FEDERAL COURT OF AUSTRALIA

Al Jadeed TV v United Broadcasting International Pty Limited [2011] FCA 983

THE COURT ORDERS THAT:

1.    The parties are to bring in Short Minutes of Order to give effect to these reasons within 21 days, including directions as to the future conduct of the hearing in respect to damages.

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

REASONS FOR JUDGMENT

1    The Applicant, Al Jadeed TV (“Al Jadeed”), is “in the business of broadcasting Arabic language television stations”, one of which is known as the New TV Service.

2    On 21 September 2004 Al Jadeed entered into an agreement with TARBS Europe SA (“TARBS”) whereby TARBS was given a right to broadcast the New TV Service throughout Australia (“September 2004 Agreement”).

3    Thereafter in March 2008 TARBS exercised an option to extend the September 2004 Agreement for a further four years expiring in September 2012. TARBS also at the same time assigned its rights to the First Respondent, United Broadcasting International Pty Limited (“United Broadcasting”).

4    Since about July 2010 the New TV Channel has also been offered in Australia to subscribers of the MySat platform, an entity owned by the Third Cross-Respondent – World Media International Pty Ltd (“World Media”).

5    It is common ground that a series of payments to be made by both TARBS and United Broadcasting were late. Some payments, it is said, remain outstanding.

6    Al Jadeed maintains that it has terminated the September 2004 Agreement with United Broadcasting on a number of occasions. Al Jadeed also maintains that the conduct of United Broadcasting in continuing to broadcast the New TV Service constitutes misleading and deceptive conduct in contravention of ss 18 and/or 29 of the Australian Consumer Law, contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth). Al Jadeed filed its Application and Statement of Claim on 1 April 2011.

7    On 11 May 2011 United Broadcasting filed a Cross-Claim naming Al Jadeed as the First Cross-Respondent; International Media Distribution LLC as the Second Cross-Respondent (“International Media”); and World Media as the Third Cross-Respondent. Orders for substituted service were made as against International Media on 31 May 2011 but it has not entered an appearance. At the outset of the hearing on 4 July 2011 United Broadcasting abandoned its Cross-Claim against both International Media and World Media. A Notice of Discontinuance was filed in Court by United Broadcasting on 5 July 2011. World Media did not oppose the discontinuance but sought costs on an indemnity basis. The question of the basis upon which costs were to be awarded was reserved.

8    A number of amendments have been made to the pleadings. The pleadings as at the date of hearing were an Amended Application and a Further Amended Statement of Claim filed in Court by Al Jadeed on 5 July 2011 and a Defence to the Further Amended Defence and Cross-Claim filed by Al Jadeed on 30 June 2011. A Second Further Amended Defence and Cross-Claim was filed on behalf of United Broadcasting on 5 July 2011. There was also a Defence to the Further Amended Cross-Claim filed by World Media on 30 June 2011.

9    It should be briefly mentioned at the outset that the terms in which correspondence and emails between the parties were exchanged made manifest the fact that English was presumably not the first language of those persons involved. To the extent that that correspondence assumes relevance, it has been set forth in the manner in which it was expressed. Some of the issues to be resolved depend in part upon the terms employed, so no corrections have been made to either spelling or grammar. In doing so there is no disrespect to those persons.

10    The principal issues addressed in written and oral submissions were variously expressed and focussed attention upon:

    whether or not the September 2004 Agreement conferred “exclusive” broadcasting rights in respect to the New TV Channel upon TARBS (and thereafter United Broadcasting);

    whether or not the dates upon which payments were made constituted a breach or breaches of the September 2004 Agreement;

    in the event that there were breaches by United Broadcasting, whether Al Jadeed elected not to terminate the September 2004 Agreement;

    whether or not either the common law or the terms of the September 2004 Agreement conferred a right of termination; and

    whether one or other of four Notices of Termination given by Al Jadeed was effective to terminate the September 2004 Agreement.

Subsidiary issues which received little attention included whether or not Al Jadeed was also in breach of the September 2004 Agreement. Although only passing reference was given in oral submissions to the claims founded upon alleged misleading and deceptive conduct, the jurisdiction of the Court was not put in issue by any of the parties.

11    An order was made on 5 May 2011 for the separate determination of “all issues other than the quantum of any monetary relief” to be granted.

Objectivity, Termination and Election

12    Centrally relevant to the issues to be presently resolved are a limited number of well-established principles of contract law going to:

    the “principle of objectivity” whereby rights and liabilities are to be determined;

    the right to terminate; and

    the doctrine of election.

13    As to the first of these issues, it is accepted that when construing the terms of a contract the subjective beliefs or understandings of the contracting parties are not determinative of their rights; a contract is to be construed by reference to what a reasonable person is led to believe. In resolving what a reasonable person may be led to believe, consideration may not only be given to the text of the contract but also to “surrounding circumstances”: Toll (FGCT) Pty Limited v Alphapharm Pty Ltd [2004] HCA 52, 219 CLR 165. Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ there referred to the earlier decision in Pacific Carriers Ltd v BNP Paribas [2004] HCA 35, 218 CLR 451 and continued:

[40] This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.

Thereafter, in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407, 76 NSWLR 603. Allsop P summarised the relevant legal principles as follows:

The lack of need for ambiguity before resort is had to legitimate surrounding circumstances

[14] The state of the law in this respect is to be ascertained from a number of High Court cases: Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at 188 [11]; Pacific Carriers v BNP Paribas (at 461 [22]); Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530 at 559 [82]; Toll (FGCT) v Alphapharm (at 179 [40]) and International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 at 160 [8] and 174 [53]. These cases are clear. The construction and interpretation of written contracts is to be undertaken by an examination of the text of the document in the context of the surrounding circumstances known to the parties, including the purpose and object of the transaction and by assessing how a reasonable person would have understood the language in that context. There is no place in that structure, so expressed, for a requirement to discern textual, or any other, ambiguity in the words of the document before any resort can be made to such evidence of surrounding circumstances.

…

[16] Further, intermediate appellate courts have been clear in their expression of view that these recent decisions of the High Court are to the effect that the identification of ambiguity is not a precondition to examining legitimate surrounding circumstances …

See also: Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144, 156 FCR 1; Cargill v Harbour City Real Estate Pty Ltd [2010] FCAFC 7 at [55] per Siopis J; Yarrabee Chicken Co Pty Ltd v Steggles Ltd [2010] FCA 394 at [9] per Jagot J.

14    Second, the rights expressly conferred by a contract are to be read together with rights conferred by the common law. Apart from any relevant statutory right to terminate a contract, it may thus be accepted as a general proposition that a contract may be terminated either pursuant to an express contractual right or pursuant to a right conferred by law: J W Carter, Elizabeth Peden and G J Tolhurst, Contract Law in Australia (5th ed, 2007) at [30-30].

15    There is, accordingly, no necessary impediment to a contracting party relying upon both rights conferred by the common law and by the express terms of a contract. Clear words, it has been said, are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of contract arising by operation of law: Concut Pty Ltd v Worrell [2000] HCA 64 at [23], 176 ALR 693 at 699. Gleeson CJ, Gaudron and Gummow JJ there went on to observe that an “express provision for termination for breach in certain circumstances may be regarded as designed to augment rather than to restrict or remove the rights at common law which a party otherwise would have had on breach”: [2000] HCA 64 at [23], 176 ALR 693 at 699 to 700 per Gleeson CJ, Gaudron and Gummow JJ. See also: W & R Pty Ltd v Birdseye [2008] SASC 321 at [191] to [194], 102 SASR 477 at 513 per Anderson J. Examples can nevertheless be provided where there are sufficiently clear words of a particular contract that displace the common law: Carter v Dennis Family Corporation [2010] VSC 406 at [23] per Habersberger J.

16    At common law a contract may be terminated for “breach of an essential term or a serious breach of a non-essential term”: Fig Tree Developments Ltd v Australian Property Custodian Holdings Ltd [2009] FCA 390 at [165] per McKerracher J (applying Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61 at [44] to [56], 233 CLR 115 at 135 to 140 per Gleeson CJ, Gummow, Heydon and Crennan JJ). See also: Rooney v ABB Grain Ltd [2010] FCA 1392 at [186] to [189] per Besanko J.

17    A party who has terminated a contract may also rely upon a breach even though unaware of it at the time of termination: Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 at 377 to 378. Dixon J there summarised the position as follows:

When the respondent terminated his agency it was not aware of the contents of the telegrams and the letter which he had sent to its customer’s buyer, and it acted upon other grounds. It is well established, however, that a servant’s dismissal may be justified upon grounds on which his master did not act and of which he was unaware when he discharged him … It is true that the agreement between the appellant and the respondent does not amount to a contract of service. But the rule is of general application in the discharge of contract by breach, and enables a party to any simple contract who fails or refuses further to observe its stipulations to rely upon a breach of conditions, committed before he so failed or so refused, by the opposite party to the contract as operating to absolve him from the contract as from the time of such breach of condition whether he was aware of it or not when he himself failed or refused to perform the stipulations of the contract. “It is a long established rule of law that a contracting party, who, after he has become entitled to refuse performance of his contractual obligations, gives a wrong reason for his refusal, does not thereby deprive himself of a justification which in fact existed, whether he was aware of it or not” (per Greer J., Taylor v. Oakes Roncoroni & Co [(1922) 127 LT at 269]) …

His Honour returned to this same proposition in Williams v Frayne (1937) 58 CLR 710 at 733 where he said:

… as a general rule, it is enough that upon the true facts a party is entitled to act as he has done and his justification is independent of his own knowledge of the facts …

See also: Byrne v Australian Airlines Limited (1995) 185 CLR 410 at 430 per Brennan CJ, Dawson and Toohey JJ; Concut Pty Ltd v Worrell [2000] HCA 64 at [27], 176 ALR 693 at 701 per Gleeson CJ, Gaudron and Gummow JJ; W & R Pty Ltd v Birdseye [2008] SASC 321 at [73], 102 SASR 477 at 492 per Doyle CJ (with whom Duggan J agreed); Vennard v Delorain Pty Ltd [2010] QCA 309 at [52] per Fraser JA (de Jersey CJ and Philippides J agreeing); Shepparton Projects Pty Ltd v Cave Investments Pty Ltd [2010] VSC 504 at [65] per Croft J; Kanes Hire Pty Ltd v Mitchell [2010] FCA 756 at [32] to [34], 203 IR 37 at 49 per Moore J.

18    The third and final general principle of contract law to be briefly addressed is the right of a party to “elect” not to terminate a contract for breach but to “affirm” the contract.

19    In Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 655 to 656, Mason J stated the principles relevant to an election as follows:

It will make for greater certainty, therefore, if the present cases are regarded as cases of election. A person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, i.e. when he has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on the continuation of the estate or the performance of the contract. It matters not whether the right to terminate the contract is conferred by the contract or arises at common law for fundamental breach — in each instance the alternative right to insist on performance creates a right of election.

Essential to the making of an election is communication to the party affected by words or conduct of the choice thereby made and it is accepted that once an election is made it cannot be retracted … No doubt this rule has been adopted in the interests of certainty and because it has been thought to be fair as between the parties that the person affected is entitled to know where he stands and that the person electing should not have the opportunity of changing his election and subjecting his adversary to different obligations.

A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other … So, words or conduct which do not constitute the exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an election to affirm the contract.

The central problem in these cases lies in ascertaining what in the eye of the law are the elements essential to the making of a binding election, in particular whether knowledge of the existence of the alternative right is a prerequisite in the party against whom election is alleged. The question is complicated because in some instances election may take place as a matter of conscious choice with knowledge of the existence of the alternative right and in other cases it may occur when the law attributes the character of an election to the conduct of a party.

A basic requirement of an election, however, is that the act of election must be unequivocal: Immer (No 145) Pty Limited v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 at 30. Brennan J there said:

A basic requirement of an election between alternative rights arising under a contract is that the party electing should know the facts which gave rise to those rights or, perhaps, at least be taken to have known of those facts …

An act amounting to an election must be unequivocal. Where a contract can be terminated at the option of a promisee, the right to terminate is not necessarily lost by the promisee doing any act consistent with the continuance of the contract. If the act is also consistent with the reservation of a right to terminate in certain events, the right to terminate is not necessarily lost by the doing of the act …

See also: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 at [356], 128 FCR 1 at 89 per Finn J; QBE Insurance (Australia) Ltd v Cape York Airlines Pty Ltd [2011] QCA 60 at [23] to [24] per Muir JA (Chesterman JA and Margaret Wilson AJA agreeing).

20    The statement by Mason J in Sargent that “once an election is made it cannot be retracted” is nothing new. See also: Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 at 451 per Barwick CJ. It may also be accepted that the fact a party may have “condoned one breach of an essential promise does not prevent him from terminating the contract if a second breach of an essential promise is committed”: Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 at 645 per Jordan CJ. The decision in this case was reversed on appeal: Luna Park (NSW) Limited v Tramways Advertising Pty Ltd (1938) 61 CLR 286. But the statements of law as made by Jordan CJ remain correct and are frequently cited with approval.

21    Whatever be the source of the power sought to be invoked by a party seeking to terminate a contract, any notice of termination must be expressed in sufficiently clear terms such that a reasonable person would understand the notice to be one terminating the contract: Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749. Notices of termination of a lease there specified a date one day earlier than the permissible date. The error did not vitiate the notice. Lord Clyde observed:

The standard of reference is that of the reasonable man exercising his common sense in the context and in the circumstances of the particular case. It is not an absolute clarity or an absolute absence of any possible ambiguity which is desiderated. To demand a perfect precision in matters which are not within the formal requirements of the relevant power would in my view impose an unduly high standard in the framing of notices such as those in issue here. While careless drafting is certainly to be discouraged the evident intention of a notice should not in matters of this kind be rejected in preference for a technical precision.

The test is an objective one. In circumstances where an estoppel might arise the actual understanding of the recipient may be relevant, but in general the actual understanding of the parties is beside the point … [[1997] AC at 782].

Lord Steyn has also previously formulated a number of general propositions, including the following:

The question is not how the landlord understood the notices. The construction of the notices must be approached objectively. The issue is how a reasonable recipient would have understood the notices. And in considering this question the notices must be construed taking into account the relevant objective contextual scene … [[1997] AC at 767].

Lord Steyn later further observed:

Even if such notices under contractual rights reserved contain errors they may be valid if they are ‘sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when they are intended to operate’ … That test postulates that the reasonable recipient is left in no doubt that the right reserved is being exercised. It acknowledges the importance of such notices. The application of that test is principled and cannot cause any injustice to a recipient of the notice … [[1997] AC at 768].

See also: [1997] AC at 780 per Lord Hoffman. The approach of Lord Steyn was relied upon by Judd J in Primary RE Ltd v Great Southern Property Holdings Ltd [2011] VSC 242 at [117].

22    Although each case must necessarily depend upon its own facts and upon the terms of the contract in issue, Dee-Tech Pty Ltd v Neddam Holdings Pty Ltd [2010] NSWCA 374 provides a comparatively recent instance where sufficiently clear words were not employed to terminate a lease. The letter relied upon as the notice of termination was a letter dated 26 February 2007 and was headed “Notice to Vacate the Premises”. It went on to state that the “Landlord’s solicitor has advised us that you are in breach of your lease” and further stated that “you are in breach of your lease and we have been instructed to terminate this current lease”. Sackville AJA stated that the “general rule is that an election to terminate a contract for repudiation or fundamental breach must be communicated by an unequivocal act or statement that the innocent party is treating the contract as at an end”: [2010] NSWCA 374 at [56]. His Honour continued:

[61] The letter of 26 February 2007, upon which Neddam relied, was not in my opinion, an unequivocal statement that Neddam was terminating the 2005–2008 Lease by reason of Dee-Tech’s breach of an essential term. The following considerations militate against any such conclusion:

The letter bore a heading appropriate to the termination of a periodic tenancy, but not to the termination of a lease for breach of an essential term.

The letter did not state that the lease was terminated. It merely said that LJ Hooker had been “instructed to terminate this current lease”.

Similarly, the letter did not state that the lease was terminated forthwith, nor that it was terminated at a specific time in the future. It merely recorded that LJ Hooker has been “advised that [Dee-Tech has] been requested to vacate the [P]remises on or before [1] May 2007” by the solicitors representing Neddam.

The letter did not contain any demand for immediate possession of the Premises. On the contrary, it does not contain any demand at all that Dee-Tech yield up possession of the Premises. It merely recorded the solicitors’ request.

The letter did not address the status or legal effect of rental payments that were presumably to be made by Dee-Tech between the date of the notice (26 February 2007) and the date on which the solicitors had previously “requested” Dee-Tech to vacate the premises.

[62] For these reasons I conclude that the letter of 26 February 2007 was not an unequivocal statement that Neddam was treating the 2005–2008 Lease as at an end. It was therefore ineffective to terminate the 2005–2008 Lease.

Campbell and Young JJA agreed with Sackville AJA.

EXCLUSIVE RIGHTS?

23    The first of the principal issues addressed by the parties was whether or not the September 2004 Agreement conferred an exclusive right upon TARBS and thereafter United Broadcasting to broadcast the New TV Channel.

24    The September 2004 Agreement entered into between Al Jadeed and TARBS on 21 September 2004 identified the “Scope of License” as follows:

Non-Exclusive rights for a trial period of four months to distribute the Service and any part of it via all modes of delivery to subscribers in the Territory and any part of it, and rights will automatically become sole and exclusive after four months if payment of license fee is RECEIVED BY Licensor as agreed under payment terms and commercial distribution in broadcast quality of the channel on the platform and necessary promotion takes place.

Immediately thereafter, the September 2004 Agreement set forth the “Rights” conferred by the agreement in part as follows:

Licensee or any entity nominated by it shall have the non-exclusive right, which will become exclusive after four months if conditions under Scope of License are fulfilled, (in addition to all rights given to it under this Agreement), in the Territory, to:

…

…

It further provided for the payment of a “License Fee” as follows:

Licensee shall pay to Licensor, on annual basis, in arrears and in advance, not annual License Fee of: US$100,000 by direct transfer to the nominated bank account of NEW TV.

Licensee shall give 50% of all commercially paid advertising revenues to NEW TV.

And the “Payment Terms” provided in relevant part as follows:

Licensee will remit payment upon signing this contract..

Payment shall be made to Licensor within 10 working days after signing this contract via bank transfer to:

…

…

N.B: If payment is not received within the specified dates, the licensor has the right to terminate the agreement with immediate effect.

25    The case for Al Jadeed as to whether the September 2004 Agreement conferred an exclusive right is simple – the “Payment Terms” required payment “within 10 working days after signing this contract”. Ten working days after 21 September 2004 was 5 October 2004 and payment of $100,000 was not received by Al Jadeed until 8 October 2004. The September 2004 Agreement was not terminated “with immediate effect” – but an agreement (so it was said on behalf of Al Jadeed) did come into effect, albeit not one conferring exclusive rights.

26    The case for United Broadcasting is equally simple. At one stage it contended that there was:

    an agreement to extend the time within which the $100,000 payment was to be made until 11 October 2004.

It also further contended that:

    the September 2004 Agreement, properly construed, conferred exclusive rights provided the $100,000 was paid; and/or

    in accepting payment of $100,000 “Al Jadeed elected not to terminate” the contract and “elected to affirm” an agreement to confer exclusive rights.

27    The agreement to extend the time for payment was said to be found in an exchange of emails. Even prior to 5 October 2004, namely on 1 October 2004, Al Jadeed was seeking confirmation as to whether the monies had been transferred. On 5 October 2004, the Senior Arabic Channels Advisor for United Broadcasting, Mr Mounes Majanni, responded that “the licence fee for NEW TV will be transfer to you account by the end of this week”. Later, on 5 October 2004 a reply email from Financial Advisor, Mr Malek Karali, stated:

Thank you for your e-mail.

in reference to your reply, kindly note that we took your words for granted to keep the contract valid till monday October 11’ 2004, otherwise if the money was not transferred by this date, we unfortunately consider that the contract is void.

This exchange of emails may have gone some way towards a conclusion that there was an agreement to extend the time for payment up until 11 October 2004.

28    But it was understood that Senior Counsel for United Broadcasting ultimately disavowed at the hearing any reliance upon the September 2004 Agreement having been the subject of any variation, including a variation in respect to the payment terms. He instead primarily characterised the acceptance of the $100,000 payment on 8 October 2004 as an election on the part of Al Jadeed to affirm the September 2004 Agreement rather than to terminate it. But even so characterised, any election left open the question as to whether the agreement conferred exclusive rights.

29    The election (or decision) not to “terminate the agreement with immediate effect” was said on behalf of Al Jadeed to be a decision or an election to affirm the agreement according to its terms – those terms being that an exclusive right was only conferred “if payment of license fee is RECEIVED BY Licensor as agreed under payment terms”. Any election on the part of Al Jadeed not to terminate the agreement could not – so it was submitted – effect any variation of the terms of the agreement. It was simply a decision or an election to affirm the contract rather than to terminate it. If the agreement was not terminated, it continued to operate according to its terms. And the term requiring payment within 10 working days if the rights were to become exclusive remained and had not been varied.

30    This approach advanced on behalf of Al Jadeed, however, is rejected. It takes far too narrow an approach to the consequences flowing from the exchange of emails and that which was the subject of the election. Although the emails could have been far more clearly and unambiguously expressed, it is concluded that the better construction of events taking place between 1 and 5 October 2004 was that Al Jadeed had elected not to insist upon the payment of the $100,000 “within 10 working days after signing this contract” as stipulated in the “Payment Terms”. This election also embraced an election not to insist upon the requirement that the “license fee [be] RECEIVED BY Licensor as agreed under payment terms”.

31    The exchange of emails, it is considered, was directed to the initial payment of $100,000 within 10 working days and to the consequences that non-payment of that amount would have upon the dual concerns of the contracting party. One party wanted the money; the other party wanted exclusive rights. To divorce one from the other would strip the payment of its commercial significance. Just as a Court will construe “the terms of an agreement with an inclination to give effect to the intention of the parties, even if that intention has been obscurely expressed” (Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19 at [122], 190 FCR 364 at 407 per Keane CJ), it is also concluded that a Court should construe the terms and effect of an election if possible so as to give effect to the intention of the parties.

32    Although unnecessary to resolve the further argument advanced on behalf of United Broadcasting as to the correct construction of the September 2004 Agreement, it should be briefly mentioned. United Broadcasting contended that “pre-contract correspondence” could be relied upon such that “the contract ought not to be subject to 2 competing interpretations, one being payment-on-time-with-exclusivity and the other payment-late-with-non-exclusivity”. The contract, it was said “is plainly for payment-with-exclusivity”.

33    Although it is unnecessary to express any concluded view, if it had have been necessary to look to “surrounding circumstances” it would have been concluded that such circumstances made it abundantly apparent that the conferral of exclusive rights was at the heart of the agreement being sought by TARBS. Prior to both the execution of the September 2004 Agreement and the exchange of emails in October 2004, there was also an earlier exchange of emails in which TARBS was insisting upon an exclusive agreement and was opposed to World Media also having a right to broadcast the same channel. One email from TARBS dated 31 August 2004, and accordingly prior to the execution of the agreement on 21 September 2004, stated in part:

Allow me to add few point explaining why we insist in getting exclusive rights for NEW TV Australia and give you an idea about World Media International …

…

Our experience with World Media is a case in point. We sublicensed a channel from them only to find out that:

1.    They themselves compete with us in their TVRO business.

2.    They do not help us with any advertising or marketing spend for the branding of the channel.

3.    They did absolutely nothing for us as sublicense.

Why do we want to finance a middleman that competes with us eventually?

We want to get a direct relationship with a broadcaster so we can give feedback to them on programming, on the channel and we can have cooperation between broadcaster and us for production and other things in Australia. We also want to bring them to other parts of the world. World Media has no platform of their own in the Australia or even in US, so how can they guarantee the carriage of channels when they don’t control the platform. Why would we want to pay the fee of a middleman when we can spend that money to promote and improve the brand of the broadcaster. World Media doesn’t spend it for the channel. They just pocket it as their revenue for doing what?

A consideration of those surrounding circumstances would have confirmed the conclusion that the September 2004 Agreement was to be construed as conferring exclusive rights upon the payment of $100,000 being received – albeit not received “within 10 working days”. The “surrounding circumstances” support both an objective interpretation of the terms used in the agreement and are consistent with what may be discerned as the intention of the parties when signing the agreement and in Al Jadeed accepting payment on 8 October 2004. See: D Cabrelli, ‘Interpretation of Contracts, Objectivity and the Elision of the Significance of Consent Achieved Through Concession and Compromise’ (2011) Juridical Review 121.

34    This conclusion, however, would have been reached with considerable reservation. Although the concern of TARBS was being unequivocally expressed, such email responses as there were from Al Jadeed provided little assistance. The “purpose and object” of the agreement being entered into, as made apparent from the “surrounding circumstances” nevertheless remained an agreement to confer and receive exclusive rights to broadcast.

35    It is thus concluded that, upon the receipt of the $100,000 within the extended time as agreed, the September 2004 Agreement thereafter conferred exclusive rights. Al Jadeed had elected to accept both the payment and an agreement conferring exclusive rights. That election follows from the exchange of emails that obviously occurred after the execution of the September 2004 Agreement and is also assisted by the exchange of emails occurring prior to the execution of that agreement.

The Contractual Right To Terminate

36    In the present proceeding, the September 2004 Agreement did nothing to expressly exclude the operation of rights also conferred by the common law. Nor is the September 2004 Agreement to be construed as impliedly excluding the common law. Such rights as are expressly conferred to terminate are to be read as supplementing common law rights to terminate.

37    By its terms the September 2004 Agreement expressly provided for termination in a number of different circumstances.

38    One mechanism was that provided for in the term addressing “Payment Terms” – namely, “the right to terminate the agreement with immediate effect” if the payment of $100,000 was not made “within 10 working days”.

39    Termination was also further addressed as follows in a separate provision expressly dealing with “Termination”:

(a)    Either party may terminate this Agreement effective at any time by giving the other party thirty (30) day’s prior written notice if the other party under this Agreement makes any material misrepresentation, commits any material breach or is unable to perform any of its material obligations.

(b)    Licensee may terminate this Agreement with immediate effect upon notice to Licensor:

(i)    if Licensee is unable to perform any material obligation hereunder as the result of any act or decree by a Governmental Authority in the Territory or if Licensee or Licensor is unable to obtain, or if there shall at any time be revoked, any licenses or consents required to distribute the Service; or

(ii)    if Licensee ceases transmission of the Arabic language service; or

(iii)    if the Service is interrupted for a continuous period of fourteen (14) days; or

(iv)    if Licensee deems the Service not commercially viable.

(c)    At the option of Licensee or Licensor (“the terminating party”) it may terminate this Agreement if the other party fails, within forty five (45) days, to comply with any notice given to it by the terminating party which requires the other party to remedy any breach of this Agreement within such forty five (45) days.

(d)    If this Agreement is terminated, such termination will not affect either party’s rights which have arisen prior to the date of termination except to the extent that Licensee shall not be required to pay any monies to Licensor after the date of termination except what has been already due.

The extent of any contractual right to terminate, and whether the right expressly agreed upon is available in the circumstances of a particular case, is ultimately a question of construction of the term itself.

40    It was clause (a) which primarily assumed importance in the present proceeding. But that clause gave rise to at least two sources of potential ambiguity, namely: the correct construction of what constituted (for example) a “material breach”; and whether termination could only take effect 30 days after notice.

41    On its proper construction, clause (a) self-evidently only confers a power to terminate where there has been a “material misrepresentation” or a “material breach” or where a party is “unable to perform any of its material obligations”. The right to terminate conferred by the September 2004 Agreement is thus restricted to those circumstances where the misrepresentation, breach or obligation is “material”. That which is “material” is to be objectively determined. It was not a term further defined expressly in the September 2004 Agreement. Relevant to a determination, for example, as to whether a breach is a “material breach” that would fall within paragraph (a) is paragraph (c). The parties are taken to have agreed to a regime where some breaches were to be addressed by the giving of a notice to “remedy” a breach as opposed to those breaches which were considered to be “material” so that termination was the remedy rather than an opportunity to redress the breach. It may be that a particular breach could fall within both paragraphs (a) and (c).

42    Whatever may be the outer reaches of clause (a), that clause did not confer a right to terminate where the misrepresentation, breach or obligation was not “material”.

43    Where there has been, however, a “material misrepresentation” or a “material breach” or an inability “to perform any… material obligations”, the power conferred by paragraph (a) requires the giving of “written notice”. Termination, upon the proper construction of that paragraph, takes effect 30 days thereafter. The clause is not to be construed as requiring 30 days prior notice to be given of an intention to terminate; the clause permits the giving of notice of a decision to terminate, with termination to take place 30 days thereafter. So construed, the clause permits the party in breach 30 days within which it can regulate its affairs or presumably to take such action as it sees fit to restrain the other party taking steps to give effect to the termination.

44    In addition to maintaining that some of the relevant facts did not fall within the reach of paragraph (a), a further submission repeatedly advanced by United Broadcasting was that Al Jadeed had elected not to terminate the September 2004 Agreement.

The Breaches Relied Upon

45    For both the purposes of exercising a common law right to terminate and for the purposes of clause (a) of the Termination provision, Al Jadeed submitted that there had been three categories of breaches which supported one or other of the Notices of Termination relied upon. These breaches were said to be:

(i)    “material breaches”; and/or

(ii)    an inability to perform “material obligations”; and/or

(iii)    “material misrepresentations”.

46    “Material breaches” were said to arise by reason of a failure to make payments in accordance with the September 2004 Agreement. That agreement called for the payment of both an “annual” license fee and the payment of “50% of all commercially paid advertising revenues”.

47    There was no real dispute that a failure to pay the “annual” licence fee, if the entirety of that sum was otherwise payable at a particular point in time, would constitute a “material breach”.

48    The history of the payment of the annual license fee of $100,000 was helpfully summarised on behalf of Al Jadeed as follows:

However the annual payments prior to about September/October 2010 may be characterised, it was the circumstances surrounding this last annual payment which assumed primary importance. Whether or not there had been election in respect to the prior payments or whether there had been a prior agreement to accept payment by way of quarterly amounts may largely be left to one side.

49    There was however dispute as to how the failure to pay the advertising revenues was to be properly characterised.

50    The breach occasioned by a failure to account for or to pay “50% of all commercially paid advertising revenues” only emerged quite close to the hearing itself – if not during the course of the proceeding.

51    On three occasions, it was common ground that there had been a denial on the part of United Broadcasting that there was any such revenue. These three occasions were as follows:

    on 21 July 2010 when the General Counsel for United Broadcasting, Ms Cass Mathews, wrote to the General Manager of Al Jadeed, Mr Dimitri Khodr, stating that “there have been no commercially paid advertising revenues received in relation to the New TV channel”. In cross-examination the sole director and shareholder of United Broadcasting, Ms Regina Leviste-Boulos, accepted that that statement was incorrect;

    on 5 August 2010 when the Solicitors representing United Broadcasting wrote to the Managing Director of Al Jadeed stating that at “the time of termination, all licence payments due to be paid by our client under the licence agreement were completely up to date”. In cross-examination Ms Boulos further accepted that United Broadcasting had “not complied with all of its payment obligations under the licence agreement”; and

    the assertion in the Defence as filed on 11 May 2011 that it “had not received any commercially paid advertising revenues in relation to the New TV Channel”. The same assertion was repeated in the Amended Defence as filed on 19 May 2011.

52    Notwithstanding these denials of amounts being received and payable, the fact that ultimately emerged was that there were “advertising revenues” being received. During 2008 and 2009 there were a series of agreements entered into by United Broadcasting with respect to advertising. The fact of the agreements was not disputed; nor was there ultimately any dispute that “advertising revenue” had been received. The amount of the “advertising revenue” generated was, however, disputed. Each of the agreements was the subject of a separate exhibit, and included within some of the materials tendered was a handwritten notation as to the amount or amounts received. These agreements, together with such further records as were available in respect to each of the agreements, may be summarised as follows:

Some of these agreements were signed by Ms Boulos. Whether or not there were other agreements also generating advertising revenues need not be presently pursued.

53    That part of the total sums known to have been received from each of the entities that was ultimately payable to Al Jadeed pursuant to the September 2004 Agreement was not attempted to be finally resolved. Monies may have been received – but how much that was payable was left uncertain. An exercise with greater precision will have to be undertaken when calculating damages. For the purpose of establishing breach, however, Counsel for Al Jadeed contended that it was sufficient to prove the fact that some monies were received and not paid. Ms Boulos in cross-examination did not deny that some monies were payable. After having been taken to one attempt to pay such monies, there was thus the following exchange between Ms Boulos and her cross-examiner:

54    Rejected is a submission advanced on behalf of United Broadcasting that the non-payment of advertising revenues does not constitute a “breach” let alone a “material breach”. The submission which is rejected is that there has been no breach at all by reason of the fact that the terms of the September 2004 Agreement made no provision for the time within which the “50% of all commercially paid advertising revenues” was to be paid. Even in the absence of an express term for the time of payment, the payments were not to be made (for example) whenever United Broadcasting may have discovered the fact that it had in fact received a payment and at some unspecified time thereafter. Payment was to be made within a reasonable time and at regular intervals, probably annually. No payments were made and the tender of payment occurred only shortly prior to the hearing. The fact of breach is thus accepted.

55    The better argument advanced by Senior Counsel on behalf of United Broadcasting, with respect, was that any failure to pay the “50% of all commercially paid advertising revenues” would not constitute a “material breach” both by reason of:

    the fact that United Broadcasting provides a subscription broadcasting service under a class licence issued under the Broadcasting Services Act 1992 (Cth). Schedule 2, Part 7 of that Act provides in part that “subscription fees will continue to be the predominant source of revenue for the service”. If the terms of the licence are complied with, revenue from advertising is thus not to form “the predominant source of revenue” of United Broadcasting; and

    the comparatively small sums in fact generated by such revenues.

Given that it was accepted by the parties that whether a particular breach was a “material breach” was to be objectively determined, it was further accepted that the correct characterisation of the failure to pay “50% of all commercially paid advertising revenues” was not to be assessed by reference to the subjective assessments of one or other of the parties. Each of the two criteria relied upon by United Broadcasting were objective criteria.

56    Compared to the annual licence fee of $100,000 it was common ground that the amount payable for advertising revenue – when ultimately quantified – would be comparatively modest.

57    Although there could be little dispute that a failure to pay the annual licence fee of $100,000 if it was otherwise due and payable would constitute a “material breach” of the September 2004 Agreement, different considerations apply to a failure to pay “50% of all commercially paid advertising revenues”. The breaches that did occur in respect to the failures to pay these amounts, it is concluded, were neither:

    a “material breach” for the purposes of paragraph (a) of the Termination clause; nor

    a breach that would have entitled Al Jadeed to terminate the September 2004 Agreement at common law.

The amounts payable as advertising revenue were comparatively modest. Even though those revenues were part of only two sources of payment that had been agreed to be paid, non-payment could not be said to be a “material breach” or a “breach of an essential term” let alone a “serious breach of a non-essential term”. In the absence of any failure to pay the annual licence fee, it may be accepted that Al Jadeed would not have purported to terminate the September 2004 Agreement by reason of any failure to pay the “50% of all commercially paid advertising revenues”. Such a breach would, perhaps, provide an instance where recourse could properly be had to paragraph (c) – but not paragraph (a) – of the Termination clause.

58    Left unresolved is the question as to why there were no internal procedures in place to record revenue payments being received and why United Broadcasting said that it was unaware of such revenue in circumstances where its sole director and shareholder was the very person who signed a number of the agreements.

59    The inability to perform “material obligations” was said by Al Jadeed to be evidenced by two emails. The first email was sent on 5 June 2009 from United Broadcasting to Al Jadeed and stated as follows:

Our records show that there is an outstanding amount of USD100,000 for the period Sept 2008-Aug2009.

We sincerely apologize for this oversight and we intend to rectify this as soon as possible.

We have already scheduled a payment for USD50,000 next week another USD25,000 on 15 July and another USD25,000 on 15 August.

Due to the global economic conditions that have affected businesses these past months, I am hoping for your kind consideration of the above.

Also moving forward, I would like to propose that we pay the fees quarterly in advance.

For the period September 2009-August 2010, we will pay you US25,000 on 15 Sept 2009 and then every quarter thereafter.

I look forward to hearing from you and receiving your acceptance of the above.

Emphasis, for present purposes, was placed upon the recognition by United Broadcasting of the impact of the “global economic conditions”. Taken alone, that email would not have made out any inability to perform “material obligations”. But there was also a subsequent email sent on behalf of United Broadcasting to Al Jadeed on 29 April 2010 which stated in part:

Due to current world economic crises and our fluctuating dollar, our cash flow has been hammered by creditors owing us substantial sums.

The response was unsympathetic. It stated:

Thanks for your reply, but the due of the economic crises affected all companies in all world, but this not means that you stop paying from September 2009 until now.

So we are so apology to tell you that if you are not going to pay know we will turn your account to the legal department for collection.

It may be presently assumed that there was an agreement to accept payments prior to about September 2010 by way of “quarterly” payments. But an inability to perform a “material obligation”, namely the obligation to pay the annual licence fee of $100,000 that was payable in September/October 2010, emerged by no later than April 2010. That inability is made out by the recognition on the part of United Broadcasting in June 2009 that “global economic conditions” had so affected its business that it was then necessary to propose a sequence of four payments and its acceptance in mid-2010 that its “cash flow [had] been hammered” by global financial circumstances. There may have been an agreement on the part of Al Jadeed to accept the “quarterly” payments that were in fact made throughout 2009 and 2010. But there was no agreement thereafter to again accept four payments of $25,000 in lieu of a single payment of $100,000. Even though there may have been an agreement on the part of Al Jadeed to accept the four payments of $25,000 throughout 2009 and 2010, the difficulty that United Broadcasting was obviously even then experiencing would not have filled Al Jadeed with confidence that future payments of $100,000 would unquestionably be made. It is concluded that United Broadcasting was unable by no later than April 2010 to perform a “material obligation”, namely it was unable (and thereafter remained unable) to pay the annual licence fee that was due to be paid in September/October 2010. That conclusion is only reinforced by the subsequent failure on the part of United Broadcasting to pay the $100,000 in September/October 2010.

60    The “material misrepresentations” which were relied upon by Al Jadeed as falling within paragraph (a) of the Termination provision were the repeated denials made by United Broadcasting that there were any “commercially paid advertising revenues”. The denial that there were any such revenues, it is concluded, is both a “misrepresentation” and a “material” misrepresentation for the purposes of paragraph (a). Even though a failure to pay such revenues may not have constituted a “material breach”, the denial of the receipt of any such revenues attracts different considerations. It was United Broadcasting that alone was in the position to know the date upon which any such revenues may have been received and the quantum of any such amounts. That was knowledge within their control. And 50% of such revenues were part of the payments to be made. Even though the amount of such revenues may have been modest, the denial of the receipt of any such revenues was a “material misrepresentation”. The date of each misrepresentation was the date of each of the denials.

61    It thus follows that Al Jadeed has established a “material breach”, an inability to perform a “material obligation” and a series of “material misrepresentations” which could have been invoked to terminate the September 2004 Agreement. The question remains whether any of the Notices of Termination effectively did so.

The Notices of Termination

62    Al Jadeed’s Statement of Claim alleges a series of what it termed “Payment Default[s]” and further alleges that it gave three Notices of Termination, namely:

    the “First Termination Notice” on 17 May 2010;

    the “Second Termination Notice” on 20 July 2010; and

    the “Third Termination Notice” on 22 July 2010.

An Amended Statement of Claim was filed by Al Jadeed on 30 June 2011, and a Further Amended Statement of Claim was filed in Court on the second day of the hearing on 5 July 2011. During the course of the first day of the hearing a further Notice of Termination was served. A Second Further Amended Defence was filed by United Broadcasting in Court on 5 July 2011.

63    On behalf of Al Jadeed it is, in very summary form, contended in respect to each of the Notices of Termination that:

    it was exercising either a right conferred by the common law or a right conferred by the express terms of the September 2004 Agreement;

    it had not elected to affirm the contract; and that

    each of the Notices of Termination was expressed in sufficiently clear terms as to be effective.

United Broadcasting expressly abandoned any reliance upon the facts constituting a variation of the September 2004 Agreement but did contend that none of the Notices of Termination constituted an effective termination of the September 2004 Agreement. Notwithstanding the fact that Al Jadeed had at some stage made abundantly clear that it thought it had terminated the agreement, the position for United Broadcasting was that none of the Notices had lawfully achieved that purpose.

64    Two preliminary issues should be addressed.

65    First, a preliminary argument addressed to each of the first three Notices of Termination should be raised at the outset so that it can be rejected. Clause 8 of the September 2004 Agreement dealing with “Other Conditions” provided as follows:

All notifications and correspondences exchanged in implementing the provisions of this Agreement shall be in writing and sent to the address indicated on the front page of this Agreement or any other nominated address. Notification and correspondence shall be sent via registered letters or handed against receipt, by telefax or fax or email to be confirmed by registered letters.

The argument should be rejected at the outset because it was not specifically pleaded, as it should have been.

66    A further reason for rejecting the argument is that it was not disputed that each of the Notices of Termination came to the attention of United Broadcasting. No question was then raised as to any of the Notices not being properly served. Moreover, non-compliance with the prescribed method of service, it is concluded, would not strip any Notice of Termination in the present proceeding of effectiveness. The purpose of the clause dealing with the method of service is to ensure that a Notice comes to the attention of the other party and presumably to rely upon proof of service where service is factually in dispute.

67    Even in the absence of advance notice being provided in the Defence, Counsel on behalf of Al Jadeed was in any event able to prove service of at least one of the Notices. The final Notice of Termination given on the first day of the hearing was served by registered post.

68    The second of the preliminary issues to be addressed is the manner in which each of the Notices of Termination should be construed. The Notices, it is considered, should not be parsed and analysed with all the skills of a lawyer bringing to bear the benefit of hindsight and intent on discerning ambiguity where none truly exists. Total legal perfection is not to be expected nor necessarily aimed for in many contractual situations. The rights conferred by a contract, including the right to terminate, are not necessarily to be exercised only in consultation with skilled legal advisers. Notices of termination are generally to be drafted by and are to be read and construed by the contracting parties. The Notices of Termination in the present proceeding, accordingly, are not to be denied effectiveness by a recipient intent on discerning ambiguity where none truly exists. The test is not to be applied by reference to the subjective knowledge or understanding of United Broadcasting – or by reference to potential defects discerned by legal representatives subsequently retained – but by reference to an objective and reasonable person. Business commonsense should prevail. A notice which conveys with reasonably clarity a decision to terminate a contract will be effective.

69    It is against this standard that each of the Notices of Termination is to be tested.

70    The “First Termination Notice” was sent by way of email from Al Jadeed to United Broadcasting on 17 May 2010. Placed in context, that 17 May 2010 email was preceded by an email dated 2 April 2010 which stated as follows:

I’m writing to you on behalf of New TV SAT Limited, pursuant to the email letter dated June 5th 2009, you unfortunately stopped paying from the date of September 25th 2009, in spite of your promise to settle the balance every quarter, & the remaining balance of the service for the year 2009 is $ 75,000 (US Dollars, seventy five thousand only).

Therefore we asked you to do the necessary to settle the existing balance within a period of 10 days.

The 17 May 2010 email stated:

Until now we didn’t receive from you answers for the outstanding balance, so we are very sorry to tell you that if today you didn’t tell us about the payment, the transmission will cut off tomorrow.

Reliance upon the 17 May 2010 email was not abandoned by Counsel on behalf of Al Jadeed during the hearing. But no oral submissions were directed to it. On any view, it is not considered that the email could constitute a notice of termination. Adopting the language employed in Mannai Investment, it is not considered that a “reasonable man” would regard this email as the communication of a decision to terminate the agreement. Just as a recipient of a Notice of Termination cannot deny effectiveness to a notice drafted with sufficient clarity to convey to a reasonable man a decision to terminate, those serving a notice cannot ascribe to a document a meaning which it truly and reasonably cannot bear.

71    The “Second Termination Notice” was in the form of a letter from Al Jadeed to United Broadcasting dated 20 July 2010. It was expressed in less equivocal terms. It stated as follows:

Subject: breach of contract

Dear Mrs Mathews,

Further to your e-mail dated 19th and 20th , 2010.

We seriously regret the content of your letter which hides unacceptable threats, noting that you have been the party failing to fulfill its obligations set in the contract notably those related to payments.

Thus your continuous delays in settling your accounts with us in the years 2007, 2008, 2009 and 2010 burdened us with damages you shall be held responsible.

We refer you to license fee article in the contract, and you should be aware that you are responsible not only for infringements related to failing to bring your account current with us, but also in not paying 50% of all commercially paid advertising revenues since 2004.

And since the contract clearly states that licensor has the right to terminate the agreement with immediate effect if payment is not received, therefore you cannot in anyway consider us in breach of contract while you have not fulfilled any of your material obligations.

We would much appreciate your attempt to do the necessary to wire the outstanding amount of 25000 US $ due to NEW TV within a period of 2 working days from receipt of this letter, and 50% of all commercial revenues since 2004 after submitting all evidence to indicate amounts due to NEW TV.

You should consider the Agreement signed in 2004 terminated with immediate effect, holding you fully responsible, in case of not settling outstanding amounts within 2 working days.

And if you fail to settle your account within the period mentioned above, you should immediately cease all services under your responsibility relating to New TV.

72    Counsel on behalf of Al Jadeed quite properly conceded during the course of her submissions that no reliance could be placed upon any failure to pay the entirety of the $100,000 annual licence fee that was payable (on her account) in September/October 2009. The letter gave two days within which the outstanding $25,000 fee could be paid. And it was so paid. But it was further contended that reliance could be placed upon:

    a “material breach”, being the failure to pay “50% of all commercially paid advertising revenues”; and

    an inability to perform a “material obligation”.

It mattered not, in the submission of Al Jadeed, that any breach may not have been known by Al Jadeed as at 20 July 2010. Any reliance for the purposes of this Notice of Termination that may have been placed upon:

    any “material misrepresentation” occasioned by the denial of the receipt of any advertising revenues

would have been rejected. The earliest misrepresentation that was established was the denial in the letter the following day, namely the 21 July 2010 letter.

73    Nor is the failure to pay advertising revenue a breach that can be relied upon by Al Jadeed. The non-payment of those amounts constitutes a “breach” but does not constitute a “material breach” entitling Al Jadeed to terminate the agreement either pursuant to paragraph (a) of the Termination clause or pursuant to any right conferred by the common law. But the accepted inability on the part of United Broadcasting to perform its obligation – namely the ability to pay the annual licence fee that was to be paid in September/October 2010 – had become apparent by no later than April 2010. And that inability fell within paragraph (a) of the Termination clause, namely an inability to perform a “material obligation”.

74    Notwithstanding some reservation, it is further concluded that this letter does constitute an effective Notice of Termination. It is certainly not a letter expressed in terms of “absolute clarity”; nor is it a letter expressed in terms of “technical precision”. But a reasonable man when receiving this letter would consider that its contents were directed to what was disclosed in the heading, namely “breach of contract”. A “reasonable man”, for present purposes, is a person drafting or reading correspondence written in a language other than the primary language of the person concerned. Difficulties in expression must be taken into account. Irrespective of any such difficulties, however, it is concluded that there is no ambiguity in the decision that the agreement is to be “terminated with immediate effect” by reason of “breach of contract”. It matters not that reliance may not have been placed by the author of the letter upon an inability to perform a “material obligation” when the letter was sent. That inability was a breach which had emerged by mid-2010 and is a breach which can now be relied upon.

75    Given the conclusion that this letter dated 20 July 2010 did constitute an effective Notice of Termination, it may ultimately be unnecessary to consider the last two Notices. But it may readily be accepted that this conclusion may not be free of argument. An accepted inability to pay an annual licence fee that is not payable as at 20 July 2010 and not payable until some two months later, it is concluded, nevertheless constitutes an inability as at 20 July 2010 to perform a “material obligation” for the purposes of paragraph (a). As the facts unfolded, there was of course no payment of the $100,000 as at that date. Al Jadeed was not forced to have to wait until the time for payment to arrive and pass without payment before it could serve a Notice of Termination. Difficulties for Al Jadeed may have arisen had it not continued to make the broadcasting services available to United Broadcasting until such time as its annual licence expired in September/October 2010. Had it discontinued such services, Al Jadeed may have itself been in breach. But there was no discontinuance of those broadcasting services.

76    The accepted room for argument as to the conclusion reached in respect to the 20 July 2010 letter makes it prudent that the submissions as to the last two Notices of Termination be also addressed.

77    The “Third Notice of Termination” was again by way of letter from Al Jadeed and again headed “Subject: breach of contract”. The letter was dated 22 July 2010 and stated as follows:

Dear Mrs. Mathews,

Further to your e-mail dated July 21th, 2010.

Kindly note the following:

-    UBI has failed to settle due license fees since 2007, according to the following breakdown:

-    Payment $100,000 paid in 21/2/2007 – Delay period 4 months & 18 days 4th year 2007

-    Payment $100,000 Paid In 27/3/2008 – Delay period 5 months & 23 days 5th year 2008

-    Payment $50,000 paid in 10/6/2009 – Delay period 8 months & 9 days

-    Payment $25,000 paid in 16/7/2009 – Delay period 9 months & 14 days

-    Payment $25,000 paid in 11/9/2009 – Delay period 11 months & 7 days 6th year 2009

-    Payment $25,000 paid in 25/9/2009 – On time

-    Payment $25,000 paid in 2/6/2010 – Delay period 8 months & 2 days

-    Payment $25,000 paid in 14/7/2010 – Delay period 9 months & 12 days

-    Payment $25,000 paid in 20/7/2010 7th year 2010

Nothing that, all payments were not voluntarily settled. It has always been paid after several claims and disputes subject of breach of contract, which we reserve all rights in this matter.

-    Your last payment, which you said it was made upon good faith, ascertain your infringements in executing your obligations related to the contract.

-    Any failure to pay the license fees in due time, will lead to immediate termination of contract without any prejudice or notification.

-    Your statement about advertisements revenues is not acceptable without delivering an official report from your auditors. As for cue tones issue, it has never been mentioned before nor in contract, therefore you shall be solely responsible to prove the contrary.

On the other hand, when we first signed the contract for /100 000/ US $ as license fee, it was based upon minimum guarantee incoming from 50% on commercially advertisements revenues, and since you haven’t reach that obligation, you will be responsible for breach of contract.

Therefore, a renegotiation of contract fee and/or a minimum guarantee relating to commercially advertisements revenues should be done as of today, in purpose of keeping NEW TV on your platform. Otherwise you should consider the contract terminated for breach of material obligations set in contract.

Hoping this letter reach your understanding and willingness for the remaining period of contract which terminates in august 2012.

This letter was immediately preceded by the email dated 21 July 2010 from United Broadcasting to Al Jadeed stating that “there have been no commercially paid advertising revenues received in relation to the New TV channel”.

78    Had it been necessary to reach a conclusion in respect to this letter, it would have been concluded that the letter taken in isolation did not constitute an effective Notice of Termination. Notwithstanding both the heading and some parts of it which did refer to events which would lead to “immediate termination”, the concluding sentence of the letter cannot be ignored. The ambiguity created by the reference to “the remaining period of contract which terminates in august 2010” is such as to deny to the letter the requisite certainty.

79    Any ambiguity – or equivocation – on the part of Al Jadeed, it should be noted, was removed later in time by its subsequent letter to United Broadcasting dated 6 September 2010. That letter stated:

Breach of Contract

I refer to my letter dated July 22, 2010 and August 11, 2010.

As set out in my letters, it is our view that the contract between us has been terminated and is at an end. As previously indicated, the contract has been terminated because of your breach of the material obligations set out in the contract.

Despite of the termination of the contract and my letter of August 11, 2010, I understand that you have continued to broadcast AL JADEED TV Channel in Australia on your platform. Your conduct in doing so without a license is a breach of our rights.

By this letter, I require that you confirm within 2 days that you have ceased all broadcasts of AL JADEED TV Channel in Australia on your platform.

Otherwise, AL JADEED TV strictly reserves its rights against you.

That letter may not be relied upon to remove such ambiguity or lack of certainty that may be exposed by the 20 or 22 July 2010 letters. But the 6 September 2010 letter certainly may be relevant as part of the “objective contextual scene” in which any further Notice of Termination is to be construed.

80    The final Notice of Termination was that given to United Broadcasting during the course of the hearing. It was a letter dated 4 July 2011 exchanged between the Solicitors for United Broadcasting and Al Jadeed. That letter was expressed in the following terms:

As you are aware we act for Al Jadeed TV/New TV (Al Jadeed).

We refer to the Licence Agreement dated 21 September 2004 entered into between Al Jadeed and TARBS Europe SA (TARBS) (Licence Agreement). We note that TARBS’ rights under the Licence Agreement were assigned to United Broadcasting International on 1 April 2008.

Without prejudice to previous notices terminating the Licence Agreement, Al Jadeed hereby terminates the Licence Agreement, to the extent to which it has not previously been terminated.

This is a notice under the Licence Agreement to UBI Licensee. A copy of this letter is also being forwarded by Registered Post in accordance with clause 8 of the Licence Agreement.

Without limiting the basis on which this notice is served, we note the following breaches of the Licence Agreement:

1.    Failure by UBI to pay the licence fee due and payable in October 2010 in the amount of US$ 100,000;

2.    failure by UBI to pay advertising revenue due and payable under the Licence Agreement, from time to time.

In relation to item 1, we note that Al Jadeed does not, and did not, accept the part payment that UBI attempted to make on 7 September 2010 of US$25,000.

In relation to item 2, we refer you to your letter dated 3 July 2011. Despite previous demands, we note that UBI has finally admitted its persistent failures to pay advertising revenue due and payable to Al Jadeed.

Left unstated in this letter is any reliance upon the “material misrepresentations”, being the denial of any advertising revenues being payable. A partial explanation for that omission may, however, be found in the fact that the admissions that such revenues had been received and not paid emerged only after the 4 July 2011 letter was served and only during the course of the hearing which took place later that same day.

81    Given the clarity with which the decision to terminate was expressed, Senior Counsel for United Broadcasting wisely did not advance any submission directed to any uncertainty on the part of his client as to what Al Jadeed was trying to achieve. It had already made clear its position that the agreement had been previously terminated. This final letter equally left United Broadcasting in no doubt that the September 2004 Agreement was terminated. In seeking to resist this letter as being an effective Notice of Termination, the submissions advanced on behalf of United Broadcasting were variously expressed but were understood to be that:

    there has been no breach of any requirement to pay the annual licence fee;

    any breach arising from any failure to pay the annual fee of $100,000 was not a “material breach” – given the acceptance by Al Jadeed previously of quarterly payments; and

    there had been a delay on the part of Al Jadeed in now attempting to terminate. Although accepting that an election to terminate did not have to be made immediately, it was nevertheless contended that such delay as had occurred was sufficient to now deny Al Jadeed the right to terminate.

It is also contended on behalf of United Broadcasting in its written submissions that:

    it “has tendered or stood ready to make … payments to Al Jadeed which it has refused to accept; crucially its refusal to accept them has included taking the form of apparently blocking, or at least [failing] to facilitate, the only contractually permitted method of payment”.

None of these arguments is accepted.

82    The precise date upon which any annual licence fee was payable remained elusive and was incapable of being identified with any precision. There was certainty as to the date for the first payment, namely “within 10 working days after signing” the September 2004 Agreement. But there was a lack of clarity as to when each successive annual licence fee was payable. Certainty was not the hallmark of the phrase employed in the term dealing with the “Licence Fee” when it stated that a fee of $100,000 was to be paid “on annual basis, in arrears and in advance”. Notwithstanding this lack of certainty as to the precise date upon which successive annual fees were to be paid, it is nevertheless concluded that each annual fee was payable in late September/early October of each year. The agreement was first executed on 21 September 2004 and the first payment was received on 8 October 2004. Thereafter the annual fee was payable annually on or about that time.

83    The fact was that there was no payment of $100,000 on or about that time in 2010.

84    And, notwithstanding the written submissions, the fact is that United Broadcasting never attempted to make payment of $100,000. During the cross-examination of Ms Boulos, she was taken to the following statement in one of her affidavits:

[85] UBI has in fact made an unsuccessful attempt to transfer a licence fee to the Applicant on 7 September 2010. However, the Applicant refused to accept that payment.

The cross-examination continued:

Whatever may have been the consequences of Al Jadeed not having made available to United Broadcasting such banking details as may have facilitated the payment of $25,000, the fact remains that there was never any attempt to pay $100,000 in about September/October 2010.

85    And whatever may formerly have been the position that Al Jadeed was previously willing to accept in respect to quarterly payments of the $100,000 annual licence fee, its position adopted in 2010 was that it insisted upon payment of $100,000 and not payment by way of quarterly instalments of $25,000. Given the course of events from at least 20 July 2010, there can be no doubt that United Broadcasting was aware of Al Jadeed’s position that it was wishing to terminate the agreement if payments were not made. Even if the earlier Notices of Termination were all defective, there has been no delay in the giving of the Notice of Termination on 4 July 2011 to give effect to that which Al Jadeed contended had already been previously achieved.

86    The letter dated 4 July 2011 was an effective Notice of Termination – even if the conclusion that the 20 July 2010 letter was also effective is assumed to be erroneous.

Misleading and Deceptive Conduct/PASSING OFF

87    Al Jadeed further maintained that United Broadcasting engaged in misleading and deceptive conduct. It was presumably this cause of action that Al Jadeed relied upon when invoking this Court’s jurisdiction. Reliance was placed upon ss 18 and 29 of the Australian Consumer Law, contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth).

88    Little attention, however, was directed to this cause of action during the course of the hearing. It should nevertheless be briefly mentioned.

89    The Further Amended Statement of Claim alleges that since 1 October 2010 United Broadcasting has transmitted the service “without authority or consent of Al Jadeed to customers in Australia”. Given the conclusion that the September 2004 Agreement has been terminated, that allegation may be accepted.

90    It is thereafter alleged that “[t]he acts and conduct of [United Broadcasting] … are calculated to mislead and deceive, or are likely to mislead and deceive members of the trade and public into believing, and [United Broadcasting] has thereby represented, that” (inter alia) it has “the approval of Al Jadeed”. That allegation is also correct.

91    Beyond making these observations, and given the lack of any real reliance placed upon these allegations in final submissions, it is unnecessary to pursue the allegations further. Nor is it necessary to address in any detail the claim based upon passing off.

The Cross-Claim Against Al Jadeed

92    The Cross-Claim filed by United Broadcasting against Al Jadeed also received little attention during the course of submission. Again, however, it should be briefly mentioned.

93    Given the abandonment on any reliance upon the September 2004 Agreement being varied, those parts of the Second Further Amended Defence and Cross-Claim which allege a variation of that agreement can be left to one side.

94    The written submissions of United Broadcasting focussed attention upon the following provision of the September 2004 Agreement:

Warranties

Licensor promises that at all times during the Term and any extension hereof:

…

(ix) it will not at any time do or fail to do any act, matter or thing that may or will undermine, harm or cause harm to Licensee, its officers, directors or employees;

…

95    In breach of this warranty, the essence of the Cross-Claim as set forth in the written submissions was that Al Jadeed “granted or purported to grant a licence or exclusive licence to distribute the NEW TV Channel in Australia” to International Media. Left unresolved is the question as to whether there has been a breach by Al Jadeed in making the broadcasting service available to World Media as from about July 2010. Given the acceptance of the quarterly payments of $25,000 throughout 2009 and 2010, and the conclusion that the September 2004 Agreement conferred an exclusive right to broadcast upon United Broadcasting, there may have been a breach on the part of Al Jadeed for the period from July to September/October 2010.

96    Whether this conclusion is correct, and whether any breach has in fact occasioned any loss or damage to United Broadcasting, is a matter best left for future resolution – if necessary. No order should thus be made at present dismissing the Cross-Claim.

The Discontinuance of the Cross-Claim Against international media and world media

97    Order 22 r 2 of the now repealed Federal Court Rules provided for the discontinuance of a proceeding in a variety of circumstances, one of those being “with the consent of all the parties” (r 2(1)(c)) and another being “with the leave of the Court” (r 2(1)(d)). Order 22 r 3 provides for the payment of costs where a proceeding has been discontinued and provides as follows:

Costs

(1)    A party who discontinues pursuant to paragraph 2 (1)(a) or (b) shall be liable to pay the costs of the other party or parties occasioned by the whole or the relevant part of the proceeding.

(2)    A party who discontinues under paragraph 2 (1)(c) is liable to pay the costs of the other party or parties occasioned by the whole or the relevant part of the proceeding, unless the terms of the consent provide otherwise.

Notwithstanding the coming into force of the Federal Court Rules 2011 as from 1 August 2011, it was Order 22 r 2 which governed the rights of the parties as at the date of hearing.

98    In the present proceeding the Cross-Claim as against the three Cross-Respondents was first filed on 11 May 2011. It was not until the outset of the hearing on 4 July 2011 that Senior Counsel on behalf of United Broadcasting sought leave to discontinue against the Second and Third Cross-Respondents.

99    World Media did not oppose leave being given to discontinue as against it – but it sought an order that costs be paid on an indemnity basis. An order for the payment of costs was not opposed by United Broadcasting; but it was understood that Senior Counsel opposed an order that costs be paid on an indemnity basis.

100    Order 22 r 3 made no express provision for the payment of costs where a proceeding has been discontinued with the leave of the Court. In such circumstances, an order for costs is left to the general discretion of the Court conferred by s 43 of the Federal Court of Australia Act 1976 (Cth). Helpful observations as to the approach to this rule have been set forth by Finn J in O’Neill v Mann [2000] FCA 1680 at [11] to [13]. See also: Smith v Airservices Australia [2005] FCA 997 at [39], 146 FCR 37 at 48 per Stone J. In exercising the discretion, it is generally recognised that the Court should not attempt to make a prediction as to the outcome of a hypothetical case: Mineralogy Pty Ltd v National Native Title Tribunal (Full Court of the Federal Court, 23 December 1998, unreported); Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194. But where discontinuance can be said to be an acknowledgment of likely defeat, costs may be awarded.

101    In seeking an order for indemnity costs, it was said on behalf of World Media that the Cross-Claim as against it was “doomed to fail”.

102    The question of costs was reserved at the outset of the hearing. The position of World Media, however, was that it had put the only submission that it wished to make and did not wish to be heard further. The lack of opposition on the part of United Broadcasting to an order that it pay costs is an acceptance on its part as to its prospects of success. Although there is much to be said for the view that costs should be paid on an indemnity basis, the fact is that the proceeding was discontinued without any hearing on the merits of that claim and it is considered inappropriate to inquire further into such other matters as would be relevant to making an order for indemnity costs.

103    United Broadcasting should pay the costs of World Media in respect to the discontinuance of its Cross-Claim but not on an indemnity basis.

Conclusions

104    The conclusion in very summary form is thus that the September 2004 Agreement was an agreement conferring exclusive rights, notwithstanding the fact of payment of the initial $100,000 not being received within the 10 working days provided for in that agreement.

105    The agreement, however, was lawfully terminated pursuant to the letter dated 20 July 2010 and if not by that letter, by the letter dated 4 July 2011.

106    The Cross-Claim by United Broadcasting against the Second and Third Cross-Respondents is without substance.

107    Leave was granted to United Broadcasting to file in Court on 5 July 2011 a Notice of Discontinuance to discontinue its Cross-Claim as against the Second and Third Cross-Respondents. United Broadcasting should pay the costs occasioned by the discontinuance, but not on an indemnity basis as sought.

108    Questions, of course, remain outstanding as to the relief which follows from these conclusions. Given the limited ambit of future dispute, the parties should give consideration to whether the outstanding issues can be agreed without the necessity for further hearing or whether mediation should be voluntarily attempted prior to any further hearing.

ORDERS

The Orders of the Court are:

1.    The parties are to bring in Short Minutes of Order to give effect to these reasons within 21 days, including directions as to the future conduct of the hearing in respect to damages.

Associate:

Dated:    26 August 2011