mobile communication services, inviting potential customers to call a particular telephone number of visit a particular website address. In December 2002 Vodafone advertised inviting potential customers to call the same telephone number. 29 There was no evidence that X4 or Housing Industry actually acquired a subscriber or subscribers by remote selling. 30 The judge's conclusion was - "878 In the result insofar as the activities of X4 and the Housing Commission [sic] are focused upon, Vodafone is shown to have breached clause 2.7 in and to the extent that it has been shown to have acted partly through its agents in the conduct of a Mobile Direct Marketing Operation in competition with Mobile." 31 The judge's reasoning to this conclusion is, with respect, not entirely clear. 32 He first dealt with the operation of "solely" in the definition of Mobile Direct Marketing Operations, saying - "864 Attention has been focused by Vodafone on the use of the word "solely" in the definition of "Mobile Direct Marketing Operation". The contention is that a Mobile Direct Marketing Operation only exists if the operator is doing that and nothing else . In short the contention by Vodafone is that clause 2.7 is limited in its application inter alia to where remote selling is the sole means by which the service provider acquires mobile telephone subscribers. 865 I accept as of substance the submission by Mobile that Vodafone's construction is incorrect for the following reasons: • the word 'solely', grammatically qualifies the words 'acquisition of subscribers' namely by 'remote selling' which is an acquisition technique relying 'solely' on responses to advertisements and is effected by means of 'orders received centrally by telephone, fax, email or the Internet'. The word 'solely' does not have any bearing on some other operation which may perchance be carried on by some other service provider.; • the exclusivity given to Mobile, which is a critical part of the arrangement, would be worthless because the new service provider could have some other business (not even telephony related) alongside its direct mobile operation and would, on this construction, not be covered; • the construction contended for by Vodafone would make clause 2.7 ambulatory. A competitor may be carrying on the same operation one day in breach of the one provision and the next day not in breach because it whimsically does something else on the next day." 33 It is evident that the declaration in order 4 was framed upon the first dot point in para 865. 34 The judge then referred to the entry into the agreements with X4 and Housing Industry, and continued - "X4 and the Housing Commission 868 Mobile submits and I accept that on the evidence presently adduced in relation to this claim and before the court: • Vodafone has clearly appointed and is clearly dealing with both X4 and the Housing Commission [sic] [see the above described agreements]; • X4 and the Housing Commission [sic] have contracted to and are acquiring subscribers for Vodafone by direct marketing [see the above described agreements and paragraphs in Ms Blake's affidavits]; • X4 and the Housing Commission [sic]: - sell hardware as sellers in their own right, - facilitate connections between the customer and Vodafone [the contractual relationship is entered into between the customer and Vodafone, these dealers acting as Vodafone's agent in this regard] [see the above described agreements and paragraphs in Ms Blake's affidavits; see also PX 7/ 1242]" 35 After a matter presently not material, the judge said - " Dealing with the matter 870 It does not seem to me that properly construed clause 2.7 grants complete exclusivity to Mobile in the field of direct marketing. Vodafone itself is not proscribed from conducting that activity. The clause does however proscribe the conduct of the relevant activity by Vodafone when acting through or in conjunction with agents. This construction is consistent with the nature of the ASP and takes into account the exclusivity covenant binding Mobile [clause 2.2]. 871 Clearly clause 2.7 prevents Vodafone itself from appointing or dealing, directly or indirectly, with a Service Provider which conducts a Mobile Direct Marketing Operation in competition with Mobile. 872 Clearly clause 2.7 also extends to oblige Vodafone to procure that no Group Member appoints or deals, directly or indirectly, with a Service Provider which conducts a Mobile Direct Marketing Operation in competition with Mobile. 873 In my view although clause 2.7 is not as elegantly drafted as it might have been, properly construed it is not intended to proscribe the activities of Vodafone in circumstances where it acts itself, as opposed to where it acts wholly or partly through an agent in conducting the relevant activity. Hence the clause can be seen to preclude Vodafone itself from conducting a Mobile Direct Marketing Operation in competition with Mobile. So much appears to have been conceded by Vodafone: "Clause 2.7 prevents Vodafone… from in effect itself establishing a Mobile Direct Marketing Operation" [Final submissions paragraph 32] 874 Vodafone focuses on the complaints concerning X4 and the Housing Commission [sic] putting the propositions that: • clause 2.7 is limited in its application to circumstances where the entity conducting the direct marketing is a "Service Provider", which not only acquires but also manages customers • Vodafone is not in breach of this clause if it: - appoints a dealer as its agent to acquire the relevant customers, - then manages and supports those customers itself. 875 This construction is rejected for the reasons already given. Vodafone is precluded from conducting a Mobile Direct Marketing Operation where the relevant activity is carried on by Vodafone in conjunction with an agent. 876 In short [leaving to the side Vodafone's obligations to procure that no Group Member will engage in particular conduct] clause 2.7 properly construed: • precludes Vodafone when acting partly through its agents, from conducting a Mobile Direct Marketing Operation in competition with Mobile; • does not preclude Vodafone when only acting itself , from conducting a Mobile Direct Marketing Operation in competition with Mobile; 877 In the result Vodafone is not precluded by clause 2.7 from promoting its plans by itself placing newspaper advertisements, conducting mail outs or contacting its existing customers by text messages. 878 In the result insofar as the activities of X4 and the Housing Commission [sic] are focused upon, Vodafone is shown to have breached clause 2.7 in and to the extent that it has been shown to have acted partly through its agents in the conduct of a Mobile Direct Marketing Operation in competition with Mobile." 36 The declaration in order 5 must have been framed upon some of these paragraphs. But why was there breach of cl 2.7 in Vodafone, the undifferentiated collective, acting through X4 and Housing Industry? 37 From para 868 it seems that the commencement of the reasoning was that Vodafone had appointed and was dealing with X4 and Housing Industry, which organisations were conducting Mobile Direct Marketing Operations. Within cl 2.7, then, the appointment of and dealing with X4 and Housing Industry must have been as new Service Providers. That had been Mobile's pleaded case, in terms that X4 and Housing Industry were Service Providers and that the breach of cl 2.7 had been by Vodafone appointing and dealing with them as its agent. The pleaded case was reflected in Vodafone's submission noted in para 874, which involved whether X4 and Housing Industry were Service Providers. 38 From this commencement, the reasoning must have been as follows. Vodafone had appointed and was dealing with new Service Providers, X4 and Housing Industry. X4 and Housing Industry had contracted to acquire subscribers for Vodafone, acting as Vodafone's agent in facilitating connections between the customer and Vodafone with the contractual relationship between the customer and Vodafone. They were acquiring subscribers by remote selling. They were conducting a Mobile Direct Marketing Operation in competition with Mobile. Clause 2.7 not only precluded Vodafone from acquiring subscribers by remote selling by appointing or dealing with them, but also precluded Vodafone through X4 and Housing Industry from acquiring subscribers otherwise than by remote selling because "solely" in the definition of Mobile Direct Marketing Operation was treated as qualifying the means of selling in the manner declared in the declaration in order 4. 39 Other paragraphs, however, obscure this reasoning. Paragraphs 871 and 872 are consistent with and support it, since they speak of appointment of and dealing with a Service Provider although not distinguishing between a new Service Provider and the other prohibited organisation in cl 2.7, an existing Service Provider. But in paras 870, 873 and 875 and following no reference to a Service Provider, one of the key concepts in cl 2.7, is to be found. Instead, the concept of agency alone seems to be used as sufficient to identify the organisation conducting the competitive Mobile Direct Marketing Operation. It seems that appointment of or dealing with an agent which conducts a competitive Mobile Direct Marketing Operation was thought sufficient for breach of cl 2.7, even acting "in conjunction with" such an agent, whatever that may mean. If that was the judge's reasoning, it was not correct. 40 In these paragraphs, including the closing reference in para 878 to Vodafone acting "partly" through its agents, it does not seem that the premise is that the agent is a new Service Provider or an existing Service Provider. If that is the premise, no Service Provider other than X4 and Housing Industry is mentioned. In particular, and the point of this will become apparent, reasoning which treats Vodafone Pty Ltd as an existing Service Provider is not to be found. On the contrary, there is only the collective reference to Vodafone as the party subject to contractual obligations. 41 Vodafone submitted that "solely" in the definition of Mobile Direct Marketing Operation had the operation rejected by the judge, requiring that the Service Provider acquire subscribers solely by remote selling, and so that cl 2.7 did not preclude appointing or dealing with a Service Provider which acquired subscribers otherwise than by remote selling as well as by remote selling. If so, it said, the declaration in order 4 should be set aside. It submitted that the declaration in order 5 should be set aside, because paras (a) and (b) did no more than reproduce the language of cl 2.7 and paras (c) and (d) erroneously recast cl 2.7 into a proscription from acting through an agent when the agent which Vodafone appointed or with which it dealt may or may not be a Service Provider. It submitted that it had not been shown that X4 and Housing Industry were acquiring subscribers by remote selling and that there was no basis for finding that they were conducting Mobile Direct Marketing Operations, whether or not "solely" had the declared operation. It submitted that in any event neither X4 nor Housing Industry was a Service Provider, because the definition of Service Provider required that they acquire, manage and support subscribers, but they only acquired subscribers and did not manage and support them. 42 Mobile conceded that Vodafone's last submission, as to neither X4 nor Housing Industry being a Service Provider, was correct for the reason given. This very much changed the landscape, and Mobile of necessity submitted that there was a breach of cl 2.7 on a basis other than that found by the judge by either process of reasoning earlier postulated. 43 Mobile submitted that Vodafone Pty Ltd was an existing Service Provider and a Group Member and was conducting a Mobile Direct Marketing Operation in competition with Mobile, through its agents X4 and Housing Industry. Accordingly, by force of cl 2.7 Vodafone Pacific Ltd or Vodafone Network Pty Ltd (whichever it might be) could not deal with Vodafone Pty Ltd. Its further submissions proceeded from this basis for a breach. It acknowledged that para (d) of the declaration in order 5 should be set aside, but said that if Vodafone Pty Ltd was a Service Provider which was conducting a Mobile Direct Marketing Operation it could be restrained whether acting itself or through an agent: it said that paragraph (d) should be replaced by a reformulated declaration. Although in its written submissions it had sought to support para (c) of the declaration in order 5, at the hearing it proposed a reformulated paragraph. The new paras (c) and (d) were - "(c) Prohibits the first and second defendant from dealing with the third defendant when conducting a Mobile Direct Marketing Operation, as defined by the ASP agreement, in competition with the plaintiff, including where the third defendant is acquiring subscribers to mobile telecommunication services partly through or in conjunction with its agents X4 Pty Limited and Housing Industry Association Limited. (d) Precludes each Defendant, when only acting itself, from conducting a Mobile Direct Marketing Operation in competition with the Plaintiff." 44 In conformity with these submissions, Mobile proposed alternative reformulations of the restraining order in order 6, in place of orders 6 and 7, both reformulations broadly following para (c) of the proposed declaration in order 5. 45 I have earlier referred to Mobile's pleaded case that X4 and Housing Industry were Service Providers and that the breach of cl 2.7 had been by Vodafone appointing and dealing with them as its agent. Mobile said that although at the trial it had put the case of X4 and Housing Industry as new Service Providers, it had also put a case of Vodafone Pty Ltd as an existing Service Provider. It acknowledged that the latter case was "not pleaded as clearly as it might have been", and referred to some pages in the transcript of the oral submissions before the judge. The acknowledgement did not go far enough: the case of Vodafone Pty Ltd as an existing Service Provider was not pleaded at all. The submissions in the pages in the transcript were in Mobile's oral submissions in reply. Reading the cold print with the benefit of the submissions made on appeal, they can be seen to put a case of Vodafone Pty Ltd as an existing Service Provider, although the putting of the case was bedevilled by loose reference to the collective Vodafone. But it is apparent that the case was not appreciated in the atmosphere of the trial, because it is not reflected in the judge's reasons. Rather, it seems to have produced confusion involving agency. 46 Vodafone accepted that Vodafone Pty Ltd was a Service Provider and a Group Member. As to the case now propounded by Mobile, it submitted that "conduct" referred only to an operation directly carried on by the organisation in question, on the case now propounded Vodafone Pty Ltd, and that an operation carried on by an agent was not consistent with cl 2.3. It submitted, however, that Mobile should not be permitted to maintain the case of Vodafone Pty Ltd as an existing Service Provider, because it had not been pleaded and the questions whether Vodafone Pty Ltd conducted a Mobile Direct Marketing Operation and whether, if it did, it did so in competition with Mobile, had not been in issue at the trial. Whatever the operation of "solely", it said, what amounted to conducting an activity was a question of fact and degree, and whether the activity was in competition with someone else's activity was similarly a question of fact and degree. It said that these questions as applied to Vodafone Pty Ltd had not been agitated at the trial; there were no findings, and there was no evidence directed to findings favourable to Mobile. 47 Putting aside the operation of "solely" in the definition of Mobile Direct Marketing Operation, I do not think that the other aspects of cl 2.7 raised by Vodafone need be or should be addressed. I consider that Mobile should not be permitted to maintain the case of Vodafone Pty Ltd as an existing Service Provider. 48 That case was put only in Mobile's submissions in reply. It is tolerably clear that what was put brought the concept of agency to prominence in the judge's reasoning, but Vodafone Pty Ltd as a Service Provider was not taken up by his Honour. There is no mention of Vodafone Pty Ltd, as would be necessary if appointment of or dealing with it by one of the other Vodafone companies was in point. There is not even reference to the collective Vodafone as an existing Service Provider. There is no finding as to the conduct by Vodafone Pty Ltd of a competitive Mobile Direct Marketing Operation, and the late arrival of the case is underlined if it be thought how easily Mobile could have attended to proof of what Vodafone Pty Ltd did by way of remote selling quite apart from what it may have done by the agency of X4 and Housing Industry. 49 Although the judge found that X4 and Housing Industry were acquiring subscribers for Vodafone by direct marketing, meaning by remote selling (para 868 second dot point), and presumably considered that they were conducting Mobile Direct Marketing Operations in competition with Mobile, it does not follow that Vodafone Pty Ltd was conducting a Mobile Direct Marketing Operation in competition with Mobile through the agency of those organisations. Particularly is that so when the evidence of what X4 and Housing Industry did was scanty, and the extent of Vodafone Pty Ltd's authority to X4 and Housing Industry and the significance of the activities of X4 and Housing Industry to Vodafone Pty Ltd's conduct of a Mobile Direct Marketing Operation (as distinct from X4's or Housing Industry's) were not in issue. It is a question of fact and degree, as is competition, and I do not think it can be said that, had those matters been in issue at the trial, Vodafone might not have addressed them by further evidence. It should be noted that Mobile said (written submissions para 565) that the judge had not decided, and it did not seek to have determined on appeal or by remission to the judge, whether the evidence established that Vodafone was conducting a Mobile Direct Marketing Operation. 50 In my view the well established principles apply, to the effect that a party will not be permitted to raise a point on appeal which was not taken at trial if evidence could have been adduced which could possibly have prevented the point from succeeding (Coulton v Holcombe (1986) 162 CLR 1 at 8-9; Water Board v Moustakas (1988) 180 CLR 491 at 496-7; Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598 at [51]), and that even if there is no question of further evidence it may not be in the interests of justice to allow the new point to be raised (Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631 at 645-6; Chilcotin Pty Ltd v Cenelage Pty Ltd [1999] NSWCA 11 at [14]-[18]; Whisprun Pty Ltd v Dixon at [52]). The case of Vodafone Pty Ltd as an existing Service Provider was not pleaded, and the point was not taken at the trial for the purposes of these principles when raised in submissions in reply in a manner which it is apparent, in the conduct of the trial, was not appreciated as putting the case now propounded. 51 The restraining orders in orders 6 and 7 must be set aside. They can not be replaced by a reformulated order 6, because breach of cl 2.7 was not established. It is not necessary to consider Vodafone's submissions that it had not been shown that X4 and Housing Industry were acquiring subscribers by remote selling and that, putting "solely" aside, there was no basis for finding that they were conducting Mobile Direct Marketing Operations. 52 What then of the declarations in orders 4 and 5? A declaration does not necessarily fall with the order giving effect to it. In rare cases, where a contract must be construed in order to decide whether the contract has been breached it may be appropriate that the proper construction is declared even though the decision is that the contract has not been breached. But in my opinion the declarations must also be set aside. 53 Although it was not the subject of submissions, I respectfully question whether the declaration in order 5 should have been made at all. Where a claim is made to damages or an injunction, a judge's consideration of the operation of a contractual provision in respects other than that immediately in issue, in the course of resolving the question of its application in the particular case, is not to be given declaratory status. Even as to the issue of the provision's application in the particular case, upholding the claim to damages or an injunction will usually suffice, with the decision upon the operation of the provision as part of the reasoning to breach warranting the award of damages or the restraint, and a declaration going beyond the particular contractual breach will commonly not be appropriate. Mobile's summons claimed restraining orders without any preceding declaration as to the construction of cl 2.7. In the present case the confusion which arose involving agency rather than Service Provider demonstrates the unwisdom of making the declaration, and it travelled beyond what was necessary for the decision in the particular case. 54 If the declaration in order 5 was to be made, it should not have been made in the form it took. Notwithstanding the general reference to Vodafone, cl 2.7 contractually bound only Vodafone Pacific Ltd or Vodafone Network Pty Ltd, depending on the unlitigated issue. On any view it did not prevent, oblige or preclude "each Defendant", as the declaration purported to convey, since only Vodafone Pacific Ltd or Vodafone Network Pty Ltd was contractually prevented, obliged or precluded. Whichever of those two companies was contractually bound had the further obligation to procure appropriate conduct from other members of the Vodafone group, including Vodafone Pty Ltd. If either the other of Vodafone Pacific Ltd and Vodafone Network Pty Ltd or Vodafone Pty Ltd were to be restrained by injunction, the legal basis for an order against it would not be the direct contractual prevention, obligation or preclusion in the ASP Agreement, and the declaration did not correctly accord with the positions in law of the Vodafone companies. Despite the failure of the parties, particularly Vodafone, to differentiate between the three Vodafone companies, the Court should have been astute to ensure that the declaration was accurately framed. 55 That aside, in my opinion the declaration in order 5 should be set aside because so far as it does more than reproduce the language of cl 2.7 it is incorrect. Paragraphs (c) and (d) fail to recognise the part played by the concept of a Service Provider, and in the manner earlier outlined give erroneous ascendency to the concept of agency alone. 56 I do not think the reformulated paragraphs proposed by Mobile should be substituted. In the new para (c) the words down to "in competition with the plaintiff" do no more than reproduce the language of cl 2.7, and the following reference to acting through or in conjunction with X4 and Housing Industry lacks the necessary foundation of a finding that in doing so Vodafone Pty Ltd is conducting a competitive Mobile Direct Marketing Operation. The new para (d) is just incorrect, at the least because it goes beyond preclusion of whichever of Vodafone Pacific Ltd and Vodafone Network Pty Ltd is contractually bound and more fundamentally because it ignores that the prohibition is against the appointment of or dealing with a new or existing Service Provider. 57 In turning to the declaration in order 4, what I have said about sufficiency of a decision upon the operation of a provision as part of the reasoning to the particular contractual breach is again in point. There was a question whether the preclusion in cl 2.7 applied where, in the competitive Mobile Direct Marketing Operation conducted by the new or existing Service Provider, subscribers were acquired otherwise than by remote selling as well as by remote selling. That question could adequately be dealt with in the course of deciding whether X4 and Housing Industry, or Vodafone Pty Ltd if that case had been put, were conducting competitive Mobile Direct Marketing Operations. 58 At a level short of the substance of the question, the declaration in order 4 is flawed. It purports to express what is meant by remote selling without allowing, as the definition of Mobile Direct Marketing Operation does allow, for agreement between the parties upon other remote selling techniques; as well, in its second use of "solely" the declaration seems to make that word apply to reliance on responses to advertisements rather than, as the definition provides (and the commencement of the declaration states) the acquisition of subscribers. The declaration carries unintended alteration of cl 2.7 as a side-wind of purporting to decide the substance of the question. 59 More significantly, the declaration does not provide an answer to the substantive question, certainly not the answer given by the judge. It is clear enough that "solely" qualifies "acquisition of subscribers" in the definition of Mobile Direct Marketing Operation. But that does not mean that the definition is so construed that the Service Provider acquiring the subscribers is caught by the definition although also acquiring subscribers otherwise than by remote selling. It is consistent with, perhaps even favours, the opposite result. Mobile submitted that in qualifying "acquisition of subscribers" the work done by "solely" was that any particular subscriber was to be acquired only by remote selling, as distinct from the general activity of acquiring subscribers. But the definition is not directed to any particular subscriber, and to read it as Mobile submitted would make no sense – "solely" would add nothing to acquisition by remote selling. If the question is to be answered as the judge answered it, some other reasoning to that result must be found, and the declaration in order 4 has no utility. 60 The declaration in order 4 should be set aside quite apart from whether the judge's answer to the question was correct. It would be wrong, however, to leave the judge's answer to the question untouched if it is not correct: that would be likely to distort the parties' conduct during the rest of the term of the ASP Agreement, which is still on foot. 61 Clause 2.7 prohibits appointment of or dealing with a Service Provider of a particular kind, a Service Provider which conducts a Mobile Direct Marketing Operation in competition with Mobile. Reading the definition of Mobile Direct Marketing Operation into the clause, at first sight one of the characteristics of the prohibited Service Provider is that it "conducts" the acquisition of subscribers to mobile telecommunications services solely by means of remote selling. Hence Vodafone's submission that, if the Service Provider in question "conducts" the acquisition of subscribers to mobile telecommunications services otherwise than by remote selling as well as by remote selling, it is not within the class of prohibited Service Providers. Vodafone added that Mobile's appointment is described as non-exclusive and by Authorised Channels in cl 2.1, and that cl 2.3 makes clear that, subject to cl 2.7, Vodafone can engage in competitive direct marketing. There was no warrant, it said, for giving Mobile greater exclusivity than granted by cl 2.7 on a strict reading. 62 If Vodafone's submission be correct, cl 2.7 can be outflanked by ensuring that the Service Provider also acquires subscribers otherwise than by means of remote selling, at least to an extent satisfying the requirement that the Service Provider "conducts" the acquisition of subscribers by that means. The judge was influenced by this, although perhaps over-stating the matter with respect to non-telephony business and daily alteration in conduct. If the submission be correct, the exclusivity conferred by Vodafone on Mobile will be compromised, if not ephemeral. Mobile submitted that this was contrary to commercial common sense, particularly where Mobile had committed its Mobile Direct Marketing Operation exclusively to Vodafone in return for the exclusivity conferred on it by Vodafone. 63 On the construction adopted by the judge, on the other hand, if Vodafone appoints or deals with a Service Provider which falls within cl 2.7 it will not be able to deal at all with that Service Provider, even where the Service Provider acquires subscribers to mobile telecommunication services otherwise than by remote selling. The extremes are both unattractive. 64 If it can be done consistently with the words used, the ASP Agreement should be given a sensible commercial operation (Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437; Australian Broadcasting Commission v Australian Performing Rights Association (1972) 129 CLR 99 at 109; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-4). Avoidance of unreasonable, inconvenient or unjust consequences, where the language is open to two constructions, is permissible "even though the construction adopted is not the most obvious, or the most grammatically accurate" (Australian Broadcasting Commission v Australian Performing Rights Association at 109, citing earlier authority). Regard to Mobile's exclusivity given to Vodafone is of assistance in recognising how the definition of Mobile Direct Marketing Operations worked in the ASP Agreement. 65 It is plain from cll 2.2 and 2.6 that the exclusivity given by Mobile to Vodafone is confined to the acquisition of subscribers by remote selling. Mobile can acquire subscribers for other carriers provided it does not use remote selling. "Solely" in the definition of Mobile Direct Marketing Operation plays a part in leaving it free to do this, by quarantining that part of Mobile's business being the business of acquiring subscribers to mobile telecommunication services by remote selling from that part of its business "outside the Mobile Direct Marketing Operation" (cl 2.6), including any business of acquiring subscribers to mobile telecommunications services otherwise than by remote selling. For this exclusivity, "solely" does not mean that if Mobile acquires subscribers to mobile telecommunication services otherwise than by remote selling, it is not conducting a Mobile Direct Marketing Operation at all. It means that Mobile is not conducting a Mobile Direct Marketing Operation so far as it does so. 66 For the exclusivity conferred by Vodafone on Mobile, the operation of "solely" is the same. It is necessary to consider the composite phrase "which conducts a Mobile Direct Marketing Operation in competition with MI". The competition is with that part of Mobile's business being the business of acquiring subscribers to mobile telecommunications services by remote selling, and not with any business of acquiring subscribers to mobile telecommunications services otherwise than by remote selling. Thus a Mobile Direct Marketing Operation conducted by a Service Provider is an offending Mobile Direct Marketing Operation only so far as the Service Provider acquires subscribers to mobile telecommunications services by remote selling. 67 Reading the characteristic of the prohibited Service Provider be in this way, results in a sensible commercial bargain. Vodafone and Mobile both submit to exclusivity in relation to acquisition of subscribers to mobile telecommunications services by remote selling, but no further. Vodafone can not escape cl 2.7 by ensuring that to the required extent (see para 61 above) the Service Provider also acquires subscribers otherwise than by means of remote selling. Conversely, if the Service Provider acquires subscribers by remote selling to the requisite extent, there can be restraint only in that respect and not from all dealing with the Service Provider. 68 I consider, therefore, that the judge was correct in his answer to the question, in that the preclusion in cl 2.7 still applies where, in the competitive Mobile Direct Marketing Operation conducted by the Service Provider (new or existing), subscribers are acquired otherwise than by remote selling as well as by remote selling; but with the limitation on the extent of the preclusion. Claims 6 and 7 and their related declarations 1, 2 and 3 69 The damages of $9,362,100 under claims 6 and 7 were awarded for breaches of contract to do with determining at nil or failing to determine target levels for the determination of which cl 18.4 of the ASP Agreement provided. In the manner to be explained, the breaches of contract were founded on both construction of the agreement and implication of terms. The judge made the declarations - "1. Upon the proper construction of the Agent Service Provider Agreement dated 2 October 1998 ("ASP Agreement") the defendants were and are not entitled to determine nil as the target level in respect of the number of connections of New Subscribers under clause 18.4. 2. Upon the proper construction of the ASP Agreement the defendants were and are not entitled to refuse or fail to set a target level in respect of the number of connections of New Subscribers under clause 18.4. 3. Upon the proper construction of the ASP Agreement the defendants were and are not entitled to set a target level in respect of the number of connections of New Subscribers under clause 18.4 other than in conjunction with the determination of a Business Plan referred to in clause 21." 70 Clause 18.4 of the ASP Agreement should be seen in the context of Mobile's remuneration under the agreement. Mobile was remunerated in three ways. 71 First, Vodafone paid Mobile's direct and indirect costs incurred in providing Acquisition Services, following a scheme in cl 17 of the ASP Agreement and relevant definitions as amended by the May 1999 amending agreement. The scheme involved monthly payment of an estimated amount and then quarterly adjustment to an actual amount. In more detail - · not later than the commencement of the month prior to the commencement of each quarter, Vodafone and Mobile agreed on the Estimated Acquisition Cost in respect of the quarter (cl 17.2); · if Vodafone and Mobile failed to agree by the commencement of the quarter, the Estimated Acquisition Cost for the previous quarter was deemed to be the Estimated Acquisition Cost for that quarter (cl 17.4); · Vodafone paid Mobile the Estimated Acquisition Fee, being a monthly sum calculated according to a formula of which the Estimated Acquisition Cost was a component, (cl 17.1); · within fifteen business days after the end of the quarter Mobile calculated and notified Vodafone of the Actual Acquisition Costs for the quarter (cl 17.5); · if the Actual Acquisition Costs for the quarter were less than the Estimated Acquisition Cost for the quarter, Mobile refunded 50 per cent of the difference to Vodafone; if they were more, subject to cl 17.7 Vodafone paid the difference to Mobile on the next monthly payment date (cl 17.6). 72 It can be seen that Mobile had an incentive to spend less than the agreed Estimated Acquisition Cost but, subject to cl 17.7, it suffered only in cash flow if its expenditure exceeded the Estimated Acquisition Cost. However, cl 17.7(a) provided that Mobile "must use its best endeavours to ensure that the Actual Acquisition Costs for a Quarter correspond to the Estimated Acquisition Cost for that Quarter as closely as possible", and by cl 17.7(b) over-expenditure beyond a particular percentage and in particular circumstances would be excluded from the calculation of Actual Acquisition Costs. 73 Arriving at the Estimated Acquisition Cost involved an amount per New Subscriber and a number of New Subscribers, the number of New Subscribers in turn involving an expectation agreed in a Business Plan. More precisely, the definition of Estimated Acquisition Cost was - " … in respect of any quarter: C x S where: C = the amount determined in accordance with Clause 17 representing the agreed costs estimated to be incurred in providing the Acquisition Services or, failing agreement and subject to clause 17.7, the Actual Acquisition Costs for each New Subscriber for the previous Quarter; and S = the number of New Subscribers expected to be connected in the next quarter as agreed in the Business Plan or, failing agreement, as determined by Vodafone." 74 Mobile was not paid the quarterly Estimated Acquisition Cost. It was paid the monthly Estimated Acquisition Fee. The Estimated Acquisition Fee went beyond costs incurred in providing the Acquisition Services, its name being a little misleading in that respect, and extended to the second source of Mobile's remuneration, the Base Acquisition Margin. I will return to the Estimated Acquisition Fee a little later in these reasons. 75 The Business Plan to which the definition of Estimated Acquisition Cost referred was the subject of cl 21 of the ASP Agreement, providing - " 21.1 Parties to agree Business Plan Within one month prior to commencement of the relevant Quarter, MI and Vodafone must use their best endeavours to agree a Business Plan for that quarter. 21.2 Failure to agree Business Plan If the parties fail to agree on the Business Plan as contemplated in cl 21.1, then the Business Plan for the 3 months prior to the relevant quarter will apply. 21.3 Expert determination Failure by the parties to agree on the Business Plan not less than one month before the commencement of the relevant 3 month period will constitute a Dispute." 76 Constitution of a Dispute enlivened cl 32, dealing with dispute resolution and providing a means of expert determination. Business Plan meant - " … an agreed quarterly business plan or, failing agreement, a quarterly business plan as determined in accordance with Clause 32, which includes the components set out in the Operation Manual." 77 The Operations Manual was an annexure to the ASP Agreement. It appeared to be a document issued by Vodafone to service providers in general. It stated that the service provider must prepare a business plan annually, comprising a financial plan and a sales and marketing plan, and send it to a Vodafone officer. Amongst many other things, the financial plan was to include a three year budget, stating "the underlying assumptions", and the sales and marketing plan was to include "actual and forecast connections by channel and state", forecast connections being "expected connection levels over each calendar month". Just what would be involved in including in the Business Plan the components set out in the Operation Manual was far from clear. 78 The May 1999 amending agreement provided that the Operation Manual should be amended - " … by inserting the following paragraphs where appropriate: (a) (i) VNPL will request Mobile Innovations to cost one or more scenarios based on different connection volumes for calculation of estimated costs to acquire. The details must be with Mobile Innovations by the 15th day of the second month in each quarter; (ii) Mobile Innovations to cost each scenario and discuss any associated issues with VNPL within 1 week of receiving the request; (iii) Mobile Innovations and VNPL to review costings and plan strategy for following quarter during the 4th week of second month of each quarter; (iv) VNPL to formally respond in writing to Mobile Innovations with agreed Costs to Acquire for following quarter by the last day of the second month in each quarter; (v) any changes required to Costs to Acquire or volumes during the quarter, or any significant variances arising must be discussed as an urgent priority. Changes to approved Cost to Acquire must be discussed with Mobile Innovations and notified by a VNPL Director in writing, giving adequate notice to Mobile Innovations." 79 The contractual operation of this is rather obscure, but as will be seen Vodafone and Mobile took a course something like that described in the paragraphs in place of agreement upon a Business Plan. 80 Going to the second way in which Mobile was remunerated, Vodafone paid Mobile the Base Acquisition Margin earlier mentioned as a component of the monthly Estimated Acquisition Fee. 81 Base Acquisition Margin meant - " … in respect of any month and subject to adjustment in accordance with Clause 18.1, an amount equal to: (a) $40 times the number of New Subscribers connected to the System in that month, up to a maximum of 8,000, subject to Clause 18.2; and (b) $20 times the number of New Subscribers connected to the System in that month in excess of 8,000, subject to Clause 18.2. and in any event subject to Clause 18.3." 82 Returning then to the Estimated Acquisition Fee, it meant - " … in respect of each month during any calendar Quarter, and subject to adjustment in accordance with Clause 19.3. [(Q + B1) x N1] +(Q – B2) x N2] where Q = Estimated Acquisition Cost divided by the number of New Subscribers expected to be connected to use the System in that Quarter; B1 = $40 (representing the Base Acquisition Margin applicable to, subject to Clause 18.2, the first 8,000 New Subscribers); B2 = $20 (representing the Base Acquisition Margin applicable, subject to Clause 18.2, New Subscribers in excess of 8,000); N1 = the number of New Subscribers estimated to be connected to use the System in that month, but in any event not to exceed 8,000; and N2 = the number of New Subscribers estimated to be connected to use the System in that month excess of 8,000." 83 Clause 18 of the ASP Agreement did not provide directly for payment of the Base Acquisition Margin: payment came via the Estimated Acquisition Fee. Clause 18 was an overlay to the calculation of the Base Acquisition Margin component of the Estimated Acquisition Fee. It provided for periodical adjustment of the Base Acquisition Margin (cl 18.1), and adjustment did occur: it is not necessary to go to the detail. It provided for some qualification on who could be regarded as New Subscribers (cl 18.2): again it is not necessary to go to the detail. It then provided - " 18.3 Minimum Base Acquisition Margin If, in respect of any Quarter, Vodafone determines that the target level for connections of New Subscribers is less than 12,000: (a) if MI does not achieve the target level, the Base Acquisition Margin will be calculated and paid in accordance with the amounts specified in the definition of Base Acquisition Margin; and (b) if MI achieves the target level, the Base Acquisition Margin will be calculated and paid assuming the greater of: (i) the actual number of New Subscriber connections in the Quarter; or (ii) 12,000. 18.4 Connection levels Vodafone will have the sole discretion to determine, from time to time, the target level in respect of the number of connections of New Subscribers. The target level will be determined by Vodafone in conjunction with the determination of the Business Plan referred to in Clause 21." 84 Pursuant to cl 17, the Estimated Acquisition Cost component of the Estimated Acquisition Fee would be adjusted upon ascertaining the Actual Acquisition Costs. Although the definition of Base Acquisition Margin and cl 18.3 provided for payment of the Base Acquisition Margin upon the actual number of New Subscriber connections, subject to the minimum Base Acquisition Margin on an assumed 12,000 connections, the effect of the multipliers N1 and N2 in the Estimated Acquisition Fee, being estimated numbers of New Subscribers, was that the component was arrived at on estimated rather than actual numbers. There was no express provision for adjustment of the Base Acquisition Margin component of the Estimated Acquisition Fee from the number of New Subscribers estimated to be connected to the number of New Subscribers actually connected. How the payment of the Base Acquisition Margin worked in this respect was not explored before us, and no doubt did not matter. 85 In cl 18.4, then, came the determination of target levels to do with which the damages were awarded. Determining a target level in respect of the number of connections of New Subscribers was taken up in the ASP Agreement only in cl 18.3, in connection with calculation of the Base Acquisition Margin, and through cl 11 next mentioned in connection with the Benchmark provisions of the agreement. Elsewhere in the ASP Agreement the language was that of an expectation as to the number of connections of New Subscribers, see in particular the definitions of Estimated Acquisition Cost and Estimated Acquisition Fee. 86 By cl 11.2 of the ASP Agreement Mobile had to satisfy the Benchmarks set out in a schedule to the agreement. Failure to meet a Benchmark constituted a First Level Breach or a Second Level Breach (cl 11.3). The Benchmarks were subject to review and alteration (cl 11.1). Occurrence of a breach enlivened a procedure for remedial action, including by discussion and mediation, with potential for ultimate termination of the agreement (cl 11.4). 87 So far as the Benchmarks in the schedule are presently relevant, if quarterly net connections were less than stated figures or monthly gross connections fell below stated figures, combinations of 6,000 and 3,000 in the original figures, and certain other requirements were met, a First Level Breach or a Second Level Breach was deemed to occur. As to both net connections and gross connections, however, the schedule included - "A First Level Breach or a Second Level Breach (as the case may be) will not be deemed to occur if Vodafone has determined, in accordance with Clause 18.4, that the target level in respect of the number of New Subscribers is less than the number of connections comprising a First Level Breach or a Second Level Breach (as set out above). 88 The third way in which Mobile was remunerated need only be outlined. Vodafone paid Mobile a monthly Management Fee for providing the Management Services, calculated at an amount per subscriber to whom Mobile provided Management Services times the number of subscribers on the day prior to the commencement of the month. The Management Fee was subject to review and adjustment, and was adjusted. 89 Standing back from the detail of the ASP Agreement, it was in Mobile's interests to maximise the number of New Subscribers it acquired. It was effectively reimbursed its direct and indirect acquisition costs, but through the Base Acquisition Margin (and subject to the Minimum Base Acquisition Margin) the more subscribers it acquired the more it was paid. It would be paid for providing Management Services to subscribers previously acquired, but over time those subscribers would be lost. A certain number of New Subscribers would have to be acquired in order to maintain its remuneration from the Management Fee, and the more New Subscribers Mobile acquired and then managed the greater the Management Fee it would receive. From Vodafone's side, however, maximising the number of New Subscribers was not necessarily in its interests. It depended on whether the subscribers were profitable to it. The tension between the two interests was fundamental. It can plainly be seen in the dispute which arose over the determination of target levels, and is important in deciding the implied terms issues. 90 Other provisions of the ASP Agreement material to claims 6 and 7 should be noted. 91 By cl 7 Vodafone promised to use its best endeavours to provide mobile telecommunications services on a postpaid basis to the existing and new subscribers brought or acquired by Mobile. However, Vodafone controlled the terms on which the mobile telecommunications services were provided. They were on Vodafone's standard terms and conditions as notified to Mobile from time to time, which Mobile could not alter (cl 7.3). Vodafone could alter the standard terms and conditions, and even suspend or discontinue the provision of mobile telecommunication services (cl 7.4). The qualification to Vodafone's control was only that Vodafone would "use its best endeavours to give MI reasonable notice in advance" of any alteration to the standard terms and conditions where the alteration would cause detriment to subscribers (cl 7.4). 92 By cl 8 Vodafone was "solely responsible for determining the tariff for Mobile Services (subject to the rights of Existing Subscribers) but will consult with MI as appropriate". The same qualification as to best endeavours in cl 7.4 applied to changes to tariffs. This underlined that, as Vodafone's (more specifically, Vodafone Billing Services Pty Ltd's) agent, Mobile could only acquire subscribers on "plans", as they were called, which Vodafone was prepared to provide. 93 Clause 32 dealing with dispute resolution has already been mentioned. If a Dispute arose the parties had to meet to attempt to resolve it, at ascending corporate levels, and if they could not an independent expert decided it. The expert's decision was final. The purpose of avoiding litigation was manifest. However, some disagreements were excluded from the dispute resolution procedure, relevantly "Vodafone's exercise of any discretion given to it under this Agreement" as to which "Vodafone's decision will be conclusive and binding on the parties" (cl 32.6). It was common ground that the determination of target levels in connection with the number of connections of New Subscribers was an exercise of discretion excluded from the dispute resolution procedure. 94 Related to this, cl 41 of the ASP Agreement provided - " 41. EXERCISE OF DISCRETION Where any provision of this Agreement allows Vodafone to exercise any discretion, including where some act of MI is expressed to be conditional on Vodafone giving its consent or granting its approval, Vodafone may (unless that provision provides to the contrary) exercise that discretion in any manner it sees fit." 95 Clause 24.1 included - " 24.1 Exclusion of Warranties and representations (a) ( Exclusion ) To the full extent permitted by Law and other than as expressly set out in this Agreement the parties exclude all implied terms, conditions and warranties. (b) … (c) ( MI has made own inquiries ) MI acknowledges and declares to Vodafone that, in making its decision to become Vodafone Billing Services' non-exclusive agent service provider on the terms of this Agreement, it has carried out all feasibility studies, inquiries, investigations and due diligence exercises that it considers necessary and prudent, and it has consulted its own independent professional consultants (including accountants and legal advisors) on such matters as the terms of this Agreement and the profitability and viability of performance under this Agreement." 96 Finally, cl 44 provided - " 44. ENTIRE AGREEMENT This agreement contains the entire agreement of the parties with respect to its subject matter. It sets out the only conduct relied on by the parties and supersedes all earlier conduct by the parties with respect to its subject matter." 97 What, then, were the breaches of contract for which the damages were awarded? In the performance of the ASP Agreement the parties identified quarters by the closing month, so that the December 2001 quarter, for example, was the three months ending on 31 December 2001. The judge found that Vodafone was in breach of contract because it determined a target level of nil or failed to determine a target level for the December 2001 to the March 2003 quarters inclusive. On the judge's findings of breaches of contract and assessments of damages, it did not matter whether the breach of contract lay in a nil determination or a failure to determine. He did not clearly find what had occurred for each quarter, although he referred near the end of his reasons to setting nil targets for the December 2001 and March and June 2002 quarters and failure to set targets for the September and December 2002 and March 2003 quarters (para 883). 98 No point arose that the breaches of contract occurred after the commencement of the proceedings in August 2001. 99 The judge's reasoning to breach of contract must be found in a judgment which is lengthy and, with respect, at times diffuse. 100 In para 602 the judge identified as "the nil target issue" - "Was there or was there not, whether as part of the proper construction of the ASP or by way of the legitimate implication of a term, any, and if so what, obligation upon Vodafone to: · put forward, in order to gain agreement [as part of an agreed business plan]; or · failing agreement, to determine. by way of a 'target', that a particular positive number of new subscribers was [or alternatively, was reasonably ], expected by it to be connected in the next quarter?" 101 After much discussion, to some of which it will be necessary to return, the judgment had a heading, "Holding in respect of the nil target issue". The heading was followed by material under three sub-headings. The first was "Proper Construction" (paras 669-72), the second was "Obligation to co-operate" (paras 673-79) and the third was "Obligation of good faith and reasonableness" (paras 680-734, all on that subject despite other sub-headings). 102 Under the sub-heading "Proper Construction", the judge said - "669 In my view this issue may be decided shortly and by construing the ASP. 670 Upon the proper construction of the ASP Vodafone was not entitled to put forward nil as the target level in respect of the number of connections of new subscribers. 671 A number of pervasive [sic] reasons for this holding have generally already been given. A number of the submissions put forward by Mobile in support of the same proposition have already been included in the above reasons. It is however convenient to add by way of supplementing the courts [sic] earlier reasoning, the following factors each of which has substance: · Under clause 18.3 the target must be set in conjunction with a business plan. Nil means no business plan. It follows the parties could not have contemplated it as a target. · Clause 17.3 and then clause 32 would have no application because there would be no scope for the agreement of Estimated Acquisition Cost. · The agreement is to perform "Acquisition Services". A nil target is inimical to the notion of performing services. Mobile has an express obligation to perform the "Acquisition Services" (Clause 5.1(a) at TB147). · The formulas in the definitions of "Estimated Acquisition Fee" and "Estimated Acquisition Cost" do not operate with a nil target. · Under clause 13.1(a) Mobile took upon itself the obligation to promote the Mobile Services, subject to Vodafone's reasonable directions from time to time. Mobile must not do anything which would reasonably be regarded as inconsistent with this obligation (TB157). It could hardly be suggested that a reasonable direction could be to stop promoting the Services or from Mobile's point of view it would hardly be using its best endeavours if it refused to promote acquisitions. · The concept of a nil target is contrary to various indicators in the agreement: (i) the definition of "Payment dates" refers expressly to the efficient operation of Mobile's business (TB140); (ii) clause 2.2 - the undertaking by Mobile to devote its Mobile Direct Marketing Operation part of its business exclusively to Vodafone (TB145); (iii) clause 4 – the non-compete obligations (TB147). · The idea that Mobile was to stagnate cannot have been the intention of the parties, objectively construed. · By setting a nil target Vodafone renders it impossible for Mobile to perform its obligations under the agreement. 672 The next question involves whether or not the pleaded terms of an obligation to co-operate, good faith and reasonableness form part of the ASP. As will appear from the following analysis, the very same decision may be reached by the implied term route." 103 It is not easy to identify in the preceding discussion the "pervasive" (perhaps "persuasive") reasons to which the factors stated in para 671 are supplementary, and the judge may have meant effectively to re-state factors found in that discussion. 104 One source of the reasons may be the discussion in pars 639-64, which were primarily directed at the nature of Vodafone's conduct in setting target levels. Pararaph 641-2 will be set out in full later in these reasons. The paragraphs include that in setting target levels of nil or refusing to set target levels Vodafone "did so in an environment in which it eschewed any participation by itself in the setting of business plans" (para 639) and "walked away from such obligation as there was to endeavour to agree upon business plans" (para 641). This seems to underlie the factor in the first dot point in para 671, that determining a target level of nil (and presumably also failing to determine a target level) meant "no business plan". 105 Another source of the reasons seems to be the judge's discussion in relation to the Benchmarks - "644 Gross connections are new connections. How then is Mobile expected to achieve a minimum performance standard apropos gross connections of more than 3000/month (ie 9000/quarter) [1st level breach provision] or 2000/month (ie 6000/quarter) [2nd level breach provision], in a situation where it has been effectively directed by Vodafone not to achieve any new connections at all? And how, in that circumstance, can Mobile continue to discharge its express obligation to use its best endeavours to promote the Mobile Services, subject to Vodafone's reasonable directions from time to time [clause 13.1 (a)]. Possibly this simply raises a question of whether or not the nil level target determination constitutes a reasonable direction in the circumstances. 645 The same point may be made with respect to net connections. How is Mobile to be expected to achieve quarterly net connections of more than 3000 [2nd level breach provision] or 6000 [1st level breach provision], in a situation where it has been effectively directed by Vodafone not to achieve any new connections at all? By definition net connections comprise the cumulative result when old connections churn away and new connections are acquired. If Mobile is obliged not to seek any new connections, then if any churn takes place there will be no net connections. So by definition Mobile cannot, by reason of Vodafone's nil target determination [or failure to give any target], both comply with the minimum performance standard and at the same time also comply with its obligation to work towards achieving Vodafone's identified target." "Churn" is mobile telephone jargon for a customer going to another service provider at the end of the customer's contract period. Something of this discussion seems to have been taken up in the third, fifth and last two dot points of para 671, 106 In his consideration of the scheme involving Estimated Acquisition Cost and Actual Acquisition Costs, after noting a submission that by simply acquiring one subscriber Mobile would be entitled to the Actual Acquisition Costs the judge said - "647 If Vodafone's submission in this regard is correct it seems to me that it is particularly important to note that clause 17.7 (a) provides an express positive obligation upon Mobile to use its best endeavours to ensure that the Actual Acquisition Cost for a quarter correspond to the Estimated Acquisition Cost for that quarter as closely as possible. Hence if Vodafone, assuming an entitlement to do so, determines a nil target for any quarter, clause 17.7 (a) in fact imposes a positive obligation upon Mobile not to incur any Actual Acquisition Costs at all during that quarter. 648 It may also be arguable that where one is dealing with a target level of zero then as a matter of semantics, there will be no Estimated Acquisition Cost at all [as compared to an estimated acquisition cost of zero] for the relevant quarter." 107 With doubt, another source of the reasons may be the judge's observations upon the overall intent of the parties. Although under a sub-heading "Implied terms", the judge said - "657 The above general description of the disparate difficulties in construing the ASP in the face of a number of apparent internal conflicting provisions serves it seems to me to require one to stand back from the agreement in an attempt to discern from the words of the document, what the parties were apparently intent upon achieving in their relationship. That the contract was a long-term contract is obvious. Each of the parties had a clear commercial interest in entering into the ASP. But above and beyond every other consideration they were about setting out a mode in which Mobile could conduct the agency business which it was appointed to conduct. That was intended to be an ongoing business until the ASP was duly terminated according to its terms or according to the respective legal rights of the parties. The business concerned direct marketing. Mobile was prevented from conducting the Mobile Direct Marketing Operation part of its business otherwise than for Vodafone. [ASP clause 2.2] Hence the parties anticipated that over sundry periods of time, advertising of high order would lead to incoming applications for subscriptions to the services being sold. 658 It seems to me that the parties [sic] careful attempts to treat with the need to regularly, as each quarter approached, co-operatively work towards agreeing the terms of the business plans which would apply in respect of that quarter [attempts replete with the alternative dispute resolution provisions should these attempts proved unsuccessful], make plain that neither of them intended that at any stage either party would have an entitlement to simply refuse to participate in the production of any form of business plan at all. But by definition Vodafone's case of an entitlement to set the target at nil is predicated upon, proposition or carries as a correlative to the reasoning underpinning that case, just such a proposition. Its case suggests something which sounds illogical, namely that the proper construction of the ASP can be seen to have entitled Mobile, notwithstanding that Vodafone would set a nil target for an ensuing quarter, to nevertheless: · go ahead and seek as many subscribers as it wished; · be paid its Acquisition Costs in respect of each of those subscribers. 659 There was of course the express general obligation upon Mobile to carry out its best endeavours to promote the Mobile Services. Let us assume that a call came in from a would-be subscriber during a quarter in respect of which Vodafone had fixed a nil target and had concomitantly, not participated in the preparation of any business plan [for the reason which Mr Bathurst forward as there not being anything which could be included on such a plan]. One wonders in that circumstance just what would or could be the content of Mobile's obligation to carry out its best endeavours to promote the mobile services The construction for which Vodafone contends would seem to suggest that Mobile should either attempt to dissuade that would-be subscriber from subscribing to the service or alternatively, perhaps, that Mobile should endeavour to locate an existing subscriber and persuade that subscriber to churn, so that, in net terms, there would be a nil figure for new subscribers. 660 Likewise it seems to be a particularly awkward approach to the ASP to contemplate that in the face of a nil target determination [and concomitant absence of a business plan], the parties should be seen to have intended that Mobile had carte blanch to sign up as many subscribers as it wished, being paid all of its Actual Acquisition Costs in this regard. Were this to occur then clearly that which Vodafone, with its absolute discretion to determine target levels may be suggested as having bargained for, would be completely outflanked. 661 Certainly I recognise that the problem in rejecting the Vodafone construction to the nil target issue inheres in one or more of a combination of: · the lack of an express criterion to be used as a yardstick by which to measure the reasonableness of any particular target number as may be put forward; and · the clarity of the provision within Schedule 1 which expressly recognises that Vodafone may determine, in accordance with clause 18.4, that the target level in respect of new subscribers, would be less than the number of connections comprising either a first level breach or a second level breach. 662 I am less impressed by the Vodafone submission relying upon the proposition than Mobile would [cf clause 17.6 (b)] still be entitled to receive its Actual Acquisition Costs notwithstanding that it may have virtually ignored the target set and simply gone about obtaining as many new subscribers as possible. This is because clause 17.6 (b) is expressly subject to clause 17.7 which latter clause, by subclause (a), obliges Mobile to use its best endeavours to ensure that the Actual Acquisition Cost for a Quarter correspond to the Estimated Acquisition Cost for that quarter as closely as possible . Hence it seems to me that as soon as Mobile would ignore the target in this way and obtain new subscribers at will and proceed to claim the whole of its Actual Acquisition Cost [on the basis that there had been an estimated Acquisition Cost of zero], Vodafone could legitimately assert that Mobile, by breaching clause 17.7 (a), had forfeited any entitlement which it otherwise may have had pursuant to clause 17.6 (b)." 108 I confess to difficulty, here in particular, in appreciating the judge's points. The discussion appears to return to "no business plan" and to suggest that determining a target level of nil would prevent Mobile from earning its remuneration and force Mobile into breach of the ASP Agreement. These matters appear in the dot points in para 671. 109 The last source of the reasons, in the paragraphs immediately preceding heading "Holding in respect of the nil target issue", may be the judge's discussion of The Eastern Extension Australasia and China Telegraph Co Ltd v The Commonwealth (1908) 6 CLR 647 (paras 663-8). This again is subject to doubt, since the judge began by saying that "one would not expect to obtain and generally cannot obtain any real assistance from the decided cases" because it was a question of construction of the ASP Agreement. He continued, "It is interesting however to observe that in The Eastern Extension Australasia and China Telegraph Co Ltd v The Commonwealth … " (para 663) and discussed the case. The judge's point seems to have been that in that case, in which there was power to "reduce" a scale of charges, it was held that the power to reduce did not authorize abolition of the charges (para 662). This does not seem to have been taken up in para 671. 110 As foreshadowed in para 672, the judge then moved to the implied terms, having said that "the very same decision may be reached by the implied term route". The "decision" must have been that stated in para 670, that Vodafone "was not entitled to put forward nil as the target level in respect of the number of connections of new subscribers". 111 Under the sub-heading "Obligation to co-operate", the judge began - "673 The pleaded co-operation term is that Vodafone would: · do whatever was necessary to be done on its part to enable Mobile to have the benefit of the ASP; · refrain from doing anything which would or which would be calculated to deprive Mobile of the benefit of the ASP. 674 In my view just such an obligation to co-operate expressed in such wide terms is shown to have formed part of the ASP. Indeed it would be difficult to suggest for a moment that such a term was not implicit in the ASP and is not implicit in every contract." 112 In para 675 the judge posed the question, what conduct would constitute a relevant breach of the duty? He amplified the question - "Does such duty to co-operate extend to require Vodafone to co-operate: - by producing [by its determination], a positive number of new subscribers to be connected in the next quarter by way of a target [' the limited reach '] or alternatively; - by producing [by its determination], not only a positive number of new subscribers to be connected in the next quarter by way of a target , but also being a number of new subscribers which was reasonably expected by Vodafone to be connected in that quarter ['the expansive reach ']" 113 He concluded that the duty to co-operate "does not go beyond the limited reach" (para 676). He set out "parameters … supportive of the implied term giving only the limited reach" (para 676), and said - "677 The very powerful argument against the implied term with the expansive reach is that it is simply impossible to understand what criterion could be used to measure whether or not Vodafone's determination of a particular positive number of new subscribers to be connected in the next quarter by way of a target could be said to be reasonably so expected. Use of the word "reasonably" in that context gives virtually no assistance at all as to just what is meant. As the ASP makes clear, Vodafone does seem to have been intended by the parties to have had the sole discretion to determine the target. Had the parties intended to qualify that discretion, as for example by an obligation that the target should be fixed by Vodafone by reference to (1) market and economic conditions or (2) to its own then position, taking into account market and economic conditions, the parties would have had to say so expressly. They did no such thing. And as pointed out above, the court is not in a position to in effect spell out what the parties have for themselves failed to agree upon. Nor is the court in a position to clarify that which is irremediably obscure. This problem presented by the suggested expansive reach comprises precisely such a circumstance of irremediable obscurity on the point. 678 Having said that I should make plain that it is likely that the implied duty to co-operate would be breached if Vodafone's discretion could be shown to have been exercised arbitrarily or capriciously. The matter is probably more conveniently dealt with below in relation to the implied obligations of good faith and reasonableness. Clearly some areas of overlap are involved where the two tranches of implied term are concerned." 114 The judge interpolated - "679 Before moving to good faith and reasonableness it is convenient to note that my own view, consistent with that of Professor Carter, is that it probably does not matter whether the duty of co-operation is referred to as an implied legal duty discerned by a process of construction , a rule of law or an implied term. In terms of the contract before the court for construction the duty of co-operation may be found by each of these routes. Hence the labeling issue is not determinative in terms of the issues presently before the court." 115 Under the sub-heading "Obligation of good faith and reasonableness", the judge then said - "680 The pleaded implied term is that Vodafone will act in good faith and reasonably in exercising its powers under the ASP . 681 As with the above analysis in terms of duty to co-operate, the far more difficult question in terms of implication of a good faith or reasonableness term concerns extrapolating from the general to the particular. The real question is as to the reach of the term. Precisely what conduct will constitute a relevant breach of these duties? 682 As already pointed out, this is one of those cases where likely there is an assimilation of the duties of cooperation and of good faith/reasonableness. In that sense both sets of duties extend to cover duties to act honestly and duties to have regard to the legitimate interests of the other party. 683 I would accept that there was an implied obligation to behave honestly and to do all such things as were necessary to enable the other party to have the benefit of the contract. [To my mind these are elements of good faith [cf Peden supra at 165]]. … 685 Probably when focusing upon the discretions given to Vodafone, the matter may be put as an implied obligation to exercise these discretions "honestly and in good faith but having regard to the provisions of the contract by which it is conferred ". 686 Quite probably the implied obligation would be breached if the discretions were exercised arbitrarily or capriciously. But this is simply to require that the exercise of the discretion take place following at the least, a proper consideration of the matter after making any necessary inquiries" [cf Abu Dhabi National Tanker Co v Product Star Shipping Limited (The Product Star) (No 2) [1993] 1 Lloyd's Rep 397]. 687 Insofar as it is shown to have been unreasonable for Vodafone to determine a nil target, it is seen to have failed to act in good faith as well as to have acted unreasonably. Since determination of a nil target prevented the parties going forward in an endeavour to reach a business plan, Vodafone is shown to have unreasonably interfered with the enjoyment of an important benefit conferred by the express contractual terms so that the enjoyment was seriously undermined and rendered nugatory. Hence one may regard Vodafone's interference of this kind as (1) a breach of the implied obligation to act reasonably; and (2) a breach of the good faith obligation – insofar as there has been shown to be a failure to comply with standards of conduct which are reasonable having regard to the interests of the parties." 116 The judge dealt with a submission by Mobile which he described as "probably simply a process of construction showing again the probable overlap between a result achievable by no more than a construction route, and the same result achievable by the application of principles which underpin the implied terms" (para 688). He said in para 689 that the submission was "only partly correct", and continued - "This is because the parties did not expressly qualify Vodafone's "sole discretion" to determine from time to time, the target level in respect of the number of connections of new subscribers. [1st sentence of clause 18.4]. Nor were the parties prepared to allow the expert to determine any issues concerning Vodafone's exercise of any discretion given to it under the agreement. Hence I do not see that Vodafone's discretion to set a target was proscribed by any such obligation as to act reasonably or in good faith in the sense that it was obliged to put forward by way of a 'target' that a particular positive number of new subscribers was reasonably expected by it to be connected in the next quarter. 690 However Mobile's close focus upon the obligation to determine a target in conjunction with the determination of the business plan clearly does throw up, as it seems to me, an obligation not to refuse to determine a target [nor to purport to determine a target of nil, which is in effect the same thing], for the simple reason that in essence this simply effectively stultifies any further operation of the agreement and could not have been intended. 691 As I have said, when one asks whether the good faith or reasonableness implied term obliged Vodafone to put forward by way of a 'target' that a particular positive number of new subscribers was reasonably expected by it to be connected in the next quarter, it does not seem to me that an affirmative answer can be given to this question. Here one is tampering with the express words of the ASP in an impermissible way. In relation to this field of discourse one is going outside conduct which by definition and with certainty operates to prevent the parties going forward in an endeavour to reach a business plan. One is here seeking to have the court in effect spell out what the parties have for themselves failed to agree upon. As before and for the same reasons the court is not in a position to clarify that which is irremediably obscure. The court would not require commercial parties such as these to behave reasonably towards each other in the matter of fixing positive as opposed to nil targets when, as Peden points out at 164, " they have not expressly included such a standard… " Peden cites the following passage from the United Kingdom Court of Appeal when refusing to imply a term in law: '[t]he common law cannot …devise such a duty which the legislature has not thought fit to impose and it could not be just or reasonable for the court to impose it' . [ Reid v Rush Tompkins Group Plc [1990] 1 WLR 212 at 230 per Ralph Gibson LJ]. 692 This is not however to suggest that the implied obligations of good faith and reasonableness would not be breached if shown to have been exercised arbitrarily or capriciously." 117 The judge referred to cases on the implication of a term in connection with the maintenance of a business, and said - "715 As with Roadshow Entertainment [Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (Receiver and Manager Appointed) (1997) 42 NSWLR 462] , Mobile was here appointed as sole or exclusive direct marketing agent. As with Roadshow Entertainment , that was a valuable right. As with Roadshow Entertainment , it is difficult to accept that it was the intention of the parties as manifested in their agreement, that Vodafone could defeat that right simply by refusing to determine a target at any time or at all, or by, what was in effect the same thing, setting a zero target. The ASP was a long term contract providing for a specific term of years. It had very specific provisions with respect to termination. Importantly, as in Coulter , it expressly provided for the stepped but very significant consequences which would flow in the event of the first or second level breaches in terms of failure to meet the defined benchmarks. Further and also importantly, it brought with it the extremely significant covenant by Mobile to devote the Mobile Direct Marketing Operation part of its business exclusively for Vodafone so that it could not during the term, deal, and would procure that none of its related bodies corporate would deal, directly or indirectly, with any other mobile network carrier or operator in respect of analogue or digital phone services. 716 These are all circumstances which are taken into account in terms of the courts [sic] here decision that as a matter of the proper construction of the ASP, Vodafone was not entitled to set a nil target or to refuse to set any target. As a matter of implication, these authorities support the finding that the relevant duty to cooperate extended to require Vodafone to cooperate by producing [by its determination], a positive number of new subscribers to be connected in the next quarter by way of a target [referred to above as "the limited reach"]." 118 The judge then considered Vodafone's submission that cl 24.1(a) of the ASP Agreement precluded the implication of what he described as "the co-operation term or the good faith term" (para 717). After reference to a number of cases, the judge said - "726 The above reasons serve to set out the extent to which the implied terms of cooperation and good faith/reasonableness [limited as to relevant content], have been held to form part of the ASP. The terms are implied in the sense of being attributed to the contractual intent of the parties , discerned from the ASP objectively construed, the contrary nowhere appearing upon a proper construction of their bargain as reduced to writing in the form of the ASP. 727 The word ' expressly ' in the phrase ' other than as expressly set out in this Agreement' " requires some examination in this context. It is possible for the parties to express their agreement to a particular obligation without that obligation being written. In this sense it is not ' expressed' but it is nonetheless to be discerned as part of the parties contractual intent. This is the position in terms of the manner in which the ASP is here construed. 728 Properly construed the implied terms which have been found by the court are embodied in the ASP just as effectively as if they were written there in express language. They spring out of the bargain discernible from the ASP. 729 It follows that the defendant's submission that the implied terms now found by the court to be part of the ASP were expressly excluded by clause 24, is rejected." 119 After referring to a submission by Mobile apparently intended to overcome the "limited reach" earlier mentioned, and saying that it "does not serve to outweigh any of the courts [sic] reasons nor to suggest that those reasons are incorrect in any parameter" (para 730), the judge moved on to assessment of damages. In the course of assessing damages he said that Vodafone "had breached the contractual obligation not to set a nil target and likewise by refusing to determine targets at all" (para 757) and that Mobile had suffered actionable loss "occasioned by reason of Vodafone's setting of nil targets or refusing to set any targets" (para 759). 120 From all this it can be seen that the judge came to breach of contract through each of the proper construction of the ASP Agreement, an implied obligation to co-operate and an implied obligation of good faith and reasonableness. The following observations may be made. 121 The reasoning to breach of contract did not distinguish between determining a target level of nil and failure to determine a target level at all. Indeed, it scarcely addressed failure to determine a target level. The "nil target issue" identified in para 602 was in terms of an obligation to put forward or determine "a particular positive number". Both the holding on the proper construction of the ASP Agreement and the holding by application of the obligation to cooperate were with respect to determining a target level of nil. The holding by application of the obligation of good faith and reasonableness was extended in paras 690 and 716, without any analysis, to failure to determine a target level. The judge's later global description of Vodafone's breaches in paras 757 and 759 and his assessment of damages treated determination of a nil target level and failure to determine a target level without discrimination, and the two were conflated. 122 However, there is a difference between determining a target level of nil and failing to determine a target level. Undoubtedly Vodafone was obliged to determine a target level: cl 18.4 of the ASP Agreement said so. Whether it could determine a target level of nil was a separate question. The damages for the two kinds of breach could differ. For example, in assessing damages for failure to determine a target level it would be material that Vodafone was entitled to determine a target level of nil, if that were the case, since the proper finding might be that if it had determined a target level Vodafone would have determined a target level of nil; whereas the reasons for holding that Vodafone was not entitled to determine a target level of nil could mean that damages would be assessed by regard to a substantial target level. 123 Linked with this, the "implied term route" (para 672) was not a parallel path to that of the construction of the ASP Agreement. So far as Vodafone failed to determine target levels, it was in breach of contract and there was no need or room for any breach of an obligation to co-operate or an obligation of good faith and reasonableness. So far as Vodafone determined a target level of nil, if on the proper construction of the agreement it was not entitled to do so again there was no need or room for the overlay of an implied term. It was necessary first to ascertain what Vodafone had power to do on the proper construction of the agreement. If it was entitled to determine a target level of nil, an implied term might control the exercise of the power. The construction of the agreement would itself bear upon whether an implied term required that it exercise its discretion by determining a target level other than nil. 124 As to the implied terms, this was not a case of the Mackay v Dick (1881) 6 App Cas 251 kind, with the question whether each party was obliged to do all that was necessary to be done on its part for the doing of what the contract said should be done. Vodafone had a contractual power, the question was what it could do in the exercise of its discretion, and the attention given to the obligation to co-operate was misplaced. 125 An obligation of good faith and reasonableness in the performance of a contractual obligation or the exercise of a contractual power may be implied as a matter of law as a legal incident of a commercial contract (Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 at 369; Burger King Corporation v Hungry Jack's Pty Ltd (2001) NSWCA 187 at [159], [164]). The focus in the present case should have been on the pleaded term that Vodafone would act in good faith and reasonably in exercising its powers under the ASP Agreement (see para 680), relevantly the power in cl 18.4, so that even if on the construction of the agreement Vodafone was entitled to determine a target level of nil, the exercise of its discretion in good faith and reasonably called for determination of a target level of some particular number of connections of New Subscribers. 126 What the judge said presents particular difficulty in relation to the number of connections of New Subscribers. 127 The judge considered that it was not open to Vodafone to determine a target level of nil, and that it had to determine a target level of a positive number. But he seems to have held, by his adoption of the "limited reach" rather than the "expansive reach", that any positive number would suffice. This is not entirely clear, since the "expansive reach" was stated in terms of the number of new subscribers which was reasonably expected by Vodafone, which may not be the same as the number of new subscribers produced by the exercise of good faith and reasonableness; the judge did not, however, otherwise address the reach of the implied terms by the standard of good faith and reasonableness. He emphasized in his paras 589-91 that the court could not fix what was reasonable, even saying (para 691) that "the court would not require commercial parties such as these to behave reasonably towards each other in the matter of fixing positive as opposed to nil targets …". 128 There may be inconsistency. If the court could not require Vodafone to act reasonably towards Mobile in fixing the target level of a positive number, what was the justification for requiring Vodafone to act co-operatively towards Mobile, or in good faith and reasonably, by fixing a target level of a positive number rather than nil? Put another way, if consistently with the exercise of good faith and reasonableness it was open to Vodafone to determine a target level of any positive number, the obligation of good faith and reasonableness had very little content. Why did the exercise of good faith and reasonableness require the determination of a target level not of nil, but of one or ten or any such positive number? Why did it not require the determination of some particular (larger) number of New Subscribers sufficient, in the judge's language in the penultimate dot point in para 671, to prevent Mobile from stagnating? 129 It may be that, despite generous language such as the references to stagnation (para 671), achievement of Benchmarks (paras 644-5) and intent that Mobile should have an ongoing business (para 657), the essence of the judge's reasoning on construction was that a target level of nil meant no Business Plan and so stultification of the ASP Agreement; if a target level of a positive number was determined, there could be a Business Plan, however, unreasonable the target level, so as a matter of construction nothing could be said about what the positive number should be. But under the implied terms the reasonableness of the target level, bearing upon the way the Business Plan served the interests of Mobile and Vodafone, should surely have arisen; conversely, if the court could not intervene in the reasonableness of the target level, there was no occasion to imply a term simply that a target level of a positive number should be determined, and no warrant to imply a term by which a particular target level should be determined. 130 The judge found the breaches of contract, it seems, simply in determining target levels of nil and failing to determine target levels at all. So far as he considered that on the proper construction of the ASP Agreement Vodafone "was not entitled to put forward nil as the target level in respect of the number of connections of New Subscribers" (para 670), no more than determining a target level of nil was necessary or material. In relation to the obligation to co-operate and the obligation of good faith and reasonableness, he saw the breach in no more than failing to determine a positive number of new subscribers as the target level, the "limited reach" rather than the "expansive reach". He encapsulated the breaches found in his paras 757 and 759 in terms of setting nil targets and refusing to set any targets. 131 The significance of this lies in what the judge did not find as the breaches of contract, to which it will be necessary to return later in these reasons in connection with the exercise of a power for an extraneous purpose. 132 Although he referred to exercise of the power to determine target levels arbitrarily or capriciously, the judge did not find that Vodafone had exercised the power arbitrarily or capriciously. This, it seems to me, is the proper reading of the judge's "if Vodafone's discretion could be shown to have been exercised arbitrarily or capriciously" in para 678, "if the discretions were exercised arbitrarily and capriciously" in para 686 and "if shown to have been exercised arbitrarily or capriciously" in para 692. All are hypotheses rather than findings. They contrast in particular with the specific attribution of failing to act in good faith and acting unreasonably in para 687 to "Insofar as it is shown to have been unreasonable for Vodafone to determine a nil target … ". Unreasonable exercise of the power is distinct in the judge's reasons from arbitrary or capricious exercise of the power. 133 A similar distinction is to be seen in the supplementary judgment of 15 April 2003. The judge said - "20 ... As the judgment makes plain the real issue concerns the content of an implied term requiring Vodafone to act in good faith and reasonably in exercising its powers under the ASP. The judgment makes explicit, for example, that in certain respects there are limits to the extent to which the good faith or reasonableness implied terms constrained Vodafone from acting in a particular way [cf paragraphs 689, 691]. 21 In the circumstances where the extent to which the implied terms requiring Vodafone to act in good faith and reasonably have been tested against particular facts, matters and circumstances, and in that regard are dealt with in the reasons for judgment, there can be no doubt but that the parties are bound by a res judicata. Further those obligations will be breached if Vodafone's discretion to determine the target is exercised arbitrarily or capriciously [cf paragraph 692]; and [see paragraph 678 referable to the implied duty to co-operate]." 134 The judge did not take up for his findings of breach some of what he said in the course of the extensive discussion earlier mentioned. The most material part of the discussion is in the paras 641-2 earlier mentioned - "641 It is extraordinarily difficult as one follows for example the close evidence given concerning the events of 2001 to follow with precision the moving pattern of stances taken by the parties on a micro basis. What does come through however quite clearly and represents the courts finding of fact is that Vodafone made a clear and conscious and very deliberate decision that it was not able to and did not wish to continue with Mobile as its direct marketing agent or with the ASP and would proceed to force the issue in some fashion by using its entitlement to set the targets as a weapon in this regard. It determined to and in fact then set about what is shown to have been an initially somewhat vacillating set of directions and changes, [Mr Clubb: ' Due to the integration of Vodac and Vodafone Network we are in a hell of a mess '] [never taking into account, Mobiles legitimate interest in its own financial survival or ability to continue in business as direct marketing agent whilst fettered by Vodafone's changing reduction of target levels down to zero], but ultimately resolving into a very clear position. This position involved first dramatically reducing previously agreed upon proposed target levels for certain quarters and in due course resulted in purporting to fix a target for a 12 month period instead of for a quarterly period, which target in any event was for such a low number of acquisitions as made it quite plain to Vodafone that Mobile could never survive if obliged to comply with such direction. The sequence of events simply involved a closing of the tap by Vodafone. I reject the proposition that Vodafone is shown on the evidence to have made clear that if and when Mobile might come forward with suggested business plans which would find favour with Vodafone, Vodafone would re-open the tap and return to the ASP template of setting targets and agreeing business plans and the like. Whilst Vodafone or some of its officers may have had in the back of their mind that commercial realities would surely in due course require Mobile to put up high-value business plans [as a matter of having its back to a wall and therefore no longer having any choice], this was not made explicit to Mobile. Mobile was entitled to conduct itself on the basis that Vodafone had and continued to repudiate the ASP. Further, Vodafone was obliged to determine the target in conjunction with the determination of the business plan[s]. Mobile was entitled to invoke the dispute procedures in the event of any failure by the parties acting in good faith to agree upon the business plans. In that event the dispute resolution procedures could be invoked by Mobile and when and if invoked, authorised the Expert to provide a conclusive, final and binding decision in relation to the matter. In determining the targets at nil, Vodafone walked away from such obligation as there was to endeavour to agree upon business plans. Mobile was denied the entitlement to have the expert resolution procedure operate in terms of the matter of selection of business plans. This walking away from its relevant obligations most clearly exhibits a repudiation and breach thereof when one looks at Vodafone's decision [Vodafone's letter of 7 March 2001 (6/ 775)] to set a yearly target instead of a quarterly target, which decision, setting a 12,000 target for the year 1 April 2001 to 31 March 2002, on examination, meant that at one in the same point in time , Vodafone was announcing that Mobile would have no targets at all for the September, December 2001 quarters and for the March 2002 quarter. Ms Blake conceded in cross-examination, that Mobile was being given no targets at all for the following September, December and March quarters. This decision clearly flew in the face of the ASP, setting at naught [a somewhat apt word to use in these circumstances], Mobile's clear contractual entitlement so long as the ASP remained on foot, to have Vodafone exercise a discretion during the month prior to the commencement of the relevant quarter, as to what target was to be set for that quarter. Vodafone blatantly and deliberately breached its obligation to exercise that discretion during the period of time stipulated for that exercise by the ASP. 642 That Vodafone approached the contract and business relationship in this way is simply a finding of fact. The reasons for it seem to have been shown to be a continuing anxiety to reduce the acquisitions on low-level plans for financial reasons." 135 In para 758, part of his consideration of damages, the judge appears to have had these findings in mind when he said - "758 Effectively the contractual breach was the conduct by Vodafone which in substance prevented the further operation of the ASP - Mobile is seen to have been stopped in its tracks from going forward promoting the Mobile Services by following and working pursuant to business plans. This was the mechanism selected by the parties as the engine of the enterprise." 136 Notwithstanding what he said in paras 641-2 and the obscure words of para 758, any potential for Vodafone being in breach of contract because it used its power to determine the target levels as a weapon to bring the ASP Agreement to an end, for a purpose for which it was not intended, was not later taken up. It was not later taken up although elsewhere, despite declining to make "a declaration as to repudiation" (para 881), the judge referred to Vodafone's conduct as repudiatory, inter alia in "the setting of a nil target for the December 2001 quarter" and "the setting of nil targets for the March and June 2002 quarters and the failure to set a target for the September and December 2002 and March 2003 quarters" (para 883). In his reasoning in the assessment of damages the judge accepted that it was open to Vodafone to "use its discretionary power as a pragmatic weapon of persuasion" (para 768), and if use as a weapon was in some other category one would expect further analysis: it is not to be found. 137 The judge did not say that the breaches of contract he found were constituted by or included exercise of the power to determine target levels arbitrarily or capriciously or use of the power for a purpose for which it was not intended. If those breaches were found, they should have been found unequivocally. The better view of the reasons, it seems to me, is that the breaches of contract found by the judge did not extend to arbitrary or capricious exercise of the discretion conferred by cl 18.4, or to abuse of the power by using it for a purpose for which it was not intended. 138 It will be apparent that in a number of respects I do not find satisfactory the judge's reasoning to breach of contract. It is necessary to consider the matter afresh, but with regard to the judge's reasons, by asking - (a) whether on the proper construction of the ASP Agreement Vodafone was obliged to determine target levels at all, and if so whether it failed to do so; (b) whether on the proper construction of the ASP Agreement Vodafone was not entitled to determine a target level of nil, and if so whether it did so; and (c) whether Vodafone was obliged by an implied term to act in good faith and reasonably in determining the target level, and if so whether it failed to do so. 139 It is important to distinguish between (b) and (c). The proper construction of the agreement regulates its general operation. The implied term regulates its operation according to the particular facts and circumstances at the time of the determination. (a) Determining target levels at all 140 Vodafone was obliged by cl 18.4 to determine target levels. It was obliged to determine the target levels in conjunction with the determination of Business Plans. In the determination of Business Plans the parties were obliged by cl 21.1 to use their best endeavours to agree, with the fall-back of the previous Business Plan and the availability of the dispute resolution procedure. Vodafone had a discretion, but the discretion was as to the number of connections of New Subscribers determined as a target level, not as to whether a target level should be determined. I do not think this was in dispute. 141 The words "the target level in respect of the number of connections of New Subscribers" in cl 18.4 did not of themselves mean a single figure. They could accommodate a range and a split between different plans. However, cl 18.3 suggested that a single figure was meant, because there was a relationship with 12,000 connections. 142 I have referred to some obscurity in what the ASP Agreement, as amended, said about Business Plans. In fact the parties used what they called a CTA worksheet, the initials standing for cost to acquire. Vodafone gave Mobile a target level figure for new subscribers for each quarter. Mobile prepared a CTA worksheet which, using that figure, split the connections between various plans, set out revenue and expenditure in acquiring subscribers and arrived at a net figure, added figures for Mobile's overheads and the Base Acquisition Margin, and stated for each plan a cost (to Vodafone) to acquire. There were then negotiations about the CTA worksheet to produce an agreed document, the negotiations including in some instances change in the figure for new subscribers per month. The CTA worksheets were treated as substitutes for the Business Plans, as the judge said "presumably for the reason that the CTA worksheets contained sufficient information to permit them to be used effectively as business plans" (para 38). 143 From the words "in conjunction with" in cl 18.4, there had to be at least a temporal relationship between determining a target level and best endeavors to agree upon a Business Plan. The parties regarded "Within one month prior to commencement of the relevant Quarter" in cl 21.1 as requiring the best endeavors to agree during the month prior to the commencement of the quarter ("the prior month"), rather than by the time the prior month began, and that is how they conducted themselves in their negotiation of the CTA worksheets. 144 The target level could be determined before the prior month began, possibly some time before, as was accepted in the proceedings by the common position that the target level for the December 2001 quarter had been determined by a Vodafone letter of 23 July 2001. From the penultimate sentence of para 641 earlier set out, the judge appears to have thought that the determination of the target level had to be during the prior month. I do not think that is correct. 145 Mobile submitted that the target level could not be determined during the prior month and had to be determined before the month began. The Estimated Acquisition Cost had to be agreed prior to the commencement of the prior month (cl 17.2), and a factor in arriving at it was the number of New Subscribers expected to be connected in the quarter "as agreed in the Business Plan or, failing agreement, as determined by Vodafone"; so, Mobile said, the Business Plan had to be agreed before the prior month began and the target level had to be determined by that time so that the Business Plan could be agreed. However, this conflicted with the parties' view that "Within one month prior to the commencement of the relevant Quarter" in cl 21.1 required the best endeavors to agree during the prior month. Either the ASP Agreement was internally conflicting or that view was incorrect. In the present case it does not matter, but the Estimated Acquisition Cost can not have been arrived at as the agreement provided. Subject to a limit on how late in the prior month, it would be difficult for Mobile now to complain of a determination during the prior month. 146 I have said, as to a nil determination or a failure to determine, that the judge did not clearly find what occurred for each quarter. No doubt he thought it unnecessary to make specific findings because, in the view he took, setting target levels of nil and failing to set target levels were both breaches of contract and the assessment of damages was the same. 147 Mobile's pleaded case was that Vodafone purported to determine target levels of nil for the December 2001, March 2002 and June 2002 quarters and failed to determine target levels for the September 2002 to March 2003 quarters. It pleaded a letter of 12 March 2002 as the nil determination for the March 2002 and June 2002 quarters. In para 883, as earlier mentioned, the judge saw as repudiatory determinations of nil and failures to determine in accordance with that pleaded case, although he did not earlier or more specifically make findings. But in para 641 earlier set out he referred to Vodafone "announcing that Mobile would have no targets at all for the September, December 2001 quarters and for the March 2002 quarter", and to failure to exercise the discretion during the month prior to the commencement of the relevant quarter, apparently meaning those quarters. 148 At least on appeal, Mobile accepted that target levels (albeit of nil) had been determined for the September 2001 and December 2001 quarters, and again at least on appeal it was common ground that the letter of 12 March 2002 was too late as a determination for the March 2002 and June 2002 quarters. Mobile submitted on appeal that there had been failures to determine for each of the March 2002 to March 2003 quarters. While Vodafone drew attention to the pleading, and said that the trial was conducted on the basis that a nil target level had been determined for March 2002 and June 2002, I did not understand it to submit that Mobile should not be permitted to put a case of failure to determine target levels for the March 2002 and June 2002 quarters. No doubt all relevant evidence had been led in order to meet the pleaded case. Vodafone followed its defence pleaded as to the later quarters in submitting, as to all the quarters, that there was not a failure to exercise the discretion but acceptance between the parties that earlier determined target levels of nil flowed on to all of the March 2002 to March 2003 quarters. 149 Following a meeting on 19 July 2001, on 23 July 2001 Vodafone wrote to Mobile - "We feel that at this stage it is necessary to consider the December 2001 quarter and the target levels for that quarter. In this respect we advise that we have decided to set the target levels for that quarter at nil connections. This will trigger the operation of clause 18.3 of the ASP Agreement and Vodafone will pay to MI the Base Acquisition Margin in accordance with that clause. Therefore, it is not necessary to prepare & review any estimated CTA for the December 2001 quarter." 150 There was then a further meeting on 2 August 2001. There were some differences in recollection of the meeting. The judge accepted that Mr Maher of Vodafone made clear that Vodafone intended to continue to set target levels at nil, Mr Maher giving as his reason that it was uneconomic to Vodafone to acquire subscribers through Mobile's direct marketing, and that the response of Mr Marchbank of Mobile was that the setting of nil targets was outside the operation of the ASP Agreement. 151 Mobile filed its summons on 27 August 2001, amongst other things claiming that the purported determination on 23 July 2001 of a nil target level for the December 2001 quarter was contrary to the ASP Agreement and should be set aside. It "restructured" by making staff redundant, closing down retail and warehouse space and stopping all activities directed at acquiring new subscribers. 152 Vodafone wrote to Mobile on 28 September 2001 inviting a proposal for acquiring customers who were profitable to Vodafone. The letter concluded - "For the avoidance of any doubt, I should point out that Vodafone's decision to set a target of zero connections for the December quarter remains in place until I have expressly confirmed in writing to the contrary". 153 On 20 November 2001 Mobile prepared a CTA worksheet for the December quarter and sent it to Vodafone. A small number of subscribers had been acquired, apparently as a result of earlier direct marketing, and Mobile claimed connection costs and overheads. Vodafone rejected the claim. CTA worksheets were not prepared for any subsequent quarter. 154 On 12 March 2002 Vodafone wrote to Mobile referring to discussion of "proposals regarding our on-going relationship and future acquisition strategies". So far as presently relevant, the letter said - "Since the Dec '01 Quarter, Vodafone and MI have been operating on the basis of a nil target level for connection of New Subscribers. … At this point, Vodafone confirms that the target level for connections of New Subscribers is nil for both the March and June 2002 quarters. It is therefore not necessary to prepare and review any estimated CTA for either of these quarters. The target level of nil will continue to apply to these quarters unless otherwise agreed in writing." 155 On 25 March 2002 Mobile replied combatively, the letter beginning - "I refer to your letter confirming Vodafone's intention to continue to set 'nil' target levels for acquisitions in the March '02 and June '02 quarters. Nil is not a 'target' nor a number within the meaning of the ASP Agreement. Therefore a target has, in effect, not been set for the March and June Quarters." 156 At some point Mobile amended its summons to include a claim that the purported determination on 12 March 2002 of a nil target level for the March 2002 and June 2002 quarters was contrary to the ASP Agreement and should be set aside. At least on appeal, Vodafone said that the letter of 12 March 2002 was "sent too late to set targets for either of those quarters", meaning the March 2002 and June 2002 quarters. Contrary to its pleading, Mobile agreed. Presumably Vodafone considered that even if a target level could be determined during the prior month, see the earlier discussion, 12 March was too late in the month. There is no reason to decline to act on the joint position. 157 There was no further assertion from Vodafone of determination of a target level or target levels, either for a particular quarter or as a continuing state of affairs, until December 2002. Nor was there complaint from Mobile of Vodafone's failure to determine a target level for any particular quarter. On 24 December 2002, however, Mobile further amended its summons to claim failure to determine target levels for the September 2002, December 2002 and March 2003 quarters. 158 For each of the March 2002, June 2002 and September 2002 quarters Vodafone paid Mobile the Minimum Base Acquisition Margin in accordance with cl 18.3 of the ASP Agreement. 159 Vodafone submitted that it was unnecessary for it to restate, for each of the March 2002 and subsequent quarters, what the parties already knew - that the target level was nil. It said that, as the letter of 12 March 2002 recorded, the parties were operating on the basis that target levels of nil were in place until further notice, and that its letter expressly did no more than "confirm" those target levels for the March 2002 and June 2002 quarters; it said that Mobile accepted the Minimum Base Acquisition Margin payments and until 24 December 2002 did not say that there should have been more particular determinations, and that 24 December 2002 was the first time failure to determine was raised; and it pointed out that in its submissions before the judge Mobile accepted that for the September 2002 and subsequent quarters "both parties have proceeded on the basis that MI is not required to obtain new subscribers". 160 Mobile responded that the ASP Agreement required that Vodafone exercise its discretion quarterly, according the factual circumstances at the time and in conjunction with the determination of a Business Plan. Mobile said, in effect, that a global determination of target levels for all ensuing quarters unless otherwise notified was not permissible: rather, it was a failure in the requisite quarterly exercise of discretion. 161 In my opinion, Mobile's submission should be accepted. Quarterly Business Plans were required and, determined in conjunction with their determination, quarterly target levels. The determinations had to be made in the circumstances pertaining as each quarter approached, and could not be made regardless of those circumstances. Quarterly exercises of discretion and quarterly best endeavours to agree were required, even if Vodafone's distaste for acquisition of unprofitable subscribers and the likelihood of low target levels (even nil) and failure to agree were known to Mobile. That for its part for the September 2002 and subsequent quarters Mobile proceeded on the basis that it was not required to obtain new subscribers is not surprising, but does not mean some kind of deemed determination of a target level of nil: from Mobile's viewpoint, that was the consequence of Vodafone's breach. Accepting the Minimum Base Acquisition Margin payments counts for little – Mobile would hardly have refused the money. 162 It was not an empty exercise, as Vodafone submitted, for it to restate what the parties already knew, since the restatement had to flow from a genuine exercise of discretion at the time. Stating an intention for the future was insufficient, and it was understandable that Mobile did not maintain its establishment or protest quarterly when it had made its own position clear but Vodafone had been unrepentant. 163 I consider, therefore, that Vodafone was in breach of contract because it failed to determine target levels for the March 2002 to March 2003 quarters. What this means for damages is another matter, to which I will come in due course. (b) The construction of the ASP Agreement 164 Although Mobile submitted that nil could not be a target level because nil was nothing, and one could not aim at nothing, as a matter of language I consider that a target level can be nil. In other contexts zero has been held to be an "amount of taxable income", with acceptance that it is a number (Federal Commissioner of Taxation v Ryan (2000) 201 CLR 109), and reduction of an insurer's liability to an "amount" has been held to permit reduction to nil (Ferrcom Pty Ltd v Commercial Union Assurance Company of Australia Ltd (1993) 176 CLR 332). These do not govern the different words of cl 18.4, still less does The Eastern Extension Australasia and China Telegraph Co Ltd v The Commonwealth, but it can quite sensibly be said that the target is to acquire no New Subscribers and the "target level" expressed as a number is nil. 165 It is important that cl 18.4 spoke of a target level, not an expectation. A target level and an expectation as to connections are different, and I have earlier adverted to the difference. Recognition of the difference is the key to the construction of the ASP Agreement. 166 The difference is conceptual. A target level for the number of connections of New Subscribers may be determined, to the achievement of which the Business Plan is attuned in the agreement process, but Vodafone and Mobile may expect that the target level will not be reached or will be exceeded. For example, they may believe that, despite striving to increase the acquisition of subscribers to the target level, economic conditions are against it; or that a desire to curb the acquisition of subscribers will be frustrated by the success of earlier marketing. 167 The difference is also dictated by the ASP Agreement itself. In the definition of Estimated Acquisition Cost the number of New Subscribers expected to be connected in a quarter is "as agreed in the Business Plan or, failing agreement, as determined by Vodafone". Since the expectation is to be agreed and in default determined by Vodafone, it cannot be the same as the target level, which by cl 18.4 is to be determined in the first instance by Vodafone in its sole discretion and in conjunction with the determination of the Business Plan. That an expected number of connections of New Subscribers as agreed in the Business Plan is not the same as a target level is underlined by the cognate concept of a number of New Subscribers estimated to be connected in the definition of Estimated Acquisition Fee, a monthly rather than quarterly number. 168 Although to be determined in conjunction with the determination of the Business Plan, the target level was used in the ASP Agreement only in the calculation of the Base Acquisition Margin and in negating a First Level Breach or a Second Level Breach for failure to achieve the Benchmark net connections or gross connections. While no doubt low or nil target levels would after a short time be likely to lead to low or nil expectations, the different concepts means that construction arguments turning on expected or estimated numbers of connections of New Subscribers in the definitions of Estimated Acquisition Cost and Estimated Acquisition Fee, the expected or estimated numbers being found in the Business Plan or otherwise, fall away. It is necessary to focus on target level as used in the agreement. 169 A target level of nil is consistent with the use of the target level in the calculation of the Base Acquisition Margin. Nil is less than 12,000, it can be achieved (and will automatically be achieved, in the agreement over-achievement not negating achievement), and Mobile will be paid the Base Acquisition Margin calculated assuming 12,000 connections of New Subscribers. The evident purpose of ensuring that Mobile is paid a Minimum Base Acquisition Margin if a low target level is determined and is achieved is fulfilled, and there is no reason to say that a low target level of one or ten should bring payment of the Minimum Base Acquisition Margin but to shrink from saying that the lowest possible target level of nil should not bring payment of the Minimum Base Acquisition Margin. While cl 18.3(a) contemplates that the target level may not be achieved, that does not exclude the determination of a target level which will automatically be achieved any more than it excludes the determination of a target level of one or ten if as a matter of fact it will inevitably be achieved. For the calculation of the Base Acquisition Margin, Mobile can hardly complain of the operation of the agreement in the latter situation, still less of its operation in the former. 170 A target level of nil is also consistent with the use of the target level in negating a First Level Breach or a Second Level Breach. Nil is less than the Benchmark net and gross calculations. If a target level of 2,999 or 5,999 is determined, a First Level Breach or a Second Level Breach will "not be deemed to occur". So also for any lesser number, and there is no reason why the lesser numbers should not extend to nil. The purpose of negating a deemed breach is equally fulfilled, and again Mobile can hardly complain of the operation of the agreement so construed. 171 From the correspondence to which I have referred in relation to failure to determine target levels, Vodafone seems to have considered that a target level of nil meant no Business Plan and no payment of the costs of providing Acquisition Services. It follows from what I have said that, on the construction of the ASP Agreement, that was not correct. The costs of providing Acquisition Services contractually turned on expectations, not target levels, although as I have said after a short time low or nil target levels would be likely to lead to low or nil expectations. If the parties can not agree on the Business Plan, the prior Business Plan applies or there is ultimately an expert's decision. The agreement copes with the consequences of determination of a target level of nil. It may not do so to the liking of Mobile, or of Vodafone if in the end the expert decides that there should be an expectation of a low number of connections of New Subscribers and Vodafone has to pay a high cost of providing Acquisition Services for very few connections. That is the bargain the parties made, one which could operate to the advantage or disadvantage of either party. 172 As the target level is used in the ASP Agreement, therefore, a target level of nil works, and in significant respects works to the advantage of Mobile. As a matter of language the target level can be nil. Vodafone has a sole discretion (cl 18.4), exercisable in any manner it sees fit (cl 41) and free from review through the dispute resolution procedure (cl 32.6(d)). Nothing in that confines the power, as a matter of construction, to determining one or ten or any other positive number rather than nil. 173 It is appropriate to return to the judge's reasons, for which purpose I go to the factors set out in para 671 as a sufficient summary. 174 In the first dot point the judge said nil meant no Business Plan, so it could not be a target level. As is apparent, I do not think that nil meant no Business Plan. The evidence did not explore the philosophy of devising a Business Plan, but according to the Operations Manual it involved expected connections. In principle a Business Plan must look to expectation, even if the expectation is moulded by a target level: for example, it should include (and the CTA worksheets did include) revenue from connections, which should be expected revenue rather than a theoretical figure if the target level happens to be achieved. To repeat, a target level and an expectation are different, and the ASP Agreement itself treated them as different and referred to an expected number of New Subscribers as agreed in the Business Plan. While no doubt significant to the Business Plan, but hardly more or less significant than a target level of one or ten, a target level of nil was consistent with reaching agreement on a Business Plan. 175 In the second dot point the judge said that cll 17.3 and 32 would have no application because there would be no scope for agreement on Estimated Acquisition Cost, and in the fourth dot point he said that the formulae in the definitions of Estimated Acquisition Cost and Estimated Acquisition Fee do not operate with a nil target. In the manner I have sought to explain, this is answered by the difference between a target level and an expectation or estimation. 176 In the third dot point the judge said, in effect, that a target level of nil was not consistent with Mobile's obligation to provide Acquisition Services. By cl 5.1(b) Mobile agreed "to perform the Acquisition Services and the Management Services in accordance with the terms of this Agreement". This may not have said anything about a number of New Subscribers Mobile had to acquire, and may have operated only in respect to whatever number of New Subscribers was in fact acquired. So far as it obliged Mobile to acquire any particular number of New Subscribers, however, Mobile's activity was governed by the Business Plan, and the Benchmark provisions meant that Mobile was not in breach if it achieved the target level. There was not the inconsistency seen by the judge. 177 In the fifth dot point the judge said, in effect, that a nil target was not consistent with Mobile's obligation to promote the Mobile Services. The Mobile Services were Vodafone's postpaid mobile telecommunications services, and by cl 13.1(a) Mobile agreed to use its best endeavours to promote them "subject to Vodafone's reasonable directions from time to time". This did not say anything about a number of connections of New Subscribers Mobile had to acquire. Assuming a target level of 12,000 new connections and a Business Plan in which 11,000, 12,000 or 13,000 new connections were expected, Mobile could not have been in breach if it failed so to promote the Mobile Services that it did not get 20,000 new connections. Mobile's obligation was plainly subject to the other provisions of the agreement, and again there was not the inconsistency seen by the judge. 178 In the sixth dot point the judge said that a target level of nil was "contrary to various indicators in the agreement". The first indicator was that the definition of Payment Dates, by which the date on which Mobile would be paid the monthly Estimated Acquisition Fee and the adjustment to Actual Acquisition Costs was arrived at, required the date to be "such as to facilitate the efficient operation of MI's business". The second indicator was Mobile's commitment of its Mobile Direct Marketing Operation exclusively to Vodafone (cl 2.2 earlier set out). The third indicator was "Mobile's non-compete obligations", shorthand for a complex cl 4 and definitions by which Mobile agreed not to compete with Vodafone during the term of the agreement. I am not sure how the judge saw in these indicators inconsistency with determining a target level of nil, but it seems that he thought that Mobile could not have an efficiently operating business, or have a business of acquiring subscribers to mobile telecommunications services on a postpaid basis at all, if a target level of nil was determined. 179 I do not think there was inconsistency, although if there were there would be much the same inconsistency if a target level of one or ten or some other low positive number were determined, which the judge seems to have thought was permissible (the "limited reach"). Mobile would still receive the costs of providing Acquisition Services so far as it acquired subscribers, and the Minimum Base Acquisition Margin, as to the former perhaps not for long but as to the latter until the expiry of the ASP Agreement. It would still manage subscribers and receive the Management Fee, perhaps decreasingly as subscribers were lost. So far as its business activity would be confined and its remuneration would be less than if large numbers of New Subscribers were being acquired, that was a consequence of the terms of the ASP Agreement. The ASP Agreement governed the extent of Mobile's business, not the other way around. 180 In the seventh dot point the judge said that the idea that Mobile was to stagnate can not have been intended. It is not entirely clear what he meant. If what I have said about the sixth dot point captures the judge's meaning, the point seems to be the same. Maybe Mobile would stagnate just as much, or as little, if a target level of one or ten or some other low positive number was determined, but it would still have the business activity and remuneration last described: why is that stagnation? If Vodafone must pay Mobile a large sum for acquisition costs if only one or ten or some other low number of New Subscribers is acquired, plus a Minimum Base Acquisition Margin, why is that not the agreed extent of preventing stagnation? The appeal to the parties' intention is, as often, dangerous; the intention is to be found in the ASP Agreement on its proper construction. 181 In the eighth dot point the judge said that by setting a target level of nil Vodafone made it impossible for Mobile to perform its obligations under the ASP Agreement. This was not further explained, and appears to take up earlier dot points, particularly the third and fifth dot points. 182 With respect, I do not find persuasive the factors to which the judge referred. In my opinion, on the proper construction of the ASP Agreement Vodafone was entitled to determine a target level of nil. (b) The implication of an obligation of good faith and reasonableness 183 The judge held that there was implied in the ASP Agreement a term described as the obligation to behave honestly and do all things as were necessary to enable Mobile to have the benefit of the contract (para 683) and, when focusing on the discretions given to Vodafone, the obligation to exercise the discretions honestly and in good faith but having regard to the provisions of the agreement (para 685). He regarded the implication of terms as a process of construction of the ASP Agreement (paras 609-10, 612, 679, 688), particularly in his reasons for finding the implied terms notwithstanding cl 24.1(a) of the agreement (paras 726-9). 184 In Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 Hope JA discussed (at 486-7) the two kinds of implication of terms in a contract, one implication as a legal incident of a particular class of contract and the other because the implication is necessary to give business efficacy to the contract. The former is commonly called implication as a matter of law. The term is prima facie implied in all contracts of the particular class, but its implication may be excluded having regard to the express terms of the contract and "the relevant surrounding circumstances of the case" (at 487). His Honour observed that the classes of contracts in which the law will imply terms is not closed, and considered (at 487-90) the test for deciding for the first time whether a term should be implied in a particular class of contract. 185 The distinction between implying a term as a matter of law and implying a term in order to give business efficacy to a contract is now well recognized, see for example Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 30 and Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 447-8. In the latter of these cases McHugh and Gummow JJ explained (at 449-50) what was meant by implying a term as a matter of law. After saying that some implied terms were "perhaps more usefully identified as rules of construction applied to the express terms of the contract" (at 449), their Honours said (at 450) - "However, the more modern and better view is that these rules of construction are not rules of law so much as terms implied, in the sense of attributed to the contractual intent of the parties, unless the contrary appears on a proper construction of their bargain. There is force in the suggestion that what now would be classified as terms implied by law in particular classes of case had their origin as implications based on the intention of the parties, but thereafter became so much a part of the common understanding as to be imported into all transactions of the particular description. The matter is put as follows in Halsbury: 'Perhaps the truth is that the ambiguous terminology enables the courts in the first instance to imply terms on the basis of the intention of the parties ... but later there comes a time when the particular implied term has become so much a part of common practice that the courts begin to import it into all transactions of that type as a matter of course; and the result is a rule of law of the type considered in this paragraph.' This understanding of the matter is consistent with the proposition that terms of this kind, although treated as implied by law, may be excluded by express provision made by the parties and also as a result of inconsistency with terms of the contract. The result is that, even if treated as rules of law, they only apply in the absence of an expression of contrary intent." (citations omitted) 186 In Breen v Williams (1996) 186 CLR 71, in a passage adopted in this Court in Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 122, Gaudron and McHugh JJ said at 103 - "A term implied by law on the other hand arises from the nature, type or class of contract in question. … Some terms are implied by statutes in contracts of a particular class, for example, money lending and home building contracts. Such terms give effect to social and economic policies which the legislature thinks are necessary to protect or promote the rights of one party to that class of contract. Other terms are implied by the common law because, although originally based on the intentions of parties to specific contracts of particular descriptions, they 'became so much a part of the common understanding as to be imported into all transactions of the particular description' ( Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 449)". 187 In Australis Media Holdings Pty Ltd v Telstra Corporation Ltd the Court said at 123 - "At the end of the day, it is to be remembered that terms implied at law do not depend upon the intention of the parties. In Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 at 348, Samuels JA said: 'The imposition of terms as a matter of law amounts to no more than the imposition of legal duties in cases where the law thinks that policy requires it'." 188 In the present case the implied terms were separated, but effectively an implied term that Vodafone would act in good faith and reasonably in exercising its powers under the ASP Agreement was said to be implied by law. Thus it is necessary to ask whether the ASP Agreement is one of a class of contracts as a legal incident of which such a term is implied, including whether it is to be given that status for the first time, and if so whether the implication by law is precluded by expression of contrary intent. The inquiry, however, can not be made in the abstract. Because there may be exclusion by express provision or inconsistency with the terms of the contract on their proper construction (and into the construction of the contract comes the surrounding circumstances to which Hope JA referred), it is necessary to address the relevant power, that conferred by cl 18.4 of the agreement. 189 As I have said, referring to Alcatel Australia Ltd v Scarcella and Burger King Corporation v Hungry Jack's Pty Ltd, an obligation of good faith and reasonableness in the performance of a contractual obligation or the exercise of a contractual power may be implied as a matter of law as a legal incident of a commercial contract. In Burger King Corporation v Hungry Jack's Pty Ltd, however, the Court said only that courts had "for the most part proceeded on the assumption" that there may be such an implication in a commercial contract (at [159]). It said that the contract there in question "does not fall into any of the traditional class of cases where terms have been implied as an incident of the contract" (at [166]), and went on to consider by the test of what was reasonable and necessary whether the term should be implied at law as a new class of case (at [167–186]). This fell short of, indeed rejected, treating commercial contracts as a class of contracts carrying the implied term as a legal incident. 190 Applying a test of what is reasonable and necessary in order to decide whether for the first time a term should be implied in a particular class of contract, as was accepted in Burger King Corporation v Hungry Jack's Pty Ltd at [167] founded on Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd and Byrne v Australian Airlines Ltd, has some overlap with implication of a term to give business efficacy to a contract. In Burger King Corporation v Hungry Jack's Pty Ltd the overlap was rather marked, because the very contract was assessed as if for the task of ad hoc implication, and the focus was not on any particular class of contract. That meant that there was merger of whether the term should be implied by law and whether the implication by law was precluded by expression of contrary intent. 191 The ASP Agreement was no doubt a commercial contract. It was not suggested that it fell within some other class of contract already carrying the implied term as a legal incident or which it should now be found to have that status. I do not think the law has yet gone so far as to say that commercial contracts are a class of contracts carrying the implied terms as a legal incident, and the width and indeterminancy of the class of contracts would make it a large step. However, I am content to assume, expressly without deciding, that unless excluded by express provision or because inconsistent with the terms of the contract, Vodafone was under an implied obligation to act in good faith and reasonably in exercising its powers under the ASP Agreement, specifically the power of determining target levels in cl 18.4. Whether the assumption might be justified by commercial contracts already carrying the implied term or now being found to have that status does not matter. I consider that the present case can be decided by addressing whether the implication of the term as a matter of law, as to the power conferred by cl 18.4 of the ASP Agreement, is precluded by expression of a contrary intent. 192 In addressing contrary intent, it is necessary to have in mind a content for the obligation of good faith and reasonableness. Only then can one sensibly enquire whether there is inconsistency with the terms of the contract. There is regrettable lack of uniformity in the cases. Reasonableness can be seen as part of good faith, and acting in bad faith is hardly reasonable. The difficulty in arriving at the content of an obligation of good faith, in particular, has often been noted: Farnsworth, "Good Faith Performance and Commercial Reasonableness under the Uniform Commercial Code" (1963) 30 U Chi L R 666 at 668 calls it a "protean" phrase. In Abu Dhabi National Tanker Co v Product Star Shipping Ltd ("The Product Star") (No 2) (1993) 1 Ll R 397, which seems to have been the source of the judge's reference to exercise of the discretion arbitrarily or capriciously (para 678), there is variable reference to bad faith, unreasonableness, abuse, arbitrariness and capriciousness. In Paragon Finance Plc v Staunton (2002) 2 All ER 248 a term was implied not to exercise a discretion to vary interest under a mortgage either "dishonestly, for an improper purpose, capriciously or arbitrarily" (at 201) or unreasonably in the sense of what no reasonable person would do (at 263). In Burger King Corporation v Hungry Jack's Pty Ltd the breach of a duty of good faith was found in "a deliberate plan to prevent HJPL expanding, and to enable BKC to develop the Australian market unhindered by its contractual arrangements with HJPL" (at [311]). 193 Good faith meaning honesty and good faith meaning doing what is necessary to enable the party to have the benefit of the contract were two elements of the implied obligation taken up by the judge (para 683). They are really different. Perhaps different again is good faith meaning reasonableness, which the judge seems also to have taken up. It should be recalled how the judge encapsulated his findings of breach of the obligation of good faith and reasonableness, that revealing the content which he thought material to his decision: para 687 should be repeated - "687 Insofar as it is shown to have been unreasonable for Vodafone to determine a nil target, it is seen to have failed to act in good faith as well as to have acted unreasonably. Since determination of a nil target prevented the parties going forward in an endeavour to reach a business plan, Vodafone is shown to have unreasonably interfered with the enjoyment of an important benefit conferred by the express contractual terms so that the enjoyment was seriously undermined and rendered nugatory. Hence one may regard Vodafone's interference of this kind as (1) a breach of the implied obligation to act reasonably; and (2) a breach of the good faith obligation – insofar as there has been shown to be a failure to comply with standards of conduct which are reasonable having regard to the interests of the parties." 194 I have earlier explained why I consider that the breaches of contract found by the judge did not extend to arbitrary or capricious exercise of the discretion conferred by cl 18.4, or to abuse of the power by using it for a purpose for which it was not intended. It is not necessary to decide whether or when an implied term of good faith so far as it precludes arbitrariness, capriciousness or abuse of a power can be excluded. It is sufficient to ask whether an implied obligation of good faith and reasonableness with the content upon which the judge rested his findings of breach is inconsistent with the terms of the contract, although it will be necessary to return later in these reasons to the raising of abuse of power in the appeal. What follows is concerned with obligation of good faith and reasonableness so confined. 195 The power in cl 18.4 was emphatically described as a sole discretion. Since there was only one Vodafone (whichever of the entities it was), the point of "sole" lay in the exclusion of any constraint upon Vodafone. Its exercise was excluded from the dispute resolution procedure, with the further emphasis that "Vodafone's decision will be conclusive and binding on the parties" (cl 32.6) and the emphasis again that it could be exercised in any manner Vodafone saw fit (cl 41). These words in the ASP Agreement can not be passed over, and they weigh against the implied obligation of good faith and reasonableness in the exercise of the power. 196 Clause 18.4 should be understood in the circumstances in which the parties contracted. I have earlier referred to the fundamental tension between Mobile's interest in maximizing the number of New Subscribers it acquired and Vodafone's interest in the subscribers being profitable to it. The ASP Agreement could only work if, should it be necessary, one party or the other had the whip hand as to the acquisition of subscribers. The agreement gave Vodafone control over terms and conditions and tariffs, and by cl 18.4 over the raw numbers. Vodafone was given control over the acquisition activities of Mobile – which, after all, was its agent – and could exercise the control in accordance with its own interests rather than those of Mobile. 197 The contrast is marked in this respect between the absolute discretion in cl 18.4 and other occasions when, according to the ASP Agreement, Vodafone or Mobile had to act reasonably (cll 2.9(a), 5.2, 7.7, 9.2, 10.2, 10.4(a)(i), 10.7(d), 11.1(b), 12.1(b), 13.1(a), 13.7(b), 14.4, 15.3(a)(ii), 25.11(a), 25.11(b), and 37(b)), and even in good faith (cl 11.4(g) concerning participation in mediation under the dispute resolution procedure). 198 Without more, in my opinion, the implication of the obligation to act in good faith and reasonably in exercising the power of determining target levels in cl 18.4 was excluded. To this may be added cl 24.1(a), by which "To the full extent permitted by Law and other than as expressly set out in this Agreement the parties exclude all implied terms … ". 199 Mobile submitted that a term implied by law was not caught by such a provision. It relied on Hart v MacDonald (1910) 10 CLR 417. A contract for the erection of a dairy plant and butter factory provided that payment by the defendant should be from the proceeds of butter produced by the defendant's cows and manufactured within the factory. The contract provided that "there is no agreement or understanding between us not embodied in this tender and your acceptance thereof". It was held that there was an implied term that the defendant would do all that was necessary to put himself in a position to pay, and that the implication of the term was not affected by the whole agreement provision. Griffith CJ said (at 421) that a promise to commence dairying and manufacture butter within a reasonable time "arises by necessary implication upon a proper construction of the express words". O'Connor J said (at 427) that "Every implication which the law makes is embodied in the contract just as effectively as if it were written therein in express language". Isaacs J said (at 430) that the whole agreement provision - " … excludes what is extraneous to the written contract: but it does not in terms exclude implications arising on a fair construction of the agreement itself, and in the absence of definite exclusion, an implication is as much part of a contract as any term couched in express words." 200 The whole agreement provision was much less than the express exclusion of all implied terms in cl 24.1(a) of the ASP Agreement. Its equivalent in the ASP Agreement was cl 44. The question is one of contrary intent, and cl 24.1(a) expresses a clear intent where in Hart v MacDonald it was held that the whole agreement provision did not. 201 The judge considered that, because the implied terms were "implied in the sense of being attributed to the contractual intent of the parties, discerned from the ASP objectively construed" (para 726), they were to be regarded as express agreements although unwritten (para 727) and "embodied in the ASP just as effectively as if they were written there in express language" (para 728). The reasoning appears to have been that, because the attributed contractual intent was "discerned from the ASP objectively construed", the implied terms were to be regarded not as implied terms, or perhaps as terms expressly set out in the agreement. I am respectfully unable to agree. 202 The judge had referred to the cooperation obligation being "an implied legal duty discerned by a process of construction, a rule of law or an implied term" (para 679), a mixture of concepts which it is not easy to understand but treating an implied term, at least one implied as a matter of law, as something found by construction of the contract. Undoubtedly the implication of a term in law has been referred to as a process of construction. Lord Blackburn in Mackay v Dick at 263 said that "the construction of the contract" is that the parties agree to cooperate, and in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 Mason J described this as a "rule of construction". In the passages in Hart v McDonald earlier mentioned Griffith CJ and Isaacs J referred to implications on the proper or fair construction of the contract. In Codelfa Construction Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 353 Mason J described the implication of a term as "an illustration of the process of construction, though differing from the more orthodox establishment of the meaning of a contractual provision". In Byrne v Australian Airlines Ltd at 440 McHugh and Gummow JJ referred to a number of these observations and said that some implied terms "are perhaps more usefully identified as rules of construction applied to the express terms of the contract." 203 Many other illustrations could be given, but matched by as many or more references to the implication of a term in law which have not treated the implied term as something found by construction of the contract. For example, a frequently cited statement of the Mackay v Dick obligation to co-operate is that of Griffith CJ, the same judge who spoke of construction of the contract in Hart v McDonald, in Butt v McDonald (1896) 7 QLJ 68 at 70-1 - "It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract." This was cited by Mason J in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd at 607, immediately after his citation from Mackay v Dick , without comment on implication rather than construction. If there is a process of construction, it accommodates the notion of implication, that is, the imposition of a legal obligation not based on actual intention of the parties. 204 The judge was clearly enough influenced by the discussion in Peden, Good Faith in the Performance of Contracts, since he cited the work as "a strong argument … in support of the proposition that the rules of construction require the underpinning duties of co-operation and good faith" (para 609). The author describes the duty of good faith or co-operation as "a general principle that specifically takes form in the process of construction" (para 6.1). She demonstrates different ways in which the courts have dealt with obligations to co-operate and act in good faith, describing them with some justification as muddled (para 6.5). While recognizing that mostly the obligation of good faith has been approached as a matter of implication, she argues that the correct approach is not one of implication but of construction by applying the principle of good faith to "determine the full impact" of the express terms of the contract (para 6.1). For example, she says that in Alcatel Australia Ltd v Scarcella the Court "could simply have said that the contractual rights would be construed to require them to be exercised in good faith, rather than suggesting that there is such an implied contractual obligation" (para 6.19), and - "As cooperation or good faith is a rule of construction, whenever a case comes before the court, the court should construe it to require cooperation as far as is provided for by the parties, as evidenced in their contract. This provides flexibility to ensure the right balance of cooperation or good faith is provided in particular cases. Yet at the same time there is sufficient certainty, since parties are assured that courts will construe contracts by reference to a principle of cooperation, unless, of course, the parties have excluded it". (para 6.19) 205 As so often in the law, it is necessary to make sure that words are the servants, not the master. If it is said that, in determining the full import of cl 18.4, as a matter of law the power conferred on Vodafone must be exercised in good faith and reasonably, and if that is described as a process of construction, so be it. But it is not construction by regard to the ordinary meaning of the words used in the agreement. There is an imposition of law, as explained by McHugh and Gummow JJ in Byrne v Australian Airlines Ltd by attribution of a contractual intent to the parties, and the rule of construction to which their Honours refer is a rule for imposing in law a meaning on the parties. I have no difficulty in using, in that situation, the accepted description of a term implied by law. 206 The obligation to exercise the power in cl 18.4 in good faith and reasonably, if found, is an obligation imposed by law by adding to the express words "will have the sole discretion" the further words "to be exercised in good faith and reasonably". It seems to me an accurate use of language to give it the description of an implied term, when from the premise of a contractual intent attributed in law to the parties they did not in fact use the express words with the added meaning. It is also a preferable use of language, since it recognizes that the obligation is imposed by law – because the term is implied in law – and does not proceed on a fiction that an intention of the parties is being found by a process of construction. As is said in Cheshire & Fifoot's Law of Contract, 8th Aust. ed, para 10.39, "In truth, implied terms begin where the intentions of the parties leave off and the law steps in". The description of a process of construction becomes even more difficult when the term implied by law is not by gloss upon any express term, but an all but free-standing obligation; for example, the implied term in a contract of employment that the employer will not require the employee to perform an illegal act and the employee will indemnify the employer for liability for wrongful acts the subject of Lister v Romford Ice and Cold Storage Ltd (1957) AC 555. 207 According to the accepted jurisprudence at the time the ASP Agreement was entered into, a non-express obligation of good faith and reasonableness arose as an implied term. That is affirmed by Mobile's reliance on the obligation as an implied term. In my opinion, the implied term found by the judge was an implied term within cl 24.1(a). It may be that the exception "other than as expressly set out in this Agreement" was no more than the obverse of the exclusion, but if it had independent effect it follows that the implied term found by the judge was not expressly set out in the Agreement. 208 In my opinion, therefore, Vodafone was not obliged by an implied term to act in good faith and reasonably, in the respects found by the judge, in determining target levels. If it be material, my reasoning would also exclude the implied obligation to co-operate. 209 That is not the end, and I come to exercise of a power for an extraneous purpose. To repeat, I do not think the breaches of contract found by the judge extended to arbitrary or capricious exercise of the discretion conferred by cl 18.4, or to abuse of the power by using it for a purpose for which it was not intended. Neither was raised by Mobile's notice of contention as a ground for affirming the judge's decision. The latter came up, however, in the course of submissions in the appeal. 210 In its written submissions Mobile had not sought to support claims 6 and 7, so far as they were concerned with determining target levels of nil, by reliance on the findings in paras 641-2 of the judge's reasons. It had said (paras 182, 195 of the submissions) that it had not been necessary for the judge to "opine on Vodafone's motives" or to make any findings as to whether Vodafone's conduct was arbitrary or capricious. It had said (para 211 of the submissions) that in para 641 the judge had found that Vodafone had sought to "force [an exit from the contract] by misusing its discretion", but only in answer to a Vodafone submission as to the effect of a target level of nil on Mobile. It had taken these matters no further. 211 Initially in the hearing of the appeal Mobile contended, consistently with what appears in the judge's reasons, that the content of the obligation of good faith and reasonableness was (with some corrections to the transcript) that the discretion in cl 18.4 - " … has to be exercised in good faith co-operatively and reasonably having regard to the principles as expressed by this Court in Renard [Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234], Alcatel and Burger King and Meehan v Jones [(1982) 149 CLR 571]". The submission then made was, in essence, that an exercise of the discretion based only on Vodafone's interests was in bad faith, and that the bad faith lay in Vodafone so exercising the discretion that as a matter of fact Mobile would be brought to stagnation. This led to debate on whether Vodafone was really making a loss on the subscribers acquired by Mobile – Mobile said it was not – and on what acquisition activity should have been left to Mobile in order that it not stagnate. 212 The further oral submission was then made that Vodafone was "simply bringing this contract to an end because it no longer suits their own financial interests …", and with reference to para 641 of the judge's reasons - " … the force of the submissions which we are putting before the Court, as we would see it, are that when one looks at the whole of the agreement, its exclusivity provisions and its terms and our obligations to provide the acquisition and management services, that it was not a proper exercise of a discretion under this agreement to set a target because they didn't wish to continue with Mobile as their direct marketing agent and proceed to force the issue in some fashion by using its entitlement to set the targets as a weapon." 213 Some time later there was a return to para 641 of the judge's reasons, and the exchange - "'DOUGLAS: The question really is, isn't it, if one comes down to whether one puts it in terms of the duty to cooperate, reasonableness, good faith, whether one can use a power to set a target to effectively bring a contract to an end, because that's what was his Honour's finding. IPP JA: How do you cope with the fact that Vodafone, for commercial reasons, set a target of nil? You are saying, I think, that you have got to exclude from those commercial reasons the idea that they did not wish to continue with Mobile as its direct marketing agent or with the ASP. DOUGLAS: We would say that is not a commercial reason. IPP JA: It is an improper reason. DOUGLAS: It is an improper reason. IPP JA: And that's really the breach of good faith. DOUGLAS: It is. IPP JA: Simply put, that's the breach of good faith, acting with the view of kicking Mobile out. DOUGLAS: Yes, but it could likewise be a breach of a duty to cooperate or a failure to act reasonably. I think these are just names or tags which courts give to a particular type of conduct which is not intended to be within the confines of the agreement. IPP JA: That is depriving Mobile of the benefit of the contract, so to speak. It fits under that rubric. That seems to me to be pivotal to your case, the finding that everything that Vodafone did was to actually force Mobile to give up the contract. DOUGLAS: Yes, your Honour." 214 That was followed a little later again by the exchange - "IPP JA: Is this the way you put it, that the contract was entered into in the belief that although the discretion would be solely that of Vodafone, it would be exercised for commercial reasons, having regard to the market, and it was in fact exercised for different reasons, mainly because they wished to get rid of Mobile, and that Vodafone has indicated that it had had enough of Mobile. DOUGLAS: Yes. IPP JA: That's an equitable fraud. DOUGLAS: I would like to put it in terms, it is not a fact which you would bring to bear on your decision to set a target. If you wanted to terminate the agreement there were procedures for termination." 215 Thus the content of the obligation of good faith and reasonableness for which Mobile contended in the appeal was rather enlarged. The bad faith did not lie just in Vodafone so exercising the discretion that as a matter of fact Mobile would be brought to stagnation. It extended to Vodafone exercising the discretion for the extraneous purpose of bringing the ASP Agreement to an end. 216 Apart from any implied obligations to co-operate and of good faith and reasonableness, the latter coming to notice in this State particularly since Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, the law has long provided remedies for the exercise of a power otherwise than for the purpose for which it was conferred. Equity will intervene to restrain the exercise of the power or to set aside the result of its exercise. Thus with the power to issue shares the court may "examine the substantial purpose for which it was exercised, and … reach a conclusion whether that purpose was proper or not" (Howard Smith Ltd v Ampol Ltd (1974) AC 821 at 835), and the exercise of a contractual right of rescission "has, by judicial decision, been kept within quite narrow limits so as to confine its operation to its original purpose and to prevent it being invoked by vendors for improper and extraneous purposes" (Godfrey Constructions Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529 at 548). The exercise of the right of rescission may be restrained if the exercise "would be unconscionable in the circumstances" (Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575 at 587; see now Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359 preferring "unconscientious"). As was said by Sheller JA in Alcatel Australia Ltd v Scarcella & Ors (at 368) - "If a contract confers power on a contracting party in terms wider than necessary for the protection of the legitimate interests of that party, the courts may interpret the power as not extending to the action proposed by the party in whom the power is vested or, alternatively, that the powers are being exercised in a capricious or arbitrary manner for an extraneous purpose, which is another was [sic] of saying the same thing. Thus a vendor may not be allowed to exercise a contractual power where it would be unconscionable in the circumstances to do so." 217 There is a developing relationship between implied terms imposing obligations of co-operation, good faith or reasonableness and this control over the exercise of a contractual power. In his Cambridge Lecture for 1993, "Contract and its relationship with equitable standards and the doctrine of good faith", Sir Anthony Mason refers to a number of existing principles invoked to regulate contract performance, suggesting that in the absence of a good faith doctrine the courts have "had recourse to equitable principle to fill the void" and that "recognition of good faith and fair dealing concepts would bring greater coherence and unity to the varied array of principles which are presently available". Depending on how the content of the obligation of good faith becomes settled, if it does, contract may take over from equitable principle. 218 However, Mobile did not in its summons clearly plead a case of Vodafone exercising the power to determine target levels for an extraneous purpose. The closest it went to extraneous purpose was the particular, in particularization of breach of the implied terms, that the determinations of target levels of nil and failures to determine target levels were breaches because "Vodafone is acting in a manner calculated to deprive Mobile Innovations of the benefit of the ASP Agreement". This had the ambiguity of "calculated" and the vagueness of "the benefit of the agreement", and it is evident, from the judge's findings of breach and the late emergence in the appeal of improper exercise of discretion, that the case at trial was not that the implied terms had been breached by Vodafone exercising the power to determine target levels for an extraneous purpose. Just as any finding of such a breach should have been unequivocal, so should its pleading have been clear and the conduct of the case at trial directed to it. 219 I doubt whether, in these circumstances, it was open to Mobile to seek to uphold claims 6 and 7 on appeal on the ground of exercise of the power in cl 18.4 for the extraneous purpose of bringing the ASP Agreement to an end. But in any event I do not think it can succeed in doing so. 220 The judge's findings are in paras 641-2 and 758. They are not particularly easy to understand. Their understanding may be assisted by noting the claim in Mobile's summons to a declaration that "in the events that have occurred, Vodafone has repudiated the ASP Agreement and has evinced an intention to no longer perform its obligations under that agreement". For the repudiation Mobile relied, amongst other things, on Vodafone's statement on 2 August that it intended to determine target levels of nil, on its determination of a target level of nil for the December 2001 quarter and on its failure to agree or pay an Estimated Acquisition Cost or Actual Acquisition Costs for that quarter. 221 The judge found that Vodafone had repudiated the agreement, relevantly in rather wider conduct - "• the setting of a nil target for the December 2001 quarter; • a statement on 2 August 2001 by Mr Maher, the Managing Director of Vodafone Plc's operations in Australia, that all future targets would be set at nil; • the setting of nil targets for the March and June 2002 quarters and the failure to set a target for the September and December 2002 and March 2003 quarters." (para 883) 222 The judge nonetheless declined to make the declaration, because Mobile had continued to receive benefits under the ASP Agreement, it had not accepted the repudiation, and no consequential relief could be given. This was, with respect, clearly correct (see Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73), and it may have been better not to make a finding which led nowhere. But what the judge said in paras 641-2 and 758 seems to have been particularly directed to whether Vodafone's conduct should be regarded as repudiatory. 223 The key statement is in para 641, that Vodafone "made a clear and conscious and very deliberate decision that it was not able to and did not wish to continue with Mobile as its direct marketing agent or with the ASP and would proceed to force the issue in some fashion by using its entitlement to set the targets as a weapon in this regard." 224 Even if Vodafone did not wish to continue with Mobile as its direct marketing agent, (still more if it was unable to do so), to the extent that so far as it was entitled to act under the ASP Agreement so that Mobile's activity would be cut down, it could do so without acting improperly. The judge said that the use of the weapon was "to force the issue in some way". What was the issue? The judge referred to Vodafone's expectation that Mobile would in due course put up high-value business plans, and in para 642 to Vodafone's "continuing anxiety to reduce the acquisitions on low-level plans for financial reasons". Consistently with this, the issue was using Mobile as its agent only for higher-level plans, and there was no suggestion that Vodafone would not pay the appropriate Minimum Base Acquisition Fee or the Management Fee. Even on the view the judge took, Vodafone could determine target levels no more than a positive number – if it could do that, it was entitled to turn the tap down to a dribble. The judge may have had that in mind when he later referred, as something open to Vodafone to use, to the discretionary power to set target levels as a pragmatic weapon of persuasion (para 768). It is consistent with the judge's findings that Vodafone exercised the power with a view to using Mobile only for higher level plans. 225 At the risk of repetition a clear finding of exercise of the power for the extraneous purpose of bringing the ASP Agreement to an end would have been expected, and would have been expected as an operative breach of the implied term of good faith and reasonableness, if the judge had intended to make it. That the judge did not decide the case on the basis of exercise of the power to determine target levels for the extraneous purpose, indeed held back from finding the cognate arbitrariness or capriciousness, supports the conclusion that he did not intend to make that finding. He certainly did not make it unequivocally. 226 It should not be overlooked that the judge considered that Vodafone was not entitled to determine target levels of nil. That plainly coloured his factual findings, since therein lay the "walking away from such obligation as there was to endeavour to agree upon business plans" (para 641) and, in the judge's view, the stopping of Mobile in its tracks from following and working to Business Plans (para 758). I have come to a different view. There was no repudiation in Vodafone doing what it was entitled to do. That meant that Mobile was confined in its acquisition activities. But Vodafone was entitled to do what it did, even if the foreseen result was adverse to Mobile and meant that the ASP Agreement stalled in that subscribers would not be acquired through Mobile. In my opinion, there was no finding of exercise of the power in cl 18.4 for the extraneous purpose of bringing the ASP Agreement to an end, and Mobile cannot uphold claims 6 and 7 on that ground. 227 What is left in claims 6 and 7, then, is damages for Vodafone's breach of contract because it failed to determine target levels for the March 2002 to March 2003 quarters. 228 When he came to damages the judge first turned to "principles dealing with causation and damage" (para 737). He discussed a number of cases and other writings under the headings of "Onus", "Difficulty of assessment", "Hypotheticals", "Loss of benefit or detriment dependent upon the making or exercise of discretionary decisions", "Doctrine of efficient breach" and "Viscissitudes" (paras 738-756) 229 Under the sub-heading "Applying these principles" the judge then said - "759 There is no doubt but that Mobile has suffered actionable loss occasioned by reason of Vodafone's setting of nil targets or refusing to set any targets. It has proven on the balance of probabilities that Vodafone's breach of the ASP caused it to lose an opportunity of clearly high value, namely the opportunity to make profits through the activity of participating in the endeavour to agree upon business plans and then to follow those business plans. It lost an opportunity because once no targets were set, the whole of the scheme set by the ASP underpinning its participation into the future went into freeze mode. And this remains the position today." 230 In the discussion which followed the judge said that the exercise was one of "ascertainment of the quantum of the loss by reference to the possibilities" (para 762). He said - "767 It seems to me to be far too simplistic to analyse the factual question which is raised for determination by suggesting that Vodafone would have set a target of 1 or of some number colourably the same: Ms Blake said as much. In this regard it is also relevant to bear in mind that Vodafone had been content to subject itself to the prohibitions with respect to the persons conducting Mobile Direct Marketing operations in competition with Mobile with whom it might deal [clause 2.7]. Hence the court is entitled to infer from the wording of the ASP that Vodafone had an interest in the continued viability of Mobile, if only because of Mobile's appointment by the very terms of the ASP." 231 The judge posed two alternative courses Vodafone might have taken - "768 It was one thing for Vodafone to · be concerned in the extreme with the difficulties it was experiencing in terms of Mobile's focus upon low-level access acquisitions and perceived failure to acquiesce in or produce what Vodafone regarded as viable alternative plans; and · to have elected to endeavor, using its discretionary power to set targets as a pragmatic weapon of persuasion. 769 It was altogether another thing for Vodafone to clip Mobile's wings by setting a target such as would effectively limit Mobile either: · to such profitability as to Vodafone may seem sufficient to do no more than to permit Mobile, as appointed direct marketing agent, to survive; or · to a relatively low but not laughable figure, in which event the background thinking would have been to keep Mobile on a tight rein so as to ensure that it would continue to endeavor to come up with constructive proposals with respect to new plans." 232 He then said - "770 The former approach is that which in my view and on the balance of probabilities, weighed in the light of all of the evidence, is likely to have been taken by Vodafone. Whilst it is very difficult to make a finding of fact as to how Vodafone's discretionary decision or power would have been exercised had the nil target estimate not been made, in my view a target of 12,000 acquisitions per quarter [ie based upon 4000 acquisitions per month] would have been made in respect of the December 2001 quarter and in respect of each of the following 5 quarters." 233 In para 771 the judge said that he had reached this conclusion "in a judgmental fashion", taking into account a number of considerations "none of which is pervasive [sic], but all of which seem to me to play a proper part justifying the finding"; the considerations were - "• the number 12,000 was the number for calculating Minimum Base Acquisition Margin in the ASP [4,000 per month]; • when Vodafone sought for the first time to drastically reduce targets on 7 March 2001 TB 775], the target was 12,000 new connections for the year, but the forecast connections for the first quarter of that year were 12,000 new connections. Accordingly, there would have been nil for the remaining 3 terms. Thus, when it came to choosing between a real target and nil, Vodafone chose 12,000 for the quarter ; • during the December 2001 quarter and the March and June 2002 quarters, Mobile experienced churn of 15,762, 11,413 and 11,759 for each quarter, respectively. This represents an average churn for those quarters of 38,934 / 3 = 12,978 per quarter = 4,326 per month. This calculation would keep Mobile in a state of static equilibrium (see the Schedules provided by the plaintiff appendix "H" which reflect these calculations); and • for the last quarter where a target was set in respect of which there is no dispute, the number was 14,150 [TB 939, 941 and 945] which is a monthly target of 4,716;" 234 The judge went on to say that he had taken into account some other matters, in summary being the 3000 gross connections per month Benchmark figure (para 772), some evidence as to which the judge said that "there is a sense in which it seems to me that setting a low target is likely to the decision makers to have been counter-productive to Vodafone" (para 773), and a letter of 13 January 2003 inviting Mobile to provide a business plan for the June 2003 quarter which the judge saw as supporting that Vodafone might "select such targets as would permit Mobile to go forward" (para 770). 235 The judge then used the target level of 12,000 new connections per quarter in the assessment of damages for each of the December 2001 to March 2003 quarters, saying that the figure calculated according to a model used by the parties should be reduced by 10 per cent as a discount "for general vicissitudes and contingencies including of course the possibility that 12,000 connections would not have been able to be achieved by Mobile" (paras 792-795). 236 By this reasoning, without distinguishing between damages for determining a target level of nil and damages for failing to determine a target level the judge found as a matter of fact what target level Vodafone would have determined if it had not been in breach of contract. Mobile submitted that this finding and the consequential assessments of damages stood for the breaches by failing to determine target levels at all, even if the breaches by determining target levels of nil fell away. Vodafone submitted that the finding that it would have determined a target level of 12,000 new connections per quarter was for a number of reasons unwarranted, to which Mobile replied that it was a finding of fact, in part credibility based and otherwise made with the advantage of the trial judge's familiarity with the evidence in the case as a whole and attracting the well-known inhibition upon appellate review. Vodafone further submitted that, although speaking of loss of opportunity (para 759) and the possibilities (para 762), the judge had erroneously taken the determination of a target level of 12,000 new connections per quarter as a certainty: this, it said, was apparent from the specific contingency that 12,000 connections would not have been able to be achieved by Mobile, without mention of the prior contingency that Vodafone would not have determined the target level of 12,000 new connections. It said that in any event the 10 per cent discount was wholly inadequate. 237 I do not find the judge's evaluation of the loss of opportunity and the possibilities easy to accept, even if the assumption that Vodafone was not entitled to determine a target level of nil be adhered to. I am not sure that I understand the distinction he saw between "using its discretionary power to set targets as a pragmatic weapon of persuasion" (para 768) and limiting Mobile's profitability to survival or some low but not laughable figure (para 769), particularly when on the judge's view the only contractual limitation on Vodafone's determinations of target levels was that they had to be positive figures. To what end was Vodafone meant to have been persuading Mobile? Apparently in the first postulated approach Vodafone was to be more kind to Mobile, allowing it greater profitability than survival or a relatively low but not laughable figure, it seems because of an interest in Mobile's continued viability (para 767). Yet if the persuasion were to have Mobile depart from its "focus upon low-level access acquisitions and perceived failure to acquiesce in or produce what Vodafone regarded as viable alternative plans" (para 768), there was little reason for Vodafone to do more than have Mobile survive. 238 What is plain is that Vodafone wanted to "reduce the acquisitions on low-level plans for financial reasons" (para 642). As has been seen in the consideration of whether it failed to determine target levels, it resolutely maintained its determination of a target level of nil in the letter of 13 July 2001, and its intention to continue to set target levels of nil. Vodafone's stance was the subject of the judge's disapprobation in para 641, and was regarded by him as repudiatory in para 883. In the face of that stance a finding that, if it had realised that it was obliged to determine quarterly target levels rather than adhere to the earlier announcement, and if it had realised that it was obliged to determine target levels other than nil, Vodafone would have determined target levels of 12,000 new connections for each of the five successive quarters, is bold indeed. 239 Once there is removed the assumption that Vodafone was not entitled to determine a target level of nil, the judge's finding is undermined. At the least, in legal principle the damages for failing to determine target levels are not to be assessed on the basis that Vodafone would have done more than it was contractually obliged to do: Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 156; TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 154; The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 92-3. Vodafone submitted that this went further, and required assessment on the basis that Vodafone would not have done more than it was contractually obliged to do. It is not necessary to enter upon that. As a matter of fact, in my opinion, the only conclusion which could properly be reached is that, if Vodafone had determined target levels for the March 2002 to March 2003 quarters, under the pressure of its desire to avoid acquiring unprofitable customers and in accordance with its announced intention it would have determined the target levels at nil. In my opinion determining target levels of nil was a certainty and there was no lost opportunity or possibility of determination of target levels otherwise than at nil. 240 I do not think that any of the considerations which the judge thought justified his finding, in the different context of inability to determine a target level of nil, is of any weight against the overwhelming demonstration of Vodafone's stance. That the ASP Agreement used 12,000 for the Minimum Base Acquisition Margin and 3,000 in respect of the Benchmarks is of no consequence. That in the past Vodafone had determined target levels of particular numbers is also of no consequence – Vodafone had then come to a firm stance of target levels of nil. The letter of 13 January 2003 was non-specific and part of the legal game then being played. So far as the judge thought that target levels of 12,000 would keep Mobile viable, again Vodafone had taken a different stance. I doubt that the judge's finding was in part credibility based, Mobile's reliance being on some evidence of Ms Blake whom the judge did not find impressive, because the finding was despite the evidence rather than by preference of another witness. But in any event Ms Blake was asked about target levels if target levels of nil had not been available, and her difficulty with that hypothesis served to underline Vodafone's resolve to determine target levels of nil. 241 In my opinion, what Mobile lost through Vodafone's failure to determine target levels at all did not rise above loss of what would have fallen to it in the event of determinations of target levels of nil. It is not necessary to consider Vodafone's submission that the judge incorrectly equated loss of opportunity as to determination of target levels with loss of opportunity as to determination of a business plan. Treating them as equivalent, in the manner damages were calculated what Mobile lost attracted no substantive damages, and Mobile is entitled only to nominal damages because it failed to determine target levels for the March 2002 to March 2003 quarters. It is also not necessary to go to the other respects in which Vodafone asserted error in the assessment of damages, or to the contest over components in the calculation of damages. 242 It would seem to follow that, even if Mobile had obtained a finding of breach of the implied terms by exercise of the power in cl 18.4 for the extraneous purpose of bringing the ASP Agreement to an end, its damages for breach of contract in that respect would also have been no more than nominal damages. Claim 5 - September 2001 quarter dispute 243 The damages of $1,145,000 under claim 5 were awarded for refusal to participate in the dispute resolution procedure when there had been failure to agree on a CTA worksheet, the parties' surrogate for a Business Plan. 244 The judge first set out the competing positions - "846 Vodafone contends that there was an agreed CTA Worksheet for the September 2001 quarter with a target of 9,000 connections. Mobile actually achieved 1,509 connections in the quarter, which was the basis upon which the BAM was calculated and paid by Vodafone to Mobile. 847 Mobile disputes that any target was agreed and alleges that it was entitled to be paid the full BAM on 12,000 connections pursuant to clause 18.3 of the ASP Agreement." 245 The parties exchanged CTA worksheets for the September 2001 quarter and had many communications towards agreement. The questions were whether there remained outstanding the inclusion of an amount for redundancies and whether agreement was conditional upon further agreement, outside the CTA worksheet, on some "operational marketing matters". It is not particularly clear, but it seems that on Mobile's case these were approval of a $15 plan, provision of guidelines for marketing under the Vodafone Direct brand and details of Vodafone's affinity programmes, all the subject of claim 4 next considered. In all other respects there was agreement on the CTA worksheet. 246 The judge found that there was no agreed CTA worksheet for the quarter (paras 848-9). In the course of his reasons for so finding he noted that on 13 July 2001 Mobile by letter "maintained that no agreement was in place for the September CTA and notified a dispute in relation to the September CTA in accordance with clause 32.1 of the ASP" (para 848). He said - "850 The conclusion that no CTA had been agreed upon carries within it the further finding that Vodafone's refusal [7/1226] to accept that the dispute resolution procedure had been enlivened, and to participate in that proceeding, constituted a breach of the ASP." 247 The judge did not assess damages at this point. He decided a matter relevant to damages, that Mobile's costs of making employees redundant were not within Actual Acquisition Costs because it "could not be said, in any logical way to involve the 'acquisition and connection of new subscribers'" (para 852), and said that the parties "will be invited to address submissions as to the way forward in terms of the above findings" (para 853). 248 The judge received further submissions, and came to assess damages in his supplementary judgment of 15 April 2003. He said - "29 Determining what follows from that breach (paragraph 853) involves the same exercise as that upon which the Court embarked in respect of the nil target quarters: · the breach constituted the loss of an opportunity of value to Mobile, namely to engage in the dispute resolution process (paragraph 759); · the damages exercise then involves an ascertainment of quantum by reference to the possibilities (paragraph 762); · the approach likely to have been taken by Vodafone (paragraph 770) is that set out in paragraph 768 – the consequence of which for the quarters from December 2001 to March 2003 would have resulted in a 12,000 connection target; · that figure is required to be discounted for vicissitudes and contingencies reflecting the possibility the target would not have been achieved (paragraph 792). 30 In respect of the September 2001 quarter, that approach is qualified by the facts that: · a 9,000 target had been notified by Vodafone and adopted by Mobile as the basis for draft CTA worksheets; · the draft CTA worksheets included Vodafone Direct and affinity programs as elements, which elements Vodafone had not satisfied by mid August; · although Mobile commenced seeking connections during the quarter, it ceased to do so, with Vodafone's acquiescence, in mid August 2001, following the nil target determination for the December quarter (paragraphs 561-2). 31 In those circumstances whilst, prima facie, 12,000 is appropriate, the Court is not in error, as it seems to me, in taking 9,000 connections, less the 1,509 actually connected as the basis for calculating damages. A 9,000 figure more than takes into account the 10% contingency rate as adopted for subsequent quarters. The figure in the draft orders includes such a discount in favour of the defendants. In short, even though taking the figure of 9,000 would more than compensate for the 10% vicissitudes, the figure in the orders takes the 9,000 figure and further discounts it by yet another 10%." 249 The reference in para 847 to "the full BAM on 12,000 connections pursuant to cl 18.3 of the ASP Agreement" must have been to the Minimum Base Acquisition Margin, since cl 18.3 was specifically mentioned and at the time Mobile made submissions a hypothetical 12,000 new connections had not been decided. If Mobile's position was correctly recorded, inherent in it was that the dispute resolution procedure would have resulted in the expert determining a target level less than 12,000, that Mobile would have achieved that target level, and that Mobile would not have acquired more than 12,000 new connections. Only in those circumstances would Mobile be paid a Base Acquisition Margin assuming 12,000 connections of New Subscribers. 250 However, the damages were not arrived at by that process. From para 29 of the supplementary judgment, damages were based upon the target level of 12,000 new connections which Vodafone would have determined arrived at by the judge for the claims 6 and 7 damages, but with the 10 per cent discount enhanced by using 9,000 instead of 12,000. The enhancement seems to have been because the 9,000 figure in the draft CTA worksheet suggested that the target level determined would not have been 12,000 but would have been 9,000, and because Mobile's ceasing to seek connections in mid-August 2001 meant that it would not have acquired as many as 12,000 new connections in the quarter. Damages calculated on this basis, then, represented the remuneration (not just Base Acquisition Margin) Mobile would have received if Vodafone had determined a target level of 9,000 connections of New Subscribers for the quarter, less the remuneration it in fact received having acquired 1,509 connections in the quarter. 251 Vodafone submitted that the judge erred in finding that there was no agreed CTA worksheet for the quarter, that he erred in finding that it refused to participate in the dispute resolution procedure (although that does not seem to have been in issue at the trial), and that in any event for a number of reasons the assessment of damages was flawed and it should have been found that Mobile had failed to prove any loss from the breach of contract. For the reasons which follow, in my opinion the assessment of damages can not stand, and it is not necessary to consider whether there was an agreed CTA worksheet for the quarter or go to Vodafone's refusal to participate in the dispute resolution procedure. 252 There are a number of difficulties with the assessment of damages, but the fundamental flaw is that it is not based on the breach of contract found. 253 Vodafone did determine a target level for the September 2001 quarter, being 9,000 connections of New Subscribers. There was no breach in that respect, and if there had been it could not have been the subject of the dispute resolution procedure. The breach of contract was not to do with determining a target level, but to do with the different exercise of determining a Business Plan, and in that exercise the dispute lay in issues other than numbers of expected connections. Both Mobile's position as recorded in para 847 and the reasoning in the assessment of damages wrongly focused upon target level. 254 The breach of contract being refusal to participate in the dispute resolution process, if (as the judge said) the breach "constituted the loss of an opportunity of value to Mobile namely to engage in the dispute resolution process" (supplementary judgment para 29), then the correct beginning of the enquiry was into the Business Plan, in the form of a CTA worksheet, which the dispute resolution procedure would have produced. There should have been a finding of the chance of the parties or the expert deciding upon a Business Plan favouring Mobile on the outstanding questions. That finding would not have been the end, as the lost chance should then have been valued, amongst other things by comparing the remuneration which Mobile was likely to have received had the Business Plan been put in place through the dispute resolution procedure with the remuneration it was entitled to receive absent that Business Plan. 255 In the commencing enquiry there is no reason to think that there would have been any change in the target level of 9,000 connections of New Subscribers, so far as that would have moulded the Business Plan arrived at by the dispute resolution procedure. The dispute over the CTA worksheet concerned an amount for redundancies and the operational marketing matters, in the case of the operational marketing matters as a precondition to agreement on the CTA worksheet. Could the dispute resolution procedure have extended to the operational marketing matters? If so, how would redundancies and those matters have been resolved? None of this was addressed by the judge. 256 Nor was the further enquiry addressed. What remuneration would Mobile have been entitled to receive under the new Business Plan? What remuneration would Mobile have been entitled to receive absent a Business Plan pursuant to the dispute resolution procedure, since if the parties could not agree on a Business Plan, the Business Plan for the previous quarter applied (cl 21.2 of the ASP Agreement)? (It may be noted that under that Business Plan the figure taken from the target level determined by Vodafone was 14,150 connections of New Subscribers. If target level had been the correct measure, which it was not, there could hardly have been damages apparently for failure to determine a target level as of 9,000 when the determination of a higher target level had contractual force.) 257 Mobile submitted that "the lost chance for the September quarter is the lost chance to agree upon a business plan … and then to follow that business plan through" (written submissions para 471), and that "the failure to agree on a CTA worksheet deprived Mobile [of] the opportunity to follow a business plan for the September 2001 quarter" (written submissions in reply para 7). But the submissions said nothing of refusal to participate in the dispute resolution procedure. Instead, the submissions asserted a quite different breach saying that - " … the fact that Vodafone had not supplied the necessary information in relation to affinity programs, had failed to provide branding guidelines for the Vodafone Direct brand, and that the changes to the $15 plan made the September quarter CTA plan unworkable meant that Mobile was unable to pursue (and was thus deprived of the opportunity to follow) a business plan for the September 2001 quarter." 258 Refusal to participate in the dispute resolution procedure did not mean that Mobile could not follow a Business Plan for the September 2001 quarter, since by cl 21.2 the Business Plan for the previous quarter applied. If there were difficulties of the kind suggested in the written submissions in reply, they were not shown to have been due to failure to participate in the dispute resolution procedure. At one point Mobile submitted that the dispute resolution procedure might have produced a different $15 plan or a different target level figure from 9,000, but even if relevant that is no more than speculation. 259 The damages the judge assessed bore no relationship to any loss Mobile suffered by reason of Vodafone's failure to participate in the dispute resolution procedure. The judge's assessment can not stand. Damages were not proved, and claim 5 fails. Again, it is not necessary to go to the contest over components in the calculation of damages. Claims 5, 6 and 7 – Contractual entitlement 260 The damages calculated according to the model included amounts for payment of acquisition costs which, on Mobile's case, were part of the loss caused by the breaches of contract. The contest over components in the calculation of damages was that Vodafone submitted that they should not have included the so-called "idle costs" and Mobile submitted that they should have included redundancy costs. From this last submission came the increase of $369,504 plus interest sought by Mobile in the judgment sum. 261 Not in relation to damages, a related contest arose because Mobile submitted that it was entitled to recover the idle costs and the redundancy costs by way of contractual entitlement rather than damages. The judge did not deal with a claim on this basis, no doubt because in the view he took it did not matter. Such a claim did not stand out in Mobile's summons, although failure to pay Actual Acquisition Costs in breach of cl 17.6 of the ASP Agreement was alleged for each of the September 2001 and subsequent quarters. 262 I have referred to the scheme for payment by Vodafone to Mobile of Mobile's direct and indirect costs incurred in providing Acquisition Services. Mobile was paid through the Estimated Acquisition Cost component of the Estimated Acquisition Fee, and pursuant to cl 17.6 that payment was adjusted according to the Actual Acquisition Costs as later calculated. The result was not necessarily that Mobile was paid the Actual Acquisition Costs, because the adjustment was qualified, but for practical purposes it was a cost reimbursement scheme. The costs to be reimbursed came from the definition of Actual Acquisition Costs. 263 Now in full, by its definition Actual Acquisition Costs meant - " … all actual direct and indirect costs incurred in providing the Acquisition Services and derived as set out in Schedule 3, but subject to adjustment in accordance with Clause 17, and including, without limitation, all merchant fees charged to merchants by companies or other entitles providing credit card or charge card facilities other than the Merchant Charges but excluding any costs associated with MI's business other than the Mobile Direct Marketing Operation." 264 Now also in full, by its definition Acquisition Services meant - " … the services comprising acquisition and connection of New Subscribers to the Mobile Services, including: (a) sales and marketing; (b) collection of relevant Subscriber Information; (c) provision of the Standard Terms and Conditions and information concerning tariff information to New Subscribers; (d) connection of New Subscribers to use the Mobile Services; and (e) delivery of handsets to New Subscribers." 265 Mobile submitted that it was entitled to be paid the idle costs and the redundancy costs because they fell within the definition of Actual Acquisition Costs, and that it was so entitled even if Vodafone had determined a target level of nil. 266 Mobile said that even if the Estimated Acquisition Cost was nil, because the number of New Subscribers expected to be connected in the quarter (which it equated with the target level) was nil and C x S mathematically produced zero, it would still be incurring costs in providing Acquisition Services. Sales and marketing might be continued even if there was no expectation of acquiring subscribers. More realistically, collection of Subscriber Information, provision of information to New Subscribers, connection of New Subscribers and delivery of handsets to New Subscribers might continue although at the time further New Subscribers were not being acquired. More widely, Mobile said that it provided Acquisition Services to Vodafone by the maintenance of an infrastructure which it could use as a base for recommencing actual acquisition of New Subscribers. 267 I accept that Actual Acquisition Costs may have been payable even if Vodafone had determined a target level of nil. Provision of Acquisition Services turned upon the Business Plan, which in the manner earlier described looked to expectation rather than the target level, and Acquisition Services may have been provided during a quarter although no New Subscribers were in fact acquired. 268 Idle costs were Mobile's overhead costs incurred in maintaining its establishment to provide Acquisition Services, even if Acquisition Services were not provided during the quarter. The costs included employee related costs, computer/PABX costs, leasing costs, rent and depreciation. 269 The judge accepted the idle costs as part of Mobile's damages, saying - "783 In my view and applying conventional causation and remoteness of damage principles, Vodafone is liable to pay the costs of the unpaid CTA insofar as Mobile's 'idle' operations are concerned. Once Vodafone has breached the ASP in terms of the Nil target regime, these are costs shown to have flowed from and to have been caused by Vodafone's breach of contract. One is now no longer dealing with the proper construction of the ASP so that the question is not resolved by the holding in the above reasons to the effect that the exercise of making employees redundant could not be said to have involved the 'Acquisition and connection of New Subscribers' to Vodafone's network [cf The definition of 'Acquisition Services' under the ASP (1/ 134)]. A breach of contract now having been proved, the court is now in the raw area of examining causation and damages. The holding is that save for the 'spotters fee' charged by Innovations pursuant to the Marketing Agreement, Mobile has made good its claim to the unpaid CTA. However in relation to the 'spotters fee' it seems to me that there is substance in Vodafone's submission that this agreement ought to have been terminated by early August 2001." 270 It is not clear why the judge took the view he did, but it does not translate to contractual entitlement. Maintaining Mobile's establishment may have been appropriate in the face of breach of contract, but for contractual entitlement it must be asked whether the terms of the agreement are satisfied. 271 In principle, in my opinion, Mobile was entitled to payment of idle costs. It is a question of fact whether the idle costs were incurred in providing Acquisition Services. Mobile did not have carte blanche in the costs it incurred in providing Acquisition Services. Vodafone is correct in its submission that each of the costs comprising Mobile's idle costs must be shown to be within the definition of Actual Acquisition Costs, that is, as a matter of fact incurred in providing Acquisition Services. 272 It was agreed that the damages awarded by the judge included idle costs, plus interest, of - December 2001 quarter $1,156,000 March 2002 quarter $512,000 June 2002 quarter $385,000 September 2002 quarter $342,000 December 2002 quarter $321,000 March 2003 quarter $301,000 $3,017,000 273 However, these figures are not apparent from the judge's reasons, and there are no findings as to the extent to which these costs were as a matter of fact incurred in providing Acquisition Services. It is not clear to me that there was agreement at the trial on the amounts used in the calculation of damages, and more particularly that the amounts used for the idle costs were agreed to have been incurred in providing Acquisition Services. We are not in a position to make findings. If the parties had not agreed and can not now agree, a limited re-trial or a procedure by inquiry or reference will be necessary. 274 Redundancy costs were Mobile's costs of making staff redundant, to the extent the staff were engaged in acquisition activities, following the contraction of those activities. As is evident from the dispute over agreement on the September 2001 CTA worksheet, redundancy costs became an issue at a fairly early time. 275 Mobile submitted that the redundancy costs were part of its overheads in conducting its business of acquiring subscribers, that Schedule 3 to the ASP Agreement required that its total overhead costs be dealt with in arriving at Actual Acquisition Costs, and that it followed "axiomatically" that the redundancy costs were encompassed within the Actual Acquisition Costs. It said that the definition included indirect costs, and extended to the costs of the resources used to provide Acquisition Services. Vodafone submitted that the redundancy costs could not be overhead costs incurred in providing Acquisition Services, for the reason succinctly stated by the judge in his para 852, that "the exercise of making employees redundant could not be said in any logical way to involve the acquisition and connection of new subscribers to Vodafone's network". 276 In my view, Vodafone's submission takes a rather narrow approach, and does not reflect the language of the ASP Agreement. The correct enquiry is whether the redundancy costs were incurred in providing the Acquisition Services, meaning incurred in providing services to do with the acquisition and connection of new subscribers. Staff must be employed as part of that activity. Staff may be engaged, perhaps at the cost of employment agency fees. Staff may leave, perhaps at the cost of annual leave entitlements. Staff may be discharged, perhaps at the cost of redundancy payments. I consider that, subject to the same question of fact as for idle costs, in principle Mobile was entitled to payment of redundancy costs. 277 Mobile claimed the redundancy costs - September 2001 quarter $310,000 March 2002 quarter $58,500 December 2002 quarter $1,004 $369,504 278 Again, however, there are no findings, and more is required to decide Mobile's entitlement. If the parties cannot agree, a limited re-trial or a procedure by inquiry or reference will be necessary. Claim 4 - June 2001 quarter dispute 279 The damages of $312,000 under claim 4 were awarded for breaches of contract to do with giving effect to the June 2001 Business Plan. The judge said - "838 To my mind this claim is to be regarded as no more than simply a subset of the parties [sic] obligations to put into place agreements which they may have reached under the ASP as part of the working mechanisms in respect of which they agreed to cooperate by doing everything reasonably required to give effect to, for example as here, a business plan which had been agreed to. So much it seems to me can very arguably be read into clause 43 of the ASP obliging each party to "take all steps, execute all documents and do everything reasonably required by any other party to give effect to any of the transactions contemplated by this Agreement". Even if that not be so, it seems to me that the agreement was necessarily implicit: Secured Income supra. 839 The courts findings are that the June business plan was agreed to on 6 April 2001; that the $15 Plan, Vodafone Direct and affinity programs to be provided by Vodafone were elements of that business plan and that Vodafone failed to do everything reasonably required by it to give effect to the transactions contemplated by that plan. 840 Clearly on the above evidence Vodafone it shown to have breached the implied term by failing to provide the $15 Plan, by failing to provide branding guidelines for the use of the Vodafone Direct brand and by failure to provide Mobile with information on Vodafone's Affinity programs." 280 Clause 43 of the ASP Agreement has thus far not been mentioned. It provided - " 43. FURTHER ASSURANCES Each party shall take all steps, execute all documents and do everything reasonably required by any other party to give effect to any of the transactions contemplated by this Agreement." 281 The judge found breach of cl 43 (para 839) and breach of an implied term to the same effect (para 840). In the light of para 838 and the judge's earlier statement of the issues (para 834), speaking in para 840 of failure rather than failure to do what was reasonably required was no more than a slip in expression; the judge considered that the obligations had the same content. How the implied term could arise if an express term governed is not easy to see, but it is not necessary to consider the implication of the term. Attention can be focussed on breach of an obligation to the effect of cl 43. 282 The CTA worksheet for the June 2001 quarter was agreed on 6 April 2001. It took a target level figure of 14,150 new connections: there had been earlier figures, but it was accepted that by its agreement to the CTA worksheet Vodafone determined the target level at that figure. Its split of connections between different plans included a $15 plan (1,500 connections), two plans for marketing under the Vodafone Direct name as distinct from the Mobile name (500 connections and 350 connections) and one plan for marketing to the customers of affinity partners (450 connections). 283 The judge adopted as "generally … correct" (para 837) the Factual Narrative in written submissions of Mobile, which he set out at length. They included that during the June 2001 quarter no $15 plan sales were made, five Vodafone Direct promotions were carried out but brought no sales (although 334 customers were connected to Vodafone Direct plans because they asked to be connected to Vodafone), and two affinity programmes were carried out resulting in four sales. The Factual Narrative also included - "135. The following is a table showing the subscribers connected during the June 2001 Quarter to MI's billing system (Stonell para 57). Plan Target Actual Vodafone Direct (TB939-941, 945) Connections Connections M!9 5,300 4,227 3 M!11 6,050 4,539 0 M!15 1,500 0 0 MC17 500 925 218 MC33+ 350 521 65 V/D Affinity 450 0 0 V.mobile 0 70 0 Other 0 269 48 TOTAL 14,150 10,551 334 The table does not fit completely with the narrative, but it is not necessary to reconcile the details. 284 The judge said - "843 In terms of causation and damages it seems to me that Mobile has made good its claim to the loss of its chance to obtain the BAM and the CTM on 2296 loss [sic: lost] subscribers [ie 1,500 + 450 + 350 – 4]. Once the modeling is revisited to provide the relevant figure it should be further reduced by a discount of 10 percent for vicissitudes, there being no certainty that the targets would be met." 285 The judge's reasoning must have been that Vodafone failed to do everything reasonably required of it to give effect to the agreed Business Plan, that is, to enable Mobile to market the $15 plan, the Vodafone Direct plans and the plan for the customers of affinity partners, and that Mobile thereby lost a ninety per cent chance of reaching the numbers of connections for those plans stated in the CTA worksheet. Calculations then produced the damages he awarded. 286 Vodafone submitted that breach of contract had not been established and that, if it had, Mobile had not proved its damages. 287 There is a difficulty at first sight in the assessment of damages. Looking at the table earlier set out, the marketing of the $11 and $19 plans did not achieve the figures in the CTA worksheet (4,539 connections compared to 6,050; 4,227 connections compared to 5,300). Although apparently not as Vodafone Direct connections, there were connections to the MC17 and MC33+ plans well in excess of the figures in the CTA worksheet (925 connections compared to 500; 521 connections compared to 350). There were the 334 Vodafone Direct connections although, on the judge's incorporated finding, not as a result of the Vodafone Direct promotions. There were 339 other connections where the target was nil. Isolating the 2,296 lost subscribers from these other ups and downs and giving a ten per cent discount is not an obvious way of coming to the damages. It was not further explained. 288 However, there are preceding difficulties in the breaches. It is necessary to go separately to each of the $15 plan, Vodafone Direct and the affinity programmes. (a) The $15 plan 289 Mobile proposed a new $15 plan on 29 March 2001. Vodafone's concurrence was needed because under the ASP Agreement it controlled the standard terms and conditions and the tariffs. On 4 April 2001 Vodafone raised changing the way SMS messages were charged under the proposed $15 plan and asked Mobile for information about the SMS usage of its customers. 290 The $15 plan was included in the CTA worksheet agreed on 6 April 2001. However, the information requested by Vodafone was not provided until an unclear time about mid-May 2001, and the proposal did not advance. Also in mid-May 2001 Mobile told Vodafone that the delay had interfered with advertising the $15 plan, "therefore the funds are being utilised across the approved CTA plans however we will endeavour to do as much up-selling as possible". Vodafone's immediate response was that the allocation of marketing funds according to the CTA worksheet should not be changed. A number of communications were exchanged, and later in May 2001 Vodafone agreed to a change of the CTA worksheet which effectively split the marketing funds for the 1,500 connections under the $15 plan equally between the $11 and $17 plans. 291 The $15 plan was approved by Vodafone on 8 or 13 June 2001. Although there were the four connections in the June 2001 quarter, it seems that Mobile did not market the $15 plan until 7 July 2001. It then acquired between 1,364 and 1,624 subscribers to the plan, but ceased marketing it in late August 2001 because it did not think it competitive. 292 Clause 43 of the ASP Agreement obliged Vodafone to do everything reasonably required by Mobile to give effect to "any of the transactions contemplated by this Agreement". What was the relevant transaction? At one level it could have been the Business Plan in the form of the agreed CTA worksheet; at another level it could have been the acquisition of subscribers to a $15 plan part of that Business Plan. Assuming one or other of these, there was no warranty that the numbers of connections to the $15 plan would be achieved, or even that the $15 plan would be put in place. At best for Mobile, Vodafone had to act with reasonable expedition to agree upon a $15 plan or, if it was not agreed, upon appropriate modification of the Business Plan. 293 With respect, I do not think that Mobile made out failure by Vodafone to do what was reasonably required of it with respect to the introduction of the $15 plan. Mobile proposed the plan very shortly before the commencement of the quarter. Vodafone was entitled to consider the commercial value of the plan, and the evidence did not show that the time it took was unreasonable, particularly when it was waiting for information from Mobile. When Mobile asked, there was then an agreed reallocation of the marketing funds, and again the evidence did not show that the time Vodafone took was unreasonable. 294 Mobile did market the $15 plan after it was approved. Returning to damages, loss to Mobile depended on finding that it failed to acquire subscribers which it would have acquired had Vodafone's $15 plan been available earlier than it was. Mobile withdrew the plan after nearly two months because it was uncompetitive. It must be questioned whether Mobile lost overall anything like the 1500 new connections in the June 2001 CTA worksheet. Why would the correct finding not have been that it would have withdrawn the plan two months after first marketing in (say) late April 2001, having acquired subscribers of that order, so that it did not fail to acquire subscribers? Further, Mobile must have obtained a benefit from the use of additional funds in the marketing of the other plans, to be offset against whatever detriment it may have suffered through not immediately marketing the $15 plan. This adds to the doubt over isolating the lost subscribers and giving a ten per cent discount. Even if there had been the breach of the ASP Agreement, I am respectfully unable to see that there should have been the bald compensation for loss of this component of the 2,296 connections. It does not matter, since the breach was not established. (b) Vodafone Direct 295 Vodafone Direct as a brand for marketing to mid to high level subscribers had been discussed between Mobile and Vodafone from time to time since late 1999. Mobile had advertising using a Vodafone Direct logo during 2000. It was necessary that the advertising comply with Vodafone's branding guidelines. Mobile knew Vodafone's branding guidelines, and that new branding guidelines were being developed. 296 Although the CTA worksheet agreed on 6 April 2001 had figures for Vodafone Direct plans, only on 5 June 2001 did Mobile ask for the branding guidelines. It did so in an e-mail on the subject of the CTA worksheet for the September 2001 quarter. The new guidelines were still being developed, and had to be completed and sent to Vodafone in Germany for approval. Mobile was told that it in the meantime could use the earlier branding guidelines, including using the Vodafone Direct logo. It carried out some marketing using the logo. 297 With respect, I cannot see that Vodafone was in breach by failing to provide branding guidelines for the use of the Vodafone Direct brand. The evidence did not warrant a finding that Vodafone's development and approval of the new branding guidelines was unreasonably prolonged or late, particularly for the June 2001 quarter, and Mobile could market the Vodafone Direct plans using the earlier branding guidelines. 298 As was noted in Vodafone's submissions, Mobile's complaint was really that Vodafone had not provided branding guidelines suitable for "launching the brand" . Vodafone referred to the evidence of Ms Statham of Mobile - "Q. In relation to guidelines would you agree with me that at about that time Vodafone confirmed that the existing guidelines could be used? A. They confirmed the guidelines could be used but the guidelines just showed a logo. It was just how to use their logo. It wasn't about launching a brand. Q. What they didn't do is this; they weren't prepared to agree to a large scale expenditure on launching the brand? A. They weren't prepared to do that, no. Q. They were prepared to let you use the logo and they gave you guidelines to do that, correct? A. Correct. Q. They were prepared, that is Vodafone were prepared, throughout 2001, to approve advertisements from time to time when they were submitted by Mobile to Vodafone. A. Yes. Q. And during 2001 the Vodafone Direct brand continued to be used both on-line and in media advertisements from time to time? A. That's right, yes." 299 However, a case of failure to take reasonable steps required by Mobile to launch the brand was not pleaded. The pleaded case was relevantly of failure to provide branding guidelines, not of failure to provide any particular branding guidelines or branding guidelines suitable for launching the brand. The CTA worksheet for the June 2001 quarter provided for $26,250 to be spent on advertising the Vodafone Direct brand. Assuming that Vodafone was obliged to accommodate this as a component of the Estimated Acquisition Cost, it was not otherwise obliged to launch the brand. 300 If there had been the breach, the assessment of damages by isolating the lost subscribers and giving a ten per cent discount again is open to question. Loss to Mobile depended on finding that it failed to acquire subscribers which it would have acquired had Vodafone provided branding guidelines for the use of the Vodafone Direct brand, in the light of the evidence being the new branding guidelines rather than the existing branding guidelines. Would the different branding guideline have affected marketing and acquisition of subscribers? Would the effect have been to the full extent of the 500 and 350 connections in the CTA worksheet, particularly so when the 334 connections were made? This component of the 2,296 connections seems a very generous estimation, but again it does not matter because the breach was not established. (c) Affinity partners 301 Affinity programmes were marketing programmes directed to the customers of another organisation, the affinity partner, by arrangement with that organisation. The plan marketed to those customers was usually not available to the general public. Both Mobile and Vodafone had affinity partners to the customers of which Mobile directed its marketing. 302 During 2000 Vodafone suggested that Mobile foster affinity marketing, to which suggestion Mobile responded favourably. Early in 2001 Mobile asked Vodafone to identify potential affinity programmes, although not specifically Vodafone affinity partners. In discussions before agreement on the CTA worksheet for the June 2001 quarter Mobile expected 100 new connections from the customers of those affinity partners. Mobile told Vodafone that it relied on Vodafone providing more affinity partners, and was told that Vodafone was going to put some more programmes in place. The affinity partners contemplated at the time were Bankers Trust, NRMA and possibly American Express. 303 The pleaded case was that Vodafone failed to provide Mobile with "information relating to Vodafone's Affinity programs". The judge's findings, by adoption of Mobile's Factual Narrative (the paragraph numbers being those of the Factual Narrative), were relevantly - "110. Between March and June 2001, there was correspondence between Mobile Innovations and Vodafone attempting to organise affinity programs and the Vodafone Direct plan to be offered in those programs. 111. In relation to a proposed affinity program to NRMA customers, on 6 March 2001 Ms Lees of Mobile Innovations requested Mr Wisbey of Vodafone to provide information on the marketing plan. She noted that the marketing plan was supposed to be offered in March and she still had not seen it (TB 838; Marchbank 22/5/02 para 117). Ms Lees followed up with Mr Stormon on 19 March 2001 (TB 838 para 117). Subsequently, Ms Karpes of Vodafone advised Ms Lees that the offer would have to be an M17 plan as opposed to a Vodafone Direct offer (TB 859 para 117). 112. Another marketing offer that Mobile Innovations tried to achieve was an offer to Bankers Trust customers. On 6 March 2001, Ms Lees sought details of the offer from Mr Wisbey. She subsequently sought details of the necessary creatives on 19 March 2001 from Mr Stormon (TB 840 para 117). On 22 March 2001, Ms Karpes advised Ms Lees that the proposed offer to the bank would be MI branded (TB 868 para 117). 113. In May 2001, Ms Statham attempted to facilitate an affinity marketing plan for campaigners involved in political campaigns (TB 975). She also did the same in relation to a Diner's Club promotion (TB 980). Ms Kenny sought information from Mr Stormon in relation to a planned affinity marketing campaign to Double Day on 14 May 2001 (TB1007; Marchbank 22/5/02 para 117) 114. In about mid June 2001, Ms Statham met with Ms Karpes to discuss Vodafone's affinity programs for the June 2001 quarter. Ms Karpes advised her that Vodafone was unlikely to come up with any new affinity partners for that quarter (Statham 2/9/02 para 36). 115. To facilitate more programs, Ms Statham attempted to obtain Vodafone's approval for affinity programs in relation to the 'Best Friend promotion' and to 'Diner's Club' customers (TB 975 and TB 980; Statham 2/9/02 paras 33 to 35 Insert A). 116. During the June 2001 quarter, the only affinity programs that were run were Bankers Trust and NRMA (Statham 2/9/02 paras 35 and 37, TB1010). These achieved only four sales (TB 699AA). No affinity sales were achieved using Vodafone Direct (Stonell para 57)." 304 The judge found, again by adoption of Mobile's Factual Narrative - "134. During the June 2001 quarter: … (c) the only affinity programs that were run were Bankers Trust and NRMA (Statham 2/9/02 paras 35 and 37, TB1010) which achieved only four sales (TB 699AA). No affinity connections were achieved using Vodafone Direct (Stonell para 57)." 305 From this the judge went straight to his findings of breach already noted (paras 839-40). 306 What was the information which Vodafone failed to provide to Mobile? 307 It is not apparent what the "information on the marketing plan" in relation to a proposed affinity programme to NRMA customers was (Factual Narrative para 111), or what the "details of the offer" in relation to an offer to Bankers Trust customers was (submissions para 112). In any event, Vodafone seems to have responded by what it said about the M17 plan and MI branding. Whatever failure to provide information there may have been, and the findings do not make it clear, they were not failures in giving effect to the CTA worksheet. The CTA worksheet was agreed on 6 April 2001, and so far as the findings went must have been agreed on the information then to hand. They were not dependent on provision of this information as further information. 308 It is also not apparent what information was sought in relation to a planned affinity marketing campaign to Double Day (Factual Narrative para 113). Double Day was a Mobile affinity partner. There was no finding that the information sought, whatever it was, was not provided, nor was there any reference to how the Double Day affinity programme was frustrated for want of the information. 309 Vodafone's advice that it was unlikely to come up with any new affinity partners (Factual Narrative para 114) was not a failure to provide information relating to Vodafone's affinity programmes. Unsuccessful attempts to obtain approval for affinity programmes in relation to the "Best Friend promotion" and Diner's Club customers, apparently what was meant in submissions para 116, was not failure to provide information. 310 On the findings made by the judge, the pleaded breach was not made out. The marketing of the Bankers Trust and NRMA affinity programmes was not particularly productive, but the findings do not indicate that that was because of any failure to provide information. 311 In fact, the finding referring to Vodafone's advice that it was unlikely to come up with any new affinity programmes (Factual Narrative para 114) did not fully reflect the evidence of Ms Statham, which was that in mid-June 2001 Ms Karpes of Vodafone told her, "We haven't got any information yet but we're working on some things and will let you know as soon as we can". Mobile's submissions on appeal included, referring to this evidence of Ms Statham, that Vodafone did not put any programmes in place other than the Bankers Trust and NRMA programmes, and that (written submissions para 415) - "415. In the light of that evidence his Honour was entitled to conclude that Vodafone had no reasonable excuse for failing to put in place the affinity programs which it had undertaken to put in place prior to the June 2001 business plan being agreed and on the basis of which the June 2001 business plan had been agreed. It was not a matter of simply failing to provide information that it had. Vodafone had an obligation to do everything reasonably required to put in place the affinity programs, which duty it palpably failed to discharge." 312 This departed from the pleaded case. It was not a submission of failure to provide information reasonably required to give effect to the CTA worksheet for the June 2001 quarter. It was a submission of breach of an undertaking to put in place affinity programmes beyond the Bankers Trust and NRMA affinity programmes. When the contemplated affinity partners were Bankers Trust, NRMA and possibly American Express, and affinity programmes with respect to the first two were run, it is far from clear that there was any failure of Vodafone to do what was reasonably required of it. Whatever failure there was, however, was not a failure in providing information relating to Vodafone's affinity programmes. 313 Without undue repetition, if there had been breach then the assessment of damages by isolating the lost subscribers and giving a ten per cent discount is again open to question. The Bankers Trust and NRMA affinity programmes brought only four new connections. Why would something more extensive, although it is not known what, have brought anything like 400 new connections? The parties' expectation as reflected in the agreed CTA worksheet appears to have been astray, and provided no basis for the assessment. The judge said only, in relation to all 2296 new connections in the June 2001 quarter, that "In terms of causation and damages it seems to me that Mobile has made good its claim" to the loss of a chance to obtain the remuneration on the subscribers (para 843). With respect, this did not adequately deal with the difficulty of the assessment of damages. 314 In my opinion, Mobile did not establish the pleaded breaches of contract, and claim 4 fails. Claim 1 - ACM Agreement dispute 315 To repeat, by the ACM Agreement Vodafone Pty Ltd agreed to provide 30,000 customers to Mobile by 30 June 2000, to be managed by Mobile under the ASP Agreement. In awarding the damages of $2,467,000 under claim 1 the judge spoke of "Mobile's obvious entitlement to claim both repudiation and breach of this agreement" (para 804), and his finding of breach was otherwise in terms of Vodafone's "clear repudiation of the agreement" (para 801) and that Vodafone "simply point blank repudiated the agreement" (para 804). The damages were assessed on a number of "assumptions" (para 811) material to the Management Fee which Mobile would have received had the customers been transferred to it, with a discount for vicissitudes. 316 Vodafone's defences to this claim included that the ACM Agreement had been terminated by agreement in May or June 2000, alternatively that it had been mutually abandoned prior to 1 July 2000, and alternatively again that Mobile was estopped from requiring performance founded on representation by Mobile that it would not require Vodafone to provide the customers. There were other defences. 317 The defence of termination by agreement and the estoppel defence were found unfavourably to Vodafone, as were the other defences. As to the defences of termination by agreement and estoppel, the judge said - "806 The evidence does not establish that the Additional Customer Management Agreement was terminated by oral agreement between the parties. No such agreement is shown to have been reached. The pleaded oral agreement said to have arisen in meetings of May or June 2000 is not shown to have been established by those meetings. Mr Ogrin disowned the suggestion of any such agreement. In fairness to the defendants Mr Bathurst did concede in final address that it was extremely difficult on the evidence for the defendants to make good the proposition that there was a formal agreement to discharge the Additional Customer Management Agreement [Transcript 1407]. At the same time the defendants determined in final address not to press the estoppel claim. These forensic decisions were prudently made in the circumstances. Nothing in Mobile's proven conduct made good the proposition that it ever represented to Vodafone that it would not require Vodafone to comply with its obligations provided for under the Additional Customer Management Agreement. Nor was Vodafone's failure to transfer the additional 30,000 customers proven to have taken place in reliance upon any belief that such representation by Mobile." 318 The judge did not deal specifically with the defence of abandonment. On appeal Vodafone relied only on abandonment of the ACM Agreement. It submitted that the evidence showed that by the end of June 2000 neither party regarded the ACM Agreement as being on foot or intended that it should be further performed, and that the parties "had so conducted themselves as mutually to abandon or abrogate the contract": DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 434. If it failed on that defence, Vodafone did not dispute the assessment of damages. 319 Mobile listed on the Australian Stock Exchange on 25 June 1999. Its prospectus forecast that its subscriber base would be 160,000 customers by 30 June 2000. By March 2000 Mobile had come to think that it would not achieve the customer base. That led to discussions with Vodafone in which Mobile obtained Vodafone's agreement to provide the 30,000 customers to it. 320 The letter embodying the ACM Agreement made indiscriminate references to Vodafone, perhaps including when the relevant organisation was either Vodafone Pacific Ltd or Vodafone Network Pty Ltd and even when it was Vodafone Billing Services Pty Ltd. The pleadings nonetheless alleged and admitted an agreement with Vodafone Pty Ltd. The letter read - "As per our discussion, this letter sets out the terms upon which Vodafone has agree to provide Mobile Innovations with 30,000 additional customers in respect of which MI will undertake customer management services (as set out in the ASP Agreement). 1. Vodafone agrees to have all these relevant customers available for Mobile Innovations to commence billing by no later than 30th June 2000. 2. Vodafone will provide Mobile Innovations with these extra customers through one of the following options, to be elected by Vodafone: · Migrating existing Vodafone billed customers to Mobile Innovations for billing management & customer care. Or/ · Providing Mobile Innovations with the responsibility to manage billing & customer care of new customers connecting to Vodafone. Or/ · Combination of Migrating existing Vodafone billed customers & provision of new customers connecting to Vodafone for the purpose of billing management & customer care. 3. Effective from the 1st June 2000, Mobile Innovations will charge Vodafone the following cost to manage rates for all customers: · Quarterly Billed Customers $4.75 · Monthly Billed Customers $7.00 This excludes current cost to manage rates for low tariff customers as per detailed in the amended agreement. Vodafone would negotiate a separate cost to manage rate for monthly billed customers if it were to propose Mobile Innovations managing new, monthly billed, customers connecting to Vodafone network in excess of the 30000 customers committed. 4. Should Vodafone choose one of the migration options outlined above, Mobile Innovations will use best endeavours to transition all (current and migrated $10 monthly billed customers) to quarterly billing by 1st July 2000. 5. MI must undertake the customer management services for the benefit of these customers as Vodafone's agent in accordance with MI's obligations under the ASP Agreement (as amended). Prior to Vodafone providing these additional customers, please confirm MI's acceptance of these terms by signing and returning a duplicate copy of this letter, as indicated below." 321 On 18 April 2000 Vodafone told Mobile of problems in "migrating" existing Vodafone customers to Mobile. 322 On 5 May 2000 Mobile wrote to Vodafone - "As you are aware, it was agreed in March that Vodafone would transfer 30,000 customers to Mobile Innovations prior to the 30th June 2000. This commitment formed the basis of our ASX disclosure that MOB would be on target for customer growth to 160,000 customers by the end of June 2000. It appears obvious that there is no clear strategy within Vodafone to effect this transfer. Several unacceptable 'smoke and mirror' solutions have been tabled, but no activity has occurred and the project once defined, is now likely not to hit the 30 June deadline. I have a duty to report this failure to the Mobile Innovations Board on Tuesday 9th May and subsequently would assume that our duty is to communicate this shortfall in our subscriber growth to the ASX, financial markets & shareholders. We have been attempting to avoid the resultant negative publicity surrounding the inability of Mobile Innovations to grow since the demise of the Network organization, however this will become the subject of some media and financial market scrutiny if we are forced to declare our under-performance. Further it is clear that the lack of growth is driven by competitive pressure which Mobile Innovations has been unable to respond to, due to Vodafone's end of Financial year constraints, and the current lack of an agreed plan going forward. If an adequate solution does exist, I would ask that Vodafone communicate the detailed project plan with timelines to Mobile Innovations so that we can assess its feasibility prior to the Board Meeting on Tuesday." 323 Vodafone replied on 8 May 2000, saying that it was "looking at possible options to enable Vodafone to transfer a group of subscribers to your base for Management purposes" and that Vodafone was "doing all it can to resolve this issue as quickly and as economically as possible and you will be kept informed of our final position". 324 At the time there were wider discussions on planning for what was described as Vodafone's direct marketing channel strategy. On 10 May 2000 Vodafone wrote to Mobile - "After more detailed investigation into Vodafone migrating subscribers from Gemini to Mobile Innovations, it has become clear that this is not a viable option. Amdocs has estimated the cost of the migration at $500K and the time for completion at 4months minimum. Clearly this was not the intent of the parties at the time this option was put forward. As discussed, we have considered other options which may temporarily satisfy your requirements, including the option of Vodafone leasing the customers from Mobile Innovations. However, this particular option also lacks viability as it does not provide a reliable solution for the achievement of customer numbers plus the cost to manage doubles. It is very clear that the last two quarters have been extremely competitive in 'off the page' channel with the introduction of 'B' Mobile and OneTel's 'BYO' promotion. Thirdly Optus Direct was launched and has since intensified its activity in this channel. Therefore we would prefer to concentrate our efforts on continuing to implement the Vodafone channel strategy and delivering future growth. …" 325 Mobile was not impressed. On 12 May 2000 it wrote to Vodafone pointing out the significance of the 30,000 customers to its prospectus forecast, and saying - "The agreement to transfer the 30,000 subscribers was absolute and unconditional. It was not an 'option' – the only option that Vodafone retained was the choice of which customers were to be transferred. We have sought legal advice, which confirms that the agreement between Mobile Innovations and Vodafone in relation to the transfer of the 30,000 subscribers is legally binding. The recent letter from Julian Ogrin clearly shows that Vodafone is not now prepared to meet its contractual obligations. We are currently seeking advice on what remedies would be open to Mobile Innovations in relation to this breach of contract by Vodafone. … This now means that Mobile Innovations is in an untenable position. Mobile Innovations has always worked with Vodafone to support it in all communications with the financial markets and institutions, but I fear that we are now at a stage where some difficult and unpalatable disclosures will soon need to be made as part of this company's continuing disclosure obligations. It is in our view crucial that both the subscriber's transfer and outstanding operational issues are resolved as a matter of urgency." 326 Vodafone replied on 19 May 2000 - "I refer to your letter of 12 May 2000 and our subsequent discussions. I emphasise the fact that my letter of 16 March 2000 was never intended to commit Vodafone to incurring significant costs or administrative time in transferring 30,000 customers to Mobile Innovations. Unfortunately, Vodafone cannot agree to incur such costs or administrative time. Nevertheless, Vodafone remains keen to discuss with you alternative arrangements whereby the customer transfer issue is resolved on a commercially sensible basis for both parties. In this regard, I am happy to meet with you as soon as possible to discuss alternative arrangements. I look forward to further discussing this matter with you." 327 Mobile replied on the same day - "Thank you for your letter received this afternoon in response to my letter to Mike Buckling dated 12th May. I am unaware of the subsequent discussions between us referred to in your letter. Your assertion that you had not considered costs or administrative time is of no relevance to the central issue outlined in my letter to Mike Buckling. As stated in my previous letter, we believe that the agreement to transfer the 30,000 subscribers by 30th June is legally binding. A week has now passed, and the issues surrounding our continuous disclosure obligations, which were then urgent, have now become critical. In addition, this company will suffer serious financial loss as a result of Vodafone's failure to honour its legal obligations. By your correspondence to us, it is clear that Vodafone has no intention to perform, or is unable to perform, its obligations under the agreement. As such, we must give full consideration to our legal rights, including, if necessary an election to terminate the contract and institute proceedings for damages. Mobile Innovations continues to be willing and able to perform its obligations under the agreement. I note your suggestion that we meet, and I am happy to do so to consider what alternative arrangements you may wish to propose. In view of the time constraints I think it would be unproductive to enter into discussions without being in receipt of your written proposals prior to any such meeting. Time is now of the essence in relation to our various announcements to both the ASX and the Investment Community. We cannot delay the necessary communication beyond close of Business on Tuesday 22nd May. Our meeting will therefore need to take place on Monday. Obviously I am prepared to make any time available to resolve this matter at the eleventh hour, and subject to receiving your written proposals, look forward to your suggested time for the meeting." 328 Apparently as the contemplated written proposals, Vodafone produced a "Channel Strategy Direct & Online". It was discussed with Mobile at a meeting on 25 May 2000. Mobile said at the meeting that it had not yet decided whether to take legal action regarding the ACM Agreement. 329 In a letter to Vodafone dated 25 May 2000 Mobile described the discussion that day as "most productive", referring to "key issues we need to address before we can make a positive announcement to our shareholders" and attaching a spreadsheet which "summarizes a plan we jointly believe is possible and should be budgeted for within Vodafone". The letter concluded - "When these issues are agreed and a budget signed off, which we suggest is early next week (w/c 29th May), Mobile Innovations needs to address its subscriber shortfall for the current year, and talk up the commitments in the next financial year. This together with the Baird IV, would satisfy Mobile Innovations and its shareholders that Vodafone are serious about providing growth to Mobile Innovations as an integral part of its channel strategy. I look forward to your confirmation of the above, which I hope is a fair reflection of our discussion this morning." 330 There followed further correspondence on the "key issues", without specific reference to the provision of the 30,000 customers. Mobile did not on 1 June 2000 begin charging the new cost to manage rates in the letter. 331 On 8 June 2000 Mobile issued an announcement to the Stock Exchange. It was headed "Tough mobile phone market causes subscriber shortfall for Mobile Innovations", and began - "The Board of Mobile Innovations today announced that its subscriber numbers would fall short of prospectus forecasts by 20% for the year ending 30 June 2000. Mobile Innovations had previously stated it was confident in meeting subscriber numbers of 160,000 for the June year-end based on an agreement with Vodafone that would have resulted in Mobile Innovations' acquiring an additional 30,000 Vodafone customers. It is now highly unlikely that those customers will be acquired by 30 June 2000. Mobile Innovations' subscriber base at 30 June 2000 is now expected to be approximately 130,000. Mobile Innovations' Chairman Will Jephcott said the outcome was disappointing. Significantly increased marketing spend [sic] by competitors and the impact of prepaid mobile phones have made it extremely difficult to achieve the forecast growth in subscriber numbers. Mobile Innovations has an exclusive 10-year Agent Service Provider agreement with Vodafone under which it provides subscribers to Vodafone from non-electronic direct marketing sources. Mobile Innovations' marketing budget and strategy is set in conjunction with Vodafone and discussions are continuing to develop plans to compete more successfully in the current market place. The roll out of both v.mobile and Vodafone Direct is expected to provide major stimulus to new subscriber growth. Both of these products were launched too late in this financial year to have a significant impact on the 30 June 2000 subscriber numbers." 332 Although Mr Marchbank of Mobile said that the ACM Agreement was "brought up from time to time in discussions", until March 2001 the provision of the 30,000 customers was not thereafter raised between Mobile and Vodafone by insistence on the provision of the customers or assertion of an entitlement to damages for failure to provide them. On 9 March 2001, however, Mobile's lawyers wrote to Vodafone asserting breach or apprehended breach of the ASP Agreement in a number of respects and breach of the ACM Agreement; as to the latter, they said - "2.1 Pursuant to the ACM Agreement, Vodafone agreed to provide MI with 30,000 additional customers by 30 June 2000. This transfer did not occur by that date and has still not yet occurred. Accordingly, Vodafone is in breach of its obligations under the ACM Agreement. MI is suffering loss and damage as a result of this breach and all its rights are reserved." 333 In due course breach of the ACM Agreement was alleged in Mobile's summons. 334 Vodafone submitted that by 30 June 2000, if not earlier, the parties by their conduct had abandoned the ACM Agreement. Although it did not provide the 30,000 customers, it said, a direct marketing strategy was arrived at to Mobile's satisfaction which removed from contention the provision of the customers. The agreement was abandoned because a satisfactory alternative had been found. Hence, it said, the absence of any complaint of failure to provide the customers after 25 May 2000 until the lawyers' letter of 9 March 2001, which it said was particularly significant when Mobile generally took every opportunity to insist on what it saw as its entitlements. Hence also, it said, Mobile's failure to move to the new cost to manage rates. 335 I do not think that this submission should be accepted. Vodafone had made clear enough, by the letter of 10 May 2000 and again by the letter of 19 May 2000, that the 30,000 customers would not be provided. Mobile had asserted that Vodafone was in breach of contract, and had said that it was considering its legal rights. It was not a situation of mutual abandonment of an unperformed agreement. Rather, there was failure of performance by one party protested by the other. That Mobile was willing to discuss alternative arrangements to provide growth via the channel strategy, a strategy which did not include the provision of the 30,000 customers, is not surprising, and did not mean abandonment of the ACM Agreement; nor is it surprising that Mobile did not move to the new cost to manage rates when Vodafone had failed to perform its part of the "package" of which that was part. Nor did Mobile's failure immediately to prosecute its legal rights mean abandonment of the ACM Agreement. The judge held that it did not bargain away its legal rights, and nothing it did amounted to abandonment for its part of those rights or of the underlying agreement. The result 336 The declarations and restraining orders should be set aside, and the appeal should be upheld as to the components of the judgment sum in issue save for the damages awarded under claim 1. The cross-appeal should be upheld in relation to idle costs and redundancy costs. 337 The new figures for the judgment can not immediately be stated. I propose that the parties be given the opportunity to agree, or to take up agreement at the trial so far as it may have it extended to the appropriate figures. If they are unable to agree, there can be remission for prompt decision or an order for an inquiry or for reference. The proceedings should be listed for directions in fourteen days time for the Court to be informed whether agreement has been reached and, if not, for consideration of the course to take. 338 It is necessary to return to the form of the orders, now only as to the judgment. The damages awarded under claim 1 should have been awarded only against Vodafone Pty Ltd, the party to the ACM Agreement. Of the components of the judgment sum not in issue on appeal, the damages awarded under claim 2 ($699,000) should have been awarded against either Vodafone Pacific Ltd or Vodafone Network Pty Ltd, the party to the ASP Agreement, and the damages awarded under claim 11 ($234,000) should have been awarded against Vodafone Pty Ltd, the party to the Website Agreement. The judgment with respect to idle costs and redundancy costs should be against either Vodafone Pacific Ltd or Vodafone Network Pty Ltd. The parties should have the opportunity to agree upon the correct judgment debtor, and again if necessary there can be remission for prompt decision of which of the two Vodafone companies was the party to the ASP Agreement. 339 Vodafone has substantially but not wholly succeeded in the appeal and cross-appeal. Nominal damages under claims 6 and 7 were really not what those claims were about, and the question of failure to determine target levels at all was relatively confined. The question of abandonment of the ACM Agreement, while sounding in a large sum of money, was also confined. The questions of idle costs and redundancy costs may or may not sound in a large sum of money, but were also confined. Rather than a complex apportionment by subject matter, I consider that a just disposition of costs is that Mobile pay 80 per cent of Vodafone's costs of the appeal and cross-appeal. 340 The judge ordered that Vodafone pay 95 per cent of Mobile's costs of the trial. Mobile's success on claim 2, the V.Mobile dispute, and claim 11, the Website dispute, was not subject to appeal. Mobile has had some success in the proceedings overall, but much less than its claims. The judge's order is no longer appropriate, and in my opinion a just disposition of the costs of the trial is that Vodafone pay 25 per cent of Mobile's costs. 341 I propose the following orders - (1) Appeal and cross-appeal each allowed in part. (2) Set aside the declarations in orders 1 to 5, orders 6, 7, 9 and 10 and the judgment made and given on 16 April 2003. (3) Stand the proceedings over to 12 March 2004 at 9.15 for directions. (4) Appellant/cross-respondent pay 25 per cent of the respondent/cross-appellant's costs of the trial; respondent/cross-appellant pay 80 per cent of the appellants'/cross-respondents' costs of the appeal and cross-appeal, and have a certificate under the Suitors Fund Act if otherwise qualified. 342 IPP JA: I agree with Giles JA. ********** Last Modified: 02/27/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.