FEDERAL COURT OF AUSTRALIA

Telstra Corporation Limited v Optus Networks Pty Ltd [2002] FCAFC 296

TELECOMMUNICATIONS – CONTRACTS – Access Agreement between Telstra and Optus relating to preselection telecommunication services – telecommunications infrastructure previously controlled and operated by Telstra – Optus introduced as competitor to Telstra for telecommunications – contractual regulation of access by Optus to infrastructure – interpretation of various provisions of Access Agreement – history of circumstances antecedent to formation of Access Agreement – Telstra’s introduction of HomeLine Net package to customers related to preselection services at particular prices – whether in so doing Telstra infringed any one or more of certain provisions of Access Agreement or Part V of Trade Practices Act (Cth) 1974 (s 52) – finding by the primary judge in favour of Optus that Telstra breached cl 13.3.7 of Schedule 13 to Access Agreement – interpretation of contract regulating relationship between Telstra and Optus concerning access to telecommunications infrastructure.

APPEAL by Telstra against finding of primary judge of breach by Telstra of clause 13.3.7 of Schedule 13 of Access Agreement comprising prohibition against a carrier “undermin[ing] the integrity of the Preselection process through their tariffing of Preselectable Services in an anti-competitive way” – consideration in particular of contractual expressions “undermine the integrity” and “in an anti-competitive way” – appeal of Telstra upheld by majority of Full Court.

CROSS-APPEAL by Optus against absence of adverse findings of other breaches of the Access Agreement by reason of the same conduct claimed by Optus to have contravened clause 13.3.7 of Schedule 13 – also of contravention of s 52 of Trade Practices Act by reason of marketing activity related to that conduct – issues of contractual interpretation – cross-appeal unanimously dismissed.

Telecommunications Act 1989 (Cth)

Telecommunications Act 1991 (Cth)

Telecommunications Act 1997 (Cth)

Australian and Overseas Telecommunications Corporation Act 1991 (Cth)

Trade Practices Act 1974 (Cth) ss 47, 52, Pt IV and Pt V

Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25 FLR 169 considered

Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197 cited

Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177 at 191 cited

Tampa Electric Co v Nashville Coal Co 365 US 320 (1960) cited

MCI Communications Corp v American Telephone and Telegraph Co (1983) 708 F 2d 1081 [1982-3] Trade Cases 65,137 referred to

Telstra Corporation Limited v Optus Communications Pty Ltd (1997) 75 FCR 171 referred to

Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 cited

Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187 cited

Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 cited

Alcatel Australia Ltd v Scarcella and Others (1998) 44 NSWLR 349 cited

Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 cited

McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 cited

TELSTRA CORPORATION LIMITED v OPTUS NETWORK PTY LTD & OPTUS MOBILE LIMITED

N 269 OF 2001

FRENCH, TAMBERLIN & CONTI JJ

23 SEPTEMBER 2002

SYDNEY

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF

AUSTRALIA

THE COURT ORDERS THAT:

1.         Leave to appeal be granted to the appellant and to the cross-appellants.

2.         The appeal be allowed.

3.         The cross-appeal be dismissed.

4.         The orders of the primary Judge be set aside and in lieu thereof the application be dismissed.

5.         The respondents to pay the appellant’s costs of appeal and of the proceedings before the primary Judge.

6.         The cross-appellants are to pay the appellant’s costs of the cross-appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

FRENCH J:

Introduction

1                     On 20 March 2001, Optus Network Pty Ltd and Optus Mobile Pty Ltd (“Optus”) instituted proceedings against Telstra Corporation Limited (“Telstra”) asserting its breach of an Access Agreement made between them on 14 August 1992.  That agreement was an incident of the ongoing process whereby telecommunication services in Australia have come to be supplied by competing carriers.  The history is set out in the Reasons for Decision of the learned primary judge and those of Conti J.  The agreement provided, inter alia, for access by Telstra customers to the Optus network and vice-versa on a non-discriminatory basis. The learned primary judge, who tried the case on issues of liability only, found that the agreement had been breached.  This Court has granted leave to appeal and to cross-appeal against his decision.  I agree with Tamberlin J that his Honour erred in finding that the Agreement had been breached and that the appeal should be allowed.  On the other aspects of the appeal and on the cross-appeal, which should be dismissed, I agree, as does Tamberlin J, with the reasons of Conti J.

The Alleged Breach of the Access Agreement

2                     The asserted breach of the agreement, which is central to the appeal, arose out of the provision by Telstra of a telecommunications service, called the “HomeLine Net” to domestic subscribers.  The service is designed for customers who have internet access.  They subscribe for Telstra HomeLine Net by ordering it on-line and receive on-line bills.  Customers who subscribe for the Telstra HomeLine Net:

(i)         preselect Telstra for national long distance calls, international calls and calls to mobile services from these services;

(ii)        agree not to acquire services from other carriage service providers by dialling the access override code of those carriage service providers while subscribing to Telstra HomeLine Net;

(iii)       pay a lower monthly access charge;

(iv)       do not receive the lower rates for neighbourhood calls available under other services known as Telstra HomeLine Complete and Telstra HomeLine Part and are charged 19 cents for local calls;

(v)        do not receive capped rates for STD or fixed to mobile calls;

(vi)       pay $3.30 per feature per month extra if they elect to receive certain enhanced calling features;

(vii)      are required to pay their Telstra HomeLine Net bills electronically (eg by way of B-pay or by telephone).

The above description is taken from the evidence of Andrew Walther before the learned primary judge.  Mr Walther was the principal product manager of the retail business of Telstra until 12 February 2001. 

3                     It is the requirement of the Telstra HomeLine Net service that its subscribers agree not to acquire services from other carriage service providers by dialling their access override codes while subscribing to Telstra HomeLine Net that was found, at first instance, to be in breach of the Access Agreement.  The relevant provision of the Agreement  is cl 13.3.7 of Schedule 13 which provides:

“The Carriers will not undermine the integrity of the Preselection process through their tariffing of Preselectable Services in an anti-competitive way.”

The contractual setting of that clause and the definitions of the terms used in it are set out comprehensively in the judgment of Conti J.

The Orders Below

4                     The judgement of the learned primary judge dealt only with the issue of liability, an order having been made on 6 June 2001 to the effect that liability would be determined before any issue of damages was considered.  The orders made by his Honour on 14 December 2001 were in the following terms:

“THE COURT ORDERS AND DECLARES THAT:

1.         Telstra Corporation Ltd has breached clause 13.3.7 of Schedule 13 of the Access Agreement dated 14 August 1992 by including as a term of subscribing to the HomeLine Net service that the subscriber agree not to acquire services from other carriage service providers by dialling the access override codes of those carriage service providers while subscribing to the service.

2.         The proceedings be stood over until 9.30am on 12 February 2002 for a directions hearing concerning further hearings to determine relief (including damages) arising from the breach referred to in order 1.

3.         Save as to the matters referred to in orders 1 and 2, the application otherwise be dismissed.

4.         Liberty to apply on 3 days’ notice.

5.         Costs reserved.”

5                     On 28 February 2002, his Honour issued injunctions in the following terms:

“1.       Subject to further order, Telstra Corporation Ltd (Telstra) whether by itself its servants or agents or otherwise be restrained on and after a date being 35 days from the date of this order from offering to provide the HomeLine Net service on terms which include as a term of subscribing to that service that the subscriber agree not to acquire services from the applicants or either of them by dialling access override codes of the applicants or either of them while subscribing to the service.

2.         Subject to further order, Telstra whether by itself its servants or agents or otherwise be restrained on and after a date being 35 days after the date of this order from providing to any existing customers of the HomeLine Net service that service on terms which include as a term of subscribing to that service that the subscriber agree not to acquire services from the applicants or either of them by dialling access override codes of the applicants or either of them while subscribing to the service.

3.         The parties have liberty to apply on 5 days’ notice.”

6                     On 19 March 2002, his Honour made further orders in the following terms:

“1.       The respondent pay the applicants’ costs of the proceedings to date.

2.         Orders 1 and 2 made on 28 February 2002 be varied by deleting the words “Subject to further order”.

3.         Order 2 above take effect on 26 March 2002.

4.         The matter be stood over generally with liberty to apply (to be exercised within 5 days of Full Court giving judgment).”

7                     His Honour’s order having been interlocutory in character, it was necessary for Telstra to apply for leave to appeal against that decision.  Leave was granted at the commencement of the hearing of the application before the Full Court and argument proceeded on the appeal and cross-appeal.

The Reasoning at First Instance

8                     The reasoning of the learned primary judge on the question whether the no override provision was a breach of cl 13.3.7 may be summarised as follows:

1.         It was common ground that the imposition of a condition upon the provision of a service may fall within the concept of tariffing – [94].

2.         It appeared to be common ground that cl 13.3.7 precluded anti-competitive tariffing of Preselectable Services at any time not limited to the transitional period in which ballots were being conducted to determine initial Preselection – [96].

3.         Calls involving an Override Communication are not within the definition of Preselectable Service, it being a characteristic of Preselectable Services that they are “accessed by non-Carrier specific dial codes” – [98].

4.         The no override condition does not directly affect Preselectable Services – [98].

5.         The HomeLine Net service includes Preselectable Services and the no override condition is imposed on the acquisition of those services – [98].

6.         The imposition of the condition therefore constitutes the “tariffing of Preselectable Services” – [98].

7.         The Preselection process is probably a reference to Preselection as made available by either carrier in their capacity as a Local Exchange Carrier – [99].

8.         The no override condition would preclude Optus from inducing the subscriber, by competitive pricing or other means, to spontaneously use override to access the Optus network, eg by making one or a number of trunk calls.  So Optus is denied a commercial opportunity that the overall scheme of interconnection and selection was designed to provide – [100].

9.         The no override condition will remove a means of engaging in rivalrous market behaviour – Re Queensland Cooperative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25 FLR 169 at 188.

10.       The tariffing of a product (even though selection of the product is the choice of the customer) that diminishes the capacity of one carrier to offer choice is anti-competitive in the way contemplated by cl 13.3.7 – [101].

11.       Although a customer can fairly readily terminate the HomeLine Net service, to do so would involve some active steps being taken and some delay in termination being effected.  Spontaneous use of the override facility is effectively eliminated or at least substantially curtailed.

12.       Telstra breached cl 13.3.7 by offering the HomeLine Net service on the basis that a subscriber will not use override to access the services of Optus – [103].

The Contentions

9                     In its submissions on the appeal, Telstra argued that the no override term of the HomeLine Net service did not involve the tariffing of Preselectable Services because those services do not include Override Communications.  The HomeLine Net provides for a basic telephone service for residential customers on prescribed terms and conditions including rates.  Such a service is not a Preselectable Service.  HomeLine Net subscribers may acquire Preselectable Services such as national long distance calls at standard rates.  Customers who subscribe for options other than the HomeLine Net which do not contain the no override term can also acquire Preselectable Services at standard or reduced rates. On that basis the inclusion of the no override term in the HomeLine Net was said not to involve the tariffing of Preselectable Services within cl 13.3.7. 

10                  In the event that the no override term constituted the tariffing of Preselectable Services then, it was argued, the trial judge nevertheless erred in concluding that Telstra breached cl 13.3.7 because he made no finding that the tariffing undermined the integrity of the “Preselection process”.  Clause 13.3.7 refers to the undermining of the “Preselection process” which is not a defined term. That process concerns the conduct of the initial ballot, the nomination of preferred carrier, the provision of the interim “10” carrier selection code arrangements for Optus, the development and implementation of the technical, operational and administrative systems within the networks of Telstra and Optus and the conditioning of those networks to make Preselection available in respect of Eligible Preselection Lines and the cut-over from the interim “10” Carrier Selection Code arrangements to pre-selection. The no override term was said in no way to affect the Preselection process.  Preselection having been implemented the process itself was completed.  It is not undermined or affected by Telstra seeking in the current year to induce customers not to make override calls with Optus or any other carriage service provider. 

11                  It was further submitted that in any event the learned primary judge erred in concluding that the no override term involves tariffing in an anti-competitive way.  His Honour was said to have misunderstood the nature of competition confusing the process of competition with its end result.  Reliance was placed upon the fact that the HomeLine Net service is terminable at will by a customer and that there are no term commitments or other contractual restrictions on a customer cancelling his or her subscription to that service. 

12                  Then it was said that his Honour erred in concluding that Optus was precluded from offering choice to prospective customers and that consequently the supply of HomeLine Net with the no override term was anti-competitive.  The no override term does not affect Optus’ ability to offer services to customers.  A customer’s choice to subscribe for HomeLine Net is simply the end result of successful competitive conduct on the part of Telstra.  In relation to his Honour’s observations about the preclusion of spontaneous use of the override, it was submitted there is nothing in the Access Agreement or its underlying policy which demands the preservation of spontaneous use of the override facility by a customer notwithstanding that customer’s choice, freely made, to subscribe to HomeLine Net and thereby choose to agree not to make override calls.

13                  Reliance was also placed upon the express intention of the parties to promote competition reflected in cl 13.13.12 which provides:

“It is not the Carriers’ intention to restrict the ability of the Carriers to compete against each other in the provision of Preselectable Services, including price competition.”

14                  Optus submitted that the word “tariff” in cl 13.3.7 is not to be read narrowly.  It is artificial and incorrect to say that the HomeLine Net was only an option for the provision to residential customers of a basic telephone or access line service.  The HomeLine Net product sets out a particular way in which a customer can acquire a bundle of services which included Preselectable Services.  The nature of the bundling requires that the whole of the tariff be taken into account in order to understand all the terms and conditions applicable in respect of Preselectable Services.  Even if customers do not strictly acquire Preselectable Services from Telstra under the terms of the HomeLine Net tariff, a condition precluding override is a condition directly related to their acquisition regardless of the actual service which may be acquired under the agreement.  The HomeLine Net tariff does not lose its character as a tariff for Preselectable Services merely because it deals with other matters. 

15                  Optus argued that Telstra’s submissions failed properly to analyse the definition of “Preselectable Services”.  A particular communication can at the one time be both an override communication and a Preselectable Service in that it falls within one of the categories of telecommunications services described in the definition of Preselectable Services and is prefixed by a non-carrier specific dial code.  Because an override communication can be a Preselectable Service, the no override condition directly involves the tariffing of Preselectable Services. 

16                  Optus rejected Telstra’s contention that the pre-selection process was in effect completed in July 1993 and was therefore not undermined by the imposition of the no override condition in 2001.  The proscription on anti-competitive tariffing of Preselectable Services in cl 13.3.7 should be construed as regulating not just conduct that undermined the initial implementation of Preselection in 1993, but also conduct that undermines the process in terms of continuing arrangements after initial implementation. 

17                  Optus supported the learned primary judge’s interpretation of the words “in an anti-competitive way” by having regard to the Access Agreement as a whole.  Optus referred to the history of the establishment of the agreement asserting that the Preselection regime established by Schedule 13 was fundamental in enabling it to compete with Telstra to provide Preselectable Services to customers already connected to Telstra’s network who represented some 95% of customers in Australia.

18                  Because of the particular environment in which the parties entered into the Access Agreement, the words “competitive” or “anti-competitive” used in Schedule 13 should be understood in the sense of allowing Optus to compete on specified terms with Telstra which was then the incumbent carrier.  The words “anti-competitive” should also be interpreted in light of the fact that the sort of anti-competitive conduct prohibited is that which can undermine the Preselection process established by Schedule 13.  The limits of what Telstra can induce customers to agree is to be determined by reference to the competitive framework put in place by Schedule 13.  That Schedule contemplates competition for customers within a carefully crafted co-operative framework designed to give them unimpeded freedom to acquire Preselectable Services from either or both of Optus and Telstra by the mechanism of being able to choose one of them as preferred carrier, while remaining free to choose the other to deliver Preselectable Services on a call-by-call basis using carrier selection codes.  To alter the framework so established by way of a term of a tariff that disables an integral part of the relevant framework by an equivalent to physical means is squarely caught and prohibited by cl 13.3.7 because it alters the nature of the competitive environment. 

19                  It was not to the point, according to Optus, to say that HomeLine Net customers are free at any time to terminate their service from Telstra.  What the no override condition denies to HomeLine Net customers is the ability to make a once off or occasional decision to acquire a Preselectable Service from Optus. The condition thus unfairly skews the competitive balance between Optus and Telstra and undermines the integrity of the Preselection process.

Whether Telstra’s No Override Term Breached Clause 13.3.7 of the Access Agreement

20                  The language of cl 13.3.7 is pitched at a general level which has an hortatory ring to it.  The use of the general evaluative words “undermine”, “integrity” and “anti-competitive way” all point to its characterisation as a kind of good faith injunction in respect of the pricing and conditions applicable to the provision of Preselectable Services.  Tamberlin J in his reasons says the language is more apposite to an expression of broad generalised intent, than to the imposition of a clear and specific legal obligation.  I agree with that characterisation and with his Honour’s further observation that nevertheless the clause appears to have been intended to create a legal duty.  In my opinion it is sufficient for the purposes of this aspect of the appeal to assume that the imposition of the no override condition under the HomeLine Net agreement constitutes a tariffing of Preselectable Services. 

21                  Consistently with the general language already identified in cl 13.3.7 the concept of the Preselection process, which is not defined, should be seen as referring, post implementation, to the continuing system or scheme for Preselection contemplated by the Access Agreement.  This accords with the ordinary meaning of process as “something that goes on or is carried on; proceeding, procedure” – Shorter Oxford English Dictionary.  What is prohibited by cl 13.3.7 therefore is a pricing regime (defined by reference not just to fees payable but also by reference to terms and conditions) that undermines the integrity of that system or scheme.  The collocation “undermine the integrity” involves two evaluative terms.  Relevantly, “undermine” means “to weaken, injure, destroy or ruin insidiously” while “integrity” refers, inter alia, to “material wholeness, completeness, entirety” – Shorter Oxford English Dictionary.  Material wholeness is probably the meaning of “integrity” which provides the best fit to the language, context and purpose of cl 13.3.7.  The collocation involves a judgment whether the impugned tariffing is such as to be inconsistent with the continuance of the Preselection process or to significantly detract from it.  In my opinion that judgment is not to be made on the assumption that a single questioned tariffing is applicable across the board to Preselectable Services.  The judgment whether the imposition of a no override condition on a particular service undermines the integrity of the process is to be made by reference to its commercial significance and not upon the hypothesis, contrary to the fact, that it applies to the provision of all Preselectable Services.  No doubt a multiplication of no override conditions through a range of services could attract characterisation as a breach of cl 13.3.7. 

22                  His Honour determined that the no override condition involved an impermissible tariffing in breach of cl 13.3.7, a determination which seems to have rested on the implied basis that any application of tariffing in an anti-competitive way would undermine the integrity of the Preselection process.  In my respectful opinion, this approach does not pay sufficient regard to the generality of the language used in cl 13.3.7 but rather treats it as imposing a clear and specific legal obligation. To establish that the integrity of the Preselection process was undermined, it was necessary to show a substantive as distinct from theoretical impact upon the process.  On his Honour’s findings of fact, in my respectful opinion, no such impact was disclosed.  As a matter of evaluation it cannot be said that the no override condition in the HomeLine Net service undermines the integrity of the Preselection process.

23                  It is, in any event, a requirement of cl 13.3.7 that in order for the tariffing of a Preselection Service to be in breach of the clause it must be done “… in an anti-competitive way”.  In the context of that clause, which is concerned with significant impacts upon the Preselection system or scheme, this requires a tariffing which is done in a way that has substantial implications for the competition between carriers which the Access Agreement protects and seeks to advance. 

24                  When one trader offers to sell its services to a consumer it necessarily does so at the expense of its competitor.  That is an inescapable aspect of the process of competition.  It is not anti-competitive.  That is to say no more than that the exclusion of a competitor from a particular transaction is an incident of competition.  It may be said that the no override condition goes further and involves a species of exclusive dealing practice on the part of Telstra.  To so characterise it however does not mean that it is anti-competitive having regard to the availability of consumer choice in terms of the services offered by both Telstra and Optus.  Even in the Trade Practices Act 1976 (Cth) exclusive dealing per se is not a contravention of the law unless it involves substantial lessening of competition (save for third line forcing which is a per se offence) – see s 47 Trade Practices Act. 

25                  In my opinion, the no override condition, assuming it constitutes a tariffing of Preselectable Services, does not do so in an anti-competitive way nor does it undermine the integrity of the Preselection process.  I agree therefore with the conclusions of Tamberlin J on this point and would allow the appeal.  I would dismiss the cross-appeal.  Except as to the breach of cl 13.3.7, I agree with the reasons for judgment of Conti J.  Optus should pay Telstra’s costs of the appeal and cross-appeal and at first instance.

Associate:

Dated:              23 September 2002

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

TAMBERLIN J:

26                  Before the Court there is an application for leave to appeal, and if granted, an appeal from the interlocutory judgment of Moore J.  Having regard to the reasons for decision set out in the judgment of Conti J on appeal and to the submissions made by the parties, I consider this is a case where leave to appeal should be granted.

27                  I have come to a different conclusion from Conti J on the question raised on the appeal as to the operation and effect of cl 13.3.7 of the Schedule 13 to the Access Agreement between the appellant (“Telstra”) and the respondents, (collectively “Optus”).  In relation to the other matters considered by his Honour, I agree with the conclusions and reasons given by him.

28                  I do not consider that Telstra has undermined the integrity of the Preselection process through the tariffing of Preselectable Services in an anti-competitive way. 

29                  This appeal falls to be considered in circumstances where the Court has decided that Optus has failed to make good any case as to any breach of the Access Agreement by reason of bad faith or of any implied term or as a result of the existence of any misleading conduct on the part of Telstra.

30                  I accept that the Preselection process can be said to be an ongoing one and that it did not terminate upon selection of a preferred carrier. 

31                  The language of cl 13.3.7 of the Access Agreement is somewhat amorphous.  In particular the expression “integrity of the Preselection process” is an ill-defined and vague concept of the most general kind and the reference to “undermining” is also general and ill-defined. The language is more apposite to an expression of broad generalised purpose rather than to defining a clear and specific legal obligation, although it appears to have been intended to create a legal duty.

32                  The clause is not concerned with the particular motive of the parties but rather with the effect of their conduct in relation to tariffing.  In particular, the question is whether the conduct of Telstra in offering the HomeLine Net service package undermines the integrity of the Preselection process in a particular way, namely by tariffing of Preselectable Services in an anti-competitive way. 

33                  The first question raised is what is meant by the amorphous expression “the integrity of the Preselection process”.  The extent of the implementation of the override facility under the HomeLine Net service in relation to any particular proposed call will depend in each case on the choice of the customer freely made whether or not to use the facility for that call.  In the present case there is no suggestion that when joining the HomeLine Net service the customer has been influenced or pressured against his or her will to desist from using the override service in relation to proposed calls.  A prospective customer is able to choose free of coercion or pressure to trade off the lower monthly access price offered by Telstra through the HomeLine Net service against the perceived benefits or advantages which may be or may become available by invoking the override facility, which would otherwise be available if the customer was prepared to pay a higher fee and forgo the benefits available under the HomeLine Net package.  It is quite open to a competitor to offer the same or a more advantageous arrangement so far as price or other terms are concerned.  Telstra has offered the HomeLine Net service as one part of its competitive armoury of packages designed to attract customers. 

34                  If a customer wishes to obtain full unrestricted service, which includes the facility to override then he or she has the option to subscribe to such a service and pay the higher fee.  It is the choice of the customer as to which package is more competitive or attractive.  There is no suggestion that Telstra has done anything other than to promote, in offering the HomeLine Net service at a lower fee in the ordinary course of commerce and competition, the advantages of such an arrangement.  The Preselection process remains in place and it is for the customer to take advantage of it or not in such a way as he or she considers appropriate.  Where the customer elects to pay the higher fee for services other than HomeLine Net and to have the override facility available but declines to use it, such a decision by the customer in relation to a particular call not to use the service does not “destroy” or “detract from” the integrity of the Preselection process.  Nor can it be said that where a customer makes a prior general commitment on taking up the HomeLine Net service not to take advantage of the override service otherwise available and to trade off this right or potential in return for a lower fee that there has been an adverse impact on the “integrity of the Preselection process”.  If customers can elect in relation to individual calls not to use the override services it is difficult to see why a customer cannot decide to enter into a contract at a lower price which carries with it an obligation not to use the override facility during the operation of that arrangement.

35                  The provision refers to the “integrity” of the Preselection process.  It does not require that the override facility should be continuously availed of at all times.

36                  It is true that the Preselection process contemplates the possibility of override arrangements being invoked from time to time as the customer sees fit, but whether this facility is invoked will always depend on the customer wishing to take advantage of the facility either in a particular case or generally.  Where a customer does not wish to take advantage of the facility it does not follow that the integrity or operation of the Preselection process has been “undermined”.  The override facility is still available in circumstances where the customer elects not to take advantage of the HomeLine Net service and pay a higher fee.  Where a customer voluntarily decides in advance on a general basis, in return for a benefit in the form of a lower fee, not to take advantage of the facility, then the Preselection process itself cannot be said to have been undermined so that its “integrity” is said to have been diminished, disabled, weakened, hindered or extinguished in any way.

37                  The second component of the prohibition in cl 13.3.7 which, in my view, has not been made out in the present case, is that the undermining must result from the tariffing of services in an anti-competitive way.  The condition challenged does not operate, in my view, in an anti-competitive way nor can it be so characterised.

38                  In order to determine whether a provision operates in an “anti-competitive way” it is necessary to consider what is the subject of the competition and the market context in which the competition takes place: see generally Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197 in relation to market definition.  In the present case the market is in respect of basic telephone services.  There cannot be said, in any realistic commercial sense, to be a market in override facilities.  They are a feature or incident of the basic telephone services.

39                  Generally, in the absence of coercion or pressure where a customer freely makes a commercial decision to subscribe to a service at a lower than standard fee on condition that the customer’s entitlement to access facilities otherwise available is not exercised, it is difficult to see that this decision to accept the offer is anti-competitive in nature.  Nor does it follow that to offer a lower price in return for the surrender of entitlements is “anti- competitive”.  There is a voluntary trade-off by the customer of the ability to access the override facility in exchange for the lower price.  The customer’s choice is exercised at that point and it is open for competitors to offer a comparable or more advantageous arrangement.  If the customer is persuaded of the advantages of the alternative competitive package then such a proposal may be accepted.

40                  As Conti J points out, among the key objectives of the implementation of Preselection, as set out in cl 13.1.3 of Schedule 13 to the Access Agreement, is to give effect to the customer’s right to choose and to empower customers to make their own free informed and positive choice.  The objective in par (j), for example, refers to the desirability of structuring the customer’s choice process so that the restrictions on carrier activities are minimised.  In the present case the voluntary entry into a bargain with Telstra to accept its HomeLine Net package amounts to the exercise of such a customer choice.  It does not follow that where a customer has so chosen to give up a right to override in return for a lower price that such a choice is anti-competitive in nature simply because, at some later stage, he or she is prevented by the earlier choice, made in a competitive market, from taking advantage of the facility which had been freely surrendered as part of the earlier contractual bargain.  This is something which has been bargained for between Telstra and the customer in circumstances where the exercise of free and informed customer choice has taken place.  It is somewhat difficult therefore to say that in such circumstances, the fact that the customer may be required to adhere to the terms of a commitment freely entered into amounts to an anti-competitive requirement.

41                  The manner in which competitive conduct operates was considered in Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25 FLR 169, a decision of the Trade Practices Tribunal, constituted by Woodward J, J A F Shipton, and Professor M D Brunt.  In that matter the Tribunal pointed out that competition is a process rather than a situation.  At 188, after emphasising that there are creative roles for firms in providing new products, using new technology and providing more effective services or improved cost efficiency, and that there are opportunities and rewards as well as punishments in this dynamic process, the Tribunal said:

“Competition expresses itself as rivalrous market behaviour.  In the course of these proceedings, two rather different emphases were placed upon the most useful form such rivalry can take.  On the one hand it was put to us that price competition is the most valuable and desirable form of competition.  On the other hand it was said that if there is rivalry in other dimensions of business conduct – in service, in technology, in quality and consistency of product – an absence of price competition need not be of great concern.

In our view effective competition requires both that prices should be flexible, reflecting the forces of demand and supply, and that there should be independent rivalry in all dimensions of the price – product – service packages offered to consumers and customers.”

42                  In the present case the HomeLine Net package offered by Telstra is one of the ways in which a new price-service package is offered to a consumer or customer.  It is part of and is a means of conducting competition in an open and free market.  Seen in that light, it is not anti-competitive in character. 

43                  In Queensland Wire Industries Pty Limited v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177 at 191, Mason CJ and Wilson J said in relation to competition:

“… the object of s 46 [of the Trade Practices Act 1974 (Cth)] is to protect the interests of consumers, the operation of the section being predicated on the assumption that competition is a means to that end.  Competition by its very nature is deliberate and ruthless.  Competitors jockey for sales, the more effective competitors injuring the less effective by taking sales away.  Competitors almost always try to ‘injure’ each other in this way.  This competition has never been a tort … and these injuries are the inevitable consequence of the competition s 46 is designed to foster.”

44                  These remarks indicate that a robust approach should be taken when deciding what is “competitive conduct” having regard to commercial reality. I accept that there may be some inertia in the circumstances of this case on the part of a customer electing to terminate the agreement with Telstra, and taking up any new offer.  This is possible on short notice and in a simple way, in order to take advantage of any offers which Optus may subsequently make from time to time in relation to override.  However, I do not consider that the tendency to such inertia, in the circumstances, leads to a conclusion that the agreement to take advantage of the lower fee in return for renunciation of the facility to override operates in an anti-competitive way.  This is not a proper characterisation where a party has freely bargained to take advantage of the offer of a particular telephone service package involving the renunciation of entitlements under another package which is more expensive.

45                  The ability of a supplier of goods or services to offer to a customer a new package which can be seen to be more advantageous with respect to price or terms is at the heart of the competitive process and this is what Telstra has proposed in the present case with its HomeLine Net service.  To preclude Telstra, or Optus for that matter, from offering such a package would, in my view, amount to anti-competitive conduct, particularly in so far as this could stifle customer choice.

46                  In the present case the provision of the HomeLine Net service by Telstra at a lower rate serves both to promote competitive consumer choice by making this package available to a consumer as one of its potential options so that the consumer can subscribe to a particular group of services at a lower cost than would otherwise be the case and to advance competition.  If the option to take up such an offer and service with a commercial advantage is denied to the customer then the objective of promoting consumer choice and competition in relation to new service packages is defeated.  The consequence that obtaining a price advantage requires the renunciation of a right, otherwise available, to override to another carrier does not mean that the lower fee is imposed or operates in an anti-competitive way.  It would be an odd result that a person could surrender the possibility of using override calls in return for a lower price and later could complain that the override facility should be available.  A contractual commitment freely arrived at will often involve surrender of future rights and this is not necessarily anti-competitive.  The consequence may be to totally prevent the customer taking services or goods from other suppliers over that period but this does not mean that there has not been free competition when making the initial choice: cf Tampa Electric Co v Nashville Coal Co 365 US 320 (1960).  The offering of such a reduction in price in return for a contractual commitment is a normal way of carrying on business in a competitive manner and as such it cannot be said to be anti-competitive and in breach of cl 13.3.7.

47                  In reaching the above conclusion I have taken into account that the broad objective of the Access Agreement was to open up the telephone services market and this supports an approach to the clause which is not unduly technical or literal.  Nevertheless, in my view, the language of cl 13.3.7 is reasonably clear and must be given effect and it supports a conclusion that there has not been a breach in this case.  Moreover, the interpretation which I favour gives effect to several key objectives of the Access Agreement.

48                  For the above reasons I consider that the following orders should be made: leave to appeal should be granted; the appeal should be allowed; the orders made below should be set aside and the application dismissed; the respondents should pay the appellant’s costs in relation to the appeal; the respondents should pay the appellant’s costs in relation to the cross-appeal and the appellant’s costs of the hearing below.

Associate:

Dated:              23 September 2002

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

CONTI J:

49                  On 14 August 1992 Telstra Corporation Limited (“Telstra”) made an agreement with Optus Network Pty Ltd and Optus Mobile Pty Ltd (together “Optus”) called the Access Agreement. Its proper construction and whether it has been breached by Telstra, fall for consideration in this appeal. In the proceedings below, the primary judge found on 14 December 2001 that breach of one aspect of the Access Agreement, namely the so-called Tariff Obligations had occurred, but that none of the other alleged breaches had occurred.

50                  The genesis and general effect of the Access Agreement is conveniently explained in its recitals. Both Telstra and Optus are carriers of telecommunication services and were licensed as such under the Telecommunications Act 1991 (Cth) (Recitals A and B). It is common ground that they are currently licensed carriers under the Telecommunications Act 1997 (Cth). The 1991 Act recited that:-

(i)         A Carrier has the right to interconnect its Network Facilities to the Network of another Carrier on agreed terms and conditions; and

(ii)        where a Carrier reasonably requests another Carrier to supply Telecommunication Services to the requesting Carrier, that Other Carrier must on agreed terms and conditions supply the Telecommunications Services so far as is necessary or desirable for the purposes of the requesting Carrier supplying Telecommunications Services. (Recital C)

The Access Agreement set out the terms and conditions upon which each of Telstra and Optus agreed to:

(i)         Interconnect its Network Facilities to the Network Facilities of the Other Carrier; and

(ii)       Supply requested Telecommunications Services to the Other Carrier; and

(iii)      Make available to the Other Carrier the services, facilities and information specified in the supplementary access conditions to which the relevant respective licences are subject. (Recital F)

51                  The Access Agreement was the product of an historic process by which Australian telecommunications services, once provided by statutory authorities, came to be provided by competing carriers. That process has been described in the judgment of Mansfield J in Telstra Corporation Limited v Optus Communications Pty Ltd (1997) 75 FCR 171 at 173-174, which was reproduced in part in the reasons for judgment of the learned primary judge. It is sufficient for present purposes to go back to 1989, at which time telecommunications services in Australia were provided by three carriers:

1.         The Australian Telecommunications Corporation, a publicly owned corporation known as Telecom which operated domestic telecommunications.

2.         The Overseas Telecommunications Commission (“OTC”), a public company whose only eligible shareholders were Telecom and the Commonwealth, and which operated international communications.

3.         AUSSAT, a proprietary limited company which operated domestic satellite telecommunications.

The general regulatory framework was provided by the Telecommunications Act 1989 (Cth). That Act established the Australian Telecommunications Authority (AUSTEL), with responsibility for economic and technical regulation of the Australian telecommunications industry.

52                  In November 1990, the process commenced by which competition was introduced into the industry in Australia. A Prime Ministerial Statement on Transport and Telecommunications Reform proposed the establishment, by the end of 1991, of a transitional duopoly in telecommunications comprising a merged Telecom / OTC, and a private sector company based on a privatised AUSSAT. Competition protections were also foreshadowed including interconnection of the networks of two carriers, with equal access by the public to each of them.

53                  In March 1991 AUSTEL reported on customer access arrangements. The response of the Minister to that report accepted that equal access could only be achieved by “Preselection with override dial codes”. In broad terms, this was a reference to the designation by the customer of a preferred carrier network to be used by that customer, with the facility to override the designation and access the competitor’s network by the use of a dial code. The Minister indicated that he would be directing Telecom to make arrangements to ensure “the earliest possible introduction of equal carrier Preselection with override codes and … would like AUSTEL to ensure that the arrangements [were] implemented efficiently and quickly”.

54                  The Telecommunications Act 1991 (Cth) came into effect on 1 July 1991. It established a regulatory framework for the provision of telecommunication services in Australia. It continued AUSTEL in existence as industry regulator with responsibility, inter alia, for the licensing of telecommunications carriers. A companion statute, the Australian and Overseas Telecommunications Corporation Act 1991 (Cth), created the Australian and Overseas Telecommunications Corporation, and provided that it was to take over the assets of Telecom and the OTC. That Corporation’s name was changed to Telstra Corporation Limited in 1993. The creation of the proposed network duopoly was effected with the sale of AUSSAT to Optus Communications Pty Ltd. That company is the owner of all issued shares in Optus Network Pty Ltd. The Minister for Transport and Communications announced the selection of Optus as the second carrier on 19 November 1991. Optus entered into a Network Development Deed with the Commonwealth on 6 December 1991. By that Deed it assumed obligations for the construction of its network. One of those obligations was to ensure that by the end of 1997, the Optus Network would have adequate capacity to provide originating access to Domestic Long Distance Services and International Long Distance Services for 100 per cent of the Australian population (cl 4.2(f)).

55                  An Interconnection and Equal Access Certification Report issued by AUSTEL in January 1992 certified that interconnection and equal access arrangements were adequately provided for. It described the essential elements of interconnection and equal access as interim dial code access, Preselection with override codes and an access agreement.

56                  The carrier licences issued to Telecom and Optus Communications were subject to conditions requiring each to ensure that by 30 June 1997, its network facilities were “… capable of being interconnected with the facilities of a nominated carrier” and would “… permit a customer to preselect a carrier as the customer’s preferred carrier and to change that selection from time to time” (licence condition 9.1). Each carrier was also to ensure that “carrier preselection with override dial codes is introduced as soon as possible”, to be available in 90% of exchange lines in each capital city and 30% of exchange lines in provincial centres, other than urban centres and rural areas, no later than 30 June 1993, and that “carrier preselection with override dial codes is available to all Australian customers no later than 30 June 1997” (licence condition 9.2). Optus began offering long distance telecommunication services in Australia in November 1992.

57                  Telstra provided by affidavit evidence a detailed technical account of the network interconnection, preselection and access mechanisms which were put in place by Telstra and Optus from 1991 and 1992, and subsequently by other carriers, which may be summarised as follows:

(i)         The process required the establishment of Telstra points of interconnection with the Optus network, and the appropriate conditioning of Telstra’s switches on a progressive basis as Optus rolled out its network. Interconnection enables calls to be passed between networks, which does not necessarily involve any preselection (for example a call from a customer directly connected to the Telstra network and a customer directly connected to the Optus network), but is necessary to enable a customer to choose which telecommunications carrier to use for Preselectable services.

(ii)        Initially, Preselectable services were national and international direct dial long distance calls, certain operator listed calls, certain call charge enquiry calls, and international ring back call charge enquiries; they now also include fixed to mobile calls. Until 1995, for a long distance call made by a customer directly connected to Telstra’s network to be sent to and carried by Optus, it had to be marked in some way so that the Telstra network recognised that it was intended to be carried by the Optus network. The initial solution was to enable the customer to dial a “1” before the long distance number dialled, if the customer wished to use Optus.

(iii)       From approximately 1995, the initial solution of enabling customers to dial “1” was no longer necessary, because the preselection ballots had been conducted, and the local access switches had become conditioned with each customer’s choice of preferred or preselected carrier. For customers who made no choice, their default choice of preselected carrier was the carrier to whose network the customer was directly connected.

(iv)       A Preselectable call made by a customer directly connected to Telstra’s Public Switched Telephone Network (“PSTN”), being a customer who has preselected Optus, or who is preselected to a carrier other than Optus, but dials the Optus override code, passes from the customer’s terminal to Telstra’s Local Access Switch (“LAS”), which is programmed so as to recognise the call as one to be routed to Optus at the Point of Interconnection (“POI”) in Telstra’s Interconnect Gateway Switch (“IGS”). The switch routes the call directly, or via Transit Network Switches (“TNSs”), to Telstra’s IGS, from which the call is routed across a POI with the Optus network. Optus bills the customer for the call, and pays Telstra for the use of Telstra’s network. If a customer directly connected to Telstra’s PSTN, having preselected Optus or dialled the Optus override code in respect of a preselectable call, calls another party in Australia who is not a directly-connected Optus customer, but is directly connected to Telstra’s PSTN, Optus needs to use the Telstra network, not only to originate the call, but also to terminate the call. In order for the call to be delivered, the call passes from the Optus network back to Telstra through a POI in Telstra’s IGS. The call then travels, either directly or via Telstra’s TNSs, to the LAS of the called party, and then to the called party’s customer terminal. Optus bills the customer for the call and pays Telstra for the use of Telstra’s network in originating and terminating the call.

(v)        It is not only Telstra and Optus which can be preselected carriers for Preselectable calls, and which have override codes. Although customers could preselect only Telstra and Optus as fixed network carriers during the period from 1991 to 1997, upon the introduction of the 1997 Act, other carriers were allowed to be licensed to provide telecommunications services, including preselection, over fixed networks (for instance AAPT, a Preselectable carrier having override code 1414).

(vi)       Telstra has conditioned its PSTN to accommodate preselection to Optus by customers directly connected to Telstra’s PSTN, and to enable carriage of Preselectable calls by such customers, or by customers selected to a carrier other than Optus who dial the Optus override code.

The Access Agreement

58                  Clause 1 of the Access Agreement sets out numerous definitions which are referred to below to the extent that is necessary. Clause 2 deals with the scope of the Access Agreement. It is intended to apply only to the provision of services by Telstra and Optus to each other, and is not to be construed as conferring benefits on third persons (clause 2.1). The governing principle of the Access Agreement, set out at some length in clause 2.3 is, in substance, that Telstra and Optus will treat each other on a non-discriminatory basis “in relation to the technical and operational quality of services provided” in recognition of the fact that in Australia, licensed carriers are primary providers of Australia’s telecommunications network and primary suppliers of telecommunications services, and that for these purposes their network facilities are interconnected; as part of that governing principle, clause 2.3 further stipulates that Telstra and Optus “will treat all customers who are similarly situated on a non-discriminatory basis”.

59                  The purpose of clause 2.3 is explained in clause 2.4 as follows:

“The purpose of clause 2.3 is to promote and safeguard and protect competition between Carriers in the provision of Telecommunications Networks and Telecommunications Services. The principle set out in clause 2.3 will be implemented in a way which facilitates and does not inhibit competition between the Carriers in the provision of Telecommunications Networks and the provision of Telecommunications Services to customers. The operational implementation of this principle is set out, in part, in the schedules and may be further agreed by the ICRG.”

The “ICRG” is the Inter-Carrier Relations Group established under clause 13.2 of the Access Agreement.

60                  The Access Agreement defines Access Carrier as “the Carrier which provides or is to provide a Service to the Interconnecting Carrier” and the Interconnecting Carrier as “the Carrier to which a Service is or is to be provided” (clause 1.1). The services to be provided include Access Services and Interconnection Services. The Agreement sets up a framework for the provision of those services. The parties, it is recited, have agreed on terms and conditions of their provision which are included in the schedules to the Agreement (cl 2.8). The term “Access Service” is defined by clause 1.1, by reference to POIs (see [57(iv)] above), which are agreed locations constituting points of demarcation between the networks of the Carriers, and which are each associated with one Telstra Gateway Exchange and one Optus Gateway Exchange. Access Service, as follows:

“‘Access Service’ means a service for the carriage of Communications between:

(a)       a POI and a called number / party; or

(b)       a calling party and a POI; or

(c)       two POIs.”

An Interconnection Service is also defined by clause 1.1 as “a service for the provision of Interconnect Conditioning, Interconnect Capacity, Network Conditioning and Network Capacity to enable, or for use in, as the case may be, the provision of one or more Access Services”. This attracts further definition of the terms “Interconnect Conditioning”, “Interconnect Capacity”, “Network Conditioning” and “Network Capacity”, which are not necessary to set out.

61                  Clause 3 deals with the provision of Interconnection Services and clause 4 with the provision of Access Services. It is sufficient to set out clause 4, which provides as follows:

“4.       ACCESS SERVICE

4.1       Subject to clause 2.8 and Interconnection Service being provided in accordance with clause 3 and the Interconnecting Carrier’s compliance with the relevant Service Ordering Procedures, the Access Carrier will provide the requested Access Service in accordance with the relevant Provisioning Procedures.

4.2       Each Carrier must ensure that the carriage of Designated Communications by it conforms to the applicable QOS Standards for the carriage in respect of which the Carrier has control.

4.3       Subject to clause 12, the schedules and any practices and procedures agreed by the ICRG, nothing in this agreement may be construed to preclude the Access Carrier from using, modifying or substituting such of its Facilities for other of its Facilities as reasonably required to provide a Service provided that the Access Carrier complies with the applicable QOS Standards and Technical Specifications for Interconnection.

4.4       Promptly after the Commencement Date, the Carriers will commence negotiations concerning the terms and conditions on which Preselection will be made available and the Carriers will use their reasonable endeavours to conclude those negotiations as soon as possible after AUSTEL has determined the requirements regarding Preselection.”

The term “Preselection” has the meaning given to it in schedule 13 (see clause 1.1) and will be set out later below.

62                  Clauses 5 to 19 inclusive are not directly relevant. They relate to a number of matters including Transmission Capacity (cl 5), Facilities Access (cl 6), Operator and Directory Assistance (cls 7 and 8), Information Support (cl 10), Billing and Settlement (cl 11), Network Protection and Network Provision and Operations Liaison (cll 12 and 13), Intellectual Property Rights (cl 14), Confidentiality (cl 15), Liability and Indemnity (cl 16), Commencement, Duration and Consequences of Breach (cl 17), Review (cl 18), Dispute Resolution (cl 19) and Miscellaneous (cl 20). The good faith requirement in clause 20.8 provides:

“20.8  Each party agrees that it will act in good faith in relation to each other party with respect to all matters relating to or contemplated by this agreement.”

Clause 20.17 stipulates an “entire agreement” provision of some complexity. Clause 20.23 requires that the parties comply with the terms of the schedules.

63                  The Agreement has been subject to many variations and the attachment of numerous schedules each deals with a particular topic. Relevant to this appeal are schedules 1 and 13.

Schedule 1

64                  Schedule 1 is entitled General Provisions Concerning Access Services. That provision of schedule 1, which is the subject of issue in this appeal, is clause 1.5 dealing with disconnection and barring procedures. That part of the clause principally relevant is 1.5.3 which provides as follows:

“1.5.3Unless and until the Carriers agree otherwise, a customer request for the barring of switched direct dialled trunk calls will be implemented by the Access Carrier so as to bar access to national and / or international switched direct dialled trunk calls to be routed over the Network of either Carrier.”

Clause 1.2.1 of Schedule 1 has been also referred to in the appeal, and reads as follows:

“1.2.1  Domestic PSTN Originating Access is provided for:

(a)               all Communications prefixed by a Carrier Selection Code; and

(b)               all Communications Preselected to the Interconnecting Carrier.”

Reference to PSTN is made in [57(iv)] above. The expression “Domestic PSTN Originating Access” is defined by the Access Agreement to mean “an Access Service for the carriage of telephone calls (ie voice, data over the voice band) from the calling number (not being a mobile number) to a Domestic PSTN POI”. Reference to POI is also made in [57(iv)] above. “Communication” is a defined expression contained in the 1991 Act, and the term “Preselected” is governed by the defined expression “Preselection” extracted in [66] below”.

Schedule 13

65                  Schedule 13 deals with “Procedures For The Implementation Of Preselection Arrangements”. It was inserted by an Access Agreement Variation Agreement on 16 July 1993. Clause 13.1 contains the following three sub-clauses:

“13.1.1    This schedule provides for procedures for:

(a)   implementation of Preselection;

(b)   the transition from the interim ‘10’ Carrier Selection Code arrangements; and

(c)   continuing arrangements relating to Preselection after initial implementation.

13.1.2      In accordance with the procedures set out in this Schedule, each directly connected customer of each Carrier will have an equal opportunity to designate, on a non-discriminatory basis, which of the Carriers will be the preferred provider of certain Telecommunications Services to that customer over each of his or her customer access lines for which Preselection is available, irrespective of which Carrier provided those Telecommunications Services to that customer over that customer access line prior to the implementation of Preselection.

13.1.3      The Carriers have agreed that the key objectives of the implementation of Preselection in Australia are as follows:

                 (a)   the promotion of and consistency with the objects and provisions of the Telecommunications Act 1991;

                 (b)   the importance of ensuring customers make a positive designation of their Preferred Carrier;

                 (c)    the importance of ensuring customer awareness and knowledge of the competitive telecommunications environment by the time a ballot is held;

                 (d)   the desirability of providing Optus Networks with an opportunity to establish its name in the market, to familiarise customers with its services and to gain knowledge of customers by the time a ballot is held;

                 (e)    the desirability of achieving customer response to a ballot process as early as possible in that process, principally by maximising the response rate to the first ballot;

                 (f)    a recognition that each ballot has certain costs, both in terms of the financial cost to the Carriers and the potential adverse reaction of customers;

                 (g)   the provision of an orderly and organised way in which customers have the opportunity freely to make an informed, positive choice of Preferred Carrier for those services that are subject to Preselection;

                 (h)   the importance of respecting the proper rights and expectations of customers, including their right to privacy and freedom of choice, and of ensuring that these rights are not compromised or jeopardised in any way;

                 (i)    the desirability of structuring the customer choice process such that, to the maximum extent possible, customers will have the opportunity to make their own decisions on issues affecting them and have the final say on such issues; and

                 (j)    the desirability of any restrictions or constraints on Carrier activities prior to and during the customer choice process being minimised and that only those activities considered likely to compromise or be detrimental to a customer’s opportunity freely to make an informed, positive choice are to be subject to agreed conditions or constraints.

66                  The term “Preselection” is central to this schedule and is defined in clause 13.2.1 thus:

“'Preselection’ means the service made available by the Local Exchange Carrier to a Service Customer in respect of a Preselected Line which will:

(a)       permit designation by the Service Customer of one of the Carriers as the Preferred Carrier;

(b)       route all Preselected Communications to the Preferred Carrier;

(c)       route Override Communications to the Override Carrier; and

(d)       allow the Service Customer to change from time to time the designation of Preferred Carrier for that Preselected Line.”

A “Preselected Line” is defined as:

“… an Eligible Preselection Line in respect of which one of the Carriers has been designated as the Preferred Carrier by the Service Customer for that customer access line.”

The definition of “Eligible Preselection Line” need not be set out for present purposes. It identifies classes of customer access line which it may be assumed are applicable in the present case.

67                  The concept of “Preferred Carrier” is of importance and is defined thus:

“‘Preferred Carrier’ means, in respect of a Preselected Line, the Carrier which has been designated by the Service Customer in accordance with the procedures in this Schedule for the carriage of all Preselected Communications originating from that line.”

68                  The schedule also defines the concept of “Override Carrier” and “Override Communication” thus:

“‘Override Carrier’ means, in respect of Preselected Line, the Carrier which has not been designated as the Preferred Carrier for that Preselected Line.

‘Override Communication’ means a communication originating from a Preselected Line which the calling party routes to the Override Carrier’s Network by prefixing that call with the Carrier Selection Code of that Carrier.”

69                  Clause 13.3.7 which is central to the appeal in this case provides that:

“The Carriers will not undermine the integrity of the Preselection process through their tariffing of Preselectable Services in an anti-competitive way.”

This clause imports the concept of “Preselectable Services”, which is also defined in clause 13.2.1, as follows:

“‘Preselectable Services’ means the following single category of Telecommunications Services which are accessed by non-Carrier specific dial codes;

(a)       National Long Distance Calls;

(b)       international direct dialled telephone calls, prefixed with the dial code ‘0011’ (for both voice and data on the voice bands) or its successor non-Carrier specific dial code;

(c)       operator connected calls prefixed with the dial codes ‘011’ and ‘0101’ or the successor non-Carrier specific dial codes;

(d)       call charge inquiry calls prefixed with the dial codes ‘012’ and ‘0102’ or their successor non-Carrier specific dial codes;

(e)       international directory assistance calls prefixed with the dial code ‘0103’ and international service difficulties prefixed calls with the dial code ‘0100’ or their respective successor non-Carrier specific dial codes;

(f)        international ‘ring-back’ call charge inquiries prefixed with the ‘0012’ code or its successor non-Carrier specific dial code;

(g)       Other services agreed by the Carriers and AUSTEL from time to time;

and for the purposes of clarification;

(h)        the term Preselectable Services excludes reverse charge (or collect) calls accessed through the dial code ‘0176’ and its successor code but includes calls of that type accessed through non-Carrier specific dial codes for operator services which are Preselectable Services.”

The primary judge recorded that it was common ground that mobile phone calls were included in the foregoing list, presumably by virtue of paragraph (g) above.

70                  Further provisions of Schedule 13 which are relevant to the cross-appeal are clause 13.13.12, and paragraph (a) of clause 13.5.3, reading respectively as follows:

“It is not the Carrier’s intention to restrict the ability of the Carriers to compete against each other in the provision of Preselectable Services, including price competition.

…

(a)       Subject to sub-paragraphs (b) and (c) each Carrier will ensure that its Preselection Systems are in place within a ballot area at least by the Ballot Nomination Date of that Ballot area for that ICCA. Each Carrier will certify to the Ballot administrator and the Other Carrier as soon as its Preselection Systems are in place in a Ballot area.”

Paragraphs (b) to (f) need not be referred to in detail for present purposes.

71                  Particularly by reason of the reference made thereto by the primary judge to the effect that the same reflected the policy underlying the Access Agreement, it is lastly appropriate to set out below clause 13.3A.1 of Schedule 13:

“13.3A.1General

                In relation to Preselection Implementation, resolution of the issue of the co-existence and interaction of Preselectable Services which are Preselectable Commissions and other Telecommunications Services (including other Communications which are or involve Preselectable Services) will be in accordance and consistent with the Government policy set out in the Telecommunications Act and in the following paragraphs of the letter from the Minister of Communications to AUSTEL dated 27 April 1993 (“the Minister’s Letter”):

                        ‘In general terms, however, it is important that the ballot be as wide as practicable in its coverage.’

                        ‘Given that consumer interests as well as competition policy considerations are at the heart of this issue, the Government’s policy position would require that where a customer has preselected a Carrier for a category of service, all that customer’s calls in that category should automatically be carried by the preselected Carrier. This would be the case regardless of how those calls were dialled, unless the customer specifically chooses otherwise, such as by using override codes or by selecting a particular service that involves a variation to the preselection decision.’

                        ‘Customer’s preselection decisions should not be frustrated or by-passed by any pre-existing arrangements with Telecom. For example, it seems to me that abbreviated dialling features associated with particular existing local exchange capabilities should in future deliver relevant calls automatically to the preselected Carrier, unless the customer overrides that selection on a case-by-case basis.’

                        …

                        ‘Any other outcome would seek to risk the bundling of services currently provided at the local exchange level (where competition will be slower to emerge because of structural and technological obstacles) with other services where competition is more immediately practicable. This would risk adverse effects on the emergence of competition. Such effects would be inconsistent with the intent of policy and the legislation.’”

Albeit that the Minister’s letter had been written in the context of the intended ballot, there is no compelling reason to confine the policy there enunciated to that historical context.

Observations of the primary judge relating to what he described as the contents of the HomeLine Net service

72                  The Telstra HomeLine Net service is an option designed for customers who have Internet access, which was introduced to residential customers on 1 March 2001. Customers are required to subscribe for the Telstra HomeLine Net service by ordering it on-line. Customers who subscribe for the Telstra HomeLine Net service also preselect Telstra for national long distance, international calls, and calls to mobile services from the HomeLine Net service. These subscribing customers agree not to acquire services from other carriage service providers by dialling the access override code of those carriage service providers, whilst still subscribing to the HomeLine Net service. Financial terms and conditions of subscribers for the HomeLine Net service involve a lower access charge than the Telstra monthly fixed telephone line access charge. As the primary judge explained, it is the agreement of HomeLine Net subscribers not to acquire services from other carriage service providers, by dialling the access override code of those carriage service providers, whilst they are still subscribing to the HomeLine Net service, which is the central element of controversy in these proceedings.

73                  In order to subscribe for this Internet service, the customer undertakes access to the Telstra on-line product catalogue, and responds to a series of commands and requests. When doing so, the customer is prominently informed on a single screen image (or computer interface) as follows:

“HomeLine Net service customers must be preselected to Telstra for Long Distance calls and customers must make all STD, Calls to mobiles and International Direct calls through Telstra.

…

It is a term of this service that you agree to use Telstra for your fixed line calls and do not override to other carriers.

…

HomeLine Net Service is provided in accordance with the terms and conditions of Telstra’s Standard Form of Agreement… available on the Internet at www.telstra.com.au/sfoa.”

74                  The relevant section of Telstra’s Standard Form of Agreement is the “Public Switched Telephone Service” (PSTS) section, and the term which may reflect the customer’s agreement not to use the access override code to acquire services from another carrier, to cite the primary judge, precisely, “emerges in a curious way”. Clause 5 of that section deals with annual charges for the so-called “Basic Telephone Service”, which includes the HomeLine Net service, and that part thereof extracted by his Honour reads as follows:

“5.1     The annual charges for:

            …

(e)                the following types of Non-Business Services:

…

            ·           a HomeLine Net Service, which is a Basic Telephone Service available to Non-Business Customers who preselect Telstra for National Long Distance calls, International calls and calls to cellular mobile services from the PSTS and who:

(i)                 apply electronically for the HomeLine Net service over the Internet in accordance with the procedures notified by Telstra from time to time;

(ii)               must agree not to acquire services from other carriage service providers by dialling the access override code for those carriage service providers while subscribing to the HomeLine Net Service; and

(iii)             agree to receive the HomeLine Net billing service as described in clause 11.12 of this Section instead of Telstra’s standard paper billing service;

…

are set out in Table 5.1.”

Table 5.1 is a table setting out annual and monthly charges.

75                  The primary judge next described the contractual consequences to a customer subscriber to the HomeLine Net service who uses the access override code to obtain the services of another carrier. Clause 10 of the General Terms and Conditions forming part of Telstra’s Standard Form of Agreement governing its services, including the HomeLine Net service contains the following provisions as to suspension and cancellation of services:

“10.1   The Customer may cancel a service by notifying Telstra. Notice must be in writing unless the service is residential.

…

10.3          Telstra may suspend, limit or cancel a service if:

            ·          The customer notifies Telstra in accordance with clause 10.1;

            …

            ·          The customer breaches the Standard Form of Agreement (including any of these General Terms and Conditions).

            …”

Those General Terms and Conditions comprise 8 pages of printed material.

76                  Another issue arising was described by the primary judge as concerning the means by which, both practically and legally, a customer can cancel a subscription to the HomeLine Net service. In the PSTS section of the Standard Form of Agreement, paragraph (a) of sub-clause 8.bb.6 provides as follows:

“Unless otherwise noted in relation to a particular HomeLine pricing package:

(a)       the Customer may cancel an (sic) HomeLine pricing package at any time by notice to Telstra.”

The Standard Form of Agreement extends over 252 pages of printed material. His Honour further observed in this context the existence of a restraint on a subscriber to the HomeLine Net service, from using the access override code, which was to be identified in marketing material distributed by Telstra. In versions of an advertising brochure promoting the service, and other services, as from 17 January 2001, the following is listed as one of HomeLine Net’s features, which may be compared with what appears in [73] above:

“8.       Available to most residential customers preselected to Telstra for long distance. Customers are not eligible for capped STD, Calls to MobileNet, the Telstra Neighbourhood Call and Telstra 25 option discounts. No override available.”

77                  The primary judge concluded his summation of the circumstances which attended Telstra’s introduction of the HomeLine Net as follows (at [69]):

“I am satisfied that the Telstra employees developing the HomeLine Net service were proposing until early February 2001 that a subscriber to the HomeLine Net service would be prevented from making certain classes or types of calls by rendering it physically impossible for the calls to be made. This would have been achieved by physically preventing the subscriber from using override access. I am also satisfied that the decision to impose the contractual terms was made to achieve the same result. That is, the decision to impose the condition was made to stop a subscriber using override access. While there is no evidence directly linking the change of approach to the letters of complaint from solicitors acting for Optus, I am satisfied the preferable inference is that the letter of 1 February 2001 gave rise to the instruction to abandon the use of a bar. The sequence of events and the timing of the instruction would sustain such an inference and the failure of Telstra to call evidence demonstrating that the instruction was given for some other reason enables the inference to more readily be drawn.”

Findings of the primary judge adverse to Telstra as to breach of what was described as the Tariff Obligations the subject of clause 13.3.7 of Schedule 13 of the Access Agreement

78                  At the time of delivering reasons for judgment on 14 December 2001, the primary judge made a declaration to the effect that Telstra had breached the so-called tariff obligations the subject of clause 13.3.7 of Schedule 13 of the Access Agreement (reproduced in [69] above) by including as a term (the so-called “no override term”) of subscribing to the HomeLine Net service that the subscriber agrees not to acquire services from other carriage service providers by dialling the override codes of those carriage service providers while subscribing to the HomeLine Net service. Subsequently on 28 February 2002, his Honour ordered that Telstra cease to offer the HomeLine Net service on what may be described as terms inconsistent with that declaratory relief. Telstra has sought leave to appeal against the grant of the declaratory and injunctive relief, in advance of the determination of a consequential award of damages against Telstra for breach of contract.

79                  The primary judge’s description of the HomeLine Net as a service is technically incorrect, so Telstra indicated by way of preliminary observation, in that the evidence disclosed that it comprises one of a range of options available for residential customers having a basic telephone or access line service, being options which together comprised the so-called “Telstra HomeLine Options”, whereas a basic telephone or access line service is constituted by the line connection between a customer’s premises and Telstra’s public switched telephone service network. In fairness to the primary judge, the description “service” is attributable to Telstra’s documentation provided to potential customers (see [73-74] above), but these reasons for judgment will mainly hereafter use the description “HomeLine Net” to avoid unnecessary controversy.

80                  The process of reasoning by which the primary judge reached the conclusion, expressed in [103] of his reasons for judgment, that Telstra had breached clause 13.3.7 of Schedule 13 of the Access Agreement, “by offering the HomeLine Net service on the basis that a subscriber will not use override to access the services of Optus”, may be summarised as follows:

(i)                  Although it is “tolerably clear” that calls comprising an Override Communication (the definition whereof is extracted in [68] above) are not comprehended by the Schedule 13 definition of Preselectable Services, so that clause 13.3.7 does not directly affect an override communication in the way in which it inhibits or prevents calls of the kinds which constitute Preselectable Services, nonetheless the HomeLine Net service does include Preselectable Services (ie national long distance calls, international calls and calls to mobile services), and the contentious condition (ie clause 13.3.7) is imposed (given the concession by counsel for Telstra rightly made that tariffing could include the imposition of a condition) on the acquisition of those services. In that regard, his Honour considered that clause 13.3.7 was not intended to have an unduly narrow operation, and that he was satisfied that the imposition of the condition constituted the “tariffing of Preselectable Services”, and did so in an anti-competitive way.

(ii)                The expression “Preselection process” where used in clause 13.3.7, is “probably a reference to Preselection as made available by either Carrier in their capacity as a Local Exchange Carrier” (the definition of Preselection is extracted in [66] above), “and if so, then it would include the service which would, relevantly, route Override Communications to the Override Carrier” (the definitions whereof are extracted in [68] above).

(iii)               The contentious clause 13.3.7 would preclude, for example, Optus inducing a Telstra subscriber by competitive pricing or other means from spontaneously using override to access the Optus network for the purpose of making one or a number of trunk calls, and it would, in that way, deny Optus a commercial opportunity that the overall scheme of interconnection and preselection was designed to provide, and thereby remove the opportunity for Optus to seek customers, who may ultimately alter their preselection, by offering special rates on trunk calls accessed by override, and thereby to engage in a particular means of “rivalrous market behaviour” (the latter expression being borrowed from a decision of the Trade Practices Tribunal in Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25 FLR 169 at 188 (Woodward J presiding)), and “would also deny the subscriber the opportunity of taking advantage of the inducement offered by Optus”.

(iv)              A recurrent theme of the so-called “key objectives” of the implementation of Preselection, set out in clause 13.1.3 of Schedule 13 (extracted in [65] above), is customer choice, reference being made by the primary judge to the “choice process” theme of sub-clause (i) thereof in particular, and to the Government policy evident in clause 13.3A.1 of Schedule 13 (extracted at [71] above). Reference may be also added in this context to the “equal opportunity to designate” provisions of clause 13.1.2 of Schedule 13 (also extracted in [65] above).

Thereafter the primary judge concluded at [101] of his reasons for judgment that “[i]t appears to me that the tariffing of a product (even though selection of the product is the choice of the customer) that diminishes the capacity of one Carrier to offer choice is anti-competitive in the way contemplated by clause 13.3.7. I accept that a customer can fairly readily terminate the HomeLine Net service. However to do so would involve some active steps being taken and there could be, as the evidence revealed, some delay in termination being effected. The primary judge doubtless had in mind the cross examination of Telstra’s officer Mr Walther. Spontaneous use of the override facility is effectively eliminated or at least substantially curtailed”. In reaching that conclusion, the primary judge observed that his reasoning might raise a question as to whether either Telstra or Optus could offer Preselectable Services on terms that included a contractual term or period, so that a Carrier could not enter into an agreement with a customer that the customer would use the Preselectable Services of that Carrier for a specified period of time. His Honour further observed that “[i]t appears that, as a matter of fact, such provisions are commonplace”, but that “it has not been suggested that the conduct of the parties under the Access Agreement bears upon its meaning, and its effect, in this context, was not the subject of submissions”.

Telstra’s submissions on findings of the primary judge as to breach of the Tariff Obligations

81                  Telstra advanced the preliminary observation that it would be surprising if a clause in a schedule to the Access Agreement could have been intended to regulate in an ongoing way the competitive relationship between the parties in a manner that at least overlaps, and perhaps went further, than the regulations and regulatory regime imposed by the 1991 Act and the Trade Practices Act 1974 (Cth). In any event, Telstra’s first principal submission on appeal was shortly to the effect that the “no override” term or condition of HomeLine Net did not involve the tariffing of Preselectable Services, simply because, as his Honour had accepted (see [80(i)] above), the defined expression “Override communication” (extracted in [68] above) is not one of the “Preselectable Services” within the definition of that latter expression. For that shortly stated threshold reason alone, Telstra asserted that the “no override” term did not involve the tariffing of Preselectable Services within the prohibition the subject of clause 13.3.7 of Schedule 13 of the Access Agreement. That submission appears to misconceive the significance of the circumstance that the “no override term” has been stipulated or imposed by Telstra as a condition of the grant or provision of those tariffed services which are the subject of the specified Preselectable Services of the HomeLine Net. Clearly enough, to provide a service on the condition that the person so provided does not acquire a similar service from a third party does not mean that the imposition of the condition involves the grant of a service per se, but the imposition of the condition becomes an aspect of the acquisition of that service which is actually so provided. That distinction was what the primary judge appears to have had in mind in the expression of his finding summarised in [80(i)] above.

82                  Telstra then contended that contrary to the finding below, the HomeLine Net did not involve the imposition of the “no override” term on the acquisition of Preselectable Services, for the reason that the HomeLine Net provided for a telephone basic service for residential customers on prescribed terms and conditions, including monetary rates payable annually or monthly, as detailed in Mr Walther’s affidavit, and a telephone basic service is not a Preselectable Service. For instance, the HomeLine Net customer may choose to make no outgoing calls, or might make only Local Calls. Moreover Telstra was said to have been offering numerous options, apart from HomeLine Net, for or relating to the provision of a basic telephone service. It was further said that HomeLine Net subscribers may acquire certain Preselectable Services, such as National Long Distance Calls (see [69(a)] above), which are supplied at standard rates contained in those parts of the Public Switched Telephone Service section of Telstra’s Standard Form of Agreement which are concerned with those Preselectable Services, and similarly, customers who subscribe for options other than HomeLine Net, being options which do not contain the “no override” term, may also acquire Preselectable Services at these standard rates, or depending on the option chosen, at reduced rates. For those reasons, so Telstra submitted, the “no override” term in HomeLine Net is not a condition on the acquisition of any Preselectable Service, and the inclusion of the no override term in the HomeLine Net does not involve the tariffing of Preselectable Services within clause 13.3.7, which therefore has no application to HomeLine Net. Those contentions do not necessarily answer Optus’ complaint that in the context of tariffing HomeLine Net to residential existing customers, whether or not they may already enjoy the benefit of a telephone basic service and some one or more services falling within a Preselectable Service category or categories, Telstra has engaged in the tariffing of certain services that do fall in any event within the defined meaning of Preselectable Services in an anti-competitive way, by reason of its imposition of the “no override” stipulation, whether in the context of customers’ continuation of some one or all of the Preselectable Service categories, or the grant of some one or more thereof to existing customers in the context of “joining the HomeLine Net programme”.

83                  Telstra next submitted that in any event, the primary judge erred in concluding that Telstra breached clause 13.3.7 of Schedule 3 to the Access Agreement because his Honour made no finding that the “no override” term in fact undermined the integrity of the so-called Preselection process. So much may not have been stated by his Honour in so many words, but a finding to that effect reflects or underpins the conclusions of the primary judge summarised in [80] above. Telstra pointed out in any event that the clause 13.3.7 expression “Preselection process” was not a defined term, in contrast to Preselection per se (see [66] above), and that the word “process” should be given its common meaning, such as, according to The Macquarie Dictionary 3^rd ed. 1999 at 1703, “a systematic series of actions directed to some end”, or “a continuous action, operation, or series of changes taking place in a definite manner”. Therefore, so it was further submitted by Telstra, clause 13.3.7 applies to tariffing that undermines the systematic series of actions, or continuous actions or operations directed to the rolling out, implementation and making available of the Preselection service, being actions provided for in Schedule 13, which concern:

(i)         the conduct of the initial ballot of customers in ballot areas in Australia to enable them to nominate their Preferred Carrier, as between Telstra and Optus;

(ii)        the provision of the interim “10” Carrier Selection Code arrangements for Optus services;

(iii)       the development and implementation of the technical, operational and administrative systems within the networks of Telstra and Optus; and

(iv)       the conditioning of those networks to make Preselection available in respect of Eligible Preselection Lines, and the cutover from the interim “10” Carrier Selection Code arrangements to Preselection.

84                  Upon that footing, Telstra submitted that the “no override” term since imposed by HomeLine Net has not affected, much less undermined, the Preselection process, and further that the system by which Preselection has been implemented, and Preselection has been provided, remains unimpaired, whether or not a customer chooses to subscribe to HomeLine Net, and thereby agrees to the “no override” term. Telstra pointed out in the context of this submission that the Preselection process of Schedule 13 of the Access Agreement was created back at the time the Access Agreement was originally made, and was designed to address concerns that Telstra would adopt anti-competitive practices to convince customers to remain with Telstra, rather than select Optus as their preferred choice. The difficulty which that latter Telstra submission encounters is that the defined meaning of Preselection, comprising as it does a service in respect of a Preselected Line (see the definitions extracted in [66] above), inherently imports or implies the notion of a process, without limitation or confinement being expressed to circumstances prevailing at the time the Access Agreement was entered into, or up to the time of completion of the contemplated balloting in the ballot areas of Australia, following upon “the series of actions or the continuous actions or operations directed to the rolling out, implementation and making available of the Preselection service”. It would reasonably be expected that if a temporal limitation had been mutually intended by Telstra and Optus as the parties to the Access Agreement in relation to anti-competitive stipulations such as clause 13.3.7, explicit provision would have been made in relation thereto, particularly in the context of what plainly purports to be implemented a highly complex and detailed contractual arrangement. The language adopted by clause 13.3.7 is of wide ranging import. There is not to be found elsewhere in Schedule 13, and in particular in the clause 13.2.1 definition of Preselection, the expression of an objective or intention to restrict or confine the ongoing scope or operation of clause 13.3.7 to the original ballot activities.

85                  A further theme of submissions advanced by Telstra, being the most crucial in my opinion, was to the effect that the “no override” term of the HomeLine Net did not in any event involve the tariffing of Preselectable Services in an anti-competitive way, even if, as the primary judge concluded for reasons already summarised, the HomeLine Net, inclusive of the override term, involved the tariffing of Preselectable Services, and even if his Honour did not err in relation to the meaning of “Preselection process” contained in clause 13.3.7. In the context of the reasons for judgment of the primary judge summarised in [80(iii)] above, his Honour said that the issue to be determined was whether “the competition contemplated by 13.3.7 would allow one Carrier to offer, competitively, a product which, if accepted, would deny (temporarily) the customer the opportunity of accepting a product offered by the other Carrier and thus effectively deny that carrier the ability to compete”. Telstra submitted that the issue arising, as so formulated (and resolved) by the primary judge, manifested a misunderstanding of the nature of competition, and in particular, involved a confusion of the process of competition with the end result of competition. It was said that rivalry in a commercial or business context takes the form of a competitor seeking to offer lower prices, better services or different services, from those offered by its competitors, for the purpose of inducing consumers to acquire goods and services from the first mentioned competitor to the exclusion of its other competitors, and well known passages concerning the nature of competition appearing in Queensland Co-Operative Milling Association at 188 (being additional to that cited in [80(iii)] above), and in Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177 at 191 were cited, being a nature described as “deliberate and ruthless”. The end result of competition, on the other hand, so the Telstra submission continued, is the consumer making a choice as to which goods and services offered by competitors the consumer will acquire, being a choice by its very nature involving other suppliers not being successful in inducing the customer to acquire goods and services from them. The mere fact that by offering HomeLine Net, Telstra sought to have customers agree to acquire Telstra services, at least temporarily, rather than those of its competitors, could not, so it was submitted by Telstra, be regarded as anti-competitive. That proposition begs the question whether any such “mere fact” is constituted nevertheless by conduct of a carrier by way of undermining “the integrity of the Preselection process”, irrespective of the employment of deliberate and ruthless means of engagement in competitive conduct. Put another way, clause 13.3.7 does not purport to proscribe a particular species of commercial or business activity, but rather the means by which the same is implemented or carried out.

86                  Moreover, and further critically to the issue at hand, Telstra emphasised that HomeLine Net is terminable at will by any Telstra customer, without penalty as to cancellation charges, and that there is no minimum duration time of commitment or other restrictions imposed on a customer cancelling his or her subscription to HomeLine Net, Telstra making reference in that context to paragraph (a) of sub-clause 8.bb.6 in the PSTS section of Telstra’s Standard Form of Agreement (extracted in [76] above). The HomeLine Net promotion was said by Telstra to have thus involved Telstra in merely seeking to induce a customer to choose to agree to use Telstra rather than Optus (or any other carriage service provider) until the customer might choose, or be induced to choose, otherwise, so much being said to be of the very essence of competition, indeed of fair competition. Telstra pointed to the affidavit testimony in the proceedings to the effect that the contractual provisions obliging customers to use the Preselectable Services of a single carrier are a predominant means of telecommunications competition, and thus for example, a carrier generally offers lower rates to customers who preselect it for certain Preselectable Services. Telstra referred further in this context to the practice of the Carriers, asserted to the primary judge to be “commonplace” in the Australian telecommunications market, of providing inducements to customers to agree, for example in the case of Optus, to acquire a single carrier’s Preselectable Services for a minimum agreed term of at least 12 months (or suffer an early cancellation penalty), to which passing reference has already been made at the conclusion of [80] above. The tariffing of Preselectable Services upon minimum agreed terms of that dimension would not necessarily be anti-competitive, so Telstra contended, in contrast to terms which may operate in practice or reality to achieve customer patronage for an indefinite or uncertain duration. I would observe that the latter circumstance is precisely what has been at the forefront of the adverse consequences whereof Optus has seemingly complained, given the understandable reluctance of a customer to withhold from joining HomeLine Net to cancel HomeLine Net, merely because of a fetter upon the right to override for the time being for instance solely in relation to national long distance calls.

87                  Telstra challenged the conclusion of the primary judge, referred to in [80] above, as to the preclusion of Optus, albeit temporarily, from offering choice, and the consequence, said to flow therefrom, that the supply of HomeLine Net containing the no override term was inherently anti-competitive. Telstra submitted that the override term did not affect Optus’ ability to offer services, and a customer’s choice to subscribe for HomeLine Net was simply the end result of successful competitive conduct on the part of Telstra, that conduct being Telstra’s offering of inducements to persuade customers not to use the services of Optus (or of any other future carrier), by means of override (I interpolate to mention that it is perhaps more accurate to say that Optus’ ultimate complaint goes more to “opportunity” rather than “ability”). Those inducements were said by Telstra to include the low monthly access prices included in the HomeLine Net “option”, being comparatively lower prices doubtless because of customer patronage of the HomeLine Net services being required for the full range thereof. In any event, the no override term was asserted by Telstra to be part of the consideration that the customer agreed to give, in the exercise of his or her original choice, in return for the full range of benefits available under the HomeLine Net “option”. It had always been open to Optus, so the Telstra submission continued, to offer customer choice, in the sense of offering services on terms that were equally or more attractive than those contained in the HomeLine Net option, in order to inducethose customers not to subscribe, or to cease subscribing, to HomeLine Net, and to subscribe instead to services that Optus supplies. Reference was made by Telstra to the primary judge’s observation that Optus did not mount a case that it was unable to offer the same or a similar product to HomeLine Net, or that Optus could not compete with Telstra in relation to the sale of Preselectable Services. After citing paragraphs (g), (h), (i) and (j) of clause 13.1.3 of Schedule 13, extracted in [65] above, Telstra concluded its submissions in relation to clause 13.3.7 as follows:

“Contrary to the trial judge’s conclusion, subscription to HomeLine Net and agreement to the no override term does not deny customers choice; rather it is an exercise of choice by a customer. In subscribing, a customer is choosing not to avail himself or herself of the override facility to make override calls whilst so subscribing. The trial judge’s construction of clauses 13.3.7 so as to preclude the no override term in reality denies customer choice and prevents the customer from having the final say and having the opportunity to make an informed choice.The trial judge’s construction of clause 13.3.7 is contrary to the agreed objective of the parties, is contrary to clause 13.1.3(j), and cannot be sustained.”

88                  A major difficulty with those Telstra submissions summarised in the preceding paragraph is the focus upon the customer’s choice involved in taking up the HomeLine Net in the first place, as described in [72-76] above, rather than the incident or incidents governing the capacity or tendency of the customer to subsequently choose to alter his or her preselection from HomeLine Net in favour of one or more of the services of another carrier such as Optus, as the primary judge explained in his findings summarised in [80] above. As there indicated, the inhibition on that ongoing capacity or tendency of the customer, as asserted by Optus, was considered by the primary judge to diminish the opportunity of Optus to successively offer the choice of alternative preferred carrier for the time being in respect of some relevant service or services. The clause 13.3.7 notion of “Preselection process” is a generic description widely conceived, being implicitly intended to reflect the preceding provisions of Schedule 13, in particular, clauses 13.1.2 and 13.1.3(g), and also of the third paragraph of the Minister’s letter of 27 April 1993 incorporated into clause 13.3A.1 thereof. In my opinion, a central theme of the “integrity of the Preselection process” thereby reflected was the availability at all times of a subscriber’s uninhibited capacity or ability, in an economic sense, to activate the same, and a subscriber’s likely objective appreciation of that circumstance, irrespective of his or her patronage for the time being of any one or more Preselectable Services provided by a Carrier.

89                  Nevertheless Telstra contended that contrary to the conclusion of the primary judge, there is nothing contained in the Access Agreement, or in any underlying policy evident therefrom, or in the Minister’s letter incorporated into clause 13.3A.1 of Schedule 13 extracted in [71] above, which demands the preservation of entitlement of uninhibited spontaneous use of the override facility in respect of any Preselectable Service by a customer, notwithstanding his or her choice, freely made, to subscribe to HomeLine Net, and to thereby choose to agree not to make any override call to acquire a replacement service from other suppliers (including Optus) whilst still so subscribing. Telstra emphasised that “… there is no obligation on customers not to make override calls, and it is the decision of a customer as to who should be its Preferred Carrier and whether or not to make override calls to another carriage service provider”. That submission is not however at least wholly borne out by the text of the HomeLine Net condition set out in [73] above, that “[i]t is a term of this service that you… do not override to other carriers”, albeit that a customer of HomeLine Net is not contractually inhibited from cancelling his total participation in the HomeLine Net without prior notice or at will.

Conclusion upon Telstra’s alleged breach of the Tariff Obligations the subject of clause 13.3.7 of Schedule 13 of the Access Agreement

90                  The primary judge was in my opinion correct in holding that Telstra breached clause 13.3.7 of Schedule 13 of the Access Agreement by making available the HomeLine Net package to subscribers containing the condition (extracted in [73] above) that they would not implement the override facility to access the services of Optus, at least for the reasons his Honour gave. The “Preselection process” the subject of clause 13.3.7 was not explicitly confined in operation in relation to the duration of the ballot programme referred to, for instance, by clauses 13.3A.1 and 13.5.3 of Schedule 13 (extracted in [70-71] above), and there is no basis in the text for implying any such confinement. The evident purpose and intent of clause 13.3.7 is the maintenance and preservation of fair competition between the Carriers in relation to their respective tariffing of Preselectable Services in an ongoing market for those services, which had previously been of course the monopoly of one of the Carriers (Telstra), being a telecommunications market where transactions of instantaneous implementation, and of short duration in execution, are a feature or characteristic, or potentially so. That the capacity to override a customer’s selection for the time being was mutually accepted as an essential key to the establishment and maintenance of a competitive market in which the Carriers were to engage is to be seen in the provisions of the Access Agreement concerning the notions of Override Carrier and Override Communication (set out in particular in clauses 13.1.2 and 13.1.3 (extracted in [65] above)), and in paragraph (c) of the definition of “Preselection” (set out in [66] above). All that was consistent with what AUSTEL had earlier reported, namely that equal access could only be achieved by “Preselection with override dial codes” (see again the full text of [53] above). It was decided many years ago in the United States that a telephone company’s switched network, required in order to connect with local distribution facilities and to offer competing services, was an essential facility, because without access to it, a prospective competitor could not compete in offering telephone services : MCI Communications Corp v American Telephone and Telegraph Co (1983) 708 F 2d 1081 [1982-3] Trade Cases 65,137.

91                  It is readily apparent, from the text of clause 13.3.7 of Schedule 13, and in particular the expression “in an anti-competitive way”, that the parties intended to create a mutually competitive environment, beyond and additional to the scope of Part IV of the Trade Practices Act 1974 (Cth), which would fulfil the “key objectives” of clause 13.1.3 of Schedule 13 (extracted in [65] above), and paragraph (g) thereof in particular. So much is further apparent from the incorporation of the text of the Minister’s letter of 27 April 1993 into clause 13.3A.1 of Schedule 13, and the themes therein emphasised as to customer capacity to override selection as material to the objective of competition, without any exception explicitly stated in relation to pre-existing arrangements. The clause 13.3.7 expression “undermine the integrity of the Preselection process” is doubtless unique for a contractual instrument, but there was a substantial measure of commercial novelty or uniqueness in the implementation of the circumstances borne out of the decision of the Australian Government to partially privatise Telstra, involving of course, as those circumstances did, the entry of an initial competitor into what had previously been the “closed shop” of a Government enterprise for many decades, upon the basis of interconnected network facilities having their foundation in what was formerly the exclusive Telstra telecommunication structures (as to which see again [55-56] above). It is of course to be kept in mind, as the primary judge recognised, that “a customer can fairly readily terminate the HomeLine Net”, and that upon any such termination being effected, the customer may forthwith preselect another Carrier, but the reality of human experience, involving the patronage of any existing service, is such that consumers sometimes, if not often, tend to be reluctant to change, or to be readily deterred from changing, the status quo of his or her choice of a service provider, particularly in the context of the modern phenomena of technological structures and mechanisms, the implications of which the customer may well not have fully comprehended or continued to comprehend. No illustration has been proffered by Telstra, of which I am aware, of an intended operation of clause 13.3.7, other than by Optus in relation to the kind or nature of circumstances presently in focus, and moreover Telstra has not pursued any case to the effect that clause 13.3.7 is void for uncertainty.

92                  The controversial notion of “Preselection process”, incorporated into clause 13.3.7 of Schedule 13, is to be interpreted and understood essentially in the light of, and not divorced from, the statutory definition of “Preselection”, and also in the light of the statement of Government policy incorporated into the abovementioned clause 13.3A.1 of Schedule 13 and the examples or illustrations there incorporated, and there is no ambiguity said by Telstra to be inherent therein. Contrary to the submission of Telstra, the word “process” produces no qualification to the defined meaning of “Preselection”, but merely imports the notion of procedure or course of action in relation thereto. The expression “Preselection process” in that context therefore connotes the process comprising or involving the making available, and the implementation, of Preselection capacity, to or in favour of a Service Customer. The “integrity… of the process”, in the context of clause 13.3.7, imports the notion or idea of the viability and effectiveness of that process. It was earlier foreshadowed by the responsible Minister in 1991 that equal access by competing carriers could only be achieved by preselection with override dial codes (see again [53] above), being an objective also reflected in the carrier licenses issued to the presently litigating parties (see again [56] above). That is not to suggest of course that ability to compete, for instance in relation to price, was intended to be excluded (see again clause 13.13.12 of Schedule 13 extracted in [70] above), though not to the extent that Telstra first sought to implement (see [95(vi)] below). There is no good reason to doubt, in my opinion, that for Telstra to have stipulated to customers of the HomeLine Net that “[i]t is a term of this service that you… do not override to other carriers”, operates to undermine the integrity of the Preselection process, and that the tendency or potentiality to do so has subsisted as a reality in the context of the telecommunications industry from the outset of Telstra’s introduction of HomeLine Net, by virtue of at least the real possibility that some customers for the time being of the HomeLine Net may well be disposed not to bring to an end the otherwise perceived remaining financial advantages and benefits of continuing participation in the HomeLine Net, as a consequence of overriding to another Carrier for a discrete service or facility already stipulated in the HomeLine Net package. Moreover, as the primary judge pointed out, there could well be some delay involved in some circumstances in putting customer terminations of HomeLine Net physically in place. It is significant that clause 13.3.7 has been framed in the unspecific terms of “integrity of the… process”, in order, I would infer, to encompass the subtleties of competitive behaviour which have the capacity for unfairness or taking unfair advantage, and thus the potential for deficiency in “integrity of the process”, in the context in which the behaviour might take place. The dictionary notion of “integrity” imports inter alia soundness of moral principle and character, uprightness and honesty. The very circumstance that Telstra notified potential customers of the HomeLine Net from the outset, on a single screen image (see again [73] above) that to “override to other carriers” was forbidden as “a term of this service”, serves in my opinion to undermine, albeit not necessarily of course to obliterate or destroy, the integrity of the Preselection process. Prospective telecommunication customers would not be expected, necessarily or entirely, to understand the implications of what Telstra informed perspective HomeLine Net customers in Telstra’s lengthy printed Standard Form of Agreement described in [76] above, to which those customers were referred by the text of the single screen image summarising the HomeLine Net, and containing inter alia the “no override” stipulation. In that present context incidentally, “integrity” imports in my opinion notions of “unimpaired” or “undiminished”.

93                  The thrust of the approach to construction of the primary judge, recounted and summarised in [80] above, was therefore correct, and his conclusion on the clause 13.3.7 issue should be upheld. The language employed in the framing of clause 13.3.7 is of sufficiently wide and descriptive import to accommodatewhat may be described as the potential subtleties of a Carrier’s means of tariffing Preselectable Services in an anti-competitive way. As I have foreshadowed, the integrity of the Preselection process is undermined in circumstances for instance where a customer of a particular Carrier is inhibited or likely to be inhibited, knowingly or unknowingly, from taking advantage of the override facility of the telecommunications system purportedly to maintain on foot an existing contractual arrangement with that Carrier for the supply of so-called Telecommunication Services or facilities. The concept of undermining the integrity of the Preselection process is the type of novel description one might expect to find in the context of the newly competitive environment of developing communication technologies involving an array of telecommunication services in the nature of the Preselectable Services. Clause 13.3.7 is in my opinion designed to obviate the subtlety of inhibitions imposed by a Carrier upon the freedom of a customer’s choice of Preselectable Services for the time being obtainable in a dynamic market, wherein unfettered or uninhibited competition is mutually intended to be an essential precept for multifaceted services, and where pricing would be likely to be susceptible to the frequency of competitive and vigorously publicised change. It may be readily inferred from the text of clause 13.3.7 that the parties to the Access Agreement were not prepared to submit to regulation inter se only to the extent provided by Parts IV and V of the Trade Practices Act 1974 (as amended). Telstra’s application for leave to appeal should be formally granted, but the appeal resulting from such grant of leave should be dismissed.

Issues raised by Optus on the Optus cross-appeal

94                  In anticipation of Telstra being granted leave to appeal, Optus sought to raise five issues by way of cross-appeal against findings of the primary judge in favour of Telstra, those issues in the sequence presented being framed as follows:

(i)         Whether Telstra breached its obligations to Optus under clause 13.5.3 of Schedule 13 to the Access Agreement, and under what was asserted to be the implied term arising therefrom, namely obligations to implement and make available preselection through Preselection Systems (the so-called “Preselection Availability Obligation”), for the reason that the obligations imposed on Telstra pursuant to clause 13.5.3:

            (a)        are enduring, and not temporarily limited, as held by the primary judge; and

            (b)        require Telstra to make override available in the sense that consumers may at any time freely choose to use override, both in a technical and contractual sense, rather than be contractually restrained from so choosing.

(ii)        Whether Telstra breached its obligations to Optus under Clause 4.1 of the Access Agreement and clause 1.2.1 of Schedule 1 thereto, and under what was asserted to be the implied terms arising therefrom, namely obligations to provide certain call carriage services to Optus over Telstra’s networks (the so-called “Access Service Obligation”) for the reasons that:

            (a)        Telstra cannot be said to carry calls of customers where it has contracted with those customers to prohibit them from acquiring services from Optus; and which

            (b)        has the result that Telstra denied Optus the benefit of Telstra’s obligations to provide relevantly the access services.

(iii)       Whether Telstra breached its obligations to Optus under clause 1.5.3 of Schedule 1 to the Access Agreement (the so-called “Barring Obligation”), and under what was asserted to be the implied term arising therefrom, namely the obligation not to allow the barring of a customer’s access to Optus override calls service, and in particular by allowing barring without observing customer neutrality.

(iv)       Whether Telstra breached its obligation to Optus under clause 20.8 of the Access Agreement to act in good faith in relation to all matters relating to or contemplated by the Access Agreement (the so-called “Good Faith Obligation”).

(v)        Whether Telstra’s representations to customers and potential customers, in the terms and conditions of the HomeLine Net and elsewhere, to the effect that “no override was available”, constituted misleading and deceptive conduct within s 52 of the Trade Practices Act 1974 (Cth).

The extent to which any of such alleged breaches of the Access Agreement, or the statutory breach, might increase or widen the scope of damage claimed to have been sustained by Optus for breach of clause 13.3.7 would doubtless fall for consideration in the event of Optus succeeding on any of these additional five issues.

95                  Before formulating its submissions upon these five issues, Optus advanced preliminary observations and references to the following aspects of the regulatory scheme:

(i)         Schedule 13 of the Access Agreement envisages that competition for customers would occur within an agreed framework, that is, through the establishment and maintenance of Preselection, the definition whereof is set out in [66] above.

(ii)        By clause 13.3A.1 of Schedule 13 of the Access Agreement, Telstra and Optus agreed that resolution in relation to the implementation of Preselection would occur in accordance and consistent with the government policy set out in the 1991 Act, and in the paragraphs of the Minister’s letter to AUSTEL dated 27 April 1993 (as set out in [71] above).

(iii)       Preselection has thus related to Preselectable Services, that is, certain classes of calls such as long distance calls, international calls and calls to mobiles.

(iv)       Preselection described the mechanism by which a customer may choose Optus or Telstra as its Preferred Carrier (the definition whereof is set out in [67] above), and so acquire Preselectable Services from Optus or Telstra on a semi-permanent default basis, and having done so, also choose to acquire Preselectable Services from the other carrier on an immediate, but one-off, Override call basis, by dialling that carrier’s Carrier Selection Code (in the case of Optus “1456”).

(v)        Alteration of the choice of Preferred Carrier is not instantaneous or always cost free (Optus referring thereby to testimony of Telstra’s Mr Walther at transcript pages 76 and 76C, to which reference may also be made to his testimony at transcript page 76J); by contrast, an override call choice, in the absence of conditions (such as the Telstra “No Override Condition”) is fleeting, and does not bind a customer in any ongoing or substantial way to acquire the services of a carrier. Requiring customers not to exercise an override choice for the period during which they may take Telstra as their default carrier (as the HomeLine Net service was said by Optus to require through the conditions imposed by Telstra on that service) removed the essential difference between those two features of Preselection.

(vi)       The alternative to the No Override Condition was to ensure that customers were physically barred from acquiring any override call service from any carrier other than Telstra. The imposition of a physical bar in such a manner was Telstra’s initial intention, and that course was subsequently abandoned after the letter sent by Optus’ Solicitors to Telstra on 1 February 2001 (see the finding of the primary judge at [77] above).

Whether Telstra breached the Preselection Availability Obligation

96                  The text of clause 13.5.3 of Schedule 13, so far as is directly material, is set out in [70] above. As indicated in para 54 of the Affidavit of Mr Waters (Solicitor for Optus), implementation of the preselection regime required Optus to incur “significant expense”, because the Optus network was required to be conditioned to support preselection, implementation costs of the Ballot were required to be shared proportionately, as were the costs of conducting the Ballot (save as to the first $8 million, which had to be borne by Telstra), and advertising and marketing costs were incurred in relation to advertising preselection. Also the costs of educating the public about the introduction of competition were required to be shared between Telstra and Optus. Since the Ballot Nomination Dates, Preselections Systems have been established and maintained in all relevant areas of Australia.

97                  The finding of the primary judge on the issue as to breach of the Preselection Availability Obligation, and his reasons therefor (set out at [93] below), were as follows:

“In my opinion, cl 13.5.3(a) served a specific and limited purpose. It was to ensure that before ballots of customers were conducted, both Optus and Telstra had in place the technical, operational and administrative systems that would enable the customer choice (of Preferred Carrier) to be given effect to while enabling the customer to access the network of the Override Carrier. It was in this sense that a Carrier (who was the Local Exchange Carrier) had to make available Preselection including a service which would route Override Communications to the Override Carrier. It was a provision intended to create the environment in which the choice of the customer would be an effective choice. I doubt that the provision was intended to create an enduring obligation on the part of each Carrier (but cf cl 13.3.9) though even if it was, it was to make available Preselection in the way discussed. That is, it was not intended to require each Carrier (in the present case, Telstra) to ensure that a customer would remain able to use Preselection in the sense of not agreeing not to use it or any aspect of it.”

98                  Optus submitted that the words “in place” in par (a) of clause 13.5.3 should be afforded an “enduring meaning”, and were not to be limited to a particular date or time, for the reasons that the Access Agreement could not have intended that an essential element of the Preselection System could be unilaterally removed by a party as soon as it was in place, and the scope of the preselection regime, both technical and operational, is of an inherently enduring nature, as was said to be illustrated by the following provisions of Schedule 13 to the Access Agreement set out in [65] above, namely clause 13.1.1, containing as it does reference to “continuing arrangements relating to Preselection after initial implementation”, and paras (h), (i) and (j) of cl 13.1.3 in particular, which speak of the importance of customers’ freedom of choice of an informed nature. Reliance was also placed by Optus in that context upon clause 13.3.9 of Schedule 13, which expressed the mutual recognition of the parties that “the successful implementation and continued operation of Preselection depends on each of them complying fully and promptly with their obligations under [Schedule 13]”.

99                  The Optus submission is not supported literally by the terms of par (a) of clause 13.5.3, nor can it be rightly postulated that it does so implicitly in substance. The preferred view of the primary judge set out in the passage extracted in [97] above should be accepted, without necessarily the inclusion of the obiter view contained in the last sentence, involving as it does treble negatives. The terms of clause 13.3.9 of Schedule 13, to which his Honour referred, and which are set out below, are more likely to represent the mutually intended ongoing regulation of the relationship between the parties here specifically applicable, particularly in the context of the generality of expression of the critical clause 13.3.7 of Schedule 13:

“13.3.9    The Carriers recognise that the successful implementation and continued operation of Preselection depends on each of them complying fully and promptly with their obligations under this Schedule. In particular, the Carriers recognise the importance of ensuring that the designations of Preferred Carrier for Eligible Preselection Lines are correctly programmed into the relevant Local Exchange and that this work is undertaken promptly and its completion accurately reported to the ballot administrator and the Other Carrier. Accordingly, the Preselection Working Group will develop procedures which enable it to verify that designations of Preferred Carrier are being implemented correctly by a Local Exchange Carrier, and also to verify the other systems, procedures and conduct of each Carrier for compliance with the other requirements of this Schedule. These verification procedures must not be unduly administratively burdensome to the Carrier subject to the verification.”

This first ground of cross-appeal brought by Optus, based upon clause 13.5.3 and par (a) in particular, should be dismissed.

Whether Telstra breached the Access Service Obligation

100               Optus described the elements of the Access Service Obligation of Telstra as follows:

(i)         to provide “the requested Access Service” to Optus;

(ii)        in particular, to provide one such Access Service – “Domestic PSTN Originating Access” – “for all Communications prefixed by a Carrier Selection Code”.

That description purportedly picks up the defined expression “Access Service” appearing in [60] above, clause 4.1 of the “Access Service” segment of the Access Agreement (extracted in [61] above), and more specifically in the contention of Optus clause 1.2.1 of Schedule 1 (extracted in [64] above), which relates to Domestic PSTN Originating Access. The provision of an Access Service by Telstra to Optus was said by Optus to involve and require the carriage of a telephone call by Telstra from the calling number of a customer who is directly connected (Optus’ emphasis) to Telstra’s communications network to a point of interconnection (ie so-called POI) with Optus’ network (as explained in par 32 of Mr Douglas’ affidavit by reference to the context of that hypothetical customer having preselected Optus or dialled the Optus override code in respect of a preselectable call). In the context of the HomeLine Net, Telstra is the Access Carrier and Optus is an Interconnecting Carrier.

101               Optus submitted that it was clear from the definition of Domestic PSTN Originating Access, and Mr Douglas’ explanation, that the provision by Telstra of Domestic PSTN Originating Access involved the necessary element of Telstra carrying the call from the calling party to an Optus POI, and not merely providing the technical capability to do so, and that therefore the primary judge erred in finding that the obligation the subject of clause 4.1 of the Access Agreement and of clause 1.2.1 of Schedule 1 thereto was limited to an obligation in the following terms expressed in his reasons for judgment at [82], namely

“… to provide the infrastructure (in a technical sense) to enable the Interconnecting Carrier to use the network and facilities of the Access Carrier to meet the Interconnecting Carrier’s obligations to its customers to carry communications from one point to another.”

As mentioned above at [100], in the context of this litigation of course, Optus is the Interconnecting Carrier and Telstra is the Access Carrier. Optus submitted that Telstra’s conduct constituted a direct breach of clause 4.1 and of clause 1.2.1 of Schedule 1, because Telstra could not be said to provide Domestic PSTN Originating Access in respect of customers whom it had contractually prohibited from being able to use any of the Optus services that would require Telstra to provide Domestic PSTN Originating Access to Optus. Further or in the alternative, Optus submitted that Telstra’s conduct complained of breached Telstra’s implied obligation to give Optus the benefit of clause 4.1 and clause 1.2.1 of Schedule 1.

102               Optus thereafter criticised the following finding of the primary judge which was consequential upon that already extracted above:

“The benefit the Interconnecting Carrier derives from cl 4.1 is access to the network and facilities of the Access Carrier which enables it to provide or offer a range of telecommunications services to its customers or potential customers.”

Optus asserted that the foregoing analysis confused the benefits conferred on Optus with the requirement under the Access Agreement for Telstra to provide Interconnection Services that would enable Optus to have access to the network and facilities of Telstra. The expression Interconnection Service is defined by the Access Agreement as:

“a service for the provision of Interconnect Conditioning, Interconnect Capacity, Network Conditioning and Network Capacity to enable, or for use in, as the case may be, the provision of one or more Access Services.”

Optus pointed out that access on its part to the Telstra network and facilities was a necessary input for Optus to be able to deliver services to its customers, but asserted that access alone did not satisfy Telstra’s obligations to provide Optus with “Access Services”.

103               Thus Optus contended that the primary judge, having found (as above stated) that the ultimate benefit conferred on Optus by clause 4.1 was to enable Optus to provide or offer a range of telecommunications services to its customers or potential customers, his Honour should have considered the specific nature of the entitlement conferred on Optus by clause 1.2.1 of Schedule 1. Optus submitted that the sole commercial benefit conferred upon it by Telstra’s requirement to provide Domestic PSTN Originating Access pursuant to clause 1.2.1 was the ability to provide Preselectable Services to customers who were directly connected to Telstra’s network, and who were chosen either to Preselect Optus as their so-called “default carrier” for all Preselectable Services, or who chose to override to Optus on a call by call basis for Preselectable Services by dialling the Optus “1456” Carrier Selection Code. Accordingly, so the Optus submissions continued, by introducing the condition in the HomeLine Net tariff that HomeLine Net customers must agree to not “override to other carriers” (see [73] above), Telstra intended to achieve the same result as under its original proposal to technically bar the use of override by HomeLine Net customers (as to which see the finding extracted in [77] above). As Optus further submitted, although customers were technically still able to breach the HomeLine Net conditions and use Optus’ “1456” Carrier Selection Code, Telstra expected and encouraged its HomeLine Net customers to believe that this was not possible, and the evidence in the proceedings below indicated that Telstra expected that most of its HomeLine Net customers would consider that it was not possible to override by dialling the “1456” Optus Carrier Selection Code.

104               The Optus contention as to breach of the Access Service Obligation necessarily involved the conceptually difficult proposition that the imposition by Telstra of a contractual fetter upon third parties, being its HomeLine Net customers for the time being, was capable of constituting a denial of access by its competitor Optus as Interconnecting Carrier to the network and facilities of Telstra as the Access Carrier.

105               In arriving at his conclusion in favour of Telstra on the Preselection Availability Obligation, the starting point of the primary judge was to characterise the direction of the Access Agreement as being essentially to the interconnection of the networks of Optus and Telstra, and to the means of dealing with their co-dependency once interconnection had been achieved, and thus generally to creating the environment, including technical environment, in which Telstra and Optus could compete while being nevertheless co-dependent. The primary judge then referred to the conditions imposed by clause 4.1 to the provision of Access Service. The first two of such conditions, reflected in the opening line of clause 4.1, predicated in his Honour’s view the obligation to provide Access Service upon prior interconnection and agreement on the terms and conditions of that interconnection, being a service to be provided by the Access Carrier to the interconnecting Carrier, the latter having complied with the relevant Service Ordering Procedures, defined by the Access Agreement as “… the procedures governing the forecasting, planning and ordering of relevant Services as set out in schedule 2”. Those procedures in effect require the Interconnecting Carrier to give six and twelve month forecasts to the Access Carrier for the latter’s planning purposes. Thereafter his Honour concluded at this point of his reasoning at [82], as extracted above at [101], that “… the obligation on the Access Carrier is to provide the infrastructure (in a technical sense) to enable the Interconnecting Carrier to use the network and facilities of the Access Carrier to meet the Interconnecting Carrier’s obligations to its customers to carry communications from one point to another”. In this context, reference may be repeated to the definitions “Access Service” and “Interconnection Service” set out in [60] above, and to the observation there made that the Access Agreement set up a framework for the provision of those services. The primary judge described at [85] the benefit which the Interconnecting Carrier derives from clause 4.1 as “…access to the network and facilities of the Access Carrier which enables it to provide or offer a range of telecommunication services to its customers or potential customers”.

106               The conclusion of the Full Court upon the issue arising under this second ground of cross-appeal of Optus is that the primary judge correctly determined that the Interconnecting Carrier (Optus) was not contractually deprived of the benefit of Clause 4.1 of the Access Agreement, and of clause 1.2.1 of Schedule 1 thereto, in circumstances where the Access Carrier (Telstra) might induce its customers, upon the footing of a contractual commitment to Telstra, not to use an aspect of the facilities for the time being available both for the benefit of the customers of Optus as Interconnecting Carrier and also for the benefit of the customers of Telstra as Access Carrier. That conclusion of contractual interpretation follows, notwithstanding the imputed existence of any implied duty to co-operate attributable to Telstra, to ensure that Optus would have the benefit of those clauses 4.1 and 1.2.1 concerning access by its customers or potential customers to network facilities, since that benefit did not operate adversely to or to the exclusion of Telstra’s contractual rights and entitlements for the time being derived from the subscribers to the HomeLine Net. The so-called duty to co-operate, discussed in the judgment of the Court of Appeal of the Supreme Court of New South Wales in Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 124-125, does not operate to subvert or displace Telstra’s contractual entitlements, otherwise validly subsisting in the circumstances postulated, but of course as has been earlier determined in these reasons for judgment, Optus is entitled in principle to obtain the substance of the redress it substantially seeks by recourse to clause 13.3.7 of Schedule 13 of the Access Agreement, for the reasons earlier provided in the segment “Conclusion upon Telstra’s alleged breach of the Tariff Obligations of clause 13.3.7 of Schedule 13 of the Access Agreement”. This second ground of appeal raised by Optus should therefore be dismissed.

Whether Telstra breached the Barring Obligation

107               The Barring Obligations asserted by Optus to have been breached by Telstra is contained in clause 1.5.3 of Schedule 1 to the Access Agreement which has been set out in [64] above. To that clause may be added reference to clauses 1.5.4 and 1.5.5 of Schedule 1 reading as follows:

“1.5.4  A customer may request the barring of national and/or international switched direct dialled trunk calls by contacting either Carrier. If the Access Carrier is contacted, the Interconnecting Carrier will notify the Access Carrier of the customer’s request. The Access Carrier may contact the customer before implementing the barring for the purpose of confirming the request. The Carriers will negotiate agreed scripts to be used for this customer contact process.

1.5.5    Except where the customer has requested service specific barring, the Access Carrier must not implement service specific barring (such as barring of access for national or international switched direct dialled trunk calls) if it also blocks access to the Interconnecting Carrier’s Network, without first obtaining the consent of the Interconnecting Carrier.”

Clause 1.5.3 deals with barring where the bar has been requested by a customer, and clause 1.5.5 deals with bars that are independently initiated by either carrier, without being precipitated by a customer request for the bar. Telstra’s Mr Douglas testified that barring means that customers can be prevented from making certain calls from their telephone service, and that a bar can be created by Telstra raising appropriate commands in its IT system, which in turn sends a command to the local access switch, where the barring would be applied; such a bar constitutes a physical or electronic frustration of the call.

108               The findings of the primary judge upon Optus’ assertion as to breach of clause 1.5.3 are set out below:

“88.     In my opinion, what cl 1.5 means is tolerably clear and its operation was intended to be limited. Clause 1.5.3 concerns a request to bar switched direct dial trunk calls which must be implemented by the Access Carrier to stop switched direct dial trunk calls (national and/or international) being made over the network of either Carrier. The mechanism established to achieve that result depends on who the customer contacts. Clause 1.5.4 sets out the mechanism. While on one view, cl 1.5.5 deals (differently) with the same subject matter as cl 1.5.3/.4 (barring of access for national or international switched direct dial trunk calls), it is appropriate to construe the clause to give meaning to all parts and arrive at a construction resulting in internal harmony. The better view is that the expression “service specific barring” in cl 1.5.5 is intended, as counsel for Telstra submitted, to cover at least a request that the override facility, as it might apply to trunk calls, be rendered inoperative.

89.       The direct benefit conferred on Optus by cl 1.5.3 is that it will not carry trunk calls of a customer who has requested that such calls be barred. In this way the provision ensures that Optus will not be exposed to commercial risk (such as a customer refusing to pay for trunk calls carried over its network notwithstanding that the customer had made a request to bar such calls) because Telstra failed to perfect a request to bar them.

90.       I accept that the decision of Telstra to impose a condition that a subscriber to HomeLine Net not use the override facility was adopted because the proposal to bar the use of that facility (and calls made using it) was abandoned in the face of complaint by solicitors acting for Optus. However the fact that this was the genesis of the decision does not, in my opinion, sustain the conclusion that the imposition of the condition deprives Optus of the benefit of cl 1.5.3. As just discussed, the benefit is more limited. Had Telstra proceeded with its original proposal and, as a result, a subscriber expressly or impliedly requested the barring of calls using the override facility by subscribing to HomeLine Net, an issue could have arisen about the operation of cl 1.5.5. However that proposal was abandoned.”

109               Optus has submitted that by introducing the contractual “no override” condition of the HomeLine Net (see again [73] above), Telstra intended to achieve that which clause 1.5.3 of Schedule 1 to the Access Agreement prohibited Telstra from doing by means of a technical bar, and that in the absence of any evidence to the contrary, the primary judge was wrong in concluding that such conduct did not deprive Optus of any benefit conferred upon it by clause 1.5.3. Optus further submitted that the restriction on the ability of Telstra’s customers to use Optus’ Preselectable Services whilst being free to use Telstra’s corresponding services, achieved by the inclusion of the no override condition, was exactly the sort of discriminatory outcome from which clause 1.5.3 was intended to protect Optus.

110               The Full Court is persuaded however that the reasoning of the primary judge is correct, and that in particular clause 1.5, which is headed “Disconnection and barring Procedures”, is more limited in scope than Optus contended below and on appeal. Clauses 1.5.3-1.5.5 are literally concerned only with technical barring, that is, the conditioning of a network so as to bar certain calls from a customer’s service. Moreover Telstra is correct in its contentions that the premise of clause 1.5.3 is a general request that all switched direct dial trunk calls be barred, and that such request is not concerned with who should carry such calls, but rather that such calls not be allowed at all. Clause 1.5.4 stipulates for the giving effect of the bar pursuant to clause 1.5.3, depending on whether the Access carrier or the Interconnecting Carrier is contacted by the customer. Unlike clause 1.5.3, clause 1.5.5 is not concerned with a general request for the barring of switched direct dialled trunk calls, but rather with a customer’s request for “service specific barring”. This third ground of cross appeal raised by Optus should also be dismissed.

Whether Telstra breached the Good Faith Obligation

111               This obligation was asserted by Optus to be based upon clause 20.8 of the Access Agreement, which is extracted in [62] above. The primary judge dismissed this cause of action propounded by Optus for the reasons set out below:

“106.   What might be the outer reaches of the operation of cl 20.8 need not be explored in these proceedings… It need not be explored because on the second day of the hearing counsel for Optus provided particulars of the allegation of lack of good faith after an issue arose about what was alleged. Those particulars stated that it was neither fair nor reasonable for Telstra to deprive Optus of the benefit of the provisions already discussed namely cll 4.1, 13.5.3(a) and 1.5.3 and in doing so Telstra failed to act in good faith. As I have already discussed, I do not accept that these provisions confer the benefits contended by Optus. It would appear to follow that the allegation of want of good faith, as particularised, must fail.”

Clause 4.1 of the Access Agreement (and as presented by Optus in argument on the cross-appeal combined with clause 1.2.1 of Schedule 1), relates to the so-called Access Obligation and clause 13.5.3 (to Schedule 13) and clause 1.5.3 (to Schedule 1) relate respectively to the so-called Preselection Availability Obligation and Barring Obligations.

112               Optus drew attention to authorities, in the context of which obligations of good faith and also of reasonableness have been implied in relation to the exercise of contractual rights and the performance of contractual obligations, the most recent being the decision of the Court of Appeal of the Supreme Court of New South Wales in Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187 (Sheller, Beazley and Stein JJA), where it was held that in circumstances in which certain contractual arrangements, principally involving a franchise for a term of 15 years, imposed an “extraordinary range of detailed considerations” regulating all or most aspects of routine and procedure, including staff presentation and vocabulary, an implied duty of good faith and reasonableness should operate to restrain one party from terminating those arrangements for insignificant breaches thereof. Earlier, the majority of a differently constituted Court of Appeal (Priestley and Handley JJA) in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 had recognised that an implied duty to act reasonably may be attributed to a contracting party in relation to the exercise of contractual rights and powers. The context in Renard was that contractual authority had been conferred on the Minister to take over the whole or any part of the construction work the subject of contractual arrangements, and to cancel the same, in circumstances of default by the contractor Renard in the performance or observance of any covenant or condition. Subsequently in Alcatel Australia Ltd v Scarcella and Others (1998) 44 NSWLR 349, the Court of Appeal (Sheller, Powell and Beazley JJA) adopted a similar approach in principle to that taken in Renard, by confirming the existence of a general principle that an implied duty of good faith, both in the context of performing obligations and of exercising rights, may be imposed upon contracting parties. The principles emerging from both of those authorities were subsequently applied by the Court of Appeal in Burger King with dramatically adverse consequences to the franchisor.

113               The attribution of duties of good faith and/or reasonableness in contractual settings has also been undertaken in this Court. As pointed out in Alcatel, the approach in principle there taken was in line with dictum of Finn J enunciated at first instance in Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 at 193-197. There is a forensic complication in transposing those principles of implied obligation to the operation of the Telstra/Optus Access Agreement by reason of clause 20.8 thereof, which explicitly requires each party to act in good faith in relation to the other in relation to “all matters relating to or contemplated by this agreement”. Clause 20.8 makes no reference to acting reasonably as well as in good faith, given that those concepts, albeit overlapping, are not identical. It is one thing to affirmatively exercise a power of termination of a contract for breach, in relation to which a requirement of good faith is more readily attracted, as exemplified in Renard and Burger King, but quite another for a contracting party to undertake a course of action, in its own commercial interests, which does not constitute breach of contract, but which, for instance, may nevertheless confer a competitive advantage upon that contracting party to the commercial disadvantage of the other contracting party. What constitutes unreasonable conduct or conduct lacking good faith in the exercise of contractual rights or obligations will or course vary according to the setting or circumstances of the particular contractual relationship. Conceptually, it would be unusual for conduct to be so characterised in the case of exercise of contractual obligations, which is the difficulty Optus faces in the context set out below.

114               Optus furnished the following particulars of Telstra’s alleged breach of Clause 20.8:

“1.       The Access Agreement obliges Telstra to provide to Optus the service of carriage of communications initiated by customers who are directly connected to the Telstra network and who dial Optus’ access code from the customer’s line to the point of interconnection with the Optus network (clause 4.1 and Schedule 1.1.2).

2.         The Access Agreement also obliges Telstra to ensure that systems are in place to make available to a customer directly connected to the Telstra network a service which will permit designation of Optus as a Preferred Carrier and which will route all preselected communications to the Preferred Carrier and which will route Override Communications to the Override Carrier and which will allow the customer to change from time to time the designation of the Preferred Carrier (eg Schedule 13.5.3(a)).

3.         The Access Agreement also obliges Telstra (without Optus’s consent) not to bar switched direct dialled trunk calls made by a customer directly connected to the Telstra network being routed over the network of Optus without also barring such calls being routed over the Telstra network (clause 1.5.3).

4.         Each of the matters referred to above is a matter relating to or contemplated by the Access Agreement within the meaning of clause 20.8 and compliance by Telstra with the abovementioned obligations gives rise to corresponding benefits to Optus.

5.         Further, the obligation on Telstra (and the resulting benefit to Optus) to carry a communication of a customer directly connected to the Telstra system who dials Optus’ access code, from the customer’s line to the point of interconnection with the Optus network is a matter relating to or contemplated by the Agreement. Equally, the benefit to Optus in receiving that communication and in providing the service of carrying that communication in that circumstance is also such a matter.

6.         Further, the obligation on Telstra (and the resulting benefit to Optus) to accept designation by a customer directly connected to it of Telstra as its preferred carrier but to carry Override Communications prefixed by the Optus override code to the point of interconnection with the Optus network while Telstra continues as the preferred carrier is a matter relating to or contemplated by the Agreement. Equally, the benefit to Optus in receiving that communication and in providing the service of carrying that communication in that circumstance is also such a matter.

7.         Each of the abovementioned benefits which Optus enjoys by reason of the provisions referred to in paragraphs 1, 2 and 3 above is hereinafter referred to as a “Benefit”.

8.         The imposition by Telstra of the condition in the HomeLine Net Service which precludes a customer overriding (“The Override Condition”) has the consequence of precluding Optus from enjoying the Benefits.

9.         As a consequence, it was neither fair nor reasonable for Telstra so to conduct itself and hence it failed to act in good faith within the meaning of clause 20.8.

10.       Further and in the alternative, the abovementioned consequence of the imposition by Telstra of the Override Condition was a consequence which Telstra intended.

11.       As a consequence, it was neither fair nor reasonable for Telstra so to conduct itself and hence it failed to act in good faith within the meaning of clause 20.8.”

What the foregoing particulars seek to do, upon the footing of the Preselection Availability, Access Service and Barring Obligations, yet upon the assumption implicitly that contravention thereof by Telstra has not occurred, is nevertheless to bring the conduct of Telstra in relation to the subject matter thereof within the scope of clause 20.8.

115               The first complaint made by Optus on appeal concerning his Honour’s finding on the Good Faith Obligation issue was that Optus’ case for breach thereof was not confined by the particulars to the three clauses of the Access Agreement identified in the passage contained in the reasons for judgment at first instance extracted in [111] above. The particulars furnished by Optus at first instance were more broadly or generally expressed as follows:

“The Access Agreement also obliges Telstra to ensure that systems are in place to make available to a customer directly connected to the Telstra network a service which will permit designation of Optus as a Preferred Carrier and which will route all preselected communications to the Preferred Carrier and which will route Override Communications to the Override Carrier and which allows the customer to change from time to time the designation of the Preferred Carrier (eg schedule 13.5.3(a)).”

Optus thus contended that the obligation imposed on Telstra, and the corresponding benefit to Optus, as described in the foregoing particulars, derives from the totality of Schedule 13, or indeed from Access Agreement as a whole. Optus referred generally to the affidavit evidence of Optus’ Mr Waters, which set out the background to the entry of Optus and Telstra into the Access Agreement, and thereafter to what was described in clause 13.1.3 of Schedule 13 as the key objectives of the implementation of Preselection in Australia, and to what was envisaged by clauses 13.1.1 and 13.1.3 of Schedule 13 in terms of the continuing operation of Preselection, and by clause 13.3A.5(b) as to the availability of LEC Override.

116               It is apparent, from the reasons of the primary judge for dismissing the cause of action based on the Good Faith Obligation, that his Honour was unable to accept that the particulars or detail of Telstra’s alleged failure to act in good faith in breach of clause 20.8 could substantiate or support a claim for breach of the Good Faith Obligation, given the particularity of the obligations of Telstra the subject of the Preselection Availability, Access Service and Barring Obligations. Put another way, the primary judge was unable to identify how it could be postulated that the generality of the Good Faith Obligation could so operate as to extend or enlarge the scope of any one or more of those three specific contractual obligations created by the Access Agreement, by reason of the benefits which Optus was intended by the Access Agreement to receive from bona fide performance of those three more specifically framed obligations. It is difficult to conceive, how Optus can achieve an outcome, by the sidewind of the Good Faith Obligation, in relation to the extent of operation of any one or more of the Preselection Availability, Access Service and Barring Obligations, beyond that found by the primary judge. The full scope and application of the clause 20.8 expression “with respect to all matters relating to or contemplated by this agreement” must be left to another day and another factual matrix. Given that on the one hand, Optus and Telstra are engaged in a species of joint enterprise involving the use and enjoyment of telecommunication structures in Australia, yet are in commercial competition with each other in the pursuit of customer patronage flowing from the use of such structures, it may well be the reality in any event that clause 20.8 adds little, if anything, of material significance to what may be derived from the implications of the general law which have been developed by authorities such as Renard, Alcatel and Burger King, in so far as the same might relate to the purported performance of contractual obligations, as distinct from the exercise of contractual rights consequential upon default in observance or performance of contractual obligations. It follows that the fourth ground of cross appeal propounded by Optus must be rejected.

Contravention of s 52 of the Trade Practices Act

117               This cause of action was based upon the conduct of Telstra in publishing the brochure promoting the HomeLine Net (and in particular par 8 thereof extracted in [76] above), until the occurrence of the events of February 2001 summarised by the primary judge and extracted in [77] above. Optus has contended that it was reasonably to be inferred that Telstra intended the words of the brochure “No override available” to accurately and truthfully reflect a situation where override was not physically available to HomeLine Net customers, and that Telstra’s HomeLine Net customers and potential customers would have understood those words accordingly. Moreover, so the Optus contention continued, it was also likely that the average Telstra customer would have understood the term “available” to mean “physically/technically available”, because that was the sense used in other parts of Telstra’s “Calling Options to Suit Every Taste” promotional brochure, comprising the following statements:

“(a)     “Available for direct dialled calls to/from most fixed phones” in clause 3;

(b)       “Available for direct dialled calls from most fixed phones to Telstra mobiles within Australia” in clause 4;

(c)        “Available from most fixed phones, excludes some services” in clause 5;

(d)       “Available for most residential customers preselected to Telstra for long distance” in clause 7;

(e)        “Available for most residential customers preselected to Telstra for long distance” in clause 8 itself;

(f)        “Available most areas” in clause 10;

(g)       “Not available for blocked calls” in clause 11;

(h)       “Available most areas and CND compatible equipment required. Not available for blocked calls” in clause 20.”

Notwithstanding Telstra’s abandonment of the plan to implement a physical bar on the ability of HomeLine Net customers to use override (as to which see again the finding of the primary judge in [77] above), no relevant change was made to the wording of the brochure. Accordingly, so the Optus submission continued, the brochure carried the false and misleading implication that override was physically unavailable to customers when in fact, customers were, indeed in a physical sense, able to continue to use override, notwithstanding the contractual inhibitions which applied (see again [73] above).

118               Telstra submitted that since the contentious condition, to the effect that a subscriber to HomeLine Net could not use override, was a term of the contractual documentation between itself and a customer, it followed that if the term was breached by the customer, Telstra was contractually entitled to cancel the HomeLine Net service. Telstra submitted that while the condition not to use override was infelicitously expressed in clause 5 of the Public Switched Telephone Service Section (PSTS) of Telstra’s Standard Form of Agreement, extracted in [74] above, the agreement should be construed in a sensible way, by evincing reference to contractual and not physical restrictions. Telstra invoked in that regard the dictum of Gleeson CJ in McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at [22], concerning the interpretation of commercial contractual documents, namely that “[a] policy of insurance… is a commercial contract and should be given a businesslike interpretation. Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure”.

119               The conclusions of the primary judge on this fifth Optus cause of action were as follows:

“109.   In my opinion, this issue can be readily resolved. Putting to one side any question of the imposition of the contentious condition being a breach of the Access Agreement (which, in this context, Optus did not rely on), Telstra was simply stating in its promotional material what the position was. That is, Telstra was stating the effect of a term in the contract entered into by a subscriber to the HomeLine Net service. It is not, in my opinion, misleading or deceptive conduct on Telstra’s part, to inform a potential party or a party to a contract that their conduct will be or is constrained by a term of the contract even though the contracting party will be able, in a physical sense, to engage in the conduct.

110.     The declaration in the advertising brochure that “No override available” appears in a list of what are effectively annotations identifying the features of the various services promoted in the brochure. It is true that this statement appears in a context where the word “available” is used in a way that would suggest, elsewhere in the annotations (including No 8 set out at [50] above), that the service or feature was or was not physically available. However it is improbable, in my opinion, that a person reading the brochure would take the reference to override as a statement concerning only its physical available (sic). The statement is in the context of a list of conditions and features concerning the various products. It is more probable that it would convey the meaning that if a person subscribed to the HomeLine Net service the person would not be able to use override. This statement is correct even though the inability flows from a contractual term.”

120               The circumstances underlying Optus’ complaint are marginal, in the light of the generality tending to ambiguity of the expressions used in Telstra’s promotional brochure to which Optus drew attention, as reproduced in [117] above. In any event, the Full Court is not sufficiently persuaded that the conclusions of the primary judge cited above are incorrect. Although of course it was not essential for Optus to tender evidence as to any HomeLine Net customer having been actually misled or deceived by Telstra’s brochure, the entire absence of any such evidence contributes some degree of support to his Honour’s conclusion. Accordingly the fifth and final ground of cross-appeal should also be rejected.

Result

121               In the result, I have agreed with the essence of the findings and conclusions of all findings the subject of Telstra’s appeal and Optus’ cross-appeals. I would therefore have dismissed the appeal of Telstra, contrary to the conclusion of the other members of the Full Court, but would also have dismissed each of the cross-appeals of Optus in line with the other members the Full Court. Accordingly I would have ordered each party to bear its own costs of the appellate proceedings, upon the basis that each party failed in the present appellate proceedings, that is to say, upon the appeal and cross-appeals respectively.

Associate:

Dated:              23 September 2002