ETT v IPSTAR Australia [2008] NSWSC 644

New South Wales Supreme Court

CITATION : ETT v IPSTAR Australia [2008] NSWSC 644

HEARING DATE(S) : 13/06/08

JUDGMENT DATE : 16 June 2008

JURISDICTION : Equity

JUDGMENT OF : White J

EX TEMPORE JUDGMENT DATE : 16 June 2008

DECISION : See paras 57 and 58 of judgment.

CATCHWORDS : INJUNCTION – interlocutory injunction – serious question of construction of agreement for appointment of exclusive distributor of broadband satellite products - balance of convenience – no evidence that defendant will be better off if interlocutory injunction refused – difficult to assess plaintiff's loss if injunction refused – injunction granted - CONTRACT – construction – compulsory arbitration clause – parties reserved their right to seek urgent equitable relief – interlocutory injunction requires that final relief is sought – whether arbitration and litigation seeking urgent equitable relief are alternative courses – comment that the two courses are not necessarily alternatives

LEGISLATION CITED : Commercial Arbitration Act 1984 (NSW)

CASES CITED : Ferris v Plaister; Stap v Gray (1994) 34 NSWLR 474 Seeley International Pty Limited v Electra Air Conditioning BV [2008] FCA 29

ETT Limited PARTIES : v IPSTAR Australia Pty Ltd

FILE NUMBER(S) : SC 3099/08

COUNSEL : Plaintiff: J Robson SC & T Baw Defendant: J Garnsey QC & D G Charles

SOLICITORS : Plaintiff: Macpherson + Kelley Lawyers Defendant: Arnotts Lawyers

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY JUDGE LIST

WHITE J

Monday, 16 June 2008

3099/08 ETT Limited v IPSTAR Australia Pty Ltd JUDGMENT 1 HIS HONOUR: This is an application for an interlocutory injunction restraining the defendant until further order from acting upon or implementing a purported notice of termination dated 30 May 2008 of an agreement dated 30 October 2007 between the plaintiff and defendant. The defendant is a supplier of broadband satellite products and services using technology licensed by its parent. By the agreement dated 30 October 2007 it appointed the plaintiff as its Australian national service operator ("NSO") with the exclusive right to distribute its products and services in Australia. 2 In the agreement the plaintiff is called "the NSO" and the defendant "IPA". The agreement is for 12 years from 1 January 2008, subject to specific provisions for early termination or extension. The plaintiff is required to purchase from the defendant minimum quantities of satellite-based bandwidth and customer premises equipment ("CPE"). An example of the latter is satellite dishes. 3 When the agreement was entered into the defendant had established relationships and contracts with internet service providers to which it supplied bandwidth and CPEs. In general terms, the contract with the plaintiff provides that if a service provider fails to agree on and execute the plaintiff's standard terms and conditions, the defendant can continue to provide bandwidth (called "NDB Capacity Service") and CPEs to such service providers on its current terms, provided that it purchases the NDB Capacity Service and CPEs from the plaintiff. The repurchase is to be at a mark-up of 10 percent. There is evidence that one existing service provider had agreed to the plaintiff's standard terms and conditions, but none of such service providers has executed the plaintiff's standard service provider terms and conditions. 4 A major issue on this application is the price at which the defendant is required to repurchase the NDB Capacity Service. A second question is whether the defendant is required to pay for the repurchase of CPEs and NDB Capacity Service in respect of supplies to a particular internet service provider, Australian Private Networks Pty Limited ("APN"). 5 The defendant claims that as at 30 May 2008, the plaintiff was indebted to it, after giving credit for repurchases, in the sum of $8,710,867.31. It claims that as at 30 May 2008, this debt was outstanding for more than 30 days. On that day it gave notice of termination of the agreement effective five days from the date of the letter. 6 The plaintiff says that the defendant did not correctly calculate the credit in its favour in respect of repurchases. The plaintiff claims the defendant is indebted to it in the sum of $1,804,464.81 as at 30 May. It also says that the defendant should be restrained from giving effect to its notice of termination because the parties had agreed to refer any such matter to arbitration. 7 The critical clauses of the agreement are as follows. Clause 2.3 provides: " Subject to take-or-pay conditions specified in Appendix A, IPA hereby agrees to provide and reserve the NDB Capacity Service for the NSO in the Territory on a Full Time Basis and the NSO agrees to utilize the NDB Capacity Service … " 8 Clause 2.3.5 provides: " Subject to Clauses 2.4, 2.5 and Appendix A, IPA shall provide the NSO with a revocable (only in accordance with clause 2.5), non-transferable, exclusive right, in the Territory, to acquire the NDB Capacity Service and the CPE from IPA and the exclusive right to offer all IPA's IPSTAR™ service providers the NDB Capacity Service and the CPE provided that such IPA's IPSTAR™ service providers agree to and execute the NSO's standard service provider terms and conditions for the provision of the NDB Capacity Service and CPE. Where an IPA's IPSTAR™ service provider fails to agree and execute the NSO's standard terms and conditions, IPA may continue, without liability to the NSO, to provide the NDB Capacity Service and CPE to such service providers on its current terms and conditions, provided that IPA purchases such NDB Capacity Service and CPE from the NSO based on the agreed terms and conditions in Appendix D. NSO retains the right to accept service providers that fail to agree to its standard terms and conditions and receive assignment of existing contracts with such service providers from IPA provided that NSO accepts ALL service providers contracted with IPA at the date of execution of this Agreement who fail to agree to its standard terms and conditions ." 9 The agreement further provides: " 2.4 The NSO agrees to purchase from IPA and IPA agrees to sell CPE to the NSO in accordance with the terms and conditions in Appendix A and Appendix I. ... 5.1.1 The Service Fee and the CPE Fee under this Agreement and their payment schedule shall be in accordance with Appendix A, subject however, to the provisions of clauses 8 and 12. 5.1.2 Payments of Service Fee and the CPE Fee shall be made by the NSO in advance, on or before the Due Date of Payment as specified in Appendix A. ... ... 12.7.1 If the NSO fails to make any payment under this Agreement and such amount remains unpaid for a period of more than thirty (30) days after the Due Date of Payment; ... 12.8 Upon the termination of this Agreement in the circumstances described in clause 12.6, and without prejudice to the other rights or remedies of IPA under this Agreement or at law: 12.8.1 The Deposit (if any) as set out in Appendix A shall be forfeited; ... 23. DISPUTE RESOLUTION 23.1 Any dispute arising out of or relating to this Agreement shall be defined by notice by the Party raising it to the other and shall forthwith be discussed on a 'without prejudice' basis by a representative from each Party in an attempt to resolve their differences amicably. All discussions as to any matter in dispute shall be held in such place and in such manner as shall be appropriate and most convenient to the Parties. 23.2 If discussion between the Parties fails to produce agreement between them on the matter in dispute under clause 23.1 or if the Parties fail to reach agreement within twenty (20) working days from the date of service of a notice defining a dispute under clause 23.1, the matter shall be referred to and finally settled by arbitration under the Rules for the Conduct of Commercial Arbitrations for the time being of the Institute of Arbitrators & Mediators Australia subject to clauses 23.3. to 23.4 inclusive. 23.3 Unless otherwise agreed, the arbitration shall be conducted in Sydney, Australia. 23.4 The arbitration award shall be final and binding on the Parties. The costs of the Arbitration shall be shared by the Parties equally. 23.5 Nothing in this clause shall prevent a Party from seeking urgent equitable relief before an appropriate Court. 24. BILLING DISPUTES 24.1 If the NSO disputes any Service Fees and/or CPE Fees ('Charges'), it must notify IPA at least 7 days prior to the due date of the relevant Charges. 24.2 Notification effected in accordance with Clause 24.1 must contain a copy of the relevant invoice, the amount disputed, the amount not disputed, comprehensive reasons for the dispute and must contain a statement that the notification is for the purposes of this Clause 24. 24.3 For the avoidance of doubt, all Charges must be paid by their Due Date of Payment, regardless of whether any Charges are disputed by the NSO. Where an adjustment to Charges is required in accordance with this Agreement, the NSO shall deduct that portion of the Charges that it was not obligated to pay to IPA from the next month[']s payment of Charges. " 10 The deposit referred to in clause 12.8.1 is $3,000,000 and has been paid.