FEDERAL COURT OF AUSTRALIA

Telstra Corporation Limited v Vocus Fibre Pty Ltd [2014] FCA 198

THE COURT ORDERS THAT:

1.    The Amended Originating Application is dismissed.

2.    The Applicant is to pay the costs of the Respondents.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    The Applicant in the present proceeding, Telstra Corporation Limited (“Telstra”), filed an Originating Application in this Court on 3 January 2014. An Amended Originating Application was filed on 10 January 2014.

2    Judicial review is thereby sought of “the decisions (or alternatively the conduct) of the Fourth Respondent”, namely the Australian Competition and Consumer Commission (“the Commission”). The Grounds of the Amended Application invoke s 5(1)(f) or, alternatively, s 6(1)(f) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (“the Judicial Review Act”). There was no express reliance initially placed on the jurisdiction conferred upon this Court by s 39B(1A)(c) of the Judiciary Act 1903 (Cth). The Amended Originating Application was however, further amended at the outset of the hearing to include reliance upon s 39B(1A)(c). Although opposed by Senior Counsel for the First to Third Respondents, the amendment was allowed and a submission advanced on behalf of those Respondents denying the jurisdiction of the Court was later withdrawn.

3    The First to Third Respondents to the proceeding are Vocus Fibre Pty Ltd (“Vocus Fibre”), Adam Internet Pty Ltd (“Adam Internet”) and Chime Communications Pty Ltd (“Chime Communications”). Each of those Respondents has entered into an agreement with Telstra titled a “Customer Relationship Agreement”. The Agreement with Vocus Fibre was executed on 14 June 2011 and is expressed to continue for a period of three years. Each of the other two Agreements are said to be in substantially similar terms such that it is sufficient, for present purposes, to make reference only to the terms of the Agreement with Vocus Fibre.

4    On 31 May 2012 Telstra forwarded an e-mail to Vocus Fibre notifying it of Telstra’s decision to vary the charges previously paid by Vocus Fibre and of the increased charges to be paid as from 1 August 2012 to June 2013. On 23 July 2012 Vocus Fibre notified Telstra that it “disputes Telstra’s variation” and that it “considers that the Access to Ducts Charge is too high…”. A like “dispute” has arisen with respect to the Second and Third Respondents. The Commission has formed the view that it has power to arbitrate the disputes between Telstra and each of the First to Third Respondents. It is this assumption of power which is sought to be reviewed by Telstra.

5    The source of the power invoked by the Commission to arbitrate the dispute between Telstra and Vocus Fibre is that conferred by cl 36(3) of Schedule 1 to the Telecommunications Act 1997 (Cth) (“the Telecommunications Act”); the source of the power invoked by the Commission in respect to Adam Internet and Chime Communications is that conferred by cl 18(1) of that Schedule. Both clauses confer power to arbitrate “failing agreement” as to the terms and conditions upon which access is to be provided.

6    Telstra maintains, in very summary form, that each of the Customer Relationship Agreements constitute an agreement as to the terms and conditions upon which access is to be granted, including a contractual power conferred upon it to vary the existing terms and conditions. It maintains that it has properly invoked that power and that, accordingly, there has been no failure to agree. Vocus Fibre, Adam Internet and Chime Communications maintain that it has properly invoked a contractual power to dispute the variation and that there is, accordingly, a failure to agree such that the Commission can properly arbitrate the disputes between Telstra and each of the First to Third Respondents.

7    A subsidiary matter to be resolved, in the event that the principal matter is resolved in favour of Telstra, are the terms and conditions presently payable.

8    It is concluded that the Commission does have power to arbitrate each of the disputes. The Amended Originating Application is to be dismissed.

The Customer Relationship Agreements

9    Each of the Customer Relationship Agreements is constituted by a series of Schedules, comprising:

    Standard Terms;

    Facilities Access Service Terms;

    Service Schedules containing Price Lists;

    a Dictionary of definitions; and

    an Alternative Dispute Resolution Policy.

Taken together, those documents record the agreement between the parties whereby Telstra (described as the “Supplier”) agrees to provide access to each of the First to Third Respondents (described as the “Acquirer(s)”).

10    The Facilities Access Service Terms provide in cl 1.1 that those terms “are additional to the Standard Terms and govern the basis on which the Supplier will give the Acquirer access to the facilities described in the Facilities Access Service Schedules”.

11    The term which presently assumes central relevance is cl 6 which provides in its entirety as follows:

6    Charges

Variation of the Price List

6.1    Subject to clause 6.3, a Charge specified in the Price List may be varied by 2 months written notice from the Supplier to the Acquirer, so long as the notice period expires after any Validity Period for that Charge set out in the Price List.

6.2    If no notice of variation is given before the expiry of the Validity Period for a Charge, the Charge will continue beyond the Validity Period until varied by 2 month’s written notice.

Increases during the Term

6.3    During the Term the Supplier will not increase any Charge in any 12 month period by more than the greater of:

(a)    an amount equal to that Charge multiplied by the aggregate of the CPI Charge plus 4%; and

(b)    the amount of the Supplier’s increased costs of providing the relevant Facilities Access.

Disputes

6.4    If the Acquirer disputes (whether under the Agreement or otherwise) the variation of any Charge under clause 6.1, then:

(a)    pending resolution of the dispute the Acquirer must pay the Supplier the Charges in the Price List as varied; and

(b)    if the resolution of the dispute results in the Charge being set at a different rate (“Varied Charge”) then, within 20 Business Days of the date of the resolution of the dispute, the Supplier must pay any refund necessary (including Interest) to put the Acquirer in the position it would have been in had the Varied Charge been applied from the time the Charge was varied.

The assumption of power by the Commission

12    The present position of the Commission that it has power to arbitrate each dispute may be traced back to the notification given by Telstra of its intention to vary the charges and the notifications given by each of the First to Third Respondents of their challenges to the variations.

13    In the case of Vocus Fibre, the e-mail forwarded on 31 May 2012 by Telstra provided, in part, as follows:

Price List for Facilities Access

In accordance with Clause 6 the Facilities Access Service Terms (FAST) under the Customer Relationship Agreement (CRA), we give you notice that, effective 1st August 2012, Telstra’s Price List for Facilities Access will be varied. Accordingly, we enclose a Price List with all changes marked up and a clean version of the new Price List for your attention.

As per paragraph 1.2 of the new Price List, the stated prices are valid up to 30th June 2013.

The increases are approximately 3.1% applied to all prices and represent the weighted average CPI increase for all groups for the 12 months to December 2011 for the 8 capital cities as reported by the Australian Bureau of Statistics.

Please note that Telstra prices under the CRA are reciprocal and therefore no notice from Vocus is required.

Marked up and clean versions attached.

The attachments to that e-mail record the charges previously paid to Telstra and the prices henceforth to be payable as from 1 August 2012. The specific prices set forth in the e-mail are said to be commercially confidential. The precise figures, however, assume no relevance to the resolution of the present dispute. The application for judicial review can be resolved without consideration being given to any specific dollar amount.

14    The response of each of Vocus Fibre, Adam Internet and Chime Communications was, perhaps, predictable. Each opposed the price increases. Each forwarded to Telstra in July 2013 a “General Dispute Notice”. The Notice provided by Vocus Fibre, for example, stated in part as follows:

General Dispute Notice

Vocus acknowledges receipt of Telstra’s notice of a variation to the charges listed in CRA 11 – Facilities Access to Ducts Service Schedule dated 31 May 2012 (Telstra’s variation). Vocus acknowledges that Telstra’s notice is in accordance with clause 6 of the Facilities Access Service Terms (FAST) under the CRA Standard Terms.

Vocus disputes Teltra’s variation. In particular, Vocus considers that the Access to Ducts Charge is too high and proposes that from 1 August 2012 the charge be varied to a rate that reflects Telstra’s costs. This should be regarded as a General Dispute in accordance with clause 10 of the CRA Standard Terms and with regard to subclauses 9.1 and 9.2 of the FAST.

15    Each of the First to Third Respondents thereafter notified the Commission of their respective disputes with Telstra. In the case of Vocus Fibre, their notice to the Commission invoked cl 36 of Schedule 1 to the Telecommunications Act; the Second and Third Respondents invoked cl 18 of that Schedule.

Clauses 18(1) and 36(3) of Schedule 1

16    The request for access, on behalf of both Adam Internet and Chime Communications, was a request for access to “supplementary facilities” owned by Telstra within the meaning of and for the purposes of cl 17 of Schedule 1 to the Telecommunications Act. Clause 17(1) provides as follows:

A carrier (the first carrier) must, if requested to do so by another carrier (the second carrier) give the second carrier access to facilities owned or operated by the first carrier.

Clause 18(1) of Schedule 1 provides as follows:

The first carrier (within the meaning of clause 17) must comply with subclause 17(1) on such terms and conditions as are:

(a)    agreed between the following parties:

(i)    the first carrier;

(ii)    the second carrier (within the meaning of that clause); or

(b)    failing agreement, determined by an arbitrator appointed by the parties.

If the parties fail to agree on the appointment of an arbitrator, the ACCC is to be the arbitrator.

17    The request for access on behalf of Vocus Fibre was a request for access to “eligible underground facilities” owned by Telstra within the meaning of and for the purposes of cl 35 of Schedule 1 to the Telecommunications Act. Clause 35(1) is in like terms to cl 17(1) and provides as follows:

A carrier (the first carrier) must, if requested to do so by another carrier (the second carrier), give the second carrier access to an eligible underground facility owned or operated by the first carrier.

Clause 36(3) of Schedule 1 is in like terms to cl 18(1) and provides as follows:

The first carrier (within the meaning of clause 35) must comply with subclause 35(1) on such terms and conditions as are:

(a)    agreed between the following parties:

(i)    the first carrier;

(ii)    the second carrier (within the meaning of that clause); or

(b)    failing agreement, determined by an arbitrator appointed by the parties.

If the parties fail to agree on the appointment of an arbitrator, the ACCC is to be the arbitrator.

18    Common to both cls 18(1) and 36(3) of Schedule 1 is the phrase “failing agreement”. That is a phrase, obviously enough, to be construed in the immediate context of Schedule 1 and in a manner which promotes the objects and purposes of that Schedule.

19    The phrase “failing agreement”, it may be noted in passing, is not only found in Schedule 1 to the Telecommunications Act. It is a phrase used in a like context in s 118QG(1) of the Radiocommunications Act 1992 (Cth) where, “failing agreement” as to the terms and conditions on which the owner or operator of a broadcasting transmission tower is to grant access, those terms and conditions are to be “determined by an arbitrator appointed by the parties”, or in default, the Commission. By way of further example, the phrase “failing agreement” is used in a variety of legislative contexts which contemplate agreement being reached as to compensation for the acquisition of property or “failing agreement” to be determined by a court: e.g., ANL Act 1956 (Cth), s 68; Commonwealth Serum Laboratories Act 1961 (Cth), s 38; Snowy Mountains Engineering Corporation Act 1970 (Cth), s 53; Olympic Insignia Protection Act 1987 (Cth), s 21.

20    It is also a phrase commonly used in commercial agreement: e.g., G Hawkins & Sons Pty Ltd v Ahern [1990] 2 Qd R 401; Kudeweh v T & J Kelleher Builders Pty Ltd [1990] VR 701. In the context of a rent review clause in a commercial lease, in Carrathool Hotel Pty Ltd v Scutti [2005] NSWSC 401, [2005] ANZ ConvR 470, at 479 – 480, White J observed:

[59]    …The expression “failing agreement” deals with all cases in which the parties have not reached agreement upon the rental for a new year. They may have failed to reach agreement because one party made an offer which the other rejected. They may have failed to reach an agreement because one party made an offer and the other did not respond. They may have failed to reach agreement because neither party made an offer. In all such cases, they would have failed to agree on the rental for the new year of the term…

See also: Hely v Sterling [1982] VR 246; Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600; Health Minders Pty Ltd v Prudential Assurance Co Ltd [1987] ANZ ConvR 251.

21    But no authority was cited which addressed the application of the phrase “failing agreement” to a contractual context where the parties had reached agreement (including agreement as to a power to later vary terms and conditions) and where a subsequent variation was within the ambit of that which was originally contemplated. The application of that phrase would presumably depend upon the precise terms that had been mutually agreed upon.

Clause 6

22    Whatever may be the manner in which the same or a comparable phrase may be construed in different statutory contexts or in different commercial agreements, the present issue dividing the parties is to be resolved by reference to:

    the proper characterisation of the ambit of the dispute between Telstra and each of the First to Third Respondents; and

    the proper construction and application of cl 6 of the Facilities Access Service Terms.

The ambit of the issues dividing the parties was considerably narrowed by there being agreement between Telstra and the First to Third Respondents that:

    the variations notified by Telstra to each of the First to Third Respondents was a variation within the constraints imposed by cl 6.3; and

    the dispute which each of the First to Third Respondents was simply that the quantum of the increase was “too high”, albeit a variation within the constraint imposed by cl 6.3.

No question arose as to the variation sought to be exacted by Telstra not being a variation imposing an increase which was not sufficiently “certain” so as to be not a proper exercise of any contractual power to vary the charges to be imposed.

23    The construction of cl 6 advanced by Telstra was that it conferred a unilateral power to vary the Charges specified in the Price List, provided the variation did not exceed the amount calculated in accordance with cl 6.3. That power, according to Telstra, was a power conferred upon it by agreement with each of the First to Third Respondents. Within the ambit of the Agreement, the only limitation upon the power was that imposed by cl 6.3. That clause was sought to be characterised as a “cap” upon the maximum amount of any variation. Each of the Customer Relationship Agreements, upon this approach, was an agreement as to terms and conditions and, within each of those Agreements, was a means whereby those terms and conditions could be varied. Having agreed to those terms and conditions and the means whereby those terms and conditions could be varied, it was said on behalf of Telstra that there could – thereafter – be no failure to agree where any variation was within the range of increases previously agreed. Clause 6.4, upon this approach, was obviously accepted by Senior Counsel for Telstra to be directed to “disputes … under clause 6.1”. But it was sought to confine the “disputes”, there referred to as “disputes” as to such matters as (for example):

    a mistake as to the “Charge specified in the Price List”;

    a failure to give “2 months written notice”;

    a mistake as to the calculation of “the aggregate of the CPI Change plus 4%”; or

    a mathematical mistake erroneously recording the place of the “decimal point” in any process of calculation.

24    That construction of clause 6 is rejected.

25    Clause 6.1, it is concluded, does not confer any unilateral and unchallengeable power upon Telstra to vary the “the Charge(s) specified in the Price List(s)” subject only to the constraints imposed by cl 6.3.

26    Clause 6.1, clearly enough, confers a power to vary those Charges. But it is a power to vary subject to the right of an Acquirer to “dispute” the variation. The contractual agreement reached between Telstra and Vocus Fibre in June 2011 (for example) was an agreement to pay the amounts initially set forth in the Agreement and an agreement that Telstra could later vary those Charges subject to the right of Vocus Fibre to “dispute” the variation. The Agreement recorded in the June 2011 contract was not an agreement confining Vocus Fibre to an entitlement to “dispute” the mere application of the terms of that clause to the facts. The Agreement recorded in June 2011 was, accordingly, an agreement:

    as to the initial terms and conditions upon which services were to be provided

including an agreement that:

    Telstra “may” vary the charges up to the “cap” imposed by cl 6.3; and

    Vocus Fibre could “dispute” the variation.

The June 2011 Agreement, not surprisingly, does not record any agreement whereby Telstra could vary the charges in an amount in excess of the “cap”. Any variation which purported to impose a variation in excess of that which had been agreed, would simply not be authorised by the terms of the Agreement; but even within the limited range of authorised variations, both parties recognised the contractual right to “dispute” the variation. Until that “dispute” was resolved, albeit a dispute as to the quantum of a variation within a limited range, the parties had failed to reach agreement.

27    Any confined construction of that which may constitute a “dispute” for the purposes of cl 6, is only further made less tenable when attention is focussed upon the phrase employed in cl 6.4, namely a dispute “(whether under the Agreement or otherwise)”. A purported variation to charges in excess of the “cap” set by cl 6.3 may be variously described as a “dispute” arising “under the Agreement”, or (perhaps more accurately) as a “dispute” arising “otherwise” than under the Agreement; a variation within the range set by the “cap” may properly be described as a dispute arising “under the Agreement”. Of present importance is the width of the language employed in cl 6.4 and a recognition mutually agreed upon that a “dispute” may arise both as to the application of cl 6.1 “or otherwise”. The fact that Vocus Fibre may seek to “dispute” a variation to the charges, albeit a variation within the range agreed upon, does not deny to the subject-matter of that dispute the character of a failure to agree.

28    That construction of cl 6, it is respectfully considered, follows from the simple meaning of the words employed in the clause itself. No other construction of that clause, it is considered, is reasonably open. No question thus arises as to the Court being confronted with alternative and equally viable constructions such that the Court should apply that construction which best achieves commercial common sense.

29    Senior Counsel for Telstra nevertheless submitted in the written Outline of Submissions that the construction being advanced by each of the Respondents would “lead to dramatic and ‘surprising results’”: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 108. Gibbs J there observed:

…It is immediately apparent that the construction for which the appellant contends will lead to surprising results.

His Honour continued:

It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, "even though the construction adopted is not the most obvious, or the most grammatically accurate", to use the words from earlier authority cited in Locke v. Dunlop, [(1888) 39 Ch D 387 at 393)… Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd, [(1932) 147 LT 503 at 514], that the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance…: (1973) 129 CLR 109-110.

In oral submissions it was argued that the construction advanced on behalf of the Respondents would be “absurd”. Those submissions are rejected. The Facilities Access Service Terms, it is accepted, should be construed “in order to avoid absurdity or inconsistency”: Fitzgerald v Masters (1956) 95 CLR 420 at 426 – 427 per Dixon CJ and Fullagar J. Commercial contracts are to be construed in a “businesslike” manner and in a manner which promotes “business common sense”: MIWA Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 at [14] per Basten JA (McColl and Campbell JJA agreeing). The “absurdity” which was said to flow from the construction of cl 6 which authorised the Commission to arbitrate the disputes was said to be exposed by the width of the matters that the Commission was to take “into account in making a determination”: e.g., Telecommunications (Arbitration) Regulations 1997 (Cth) reg 8. But the width of those powers, it is respectfully considered, exposes no “absurdity”. The width of those powers is but the legislative recognition of the ambit of powers necessary to arbitrate a “dispute” as to the terms and conditions of granting access to publicly important telecommunications facilities. If those powers are perceived to be too extensive, that is a matter to be addressed by the Legislature. The courts cannot construe a commercial agreement in a manner so as to avoid what individual judges may or may not perceive to be the conferral of power beyond that which is necessary to resolve a “dispute” which may (on one view) be within a confined ambit. Initially, the identification as to the terms and conditions upon which each of the First to Third Respondents were to be granted access was left to the commercial judgment of those Respondents and Telstra. “Failing agreement” the arbitration regime contemplated by the Legislature thereafter fell to be followed. And such powers as are conferred upon the Commission are thereby enlivened.

30    And there is a failure to agree for the purposes of cls 18(1) and 36(3) of Schedule 1, notwithstanding the terms of cl 10 of the Standard Terms and Conditions. Clause 10 of the Standard Terms to each of the Customer Relationship Agreements provides a regime whereby “General Disputes” are to be resolved, including referral to “one of the processes of alternative dispute resolution…”. A “General Dispute” is defined as meaning:

… any dispute, difference or claim arising out of or in connection with this Agreement or the subject matter of this Agreement, including any question about the construction of this Agreement or a party’s rights or obligations, which is not a Billing Dispute.

A “Billing Dispute” is also defined but that definition can be left to one side. One submission advanced on behalf of Telstra was that “there is nothing in cl 10 that prevents a party referring a General Dispute to arbitration or seeking to enforce its bargain in the Courts”. Indeed, the notification provided by Vocus Fibre to Telstra in July 2013 invoked cl 10. Running contrary to the dispute resolution process envisaged by cl 10 was the fixed regime of cl 6. The construction of cl 6 embraced by the Respondents, it was said on behalf of Telstra, conferred “arbitral jurisdiction on the ACCC by agreement”. That characterisation of the operation of the contractual and statutory provisions is, with respect, considered to be erroneous. By the terms of the Customer Relationship Agreements, the parties have agreed for those matters which constitute a “General Dispute” to be resolved in the manner set forth in cl 10. Where there is a price variation to the charges upon which access to facilities is to be granted, the parties can either agree or disagree; but where there has been a failure to agree upon terms and conditions, that dispute may be notified to the Commission. The contractual right to “dispute” a variation is that reserved by cl 6.4. Clauses 18(1) and 36(3) of Schedule 1 thereafter operate according to their terms. Clause 10 of the Standard Terms does not lead to any different construction as to the reach of cl 6.4.

31    A further submission advanced by Telstra in its written Outline of Submissions was that the manner in which the term “dispute” was to be construed as a contractual provision did not necessarily dictate the further conclusion that such a “dispute” satisfied the statutory phrase of “failing agreement” for the purposes of Schedule 1. It was submitted that a “complaint about the application of the price increase mechanism that is a “dispute” under the CRA…does not mean that there has been a failure to agree within the terms of the Act”. That further argument is also rejected. Although cls 17(1) and 35(1) of Schedule 1 to the Telecommunications Act refer to the “giving” of access, clauses 18(1) and 36(3) – it is concluded – can nevertheless continue to apply even where there has been an initial agreement as to the terms and conditions upon which access been “given” and where there is agreement as to the power to thereafter vary those terms and conditions. A subsequent “dispute” as to the terms and conditions upon which access is to be provided after the expiration of any initial period of time when prices were fixed, can – it is considered – be properly characterised as a “dispute” as to the terms and conditions upon which access is “given” for the purposes of cls 17(1) and 35(1) of Schedule 1. “Given”, it is concluded, can refer equally to the initial terms and conditions upon which access is first “given” and to the terms and conditions upon which access is continued to be “given”.

Conclusions

32    The initial objection taken by the First to Third Respondents as to the jurisdiction of the Court to resolve the present dispute was overtaken by the Applicant’s belated reliance upon s 39B(1A)(c) of the Judiciary Act. It was thereafter common ground between all the parties to the proceeding that the Court had jurisdiction to resolve the construction of cl 6 and the consequential assumption of power by the Commission to arbitrate the “disputes” between Telstra and the First to Third Respondents “failing agreement” as to the terms and conditions.

33    Clause 6, it has been concluded, is not to be given the limited construction advanced on behalf of Telstra, but rather that advanced by the First to Third Respondents.

34    It follows that the Amended Originating Application should be dismissed with costs. That order for costs would, in turn, include the costs of the First to Third Respondents’ preparation of submissions as to the absence of any jurisdiction being conferred upon this Court by the Judicial Review Act. There is no reason why any order should be made other than that the Applicant should pay the costs of the Respondents on a party/party basis.

THE ORDERS OF THE COURT ARE:

1.    The Amended Originating Application is dismissed.

2.    The Applicant is to pay the costs of the Respondents.

Associate:

Dated:    12 March 2014