FEDERAL COURT OF AUSTRALIA

Optus Networks Ltd v Telstra Corporation Ltd (No. 3) [2009] FCA 728

EQUITY – duty of confidentiality – ‘confidential information’ defined in agreement between the parties – equitable intervention is not necessary where alleged conduct is common to both the finding of breach of contract and the ground relied upon for equitable intervention.

TRADE PRACTICES – unconscionable conduct as defined by s 51AA of Trade Practices Act 1974 (Cth) – ‘unconscionable conduct’ includes conduct in respect of which a judge in equity would have been prepared to grant relief – the access agreement between the parties did not result from the knowing exploitation of any special disadvantage – impugned conduct did not prevent applicant from exercising a legal right in a way that involves unconscionable departure from a representation relied upon by applicant to its detriment – otherwise not unconscionable conduct.  

Trade Practices Act 1974 (Cth) s 51AA

ACCC v Samton Holdings Pty Ltd & Ors (2002) 117 FCR 301 considered

Moorgate Tobacco Co Ltd v Philip Morris Ltd (No. 2) (1984) 156 CLR 414referred to

Meagher R, Heydon D, Leeming M, Equity, Doctrine and Remedies (4^th ed., Butterworths, 2002) 

OPTUS NETWORKS PTY LIMITED v TELSTRA CORPORATION LIMITED

NSD 1087 of 1997

EDMONDS J

10 JULY 2009

SYDNEY

THE COURT ORDERS THAT:

1.         The parties bring in short minutes of order to give effect to the reasons published on 30 April 2009 and today; including directions as to a timetable of the steps to be taken by each party to prepare the second phase of the proceeding for hearing.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                          In my reasons for judgment published on 30 April 2009, I concluded on the issue of relief in the following terms:

[130]    Optus seeks, among other relief, a declaration going to the confidentiality to Optus of the information used by Telstra as well as a declaration that the use by Telstra of such Confidential Information for the unauthorised purposes as defined in para 15 of the Third Consolidated Amended Statement of Claim is:

(a)        A breach of the Access Agreement;

(b)        in breach of the duty of confidentiality [owed] by Telstra to Optus; and

(c)        unconscionable conduct within the meaning of s 51AA of the TPA.

[131]    I am not, at this point in time, convinced that there is any utility in making such declarations.  I have found that Telstra is in breach of the relevant provisions of the Access Agreement by reason of its conduct and doubt whether, in the exercise of my discretion to grant declaratory relief, anything is to be gained by merely recording conclusions reached in my reasons for judgment.  However, I am happy to hear the parties on the issue of relief in relation to the matter of liability in the proceeding at a mutually convenient date.

2                          While I found that Telstra was in breach of the relevant provisions of the Access Agreement by reason of its conduct, I made no findings in relation to the alternative claims in the Third Further Amended Application.  First, that the same conduct involved a breach of the duty of confidentiality owed by Telstra to Optus; and second, that it also involved unconscionable conduct in contravention of s 51AA of the Trade Practices Act 1974 (Cth) (‘the TPA’).  It is appropriate that I do so, or decline to do so, before the proceeding moves forward to the next phase.

BREACH OF A DUTY OF CONFIDENTIALITY OWED BY TELSTRA TO OPTUS

3                          As the learned authors of Meagher, Gummow and Lehane’s Equity, Doctrine and Remedies, 4^th ed., observe at 41-025 it may be accepted that, since Moorgate Tobacco Co Ltd v Philip Morris Ltd (No. 2) (1984) 156 CLR 414, there exists a general equitable jurisdiction to grant relief against actual or threatened abuse of confidential information not involving any tort or breach of contract (at 438 per Deane J in delivering the judgment of the High Court).  But where there exists a contract, the position is not as clear.  The learned authors had earlier said (at 41-020):

Where there is a contract then it is to the contract that the court should look to see from express words or necessary implication what the obligations of the parties are and the introduction of equitable concepts should be resisted.

On the other hand, as the learned authors go on to acknowledge, there have been a number of cases involving a contractual nexus where judges have nevertheless treated equitable principles at length as if they overlapped or were concurrent with the common law.

4                          Nevertheless, where, as here, there is not only a contract between the parties, but a contract which, in its terms, defines ‘Confidential Information’ on an exhaustive basis (cl 1.1 of the Access Agreement) and regulates the obligations of each party in relation to the Confidential Information of the other party on a comprehensive basis (cl 15 of the Access Agreement), there is, in my view, no reason for the intervention of equity for the simple reason that there is no need for its intervention to achieve justice between the parties for conduct which is common to both the finding of breach of contract and the ground relied on for equitable intervention.

5                          Moreover, the conclusion expressed in [4] above is reinforced where, as here, the contract contains a provision such as cl 16.1 which provides:

Save to the extent that another provision of this agreement expressly provides for (or expressly excludes or limits) a remedy, a liability or a form of compensation in relation to an act, omission or event, this clause 16 shall regulate the liability (whether arising in contract, in tort, under statute or in any other way and whether due to negligence, wilful or deliberate breach or any other cause) of a party to each other party under and in relation to this agreement and in relation to any act, omission or event relating to or arising out of this agreement.

6                          In these circumstances, I decline to find any breach of a duty of confidentiality owed by Telstra to Optus overlapping or concurrent with my finding of Telstra’s breach of contract.

UNCONSCIONABLE CONDUCT IN CONTRAVENTION OF S 51AA OF THE TPA

7                          Here again, the conduct relied upon is the same conduct upon which I found that there was a breach of contract by Telstra.  But it does not follow from that finding that the common conduct is also unconscionable conduct in contravention of s 51AA of the TPA.

8                          Section 51AA(1) of the TPA provides:

A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.

9                          In ACCC v Samton Holdings Pty Ltd & Ors (2002) 117 FCR 301 a Full Court of this Court considered the pre-history of s 51AA ([39] – [42]); the text of s 51AA ([43] – [45]); the way in which equity will intervene to prevent unconscionable behaviour and, in doing so, identified five categories of cases where equity will intervene and the relief it will provide ([46] – [48]); and the scope of s 51AA ([49] – [50]).  Relevantly, in relation to the five categories, the Court observed at [48]:

Under the rubric of unconscionable conduct, equity will:

(i)         Set aside a contract or disposition resulting from the knowing exploitation by one party of the special disadvantage of another. The special disadvantage may be constitutional, deriving from age, illness, poverty, inexperience or lack of education – Commercial Bank of Australia Ltd v Amadio [(1983) 151 CLR 447]. Or it may be situational, deriving from particular features of a relationship between actors in the transaction such as the emotional dependence of one on the other – Louth v Diprose [(1992) 175 CLR 62]; Bridgewater v Leahy (1998) 194 CLR 457.

(ii)        Set aside as against third parties a transaction entered into as the result of the defective comprehension by a party to the transaction, the influence of another and the want of any independent explanation to the complaining party – Garcia v National Australia Bank Ltd (1988) 194 CLR 395.

(iii)       Prevent a party from exercising a legal right in a way that involves unconscionable departure from a representation relied upon by another to his or her detriment – Waltons Stores (Interstate) Ltd v Maher [(1988) 164 CLR 387]; Commonwealth v Verwayen [(1990) 170 CLR 394].

(iv)       Relieve against forfeiture and penalty – Legione v Hateley [(1983) 152 CLR 406]; Stern v McArthur [(1988) 165 CLR 489].

(v)        Rescind contracts entered into under the influence of unilateral mistake – Taylor v Johnson [(1983) 151 CLR 422].

Each of these categories of case (the list may not be exhaustive) involves the identification of unconscionable conduct, albeit its content and degree will vary according to the category. It is a term which has various shades of meaning according to its context. There are different thresholds of conduct in various categories, all of which may be described as unconscionable – G Dal Pont, “The Varying Shades of ‘Unconscionable’ Conduct – Same Term, Different Meaning” (2000) 19 Aust Bar Rev 135 at p 165.

10                        On the scope of s 51AA the Court observed at [49] – [50]:

[49]      Ultimately the language of s 51AA requires identification of conduct able to be characterised as unconscionable in a sense known to the unwritten law. In the context of that law as it presently stands, unconscionable conduct is that which supports the grant of relief on the principles set out in specific equitable doctrines. Five categories of case are set out above. As was said of s 51AA in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (No 2) (2000) 96 FCR 491 at 509:

“[It] prohibits conduct in respect of which a judge in equity would have been prepared to grant relief. The imposition of the prohibition precedes any actual or notional judicial decision. The judge deciding a case under s 51AA will be asking himself or herself whether he or she would have been prepared to grant relief at equity on the basis of an assessment of the conduct in question as unconscionable.”

Although the application of the principles in that case to a particular circumstance of special disadvantage on the part of a shopping centre tenant was overturned by a Full Court the principles were not impugned – see CG Berbatis Holdings Pty Ltd v Australian Competition and Consumer Commission (2001) 185 ALR 555. See also the discussion in Dietrich, “The Meaning of Unconscionable Conduct under the Trade Practices Act 1974” (2001) 9 Trade Practices Law Journal 141.

[50]      The approach has been criticised as too wide having regard to the terms of the explanatory memorandum and the second reading speech which referred to the special disadvantage cases of Blomley v Ryan [(1956) 99 CLR 362] and Amadio – see Buckley, “Section 51AA and Section 51AC of the Trade Practices Act 1974: The Need for Reform” (2000) 8 Trade Practices Law Journal 5. But as already noted, the terms of the section are not limited to those categories. Although the section is confined by the parameters of the “unwritten law”, it is the unwritten law “from time to time”. Neither the explanatory memorandum nor the second reading speech can be treated as imposing qualifications which are not found in the words of s 51AA. On the other hand, equitable doctrine does not presently provide a remedy against conduct simply on the basis that it is unfair in the opinion of a judge. It cannot be applied to unconscionable conduct at large. As Gummow and Hayne JJ recently observed in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 245; 185 ALR 1 at 28, “the notion of unconscionable behaviour does not operate wholly at large”. In this respect it is not necessary to pass upon the correctness or otherwise of Olex Focas Pty Ltd v Skodaexport Co Ltd [1998] 3 VR 380 which was concerned with the grant of interlocutory relief and the existence of a serious question to be tried rather than any concluded view as to the construction of s 51AA.

11                        Specifically, Optus contended that the unconscionable conduct arises by reason of the following circumstances apparent on the evidence:

(a)        Telstra was both a carrier of telecommunications traffic generated by Optus’ customers and a competitor of Optus as a provider of telecommunications services to customers including members of the public.

(b)        In its capacity as a carrier of telecommunications traffic generated by Optus’ customers, Telstra had access to Optus’ traffic information which was confidential.

(c)        Such information was capable of being used by Telstra in its capacity as a competitor of Optus for the purpose of Telstra’s marketing, promotional and related activities and, consequently, to the benefit of Telstra as a competitor of Optus and to the detriment of Optus’ business interests.

(d)        Optus was unaware as to the nature of the use that Telstra was or may have been making of the information and, consequently, for the impact or potential impact of such use on Optus’ business interests.

(e)        Telstra unreasonably failed to inform Optus of the above matters and, specifically, of the nature of the use that Telstra was making or may have been making of the information in question; but set about to keep its use of Optus’ information and Telstra’s breach of contract secret.

(f)         In these circumstances, Optus was under a special disadvantage in dealing with Telstra such that there was an absence of any reasonable degree of equality between them in relation to Telstra’s continuing access to and use of the information, and Optus was unable to make any reasonable judgment as to what was in its business interests as regards Telstra’s continuing access to and use of the information.

(g)        The above matters were known to Telstra or ought reasonably to have been sufficiently evident to Telstra as to make it unfair or unconscientious that Telstra use and continue to use the information for the purposes referred to above.

12                        Telstra made the following submissions in response to Optus’ contentions:

(a)        The conduct which Optus contends is unconscionable in contravention of s 51AA of the TPA, is precisely the same conduct which is said to amount to a breach of the equitable duty of confidence, which in turn is the same conduct relied upon in support of the claim of a breach of the Access Agreement.

(b)        Central to the unconscionability claim is a contention that Optus was at a relevant disadvantage vis-a-vis Telstra.  This contention should be rejected.  Optus was not at a relevant disadvantage vis-a-vis Telstra.  Indeed, a contention that a corporation the size of Optus could ever be at a special disadvantage is somewhat novel.  The time for determining the issue of special disadvantage is the time at which Access Agreement was entered into, being the time at which the parties entered into an agreement to govern their respective dealings with one another.  Optus was at no special disadvantage vis-à-vis Telstra in relation to these negotiations.  Optus was perfectly placed to protect itself by having a capable firm of solicitors with relevant expertise representing it and appropriate terms included in the Access Agreement.  This it did.

(c)        Insofar as questions of limitation periods and entitlement to relief arise in relation to the unconscionability claim, Telstra was content that those issues be addressed at the second stage of the hearing should the Court find, contrary to the submissions made above, that Telstra has in fact engaged in unconscionable conduct.

13                        I am of the view that the Access Agreement did not result from the knowing exploitation by Telstra of any special disadvantage of Optus whether constitutional or situational: the first category referred to in Samton Holdings ([48]).  I am also of the view that this is not a case where equity needs to intervene to prevent Telstra from exercising a legal right in a way that involves unconscionable departure from a representation relied upon by Optus to its detriment: the third category referred to in Samton Holdings ([48]).  The other categories there referred to are irrelevant.

14                        While the Full Court itself acknowledged the list may not be exhaustive, the fact that the terms of the Access Agreement were ultimately concluded in the way they were such that the conduct of Telstra which is impugned in this case was found to be a breach of contract would suggest that Optus was not only aware, which it undoubtedly was, that Telstra would have access to Optus’ traffic information but that its disadvantage in this respect – it did not have access to Telstra’s traffic information – was nevertheless counter-balanced by the restrictions on the use and disclosure of such information.  The fact that Telstra acted in contravention of those restrictions does not make its conduct unconscionable.

15                        It follows that I also decline to find that Telstra engaged in unconscionable conduct in contravention of s 51AA of the TPA.

16                        I will direct the parties to bring in short minutes of order to give effect to these reasons and the reasons published on 30 April 2009, as well as to move the proceeding to its next phase.

Associate:

Dated:         10 July 2009