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Springfield City Group Pty Ltd v Pipe Networks Pty Ltd QSC 255
SUPREME COURT OF QUEENSLAND
Springfield City Group Pty Ltd v Pipe Networks Pty Ltd  QSC 255
SPRINGFIELD CITY GROUP PTY LTD
ACN 055 714 531
PIPE NETWORKS PTY LTD
ACN 099 104 122
BS 2798 of 2016
18 November 2022
9–13 and 16–20 November 2020; 16, 19–20 and 31 August 2021. Further written submissions received by the defendant 6 September 2021; and by the plaintiff 13 September 2021
The orders of the Court are:
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – GENERALLY – where the plaintiff contracted with the defendant – where the plaintiff agreed to finance the construction by the defendant of a fibre optic cable network between Brisbane and Springfield – where the defendant constructed, operated and maintained that network for the plaintiff – where the defendant installed their own fibre optic cable network in the pits and conduits which accommodated the plaintiff’s network – where the plaintiff contends that the defendant must be regarded as contractually constrained against constructing and operating that duplicate network either as a matter of the proper construction of the contract or by the implication of relevant terms – whether the defendant breached the contract
TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – MISLEADING OR DECEPTIVE CONDUCT GENERALLY – GENERALLY – where the plaintiff agreed to finance the construction by the defendant of a fibre optic cable network between Brisbane and Springfield – where the defendant constructed, operated and maintained that network for the plaintiff – where the defendant installed their own fibre optic cable network in the pits and conduits which accommodated the plaintiff’s network – where the plaintiff contends that the defendant expressly, implicitly or by its silence made representations to the plaintiff in a manner apt to mislead – whether those representations induced the plaintiff to enter into the contracts – whether those representations constituted misleading and deceptive conduct on the part of the defendant – whether the defendant engaged in further post-contractual acts of misleading and deceptive conduct
TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – UNCONSCIONABLE CONDUCT – GENERALLY – where the plaintiff agreed to finance the construction by the defendant of a fibre optic cable network between Brisbane and Springfield – where the defendant installed their own duplicate network in the pits and conduits which accommodated the plaintiff’s network – whether by constructing and operating the duplicate network in competition with the plaintiff the defendant contravened statutory unconscionable conduct provisions
COMMUNICATIONS LAW – TELECOMMUNICATIONS – CARRIAGE SERVICE PROVIDER – where the plaintiff agreed to finance the construction by the defendant of a fibre optic cable network between Brisbane and Springfield – where the defendant installed their own duplicate network in the pits and conduits which accommodated the plaintiff’s network – where the defendant was a licenced telecommunications carrier – whether the Telecommunications Act 1997 (Cth) imposed a duty on the defendant to give notice to the plaintiff before constructing the duplicate network in the off-rail sections of the plaintiff’s network
TORTS – INTERFERENCE WITH PROPERTY – INTERFERENCE WITH GOODS – TRESPASS TO GOODS – OTHER MATTERS – where the defendant constructed, operated and maintained a fibre optic cable network for the plaintiff – where in so doing, the defendant installed their own fibre optic cable network in the pits and conduits which accommodated the plaintiff’s network – where the plaintiff contends that the defendant committed a trespass when laying that duplicate network in the infrastructure which accommodated the plaintiff’s network – whether the defendant spliced into the plaintiff’s fibres constituting trespass
TORTS – INTERFERENCE WITH PROPERTY – INTERFERENCE WITH GOODS – CONVERSION AND DETINUE – CONVERSION – OTHER PARTICULAR CASES – where the defendant constructed, operated and maintained a fibre optic cable network for the plaintiff – where in so doing, the defendant installed their own fibre optic cable network in the pits and conduits which accommodated the plaintiff’s network – where the plaintiff contends that the defendant’s independent contractors spliced into particular fibres on cable which should be regarded as the plaintiff’s – whether the defendant converted the relevant fibres by using them
EQUITY – GENERAL PRINCIPLES – FIDUCIARY OBLIGATIONS – GENERALLY – where the plaintiff contracted with the defendant – where the plaintiff agreed to finance the construction by the defendant of a fibre optic cable network between Brisbane and Springfield – where in so doing, the defendant installed their own duplicate network in the pits and conduits which accommodated the plaintiff’s network – whether the defendant owed fiduciary duties to the plaintiff – whether by constructing and operating the duplicate network without the plaintiff’s consent the defendant breached fiduciary duties which it owed to the plaintiff
Telecommunications Act 1997 (Cth), s 5, s 42, pt 3 div 4, sch 3 s 17
Trade Practices Act 1974 (Cth), s 4D(2), s 45
Adani Abbot Point Terminal Pty Ltd v Lake Vermont Resources Pty Ltd & Ors  QCA 187, cited
Adaz Nominees Pty Ltd v Castleway Pty Ltd  VSCA 201, cited
Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104, cited
Baldwin v Icon Energy Ltd  1 Qd R 397, cited
Barboza v Blundy & Ors  QSC 68, cited
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, cited
Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1, cited
Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, cited
Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389, cited
Commonwealth Bank of Australia v Barker (2014) 253 CLR 169, cited
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500, cited
Henderson v Queensland (2014) 255 CLR 1, cited
Hollis v Vabu Pty Ltd (2001) 207 CLR 21, cited
Jewelsnloo Pty Ltd v Sengos  NSWCA 309, cited
Jones v Dunkel (1959) 101 CLR 298, cited
King Tide Company Pty Ltd v Arawak Holdings Pty Ltd  QCA 251, cited
Murray v Murray (1960) 33 ALJR 521, cited
Re Day (2017) 91 ALJR 262, cited
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, cited
Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161, cited
Wagners Cement Pty Ltd & Anor v Boral Resources (Qld) Pty Ltd & Anor  QSC 124, cited
Westpac Banking Corporation v Hughes  1 Qd R 581, cited
Wormald v Maradaca Pty Ltd  NSWCA 289, cited
D A Savage KC, C R C Newlinds SC and G Handran KC, with W LeMass, for the plaintiff
S Couper KC and D de Jersey KC for the defendant
McBride Legal for the plaintiff RBG Lawyers for the defendant
- The plaintiff (SLC) is a private company which was at all material times the owner and developer of the urban area south-west of Brisbane known as Springfield.
- Mr Maha Sinnathamby and his business associate, Mr Bob Sharpless, were in 2005, respectively, the chairman and the managing director of SLC. In practice, ultimate decision-making for SLC rested with them, although Mr Sinnathamby’s opinion was the determinative one, as he controlled 75% of SLC’s shares to Mr Sharpless’ 25%.
- Prior to 2005, Mr Sinnathamby had formed the ambition that Springfield should develop as a technology hub along the lines of Silicon Valley in California. SLC engaged The Strategic Directions Group Pty Ltd (Strategic Directions), a company which conducted an ICT consulting practice, to come up with an ICT masterplan. The development of a data centre for Springfield became a key part of the masterplan.
- The defendant (PIPE) was at all material times a private company which held a telecommunications carrier licence issued pursuant to Part 3 of the Telecommunications Act 1997 (Cth) and whose business involved, amongst other things, providing installation and maintenance services concerned with telecommunications infrastructure, fibre optic networks, and internet exchange products and services.
- In December 2004, PIPE provided a proposal to Strategic Directions for discussion purposes to determine how PIPE and SLC could work together with a view to building a data centre for the Springfield CBD. Amongst other things, the proposal suggested that the data centre be connected to the Brisbane CBD via a fibre optic cable network.
- Before continuing, it is appropriate to interpolate some technological background. A data centre is a place used to house the infrastructure needed to service modern business computing requirements. Typically, a data centre provides a secure temperature-controlled and humidity-controlled environment capable of housing multiple computer servers, which in turn service external clients. There is a need for reliable and competitive telecommunication connectivity between the data centre and the external clients. Fibre optic cabling is an efficient means of providing such connectivity.
- Fibre optic or “dark fibre” cabling is comprised of multiple individual strands of glass fibre “cores”. Each individual core provides the transmission medium for data in the form of light encoded with digital information. Each core is comprised of a single glass fibre, cladding to contain the light, and a protective coating. A fibre optic cable is comprised of multiple individual fibres or cores, typically grouped in multiples of 12 within tubing, which tubed groups are then contained within a sheath. Thus, a single fibre optic cable might contain 72, 144, or 216 cores within a single sheath, and would be referred to as a 72f, 144f, or 216f cable. Larger numbers of fibres were possible. In 2005, technology existed which could drive the transmission of data over distances in excess of 70km, at speeds in excess of 40 gigabits/second per fibre pair, a pair being one fibre strand or core used for transmission, and another used for reception.
- A typical example of a fibre optic cable is shown in the figure below:
- Optic fibre cables can be installed overhead, in cable trays, or underground. Underground installation is common in urban and semi-urban areas and typically involves installation of cabling within PVC conduit placed within trenches, which are then backfilled. Depending on the diameter of the conduit and of the cabling, multiple cables can be installed or “hauled” through a single conduit. Cable can also be installed using “subduct”, namely by being installed within a conduit of a smaller diameter than the principal conduit, and which, like a long hose, can be hauled through the larger conduit.
- PIPE’s proposal to construct a data centre did not proceed and the “Polaris Data Centre”, as it came to be known, was constructed by others. However, by an agreement dated 7 November 2005 (the IRU Agreement), SLC and PIPE entered into a contract pursuant to which SLC agreed to finance the construction by PIPE of a fibre optic cable network between Springfield and Brisbane. The IRU Agreement was a long-term contract the evident goal of which was that SLC would obtain a guaranteed ability to use a 72-core fibre optic capacity in a fibre optic cabling network between Springfield and the Brisbane CBD for at least 15 years, but possibly as long as 30 years. There was also a related Wholesale Fibre Service Agreement (the WFS Agreement) bearing the same date.
- PIPE constructed, operated and maintained the network which was the subject of the IRU Agreement (the Network). That network was comprised of a western and an eastern path, each connecting the Brisbane CBD with the Springfield CBD. The western path was constructed first and connected to the part of the University of Southern Queensland (USQ) campus at Springfield known as the World Knowledge Centre by about February 2006. The eastern path was constructed later and connected to the Polaris Data Centre at Springfield by about December 2007. The western path was relocated, via an alternate route within the Springfield CBD, to be connected to the Polaris Data Centre by about 2008.
- The genesis of this proceeding was that in November 2009, and without informing SLC or seeking its consent, PIPE installed its own 216f cable in some of the pits and PVC conduits in which the Network had been accommodated. It is convenient – albeit inaccurate (see  below) – to refer to the new network as the Duplicate Network. SLC says that since installation PIPE has been utilising the Duplicate Network to sell fibre optic capacity to the Springfield area, in competition with SLC’s ability to sell capacity on the Network. SLC’s case is that PIPE was not entitled to use the Network’s infrastructure to accommodate a competing network (at least during the life of the IRU Agreement).
- The first of the many problems facing SLC is that it is conceptually wrong to think of the Network as SLC’s network or of the infrastructure used by PIPE as SLC’s infrastructure. Part of the Network (known as the “On-Rail” part) was accommodated in infrastructure on land owned by Queensland Rail. In that part of the Network, SLC did not even own the relevant fibre optic cable let alone the infrastructure, but had contracted only for a guaranteed right to use fibre optic capacity in cable which was owned by someone else. And in the other part of the Network (known as the “Off-Rail” part) although SLC owned the cable (or at least part of the cable), the cable itself was accommodated in infrastructure (including all pits and conduits) which SLC had specifically agreed would be owned by PIPE. Indeed, subject to those provisions, SLC had agreed that PIPE retained all other rights of ownership in the Network “to the fullest extent permitted by law”. The evidence reveals that the infrastructure which PIPE used for the Duplicate Network was infrastructure which SLC had agreed that PIPE owned.
- The final as-built route of the Network and of the Duplicate Network can be understood by reference to two summary drawings prepared by SLC’s expert Mr Lordan, which are reproduced in the following two pages (place names added).
- The first drawing (labelled “Springfield Network – Cable and Joints”) shows the as-built route of:
- (a)Shared cable, which, so far as the On-Rail section was concerned, was not owned by SLC in any respect, but in respect of which SLC had a right to use fibre optic capacity. In the west shared cable ran from Brisbane to Goodna and in the east from Brisbane to Hill Crest.
- (b)Springfield cable, which was owned by SLC. In the west the Springfield cable ran from Goodna initially to the World Knowledge Centre at USQ, but, after relocation, to the Polaris Data Centre, both locations being in Springfield. In the east it ran from Hill Crest to the Polaris Data Centre.
- (c)Duplicate Network cable, which was the 216f cable installed in November 2009 and owned by PIPE. It followed only the route of the Springfield cable from Goodna to the Polaris Data Centre and from Hill Crest to the Polaris Data Centre.
- The second drawing (labelled “Springfield Network – Routes / Conduit”) shows the infrastructure utilised by:
- (a)Shared cable, namely cable laid in infrastructure not owned by SLC. In the west from Brisbane to Goodna it was laid in Queensland Rail conduit and trays, and in the east from Brisbane to Hill Crest it was laid in Telstra lease conduit.
- (b)Springfield cable, namely cable laid in 50mm conduit, marked on the drawing as P50 conduit. This was infrastructure which the IRU Agreement said was owned by PIPE. In the west that occurred from Goodna initially to the World Knowledge Centre. After relocation, the cable was laid into the Polaris Data Centre via the Landcorp 100mm conduit. It will be necessary to return to the question of the ownership of the Landcorp conduit, as it was a matter of some controversy in respect of which the evidence was poor. In the east the cable from Hill Crest to the Polaris Data Centre was laid via the Landcorp 100mm conduit.
- (c)Duplicate Network cable, which was laid in the same 50mm PIPE conduit and the same 100mm Landcorp conduit as was the Springfield cable.
- For completeness, I should say that I have set out the above drawings for the limited purposes I have identified, namely general route depiction and identifying the fact of shared cable, SLC cable, and Duplicate Network cable. The accuracy of the identification of relevant joint/splice numbers and of the minutiae of the enlarged inset drawings is not relevant to those purposes and I do not mean to convey that I have accepted it.
- SLC’s answer to the issues created by the express terms concerning ownership of the infrastructure was to suggest that, nevertheless, PIPE must be regarded as contractually constrained against constructing and operating a competing Duplicate Network without SLC’s consent either as a matter of the proper construction of the contract concerned or by the implication of relevant terms. For reasons which follow, both aspects of that case must fail. The parties contracted to allocate ownership rights in the way they did in the context of a complex statutory telecommunications regulatory regime and their intention, both objectively assessed and in fact, was to bring about a position in which they felt it was likely that the burden of compliance with that regime would fall on PIPE rather than on SLC and that their agreement concerning ownership would assist them in achieving that goal. Real effect should be given to the allocation of ownership rights, especially when the parties agreed that PIPE’s ownership rights would be held by PIPE “to the fullest extent permitted by law”. There is no reason either on the proper construction of the contracts or by implication of terms to bring about a position in which PIPE’s ability to take commercial advantage of its ownership rights was constrained in the way for which SLC contended.
- SLC contended that in the events leading up to, and by the parties’ entry into, the IRU Agreement and the related WFS Agreement, PIPE (in a manner apt to mislead) expressly, implicitly or by its silence conveyed to SLC that PIPE:
- (a)would provide SLC with the only network infrastructure capable of supporting Springfield’s telecommunications requirements during the term of the IRU Agreement;
- (b)did not intend to, and would not, compete with SLC to supply optic fibre capacity to wholesale suppliers and retail customers of telecommunications services between Brisbane and Springfield;
- (c)would not solicit or attempt to solicit any customer, or potential customer, of the Network; and
- (d)would not do anything to detract from, and in fact would work to maximise, SLC’s revenue earning capacity by the provision of telecommunications services to the Springfield area, and that such representations induced SLC to enter into the contracts and constituted actionable misleading and deceptive conduct.
- That misleading and deceptive conduct case was completely artificial: the representations were not made, and, even if one could reach the conclusion that they were, it is plain that SLC did not rely upon them. As to the latter aspect, SLC and PIPE were both sophisticated commercial actors. Further, and as has been mentioned, SLC had retained its own independent ICT consultants to advise it. They did so, including by evaluating PIPE’s proposals. Moreover, the evidence was that SLC normally required legal signoff before formally executing contracts. And it plainly did so for this transaction. To that end, SLC had its own in-house legal counsel team and it also retained Mallesons Stephen Jaques as its solicitors. For its part, PIPE retained Minter Ellison. The contracts were negotiated at arms-length between SLC and PIPE where each was assisted by its own external (and, at least in the case of SLC, internal) legal advisers.
- Further, SLC contended that, despite the terms of the IRU Agreement, as between SLC and PIPE, SLC should be taken to own the Landcorp 100mm conduit and related infrastructure. It says that PIPE must have committed a trespass actionable by SLC when PIPE laid the Duplicate Network cable in that infrastructure. For reasons which follow, that case fails because, as between themselves, SLC and PIPE had agreed that PIPE would own the infrastructure for that section of the Network and that agreement extended to encompass the Landcorp infrastructure. Further, and in any event, SLC did not establish that it had such rights in relation to the Landcorp infrastructure as would support a trespass case.
- Alternatively, SLC contended that in constructing and operating the Duplicate Network, without its consent, PIPE had breached fiduciary duties which it owed to SLC and also contravened statutory unconscionable and misleading conduct provisions. It also complained that in the course of laying the cable into the Polaris Data Centre, PIPE engaged in further acts of misleading and deceptive conduct which had the result that SLC had not realised that the Duplicate Network was being laid, with the result that it lost the opportunity of preventing the connection of the Duplicate Network into the Polaris Data Centre. For reasons which follow, each of those cases fails on the facts. PIPE did not owe SLC the alleged fiduciary duties and PIPE’s conduct was not unconscionable.
- SLC said, further, that I should infer from various documents that at some places over the length of the Duplicate Network independent contractors on PIPE’s behalf had spliced into particular fibres on the cable which must be regarded as SLC’s fibres. SLC contended that, on any view, PIPE was not entitled to splice into those fibres and that the splicing constituted a trespass. It says that, having spliced into SLC’s fibres, PIPE then tortiously converted relevant fibres by using them. In order to prove the trespass SLC needed to prove that PIPE instructed some relevant contractor to splice into SLC’s fibres. SLC never explained why PIPE would have wanted to do that. Indeed an experienced contractor gave evidence before me and found it difficult to imagine why an instruction would be given which would involve splicing new cable into an existing operative network. But, putting the question of motivation to one side, SLC’s case depended on identifying the particular fibres which, one way or another, could be regarded as SLC’s fibres and not PIPE’s fibres, where both existed in essentially the same physical location and then proving that an instruction was given to splice into those fibres. The conversion case also depended on proving that the particular fibres which PIPE used were fibres which must be regarded as SLC’s fibres. For reasons which follow, I am not persuaded to infer the truth of the requisite foundational factual proposition. This case, too, fails on the facts.
- SLC claimed:
- (a)damages for alleged breach of contract, breach of statutory duty and trespass or conversion;
- (b)an account of profits or equitable compensation for breach of alleged obligations of good faith, alleged fiduciary duties or based on a claim for equitable estoppel;
- (c)damages pursuant to s 236 of the Australian Consumer Law or s 82 of the Trade Practices Act for alleged misleading conduct or compensation pursuant to s 237 of the Australian Consumer Law or s 87 Trade Practices Act for alleged unconscionable conduct;
- (d)an injunction restraining PIPE during the term of the IRU Agreement from:
- (i)being engaged concerned or interested in any business or undertaking as a telecommunications asset owner offering competitive fibre cable capacity to wholesale suppliers or end-users of telecommunication services in Springfield; and
- (ii)from using any infrastructure relating to the Off-Rail section of the Network, including any cable situated therein comprising the Duplicate Network;
- (e)an order that PIPE remove the Duplicate Network and an injunction permanently restraining PIPE from obstructing SLC from removing those parts of the Duplicate Network that are in conduits owned by SLC;
- (f)a declaration that, on the proper construction of the IRU Agreement and the WFS Agreement, the term of the IRU Agreement may be extended under clause 13.l(c) by either party unilaterally;
- (g)an injunction restraining PIPE from interfering with, or removing, any of the customers on SLC’s Network, other than on the instructions of SLC, for the remaining duration of the IRU Agreement;
- (h)interest pursuant to the Civil Proceedings Act 2011; and (i) costs.
- For its part, PIPE contended that SLC could not make good any of its claims.
- I agree.
The structure of these reasons
- I organise these reasons, first, by identifying the approach I will take to fact finding and to contractual construction, second, and in roughly chronological order, by identifying the facts which I have found, and, finally, by addressing the various claims advanced by SLC under appropriate headings.
- In this regard I should note that I received about 564 pages of written opening and closing submissions. The closing oral addresses occupied 210 pages of transcript. I will not seek to recapitulate and then specifically address every argument advanced in that wealth of submissions. Rather, in these reasons I will seek to address all the matters I have regarded to be of relative significance to the resolution of the determinative issues concerning the various causes of action which SLC has sought to pursue against PIPE and which I have identified in that material.
- I have not sought to address a multiplicity of issues relating to quantum or to the expert evidence adduced on that subject. That was not because quantum was not in issue at the trial. The contrary was the case. The trial had to be adjourned part-heard because of issues which arose in relation to the expert opinion evidence on quantum: see Springfield City Group Pty Ltd v Pipe Networks Pty Ltd  QSC 395. It did not reconvene until about nine months later. The quantum case was riddled with complexity. Indeed, SLC’s own closing submissions suggested that unless my findings favoured all the inputs which their expert had put into his financial model, I should deliver reasons without calculation of loss and instead direct the parties to attempt to agree final orders to reflect my reasons and, failing agreement, I should provide the parties further opportunity to be heard.
- I have not addressed quantum because, as I have already mentioned and for reasons which I will come to, in my judgment SLC cannot make good any cause of action entitling it to recover any pecuniary compensation from PIPE. And although I acknowledge that it is often, perhaps even usually, appropriate for a trial judge who has found against a claimant to make findings on the measure of damages or other pecuniary relief sought by the claimant in case he or she is found to be wrong on liability by an appellate court, I have formed the view that in this case it is not.
- In this case such an examination would necessarily require me to measure pecuniary relief by accepting as true factual hypotheses which I have found are false or not supported by the evidence and then, on such false foundations, to go forward to make further assumptions and calculations and findings, and perhaps even to operate a complex financial model which has been prepared by SLC’s expert. Given the complexity of the various causes of action in this case and the permutations which that might involve, by which combination of what I would regard to be false assumptions would I proceed? The reason I have not addressed quantum is that so to proceed seems to me to be wrong and grossly inefficient.
- In what follows, I have sought to apply the following principles.
- In a civil case, proof of a fact in issue requires proof which enables a judge to be positively satisfied of the affirmative of the issue. In determining whether the judge is positively satisfied, the judge is at liberty to be satisfied upon a balance of probabilities. But the judge does not merely balance probabilities and say which way they incline. Rather, the judge must be affirmatively persuaded, having regard to the balance of probabilities, that the fact occurred.
- The requisite state of positive satisfaction may be obtained by the judge accepting evidence which directly proves the fact in issue. But it may also be reached by inference from other circumstances which have been proved, if those circumstances give rise to a reasonable and definite inference and not merely to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture.
- In Re Day, Gordon J recently restated these principles in this passage (footnotes omitted):
The tribunal must feel an actual persuasion of the occurrence or existence of a fact before it can be found. Where direct proof is not available and satisfaction of the civil standard depends on inference, “there must be something more than mere conjecture, guesswork or surmise” – there must be more than “conflicting inferences of equal degrees of probability so that the choice between them is [a] mere matter of conjecture”. An inference will be no more than conjecture unless some fact is found which positively suggests, or provides a reason in the circumstances particular to the case, that a specific event happened or a specific state of affairs existed.
- Generally speaking, these principles apply equally where the issue is proof of a single event as they do where the issue is proof of the existence of a state of affairs, or of the nonhappening of an event or of the non-existence of a particular state of affairs.
- I will shortly turn to an examination of the pre-contractual conduct. The principal relevance of that examination is to SLC’s pursuit of extra-contractual remedies.
- However, in light of the fact I would conclude that some of the terms of the IRU Agreement and the WFS Agreement are ambiguous, the pre-contractual conduct may be a source from which may be found relevant evidence of events, circumstances and things external to the agreements which were known to the parties, or which assist in identifying the purpose or object of the transaction. Of course, that is not to say that everything which I identify in my discussion of pre-contractual conduct will be relevant or admissible in that sense. In this regard, the approach I will take to contractual construction is that which I summarised in Wagners Cement Pty Ltd v Boral Resources (Qld) Pty Ltd  QSC 124 at  to :
For present purposes, the principles of construction of commercial contracts were sufficiently identified by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd and subsequently approved in Victoria v Tatts Group Ltd:
 The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
 In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
 Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
 However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
 Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
 Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties ... intended to produce a commercial result”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.
… the issues which have arisen between the parties and which I examine under separate headings below all address matters on which the terms of the Agreement itself are relevantly ambiguous. The result of the application of the above principles is that, in order to determine the proper construction of the Agreement, recourse may be had to:
- (a)the text of the terms, the meaning of which is disputed;
- (b)the internal context within which that text occurred, namely the entire text of the Agreement as well as the particular documents referred to in the text of the Agreement; and
- (c)evidence of events, circumstances and things external to the Agreement which were known to the parties or which assist in identifying the purpose or object of the transaction.
The Supplier submitted that [evidence of subjective intention or opinion, or of things said in precontractual negotiations, which was not capable of being used in the manner contemplated by the last category] was admissible in aid of construction. The Supplier’s proposition was that the law had moved on and now permitted an examination of the communicated negotiating position of parties from time to time in relation to a particular contractual term, because the communicated negotiating position should itself be regarded as a “fact” known to both parties, which might then tend to show the purpose or object of the clause (in the sense of the “mischief” to which it was directed) and therefore be admissible in aid of construction. It is true that there are statements in the New South Wales Court of Appeal in Cherry v Steele-Park (2017) 96 NSWLR 548 at  to  and in Commonwealth Steel Company Ltd v BHP Billiton Marine and General Insurance Ltd  NSWCA 242 at  to  which lend support to the Supplier’s proposition. However, to my mind the Supplier’s proposition is inconsistent with High Court authority and plainly wrong: see Heydon on Contract at [9.50], [9.660], [9.1360] and [9.1410] and the cases there cited. The orthodox view of the law, consistent with High Court authority, is that which was expressed by the Queensland Court of Appeal in Velvet Glove Holdings Pty Ltd v Mount Isa Mines Ltd  QCA 312 per Philippides J (with whom Fraser and White JJA agreed) at  to  and in Watson v Scott  2 Qd R 484 per McMurdo P (with whom Morrison and Philippides JJA agreed) at . The law as stated in those cases would exclude the contested evidence, “drenched in subjectivity” as it was, on the grounds that it was irrelevant. The law as stated in Velvet Glove Holdings Pty Ltd v Mount Isa Mines Ltd and in Watson v Scott is the law which I have applied.
- It will appear that it is necessary to construe the significance of some clauses which appear in the form of express exclusions. It is worth emphasising that the approach to be taken to construing such clauses is no different to the approach to be taken to construing any other clause in a commercial contract. As the High Court observed in Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 at 510-11 (emphasis added):
These decisions clearly establish that the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity. Notwithstanding the comments of Lord Fraser in Ailsa Craig [[1983 1 W.L.R. at 970;  1 All E.R. at 105], the same principle applies to the construction of limitation clauses. As King C.J. noted in his judgment in the Supreme Court, a limitation clause may be so severe in its operation as to make its effect virtually indistinguishable from that of an exclusion clause. And the principle, in the form in which we have expressed it, does no more than express the general approach to the interpretation of contracts and it is of sufficient generality to accommodate the different considerations that may arise in the interpretation of a wide variety of exclusion and limitation clauses in formal commercial contracts between business people where no question of the reasonableness or fairness of the clause arises.
Relevant pre-contractual conduct
- I will examine first the documentary evidence, which was expressed in the Court Book. I will then move on to consider the oral evidence adduced before me.
- References in these reasons to the “Court Book” are to those parts of the Court Book which were admitted to evidence. Relevant parts were contained in exhibits 1, 2, 3, 8, 9, 12, and 13. Some objections to admissibility were taken to some parts of the Court Book and not resolved during the trial. Helpfully, during its closing submissions SLC provided to me a document entitled “plaintiff’s response to defendant’s documentary objections”. A schedule to the document identified:
- (a)documents to which objection had been taken, but in respect of which SLC no longer pressed for inclusion in the Court Book; and
- (b)documents to which objection had been taken, and which SLC continued to press for inclusion and in respect of which SLC required my ruling.
- I rule on the documents in the latter category in Appendix 1 to these reasons.
The documentary evidence
- So far as the documentary evidence revealed, the first relevant contact between SLC and PIPE occurred on about 7 December 2004 when PIPE provided the discussion proposal referred to at  above. That proposal was a 6-page confidential written presentation entitled “Proposal for Data Centre initiative in Springfield CBD”. It suggested a joint venture between SLC and PIPE aimed at building, by the end of 2006, a data centre in Springfield to satisfy the demand from Brisbane City, Springfield and possibly Ipswich for data centre services. Part of that proposal involved the idea that the data centre would be connected to the Brisbane CBD via a fibre optic network ring “to allow for diverse fibre connections”.
PIPE written presentations
- In about mid-February 2005, PIPE provided a further 6-page confidential written presentation to Strategic Directions entitled “PIPE Networks Proposal to Strategic Directions for a Fibre Optic Network between Brisbane CBD and the Springfield CBD”. The scope of the proposal had narrowed somewhat and no longer included provision for the construction of a data centre. The opening paragraph provided:
PIPE Networks will build a large core count fibre optic network between Brisbane CBD and Springfield CBD (as planned). The aim of this build is to bring competitive telecommunications services to Springfield CBD as is available in Brisbane CBD. This will allow businesses to easily move their operations to Springfield without communications costs being a barrier.
- The details of the proposal were as follows:
- (a)The network would be constructed as a 79km network “ring” comprising a western and an eastern leg, with each leg comprising 72 fibre cores. The route would have OnRail and Off-Rail components. All On-Rail fibre would be subducted to increase protection. Part of the eastern leg would be subducted within existing Telstra ducting. PIPE proposed to provide a 99.999% “uptime” guarantee on the cable operation.
- (b)SLC could use the network for any legal activity, including:
- allocation to telecommunications carriers who might wish to set up a point of presence at Springfield without the burden of the build;
- allocation to a customer for their dedicated communications requirements back to the Brisbane CBD, possibly being bundled in with a lease or other long-term agreement; and
- bundling with any future data centre operation.
- (c)There would be “Network Access Points” at either end of the cable, which points would allow customers to connect to either end of the cable in order to send and receive data traffic. These would also be the points where other telecommunications carriers could deliver services from Brisbane to Springfield. In Springfield these points would be any future data centre and some outside plant assets such as pits. In Brisbane these points could be either one or two pits of choice and/or one or two data centres of choice.
- (d)PIPE proposed to undertake to provide users of the cable access to its “Wholesale/Carrier rates” for connection from CBD buildings to the Network Access Points.
- (e)PIPE’s responsibilities would include:
- the initial build of the network;
- physical maintenance of the network;
- telecommunications carrier and regulatory issues regarding the cable; and
- responding to work orders from SLC in relation to the connection or disconnection of customers and testing for any reported faults.
- (f)PIPE proposed a price of $6,350,000 excluding GST for building the network and for its ongoing use and maintenance for 15 years.
- Within a few days, PIPE developed that 6-page presentation into a 12-page presentation. A draft document was provided to Strategic Directions on 17 February 2005 and a final document emailed on 18 February 2005. Changes and additions to the 6-page proposal included:
- (a)The addition to the opening paragraph quoted at  above of the following:
This proposal will allow for the customers to use the fibre for communications between Springfield and Brisbane. It will allow Springfield Land Corporation (SLC) to have access to a tangible and valuable piece of infrastructure that will enhance the great CBD offering that is Springfield.
It will not require SLC to:
- become a carrier or deal with any carrier related issues,
- deal with end users of fibre services between Springfield and Brisbane[.]
- (b)The provision of cost information concerning existing high-speed data transmission to Springfield via Optus or Telstra.
- (c)Explanation of the recommendation for a 72-core count network.
- (d)The provision of further detail concerning the route description by a diagram showing the eastern leg of the route described as “City to Springfield via Sydney-Brisbane Rail Line” and the western leg of the route described as “City to Springfield via IpswichBrisbane Rail Line”. Further detail was then set out, including that parts of the eastern leg of the route would be subducted in Telstra underground duct; part subducted in Queensland Rail concrete troughs; part in 100mm conduit beside the railway; and part in 50mm conduit. Part of the western leg would be subducted in Queensland Rail concrete troughs and part would be in 50mm conduit.
- (e)The statement that fibre cable has a stated life of 15 years. The statement that the life of the asset would be 20 to 30 years, excluding cable life, and the provision of a conditional quote to re-haul the network as an end-of-life upgrade.
- (f)The provision of comparative pricing for network build and maintenance as between a 72-core network and a 144-core network. The quote for the former was reduced slightly to $6,323,000. The quote for the latter was $7,239,000.
- PIPE’s email also provided a simple single sheet financial “model” which had been “put together that we can utilise to simulate different costings, number of circuits sold, etc - and which will help us to understand the payback period for SLC”. On the basis of certain stated assumptions, the model suggested that:
- (a)if SLC could sell the capacity of about 21% of available fibre pairs, it could earn annual recurring revenue sufficient to enable it to payback its initial investment in a little over three years; and
- (b)the proposal could enable SLC to offer transmission capacity to its customers which would offer savings when compared to the price of comparable offerings by Telstra.
Strategic Directions’ advice to SLC
- On 21 February 2005, Strategic Directions’ Mr Andrea emailed the proposal to SLC’s Mr Schroor, copied (amongst other people) to SLC’s Mr Sharpless. He sought a meeting to discuss the proposal in more detail, but summarised it in these terms:
This proposal is effectively a guarantee that the fibre will be built based on Springfield’s investment, and provides the following
- –15 year irrefutable right of use by SLC
- The means SLC can bundle fibre connectivity into leasing arrangements if required
- By treating this as an investment, SLC can make a solid return in the medium to long term
- –The ability to guarantee fibre connectivity in the SLC submission to Qld Govt Dept of Public Works
- –The ability to market the capability around the Data Centre publicity statements
- –15 years maintenance and support of the links
- –Carrier independency as SLC can provide fibre connectivity to any carrier as needed (possibly at wholesale rates as part of the ROI model)[.]
- On 3 March 2005, Strategic Directions provided to SLC a 15-page written “Project Report” on “Springfield CBD to Brisbane CBD Fibre Connectivity Options”. The following observations may be made.
- In the first section of the report, Strategic Directions recorded the nature of its retainer and the task sought to be performed by the report in these terms:
Springfield Land Corporation (SLC) engaged The Strategic Directions Group Pty Ltd (Strategic Directions) to review a range of IT and telecommunications components relating to Springfield's planned Gateway CBD development.
As part of the overall business solution regarding implementation of a new purpose built Data Centre, dual path (redundant) fibre optic connectivity is required between Springfield CBD and Brisbane CBD.
Strategic Directions has held discussions on the available options to achieve the required fibre connectivity with Telstra, Optus, PIPE Networks and SPTel. PIPE Networks was the only carrier who has subsequently provided a costed proposal for Springfield's consideration, which is reviewed in Section 3.
This document reports the outcomes of the discussions and subsequent options on how to progress Springfield's fibre connectivity needs.
- In the second section of the report, Strategic Directions advised that having a data centre was 100% dependent on having fibre connectivity to Brisbane and/or the rest of Australia. Further, it advised that no significant potential customer of a data centre would commit to a data centre that was not connected to multiple carriers over fibre, but also that no carriers (including Telstra, Optus, SPTel (with Nexgen) and PIPE) would commit to spend their own money building a connection without a committed customer spend. This “chicken and egg” scenario was a justification for Springfield taking the step of investing in fibre infrastructure itself, if it wanted a data centre. Such a spend would be regarded as a significant component in making the Springfield CBD a business location of the future. Strategic Directions stated that one thing which set such an investment apart from investment on roads, bridges, subdivisions and other infrastructure was the ability of providing a recurring revenue stream.
- The third section of the report canvassed a number of potential options available to SLC to provide or obtain dual path connectivity to a data centre. It concluded that acceptance of the PIPE proposal would set up the ability to influence cost effective connectivity for CBD customers. Amongst other things, Strategic Directions advised:
PIPE Networks is the only provider to deliver a firm quote to SLC during discussions with the market. The quote is based on a construction-phase study and associated pricing by NDC and Queensland Rail.
Summary of the PIPE Networks proposal:
- SLC underwrite both legs of an optic fibre installation (72-core cables) – capital for the installed cable runs of $4.621 m exGST
- PIPE Networks manage and maintain the fibre infrastructure, including all regulatory issues for 15 years, paid up-front ($1.702m) or annually ($115k)
- PIPE owns the cable, however, SLC takes a 15 year IRU over both legs of the cable
- Total capital contribution for cable installation and 15 years maintenance $6.323m exGST
- Options were provided to only install one of the legs, and pricing to increase the core count to 144-core cable
- The quote is valid for 90 days
PIPE have also indicated they are prepared to structure the agreement around an NCD in lieu of an IRU, with SLC owning the cable, and PIPE managing and maintaining as noted above. On the face of it, there is no immediate financial benefit, other than a more flexible Exit Strategy on potential sale of the infrastructure.
- The comment concerning exit strategy was elaborated later in the section in these terms:
Discussions with PIPE Networks demonstrate some flexibility in possible Exit Strategies including:
- Buy-back / buy-out and the end of the contract term
- Use of Commercial (revenue) Triggers during the contract term for PIPE to buy the infrastructure off SLC
- Basis is currently a pay-back within 36 months
- Ability under an NCD (where SLC owns the infrastructure) for other carriers to bid/purchase the infrastructure at any time[.]
- Strategic Directions defined NCD in these terms:
Nominated Carrier Declaration – an NCD is a formal declaration to the Australian Communications Authority (ACA) that a carrier is managing and maintaining telecommunications infrastructure on behalf of a third-party in accordance with their Telecommunications Carrier Licence.
This would allow Springfield to use the fibre cores in any way they see fit, while retaining ownership of the fibre infrastructure.
- Although the question of ownership of the telecommunications infrastructure involved in the PIPE proposal was not made explicit in the terms of the written PIPE proposals to this time, I infer from the foregoing that there must have been other communications between Strategic Directions and PIPE at least concerning ownership of the infrastructure. Strategic Directions’ advice to SLC treated the PIPE proposal as involving PIPE ownership of cable with PIPE guaranteeing SLC an “Irrefutable” or “Indisputable” right of use or IRU of defined capacity over a particular period. However, Strategic Directions also recorded that PIPE had conveyed its willingness to consider another model, in which PIPE would make a “Nominated Carrier Declaration” or NCD to the regulator that it as a carrier was managing and maintaining telecommunications infrastructure on behalf of SLC, which would allow SLC to own the cable. The terms of the report suggested that, at this time, Strategic Directions were treating the terms “cable” and “infrastructure” as interchangeable.
The regulatory regime
- It is necessary at this juncture to interpolate a brief explanation about the then applicable regulatory regime and its perceived significance to the relationship between SLC and PIPE and, in particular, to the question of ownership of cable and infrastructure.
- The regulatory regime was that prescribed by the Telecommunications Act 1997 (Cth) and related statutes. Section 5 of the Telecommunications Act sets out a simplified outline of the Act in the following terms (emphasis in original):
- This Act sets up a system for regulating telecommunications.
- The main entities regulated by this Act are carriers and service providers.
- A carrier is the holder of a carrier licence granted under this Act.
- The owner of a network unit that is used to supply carriage services to the public must hold a carrier licence unless responsibility for the unit is transferred from the owner to a carrier.
- There are 4 types of network unit:
- (a)a single line link connecting distinct places in Australia, where the line link meets certain minimum distance requirements;
- (b)multiple line links connecting distinct places in Australia, where the line links meet certain minimum distance requirements;
- (c)a designated radiocommunications facility;
- (d)a facility specified in a Ministerial determination.
- Carrier licences are subject to conditions.
- There are 2 types of service provider
- (a)a carriage service provider;
- (b)a content service provider.
- A carriage service provider is a person who supplies, or proposes to supply, certain carriage services.
- A content service provider is a person who supplies, or proposes to supply, certain content services.
- Service providers must comply with the service provider rules.
- The Australian Communications and Media Authority (ACMA) is to monitor, and report each year to the Minister on, significant matters relating to the performance of carriers and carriage service providers.
- Bodies and associations that represent sections of the telecommunications industry or the emarketing industry may develop industry codes.
- Industry codes may be registered by the ACMA.
- Compliance with an industry code is voluntary unless the ACMA directs a particular participant in the telecommunications industry or the e-marketing industry to comply with the code.
- The ACMA has a reserve power to make an industry standard if there are no industry codes or if an industry code is deficient.
- Compliance with industry standards is mandatory.
- Carriers and carriage service providers must protect the confidentiality of communications.
- The ACMA, carriers and carriage service providers must do their best to prevent telecommunications networks and facilities from being used to commit offences.
- A carrier or carriage service provider may be required to have an interception capability.
- Carriers and carriage service providers must ensure that it is possible to execute a warrant issued under the Telecommunications (Interception) Act 1979.
- Carriage service providers may be required to supply carriage services for defence purposes or for the management of natural disasters.
- A carrier or carriage service provider may be required to enter into an agreement with the Commonwealth about:
- (a)planning for network survivability; or
- (b)operational requirements in times of crisis.
- The ACMA must require certain carriers and carriage service providers to provide pre-selection in favour of carriage service providers.
- The Advanced Mobile Phone System is to be phased out by 1 January 2000.
- Carriers and carriage service providers may be required to comply with certain international conventions.
- The Minister may make Rules of Conduct about dealings with international telecommunications operators.
- Provision is made for the technical regulation of customer equipment, customer cabling and cabling work.
- The ACMA may regulate numbering by means of a numbering plan.
- Provision is made for standard agreements for the supply of carriage services.
- The ACMA and the ACCC may hold public inquiries about certain matters relating to telecommunications.
- The ACMA may investigate certain matters relating to telecommunications.
- Certain switching systems must be capable of providing calling line identification.
- Provision is made for the following ancillary matters:
- (a)information-gathering powers;
- (b)powers of search, entry and seizure;
- (c)review of decisions; (d) injunctions.
- Under s 42 of the Telecommunications Act, owners of network units were prohibited from using the network unit either alone or jointly with one or more other persons to supply a carriage service to the public unless either the owner held a carrier licence itself or there was an NCD in force in relation to the network unit.
- The concepts of “network unit”, “carriage service” and “supply to the public” were critical to the operation of the s 42 prohibition, and, indeed, to the extent of regulation applicable to the owner under the Telecommunications Act, but it is not necessary to descend into any detailed exegesis of those concepts, because the communications between PIPE and Strategic Directions and Strategic Directions and SLC revealed a perception that the network the subject of the proposal would be regarded as subject to the s 42 prohibition.
- It may be at least observed that the perception seems to have been soundly based. Relevantly, “network unit” was defined to include certain “line links” (s 25 et seq.); “Line links” were constituted by “a line” (s 30); and “line” was defined to mean a “…, cable, optical fibre, …, conduit, … or other physical medium used, or for use, as a continuous artificial guide for or in connection with carrying communications by means of guided electromagnetic energy” (s 7). There was an obvious basis to conclude that fibre optic cable and the conduits through which it was laid when used for the proposed purpose would be regarded as subject to the s 42 prohibition.
- If PIPE and SLC contracted on the basis that PIPE owned both infrastructure and cable, then SLC would not be an owner and would not have to hold a carrier licence and would therefore avoid the onerous regulatory responsibilities involved in holding such a licence. But if SLC wished to own both infrastructure and cable, it would be the subject of the s 42 prohibition and would either need its own licence or it would be necessary to have an NCD in place. (It is not clear, at this stage, whether the parties had separately considered the question of separate ownership of infrastructure and cable.)
- The provisions governing NCD’s were those set out in Part 3 Division 4 of the Telecommunications Act. PIPE would have to make an application to the regulator – the Australian Communications and Media Authority (ACMA) – and ACMA would have to declare in writing that the applicant was the nominated carrier in relation to the network units concerned, which ACMA would only give if ACMA was satisfied that PIPE would be in a position to comply with all of the obligations imposed on it in its capacity as the nominated carrier and making the declaration would not impede the administration of the Telecommunications Act. The result of being a nominated carrier was that the Act applied to the nominated carrier in relation to the network units concerned as if they were owned or operated by the nominated carrier.
Further PIPE written presentations
- By letter dated 18 March 2005 to Strategic Directions, PIPE responded to Mr Andrea’s request to provide a list of unique features of its proposal to SLC. Amongst other features, PIPE stated:
- (a)It had provided what it believed was a unique proposal to SLC to bring diverse, highspeed connectivity to the new Springfield CBD that would allow for the competitive carriage of data services into the area.
- (b)The ability to deliver cost-effective and high-speed communications services into the Springfield area would be crucial to the attractiveness of the CBD to potential purchasers of land and buildings, as well as their tenants.
- (c)PIPE was carrier-neutral. It would allow all other carriers to access the diverse fibre runs, and because the structure of the proposed agreement gave SLC an IRU over the fibre for 15 years, SLC could itself offer fibres to any other telecommunications carrier or end-user that they wish.
- (d)PIPE was a specialised dark fibre provider. Such fibre offered the ultimate in flexibility, speed and reliability for customers who wished to use the fibres for delivery of other managed services or delivery of non-network traffic (e.g., storage) to the SLC data centre and CBD precinct. PIPE had been an active supplier in the dark fibre space for all of its existence as a carrier and would continue to be so.
- (e)PIPE would include as part of any agreement with SLC the ability for SLC to assume ownership of the cable in its entirety in the case of any material events occurring.
- At a stage which is likely to have been in early 2005 but after PIPE’s 18 March 2005 letter was produced, PIPE produced a more detailed 16-page version of the proposal discussed at  to  above. That document appears to have been the last and most detailed proposal produced by PIPE before, as will appear, the parties:
- (a)on 21 July 2005 executed a “Dark Fibre Service Order Form” by which they entered into an agreement for the provision of services by PIPE which, amongst other things, was “subject to both parties agreeing the specific terms of the IRU or other legally binding document as agreed, provided the fundamental agreed commercial terms remain as proposed”;
- (b)in October 2005 and the first week of November 2005, together with their lawyers, negotiated the terms of the IRU Agreement and the WFS Agreement; and (c) on 7 November 2005 entered into the IRU Agreement and the WFS Agreement.
- Relevant additions or changes included in the document included:
- (a)The 79km network “ring” would take 180 days to build from contract signing.
- (b)A slightly changed route was identified, but the proposed laying of cable in the combination of part subducted in Telstra underground duct; part subducted in Queensland Rail concrete troughs; part in 100mm conduit beside the railway; and part in 50mm conduit was maintained.
- (c)The addition of a proposal for “Material Event Protection” as had been foreshadowed by the letter of 18 March 2005, in these terms:
Material Event Protection
An outdoor fibre optic network of any size is a long-lived asset. Over the life of this asset care and thought needs to be given to protection of those involved in the event of a material event that prevents the ongoing commercial operations for either PIPE Networks or SLC.
Any agreement entered into between PIPE Networks and SLC will have the following principles:
- a material event is an event that involves liquidation;
- network assignability will be possible in this event and/or;
- there will be a fixed charge over the network (72 cores dual fibre optic network)
Network built to allow assignment
PIPE Networks has proposed a network that is ‘Material Event Proof’. We have done this by not using tradition right of way elements such as regulated access to other carrier’s underground ducting. These paths require a separate process to assign in the event of a material event.
All outside plant is in either purpose built underground facilities or QR right of way. PIPE Networks has agreement with QR to allow assignment of fibre cores to SLC on a material event. Note: ownership of the network will require a Carrier License or a nominated carrier declaration.
- (d)Expansion of the statement concerning PIPE’s responsibilities in relation to telecommunications carrier and regulatory issues regarding the cable to include the statement:
This network will be owned and operated by PIPE Networks for the exclusive use of SLC. This means that SLC will have no carrier related regulatory issues to deal with.
- Carrier and regulatory issues regarding the cable
- All Federal interception requirements, liaising with lead agency and preparing Interception Capability Reports
- All ACA requirements for reporting and levies
- All ACCC reporting for fixed line infrastructure as required from time to time[.]
- (e)Addition of detail concerning how users of the network would be connected to it, including an explanation as to how PIPE would implement its wholesale prices for connecting local access links or tails from the location of the users in CBD buildings to the Network Access Points.
- The document made clear that it contemplated that the network was not just the fibre cable, but was composed of different types of “outside plant” or “OSP”, obviously including pits, troughs and conduit. The statement quoted at (d) might then be construed as an indication that PIPE was willing to contract on the basis that it would own all the cable, including all of the infrastructure, and that it would do so for SLC’s exclusive use. PIPE suggested that an advantage for SLC would be to relieve it of the burden of carrier related regulatory issues. But no such contractual term found its way into the bargain. Neither the documentary nor the oral evidence shed any explicit light on why, when PIPE had been prepared to contract on this basis, the parties ultimately contracted (1) to split ownership rights, allocating cable ownership to SLC and ownership of infrastructure to PIPE in the way already mentioned; and (2) not to condition such ownership and operation rights as PIPE was given in relation to the network with the promise that they be exercised for the exclusive use of SLC. Indeed, it will appear that the terms of the contract actually entered into were expressed in a way inconsistent with the notion that SLC had exclusive use of the pits and conduits which were to be owned by PIPE. It has already been mentioned that PIPE’s ownership rights were to held by it “to the fullest extent permitted by law”. And, cl 4.1(d) of the IRU Agreement only permitted SLC access to pits and conduits at SLC’s cost and on reasonable notice and then only with “appropriately skilled nominees”.
PIPE power point presentations
- The documentary evidence contains documentary print outs of three PowerPoint presentations made by PIPE. Although the documents are not dated, the Court Book describes the first two as dated 12 April 2005 and the third as dated 9 May 2005.
- The first, entitled “Company Overview”, contained general and fairly anodyne promotional material about PIPE, its fibre network business and its existing customer base. It suggested that Southeast Queensland needed a data centre serviced by dark fibre; that Springfield was an ideal location for such a data centre; and that PIPE was suited to provide SLC with such a centre. Given that PIPE’s proposal had long moved away from the provision of a data centre to the provision of a fibre optic network, I doubt the accuracy of the date and think it is more likely to have been a document produced at a much earlier stage.
- The second, entitled “Springfield CBD Fibre”, had a content more consistent with the date ascribed to the document. Two pages contained relevant statements:
- (a)Under the heading “Recapping”, the document stated (footnote added):
- SLC are building a new CBD with major tenants to be Uni’s, Health Providers, Govt, Retail, Commercial, etc.
- SLC have also recognised the potential for a Data Centre for Primary and DR hosting
- PIPE has delivered a proposal for high core-count diverse fibre to Springfield CBD
- Looking at moving forward to construction[.]
- (b)Under the heading “Current Situation”, the document stated:
- Telstra and Optus /UeComm have Fibre close-by
- Not very attractive for competitive Telcos to offer services in the area, leaving a big gap in the market
- Quote obtained by PIPE indicate that it is cheaper to buy Bandwidth between BNE and MEL than BNE to Springfield ($20-$30K/mth for Gigabit Ethernet)
- PIPE Networks proposal allows SLC full control of the fibre under an IRU, including access to all other carriers[.]
- The third PowerPoint presentation, entitled “Springfield CBD Fibre “Connecting Springfield””, does appear to be a document produced at a time when PIPE was not seeking itself to provide the data centre and was seeking to persuade Strategic Directions and, presumably, SLC, that its proposal to provide a dark fibre network should be proceeded with. Given, as will shortly appear, that Strategic Directions assessed the position and made a recommendation to SLC’s board by memorandum dated 13 April 2005, I doubt the correctness of the 9 May 2005 date ascribed to the document. I think it is more likely that the document was produced before the Strategic Directions memorandum of 13 April 2005. Relevant statements included:
(a) Under the heading “Recapping”:
- Springfield promoting new CBD. Major tenants to be: Universities, Health Providers, Government, Retail, Commercial, etc.
- Springfield committed to build a World-class Data Centre
- PIPE proposal for high core-count diverse Dark Fibre to Springfield CBD[.]
- (b)Under the heading “The Opportunity – Springfield”:
- Springfield to become a city of International envy and the most modern city in Australia
- Attract existing businesses currently based in other capital cities to the Springfield business and residential community
- Attract International knowledge based industries looking to establish an Australian operation and appreciate the benefits of being part of a master-planned community designed for the 21st century[.]
- (c)Under the heading “The Opportunity – Datacentre”:
- Build Australia’s only premier datacentre facility outside of Sydney
- Truly unique datacentre which can host both production and DR services for businesses based anywhere in Australia or indeed the Asian region
- Current city datacentres are at or near capacity and are no longer seen by major corporate and government clients as acceptable for DR purposes[.]
- (d)Under the heading “The Opportunity – The Community”:
- Able to provide residents with leading telecommunications technologies and infrastructure such as FTTH, ADSL2+ and wireless
- Opportunity to offer competitive carriers access to infrastructure to provide competing services to the vanilla Telstra offering[.]
- (e)Under the heading “Current Barriers @ Springfield”:
- Transmission Capacity too expensive – cheaper to buy capacity from Brisbane to Melbourne than Brisbane to Springfield
- Serious lack of carrier options at Springfield
- Distance – difficulty for any carrier other than Telstra/Optus to justify building network infrastructure (which takes back to first point) and they will only offer “managed services”
- Serious limitation of Network Infrastructure to Springfield[.]
- (f)Having a competitive telecommunications access was critical. Under the heading “PIPE Networks Solution”:
- Providing Springfield with the only Network Infrastructure capable of supporting Springfield’s telecommunication requirements to and beyond 2020
- Includes a fully diverse 72 core fibre optic network from Brisbane to Springfield on a 15 year IRU basis
- Provides Springfield with a true DF service and the ability to offer the cores to whoever and on whatever commercial terms Springfield decides
- Springfield has effective ownership of those cores without the headaches associated with being a carrier[.]
- (g)Under the heading “Why You Should Choose PIPE”:
- Track record of providing unique solutions for clients as a default offering and not a “reactionary” offering to keep out competition
- Significant network of major corporate and government clients that require comms and datacentre space
- We share your vision of creating a major datacentre outside of the CBD area – prepared to take datacentre space at the facility as a sign of our commitment
- Are able to bring along other major carrier customers such as Primus, SPTel, Powertel, Nextgen, iiNet/OzEmail, Agile etc. which may be interested in establishing network PoP’s at Springfield[.]
Strategic Directions board recommendation
- By a memorandum dated 13 April 2005, Mr Andrea of Strategic Directions made the following recommendation to SLC’s board of directors on the subject of “Springfield – Brisbane Optic Fibre Cable Investment”:
Springfield board is recommended to consider the following investment:
- $4.621m in capital through PIPE Networks as a licensed telecommunication carrier to deploy a diverse 72 core fibre network linking Springfield's Data Centre to Brisbane CBD (refer aerial photo for routes); and
- A committed $1.702m over 15 years in operational maintenance and management of the network through PIPE Networks
This investment is subject to:
- A signed lease agreement with PIPE Networks and with USQ for diverse fibre pairs for minimum 5 years
- A signed lease agreement with PIPE Networks for a minimum 50m2 of Data Centre space.
The SLC Board is requested to approve this investment at its earliest convenience to enable completion of the network build prior to USQ occupation commencing in the Education Precinct (anticipated January 2006).
- By way of background, Strategic Directions advised SLC that:
- (a)The availability of carrier independent fibre connectivity with Brisbane and potentially other data centres was a mandatory requirement (in context, this should be construed as mandatory to the success of the development of Springfield).
- (b)Major carriers (Telstra, Optus, UeComm, SPTel and PIPE) would not invest in extending existing fibre services to Springfield without:
- significant customer demand and commitments; or
- financial contribution from the developer or customer.
- (c)But potential data centre customers would not commit to Springfield or the carriers without a commitment from the carrier that cost effective services would be provided for the data centre, thereby creating a “chicken and egg” scenario that could not be resolved without SLC’s intervention.
- Strategic Directions identified the benefits to SLC in these terms (footnote added):
By building the diverse fibre optic network, the following advantages will be realised by SLC:
- A key requirement in making the Springfield Data Centre a viable customer consideration will be met
- Provides SLC with a unique and flexible Data Centre leasing model, whereby data carriage can be bundled into a customer's lease cost
- A 'Connected Lease' could include the communications lease cost with the Data Centre lease cost
- An 'Unconnected Lease' can related solely to the Data Centre lease, thereby allowing customers to maintain existing carrier relationships
- Delivers a key marketing statement for both Springfield City and the Data Centre around carrier independent, diverse fibre-based connectivity with Brisbane CBD
- Provides a new, long-term revenue stream through an asset (that can be capitalised, depreciated, assigned and transferred) as both retail customers and other carriers (wholesale) enter the Data Centre or link into Springfield CBD, while SLC itself does not need to become a carrier
- PIPE Networks has significant contact with major Data Centres customers across Queensland and the southern States, while PIPE Networks has committed to sign a Letter of Intent to take a lease in the Springfield Data Centre
- The Data Centre will be reinforced as the major customer communications and IT systems interconnectivity point in Springfield CBD
- Reinforces the Springfield CBD as the "smart CBD" and positions it for favourable consideration by State Government short-term requirements[.]
- Strategic Directions noted that only two carriers (PIPE and UeComm) were actively delivering dark fibre services to the carrier wholesale and business retail markets and advised that PIPE was regarded to be a lower risk partner in deploying, managing and delivering joint marketing over the next 15 years. The memorandum concluded by identifying the recommended course of action in these terms (footnote added):
Strategic Directions recommends the following course of action
- SLC Board approve the investment strategy
- SLC instruct Strategic Directions to complete fibre contracts with PIPE Networks and USQ to secure $324,000 revenue in order to cover operational costs and interest cover on loan on capital expenditure
- Complete contract negotiation with USQ for usage of SLC fibre pairs
- Strategic Directions to work with Pipe and SLC financial advisors and legal representatives to document relationships[.]
- So far as the last dot point is concerned, the evidence revealed that SLC had its own in-house legal counsel team and that it retained external legal advisers. The in-house counsel team reported ultimately to Ms Raynuha Sinnathamby, who was the daughter of Mr Maha Sinnathamby. She was a qualified solicitor holding degrees in Arts and Law, and also a Master of Business Administration. At all relevant times she was on the board of SLC, and at the time she gave evidence before me she was the managing director of SLC.
PIPE’s business model
- In April 2005, PIPE lodged a prospectus with ASIC for a $3,500,000 public offering in a bid to list on the Australian Stock Exchange. Although there was no evidence that either Strategic Directions or SLC had any regard to the contents of the prospectus, the contents did reveal PIPE’s public statements concerning its business model at the time. Thus:
- (a)In the investment overview section of the prospectus these statements were made (emphasis added):
PIPE Networks' objective is to extend and maximise the utilisation of its network and to grow revenues and earnings. PIPE Networks does this by installing additional Fibre Optic capacity commensurate with anticipated demand for Dark Fibre services. Further, PIPE Networks is continually evaluating new products and services with the aim of expanding its customer base and driving additional traffic onto its network.
Typical Sales Process for Dark Fibre Services:
- Dark Fibre service opportunity identified.
- Opportunity evaluated and investigation undertaken to investigate proximity of site locations to existing fibre network.,
- Solutions designed, costed and provided by PIPE Networks to client for their evaluation.
- Upon acceptance by customer, order is generated.
- PIPE Networks engages relevant contractors to compete the works within the required timeframe.
- Prior to customer handover, PIPE Networks completes network testing and finalises preparation for customer handover pack which includes all necessary information including fibre trace and testing results.
- All new network elements are captured in PIPE Networks Geographical Information System and forwarded to NDC for Inclusion in Network Maintenance records.
- Service handover to customer with network ownership retained by PIPE Networks.
- (b)In the section of the prospectus identifying the regulatory environment, these statements were made (emphasis added):
The PIPE Networks Dark Fibre network relies all the Company’s rights to access cable ducts and other telecommunications facilities, and to install cable and telecommunications facilities, in different geographical areas.
PIPE Networks has statutory rights under the Telecommunications Act 1997 (Cth) to access 'underground facilities' and 'supplementary facilities’ including conduits, lines, holds or ducts owned or operated by other carriers, which it has exercised.
PIPE Networks has also exercised its statutory right under the Telecommunications Act 1997 (Cth) to install 'low-impact facilities' in various locations. Those rights enable PIPE Networks to enter on and occupy any land and do anything on, over or under the land for the purpose of installing low-impact facilities. The Telecommunications (Low-Impact Facilities) Determination 1997 specifies the low-impact facilities that a carrier has the right to install. These include underground and above ground housings, underground cable facilities and co-located facilities within another facility or structure. The Determination does not extend to overhead cabling and is only applicable if the facility is in residential, commercial, industrial or rural areas. The right to install low-impact facilities also does not extend to areas of environmental significance.
PIPE Networks has entered into agreements with other carriers for the sharing of underground facilities to obtain the access required to complete its current networks. Where the Company has not had a statutory right install low-impact facilities, it has entered into licence arrangements with various landowners giving it a right to install the facilities required. For example, licence arrangements have been entered into with a building owner where it has been necessary to install cabling and housing through a building.
These contractual and statutory rights for access and installation of cable and related equipment extend to the Company's entire Dark Fibre network.
PIPE Networks will continue to exercise its statutory rights and to negotiate agreements with other carriers and landowners to obtain the access to facilities required, and to install new facilities to expand its Dark Fibre networks. If the Company is unable to negotiate agreements to access or install cable or facilities on favourable terms in the future, or existing agreements are terminated or cannot be renewed on acceptable terms, this may impact adversely on the Company’s growth.
The 21 July 2005 order form contract
- There was a surprising paucity of either documentary or, as will appear, oral evidence identifying the events which happened between 13 April 2005, when Strategic Directions made its recommendation to the SLC board, and 7 November 2005, when the relevant contracts were entered into.
- I will deal first with the documentary evidence before moving to identify the nature of the oral evidence.
- On 18 July 2005, Mr Paddon of PIPE sent to Mr Andrea of Strategic Directions and Mr Schroor of SLC four documents apparently intended by him to document the relationship between SLC and PIPE. In the context of seeking a commitment before PIPE proceeded to advance a tender to USQ, the email stated:
Please find attached application form and contract for the Springfield Dual Diverse Dark Fibre run. As you will note on the ‘Special Conditions’ section of the Application form, PIPE Networks will submit to SLC an IRU (Indefeasible Right of Use) on the Network upon payment of the 25% instalment of the Phase 1 (Western Leg) build.
Unfortunately, there’s a timeline on this – we need to receive back the signed paperwork from SLC by COB on Wednesday 20/7/05, in order for us to submit the response to the USQ tender, which we will be personally delivering in Toowoomba on Friday.
PIPE looks forward to a mutually rewarding relationship with SLC, and being part of the increased growth of the CBD and residential areas by bringing carrier neutral fibre to the region.
- There were four documents attached:
- (a)A dark fibre services agreement, which, amongst other things, recorded an agreement in which:
- (i)PIPE granted to SLC a non-exclusive licence to use dark fibre on the “NETWORK”, which was a term defined as PIPE’s “telecommunication facilities and the links located in several states”.
- (ii)PIPE reserved all rights not specifically granted to SLC, including, without limitation, the right to:
- access to and use of each other DARK FIBRE not allocated to [SLC] in a fibre cable for its own use and for the use of its agents and CUSTOMERs;
- grant additional licenses to other users for the use of DARK FIBRE not allocated to [SLC]; and
- exercise or grant other rights not inconsistent with the rights granted hereunder.
- (iii)PIPE and SLC agreed that “this Agreement constitutes a mere license and not an interest in the NETWORK, except as set forth herein”.
- (b)A service level agreement.
- (c)A document setting out PIPE Networks’ “Terms and Conditions for Delivery of Service”, which, amongst other conditions, contained a clause in these terms:
4.3 TITLE AND POWER.
Title to all facilities (except as otherwise agreed), including terminal equipment, shall remain with [PIPE].
- (d)A dark fibre service order form which contained provision for signature by SLC and PIPE, which:
- (i)set out the “Service Charges” applicable to phase 1, namely a “72 core Dark Fibre build from Brisbane CBD to Springfield CBD via Western Leg as per PIPE Networks proposal” of $2,137,000 installation and $56,500 per year for 15 years, giving a total value of $2,984,500;
- (ii)set out the “Service Charges” applicable to phase 2, namely a “72 core Dark Fibre build from Brisbane CBD to Springfield CBD as per PIPE Networks proposal – diverse route via Eastern Leg” of $2,484,000 installation and $56,500 per year for 15 years, giving a total value of $3,331,500;
- (iii)set out a total of $6,316,000 plus GST of $631,600, giving a total agreement charge of $6,947,600; and
- (iv)recorded the parties’ agreement that:
PIPE Networks will supply, and the Customer will acquire the services on the terms and conditions of:
- (a)the PIPE Networks order form for each individual service,
- (b)the Dark Fibre Services Agreement,
- (c)the Service Level Agreement
- (d)the Terms and Conditions for Delivery of Service
In the event of any inconsistency between the terms of this agreement, the order of priority of documents will be from (a) to (d) above.
- It is notable that the tenor of PIPE’s proposal was consistent only with PIPE owning the whole of the Network with which it dealt (even though SLC was paying for its construction); with PIPE granting SLC specific rights; and with PIPE explicitly reserving rights to do whatever it wanted with any fibre not allocated to SLC, including by allocating them to other PIPE customers. It is inconsistent with SLC’s suggestion in this litigation that the “deal” between them permitted of no possibility that PIPE might be entitled to use any part of what was constructed for its own purposes, including competition with SLC.
- Mr Schroor of SLC responded by email dated 20 July 2005 advising that he had discussed and agreed the concept with SLC’s chairman (which I would conclude was a reference to Mr Maha Sinnathamby) but that the chairman was conscious that SLC normally required legal signoff before formally executing contracts. The email then proposed some special conditions be added to the order form in light of the limited time to get a full legal audit, which, it was thought, would allow PIPE the comfort required to lodge the tender, but would allow SLC sufficient comfort to finalise the documentation. There was a reference to a telephone discussion to take place following the email. The proposed special conditions were as follows:
- The Service Order form is subject to agreeing the specific terms of the IRU.
- All commencement dates are subject to USQ successfully awarding Pipe the contract for supply of telecommunication services in accordance with the Tender dated 22 July 2004.
- The installation costs identified are deemed to be estimates at this stage and will need to be fully supported prior to construction commencement approval.
- SLC receive all revenues from the USQ tender and the IRU.
- Phase 2 commencement is subject to agreement between the parties and is generally to be at least 6 months prior to the opening date of the Springfield Data Centre.
- The evidence did not shed any light on the content of the telephone discussion referred to in the email between Mr Schroor and Mr Maha Sinnathamby; on the negotiations which must have occurred in relation to PIPE’s proposal or SLC’s initial response; or how it was that instructions were given to execute the proposed agreement. The documentary evidence merely revealed that on 21 July 2005, a 5-page order form was executed by both Mr Schroor, describing himself as “Associate Director” on behalf of SLC, and Mr Thompson, the chief financial officer and company secretary, on behalf of PIPE. The order form contained the agreement quoted in (d), specified pricing, but then recorded the following special conditions:
- This Service Order form is subject to both parties agreeing the specific terms of the IRU or other legally binding document as agreed, provided the fundamental agreed commercial terms remain as proposed.
- All commencement dates are subject to USQ successfully awarding PIPE Networks the contract for supply of telecommunication services in accordance with the Tender dated 22 July 2005.
- The installation costs identified are deemed to be estimates at this stage and will need to be fully supported prior to construction commencement approval.
- SLC receive all revenues from the USQ tender and the subsequent fibre leases covered by the IRU less any billing charges levied by PIPE Networks.
- Phase 2 commencement is subject to agreement between the parties and is generally to be at least 6 months prior to the opening date of the Springfield Data Centre.
- –PIPE Networks will deliver to Springfield upon payment of the first 25% payment for Phase 1, an Indefeasible Right of Use (IRU), as agreed by the parties, on the 72 Core network for a period of 15 years;
- –The IRU shall:
- Assign all rights for the 72 core network to Springfield Land Corporation for a period of 15 years from the handover date
- Name PIPE Networks as the entity responsible for all carrier related responsibilities as defined in the Telecommunications Act
- Name PIPE Networks as the billing provider as per the proposal to SLC o Commit PIPE to "better than wholesale" pricing to SLC for connections between Brisbane CBD drop-off points and the PIPE Dark Fibre network o Define methods for handling upgrades of capacity during the 15 year IRU period
- Define how the network is handled after the initial 15 year IRU period o Define how the parties will handle commercial issues arising from the contract
- State that the ownership of the cable will revert to SLC in the event that PIPE Networks is in liquidation
- –Payment schedule is 25% of Phase 1 upon awarding of the USQ Tender, 50% at an agreed midpoint and 25% on successful handover;
- –Phase 2 will be commenced upon approval from SLC, in order to meet the delivery timeframes required for the Springfield DataCentre (generally to be at least 6 months prior to the opening date of the Springfield Data Centre.)
- –Payment schedule for Phase 2 is 25% on approval from Springfield to commence build, 50% at an agreed midpoint, and 25% on successful handover;
- –Springfield Land Corporation must pay the yearly maintenance fee to PIPE Networks in advance each year, on the anniversary of the successful handover dates;
- –Failure to pay the yearly maintenance fee within 90 days of the due date will terminate the IRU[.]
- As to ownership of the Network and the rights which might be associated with ownership:
- (a)The special conditions did reveal that it must then have been contemplated that the eventual bargain would define methods for handling upgrades of capacity. It will appear that it did not, but simply expressed an agreement to agree on that subject matter, once PIPE advised SLC of the time and cost which might be involved in any upgrade. It will appear also that SLC plainly understood that that topic was left for future agreement.
- (b)The special conditions did reveal that it must then have been contemplated that PIPE would own all the cable, because there was provision for reversion to SLC of the title to cable if PIPE went into liquidation. It will appear that that intention must have changed. There is no specific reference to infrastructure, including pipes and conduits.
- (c)The signed order form incorporated the documents and conditions identified at , so although there was no specific allocation of rights to the infrastructure, including pits and conduits which were to be built, such rights might arguably have been covered by the reservation of rights clause referred to in (a) or the title clause referred to in (c).
- (d)As to the question of the rights issues discussed in  above, reading the special condition that the IRU agreement would “Assign all rights for the 72 core network to Springfield Land Corporation for a period of 15 years from the handover date” with the reservation of rights clause referred to in (a) and the title clause referred to in (c), suggests that the rights concerned would be regarded as the rights to use the 72 fibres in the cable owned by PIPE. On the other hand, the reference to “all rights” and the priority clause in the order form might have suggested that there was an issue for construction there.
Negotiation of the IRU Agreement and the WFS Agreement
- The questions of construction referred to in the preceding paragraphs need not be resolved because the special conditions plainly contemplated further and more detailed contractual arrangements between the parties which would be dealt with by a process which would lead to both parties agreeing the specific terms of the IRU Agreement or other legally binding document. Those arrangements were ultimately finalised by execution of the IRU Agreement and the WFS Agreement on 7 November 2005.
- The documentary evidence revealed that draft versions of the proposed contracts were exchanged between SLC and PIPE and their respective lawyers during the period 27 September 2005 to 6 November 2005, but also suggests (as would be hardly surprising) that there must have been other meetings and conversations both internally and as between each side. The documentary record does not shed much light on what occurred during those other meetings and conversations. And, as will appear, SLC made no attempt to elicit any evidence concerning this course of negotiation from any witness which it called.
- On 27 September 2005, PIPE’s Mr Paddon emailed SLC’s Mr Schroor and suggested that PIPE sought the execution of an attached “LOI” (presumably, letter of intent) to be used to move forward, allowing PIPE to incur expenses of the Springfield fibre run pre-contract. The attachment was not in the evidence. The email otherwise stated that PIPE expected to have a draft IRU Agreement for SLC to look at over the next few days. That suggests that PIPE had not yet provided a first draft of the IRU Agreement to SLC. The Court Book contained a draft agreement bearing an earlier date, but there is insufficient evidence to conclude that that version of the agreement was provided to SLC.
- On 3 October 2005, PIPE’s Mr Paddon emailed SLC’s Mr Schroor (copied to Strategic Directions’ Mr Andrea) addressing matters of detail concerning price, and asking, amongst other things, “Please let me know how the review of the IRU document is going, and when you expect to be in a position to sign the agreement and make the initial 25% payment.” Strategic Directions responded the same day raising some questions concerning cost and risk components of the PIPE price. It seemed, accordingly, that a version of the IRU Agreement had been provided to SLC by that date.
- SLC’s external legal advisers were Mallesons Stephen Jaques. By email to Ms Sinnathamby dated 10 October 2005, a solicitor from that firm provided to Ms Sinnathamby a revised draft of the IRU Agreement and sought instructions, proposing a meeting to discuss the proposed revisions and suggested that once that had occurred Mallesons Stephen Jaques would forward the revised draft to PIPE.
- By email to Strategic Directions dated 10 October 2005, PIPE advised that it needed to have the contracts turned around in a timely manner and sought feedback from SLC’s lawyers. The urgency was put on the basis that USQ had given to PIPE the contracts which it wanted PIPE to enter and PIPE wanted a commitment from SLC in place. In the meantime, steps had been taken towards that end within SLC: on 10 October 2005, Mallesons Stephen Jaques had emailed a revised draft IRU Agreement to Ms Sinnathamby raising various questions to be addressed by SLC (via Mr Schroor and Mr Andrea).
- By email of 11 October 2005, Mr Schroor responded to PIPE’s email of 10 October 2005 and advised that they should have Mallesons Stephen Jaques over to PIPE shortly.
- An email dated 11 October 2005 from Mallesons Stephen Jaques directly to PIPE (but copied, amongst other people, to Ms Sinnathamby and Mr Schroor) attached a document containing proposed amendments to the version of the IRU Agreement which PIPE sent to SLC. The email said that Ms Sinnathamby had instructed the author to send the attached revised IRU Agreement. The email proposed a meeting on the following day at Mallesons Stephen Jaques to be attended by Ms Sinnathamby, Mr Schroor and representatives of PIPE and its lawyers.
- On 26 October 2005, PIPE’s solicitors, Minter Ellison, sent a further revised draft of the IRU Agreement to PIPE, Strategic Directions, SCL (Ms Sinnathamby and Mr Schroor) and SCL’s solicitors Mallesons Stephen Jaques. This version introduced for the first time – it is not clear why – a departure from forms of contract earlier advanced (which did not have SLC owning any part of the Network) by introducing the concept of SLC owning the cable and PIPE owning the infrastructure in the Off-Rail section.
- On 27 October 2005, PIPE’s Mr Slattery wrote to SLC’s Ms Sinnathamby noting that “[d]uring recent conversations and meetings” both sides had been attempting to finalise contractual arrangements to replace the current agreement with an IRU Agreement agreeable to both parties. The letter evidenced PIPE’s concerns with the delay in achieving that outcome and its exposure in relation to performing its obligations with USQ. But it was also significant because it recorded PIPE putting on the table an option for consideration that would have it own and operate the whole Network, trading directly with subscribers on its own behalf. Obviously enough, central components of the possibility of a deal between the two sides were still in flux. PIPE proposed three possible ways forward, in these terms:
PIPE Networks sees several possible ways in which we can move forward:
1/ SLC and PIPE accept the IRU agreement as it currently stands and with SLC accepting that they will become a CSP and taking duty for those potential obligations.
2/ SLC pays a Capital Contribution to PIPE Networks of 50% of the Phase 1 build fee [approximately $1.07M], PIPE Networks will own and operate the fibre network, will engage directly with fibre subscribers and will pay to SLC 50% of all revenue received from the cable (including CBD tails at the Brisbane end but excluding revenue from USQ and the O&M fees) for a period of 10 years or until the original Capital Contribution is repaid without interest, whichever is the sooner.
Under this mechanism, SLC understands that there is a significant economic benefit to the Greater Springfield area by having Dark Fibre capacity available, and that PIPE Networks is also contributing 50% of the build cost, but that there is no guarantee made by PIPE Networks of the capital repayment being achieved within the 10 year period, or at all, as this hinges to a large degree on the success of the Springfield CBD itself. SLC recognises that PIPE is also taking a potentially significant risk.
3/ SLC pays to PIPE Networks a deposit amount of $534,250 ex GST [being the amount of the initial 25% payment of the agreed Phase 1 installation fee] by noon (12pm) on Monday the 31st October 2005 provided PIPE renders an invoice to SLC before this time. The parties will work towards securing agreement on a final contract before 30th November 2005. This amount may only be refunded to SLC by PIPE should PIPE fail to deliver the fibre pair to USQ by 20th May 2006. If the parties fail to reach agreement but PIPE do deliver the fibre pair to USQ by the above date, PIPE Networks will retain the deposit and continue to own and operate the Network, and will receive 100% of all revenues from the Network. If agreement on the IRU is reached by 30th November 2005, then we will proceed as per the IRU.
Each of the potential options obviously above have “Pro's and Con's” associated with them, and we hope that there is one option that SLC prefers and that we can proceed with by COB 28th October 2005. PIPE are more than happy to discuss any of the above in further detail.
If we cannot achieve agreement by this time, PIPE Networks will unfortunately need to alert USQ to the potential for a delay, significant or otherwise, on the installation of their fibre link, and the reasons for the delay. PIPE Networks would request that SLC meet with PIPE Networks and USQ to explain the situation, and determine an outcome.
Raynuha, I believe we can form a new agreement with SLC which benefits both parties without exposing either party to significant risk and that we can get on with the business of making Springfield an attractive location for large businesses who have significant 'knowledge industry' status.
PIPE Networks are available to teleconference with SLC this afternoon between 2:30pm and 5:00pm.
- Despite the deadline there referred to, further attempts were evidently made to develop further the extant form of IRU Agreement without making the more radical changes suggested in PIPE’s letter.
- At 6:25pm on Friday 28 October 2005, SLC’s lawyers Mallesons Stephen Jaques emailed SLC’s Mr Sharpless, PIPE’s Mr Slattery and PIPE’s lawyers Minter Ellison (copied to, amongst others, SLC’s Ms Sinnathamby and Mr Schroor, and Mr Andrea of Strategic Directions). The email listed outstanding issues for commercial agreement in relation to the IRU Agreement and the WFS Agreement, which could be worked through at a meeting on the following Monday morning. Amongst other issues identified in the email were the following:
- To lead off with the most difficult question, I understand broadly that PIPE are comfortable picking up Telco Act-related obligations in relation to the IRU network as those obligations exist now, but PIPE will charge SLC on a cost+ recovery basis for compliance with new obligations that arise from time to time. Does this mean that PIPE will pick up, and perform on SLC's behalf, any carriage service provider obligations that may be currently imposed on SLC? i.e. does "Telco Act-related obligations" in the first sentence mean obligations imposed on SLC by the Telco Act in relation to the IRU network as well as PIPE's carrier obligations, or just PIPE's carrier obligations?
- If the parties intend for PIPE to pick up any current CSP obligations for SLC, and if PIPE fails to perform a CSP obligation, what will happen? Will PIPE accept liability? If so, does the normal cap apply?
- What happens if PIPE's NCD application fails? This is important to consider because, in that event, SLC will be the owner (after it pays for it) of a cable that it is not allowed to use, and PIPE will not be allowed by the Telco Act to use it to sell tails because it is owned by SLC, a non-carrier. This will be bad for both parties. There are at least 2 options here:
(a) PIPE pays back SLC's instalments, and takes ownership of the fibre optic cable. The cable becomes part of PIPE's infrastructure, and all revenue attributable to the cable is PIPE's.
(b) If the NCD has not been approved by the time of the second or third instalment, SLC withholds payment of those instalments until the NCD is approved. If after a further period the NCD still hasn't been approved, revert to option (i).
5. When we have discussed SLC's ownership of the Off-Rail section to date, that discussion has been limited to ownership of the actual fibre optic in the Off-Rail section - i.e. not the conduit, and not the pits. PIPE: this may be to accord with your carrier obligations under the Telco Act schedules. Not sure. Is SLC comfortable that its ownership rights in the fibre optic, without ownership of the pits and conduit, can be usefully exercised at the end of the 15 year term? Would PIPE consider giving SLC access rights, but not ownership, in the pits etc?
- I interpolate that SLC led not a shred of evidence on these matters and how they might have been considered by Mr Sharpless (who SLC’s lawyers had addressed the email) or by Ms Sinnathamby, Mr Schroor or Mr Andrea.
- Mallesons Stephen Jaques emailed further drafts of both the IRU Agreement and the WFS Agreement on the evening of Monday 31 October 2005. The emails were copied, amongst other people, to Mr Sharpless and Ms Sinnathamby. Further discussions and email exchanges occurred for the rest of that week on the wording of various clauses. A final draft of the IRU Agreement was circulated by PIPE’s lawyers by email for final approval late on the evening of Friday 4 November 2005 (again copied to Mr Sharpless and Ms Sinnathamby). A final draft of the WFS Agreement was circulated by SLC’s lawyers on the afternoon of Sunday 6 November 2005 (again copied to Mr Sharpless and Ms Sinnathamby).
- The course of negotiations outlined by the steps just identified and a consideration of the terms of the draft agreements exchanged reveals:
- (a)specific attention was paid by both sides to the definition of terms, including the important definitions of “Fibre Capacity”; “Indefeasible Right to Use”; “Network”; “Phase”; and “Title-Relevant Element”;
- (b)specific negotiations occurred in relation to the terms of cl 4, which expressed the grant by PIPE of the Indefeasible Right to Use, and that clause was very significantly redrafted over the course of the negotiations;
- (c)specific negotiations occurred in relation to the terms of cl 5, which expressed PIPE’s obligations concerning ownership, operation and maintenance of the Network, and that clause was very significantly redrafted over the course of the negotiations;
- (d)ownership, and in particular the articulation of such rights as might be concomitant thereupon, moved from a general proposition of PIPE owning the whole of the Off-Rail sections of the Network to the eventual split between:
- ownership of cable in the Off-Rail section (allocated to SLC); and
- ownership of (1) infrastructure (including pits and conduits) in relation to the Off-Rail section and (2) all other rights of ownership in the Network (both of which were allocated to PIPE),
which was reflected in the agreements as executed; and
- (e)the parties recognised that whatever agreement they struck as to ownership of component parts of the Network had implications for the impact of the regulatory regime and that impact drove some aspects of the drafting.
- It remains to note the existence of an internal SLC memorandum entitled “PIPE Networks Proposal” to which the date 18 October 2005 was attributed in the Court Book. Mr Schroor accepted it was his document. A reading of the document suggests it was something put together as being directed to SLC’s decision-makers, Mr Sinnathamby and Mr Sharpless. Mr Schroor had doubts that it was prepared on the date attributed to it, regarding it as directed towards a decision as to whether to proceed with the second leg of the Network, but ultimately accepted that the memo pre-dated the actual agreements. It seemed to me that this acceptance was not reliable. He did not really know for sure, and a close reading of the document suggests it was written after the IRU Agreement had been negotiated. That must be so because it refers to a “Stage 1 build cost” of $2,137,000 as a price “that was issued 8 months ago”. On any view that means the document was not produced on 18 October 2005. I would conclude that it must have been produced after 7 November 2005 and must have been produced in early 2006. It does, however, shed light, uninfluenced by this litigation, on Mr Schroor’s then views as to the deal between SLC and PIPE.
- Amongst other things, the memorandum revealed:
- (a)His advice was that entering the contracts had been regarded as an investment in infrastructure:
- The installation of a dark fibre connection between Springfield and the Brisbane CBD is a critical part of our lCT strategy and our strategy to reduce the cost of ownership for businesses relocating to Springfield.
- This investment is an investment into infrastructure. Unlike other infrastructure there is a direct ability to get a return on the investment.
- This investment should be viewed as an enabler it should not be viewed in isolation. The fact that we will get a return on the asset is not the main game. The main function of the infrastructure is to enable us to fill 1 million square meters of CBD development. Eg if we can convince Suncorp to occupy 10,000 m2 of office we may well throw the connectivity in for free.
- (b)SLC had sought independent views on the proposal, and industry experts believed that for SLC to achieve its objectives in the Springfield CBD, dark fibre connectivity was a major point of difference and necessary in order to be able to persuade customers, including government, to relocate to use the data centre at Springfield. Notably (footnote added):
- We have been told by [CITEC, the Queensland Government’s ICT services provider] that government would not support an initiative to relocate it's data centre to Springfield unless we solve the connectivity issue.
- We have made representations to Government Departments & Government Ministers regarding the strategy and have also sent a briefing note to the Federal Minister.
- Our strategy regarding the dark fibre is on our Web Site, in our Corporate Brochure, within the Polaris brochure and also a key selling feature of our EOI document for the Data Centre that is about to hit the market.
- We have been privy to a deal with USQ in an attempt to provide USQ with a further saving to their operations. USQ have also favourably dealt with the tender as they wanted to assist SLC in their fibre objectives.
- Pipe Networks lodged their tender on the basis of the LOl with Springfield. Springfield had a number of concerns and we forced the inclusion of 7 Special Conditions that addressed our concern. We subsequently negotiated the IRU in light of SLC's concerns and have maximised our position under the current structure. At the time we did not have a concern that [t]he asset would be paid back in 3 years.
- (c)A description of the “Actual Deal” in these terms:
Stage 1 build cost is $2.137 million plus approx. $20k in legals. This is a fixed lump sum price and we are not exposed to any cost for Latent conditions or price increases. It is also a price that was issued 8 months ago and we have not allowed an increase.
There are no other capital costs involved in connecting USQ and securing a return of $150k per year.
Pipe are paid an operating and management fee of $56,300 for the first phase and we have fixed this price for the full term of 15 years, there is no escalation of this price.
If no other tenants are secured in the first year we will net approx $95,000 which will contribute toward the interest bill.
We never expected to get a positive return after the first year.
As soon as we secure a second user on the fibre we are positively geared and can start to pay down the principal.
If we fail to secure a return on the investment it is because we have failed in our ability to develop Ed City, the Health Precinct and Nucleus.
If we proceed with the second leg USQ have committed to taking a diverse pair and Pipe Networks have committed to taking a diverse pair.
- We are not behest to Pipe. We can get any carrier to do the connections at either end and can tender the work to ensure it is competitive.
- We own the fibre for the whole of the Off Rail section for as long as the cable works.
- We do not own the on rail section. We cannot own the on-rail section but will have an Indefeasible Right to Use the cable. This is an agreement provided by QR.
- If we wanted to own all the cable we would have to do the whole install off rail and this would double the price.
The oral evidence
- SLC elicited evidence addressing relevant pre-contractual events from the following witnesses, and in this order:
- (a)Mr Schroor;
- (b)Mr Sharpless; and
- (c)Ms Raynuha Sinnathamby.
- I will identify what I found to be the material parts of their evidence on this topic and my assessment of each witness under separate headings below. I will address their evidence in the reverse of the order in which the witnesses were called. One preliminary observation should first be made.
Mr Maha Sinnathamby was not called
- To my mind the most important witness in relation to SLC’s decision to contract with PIPE and what SLC might have done in counterfactual scenarios was a witness who was not called, namely Mr Maha Sinnathamby. In 2004 to 2005, SLC did not really have formal board meetings. Rather, the ultimate calls on important decisions for SLC – and the contract with PIPE was plainly such a call – were made in discussions between Mr Maha Sinnathamby and Mr Sharpless, with Mr Sinnathamby’s view carrying the day in the event of any disagreement. Mr Sinnathamby was a participant in the decision-making process to enter into the agreements between SLC and PIPE, and those agreements would not have proceeded unless he agreed.
- The first actual “deal” between the parties was the deal struck by the execution of the 21 July 2005 order form. Mr Sinnathamby was specifically involved in that process.
- While Mr Sinnathamby was available to SLC, he was not called. No explanation was ever advanced for that failure. Mr Sharpless was asked about Mr Sinnathamby. In fact, Mr Sharpless had spoken to Mr Sinnathamby on each of the two days prior to Mr Sharpless giving his own evidence. And on the first of those two days Mr Sharpless had spoken to Mr Sinnathamby about the case. All Mr Sharpless could say was that Mr Sinnathamby had given him no indication that there was any reason why he could not give evidence in the case. Mr Sharpless said that Mr Sinnathamby had not offered nor had he been asked to give evidence.
- I accept that the rule in Jones v Dunkel does not require a litigant to call multiple witnesses to establish the same point, but in this case the person not called was actually the ultimate decision-maker. He was one of a two-person decision-making team, where he controlled 75% of SLC’s shares and the other member of the team controlled 25%. And, of course, Mr Sharpless could not give direct evidence or even admissible opinion evidence concerning the state of Mr Sinnathamby’s mind. I would infer that Mr Sinnathamby’s evidence would not have assisted SLC’s case. In particular, I would infer that Mr Sinnathamby would not have assisted SLC’s case concerning reliance on alleged misleading and deceptive conduct and what course SLC would have decided to take in relevant counterfactual scenarios.
- I am conscious that an inference that Mr Sinnathamby’s evidence would not assist should not be treated as an inference that his evidence would have been adverse to SLC’s case, but the inference that his evidence would not assist may be taken into account by me in my decision whether or not to accept other evidence adduced by SLC on matters on which he could have spoken.
Ms Raynuha Sinnathamby.
- As has been mentioned, Ms Sinnathamby is the daughter of Mr Maha Sinnathamby. She was a qualified solicitor and had an MBA. At all relevant times she was on the board of SLC, and at the time she gave evidence before me she was the managing director of SLC.
- Subject to one concern which I will address later, I formed the view that Ms Sinnathamby sought to give honest responses to the questions asked of her. In most respects I found her evidence to be reliable, so far as it went. To the extent I have found some parts of her evidence to be unreliable, I will explain why when discussing the relevant part.
- In her evidence-in-chief, Ms Sinnathamby said that she was involved in the negotiations and dealings that led to the IRU Agreement and the WFS Agreement and also in their preparation. She acknowledged that Mallesons Stephen Jaques were engaged to assist in the drafting and that she was involved in that process and instructed them. She signed the contracts on behalf of SLC. Within SLC, she had the job of explaining to the lawyers what was to be documented. To obtain information for that purpose, she would have spoken to Mr Sharpless, Mr Sinnathamby and Mr Schroor. She read the final version of the contracts and as best she could tell they reflected the commercial deal as she understood it to be.
- She agreed that she now recognised that “nowhere in those contracts does it say that PIPE is not allowed to build a duplicate network and compete with Springfield”, but said that she never turned her mind to whether the contracts should have such a provision in it at the time they were being negotiated.
- However, there followed an important passage of the evidence-in-chief:
MR NEWLINDS: … And did the notion that that’s something that PIPE might do in the future ever occur to you?---Only to the extent that, if it was done, it would be done in partnership between SCG and PIPE.
Well, did you actually think about that though at the time?---We thought that it could happen. Yep.
[MR NEWLINDS:] All right.
HIS HONOUR: It could happen.
MR NEWLINDS: What would you have - - - HIS HONOUR: Just a moment.
MR NEWLINDS: Sorry?
HIS HONOUR: You said, “we thought it could happen”. What did you mean by “it”?---We thought that there could be potential to have more fibre built by both parties.
MR NEWLINDS: But there’s nothing in the agreement which expressly refers to that; correct?---Yes.
[MR NEWLINDS:] Was there any discussions about that?---There – there had been talk about that the pipe had more capacity and it could – you know, that that is something at future time, if there was demand, that we could do together.
- This passage reveals that at the time the contracts were entered into, the individuals responsible for documenting the arrangement and covering future risks had specifically contemplated the possibility that further fibre might be constructed in the future when justified by demand. There had been talk about how that might occur in the future, including that it might be done by SLC and PIPE together. The important point is that despite that contemplation, the parties chose not to regulate that subject matter by a contractual term. They chose merely to deal with ownership and the rights which might follow from that in the way they ultimately expressed it in the IRU Agreement. Further, and as will appear, although the parties did agree on a mechanism by which SLC could request PIPE to perform an upgrade to Fibre Capacity on Phase One or Phase Two, they did not do so in terms which obliged PIPE to perform upgrade works as requested, they merely agreed on a mechanism by which PIPE was obliged to provide a written estimate of costs and delivery timing, and the parties expressed their agreement that “[t]he parties must agree the costs and delivery timing of the Upgrade before the works required to carry out the Upgrade are commenced”: see cl 10 of the IRU Agreement.
- Perhaps unsurprisingly, Senior Counsel on behalf of SLC made no attempt to explore the answer further.
- Ms Sinnathamby was then asked to address a counterfactual:
[MR NEWLINDS:] All right. Thank you. So we can you tell us – and I know it’s hypothetical – what you would have done or thought if someone had said to you that, instead of that being a possibility of something that could be done together, there was actually a possibility that PIPE could go off and do it by itself and compete?---No, that was not the deal.
No, I know?---Yeah.
But can you tell us if someone had said, “Well, that is the deal, we better write it in the contract,” what your reaction would have been?---Well, I would have been quite shocked. That hadn’t been the nature of the discussions that had taken place to date. That was inconsistent with what we had discussed to date.
- This passage of evidence struck me as an unreliable defensive statement from a person who had just acknowledged that the possibility of further fibre being constructed in the future had been discussed and thought about, but ultimately not regulated in the agreement. I regard it as a hindsight reconstruction by a lawyer (now the managing director of SLC) who carried the responsibility for the form of contract entered into by SLC, which had, at least to her current perception, proved to be inadequate.
- Further, to my mind it was utterly unpersuasive to have Ms Sinnathamby articulate anything about what the “deal” was without reference to the whole process of when and how the deal was made and without identification of the particular “discussions” to which she was referring. As the discussion above of the documentary evidence reveals, a “deal” was first struck on 21 July 2005, when a 5-page order form was executed on behalf of PIPE and SLC. On its face, that deal contemplated PIPE owning the whole Network and reserving the right to do whatever it wanted with the Network, other than the specific fibres given to SLC (see  to (d) above), but explicitly left issues to be defined in the final form of agreement. Then, that “deal” was replaced on 7 November 2005 with the ultimate “deal” after a detailed process of negotiation to which at least Ms Sinnathamby, Mr Sharpless and external lawyers were party: see  to  above. Yet there was no consideration of any part of either process in Ms Sinnathamby’s evidence-in-chief. That severely diminished any weight I might otherwise be minded to give to this passage of Ms Sinnathamby’s evidence. (In expressing this view I accept that the rule in Jones v Dunkel does not apply to require a party to adduce privileged communications, but in this case two things could be emphasised. First, as will be apparent from my discussion of the documentary evidence, SLC did choose to tender at least some otherwise privileged communications, between it and its lawyers which were made during the final negotiations. Second, even if that was not sufficient to amount to a waiver of privilege beyond those documents, Ms Sinnathamby could have expressed evidence concerning her state of mind without further waiving privilege.)
- I do not accept that part of her evidence which addressed the counterfactual.
- In cross-examination, Ms Sinnathamby again confirmed that it was her job to oversee the negotiations for the formalisation of agreements between SLC and PIPE. She had an understanding about what the essential elements of the deal were, obtained primarily from Mr Sharpless and Mr Schroor. She read agreements in their final form and satisfied herself that they dealt with all the essential elements of the deal in a way which was satisfactory to SLC.
- She was then taken to the terms of cl 11.2 of the IRU Agreement, which provides:
Each party acknowledges that:
- (a)it has relied on its own enquiries in respect of all matters relating to this agreement and has not relied on any representation, warranty, condition or statement made by or on behalf of the other party other than as set out in this agreement; and
- (b)any conditions or warranties which may otherwise be implied by law into this agreement are expressly excluded to the extent permitted by law,
and each party releases the other party from all actions, claims, demands and liability (whether or not known) which it may have or claim to have, or but for this release, it might have had against the other party arising out of any representation, warranty, covenant or provision not set out or referred to in this agreement.
- She agreed that she had satisfied herself, so far as SLC was concerned, that it was correct to say, as the clause did, that SLC had relied on its own enquiries in respect of all matters relating to the agreement and had not relied on any representation. I accept that evidence. It is entirely consonant with and bolsters the inference that would otherwise be readily drawn from the matters referred to at  above and subsequently discussed in relation to the documentary evidence.
Mr Bob Sharpless
- Mr Sharpless was and still is the business partner of Mr Sinnathamby. He and Mr Sinnathamby were and still are controllers of the shares in SLC and related companies in the proportions earlier identified. He described himself as a director of a property development company.
- In his evidence-in-chief, Mr Sharpless explained that during the period 2004 to about 2014 or 2015, he was the deputy chairman of the Springfield group of companies. He recalled that SLC’s Mr Schroor and Strategic Directions’ Mr Andrea were involved in the early investigations into SLC’s desire to investigate how a data centre might be incorporated into the ICT masterplan for Springfield and how a dark fibre network might also be provided. From time to time they reported back to him.
- He said that he did not have too much involvement with any of the people at PIPE, other than the odd meeting with PIPE’s CEO, Mr Bevan Slattery. He was taken to the PIPE proposal discussed at  to  above. He said he could “certainly recall something – if not this document, something very similar” and said he thought that at a high level he would have read it.
- He was then taken to the subject matter of presentations which had been made by PIPE. In particular, he was taken to the PowerPoint presentation discussed at  above. He said his recollection was that at the PIPE presentation he attended there was a slideshow presented. He could not recall whether there was more than one. He said that he recalled that present for SLC were himself, Mr Sinnathamby, Mr Schroor and Strategic Directions’ Mr Andrea, and present for PIPE was Mr Slattery. He said that essentially Mr Slattery took them through a presentation and he recalled Mr Schroor and Mr Andrea being “pretty positive” about it. He said “there was a lot of support for it”.
- His attention was then drawn to the 13 April 2005 Strategic Directions recommendation to SLC’s board of directors discussed at  to  above. He could not recall whether the PowerPoint presentation he had discussed came before or after the recommendation to SLC’s board. He was then asked:
[MR NEWLINDS:] Okay. In any event, at some point, did you form the view that it was a good idea for Springfield to move to enter into a commercial deal along the lines set out in this recommendation at 10270?---Yes.
And that becomes the formal contracts that are eventually signed, which I’ll come to in a moment; right?---Yes.
- I interpolate these observations:
- (a)The recommendation at 10270 of the Court Book is that which I have recorded at  above.
- (b)Mr Sharpless affirming the proposition that the commercial deal along the lines set out in the recommendation “becomes the formal contracts that are eventually signed” was a response to a leading question.
- (c)The leading question was in any event a stunning leap from 13 April 2005 to 7 November 2005, without asking the witness to pay any regard whatever to what occurred in between.
- (d)I attribute no weight to the answer.
- Mr Sharpless was then asked what the source of information for his understanding of what the deal between SLC and PIPE was at the time he gave the go ahead for the lawyers to draw up documents. He identified the sources as Mr Schroor, Mr Andrea, the 13 April 2005 Strategic Directions board submission, and Mr Slattery, because he “was a great salesman, so I mean, I was quite trusting of him. I thought he would be a good asset for our project.” He was asked to develop the latter point in the following passage:
MR NEWLINDS: How did it go, just at the highest level? Mr Slattery stood up and said something, did he, or sit down and said something?---Yeah, it was just a presentation about dark fibre and about PIPE networks.
All right. Now, are you able to remember the words Mr Slattery said?---Not – not – not in a specific way, no. It was – it was one of those general-type of presentations that we get a lot of from people. It wasn’t -
At a general level, can you remember the gist of what he said?---That PIPE Networks were a very reputable company, and they were doing great things with dark fibre, and they really wanted to have a big involvement in the Springfield development list.
And what about the actual deal that was proposed? What was the gist of what he said about that?---Well, in the presentation, we didn’t get him – from my recollection, we didn’t get into the cost and specifics, it was more about the concept of it.
Well, tell me – tell me what he said about the concept?---Well, my recollection was that dark fibre was the best solution for connectivity to Springfield, that PIPE Networks were an organisation that had a lot of expertise in that space, and we should – we should engage with them.
Okay, now to a slightly more granular level, what was the commercial deal he was proposing? Do you remember?---Not in that presentation, no.
All right. Now, was – did – was he using the presentation as – the slideshow as part of the presentation?--Yes.
All right, and how did that work? Did he have a button or a – how did he change the pages?---I can’t recall. I can’t recall it.
But did you – did you recall whether you saw the first slide to the one that says thank you at the end?--Yes, I think so.
And do you recall anything Mr Slattery said at that meeting being inconsistent with what you saw on the slides?---No.
And can you tell me – you – you said that Mike and Chris were enthusiastic supporters?---Yes.
Can – can you tell us the gist of what they were saying about the deal?
HIS HONOUR: Sorry, are we talking, now, about the particular occasion in which
- - -
MR NEWLINDS: At the same presentation?---My recollection was it was just a – they had been running a bit of a process to test the market, and – and they were big advocates of PIPE networks.
- By itself that passage reveals that Mr Sharpless’ recollection of the detail of events was poor. However, I interpolate that it became clear during cross-examination that he had actually sought to present in his evidence about both the PIPE presentation and the Strategic Directions board submission a stronger recollection than he had previously expressed to SLC’s own solicitors. I observe:
- (a)During the interlocutory stages of the proceeding, I made directions which required SLC to provide to PIPE summaries of the evidence which witnesses were expected to give at the trial. Those summaries were not tendered.
- (b)In cross-examination, Mr Sharpless’ attention was first drawn back to the PowerPoint presentation discussed at  above and he confirmed that his evidence was that he believed he was at a presentation when those slides were shown. He said he had a recollection of being at the presentation where PIPE presented “this sort of material”.
- (c)He was then taken back to the 13 April 2005 Strategic Directions recommendation to SLC’s board of directors discussed at  to  above. He confirmed that his evidence was that he could recall reading that document.
- (d)Senior Counsel for PIPE obtained from Mr Sharpless his agreement that before his witness summary was given to PIPE he had checked it to make sure that it was accurate. He then took Mr Sharpless to his previous witness summary at  to . Those paragraphs provided:
- It is likely that Mr Sharpless was in attendance when Bevan Slattery of PIPE presented to senior members of the Company. It was his usual practice to attend presentations or meetings of that nature. He has no memory one way or the other of attending any PIPE presentation.
- Mr Sharpless will refer to a memorandum to the Board of Directors of the Company prepared by Mr Andrea dated 13 April 2005 ... By reference to his usual practice and the fact that it is addressed to the directors, he will say it is probable that it was provided to him and that he read it at least at a high level.
- (e)As to , his only explanation for the improved recollection evidenced in his sworn oral evidence was that he had “reflected” on the evidence after the summary had been prepared. As to , he confirmed that what was there stated was as far as his memory permitted him to go when he checked the witness summary and said it was accurate. He understood the difference between that statement and his evidence that he could recall reading the document, but said he did not think it made any difference.
- (f)I did not find either explanation to be credible. I think the true position was that he had no memory one way or the other of attending any PIPE presentation and that, although he was correct to infer that he must have read the 13 April 2005 board submission, he had no actual recollection which could assist.
- (g)Senior Counsel for PIPE tendered the extracts from the witness summary, and, as a matter of fairness and after there had been some objection, also tendered paragraph  of the summary, which provided:
- Reading it now, Mr Sharpless will say that Mr Andrea’s memorandum was consistent with his understanding of the key terms of the arrangement with PIPE; including from his discussions with Mr Andrea and Mr Schroor.
- (h)I attribute no weight to a present statement by Mr Sharpless seeking to reason back from a present reading of a document to express an opinion about what he recalled about his then understanding of the key terms of the arrangement. I do not think he had any reliable present recollection of what his state of mind was back in 2005. Further support for that was found in his evidence that:
- He had no recollection of the 21 July 2005 order form contract, but would have expected that Mr Schroor would have made sure he was aware that SLC was signing the order.
- He said he had very little involvement in giving instructions and reading the documents during the process of preparation of the contract documents eventually executed on 7 November 2005.
- He accepted that he left it up to Ms Sinnathamby, Mr Schoor and Mr Andrea to work out, basically, the best deal they could get from PIPE to have PIPE build a dark fibre network from Brisbane to Springfield. He did not read the contracts before signing them.
- When cross-examined on a number of terms of the agreement he professed either not recalling ever reading the terms or not having an understanding of terms which were in plain English.
- (i)I took away from this cross-examination the conclusion that his evidence given in court as to his recollection of the PIPE presentation and its significance and as to the 13 April 2005 board submission must be regarded to be unreliable.
- His unreliability on those two important matters adversely affected my view on his reliability on other matters. Particularly was that so in relation to his evidence about what he would have done in counterfactual scenarios put to him in chief. That topic was raised in this passage:
[MR NEWLINDS:] All right. Now, can I ask you this question: at any time during the period when you were thinking about whether it was a good idea to enter into the contracts with PIPE and up to the time when you signed those contracts, did you ever turn your mind to the notion that perhaps, under those contracts, PIPE would be allowed to run their own cables through the conduits and set up a - - -?--Never. Never even crossed my mind they would do that.
If it had crossed your mind or if somebody had suggested to you that that might be a possibility, are you able to hypothesise as to what your reaction would have been?---I would have been very much against it. It was not – it just wasn’t consistent with what the arrangements were with PIPE. I mean, we - - - All right. All right. Can we just unpacked that?---Yep.
Why not?---Because they were going to be, if you like, our telco partner. They wanted to be involved with us with the data centre. They wanted to comarket opportunities in the data centre. This is not our space. We – we don’t – we’re not in this industry, but, you know, very typical of the way we do business is we tend to partner with organisations who can bring value to the things that we do. You know, we’re building a very large project and we don’t – we don’t always have the expertise and so we bring in people who do. So this was seen as a very long-term arrangement, and we thought we would have a long-term future with PIPE.
And just explain why it would be inconsistent with what – everything you’ve just said, in your mind, for PIPE to run their own duplicate network through the conduits and to then compete for the same customer.
HIS HONOUR: Well, the question is not why this witness presently thinks it would be inconsistent.
MR NEWLINDS: At the – yeah – at the time, when you said you would have been very much against it, what was it about that - - -?---Well, we were paying for this.
All right?---We were paying a lot of money to build a dark fibre network from Brisbane to Springfield. No other carrier would pay for it, so we had to pay for it. And then we were asking PIPE to manage it on our behalf and to help us connect customers, and we wanted to provide good connectivity to our data centre. And it was also, in our view, likely to be highly profitable.
For yourself, or for your companies?---For the company.
All right. So you say you would have been very much against it. What would you have done if you had – what would you have done if you had said, “Well, I’m very much against that,” and PIPE had said, “Well, let’s take it or leave it.”?---I would have said, “Well, we’re not going to proceed on that basis[”], and I would have believed that I could have sat down with Bevan and worked out some form of solution to that.
See, Bevan’s interest was more in the – you know, it was very strongly in the data centre space, as well as the dark fibre. This was a much bigger conversation than just dark fibre.
- I observe in relation to that evidence:
- (a)It was just as unpersuasive to have Mr Sharpless address the counterfactual in the way which was done as it was in relation to Ms Sinnathamby, and for the same reasons: see  above.
- (b)I have explained why I do not think Mr Sharpless had any reliable present recollection of what his state of mind was back in 2005.
- (c)Quite apart from those two issues, I formed the clear impression that his evidence on the counterfactual was affected by a desire to assist SLC’s case. It was exaggerated, particularly given:
- his professed lack of attention to the detail of the documents by which “the deal” was actually recorded: see (h) above;
- his evidence that he had not actually read the IRU Agreement at all before signing or since November 2005; and
- the relativities between the importance of what he had acknowledged was the “main game”, namely the data centre, where capital cost was almost $160,000,000 and net annual income was in excess of $18,000,000; and dark fibre, where capital cost inclusive of maintenance was of the order of $4,600,000 and net annual income to be earned was only ever in the hundreds of thousands.
- (d)True it was that SLC paid for construction of the Network, but ownership and rights which flowed from ownership was always a particular topic for negotiation, strongly affected by a perception of the risk of regulatory impact. Mr Sharpless was specifically addressed by emails from SLC’s lawyers during the negotiation in November 2005 and those emails raised ownership issues in the specific context of regulatory impact. Yet Mr Sharpless remembered nothing of that.
- I do not accept that part of his evidence which addressed the counterfactual.
Mr Chris Schroor
- Mr Schroor worked for SLC between about 2000 and 2010. At the relevant time he was “Executive Director of Commercial”. That didn’t mean he was a director of the company: he was the employee in charge of non-residential development carried out by the company. In cross-examination, Mr Schroor accepted that the decision to enter into the contracts with PIPE was that of Mr Sinnathamby and Mr Sharpless, and not his. He reported to them and regarded himself as responsible for the presentation to them of the business case to enter into the contracts with PIPE. At the time of giving evidence before me he was in business for himself as a property developer.
- I formed the view that he sought to give honest responses to the questions asked of him. However, it seemed to me that he had not before giving evidence immersed himself in the documents to seek to refresh his memory of the course of events. His recollection was only relatively general and was certainly not detailed.
- Mr Schroor was essentially the project director for the data centre project. The project started when Mr Sinnathamby came into the boardroom one day with a map of Silicon Valley and stated that he wanted this for Springfield. Mr Schroor’s role was to conceptualise the idea of building a data centre and to take it all the way through to completion. In the course of so doing, he worked with Strategic Directions’ Mr Andrea.
- He had meetings with PIPE, both with and without Mr Andrea. PIPE’s Mr Slattery explained to him PIPE’s usual business model:
[MR NEWLINDS:] Can you tell me, if you can, what the gist of those discussions were?---Yes, he – he explained to me that they were a company that was going out building dark fibre networks, and for me it was a bit of a novel concept. And what – what he explained to me was that if a company needs connectivity between point A and point B, they were to contact PIPE and PIPE would price up that build. And it might be whatever the – the number is, he would look to amortise the cost of that piece of network into a price to those people and then he’d lay that network. But in doing so, he would then have capacity in that network, and when someone wanted to then connect from point B to C, he could bundle a bit of that network, build some new network, and then over time his – his footprint through CBD locations would grow.
And can you remember what you said in response to that outline?---We – I was – I was interested in it because we were trying to get connectivity to Springfield. And, in particular, we knew that if we could get connectivity to Springfield, one of the big anchor tenants in the data centre was a possibility, which was [CITEC] because [CITEC] had looked at building a data centre near the jail out at Wacol.
All right. So CITEC. Yes, go on?---Yep. And they were going to build a data centre at Wacol. And in my meetings with CITEC, they alluded to the fact that that got killed off because it was too expensive. They couldn’t get network connectivity out there and if they did, it was going to be too expensive. So we were trying to pitch to them to come to Springfield. And so the idea of building a fibre network to Springfield was really attractive to us, and hence [PIPE] was in the – in the business of growing a fibre network and so that – that was, I guess, the foundation of the initial discussions with him.
Now, what about the part of the business model that he described to you that he could then in the future use the capacity to grow his business. Would you say anything about that?---Not at the time.
- During his evidence he was taken to these documents:
- (a)He had input into the 3 March 2005 report by Strategic Directions referred to at  to  above. He and Mr Andrea reached agreement with its content before it was put before the decision-makers.
- (b)He was taken to the PIPE proposal referred to at  and  above, but had no recollection of receiving and reading it. He thought that in accordance with his usual practice he would have read it before working with Mr Andrea on his reports.
- (c)He was taken to the PIPE PowerPoint presentation mentioned at  above. He had no particular memory of the document but was at presentations where similar content was presented.
- (d)He was taken to the Strategic Directions board recommendation of 13 April 2005 referred to at  to  above, and again he and Mr Andrea reached agreement with its content before it was issued.
- (e)He was taken to the 21 July 2005 order form contract, referred to at  and  above, which he executed on behalf of SLC. He said he had authority from Mr Sharpless to do so. The only part of his testimony which addressed the significance of what was signed was an affirmative answer to leading questions from SLC’s Senior Counsel in this passage (emphasis added):
Thank you. And we’ve all read it. You can see on 10328 that it’s actually conditional on formal contracts being entered into?---Yes.
Can you tell us the circumstances under which this order was based?---As part of our other CBD activities we were trying to – well, we were building a new campus for the University of Southern Queensland. And part of our pitch to them was that we could help them with their connectivity because as a university they needed to connect into the R-Net backbone, which was at University of Queensland at St Lucia. And so they were going through an RFP process through their procurement team, but we made them aware that we control a piece of network and we control the price unit and we could help them get a price that was a lot better than Telstra and Optus.
HIS HONOUR: RFP?---Request for pricing. Sorry. And so we had done that and they were going through a really formal sort of rigid procurement process, as universities do, and PIPE had been notified that they were successful in bundling our network and theirs, to provide a solution that was cost-effective. But the procurement team within the University of Southern Queensland wanted proof that the network was going to be built because it didn’t exist at the time. And so we had to kind of rush through – I wouldn’t necessarily say it was window dressing, but we needed to get some paperwork put in place ahead of, I guess, our normal process of formalising a binding contract so that they could show that to USQ.
MR NEWLINDS: All right. And if you would just look at the bullet points – the second lot of bullet points halfway down 10328?---Sorry, which one?
So there’s some bullet points that are black and there are some bullet points that are white. Do you see that?---Yes.
So the second lot. At the time you signed this document did that high level – and I accept it’s the highest of level – summary of what the formal deal was to be, accord with your understanding of what had been negotiated?---Yes.
- (f)He was referred to the fact of the execution of the formal contracts in November 2005. He said he had some involvement in the original briefing to Mallesons Stephen Jaques about the detail but wasn’t heavily involved in the formal documentation. He thought he would not have read the documentation from “cover to cover” before execution. His recollection was that Mr Sharpless, with Ms Sinnathamby’s support, were primarily involved in liaising with the external lawyers.
- (g)As I have mentioned, he gave evidence concerning the memorandum to which the date 18 October 2005 was attributed, which is referred to at  and  above.
- I did not find that his evidence added at all to an understanding of the significance of any those documents.
- He was asked to address the counterfactual which Ms Sinnathamby and Mr Sharpless were asked to address:
Now, if someone had said to you during the period when you were considering the project and considering whether you were prepared to recommend it to Bob and Maha that, as part of this deal, PIPE might be able to build its own duplicate network and compete using that network with Springfield, what would your reaction have been? I know it’s hypothetical, but can you tell us?---I – I guess I’d be confused because we – we started the journey by wanting to build fibre out to Springfield. Now, we – we didn’t necessarily want to own it. We talked to PIPE about doing it and they didn’t have, in their mind, a business case. They didn’t have customers that they could point to that would pay them to build that network out there. We were saying, “There will be customers. We’re going to build a data centre and bring all these customers,” and they didn’t – couldn’t accept that business risk. And – and that led us to the point where we said, “Well – well, what about if we pay for it and we take that – that risk to bring the tenants out to Springfield? We’re building a CBD. We’ll – they’ll come eventually.” And so the whole thing was predicated on – on that. So if they had have said they wanted to build a network, we’d go back to say, “Well, why don’t you build a network and we’ll take some fibre off you.”
Now, focusing down on this hypothetical scenario, what if it had been made clear to you that they would build this duplicate network using the very conduits that you were going to pay for to have built by them?---I think my – my biggest challenge would have been to try and explain that to Bob and Maha. Like, this whole business case that I’d put forward has a bit of a hole in the argument.
Would that have been consistent with your business case?---No.
- He said that he would have had difficulty equating the proposition with the business case which he had presented.
- This evidence was unpersuasive as to what SLC by its actual decision-makers would have actually done in the counterfactual circumstances, for the same reasons as I mentioned in relation to Ms Sinnathamby. Mr Schroor was no longer on top of the documentation, and the questioning by which he was led to the position of expressing his views on the counterfactual had not sought to improve that position. The principal limitation of his evidence was that he equated the “deal” with PIPE with his own assessment of the business case and paid no regard to the wording of either the 21 July 2005 order form contract; or to the fact that the “deal” still left matters to be resolved by negotiation; or to the way in which the only “deal” which mattered was actually finally struck by negotiation. Indeed, on his own evidence, he had not participated in that process.
The relevant contracts
- The IRU Agreement and the WFS Agreement were each executed and dated 7 November 2005. Each cross-refers to the other. Indeed, entry into the WFS Agreement was a condition precedent to completion of the IRU Agreement. Each may be regarded as context relevant to the proper construction of the other.
The IRU Agreement
- “IRU” was an acronym which, although not specifically defined by the terms of the agreement, must be construed as a reference to “Indefeasible Right to Use”.
- A number of relevant and interrelated concepts were introduced by the Recitals, capitalised terms being defined in cl 1.1:
- APIPE holds a Carrier Licence and is a CSP.
- BPIPE has entered into arrangements for the construction, operation and maintenance of the Network.
- CSLC has agreed to finance the cost of construction of the Network, subject to the terms of this agreement.
- DSubject to the terms of this agreement, SLC will own the fibre optic cable in the Off-Rail section of the Network and PIPE will own all the infrastructure relating to the Off-Rail section of the Network.
- EPIPE has an exclusive right to use, and grant sub-rights to use, the On-Rail sections of the Network and agrees to grant SLC an Indefeasible Right to Use the Fibre Capacity on the OnRail section of the Network on the terms of this agreement.
- The first relevant concept was introduced by Recitals B and C, namely the principal division of roles between PIPE and SLC was that PIPE would arrange for the construction, operation and maintenance of the Network and SLC would finance the cost of construction.
- The second relevant concept was that introduced by Recitals D and E, namely the rights and obligations of the parties in relation to the Network, the construction of which SLC would finance, varied as between the On-Rail and Off-Rail parts of the Network, and, notably, ownership of the Off-Rail part of the Network was split between ownership of the cable and ownership of the infrastructure (later clarified as including “all pits and conduits”), the former being allocated to SLC and the latter to PIPE.
- The third relevant concept was that introduced by Recital A and concerned regulatory compliance matters.
- In order to explain the operation of the IRU Agreement it is appropriate in the first instance to do so by reference to each of those concepts.
PIPE’s construction, operation and maintenance obligations
- Pursuant to cl 2.1, the IRU Agreement was subject to three conditions precedent. The first was USQ and PIPE having entered into a binding Fibre Capacity User agreement in particular terms. The second was PIPE and Queensland Rail having entered into a binding agreement in respect of the construction and use of the On-Rail section of the Network in particular terms. The third has already been mentioned, namely entry into the WFS Agreement.
- Subject to payment by SLC of the “Phase One Installation Charge” and the payment of the first “Phase One O&M Fee”, the defendant agreed to install “Phase One”, to commission the “Fibre Capacity” for that phase and to make the “Fibre Capacity” for that phase available on or before the “Required Phase One RFS Date”: see cll 3.1 and 3.4 and related definitions in cl 1.1. As to this:
- (a)The “Required Phase One RFS Date” was defined as 27 February 2006.
- (b)The “Phase One Installation Charge” was defined at the amount of $2,137,000. The “Phase One O&M Fee” was the monthly operation and maintenance fee of $4,708 in respect of Phase One.
- (c)“Phase One” was defined as the western leg of the “Network”, as marked on the plan in Schedule 1.
- (d)“Network” was defined as “72 cores of fibre optic capacity On-Rail and a 72 core fibre optic cable Off-Rail to be installed in accordance with the Network Specifications, as shown on the plan in Schedule 1”.
- (e)Schedule 1 depicted an indicative route for the western and eastern legs of the Network and also a schematic cross-section view of the typical Off-Rail cable installation:
- (f)“Network Specifications” was defined by reference to the technical specifications set out in Schedule 2.
- (g)“On-Rail” meant “in relation to the Network the sections of which are deployed on land owned by Queensland Rail”. “Off-Rail” meant “in relation to the Network the sections which are not On-Rail”.
- (h)“Network Access Points” were defined physical points in Springfield and in Brisbane as identified in Schedule 4.
- (i)“Fibre Capacity” meant “the 72 core fibre optic capacity between the Network Access Points contained in each phase of the Network”.
- Clauses 3.2 and 3.4 also expressed a similar obligation on PIPE to install “Phase Two”, to commission the “Fibre Capacity” for that phase and to make the “Fibre Capacity” for that phase available to SLC on or before the “Required Phase Two RFS Date”. As to this:
- (a)“Phase Two” was defined as the eastern leg of the “Network”, as marked on the plan in Schedule 1.
- (b)As with the obligation in relation to Phase One, that obligation was conditional upon SLC making the relevant payment. The “Phase Two Installation Charge” was defined at the amount of $2,484,000. The “Phase Two O&M Fee” was the monthly operation and maintenance fee of $4,708 in respect of Phase Two.
- (c)But it was also subject to a number of other conditions, including receipt of a written request from SLC to do so (cl 3.2(a) and (b)), that written request being given within a particular time frame (cl 3.2(c)(ii), and upon SLC and PIPE entering an agreement under which PIPE agreed to a 10-year lease of premises at Springfield for use as a data centre (cl 3.2(a)). Indeed, by cl 3.2(a) PIPE agreed to use best endeavours to negotiate the terms of such a lease with SLC.
- (d)The “Required Phase Two RFS Date” was defined as the date specified by SLC by written notice to PIPE, which in any event could not be later than 1 January 2009.
- (e)Pursuant to cl 3.2(c), if SLC requested the construction of Phase Two of the Network, PIPE was obliged under the IRU Agreement to submit an order under the WFS Agreement to acquire two fibre pairs on each Phase of the Network for a fee of $3,000 including GST per month.
- In return for the payment of the monthly O&M fees, PIPE also agreed to operate and maintain the Network, in particular in accordance with a schedule which defined required service level targets set out in Schedule 3: cll 4.1(a), 5.1(c)(iii), 5.4 and 5.5. As to this:
- (a)Clause 4.1(a) (cl 4.1 is quoted in full at  below) provided that PIPE would throughout the Term provide that Fibre Capacity in accordance with the Service Levels. “Service Levels” was defined as “the service levels set out in Schedule 3”.
- (b)Clause 5.1(c)(iii) obliged PIPE to maintain all “Authorisations” (a term defined in cl 1.1 as “all licences, declarations, permits, accreditations and approvals of any type”) necessary to:
subject to clause 5.3, operate the Network and provide Fibre Capacity to Fibre Capacity Users over the Network, regardless of whether title to the Title-Relevant Elements has passed under clause 5.7[.]
- (c)Clauses 5.4 and 5.5 relevantly provided:
PIPE must maintain throughout the Term a register containing details of fibres used on the Network, the identity of assignees and installed baseline test readings. The register must be made available by PIPE to SLC on demand.
- (a)Subject to clauses 7.4 and 7.5, PIPE will maintain the Network throughout the Term:
- in accordance with Schedule 3;
- with all due care and skill; and
- such that the Network conforms with the Network Specifications.
- (b)Maintenance, as that term is referred to in clause 5.5(a), includes relocating or rebuilding any part of the Network as required by a person with legal authority to so require (including, without limitation, Queensland Rail or a government authority but excluding PIPE and SLC). …
- (d)Schedule 3 set out requirements which defined the periods within which a “Fault” (namely where one or more fibre cores did not meet the Network Specification) would be remedied. It set out procedures for the reporting of Faults and their remediation. So far as maintenance was concerned, Schedule 3 provided that “Where possible, PIPE will give SLC the period of notice set out in Table 1 of Schedule 3 in relation to any Planned Outage Periods and the length of any Planned Outage Periods.” The period of notice specified was seven days and “Planned Outage Periods” was a term defined in the Schedule as:
… the period during which PIPE, or a party on behalf of PIPE, may carry out work on its facilities, networks or systems for any reason, including arising out of or in connection with:
(a) installation of infrastructure;
(b) maintenance requirements (including Scheduled Maintenance); and
(c) infrastructure upgrades.
- It is important to appreciate that that which PIPE agreed to operate and maintain was the “Network” as defined, namely “72 cores of fibre optic capacity On-Rail and a 72 core fibre optic cable Off-Rail to be installed in accordance with the Network Specifications, as shown on the plan in Schedule 1.” Consistently with that conception, the promises to operate were expressed in terms of the provision of “Fibre Capacity” as defined: see cll 4.1(a) and 5.1(c)(iii) and the definition of “Fibre Capacity” (namely “the 72 core fibre optic capacity between the Network Access Points contained in each Phase of the Network”). And the promise to maintain was also a promise to maintain the “Network” in accordance with Schedule 3. Insofar as the IRU Agreement obliged PIPE to comply with Schedule 3 it did so not as a freestanding promise to comply with Schedule 3 but was part of either:
- (a)a promise to provide Fibre Capacity in accordance with the Service Levels set out in Schedule 3; or
- (b)a promise to maintain the Network (as defined) in accordance with Schedule 3.
SLC’s payment obligations
- SLC’s payment obligations were expressed in cl 7. That clause set out detailed provisions governing timing obligations concerning SLC’s obligation to pay the Phase One Installation Charge; the Phase One O&M Fee; the Phase Two Installation Charge; and the Phase Two O&M Fee. There were also provisions concerning invoicing, interest on unpaid amounts and a mechanism for disputing payment.
- The payments to be made to PIPE were:
- (a)A Phase One Installation Charge of $2,137,000.
- (b)A Phase One O&M Fee, namely a monthly operation and maintenance fee of $4,708 in respect of Phase One.
- (c)A Phase Two Installation Charge of $2,484,000.
- (d)A Phase Two O&M Fee, namely a monthly operation and maintenance fee of $4,708 in respect of Phase Two.
On-Rail, Off-Rail, and the express allocation of ownership rights
- Although SLC agreed to finance the cost of construction of the Network, SLC must be taken to have done so in the clear appreciation that it would end up owning only part of what PIPE ultimately built at SLC’s cost. That much was clear from Recitals D and E to which reference has already been made, accepting of course that recitals are not operative terms. But it was also made clear in the operative terms that, save in the limited extent specified, provided that the Network could not be regarded as owned by SLC.
- Clause 4.1 was the clause which granted the Indefeasible Right to Use. It did so in terms which provided for the ownership split and reservation of rights to which reference has already been made. It was in the following terms (emphasis added):
Subject to this agreement, by giving notice in accordance with clause 3.4(a) or clause 3.4(b), PIPE grants SLC an Indefeasible Right to Use the Fibre Capacity on the Phase specified in the notice from the date of the notice until the end of the Term on the basis that:
- (a)PIPE will throughout the Term provide that Fibre Capacity in accordance with the Service Levels;
- (b)SLC has exclusive use of that Fibre Capacity (including the right to resell or sub-lease the Fibre Capacity) during the Term;
- (c)PIPE may intercept, without any prior or subsequent notification to SLC or to Fibre Capacity Users, communications carried over the Fibre Capacity in order to meet any lawful request or direction of a law enforcement or other agency which has powers to require interception and SLC agrees to provide all reasonable assistance to PIPE in respect of PIPE's power to intercept communications;
- (d)subject to clause 5.7, SLC will own the Title-Relevant Element in each Phase and PIPE will own all the infrastructure relating to the Off-Rail section of the Network, including without limitation all pits and conduits. SLC and its appropriately skilled nominees or agents have the right, at SLC's cost and on reasonable notice to PIPE, to access the pits and conduits at SLC's sole risk.
- (e)PIPE has an exclusive right to use, and grant sub-rights to use, the On-Rail sections of the Network and agrees to grant to SLC an Indefeasible Right to Use the Fibre Capacity on the On-Rail section of the Network on the terms of this agreement.
- (f)subject to clause 4.l(d), to the fullest extent permitted by law PIPE retains all intellectual property rights and all other rights of ownership in the Network and the Network Specifications;
- (g)PIPE grants SLC a royalty-free licence for the term of this agreement to use the intellectual property rights in the Network and the Network Specifications, including the right to reproduce the Network Specifications, for the sole purpose of exercising SLC's rights wider this agreement;
- (h)on or before the payment to be made by SLC under clause 7.1(b) of this agreement becoming due, PIPE will deliver to SLC a letter from Queensland Rail addressed to SLC which includes an undertaking by Queensland Rail that on the occurrence of an Insolvency Event in respect of PIPE or on any other termination of the agreement between Queensland Rail and PIPE in respect of the Network, Queensland Rail must ensure that the Indefeasible Right to Use the On-Rail section of the Network granted to SLC under this agreement is maintained for the term of this agreement;
- (i)PIPE undertakes not to increase the number of Network Access Points beyond the number set out in Schedule 4; and
- (j)subject to on each occasion its prior approval being given, not to be unreasonably withheld or delayed, each party grants the other party a limited licence for the term of this agreement to use its logos, brands and trade marks solely for the purpose of assisting with the resale or sub-lease of Fibre Capacity.
- The following observations may be made about cl 4.1.
- First, the clause expressed PIPE’s grant of an “Indefeasible Right to Use” on particular bases. Those bases must be regarded as expressing promissory terms.
- Second, “Indefeasible Right to Use” was defined as “an exclusive, indefeasible right to use.” Two things must be noted:
- (a)First, the right conferred was only an exclusive right in relation to the “Fibre Capacity”, that term being defined in the limited way already mentioned, namely “the 72 core fibre optic capacity between the Network Access Points contained in each Phase of the Network”, with Network itself defined as “72 cores of fibre optic capacity On-Rail and a 72 core fibre optic cable Off-Rail to be installed in accordance with the Network Specifications, as shown on the plan in Schedule 1.” It was plainly not expressed as an exclusive right to use the infrastructure within which the Fibre Capacity was provided.
- (b)Second, the mechanism by which the right was conferred differed as between the OnRail and the Off-Rail sections of the Network, rights to the former only capable of being conferred because PIPE had contracted with Queensland Rail for the construction and use of the On-rail part of the Network, and obtained from Queensland Rail an exclusive right to use, and to grant sub-rights to use, that part of the Network.
- Third, subject to cl 5.7, the parties agreed that “SLC will own the Title-Relevant Element” in each Phase. As to this:
- (a)“Title-Relevant Element” was defined to mean “in relation to a Phase of the Network, the fibre optic cable in the Off-Rail Section of that Phase”.
- (b)The term was expressed in the future tense, because, first, the Title-Relevant Element had yet to be built and, second, the agreement provided that the passing of title would be conditional in some respects. Clause 5.7 provided that title to the Title-Relevant Element of each Phase of the Network would pass to SLC on payment of the final instalment of the applicable installation charge, except if PIPE had not obtained a nominated carrier declaration in respect of that element. (Ultimately, as SLC paid the requisite monies and PIPE obtained the requisite NCD, title to the Title-Relevant Element must be taken to have passed.)
- (c)SLC did not own the cable in the On-Rail section of the Network. There were two reasons for that conclusion. First, the contemplated contract between PIPE and Queensland Rail justifies the assumption that either Queensland Rail or PIPE must have owned that cable. Second, cl 4.1(f) provided that “to the fullest extent permitted by law” PIPE retained all other rights of ownership in the Network.
- Fourth, the parties agreed in cl 4.1(d) that “PIPE will own all the infrastructure relating to the Off-Rail section of the Network, including without limitation all pits and conduits.” As to this:
- (a)This was consistent with the terms of Recital D, the inclusion providing the elaboration of what was within the conception of “infrastructure”.
- (b)The term was expressed in the future tense because the infrastructure had yet to be built. Notably, the mutual promise that PIPE would “own” was not conditional. Notably also, “ownership” was “ownership” in a real sense. That was why in the same clause it was necessary to provide that SLC had the right at its costs and upon notice to access the pits and conduits. Without that qualification, PIPE’s ownership rights would have permitted it to exclude SLC.
- (c)It will be necessary to return to this obligation in the context of the eventual connection of the Network to the Polaris Data Centre via the Landcorp 100mm conduit. Would the Landcorp 100mm conduit be regarded as “infrastructure relating to the Off-Rail section of the Network”? If so, would the promise that PIPE would own that infrastructure extend to the Landcorp 100mm conduit?
- (d)Prima facie, the right of ownership would be seen to carry with it the right to use what is owned, as one sees fit, subject to any particular limitations. One agreed limitation was that, by cl 4.1(i), PIPE undertook not to increase the number of Network Access Points beyond the number set out in Schedule 4.
- Fifth, when the chapeau to cl 4.1 is read with cl 4.1(d) and cl 4.1(f), one can see that the parties had agreed that one of the bases on which SLC would obtain its Indefeasible Right to Use was that that “to the fullest extent permitted by law” PIPE would retain “all other rights of ownership in the Network”. The clause did not define what such other rights might include. The retention of “all other rights”, “to the fullest extent permitted by law” operate specifically to emphasise and confirm that the right of ownership was intended to carry with it the right to use what was owned, as the owner saw fit, subject to particular expressed constraints.
- Sixth, it would be inconsistent with the terms of cl 4.1 to regard the exclusive, Indefeasible Right to Use conferred to SLC as extending to an exclusive indefeasible right to use the infrastructure. There was certainly a right to use the infrastructure to an extent, because the infrastructure carried the cable and there was a right to use Fibre Capacity, which could only be fulfilled by use of the cable. But there could not be any suggestion that the right to use was exclusive.
- Seventh, cl 4.2 imposed a number of important corollary obligations on SLC. Thus, SLC accepted the obligations:
- (a)to comply with all reasonable requests made by PIPE in relation to the Fibre Capacity or the Network;
- (b)to obtain and maintain all “Authorisations” required for it to enter into and to perform its obligations under the agreement;
- (c)to provide all assistance and information reasonably required by PIPE in order for PIPE to comply with its obligations under the agreement;
- (d)to grant PIPE access to land owned by SLC or Springfield Land Corporation (No. 2) Pty Ltd as required in order for PIPE to comply with its obligations under the agreement; and
- (e)to obtain all necessary approvals for PIPE to enter all premises or land under the control of SLC or Springfield Land Corporation (No. 2) Pty Ltd for installation and delivery of the Network.
- It will be necessary to return to these corollary obligations in the context of consideration of the question referred to at (c) above.
- The operative terms of the IRU Agreement plainly reveal that the incidence of the obligations which the Telecommunications Act and the related Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth) imposed on PIPE and which they might impose on SLC were of significance to the parties. The operation of the regulatory regime has been outlined at  above.
- One should infer from the terms discussed below that the parties appreciated that:
- (a)If SLC owned something which might be regarded as a network unit it would either have to be licensed or obtain the requisite NCD and that, to that end, the parties agreed that:
- (i)PIPE would own the Network, except for the cable in the Off-Rail Section, and would take appropriate steps to continue to be regarded as owning the Network; and
- (ii)the potential impact of the regulatory regime on SLC by virtue of its ownership of cable, would be dealt with by PIPE accepting the burden of using its best endeavours to obtain an NCD in respect of the cable.
- (b)There was nevertheless a risk that SLC might be regarded as falling within the statutory definitions of carrier or carriage service provider and be rendered the subject of statutory obligations and, to that end, the parties agreed that, to the extent permitted by law, PIPE would perform or procure the performance of such obligations.
- Recital A refers to PIPE holding a “Carrier Licence” and its status as a “CSP”.
- Clause 1.1 defined the following relevant terms:
- (a)“ACMA” was defined as the Australian Communications and Media Authority or statutory successor.
- (b)“Carrier” meant a carrier under the Telecommunications Act.
- (c)“Carrier Licence” was defined as a licence of that name granted under the Telecommunications Act.
- (d)“C/CSP” meant a Carrier or CSP.
- (e)“CSP” meant a carriage service provider under the Telecommunications Act.
- (f)“CSP Obligation” meant an obligation imposed on SLC by law, including under the Telecommunications Act or the Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth), by reason of SLC being, or becoming, a CSP.
- (g)“In-scope CSP Obligation” meant a CSP Obligation that:
- is connected with or arises in relation to an “Individual Fibre Service” supplied to PIPE under the WFS Agreement, including in relation to services provided to “PIPE End Users”; or
- is connected with or arises in relation to the Network or the Fibre Capacity provided under the IRU Agreement, or which does not fall within paragraph (a) of the definition, but is not an “Out-of-scope CSP Obligation”.
- (h)“NCD” meant a nominated carrier declaration of that name granted under the Telecommunications Act.
- (i)“Non-C/CSP” meant a person who is neither a Carrier nor a CSP.
- (j)“Out-of-scope CSP Obligation” meant a CSP Obligation that is connected with or arises in relation to a service provided using the Fibre Capacity, other than a service contemplated under paragraph (a) of the definition of In-scope CSP Obligation, for example a service provided by SLC directly to another C/CSP under an agreement between SLC and that C/CSP.
- Clauses 5.1 and 5.2 were the terms which, together with the cl 4.1 and 5.7 provisions concerning title, were focussed on promoting the possibility that SLC would not become subject to the relevant statutory obligations. They set out PIPE’s obligations concerning regulatory requirements in these terms:
5.1 Regulatory - general
(a) use its best endeavours to:
- (i)obtain an NCD in relation to the Title-Relevant Element of each Phase by that Phase's RFS Date; and
- (ii)maintain that NCD for the remaining period of the Term;
(b) for each NCD that is obtained under clause 5.1(a), and for the period that the NCD is in place, comply with all of PIPE's Carrier obligations, including those under its Carrier Licence, in relation to each Title-Relevant Element to which the NCD applies;
(c) maintain all Authorisations necessary to:
- (i)construct the Network and otherwise to provide the Fibre Capacity to SLC for the Term of the agreement;
- (ii)own the Network, except in relation to the Title-Relevant Elements for which title is transferred to SLC under clause 5.7; and
- (iii)subject to clause 5.3, operate the Network and provide Fibre Capacity to Fibre Capacity Users over the Network, regardless of whether title to the Title-Relevant Elements has passed under clause 5.7; and
(d) subject to clause 5.3, do all things necessary in respect of the Network, including the performance of PIPE's Carrier obligations, which are required to be done under the Telecommunications Act or as otherwise required by law.
5.2 Regulatory - NCD best endeavour obligations
PIPE's best endeavour obligations under clause 5.1(a) to acquire an NCD in relation to the Title Relevant Element of each Phase includes an obligation:
- (a)to prepare and submit to the ACMA an application and all required accompanying documents to become the nominated Carrier in relation to that Title-Relevant Element;
- (b)upon the invitation of the ACMA, to make submissions in support of the NCD application or in support of the NCD not being revoked by the ACMA;
- (c)to pay all application fees, annual fees, universal service obligation levies or others fees, costs or charges which PIPE incurs by reason of PIPE's application for the NCD; and
- (d)not to communicate to the ACMA a withdrawal of its consent to the NCD. To avoid doubt, such a withdrawal would be a wilful breach of clause 5.1(a).
- Clause 5.3 provided a detailed clause covering what would occur in the event that SLC became the subject of a CSP Obligation as defined. As a general proposition, such obligations were categorised as either In-scope or Out-of-scope CSP Obligations. The clause sought to impose on PIPE the burden of the former but not the burden of the latter. Thus, by cl 5.3(a) PIPE was, to the extent permitted by law, and to the extent that such obligations existed from time to time, obliged to perform or to procure the performance of In-scope CSP Obligations, and cl 5.3(c) dealt with PIPE’s right to payment. By cl 5.3(b), in the event that PIPE was not permitted by law to perform or to procure the performance of SLC’s In-Scope CSP Obligation, PIPE was obliged to advise SLC of the existence, nature and scope of the obligation and pay costs reasonably incurred by SLC in performing the obligation in certain circumstances.
- Reference has already been made to the fact that the only part of the Network which the IRU Agreement contemplated would be owned by SLC would be “in relation to a Phase of the Network, the fibre optic cable in the Off-Rail Section of that Phase”. Clause 5.7 provided that such title would not pass if PIPE had not obtained an NCD in relation to the cable. In those circumstances the clause gave SLC the option of acquiring title to the cable at any time after the commencement of the provision of Fibre Capacity.
Other relevant terms
- As has been mentioned, the IRU Agreement was a long-term contract. That meant that SLC had the benefit of guaranteed long-term availability of 72 cores of fibre optic capacity in a fibre optic network between Springfield and the Brisbane CBD and could use this as a selling point for the development work which it and its related companies were doing in Springfield. That had been SLC’s main game.
- But SLC secured for itself a right to earn income from the Fibre Capacity. Clause 6 governed what SLC could do with the Fibre Capacity to which it had the Indefeasible Right to Use, and set out an express link with the WFS Agreement:
- (a)SLC had the right to resell or sub-lease any part or all of its Fibre Capacity to a “Fibre Capacity User” for a period not exceeding the Term on the terms set out in cl 6 and the WFS Agreement.
- (b)Fibre Capacity Users were defined as:
- to whom SLC asked PIPE to supply part of the Fibre Capacity directly;
- to whom SLC or PIPE resold or sub-leased part of the Fibre Capacity or allowed to distribute part of the Fibre Capacity;
- who SLC allowed to use part of the Fibre Capacity; or
- to whom SLC supplied any services which used or relied on part of the Fibre Capacity.
- (c)For its part, PIPE promised to provide wholesale pricing to SLC and to any Fibre Capacity User in respect to connection to the Network Access Points, with SLC accepting a best endeavours obligation in relation to introducing users which required such connections and to encourage them to consider any offer by PIPE.
- (d)PIPE was also required to connect users to the Network if requested by SLC.
- The IRU Agreement did contemplate the possibility that SLC might during the term of the contract wish to make changes to the Fibre Capacity (as defined). To that end, cl 10 provided:
10. Change in Fibre Capacity and Technology
10.1 Notification of changes
As soon as reasonably practicable after becoming aware of any material reduction in the Fibre Capacity, PIPE must notify SLC in writing of:
- (a)the extent of the reduction; and
- (b)if the reduction is not of a permanent nature, the likely period during which the Fibre Capacity will be affected.
10.2 Upgrade of Fibre Capacity
- (a)At any time during the Term, SLC may issue a written request to PIPE (Upgrade Request Notice) to upgrade its Fibre Capacity on either Phase One or Phase Two (Upgrade).
- (b)The Upgrade Request Notice must refer to Phase One or Phase Two and must specify the additional Fibre Capacity required.
- (c)Within 21 days of receiving the Upgrade Request Notice, PIPE must provide SLC with written notice of the estimated costs (both for installation and any additional operation and maintenance fee) and the proposed date of delivery of the Upgrade.
- (d)The parties must agree the costs and delivery timing of the Upgrade before the works required to carry out the Upgrade are commenced.
- (a)After the Fibre Capacity is made available to SLC in accordance with clause 3.4 of this agreement, and without derogating from PIPE's obligations under clause 5, PIPE has no obligation:
- (i)to upgrade or improve that Fibre Capacity to ensure that its performance is equal to the performance of fibre capacity offered on networks other than the Network from time to time; or
- (ii)otherwise to enhance the performance of the Fibre Capacity.
- (b)Notwithstanding clause 10.3(a), PIPE undertakes to notify SLC from time to time during the Term if it reasonably believes that improved or changed technology would, if implemented on the Network, enhance the performance of the Fibre Capacity.
- (c)PIPE further undertakes to consult with SLC with regard to the estimated cost and timing of delivery to implement improvements or upgrades to the Network agreed under this clause 10.3.
- Enforceable “variations” clauses in construction contracts require the contractor to perform any directed changes to contract work in return for an alteration to the contract price assessed either by reference to agreed rates or some objective criteria. Clause 10 was not drawn in that way. It did not in terms impose an obligation on PIPE to comply with requests by SLC for upgrade or enhancement to Fibre Capacity other than by notifying SLC of what the requested work would cost and how long it would take to carry out and then attempting to reach an agreement on costs and timing. I make the following observations:
- (a)Clause 10.2 permitted SLC at any time during the contract term to request an upgrade to Fibre Capacity on Phase One or Phase Two.
- (b)The first obligation which the clause imposed on PIPE was the obligation to provide a written estimate of costs and delivery timing. The parties expressed their agreement that “[t]he parties must agree the costs and delivery timing of the Upgrade before the works required to carry out the Upgrade are commenced”. But that wording did not impose any obligation on PIPE to perform the requested upgrade works at all. The evident assumption was that unless agreement was reached on the cost and delivery time for the performance of the works, no obligation to perform the works could exist.
- (c)That conclusion finds further express support on the limitation stated in cl 10.3. Once Fibre Capacity in each Phase was made available under cl 3.4 (which, with some oversimplification, means the Phase was completed by PIPE, paid for by SLC, and made available for use by PIPE), PIPE expressly had no obligation to upgrade or improve Fibre Capacity for the purpose mentioned in cl 10.3(a)(i), or “otherwise to enhance the performance of the Fibre Capacity”.
- It will be necessary to return to a consideration of cl 10, when SLC’s breach of contract case is considered.
- Clause 11 dealt with representations and warranties. As to that:
- (a)Clause 11.1 expressed relevant representations which each party had made to the other. Amongst other representations was that set out in cl 11.1(d), namely that the agreement constituted the parties’ valid and binding obligation. The significance of that representation must be assessed by the intention evidenced in cl 24, which enabled any provision which might otherwise be invalid or unenforceable to be read down or severed if possible.
- (b)Clause 11.2 set out a disclaimer of reliance on any other representation or warranties. That disclaimer has been quoted at  above and was the subject of a concession by Ms Sinnathamby that it was correct to say, as the clause did, that SLC had relied on its own enquiries in respect of all matters relating to the agreement and had not relied on any representation by PIPE.
- (c)A further clause to be mentioned in this context was cl 23 which set out the parties’ agreement that the agreement constituted the entire agreement between them as to its subject matter; and that, in relation to that subject matter, it superseded any prior understanding or agreement between them and any prior condition, warranty, indemnity or representation imposed, given or made by either of them, whether orally or in writing.
- Express contractual terms revealed the intention to exclude the implication of terms into the agreement:
(a) Clause 11.2 provided:
Each party acknowledges that:
- (a)it has relied on its own enquiries in respect of all matters relating to this agreement and has not relied on any representation, warranty, condition or statement made by or on behalf of the other party other than as set out in this agreement; and
- (b)any conditions or warranties which may otherwise be implied by law into this agreement are expressly excluded to the extent permitted by law,
and each party releases the other party from all actions, claims, demands and liability (whether or not known) which it may have or claim to have, or but for this release, it might have had against the other party arising out of any representation, warranty, covenant or provision not set out or referred to in this agreement.
- (b)Clause 12.1(c) expressed an exclusion by PIPE of the implication of terms, conditions or warranties into the agreement, in these terms:
Except where to do so would contravene any statute or cause any part of this agreement to be void or unenforceable, PIPE:
- (c)excludes all terms, conditions and warranties implied into this agreement by statute or otherwise[.]
- (c)Clause 12.2(c) expressed a similar exclusion by SLC of the implication of terms, conditions or warranties into the agreement, in these terms:
Except where to do so would contravene any statute or cause any part of this agreement to be void or unenforceable, SLC:
- (c)excludes all terms, conditions and warranties implied into this agreement by statute or otherwise[.]
- It will be necessary to return to the significance of the entire agreement clause and to these exclusions because those matters are relevant to SLC’s argument that there should be terms implied into the IRU Agreement.
- Clause 13.1 provided (footnotes added):
- (a)This agreement commences on the date of this agreement and expires on [16 February 2021] or at the end of the period by which this agreement is extended in accordance with clause 13.1(b) unless earlier terminated in accordance with clauses 13.2, 13.3, 13.4 or 13.5.
- (b)Subject to clause 13.1(d), the Term may be extended up to five times, in each case by a period of three years, on written request by either party to the other party not less than 3 months prior to the end of the initial or any renewed Term.
- (c)On receipt of a written request to extend the Term, the parties agree to negotiate in good faith the terms of any extended Term of the agreement including, without limitation, the Service Levels, the Network Specifications and the O&M Fees.
- (d)The Term must expire on or before [16 February 2036].
- It will be necessary to return to the significance of that clause. SLC contends that it has acted under cl 13.1(c) to extend the term of the IRU Agreement by three years, and PIPE contends that the clause is void for uncertainty.
- Clause 15 set out a confidentiality clause. I will return to that clause in the context of considering SLC’s argument that its terms must have been breached.
- Clause 17 provided that:
This agreement does not create a relationship of employment, agency or partnership between the parties.
The WFS Agreement
- By an agreement also dated 7 November 2005 and titled “Wholesale Fibre Services Agreement”, SLC and PIPE entered into a further long-term contract which set out the terms on which SLC agreed to supply, and PIPE agreed to acquire, Individual Fibre Services over the Network the subject of the IRU Agreement: Recitals A and B.
- An “Individual Fibre Service (or IFS)” was defined by cl 1.1 as the provision of fibre optic capacity over a single core of the Network and between each of the Network Access Points (which were identified physical points in Springfield and in Brisbane and which formed the network boundaries of each IFS).
- In order for an actual supply and acquisition of an IFS to occur between SLC and PIPE, the WFS Agreement contemplated that PIPE would have to submit (and SLC would have to accept) an order for one or more Individual Fibre Services and they would have to negotiate agreement on the terms applicable to any particular order: cl 2. SLC had no obligation to accept an order submitted by PIPE: cl 2(d)(ii).
- It will be recalled that pursuant to cl 3.2 of the IRU Agreement, if SLC requested the construction of Phase Two of the Network, PIPE was obliged under the IRU Agreement to submit an order under the WFS Agreement to acquire two IFSs on each Phase of the Network for a fee of $3,000 including GST per month. Notably, SLC was not obliged to accept that offer. But apart from that requirement that such an offer be made, neither contract imposed any obligation on PIPE to order any particular number of IFSs from SLC, or on SLC to supply any particular number of IFSs to PIPE.
- Indeed, as mentioned, under cl 6 of the IRU Agreement, SLC had the right to sell or sublease all or any of its IFSs. That right extended to include users who might be PIPE’s competitors. The unambiguous effect of the WFS Agreement was that SLC, in its absolute discretion, could exclude PIPE from using any of the IFSs in favour of third-party carriers or carriage service providers. In such circumstances, PIPE would not have the opportunity of obtaining revenue by acquiring IFSs under the WFS Agreement and using the acquired IFSs to its benefit.
- The WFS Agreement included (by cl 8.2(c)) an exclusion of implied terms worded in the same way as cl 12.1(c) of the IRU Agreement and (by cl 18) an entire agreement clause worded in the same way as cl 23 of the IRU Agreement.
- The WFS Agreement expressly provided that it commenced on 7 November 2005 and it expired 15 years later, unless terminated earlier. The WFS Agreement did not contain any provision for extension of that term. On its face, that meant that the term of the WFS Agreement expired on 7 November 2020. SLC initially advanced but later abandoned a contention that despite the express terms of the WFS Agreement, there was a construction of the two contracts which permitted of the conclusion that the WFS Agreement might also be extended in the same manner as the IRU Agreement.
The pre-contractual misleading and deceptive conduct case
The impugned conduct
- SLC contended that PIPE (in a manner apt to mislead) expressly, implicitly or by its silence conveyed to SLC that:
- (a)PIPE would provide SLC with the only network infrastructure capable of supporting Springfield’s telecommunications requirements during the Term of the IRU Agreement, and that to say as much was to convey that PIPE would not install any additional infrastructure between Brisbane and Springfield during that period;
- (b)PIPE did not intend to, and would not, compete with SLC to supply optic fibre capacity to wholesale suppliers and retail customers of telecommunications services between Brisbane and Springfield;
- (c)PIPE would not solicit or attempt to solicit any customer, or potential customer, of the Network; and
- (d)PIPE would not do anything to detract from, and in fact would work to maximise, SLC’s revenue earning capacity by the provision of telecommunications services to the Springfield area.
- The closest the circumstances come to supporting the conclusion that anything like these representations were made are the statements made in the third PowerPoint presentation discussed at . As to this, Senior Counsel for PIPE submitted of that PowerPoint presentation (and I agree):
… It says nothing at all, either standing alone or read in context, to suggest that what we’re saying is, and we will never build another network at any time in the life of any contract we have. It’s simply saying we’re your choice. It’s not a surprising marketing proposition. Here’s the reason no one else is doing it; we’ll do it; we’re the only one. That does not, in our submission, and cannot translate to a representation that we will never build another network.
- At best for SLC, the PowerPoint should be regarded as communicating something about PIPE’s then present state of mind concerning the circumstances then affecting the choice to be made by SLC. It was not a prediction as to a future matter. In this regard, SLC made it perfectly clear at the outset of the trial before me that it did not advance a case that PIPE had misrepresented the nature of its present intentions at any time before contract. It was not part of SLC’s case to suggest, for example, that when the PowerPoint presentation was made that PIPE had a present intention to do something like what it actually did, and misled SLC about the nature of its then intentions. As to this:
- (a)PIPE, correctly, drew my intention to the fact that paragraph  of the plaintiff’s opening submissions (emphasis in original):
It is not SCG’s case that PIPE, as a matter of fact, secretly intended to compete with SCGs Network when the bargain was struck in 2005. Rather, SCGs case is that during the precontractual negotiations, PIPE, represented by its then director Mr Bevan Slattery, did genuinely intend to work co-operatively with SCG for SCG and PIPE’s mutual benefit and not to compete with SCG’s Network.
- (b)Senior Counsel for SLC confirmed that position during his oral opening address.
- (c)Some attempt to shift the ground on this point was made during SLC’s closing submissions but I would not permit that course. SLC must be bound by the way it conducted the trial.
- In my view the proposition that any of these representations were made either expressly, implicitly or by silence cannot be maintained.
- PIPE did not convey, nor would it be thought to be making a prediction about whether it or any other carrier (e.g., Telstra, Optus or SPTel) might in fact build additional network infrastructure at some stage in the future during the Term of the IRU Agreement. SLC had been advised by Strategic Directions that no other carrier had given a quote, but no reasonable person would take from that advice that Strategic Directions contended anything about what those carriers might in fact do in the future. A fortiori in relation to the communications made by PIPE.
- In the context in which they were made, PIPE’s actual communications to SLC whether directly or via Strategic Directions, could only have been understood by any reasonable person, and in my view they must have been so understood by SLC and Strategic Directions, as preliminary indications of the basis on which PIPE was prepared to contract with SLC, the shared contemplation of all parties being that before any commitment was made or deal struck, the preliminary indications would be reduced to some form of binding written contract.
- The relationship between these three actors in the context in which they were dealing with each other left no room for the discernment of the alleged representations by implication or by PIPE’s silence from time to time on the subject matter of the representations. I observe “from time to time” because in fact the history of communications from about the time of the 21 July 2005 order form contract reveals communications from PIPE about the contractual terms which it sought which are plainly inconsistent with the existence of the representations suggested by SLC. As Macfarlan JA (with whom Beazley ACJ and Payne JA agreed) in Jewelsnloo Pty Ltd v Sengos  NSWCA 309:
… the normal competitive basis upon which arm’s length commercial parties deal with each other is not abrogated by statutory prohibitions on misleading and deceptive conduct. Such parties are not obliged to volunteer information to the others with whom they are dealing simply because they realise, or should realise, that it is of importance to the commercial interests of the others. There has to be something more that renders their silence misleading or deceptive.
- In this case, there was nothing more.
- I reject SLC’s case that PIPE engaged in the alleged misleading and deceptive conduct.
The causation hypothesis
- If I had found actionable misleading and deceptive conduct to be established, it would be necessary to consider whether the conduct was causative of loss. SLC suggested that the requisite causal connection between impugned conduct and claimed loss was established because two propositions were justified on the evidence.
- The first was that SLC entered the contracts having been induced to do so by representations made by PIPE. But the evidence did not justify that finding. It justified the opposite. I find:
- (a)The two subject contracts were negotiated on an arms-length basis between two sophisticated corporations both of whom were advised by major law firms.
- (b)SLC had the advantage of having in-house counsel and having obtained advice from Strategic Directions, who were independent ICT consultants.
- (c)The contracts contained the express written acknowledgment consciously intended by the legally qualified SLC director responsible for documenting the deal between the parties (namely Ms Sinnathamby), that SLC relied on its own enquiries and had not relied on any representations made by PIPE. That acknowledgement expressed the truth. That conclusion is also supported by the fact that the IRU Agreement also contained the cl 23 “Entire agreement” clause expressed in terms earlier identified.
- (d)As I have already remarked, I would infer that evidence from SLC’s principal decisionmaker, Mr Maha Sinnathamby, would not have assisted SLC’s case.
- In my view the proposition that SLC was induced to enter into the contracts by any precontractual representations made by PIPE is a lawyer’s confection. Rather, I find that SLC relied on its own enquiries, and not on the alleged, or indeed any, representations made by PIPE.
- That conclusion is fatal for the first proposition.
- The second proposition was a counterfactual, namely that if PIPE had conveyed to SLC that at some time in the future it might construct the Duplicate Network so as to compete with SLC for the income which might be obtained by selling fibre connections to customers on the 72-core fibre Network, SLC either would not have contracted with PIPE or would have contracted on the basis of a clause which would have contained a promise which would have operated to prevent PIPE from taking that course.
- While it is true that some of SLC’s witnesses did give evidence consistent with the counterfactual, I have explained why I would not accept their evidence. What SLC would have done in the hypothesised circumstances was a far more nuanced issue than that sought to be painted by SLC’s witnesses.
- First, the core business of SLC was property development, in particular in Springfield. Mr Sinnathamby had ambitions that Springfield could be Queensland’s Silicon Valley. Entry into the contracts would give SLC the benefit of guaranteed long-term availability of 72 cores of fibre optic capacity in a fibre optic network between Springfield and the Brisbane CBD. That would enable the Polaris Data Centre to be developed and marketed on a more favourable basis. It would a step towards the fulfilment of Mr Sinnathamby’s Silicon Valley ambitions. And the benefits of the Polaris Data Centre could be used as a selling point for the development work which it and its related companies were doing in Springfield. This was the main game for SLC.
- Second, it must be acknowledged that the main game was not the only game from SLC’s point of view. It was advantageous to the making of the initial investment decision that the Network would be a profit centre in its own right. Earned profits could go towards paying back the investment over a contemplated short-term period, even though they were measured only in the hundreds of thousands.
- Third, the core business of PIPE, on the other hand, was to provide dark fibre services over its network to its customer base and to grow that base and its income by installing additional fibre optic capacity commensurate with anticipated demand for dark fibre services. If the Polaris Data Centre was established in Springfield and Springfield demand for dark fibre services increased sufficiently, those opportunities would exist. PIPE already had a fibre network from Brisbane to Goodna in the west and from Brisbane to Hill Crest in the east. All it would need would be to connect to Springfield from those points. Contracting with SLC on the basis that it could be paid for constructing a 72-core fibre network for SLC, but could retain ownership of infrastructure including pipes and conduits would put it in the position of expanding its business if there was sufficient demand.
- Fourth, an evaluation of what SLC would have done in the posited counterfactual would require putting oneself in the position of Mr Sinnathamby and Mr Sharpless at material times during the period from February 2005 to 7 November 2005. It would require a nuanced reconsideration of all the matters which led into the initial decision to continue discussions with PIPE; and which led into the decision to enter into the initial conditional order form contract on 21 July 2005; and to take all the steps which were taken during the final negotiation in the week preceding 7 November 2005. It would require balancing how much more important to SLC was the main game than the prospect of diminished income from dark fibre, somewhere down the track when demand warranted it (which would mean that the main game was succeeding).
- Fifth, objective considerations do not point clearly to what decision SLC would have made in the posited counterfactual, nor do they clearly suggest what PIPE might have done in response.
- Sixth, I take into account the fact that Mr Sinnathamby was not called and the inference which I have drawn that his evidence would not have assisted SLC’s case.
- The result is that I am not prepared to find the posited counterfactual has been established on the evidence. I reach this conclusion without having regard to the evidence subsequently analysed which supports my finding that it was in 2011 that SLC first discovered that PIPE had had built duplicate cabling in the pits and conduits where the Network was constructed and installed, but that SLC did nothing about that discovery until 2014, when it obtained further information about the extent of the duplicate cabling. However, I am comforted in reaching my conclusion by the fact that that analysis tends to confirm the correctness of my conclusion.
- The foregoing findings are fatal to SLC’s causation case in relation to pre-contractual misleading and deceptive conduct.
- SLC’s pre-contractual misleading and deceptive conduct case must fail.
Construction of Phase One and Phase Two of the Network
- PIPE made its application for an NCD on 25 November 2005. It described the line links the subject of the application as “Single and multiple line links located in the municipality of Ipswich, Queensland and owned by [SLC] and managed by [PIPE]”, which was plainly a reference to the cable in the Off-Rail section of the Network. ACMA made the NCD by instrument dated 20 December 2005.
- By letter to SLC dated 24 February 2006, Queensland Rail confirmed the existence of the agreement between it and PIPE referred to in the condition precedent set out in cl 2.1 and gave the undertaking contemplated by that clause.
- Phase One was constructed and connected to the part of the USQ campus at Springfield known as the World Knowledge Centre by about February 2006. The On-Rail part of Phase One involved the allocation to SLC of part of a 216-core cable. Mr Van Hecke was an employee of PIPE’s independent contractor Optilinx which carried out the performance of the work. He was personally involved in the performance of the work. He was very knowledgeable, detail-oriented, had a good memory and was inclined to be helpful. I have no hesitation in accepting his evidence. He said that Optilinx did all the splicing for the western route. He gave evidence that the original 72f used for the Network from Brisbane to Goodna had been part of a 216f cable, of which 72f were allocated to Queensland Rail, 72f were allocated to PIPE and 72f were allocated to SLC. The Off-Rail part of Phase One from Goodna to Springfield involved a single 72-core cable.
- PIPE issued a certificate of practical completion for Phase One on 27 August 2008, but which stated that practical completion took effect from 17 February 2006. The circuit identification numbers for the fibres concerned (each circuit using two fibres) were identified by PIPE in a “Completion Pack” provided by PIPE which provided as follows:
- (a)CQ162: 333 Adelaide St to UQ – Prentice Building.
- (b)CQ163: UQ – Prentice Building to USQ Springfield.
- (c)CQ176: 127 Creek St to MDF Room – Springfield.
- (d)CQ212 – CQ245: Street Network outside Rail Centre 1 to MDF Room – Springfield.
- The completion pack also provided sheets prepared by Optilinx dated 23 March 2006 recording the test results which it obtained for the circuits, which established that the Fibre Capacity met the Network Specifications.
- The basic plan of the Network path was identified in the completion pack as follows:
Phase Two and relocation of the Springfield end of Phase One
- It will be recalled that one of the contemplations of the IRU Agreement was that Phase Two was conditional upon PIPE and SLC entering an agreement for a “Data Centre Lease”: see (c) above. Some degree of planning for the eventual connection of the Network to the proposed data centre was in place by March 2006.
- By an amended drawing dated 24 March 2006, Strategic Directions developed a Springfield Central ICT plan which provided for an eventual relocation of the Phase One cable path so that it could be connected up with the Polaris Data Centre via 100mm conduit. The plan drawn by Strategic Directions showed a rough diagram of the existing pathway into the World Knowledge Centre at USQ and then suggested 100mm conduit paths for both the western path (Phase One) and the eastern Path (Phase Two) to run along Sinnathamby Boulevard on either side of the Polaris Data Centre so as to be connected to it, the path to be reviewed with final development plans.
- By 26 March 2007, that plan had apparently been developed further. Strategic Directions emailed PIPE in these terms (attaching an autocad file):
As previously discussed with Bevan and Brent (before his departure) Springfield Land Corporation will be installing Pit and Pipe around Springfield CBD for use by Springfield and Pipe Networks (and others under wholesale rental agreements) in rolling out fibre communications across the city[.]
Attached is the initial build of pit and conduit for your records[.] As previously discussed Pipe Networks would consider [maintaining] the dial-before-you-dig records for these assets. No doubt there are a few issues we need to work through to ensure this is acceptable to both parties[.] The base arrangement was centred around the option of SLC selling the assets to Pipe Networks for $1, with an irrevocable option for SLC to purchase the assets back for $1 at any time.
Please let me know if this arrangement / model is still acceptable.? If possible [I’d] like to meet this week to discuss the finer details [etc.] how are you placed on Thursday 29th at 2pm?
- On 29 March 2007 at 2:15pm, PIPE issued an internal email, copied to Strategic Directions, on the subject matter “We need to get PIPE logos on the Pit Lids in Springfield ASAP”. The email attached the same autocad file which had been provided by Strategic Directions and stated:
Can you please organise to get our logo’s glued to the existing pit lids in Springfield. I have attached a dwg file of the relevant network, please contact Mike if you need more details.
This is a high priority please advise when you could get this done, also please email Mike to advise when our guys are on-site.
While we are on-site please take pictures of the pits to verify that pits are empty prior to our logo’s going onto the lids.
- At about the same time, SLC were taking steps to promote the proposed Polaris Data Centre. It proposed that construction of the data centre would commence in May 2007, and it proposed to potential lessees that services under the proposed leases could commence in the fourth quarter of 2008. Thus, in February 2007, SLC made a proposal to the Queensland Government that it could take a lease of space in the centre. And on 3 March 2007, Strategic Directions provided a similar proposal to PIPE on behalf of SLC. The proposal was “designed to outline the intended capabilities of the Polaris Data Centre, and address the use of Core and Additional Services proposed to be implemented for [PIPE].” It was said to “provide the following solution to assist PIPE Networks deliver services in Springfield, South-East Queensland and Australia.” The introduction to the proposal stated:
Based on recent discussions and correspondence, the key requirements outlined by PIPE Networks for this proposal include:
- Data Centre Service comprising an initial 500m2
- Respective service fees at 800W/m2
- Service Term of 10 years
- Service commencement date of Q4 2008.
The technical data centre space will be preconfigured with raised floor, cooling and power distribution infrastructure meaning it will be ready to use on service commencement.
The scale of the Polaris Data Centre is such that PIPE Networks Total Technical Space requirements can be accommodated on a single floor of the facility (actual available technical area is 2,333m2). PIPE Networks is able to manage your own ICT infrastructure within their Technical Area, compliant with Polaris Operational Policies.
- On 28 June 2007, SLC confirmed its instruction to PIPE to proceed with Phase Two in these terms:
We hereby confirm our instruction for Pipe Networks to proceed with the construction of Phase 2 of the Springfield dark fibre network in accordance with clause 3.2 e) of the IRU Agreement.
We also confirm that the agreement is subject to clause 3.2a) of the agreement and we look forward to progressing our negotiations in this regard.
At this stage we are comfortable with an RFS date of 31 January 2008.
- Between late 2007 and early 2008, SLC caused civil works to be carried out by other contractors by which Sinnathamby Boulevard was extended to the Polaris Data Centre. During the performance of those civil works, SLC caused those other contractors to install telecommunications pits and 100mm pipe conduit (the Landcorp infrastructure) below ground and on either side of the pathways leading into the Polaris Data Centre, as appears from the drawings referred to at  and  above. The evidence did not reveal who owned the land in which the Landcorp infrastructure was installed, or what, if any, contractual arrangements were made as between SLC and the landholder.
- Email communications during this period justified the inference that PIPE was kept informed of the fact and timing of the performance of those works by SLC’s contractors and arranged for its own contractors to carry out the installation of the cable the subject of the IRU Agreement via subduct in the conduits in the Landcorp infrastructure.
- The installation of 72f cable into the Landcorp infrastructure required:
- (a)the relocation of the Springfield end of the Phase One pathway from its initial end point in the World Knowledge Centre to the final end point in the Polaris Data Centre; and
- (b)the completion of the Springfield end of the Phase Two pathway in such a way that it connected up to the Polaris Data Centre.
- Mr Van Hecke of Optilinx was again involved in the performance of this work for PIPE. Optilinx did all the splicing for the eastern route as well. Mr Van Hecke explained that for the section of the eastern path from Brisbane to Hill Crest the original 72f used for the Network had been part of a 144f cable which had been installed in Telstra conduit as part of an existing network and of which 72f was allocated to SLC with 72f remaining for PIPE. I would conclude that this cable was the cable identified as shared cable and Telstra lease conduit in the drawings referred to at  and  above. The section from Hill Crest to the Polaris Data Centre involved a single 72f cable.
- Mr Van Hecke described what was involved in the connection of the western and eastern pathways of the Network to the Polaris Data Centre by reference to the following diagram, which was an amended version of the Strategic Directions 24 March 2006 plan referred to at  above:
- From that plan he observed that the Phase One western path (depicted by the curved yellow line running from top left to centre right to the WKC) was altered by following the “Install P8 pit …” instruction; creating a loop of fibre, splicing it so as to link to the Landcorp pits and 100m conduit to get across the Centenary Highway down to Sinnathamby Boulevard and into Polaris Data Centre (identified by the rectangle marked “Polaris DC”). He described how the Landcorp conduits followed from Polaris along Sinnathamby Boulevard to the joint at the top right of the page where they connected to the 50mm conduit (which comprised Phase Two of the Network.)
- It was common ground on the face of the pleadings that construction of Phase Two of the Network and the associated relocation of Phase One was carried out as follows:
- (a)The eastern pathway was constructed and connected to the Polaris Data Centre at Springfield by, in, or about December 2007.
- (b)The western pathway was relocated to be connected to the Polaris Data Centre by, in, or about 2008.
- (c)Construction of the Network was complete by, in, or about 2008, and terminated at the Polaris Data Centre at Springfield.
- By email dated 20 December 2007, PIPE issued a certificate of practical completion for Phase Two which stated that practical completion took effect on 20 December 2007. The completion pack which was subsequently issued by PIPE:
- (a)identified the 36 circuit identification numbers for the fibres concerned (again, each circuit using two fibres) as CQ3515 to CQ3550 from Polaris Data Centre, Springfield to Makerston St Handoff Joint and depicted a basic plan of the Network path as follows:
- (b)identified the circuit port locations for those circuits as:
- (in the Polaris Data Centre) Level 1, IDF 1 QB3758.FTP1 Ports 1-72; and
- (at the Makerston St Joint CBD) QL0234/S2 Fibres 1-72; and
- (c)provided sheets prepared by Optilinx dated 27 April 2009 recording the test results which it obtained for the circuits, which established that the Fibre Capacity met the Network Specifications.
- PIPE also issued a completion pack for the western path as relocated which:
- (a)identified the 36 circuit identification numbers for the fibres concerned (again, each circuit using two fibres) as CQ163, CQ176 and CQ212 to CQ245 from Polaris Data Centre, Springfield to Ann St Handoff Joint and depicted a basic plan of the Network path as follows:
- (b)identified the circuit port locations for those circuits as:
- (in the Polaris Data Centre) Level 1, IDF 2 QB3758.FTP2 Ports 1-72; and
- (at the Ann St Joint CBD) QL0021/S Fibres 1-54 & 67 to 84; and
- (c)provided sheets prepared by Optilinx dated 27 April 2009 recording the test results which it obtained for the circuits, which established that the Fibre Capacity met the Network Specifications.
- There is reason to doubt that the eastern pathway was actually connected to the Polaris Data Centre by December 2007, because it appears from emails sent on 22 October 2008 and 2 December 2008 that the fibre optic cable had not yet been laid so as to enter the Polaris Data Centre itself (which was then under construction). Indeed, the terms of a Land Access and Activity Notice (LAAN notice) which PIPE, as holder of a Carrier Licence under the Telecommunications Act, was obliged to give to the landowners of the land on which Polaris Data Centre was built suggested that the work of connection was to be done after 15 December 2008. A subsequent Optilinx invoice suggests the work must have been done before 16 January 2009. This discrepancy may not matter.
- The Polaris Data Centre itself was not completed until January or February 2009. It was not constructed on land owned by SLC. Rather, it was built on land owned by Springfield Land Corporation (No 2) Pty Ltd, a related company to SLC. Two other related companies (Springfield Real Estate Sales Pty Ltd and SPDEF #2 Pty Ltd) were joint lessees of that land and entitled to possession of that land. Thus, the LAAN notice to which reference was made in the preceding paragraph was directed to the landowner and not to SLC.
The Landcorp infrastructure must be regarded as subject to the IRU Agreement
- Given that practical completion for Phase One had been achieved on 17 February 2006, the relocation of the Phase One pathway constituted extra work by PIPE, for which one might imagine that there would have been some arrangement for additional payment. And the manner of completion of the Phase Two pathway was done in such a way that PIPE was able to take advantage of some work done by SLC’s contractors rather than having to do all the work into the Polaris Data Centre for itself as had been contemplated by the IRU Agreement, for which one might imagine that there would have been some arrangement for reduction in the payment which otherwise had to be made to PIPE under the IRU Agreement.
- Nevertheless, the evidence did not demonstrate that either of those things occurred. I observe:
- (a)In the email of 26 March 2007, referred to  above, there was a hint of an arrangement for transfer of ownership of some infrastructure to PIPE for $1, but there was no evidence that such an arrangement was ever struck.
- (b)There was some suggestion in various emails in late 2007 and early 2008 that PIPE had provided quotations regarding at least some part of the relocation work. But there was no evidence that they were accepted and no clarity whether they covered the entirety of the relocation work.
- (c)There was no other evidence addressing any amendment to the contractual arrangements, despite the fact that there must have been meetings at least attended by representatives of PIPE and of SLC.
- (d)There was no evidence of any formal contractual arrangements having been entered into in relation to the relocation work, or the work done to complete Phase Two into the Polaris Data Centre.
- Despite this lack of clarity, I have no doubt that the proper inference must be that, once completed, the final as-built pathways of the Network were to be regarded as part of the Network the subject of the IRU Agreement and the WFS Agreement and subject to the contractual arrangements there set out.
- There are two juridical routes by which that conclusion is justified.
- First, the future-facing terms of the IRU Agreement should be regarded as sufficient to encompass the steps the parties eventually took, without the need for any further agreement between the parties. By their existing agreement, the parties had subjected themselves to mutual obligations expressed in terms which required their taking the requisite steps to bring about a particular ownership position in relation to that which fell within the relevant contractually defined terms. Thus:
- (a)The promissory terms recorded in cll 4.1(d) and 4.1(f) applied to the entirety of the Phase One and Phase Two pathways of the Network, with the result that the parties had promised each other that:
- SLC would own the Title-Relevant Element in each Phase;
- PIPE would own all the infrastructure relating to the Off-Rail section of the Network, including all pits and conduits; and
- subject to the promise as to what SLC would own, to the fullest extent permitted by law PIPE retained all other rights of ownership in the Network.
- (b)SLC and PIPE had promised each other that each would obtain and maintain all “Authorisations” (namely all licences, declarations, permits, accreditations and approvals of any type) required for them to comply with, amongst other things, their mutual promises concerning ownership: see IRU Agreement cl 4.2(a)(iv) in relation to SLC and cl 5.1(c) in relation to PIPE.
- (c)The language used in the relevant contractually defined terms was apposite to encompass all of the final as-built pathways of the Network.
- Second, if, contrary to the view just expressed, some further agreement was required to bring about the position that the final as-built pathways of the Network were properly regarded as subject to the IRU Agreement and the WFS Agreement, I would be prepared to infer that such an agreement must have been made. An enforceable contract may be inferred when the manifest intention of the parties, objectively ascertained, evinces a tacit agreement with sufficiently clear terms, so long as the evidence positively indicates that both parties must have considered themselves bound by the agreement: see King Tide Company Pty Ltd v Arawak Holdings Pty Ltd  QCA 251 at  and .
- I am supported in reaching that finding by these considerations.
- First, the relevant context for any such agreement included the terms of the IRU Agreement and the WFS Agreement, including those identified in my discussion of the first juridical route. The relocation of Phase One was conducted at the same time as the installation of Phase Two and plainly the existing contractual arrangements governed the latter phase. Further, the context reveals the objective importance to both parties of the vindication of the contractual intention regarding PIPE having responsibility for the operation and maintenance of the Network once it was completed. Similarly in relation to the contractual intention concerning PIPE taking responsibility for meeting regulatory requirements pursuant to the arrangements governing those requirements. If that part of the Network which was laid in the Landcorp infrastructure was not regarded as subject to the existing contractual framework, there would have been no way to vindicate that intention.
- Second, the following exchange:
- (a)On 29 October 2007, PIPE emailed Strategic Directions on the subject of the “Springfield Land Corp – Sinnathamby Route” attaching a plan of the proposed fibre routes to the Polaris Data Centre and the World Knowledge Centre “as agreed” and requesting agreement. The email advised that once the “current project” was completed PIPE would have connected 72 fibres on each of the eastern and western Routes.
- (b)On 30 October 2007, Strategic Directions’ email response raised some matters of detail concerning the route, but confirmed that “The key point is that Polaris becomes the termination point of the ‘Legs’”.
- (c)By a reply email on 31 October 2007, PIPE responded that the proposal made sense, but added some further detail concerning the route.
- Third, the following allegations were pleaded by SLC and admitted by PIPE:
- (a)“Commencing in about late 2005, pursuant to [the IRU Agreement] and [the WFS Agreement], [PIPE] constructed, operated and maintained for the plaintiff, a 72-core fibre-optic cable network, along two (eastern and western) paths from the Brisbane CBD to the Springfield CBD (the "Network").”
- (b)“[SLC] funded and constructed (with the assistance of [PIPE]) for its own use, an additional section of the Network within the Springfield CBD connecting inter alia the World Knowledge Centre to Polaris Data Centre, by in or about September 2008 (the "Network Extension").”
- (c)“The Network Extension formed part of the Network” (a term which SLC’s pleading had defined as “a 72-core fibre-optic cable network, along two (eastern and western) paths from the Brisbane CBD to the Springfield CBD”).
- (d)“The Network is maintained by [PIPE] for and on behalf of [SLC].”
- Fourth, there is evidence that SLC appreciated the intention that PIPE should take ownership of that infrastructure and had communicated that intention. An email from SLC’s infrastructure manager to Strategic Directions dated 11 November 2008, which was forward to PIPE, provided, inter alia, as follows:
We also need to ensure PIPE take ownership of remaining dark fibre infrastructure along Sinnathamby Blvd, Centenary Highway and Augusta Parkway. Can you please discuss with PIPE.
- Fifth, PIPE provided “completion packs” to SLC on 27 April 2009 separately for each of the western and eastern pathways of the Network, in each case describing the pathway as extending to the Polaris Data Centre.
- Sixth, SLC subsequently sought and was paid by PIPE remuneration by reference to the assumption that the existing contractual arrangements covered the entirety of the cable network pathways, including the pathways to and from the Polaris Data Centre.
- The result is that both juridical routes justify the finding that the entirety of the Phase One and Phase Two pathways, including so much of the pathways as became connected into the Polaris Data Centre via cable being laid in the Landcorp infrastructure, were to be regarded as “the Network” and subject to the contractual arrangements expressed in the IRU Agreement and the WFS Agreement.
- And, as between SLC and PIPE, the mutual promises recorded in cll 4.1(d) and 4.1(f) concerning ownership of component parts of the Network applied without distinction between the part of the Network which was laid in the Landcorp infrastructure and the part which was not. All of the part which was laid in the Landcorp infrastructure would be regarded as within the Off-Rail section of the Network. Accordingly, SLC must be taken, as against PIPE, to have agreed that PIPE owned that infrastructure, and that SLC would obtain and maintain all “Authorisations” necessary to enable it to fulfill that agreement.
The construction of the Duplicate Network in November 2009
- In relation to the Duplicate Network, it was common ground on the face of the pleadings that:
- (a)at some unspecified time before July 2009, PIPE decided to install a network of fibre optic cable in the same pits and conduits in which the Network was located;
- (b)PIPE decided to install the network of fibre optic cable so as to supply access to its own fibre optic cable network to persons wishing to have access for the purpose of using that network between Brisbane and Springfield;
- (c)PIPE decided that it would compete with the Network by operating the network of fibre optic cable that it decided to install; and
- (d)in about November 2009, PIPE commenced and completed the installation of 216-core fibre optic cables along the eastern and western paths of the Network.
Optilinx did the work
- Mr Van Hecke of Optilinx was again involved in the performance of the installation of the Duplicate Network.
- The first approach from PIPE to Optilinx seems to have been an email of 15 July 2009 on the subject of “Springfield 216f Hauling & Splicing quote”. The email referred to hauling a new 216f in PIPE’s and SLC’s conduits “… from the rail at Goodna to Polaris and from where we breakout of Telstra at Boronia Heights to Polaris. Total distance is 13,710m on the West Leg and 21,500m on the East. We will allow for subduct in the SLC conduits for 1710m on the West and 1510m on the East”. The reference to the breakout of Telstra was a reference to the area of the eastern path near Hill Crest. The reference to allowing for subduct in the SLC conduits for 1710m on the west leg and 1510m on the east leg was a reference to the Landcorp infrastructure.
- Mr Van Hecke was involved with a number of meetings with PIPE staff concerning the project referred to as the “Springfield 216 fibre upgrade project”. To assist in the preparation of the quote, on 23 July 2009 PIPE emailed to Optilinx plans and diagrams said to contain “civils as builts as requested” dealing with the east route. Mr Van Hecke said that the plans so provided were PIPE plans from PIPE’s original civil build. For the western route, Optilinx was only provided a generic geographical line obtained from a special information services. Optilinx also used the “Dial Before You Dig” service in order to conduct the civil works necessary for the installation. That is a publicly available service which gives a user a line showing the position of a network by reference to a cadastral overlay of a map which identifies streets, houses and lots. It identifies where the underground network is by reference to a line which identifies position and pits, but which does not give detailed offset dimensions or alignments.
- PIPE accepted the Optilinx quote and Optilinx undertook the associated civil works, hauling the cable, splicing and testing. Mr Van Hecke said that Optilinx ended up constructing the project in just over three weeks. An internal PIPE email dated 11 November 2009 confirmed that the 216f cable on the eastern and western paths out to Polaris was complete as two weeks early and that Optilinx had done an excellent job.
- The Duplicate Network as so completed by Optilinx was not literally a duplicate of the Network because it was comprised of 216f cable, rather than 72f cable. And, notably, the Duplicate Network did not involve any new hauling of cable in the western Network path north of Goodna or the eastern Network path north of Hill Crest. As has already been recorded – see  and  above – PIPE already had its own cable on those paths. Indeed, the parts of the Network on those paths already involved sharing cable with PIPE.
- Mr Van Hecke also explained, that even though the Duplicate Network was constructed of a 216f cable, the last few hundred metres that went into the Polaris Data Centre was not of 216f. Optilinx only took 144 cores from either side into the Polaris Data Centre. The cables that went into the Polaris Data Centre just followed the original 72f cable of the Network through a building entry point (or BEP) on the basement 2 level of the Polaris Data Centre up into an internal distribution frame (or IDF) and terminated in a fibre termination panel. The cables were separately labelled and in a manner distinct from how the original 72f cable was labelled.
- Mr Van Hecke identified and explained two scope of work (SOW) documents that depicted that sequence of works. The first document he was taken to was that which applied to the eastern side of the build, from a joint near Hill Crest down to the Polaris Data Centre. The second document was that which applied to the western side of the build, from a joint near Goodna down to the Polaris Data Centre. Both documents were documents issued by PIPE which gave instruction to Optilinx as its contractor as to tasks it was to perform in a format which:
- (a)had a heading which gave a code for the job and some details of the nature of the job;
- (b)identified contact details for the responsible PIPE supervisor;
- (c)gave some other instructions introduced by the words “Please supply”, which related to task details which followed and which contemplated that the recipient contractor would eventually return the document ticking boxes to indicate that the tasks had been performed; and
- (d)which gave further task details on a joint by joint-by-joint basis, including details as to installation, labelling and splicing, by reference to an attached “line diagram”.
- Both documents were in the same format. It suffices to explain by reference to an excerpt from the SOW document for the east build, as set out below:
- Some of the instructions in the SOW document identified that Optilinx was also to perform 12 splices as per “line diagram”. As will next appear, the instruction to perform splices was not an instruction to splice the 216f Duplicate Network cable into some part of the existing 72f Network cable. Rather, it was an instruction about splicing sections of the 216f cable to other sections of the 216f cable, as part of the process of installation of that cable.
- I observe, parenthetically, that no line diagram was attached to either SOW document as they appeared in the Court Book. An undated line diagram had been inserted in the Court Book as a separate document immediately following each SOW document. Each was in similar form. The first one was as follows:
- I am not prepared to find that those two diagrams were the respective line diagrams attached to the SOW documents. Although they had been produced by PIPE in compliance with its disclosure obligation, and I could accept that they were “Fibre Diagrams” because that was how they were described, counsel for SLC did not take Mr Van Hecke to them or seek to have him identify them; explain what they meant; or identify whether the information which might be inferred from them could be regarded as a reliable record of the works which Optilinx performed in compliance with the SOW document. This failure was notable and inexplicable, given that, as will shortly appear, the interpretation and reliability of analogous fibre diagrams formed an essential part of SLC’s trespass and conversion case.
PIPE gave no instruction to splice Duplicate Network cable into other cable
- In his evidence-in-chief Mr Van Hecke explained that one does not haul the cable through conduit all in one length. It is necessary to haul a certain amount of cable through conduit and then splice it to another amount of the same cable and so on.
- Mr Van Hecke was cross-examined on how it could have come to pass that some part of the Duplicate Network cable had been spliced into the Network cable, if that had in fact happened. His evidence was that it could never have occurred deliberately and, certainly, PIPE had not instructed Optilinx to do so:
One other topic. The 216 fibre cable – has your company been responsible for whatever splicing has happened with that cable since it was installed?---To the original installation, yes. For every damage that’s occurred under our O&M contract, yes, for the provision of additional services. So as I discussed, we first did the original build and pressed four tubes and spliced one tube, basically. As the markets become flooded within TPB of additional contractors, we did used to pretty much do every Pallara service, but that’s certainly not the case at this point.
All right. Can I ask you this, is it the case that you were never instructed by PIPE, to splice any part of the 216 fibre cable, into the existing 72 fibre cable?---Please repeat your question.
Yes. Is it the case that you were never instructed by PIPE to splice any fibre in the 216 fibre cable, to any fibre in the 72 fibre cable, as they were to be kept distinct, is that right?---Correct. So as I said, we went through the same joints, but the 72 was spliced to the 72, and the 216 was spliced to the 216.
So that if it was the case that for a section, the 216s been spliced to part of the 72, that must be a mistake. Is that right?---There was one job that was a damage repair, where we replaced both cables with one section of 288 – this is in the last couple of years. It was noticed by the GIS section, and by Zelco. And then it was rectified as two separate cables.
I’ll ask you my question again. If you’ve got the separate 216 and the separate 72, as we have generally, if it’s been found that, for some section of the length, the 216s been spliced into the 72, that’s a mistake, isn’t it?---I can’t imagine why that would happen. That would be a mistake, yeah.
Yeah. You imagine how it would happen?---Large contract to base within TPG, so provisioning of new circuits, they may have transposed from cables. Imagine these joints now have a 216 and a 216, and a 72 and a 72, plus possibly additional cables going elsewhere. So they may have simply grabbed the wrong fibres, and then they will have had to grabbed those wrong fibres again at some point down the track. Maybe it was done by us in a damage situation, but I doubt it, because we’re quite good at knowing what’s what with the two cables. I’d be surprised, but it’s not my network. We stopped being a solid contract back in 2010.
- I accept his evidence in relation to the work which Optilinx did. I find that PIPE did not instruct Optilinx to splice the Duplicate Network which Optilinx constructed by November 2009 into the Network. I find that an experienced contractor found it difficult to imagine why an instruction which would involve splicing new cable into an existing operative network would be given.
Other relevant post-contractual events
Arrangement for access to the Polaris Data Centre
- Mr Van Hecke explained that PIPE arranged for the physical access to the Polaris Data Centre to allow Optilinx to do the installation of the Duplicate Network cabling. PIPE did so by emailing Byron Wallace (the Strategic Directions consultant then in charge of the Polaris Data Centre) arranging access for both installation and testing once installed.
- The documentary evidence revealed the following.
- On 2 November 2009 at 11:43am, Andrew Perkins of PIPE (the “Projects Team Leader – Northern Region”) sent an email to “[email protected]”, which was a group email address set up by the Polaris Data Centre for the purpose suggested by the wording of the address. The email was copied to a PIPE group email address, to Mr Wallace and also to David Goss, who was the facilities manager for Dalkia Corporation, which had the contract for the management of the Polaris Data Centre facility at the time. The email stated that it had attached a “Polaris access request form for this week from the 4th to the 6th of November” and requested any issues to be addressed by contacting the author directly. The attachment was a Dalkia Corporation “Service Provider / Contractor Access Request” form. PIPE requested access for 5 and 6 November 2009. It had completed the part of the form which requested the insertion of the reason for access request in these terms (emphasis in original):
Where: Comms lead-in pits outside Polaris and BEP Rooms 1 & 2 & IDF1&2 on level 1. SOW: As per discussion with Byron Wallace, Optilinx will be hauling fibre into IDF1 & IDF2 via the BEP rooms and external pits & pipe and left in the PIPE racks for termination at a later date.
- On 2 November 2009 at 11:46am, Mr Wallace responded to the email by sending his own email to “access.req[email protected]”, copied to Mr Goss in these terms:
Pipe and I have discussed this fibre cable. It represents the start of the greater Springfield technology infrastructure.
Please allow access as required.
- Mr Perkins of PIPE responded a few minutes later:
Just to clarify, these cables are to be installed as PIPE Networks infrastructure only at this stage as no agreement has yet been made in regards to the greater Springfield Technology infrastructure.
This is to provide additional options to Springfield for future capacity.
As discussed with Byron. It will be terminated in the existing carrier rack containing the existing PIPE/Springfield fibre.
- SLC called Mr Wallace at the trial. He explained that part of his job with Strategic Directions was to approve access into the Polaris Data Centre. It was not part of his duty to receive LAAN notices issued under the Telecommunications Act. He was not able to recall receiving the email exchange referred to at  above. He speculated that the terminology “greater Springfield technology infrastructure” was a reference to “the start of the surrounding areas of Springfield – for example, the schools, the commercial precincts, the residential precincts – and starting to put fibre-optic cable to those precincts” and that the use of that terminology was not consistent with any concepts such as “PIPE running a duplicate … 72 fibre-optic network into Polaris”. Similarly, he was asked to speculate on the meaning of the last sentence quoted at  above and suggested that it meant the cable would be put into Polaris Data Centre, left coiled in a rack, for future capacity. He said that he was not aware that PIPE was in fact building a duplicate network and if that had come to his notice he would not have approved access but would have escalated it because that would have been something completely out of the normal. He said he would have escalated it to Mr Andrea of Strategic Directions or possibly Mr Schroor of SLC.
- I would not attribute any weight to Mr Wallace’s evidence as to the meaning of any part of the email chain, or as to what he said he would have done in hypothetical circumstances. My clear impression of him was that he had no recollection of the circumstances and it seemed to me that he was giving answers in order to assist SLC’s case. As to the meaning of the email chain, I thought that it was obvious from the terms and context of the emails and without his commentary that:
- (a)the reference to Springfield was to the place rather than to SLC or any related corporation;
- (b)by the emails PIPE had plainly communicated that it sought access to install new cable into Polaris for its own purposes and not for SLC’s purposes;
- (c)the reference to termination in the existing rack was simply the use of technical language identifying connection; and
- (d)the emails would not properly be interpreted as indicating any intention by PIPE not to use the new cable for its own purposes.
- Indeed, it was established during cross-examination that Mr Wallace must have appreciated that PIPE was notifying of new cable coming in and that the cable was additional and not in replacement of the existing cable. It was established that he must have appreciated that PIPE had notified that the cables were not being installed on behalf of SLC. The relevant passage was as follows:
MR COUPER: All right. And if we come to the email at the top of the page, from Andrew Perkins to you. He says, “Just to clarify, these cables are to be installed as PIPE Network’s infrastructure only at this stage.” You understood that to mean that these cables were not being installed on behalf of Springfield Land Corporation, correct?---Correct.
And you knew, is this right, that there was no agreement between PIPE Networks and Springfield Land Corporation about how those cables might be used in the future, correct?---Correct.
And do you say that that’s where you left it, knowing that PIPE was running in new cables to the data centre and knowing it wasn’t doing it for Springfield Land Corporation, you thought that’s fine, no problem?---Correct.
Right. And is that because you had no belief there was any limitation or constraint on PIPE running its own new cables into the data centre if it chose?---Correct. If the access is approved, they were allowed.
- The upshot of the foregoing is that when PIPE chose to seek access to the Polaris Data Centre for the Duplicate Network cables its conduct involved:
- (a)making the request for access by filling out what was apparently the appropriate form;
- (b)doing so in a way which transparently indicated that the cables the subject of the request were for its own purposes and not for SLC’s purposes;
- (c)sending the request to the specific email address apparently set up for the purpose of receiving such forms; and
- (d)obtaining the access which it sought.
- SLC’s case attributes misleading conduct and trickery to PIPE’s conduct. I do not.
SLC becomes aware of the Duplicate Network in 2011
- In 2011, SLC discovered that PIPE had underpaid it to the tune of $488,000 in respect of monies earned via the Network. The circumstances in which that discovery was made are relevant to the question when SLC first became aware of the Duplicate Network.
- I turn to what the evidence reveals.
- By email sent 19 January 2007, PIPE advised SLC that PIPE would prepare a monthly reconciliation that detailed billing for links on SLC fibre, and also advised that going forward PIPE would prepare the reconciliation and forward to SLC. Multiple documents entitled “Springfield fibre report” were contained in the Court Book.
- By email to Strategic Directions dated 8 August 2011, PIPE sent to SLC an updated “Fibre Register” which contained PIPE’s “notes of our findings across our various billing and support systems”. The email suggested that they should meet once Strategic Directions had had a chance to review the file. Amongst other things, the attachments to the email:
- (a)raised question marks in relation to circuits CQ5094, CQ5095, CQ5108, CQ5109 and CQ5250, which, it will appear, were subsequently identified as circuits for which PIPE should have paid SLC but had not;
- (b)identified three other fibre circuits between the Polaris Data Centre and Brisbane (CQ5133, CQ6026 and CQ6027), which had been “provisioned” on SLC fibres “in error” and which should be on “PIPE fibres”, thereby apparently confirming the existence of PIPE fibres running between the Polaris Data Centre and Brisbane.
- By email sent 16 August 2011 (copied to Mr Sharpless and also to Fiona Nelson, one of SLC’s in-house counsel), Strategic Directions on behalf of SLC advised PIPE in these terms:
In regards to the billing issue uncovered in the recent audit of Springfield's diverse Dark Fibre network connection to Brisbane, the outstanding payment of $488,000 (ex-GST) has been discussed with Springfield Land Corporation's Managing Director.
Springfield Land Corporation requires payment of $488,000 ex-GST within 30 days. Payback over an extended period has been discussed and rejected. I have attached the calculations for reference, and note the ongoing monthly billing cycle is to be updated to reflect the services below.
We have also drafted some changes for the IRU as discussed, and are reviewing the Wholesale Services Agreement. We will present these changes to Pipe Networks pending internal legal review at Springfield.
[reconciliation table set out]
Please let me know if SLC need to raise an invoice for the amount noted, or whether this email is sufficient to arrange payment.
- I reproduce the reconciliation table omitted from the quote in the previous paragraph below. It reveals there had been an apparent omission in the reconciliations of five particular fibre circuits for almost two years. The $488,000 concerned reflected a fee of $4,000 per month for each of the circuits.
- PIPE responded on 18 August 2011 by requesting SLC to send a tax invoice in the amount concerned plus GST to cover all fees for these services to the end of August 2011. The email advised that PIPE would ensure that the monthly report would be updated for the services concerned also so they fell in line with the normal process from September onwards.
- The requested invoice was provided by email on 22 August 2011 and paid by PIPE on about 20 September 2011.
- SLC suggested that PIPE had represented that it would -
- (a)prepare a monthly reconciliation that details billing links on SLC’s fibre; and
- (b)bring the billing of those additional customers serviced by it and not already included in the SLC’s monthly billing in line with the arrangement between SLC and PIPE under the IRU Agreement and/or the WFS Agreement.
- The former can be accepted, but that representation went nowhere. The latter was an attempt to tease out from the exchange some sort of representation that PIPE would effectively communicate to SLC details of customers which PIPE had serviced on the Duplicate Network. No such representation was made. An error was identified and corrected in a way which the parties found satisfactory.
- More than three years later, on 22 January 2015, SLC’s solicitors wrote to PIPE giving to PIPE a notice of dispute under the dispute resolution clauses in the IRU Agreement and the WFS Agreement. The letter recorded SLC’s instructions. It was tendered by PIPE without objection by SLC. Relevantly, the following instructions were recorded (bold print and underlining in original):
Breach - Underpayment
We are instructed that your company previously breached the IRU Agreement and WFS Agreement in the following manner:
- By letter dated 9 February 2011, your company advised Strategic Directions (noting an undocumented meeting between your company, our client and Strategic Directions purportedly held on 4 November 2009) that it planned to install "additional cabling to the Polaris Data Centre for its own private purposes". In that letter your company confirmed it was committed to its partnership with our client. Our client did not agree to the installation of additional cables.
- An August, 2011, Strategic Directions, on behalf of our client, commissioned a cable and service audit of the Network (2011 Audit).
- In the 2011 Audit, our client discovered that your company:
- (a)had built duplicate cabling in the pits and conduits where the Network was constructed and installed (duplicate network);
- (b)appeared to have, since August 2009, been connecting customers to the duplicate network instead of the Network;
- (c)charged fees to those customers and did not remit fees to our client, in breach of the IRU Agreement and the WFS Agreement (underpayment breach).
- Over time as a result of this and in breach of the IRU Agreement and WFS Agreement, your company failed to remit the sum of $488,000 (plus GST) to our client.
- As a result of the 2011 Audit, Strategic Directions discovered the underpayment breach and our client brought it to your company's attention.
- After some discussions, your company conceded that it was required to remit the sum of
$488,000 (plus GST) to our client for its use of the Network in accordance with the terms of the Agreements.
- In September 2011, your company repaid the sum of $488,000 (plus GST) to our client.
Our client's current complaint
- In August 2014, Strategic Directions, on behalf of our client, commissioned a cable and service audit of the Dark Fibre Network (2014 Audit).
- The 2014 Audit has revealed that there are four Pipe Networks labelled cables that appear to terminate outside of the Polaris Data Centre. There are a total of 432 cores in the four cables. A considerable number of those cores are in use.
- Attached to this letter is a diagram setting out the Pipe Networks Cable identifier, the respective number of cores and the cores in use (Patched) as compiled by Polaris Data Centre personnel. ln summary, the diagram shows:
- It is clear from the 2014 Audit that your company installed two 144 core cables, one on each of the western and eastern legs, in addition to the two 72 core cables installed for our client under the IRU Agreement (duplicate cabling).
- In breach of the IRU Agreement and WFS Agreement, your company has:
- (a)constructed the duplicate cabling;
- (b)used the duplicate cabling without remitting any revenue to our client.
- In addition, your company:
- (a)installed the duplicate cabling in the pits and conduits constructed for the Network, which our client paid for; and
- (b)continues to charge our client for the full maintenance of both the eastern and western network paths, for which our client does not have exclusive use because of your company's duplicate cabling.
- Mr Sharpless said that he did not know that the Duplicate Network was being built at the time it was built in 2009. He said that he did not become aware it had been built until sometime in 2014. I accept the first proposition, but am not prepared to accept the latter. I observe:
- (a)In evidence-in-chief, he said that it was he who had first noticed that SLC was not receiving as much income from the Network as had been hoped because income had plateaued. He said he had a discussion with Strategic Directions’ Mr Andrea and instructed him to go and check that SLC was being paid for the people who were on its fibre. He said he recalled Mr Andrea telling him that there were in fact customers on SLC’s fibres for which SLC hadn’t been paid. He had a memory of receiving the email which demanded payment referred to at .
- (b)In evidence-in-chief, he said that in 2014, SLC employed Paul Wyatt to manage the Data Centre and the dark fibre relationship. He remembered that Mr Wyatt had drawn to his attention to what PIPE had done. He said that Mr Wyatt “just sort of confirmed what I’d sort of suspected”. At some point in late 2014, SLC engaged the solicitors who wrote the letter I have quoted above. The letter was written on Mr Wyatt’s instructions and Mr Sharpless said he did not read it before it was sent.
- (c)In cross-examination, Mr Sharpless confirmed that he had instructed Mr Wyatt to investigate what had happened, to find out all he could. He said that Mr Wyatt was the person who was looking after this within the Springfield Group at the time the investigation was done. The result of that investigation was the letter from the solicitors dated 22 January 2015. Mr Sharpless did not suggest that the facts recorded in the letter about SLC knowing of PIPE’s duplicate cabling in 2011 were wrong. The relevant passage was as follows:
So the statement as plain, Mr Sharpless, that your company found out in 2011 of the building in 2000 – sorry, of the building of the duplicate network and the fact that since August 2009, customers had been connected to it; correct?---Well, the statement says that, but I certainly wasn’t aware of that.
And can we assume you’ve made no investigation to find out who within your organisation was aware of it?---Well, I’ve had my suspicions, but as I said, until I had Paul’s report and what I would regard as proof, I didn’t do – I didn’t turn my mind to it for a long period of time. I had a lot of things that I was involved in at the time. This, as I said earlier, the dark fibre business is a small component of what we do. I’m not across everything that happens in our business. There were others who look after things, and it was Paul who had briefed the solicitors, and that caused this letter to be written. I didn’t write this letter, they did.
- (d)Mr Sharpless was taken again to the email of 16 August 2011 which demanded payment referred to at , which had been copied to him and which also stated:
We have also drafted some changes for the IRU as discussed, and are reviewing the Wholesale Services Agreement. We will present these changes to Pipe Networks pending internal legal review at Springfield.
- (e)Mr Sharpless accepted that if the view in 2011 was that the problem was just a billing issue, there would be no conceivable basis for SLC to be contemplating changes to the IRU Agreement and also accepted that Mr Andrea did not have authority to propose amendments to the IRU Agreement without first consulting Mr Sharpless. I found unpersuasive his further evidence that he had no reason to pay attention to the fact that Mr Andrea had copied him in on communication to PIPE which made reference to such matters, or that he suspected that Mr Andrea had found out about the Duplicate Network but just not told him.
- (f)I do not accept Mr Sharpless’ evidence that he did not know about it until 2014 when he had the “proof” of Mr Wyatt’s report. In 2011, he may not have become aware of the extent of cable which had been built by PIPE or that it had been built in 2009, but I think it is likely that he was in fact told about the Duplicate Network but that he did not turn his mind to it “for a long period of time”, as he put it.
- Ms Sinnathamby was also asked questions on this subject matter. I observe:
- (a)She said in chief that at no time during any of those discussions concerning the billing error in 2011, did it come to her attention that, in fact, what was going on was that PIPE was running a duplicate network. Although she was not sure of the exact date, she said that the first time she heard that PIPE had, in fact, built a duplicate network and was operating it was around 2014. She said that her reaction when she first heard it was that she was mortified. She intimated she had reacted with disbelief.
- (b)Ms Sinnathamby was cross-examined about the reference in the email of 16 August 2011 to proposed changes to the IRU Agreement with a view to exploring whether the proposed changes were a response to having found out about the Duplicate Network at some stage much earlier than 2014. Although she acknowledged that any proposed changes would inevitably have had to be referred to her, she said she was unable to recall any relevant details. Ms Sinnathamby’s evidence was in the following passage (italics in original):
All right. Can you look, please, at the third paragraph of that email:
We have also drafted some changes for the IRU, as discussed, and are reviewing the whole services agreement. We will present these changes to PIPE Networks, pending internal legal review at Springfield.
Were you aware in August 2011 that there was a proposal for changes to the IRU agreement?---I cannot recall.
You cannot recall. Were you aware of there being an internal legal review of the IRU agreement
- - -?---I - - -
- - - and wholesale fibre services agreement as at August 2011?---I – I can’t recall.
Were you aware of any circumstance as at August 2011 which would warrant somebody thinking, “Gee, we better think about amending the IRU agreement”?---I cannot recall.
Could it be that this was the circumstance, Ms Sinnathamby, that it had been discovered that PIPE Networks had built its own duplicate network and was using it for customers?---I – I have no recollection of that at all.
Does that mean it’s a possibility that you can’t recall it?---I just cannot recall that being discussed at all.
And is it your evidence you can’t recall any reason why anybody within the Springfield companies would be discussing what the – have gone to stage of drafting changes to the IRU; is that right?--I just don’t remember this at all.
- (c)As I have mentioned earlier, my overall impression of Ms Sinnathamby was that she sought to give honest responses to the questions asked of her. The quoted passage was the only part of her evidence in which the way she gave her answers gave me concern as to the honesty of her responses.
- (d)On balance, and given my overall impression of her, I am prepared to accept that at the time she gave evidence before me, she had no recollection of the matters about which she was questioned of in the passage above. The exchange did, however, cause me to have sufficient doubts as to the reliability of her assertion in chief recorded above as to when she first became aware of the Duplicate Network, that I would not accept it as a sufficient basis to find that SLC first became aware of the Duplicate Network in 2014.
- I find that in August, 2011, Strategic Directions, on behalf of SLC and in response to concerns expressed by Mr Sharpless, commissioned a cable and service audit of the Network. That audit led to the identification of a billing discrepancy. But it also led to SLC discovering in 2011 that PIPE had built duplicate cabling in the pits and conduits where the Network was constructed and appeared to have since August 2009 been connecting customers to the Duplicate Network instead of the Network. There is no reason not to give weight to the admission of that fact recorded in SLC’s solicitors’ letter of 22 January 2015. In particular I have not accepted the relevant aspects of the evidence of Mr Sharpless and Ms Sinnathamby which might have persuaded me to the contrary. One might speculate from the reference to the discovery of the fact of the Duplicate Network led to Strategic Directions proposing the making of amendments to the IRU Agreement, as referred to in the email of 16 August 2011. It is possible that that was so. But absent further explanatory evidence as to what was concerned, I think speculation is as high as that proposition may be put.
- Documentary evidence produced in 2011, including the email of 16 August 2011 suggested that the 2011 audit also identified a billing error involving an apparent omission in the reconciliations of five particular fibre circuits for almost two years. SLC sought and received payment from PIPE of $488,000 reflecting a fee of $4,000 per month for each of the circuits. But there was no suggestion in the 2011 documentary evidence that the circuits concerned were not circuits on the Network. The solicitors’ letter of 22 January 2015 suggests that the $488,000 may have been connected to the fact that PIPE had connected its customers to the Duplicate Network instead of the Network. But I am not prepared to make a finding that that was so absent some real and detailed explanation of the proposition by reference to the 2011 documentation. SLC did not provide such an explanation.
- It will be necessary to return to the significance of the foregoing findings when considering SLC’s post-contractual misleading and deceptive conduct and unconscionable conduct case.
PIPE refuse to negotiate the terms of an extended Term of the IRU Agreement
- It was common ground between the parties that unless the Term of the IRU Agreement was validly extended pursuant to cl 13, its initial Term expired on 16 February 2021.
- Clause 13.1(b) permitted SLC to extend the initial Term by a period of three years “on written request … to [PIPE] not less than 3 months prior to the end of the initial or any renewed Term”.
- By letter dated 22 May 2020, SLC’s lawyers gave notice to PIPE’s lawyers in these terms:
This letter is a notice, pursuant to clause 13.1(b) of the IRU Agreement, to extend the Term of the IRU Agreement by a period of three years.
If PIPE wishes to negotiate any variation to the existing terms of the IRU Agreement for the extended Term, Springfield will participate in those negotiations, in good faith, as required by clause 13.1(c). Could you please advise whether PIPE wishes to negotiate with Springfield about any such variations.
- By letter dated 21 October 2020, PIPE’s lawyers responded in these terms:
Clause 13.1(c) of the IRU Agreement … is uncertain and therefore unenforceable.
Our client accepts your client’s assertion that the term of the IRU expires on 16 February 2021.
Our client will proceed on the basis that it is released from its obligations pursuant to the IRU (except those which are expressed to survive expiration) from 16 February 2021.
Relatedly, and for completeness, we observe that the Wholesale Fibre Service Agreement between PIPE and SCG dated 7 November 2005 expires on 7 November 2020.
SLC builds its own network
- SLC caused to be constructed a network between Brisbane and Springfield with two legs of 720f each, commencing in late 2018.
- Mr Gibson, who was the head of data centres for SLC and who commenced on 6 January 2018, gave evidence that as at the end of 2019, SLC’s 72f Network was at about 98 % to 99 % capacity. He was part of a team which put together a strategy that the Polaris Data Centre should grow and that SLC should build a new network. He said that the strategy was put together in a submission to the board of directors in about October or November 2018.
- He said that there were two “fronts” driving the strategy:
- (a)the existing 72f Network was full; and
- (b)he wanted to build a network to connect to other data centres to enable a higher percentage of competitors to use the Polaris Data Centre.
- His evidence was that as at November 2020, the construction of the new 720f network was very close to finished.
- Mr Sharpless explained that PIPE had put SLC on notice that the agreements were not going to be extended and that was the major factor in SLC making the decision to build its own network. He said SLC took the view that it needed to protect its infrastructure (particularly the Polaris Data Centre) and its customer base, and sought to build a new network free of having any further involvement with PIPE. Another factor involved in that decision, but not the major factor, was the fact that back in 2018 SLC’s existing 72f Network was at about 98% or 99% capacity.
The post-contractual misleading and deceptive conduct
The impugned conduct
- SLC’s pleaded case was that by the time the billing error was brought by PIPE to SLC’s attention, PIPE had represented to SLC that PIPE:
- (a)did not intend to, and would not, compete with SLC as a telecommunications asset owner who would supply competitive fibre cable capacity to wholesale suppliers and retail customers of telecommunications services to Springfield;
- (b)would not seek to solicit any customer or potential customer of the Network;
- (c)would not do anything to detract from, and would work to maximise, SLC’s revenue earning capacity from the Network;
- (d)would obtain and hold all necessary nominated carrier licences for the benefit of SLC.
- These representations were said to be founded on pre-contractual conduct; the terms of the IRU Agreement and the WFS Agreement; and the events surrounding the discovery of the billing error. I have already expressed my view as to the significance of these matters. I accept PIPE’s submission that I should find that no such representations were made.
- There was a suggestion that the post-contractual representation case could be supported by the proposition that the representation by silence continued post-contract. No such representation existed pre-contract so it could not continue post-contract.
The causation hypothesis
- SLC’s causation hypothesis in relation to the alleged misleading and deceptive conduct postcontract turns on what SLC said would have happened had it known about the Duplicate Network at an earlier stage than 2014. It argues that if it had known it would have taken steps to stop PIPE taking advantage of the Duplicate Network.
- Support for this was said to be found in the evidence of Ms Sinnathamby and Mr Sharpless.
- In this regard evidence was adduced through Mr Sharpless addressing multiple counterfactual scenarios.
- Mr Sharpless said that he did not know that the Duplicate Network was being built at the time it was built in 2009. He said that if he had known about that in 2009, he would have spoken to SLC’s lawyers and sought legal advice to decide what the best course of action was. If SLC’s lawyers had advised that one of SLC’s options was commencing proceedings for an injunction and explained the requirement to offer the usual undertaking as to damages, he would have considered that option. If he was advised that another option might be to exercise rights under cl 10.2 of the IRU Agreement to issue a request to upgrade Fibre Capacity to “fill up the conduits with cables for [SLC]”, he said he would have considered that course also. He then embraced with enthusiasm the proposition that he would have agreed to spend $2,600,000 to achieve that outcome.
- I do not accept that merely knowing that the Duplicate Network was being built at the time it was built in 2009 would have caused SLC to act in the way posited. That is gainsaid by the finding I have made concerning SLC’s actual inaction for years after 2011, even though it knew from that time that PIPE had built duplicate cabling in the pits and conduits where the Network was constructed and installed and had been connecting customers to the Duplicate Network instead of the Network. What that means is that at least in 2011, SLC knew that PIPE had done the very thing which would, in the counterfactual world which suited SLC’s case have caused it to take immediate steps against PIPE, but in the real-world SLC chose to do nothing about it for more than three years.
- SLC contends that in the course of laying the cable into the Polaris Data Centre, PIPE engaged in further acts of misleading and deceptive conduct which had the result that SLC had not realised that the Duplicate Network was being laid until years later, with the result that it lost the opportunity of preventing the connection of the Duplicate Network into the Polaris Data Centre. But I have found that PIPE’s conduct in that context was not misleading and deceptive and that it obtained permission by using the processes which had been established for that course.
- That Mr Sharpless and SLC would have considered advice given is not difficult to accept. What I do not accept is that part of his evidence which suggests he would have done any more than simply consider advice in 2009. That is because the questions were not premised with any proposition concerning the merits of SLC’s case or what the hypothetical advice might have been in that regard. The enthusiasm to give the affirmative to the counterfactual – when allied with concerns I have previously expressed as to his reliability in this area – suggested to me that he was answering in the affirmative because he believed that would assist SLC’s case. The extent to which I accept Mr Sharpless’ evidence addressing what would have been SLC’s conduct in the counterfactual world is limited to his evidence that he would have considered legal advice given to him if he had sought it.
- It remains to note that, as I did in relation to the pre-contractual misleading and deceptive conduct case, I take into account the fact that SLC did not seek to adduce any evidence from Mr Sinnathamby. I infer that his evidence would not have assisted SLC in this part of its case.
- The result is that I am not persuaded of SLC’s causation hypothesis.
- This part of SLC’s case must fail also.
The breach of contract case
- In my view, when PIPE constructed and used the Duplicate Network and it was simply taking commercial advantage of the ownership rights which it had bargained for and which I have described in detail earlier in these reasons. There was no express term of either the IRU Agreement or of the WFS Agreement which expressly constrained it against so doing.
- SLC argued that, nevertheless, PIPE must be regaarded as contractually constrained against constructing and operating a competing duplicate network without SLC’s consent (or without at least notifying SLC of its plans) either as a matter of the proper construction of the particular aspects of the contracts concerned or by the implication of relevant terms. The proper construction of the relevant express terms was contested. The existence of many of the implied terms was also contested. The question of breach was also contested.
Alleged breach of implied terms
The alleged Non-Occupation Term.
- SLC suggested that a term to be implied into the IRU Agreement was that PIPE would not use or occupy any of the Network infrastructure (including the pits and conduits), or the space available within the conduit housing the Off-rail section of the Network, during the Term (the Non-Occupation Term). It argued that the space concerned was to be available for requests by the plaintiff to upgrade the Fibre Capacity of the Network pursuant to clause 10.2 of the IRU Agreement.
- SLC first contended (and PIPE denied) that the term was to be found in the language of the IRU Agreement, read as a whole and read with the WFS Agreement. But there is nothing in the language of either agreement which supports the proposition that the IRU Agreement should be construed as containing any such term. Indeed, the proposition that PIPE has promised to make space available within the conduit for the Term of the agreement in case SLC might some day want to use that space is contrary to cl 12.3 which provides (emphasis added):
Without limiting clauses 12.1 or 12.2 and except as otherwise expressly provided in this agreement, any express or implied warranty as to the quality, availability, reliability or other technical specification of the Network (or any part of it) or any facilities associated with the Network is, to the extent permitted by law, excluded.
- When one is considering the language of the contract, the real argument was whether PIPE should be regarded as implicitly constrained against conducting itself in the way contended because so conducting itself would necessarily render impossible of performance the obligations imposed on PIPE by cl 10.2. Or, to look at it from the point of view of SLC, PIPE should be regarded as implicitly constrained against conducting itself in the way contended because so conducting itself would necessarily render SLC’s rights under cl 10.2 nugatory or worthless. That argument must fail for at least three reasons.
- First, it proceeds by an assumption that cl 10 imposed an obligation on PIPE actually to perform any work the subject of an “Upgrade Request Notice”. But for the reasons I explained at  above, the clause does not impose any such obligation.
- Second, the first obligation imposed on PIPE by the clause is the obligation to provide a written estimate of costs and delivery timing within 21 days of receipt of the notice. Obviously, that estimate of costs and time would have to be prepared by reference to whatever state of affairs existed at the time of receipt of the Upgrade Request Notice and which would affect the assessment of the costs of performing the works the subject of the notice and of the time which would be taken to perform the works. But there is no reason to think that the impugned conduct would render that obligation impossible of performance, so as to give rise to an implicit constraint on PIPE’s ability to use space in the conduit which it owned. The process of estimation would simply take into account the fact of the work which had been done by PIPE in relation to the conduits which it owned and whatever impact that work had on the proper assessment of costs and time. I make the following observations:
- (a)Having regard to the defined terms used in cl. 10.2, an Upgrade Request Notice is a request to upgrade “Fibre Capacity” as defined, namely “the 72 core fibre optic capacity between the Network Access Points contained in each Phase of the Network”.
- (b)PIPE admitted that the Fibre Capacity of the Network could be upgraded by hauling additional fibre optic cable or cables and that the words "upgrade the Fibre Capacity of the Network" in clause 10.2 should be construed accordingly.
- (c)Let it be assumed, for the sake of analysis, that during the contract Term SLC had issued an Upgrade Request Notice that the 72-core fibre optic capacity be upgraded by requiring an additional Fibre Capacity of 720 cores. PIPE’s obligation would then be to prepare an estimate of the time and cost necessary to bring about such an upgrade to Fibre Capacity.
- (d)The estimation process would require a consideration of the costs of bringing about that result which would in turn require consideration of how an additional cable might be hauled between the Network Access Points contained in each Phase of the Network.
- (e)To comply with the notice, PIPE would have to work out the cost of bringing about that result, however it could be achieved. One option inevitably to be considered would be the costs of hauling the cable through the existing infrastructure (in the west (1) Queensland Rail conduit north of Goodna and (2) conduit owned by PIPE the remaining part of the path, and in the east Telstra lease conduit north of Hill Crest and conduit owned by PIPE the remaining part of the path), whatever that cost was. But, if, at the time the request was made, the requested upgraded Fibre Capacity could not be accommodated by the Queensland Rail conduit, or the Telstra lease conduit, or PIPE’s conduit (or, for some reason, was rendered more difficult and costly of performance), PIPE’s task would be to work out the time and cost of complying with the request even if it had to be performed in some other way, perhaps by installing additional conduit. Once it responded to the request by providing the estimate, it would have complied with its obligation.
- Third, the only other obligation arguably imposed by the clause was the obligation to agree the costs and delivery timing. If it were necessary to do so I would accept PIPE’s argument that, consistently with the reasoning of McMurdo J (as his Honour then was) in Baldwin v Icon Energy Ltd  1 Qd R 397, that promise is an unenforceable agreement to agree, so that SLC does not actually have any valuable right under this clause. However, I do not think that point needs to be determined. SLC contended that the defects in the wording of the clause could be remedied by the implication of a term requiring the parties to negotiate in good faith. Let it be assumed, for the sake of analysis, that SLC’s argument is correct. The important point is that there would be no reason to think that PIPE’s conduct rendered that obligation impossible of performance, so as to give rise to an implicit constraint on PIPE’s ability to use its ownership rights to its advantage. The negotiation would simply take place by reference to the circumstances which then existed, including whatever was the appropriate estimate of time and costs necessary to achieve the additional Fibre Capacity requested and having regard to the matters referred to in the preceding paragraph. If an agreement was reached, then PIPE would become obliged to do that which was necessary to achieve the additional Fibre Capacity. If not, then it would not. But if cl 10.2 must be taken to include an enforceable obligation to negotiate in good faith, that obligation is not rendered impossible of performance if at some time prior to the request being made, PIPE has used the infrastructure which SLC agreed that it owned (or, for that matter, Queensland Rail, or Telstra had done something which meant that their conduit could not be used).
- Next, SLC contended (and PIPE denied) that the term was to be implied as a matter of fact because it:
- (a)was reasonable and equitable;
- (b)was necessary to give business efficacy to the contract;
- (c)was so obvious that it went without saying;
- (d)was capable of clear expression; and
- (e)did not contradict any express term of the IRU or the WFS Agreement.
- The implication of terms in contracts in this way was described by the High Court in Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 at 185  as implication “in fact or ad hoc to give business efficacy to a contract”. The reasons expressed by SLC are an articulation of the Codelfa tests.
- The suggestion that the term should be implied on such a basis must fail for two reasons.
- First, contrary to SLC’s contention, the term does not meet the Codelfa tests. In Campbell v Backoffice Investments Pty Ltd, the High Court approved the observation made by Young CJ in Eq that “where there is an express term in a contract, it is almost impossible for the court to imply a term that operates in the same area.” It is not necessary to give business efficacy to the IRU Agreement. As to the distinction between necessity and mere desirability, see Australis Media Holdings Pty Ltd v Telstra Corporation Ltd discussed at  below. Without the implication of the term, the evident goal of the IRU Agreement (namely that SLC would obtain a guaranteed ability to use a 72-core fibre optic capacity in a fibre optic cabling network between Springfield and the Brisbane CBD for at least 15 years) would still be achieved. And if SLC wished to obtain additional fibre optic capacity, it could still do so, albeit at an appropriate cost. Further, that the IRU Agreement contained such a clause is not so obvious as to go without saying. Especially is that so in light of the contractual conferral on PIPE of ownership rights in the infrastructure. It is not immediately obvious why PIPE should have any constraint on its ability to use that which it owns in any way which it determines is to its commercial advantage, so long as it can perform what it has promised to perform. Finally, the implication of the suggested term would contradict the express intention to exclude terms whether they are implied by law, statute or otherwise evidenced by the clauses referred to at  above (cll 11.2(b), 12.1(c) and 12.2(c) of the IRU Agreement) and their equivalents in the WFS Agreement (cll 8.1(c), 8.2(c) and 9.2(b). It would also be inconsistent with the express exclusion of an implied warranty as to availability expressed in the terms referred to at  above. It would also be inconsistent with the entire agreement clause (cl 23 of the IRU Agreement).
- Second, (although this might simply be another way of expressing the previous point) the possibility that such a term should be implied into the IRU Agreement was excluded by cl 12.1(c) of the IRU Agreement and effect should be given to that clause. As to this:
- (a)Clause 12.1(c) expressed an exclusion by PIPE of the implication of terms, conditions or warranties into the agreement, in these terms:
Except where to do so would contravene any statute or cause any part of this agreement to be void or unenforceable, PIPE:
- (c)excludes all terms, conditions and warranties implied into this agreement by statute or otherwise[.]
- (b)SLC contended that the language of cl 12.1(c) was not apposite to exclude terms implied in fact because there is a distinction between terms “implied into” the contract independently of the parties’ intention (i.e., by a statute or other written law), rather than terms implied to give business efficacy to “this agreement” (i.e., from the parties’ intention and by necessary implication from the express words of the contract). On SLC’s contention, “or otherwise” could not have been intended to be a reference to the latter type of implied terms.
- (c)I do not find it to be helpful to be drawn into a comparison of the terms of the contracts drafted by the parties in this case and those dealt with in other contracts drawn in different terms and for different purposes. The task of the court is to construe the terms of this particular contract by the application of ordinary contractual principles. I have earlier stated the approach I will take to contractual construction.
- (d)The High Court observed in Commonwealth Bank v Barker (2014) 253 CLR 169 at 185186  (footnotes omitted):
Courts have implied terms in contracts in a number of ways:
- in fact or ad hoc to give business efficacy to a contract;
- by custom in particular classes of contract;
- in law in particular classes of contract; or
- in law in all classes of contract.
Contractual terms implied in law may be effected by the common law or by statute. If effected by the common law they may be displaced by the express terms of the contract or by statute.
- (e)Thus, the implication of terms implied into contracts by the common law may be displaced by the express terms of the contract concerned. The application of the Codelfa tests makes plain that contracting parties may by the way they have expressed their bargain evince the intention that terms should not be implied into their contract in fact or ad hoc. It is axiomatic that implication of terms by custom is also capable of being excluded in that way (although that mechanism of implication is not relied on here). It follows that, putting to one side the presently irrelevant category of terms implied by statute, it is evident that in principle the implication of terms in fact or ad hoc, by custom or by common law is capable of being displaced by the express terms of the contract concerned.
- (f)In this case, the words of cl 12.1(c) are plain. They seek to exclude the implication of terms by statute, or otherwise. The “or otherwise” is obviously an attempt to refer to other means of implication than by statute. Necessarily that would cover the means of implication for which SLC contends.
- (g)And it is notable that when one examines that term in the context of the contract as a whole, one inevitably notes that the parties made plain their intention to exclude the implication of terms and to articulate the conclusion that the entirety of their bargain is as expressed in the two relevant instruments executed by them. Both parties acknowledged the express exclusion of terms implied by law to the extent permitted by law: see cl 11.2(b) of the IRU Agreement and cl 9.2(b) of the WFS Agreement. And it was not just PIPE but SLC also who excluded all terms “… implied into this agreement by statute or otherwise”: see cl 12.2(c) of the IRU Agreement and cl 8.2(c) of the WFS Agreement. It seems to me that the parties were united in seeking to cover the field to the extent they could against the implication of terms whether by law, by statute or otherwise. This unity of purpose supports giving the term “or otherwise” a meaning which would cover the type of implication for which SLC contends. And, finally, both instruments included an entire agreement clause: cl 23 of the IRU Agreement and cl 18 of the WFS Agreement.
- The result is that I conclude that the alleged the Non-Occupation Term should not be implied into the IRU Agreement.
The alleged Telco Notice Term
- SLC contended that there was a term of the IRU Agreement that PIPE would comply with the Telecommunications Act requirements for notices and give SLC and its related entities notice before accessing their property and the Off-Rail sections of the Network (the Telco Notice Term).
- SLC’s pleading had suggested that such a term was an express or, alternatively, an implied term of the IRU Agreement, as a matter of law or in order to give business efficacy to the agreement, or alternatively it was the proper construction to be given to cl 5.1(d) of the IRU Agreement.
- SLC’s final submissions seemed to abandon the implied term basis of the Telco Notice Term. If so, SLC was correct to do so. Such an implied term would fail for reasons expressed at  and  in relation to the Non-Occupation Term.
- SLC’s final submissions contended only that the Telco Notice Term should be regarded as arising from the express terms of the IRU Agreement which stated:
- (a)(in cl 5.1(d)) that PIPE must “do all things necessary in respect of the Network, including the performance of PIPE's Carrier obligations, which are required to be done under the Telecommunications Act or as otherwise required by law”; and
- (b)(in Schedule 3, cl 5.1) that PIPE must give notice of any “Planned Outage Periods” which includes performing work on the facilities.
- As to the first basis:
- (a)It was common ground that PIPE was (1) a licenced carrier under the Telecommunications Act and, as such, governed by that Act; (2) Schedule 3 to the Telecommunications Act provided and provides, by s 17, that PIPE must first give written notice to the owner of land before engaging in an activity under Schedule 3, Part 1, Division 2, 3 or 4 in relation to that land; and (3) the hauling of fibre optic cable through an existing underground conduit was and is an activity under Schedule 3, Part 1, Division 3 or, alternatively, Division 4.
- (b)But putting cl 5.1(d) aside for the moment, a failure by PIPE to give notice under the Telecommunications Act could only be actionable by the relevant landowner or landowners. SLC was not the landowner of the Polaris Data Centre. Nor did it prove that it was the relevant landowner of any of the other land under which PIPE must have hauled cable when it constructed the Duplicate Network. And, even if the conduit itself might be thought to be part of land thereby attracting the obligation, SLC had agreed with PIPE that PIPE was the owner, so it could hardly contend that PIPE had failed to comply with a requirement to notify the owner.
- (c)Presumably that is why SLC seeks to source this obligation in cl 5.1(d).
- (d)But cl 5.1(d) is not a relevant source of an obligation owed to SLC requiring PIPE to give SLC notice of work which PIPE was doing in its own commercial interests and not in respect of the Network. Clause 5.1(d) imposed obligations to do things necessary in respect of the Network and, as I have said, Network was defined as “72 cores of fibre optic capacity On-Rail and a 72 core fibre optic cable Off-Rail to be installed in accordance with the Network Specifications, as shown on the plan in Schedule 1”. Such notice obligations as PIPE might have had under the Telecommunications Act for the work which it was doing for its own commercial interests were not within the scope of the obligation expressed in cl 5.1(d).
- As to the second basis:
- (a)I have discussed the clauses dealing with PIPE’s maintenance obligation at  above.
- (b)It is certainly true that cl 5.1 of Schedule 3 of the IRU Agreement obliged PIPE, where possible, to give SLC seven days notice “… in relation to any Planned Outage Periods and the length of any Planned Outage Periods.” It is also true that the term “Planned Outage Period” was defined as the period in which PIPE might carry out work on its facilities for any reason. There is a literal sense in which SLC’s contention is correct.
- (c)However, there are three reasons why I reject this clause as a basis for the alleged Telco Notice Term.
- (d)First, for reasons I have explained at  above, there was no freestanding promise to comply with Schedule 3. There is no sense in which work done by PIPE to install the Duplicate Network without notice to SLC can be regarded as breach of the operative terms of the IRU Agreement which did require the provision of Fibre Capacity or the maintenance of the “Network” as defined. There is no evidence that the doing of the work interfered with the provision of Fibre Capacity in any sense at all or that it was connected with the performance of maintenance of that which fell within the definition of the Network.
- (e)Second, SLC’s literal argument ignores the words used in the term which was defined, namely Planned Outage Periods. In my view the objective intention of the parties was that the obligation was aimed at circumstances in which the doing of the work led to a contemplation of outage, so as to give real meaning to “planned”, “outage” and “periods”. Circumstances in which doing work might lead to unplanned outage were covered by the obligation to restore faults.
- (f)Third, as PIPE contended during oral closing submissions the case of breach of 5.1 of Schedule 3 of the IRU Agreement was not pleaded.
- The result is that I conclude that the alleged the alleged Telco Notice Term was not a term of the IRU Agreement.
The alleged Non-Competition Term
- SLC contended that it was an implied term of both the IRU Agreement and the WFS Agreement that PIPE would not compete with the Network or enable its associates and related entities to compete with the Network either at all, or, alternatively, by using the same pits and conduits as the Network. In either form SLC referred to this as the Non-Competition Term.
- As it did in relation to the Non-Occupation Term, SLC sought to justify the existence of the term, first, on the basis that the term was to be found in the proper construction of the IRU Agreement, and, second, on the basis that the implication of such a term was justified by the application of the Codelfa tests.
- As to the first proposition, there is nothing in the language of either agreement which supports the proposition that the IRU Agreement should be construed as containing any such term.
- As to the suggestion that such a term should be implied in fact or ad hoc to give business efficacy to the two agreements on the basis that it satisfies the Codelfa tests, that suggestion must also fail for the reasons expressed at  and  in relation to the Non-Occupation Term. The suggested constraint on PIPE’s ability to use infrastructure is not necessary to give business efficacy to the agreements; is inconsistent with the ownership provisions addressing infrastructure in the IRU Agreement; and is plainly not so obvious as to go without saying when one has regard to the terms of cl 4 of the IRU Agreement.
- There is a further reason why such a term would not be implied in relation to PIPE’s ability to compete with the Network by using the same pits and conduits as the Network, remembering that those pits and conduits comprised Queensland Rail conduits; Telstra lease conduits; and conduits which, by the IRU Agreement, the parties agreed were to be regarded as owned by PIPE. I observe:
- (a)Section 4D(2) of the Trade Practices Act 1974 (Cth) (the TPA) relevantly provided (emphasis added):
A person shall be deemed to be competitive with another person for the purposes of subsection (1) if, and only if, the first-mentioned person … is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person … in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates.
- (b)On the hypothesis (which it will be evident that I reject) that the Codelfa conditions were otherwise satisfied in relation to the proposed Non-Competition Term, it would follow that the parties must have contemplated that, but for such a term, PIPE would have been likely to compete with SLC (in the same way and in the same market as in fact it did, and of which SLC now complains). It follows that PIPE would be deemed to be competitive with SLC when they entered into the IRU Agreement.
- (c)The Non-Competition Term would have had the obvious purpose and effect of preventing, restricting or limiting PIPE from supplying access to its own fibre optic cable network to persons wishing to have access for the purpose of using that network between Brisbane and Springfield (as opposed to using the Network the subject of the IRU Agreement). Such a term would have constituted an exclusionary provision pursuant to s 4D of the TPA; entry into a contract containing such a term would have been a contravention of s 45(2)(a)(i) of the TPA; and pursuant to s 45(1) of the TPA the alleged implied term would have been unenforceable in so far as it confers rights or benefits or imposes duties or obligations on SLC.
- (d)SLC suggested that the term could not be an exclusionary provision because PIPE could not establish:
- that it and SLC were competitive with each other; and
- the purpose of the provision was the purpose of preventing, restricting or limiting the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons.
- (e)The answer to the first point was the deeming operation of s 4D(2) and the answer to the second point was that whilst one might well be able to argue that the proposed term could be seen to have other purposes, the plain evident purpose of such a term was the purpose which would have rendered it an exclusionary provision. It would be aimed at that very thing and that would be the only purpose of having it in the first place, namely stopping PIPE from offering fibre optic cable network services to persons who might otherwise obtain such services from SLC.
- (f)It could not be said that the implication of an unenforceable term was necessary to give business efficacy to the agreements.
- The result is that I conclude that the alleged Non-Competition Term was not a term of either the IRU Agreement or the WFS Agreement.
The alleged obligations founded on the implied duty to co-operate
- It was common ground on the face of the pleadings that the following two terms were to be implied into the IRU Agreement and the WFS Agreement as a matter of law, namely that:
- (a)PIPE would act honestly and with fidelity to the agreement; and
- (b)PIPE would not act so as to undermine the agreement, nor act to derogate from the rights and benefits contemplated under the agreement.
- SCL contended but PIPE denied that it was to be implied into the IRU Agreement and the WFS Agreement either as a matter of law or in order to give business efficacy to the agreements, that PIPE would act reasonably and with fair dealing having regard to the interests of the parties and to the provisions, aims and purposes of the agreements. PIPE’s denial was founded on its pleaded contention that the implied term:
- (a)was not reasonable and equitable;
- (b)was not necessary to give business efficacy to the agreements;
- (c)was not so obvious as to go without saying;
- (d)was not capable of clear expression;
- (e)conflicted with the entire agreement clauses (cl 23 of the IRU Agreement and cl 18 of the WFS Agreement); and
- (f)was excluded by the contractual exclusion of “all terms, conditions and warranties implied into this agreement by statute or otherwise” (cl 12.1(c) of the IRU Agreement and cl 8.2(c) of the WFS Agreement).
- SCL contended in its closing submissions that it was also common ground on the face of the pleadings that PIPE admitted that it was to be implied into the IRU Agreement and the WFS Agreement either as a matter of law or in order to give business efficacy to the agreements, that PIPE would do all things necessary on its part to enable SLC to have the benefit of the IRU Agreement. That argument was based on the argument that the allegations in the statement of claim at [2O(d)] and [2Q(d)] were deemed to be admitted because they were not specifically traversed in the defence and in particular at defence [4L(c)] and [4N(c)]. I am not prepared to accept that proposition. It seems to me likely to have been an obvious typographical error that defence [4L(c)] and [4N(c)] respectively omitted reference to subparagraph (d) of the paragraphs to which they were responding. Consistently with that proposition, SLC’s written opening mentioned only express admissions by PIPE and PIPE’s written opening asserted without any demur by SLC (until its closing submissions) that the only admissions as to implied terms were the admissions to which I have referred at  and all other implied terms were in dispute. PIPE’s closing submissions were to the same effect. It seems to me that fairness requires that this aspect of the case should be dealt with on the basis that the alleged term was disputed by PIPE.
- The issue is whether there should be implied into the the IRU Agreement and the WFS Agreement either as a matter of law or in order to give business efficacy to the agreements:
- (a)a term requiring PIPE to act reasonably and with fair dealing having regard to the interests of the parties and to the provisions, aims and purposes of the agreements; and
- (b)a term requiring PIPE to do all things necessary on its part to enable SLC to have the benefit of the IRU Agreement.
- The further issue is whether the admitted duties, being as they are articulations of the duty to co-operate, can be availed of in the way which SLC seeks to do.
- As to the first issue, the contention that such terms should be implied in fact or ad hoc to give business efficacy to the either agreement on the basis that they satisfy the Codelfa tests must also fail for the reasons expressed at  and  in relation to the Non-Occupation Term.
- As to the second question, the way in which SLC sought to deploy the implied duties was to contend that their fulfilment required PIPE to act in the way suggested by the NonOccupation Term, the Telco Notice Term and the Non-Competition Term. In other words, SLC’s case on the implied duty to co-operate terms was to obtain the same outcome as might have been obtained by the implication the Non-Occupation Term, the Telco Notice Term and the Non-Competition Term, merely by elevating the generality of the expression of conventional duty to co-operate terms and contending that PIPE’s conduct breached those terms. PIPE’s argument was that no proper expression of an implied duty of co-operation term could avail SLC because the implication of such terms could not result in the imposition of such substantive new obligations.
- I agree.
- As Mason J pointed out in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607-608:
It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to cooperate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.
- And in Australis Media Holdings Pty Ltd v Telstra Corporation Ltd, Mason P, Beazley JA and Stein JA observed (emphasis added):
The “implication” of a term implied in law depends upon the demonstration of “necessity”: see Liverpool City Council v Irwin; Secured Home Real Estate (Australia) Ltd v St Martins Investments Pty Ltd; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 452-453. It follows that, leaving aside fiduciary obligations (which are not involved here), there cannot be a duty to co-operate in bringing about something which the contract does not require to happen. An “implication, arising as it does from necessity, must be limited by the extent of the need”: Board of Fire Commissioners (NSW) v Ardouin (1961) 109 CLR 105 at 118, per Kitto J. ...
In his “alternative way of approaching the matter”, the learned trial judge referred to implied obligations:
“… not voluntarily to do anything to cause or permit the enjoyment by the plaintiffs of the benefits contemplated in the above quoted parts of clause 3, 5.1, 5.4, 8.1, 8.2 and 9.6 of the agreement to be rendered nugatory or worthless or seriously undermined.” (Emphasis added.)
His Honour cited Byrne v Australian Airlines Ltd and Breen v Williams. We are of the view that his Honour erred in taking this alternative approach, first because it is not supported by the authorities cited, and secondly because it lacks the “necessity” required before a term may be implied. Many terms now said to be implied by law in various categories of contract reflect the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined. It would be, however, fallacious to elide the purpose of implying such terms with the terms themselves. To do so would replace necessity with desirability. The passages cited from Nullagine Investments Pty L[t]d v WA Club Inc (1993) 177 CLR 635 at 647-648, 659, Byrne and Breen, show the High Court as drawing a clear distinction between the term implied and its rationale. A contract may “contemplate” many benefits for the respective parties, but each can only call on the other to provide, or co-operate in the providing of, benefits promised by that party. For example, in the absence of an express covenant, a landlord is not bound in contract to repair the demised premises.
- The way in which SLC sought to deploy the implied terms which were admitted and which it would seek to deploy the implied terms which were disputed runs contrary to the authorities which I have cited. I agree with these observations made by McLeish JA in Adaz Nominees Pty Ltd v Castleway Pty Ltd  VSCA 201 at :
The above decisions make clear that the obligation to ensure that the other party has the ‘benefit of the contract’ is not an obligation to ensure that the contracted arrangement is broadly to the other party’s benefit, nor an obligation to ensure that the arrangement operates in the most commercially beneficial way for the other party. Nor is it an obligation to act so that the other party receives benefits which the contract anticipates but does not promise — it is simply an obligation to cooperate so that the other party gets the fundamental promises they have contracted for, and a corresponding negative obligation not to deprive the other party of that benefit.
- No duty to co-operate, whether in the terms which were admitted by PIPE or in the terms disputed and which I have found would not be implied, would operate to require PIPE to conduct itself in the way posited by the Non-Occupation Term, the Telco Notice Term and the Non-Competition Term.
- I have rejected SLC’s case as to the existence of the Non-Occupation Term, the Telco Notice Term and the Non-Competition Term. I have rejected SLC’s case as to the existence of any implied duty to co-operate terms beyond those specifically admitted by PIPE. And I have rejected SLC’s case that the terms which were admitted could assist SLC essentially because they could not result in the imposition of the substantive new obligations on which SLC’s case depends.
- SLC’s claim for damages for breach of implied terms must fail.
Alleged breach of contractual terms
Alleged breaches of clauses 3.4, 4.1(b) or 4.1(d)
- Clause 3.4 of the IRU Agreement provided:
- (a)On or before the Required Phase One RFS Date PIPE will, subject to SLC having paid to PIPE all instalments of the Phase One Installation Charge then due and the first Phase One O&M Fee on or before that date, make the Fibre Capacity in Phase One available to SLC and give SLC written notice of such availability.
- (b)On or before the Required Phase Two RFS Date PIPE will, subject to SLC having paid to PIPE all instalments of the Phase Two Installation Charge then due and the first Phase Two O&M Fee on or before that date, make the Fibre Capacity in Phase Two available to SLC and give SLC written notice of such availability.
- The evidence did not establish that the Fibre Capacity as defined was not made available in the dates mentioned. Nor is there any evidence that Fibre Capacity as defined was not made available otherwise during the course of the IRU Agreement. There was no breach of cl 3.4 of the IRU.
- Clauses 4.1(b) and 4.1(d) were in the form quoted at  above. As previously explained, PIPE’s promise was to give SLC exclusive use of 72 fibre optic cores worth of capacity. In relation to the Off-Rail section of the phases the subject of the IRU Agreement, it promised that SLC would own the cable. The construction and use of the Duplicate Network did not interfere with either promise. There was no breach of either of these clauses
- If, as might be the case, SLC seeks to vindicate a breach argument by reference to the case it advances in relation to trespass and conversion rather than by reference to the construction and use of the Duplicate Network, then that case must also fail on the facts for the reasons I develop below when I consider that aspect of SLC’s case.
Alleged breach of cl 5.1 of Schedule 3
- SLC contended that by constructing the Duplicate Network without giving SLC any notice that it was doing that work, PIPE breached a notice obligation contained in Schedule 3 to the IRU Agreement.
- For reasons expressed at  above, the impugned conduct was not a breach of that term of the IRU Agreement.
Alleged breach of cl 10.2 of the IRU Agreement
- SLC argued that by inserting a further cable in the relevant infrastructure, PIPE made it physically impossible to comply with any Upgrade Request Notice which sought to have additional Fibre Capacity added to the Network. The theory was founded on the proposition that the internal diameter of the conduit in the Network could not be sufficient to accommodate the original 72f cable, the 144f cable used in the Duplicate Network, and the hypothetical third cable the subject of the Upgrade Request.
- There was evidence from SLC’s expert Mr Lordan on that technical issue which suggested that in some circumstances and depending on the diameter used in the hypothetical proposed cable, it might not have been possible to haul a new cable within the existing conduit and may have been necessary to install new conduit. On the other hand, Mr Van Hecke of Optilinx suggested that it could be done within relevant conduit, again depending on diameter, but that the process of so doing could be difficult.
- For the reasons I have expressed at  to  above, even if the technical issue was to be found in SLC’s favour, SLC still would not have proved its case of breach of the clause. PIPE’s first obligation upon receipt of a request asking it, say, to upgrade Fibre Capacity between the Network Access Points by hauling a further 720f cable, was to respond by providing SLC with written notice of the estimated costs of installation and any additional operation and maintenance fee. The costs concerned would be costs at the time the Upgrade Request was given. If at that time, existing pits and conduits could not be used, then presumably some other manner of installation would have to be determined and costed. The evidence did not justify the conclusion that it would simply not be possible to install further conduit to meet such a request, if that proved necessary. PIPE’s conduct did not render the first obligation impossible of performance. And its other obligation under the clause was to agree time and cost before performance. Even if that obligation is enforceable in the way that SLC contends, it is not rendered impossible of performance by PIPE’s conduct.
- The impugned conduct was not a breach of this cause.
Alleged breach of cl 13.1(d) of the IRU Agreement
- The facts relevant to this contention are straightforward and are set out at  to  above.
- PIPE received SLC’s written request to extend the Term. Clause 13.1(c) then provided:
On receipt of a written request to extend the Term, the parties agree to negotiate in good faith the terms of any extended Term of the agreement including, without limitation, the Service Levels, the Network Specifications and the O&M Fees.
- PIPE did not take up SLC’s invitation to negotiate in good faith. Rather, by its letter dated 21 October 2020, it asserted that the obligation was uncertain and therefore unenforceable and stated that it would proceed on the basis that it was released from its obligations pursuant to the IRU Agreement (except those which were expressed to survive expiration) on the date of its expiry, namely 16 February 2021.
- If the clause is certain and enforceable then PIPE has breached its terms. The question is whether PIPE’s contention to the contrary is correct. In my view it is.
- The critical consideration is that cl 13.1(c) made it clear that the issue for negotiation was “the terms of any extended Term” and this included “without limitation” the defined terms the “Service Levels”; the “Network Specifications”; and the “O&M Fees”. First, the use of “any” instead of “the” in relation to “extended Term”, seems to contemplate the possibility of no agreement being reached. Second, by referring to “Service Levels” the clause emphasised that the question of what PIPE would be obliged to do during the extended Term was on the table. Third, by referring to “Network Specifications” the clause emphasised that the technical outcome which PIPE would be obliged to achieve was on the table. Fourth, by referring to “O&M Fees”, the clause emphasised the question of how much PIPE would be paid was on the table. Finally, by providing that the contemplated negotiation would address “the terms of any extended Term … including, without limitation”, the clause made plain that the all the other commercial terms applicable during the extended Term were also on the table.
- It was plain, therefore, that the contemplated negotiation was a negotiation in which all the existing contractual terms were on the negotiating table. The parties would be seeking to negotiate the terms which might, if their negotiation was successful, lead to a continued contractual relationship. Of course, there was a starting point, namely they had been in a contractual relationship for the past 15 years on particular terms. But, as I have said, that deal had expired and all those terms were on the table. There was no longer any need for fidelity towards the terms in which that bargain had been expressed. The only criterion governing their behaviour in relation to the negotiation was that they would negotiate in good faith. That standard could not be construed to impose the standard of objective reasonableness on the parties’ conduct. It would necessarily permit of self-interested behaviour by each party in relation to the myriad of aspects of the contemplated negotiation.
- I would apply the reasoning of McMurdo J (as his Honour then was) in Baldwin v Icon Energy Ltd  1 Qd R 397 to conclude that such a promise should not be construed as expressing a certain or enforceable term, preferring that reasoning to that expressed by Allsop P in the cases to which his Honour refers (and since), essentially for the reasons his Honour expressed.
- As the clause is not to be regarded as certain or enforceable, SLC’s claims in relation to its breach must fail.
Alleged breach of cl 15
- The defendants pointed out, correctly, in their closing written submissions (footnotes omitted):
[SLC] also pleaded a claim alleging misuse of confidential information in breach of contract or alternatively in breach of an equitable duty of confidence. That case was not opened in writing, it was not mentioned in [SLC]’s list of issues in dispute and it was scarcely mentioned in [SLC]’s oral opening. It appeared to have been abandoned. However, during the course of the second day of the hearing, [SLC] confirmed that to the extent that it is pursued, it is as “breach of the contractual provisions as to confidentiality … and the breach of confidentiality [as] a particular of the breach of fiduciary duty”. Springfield confirmed “we’re not running a standalone breach of confidence case. It is but one of the many breaches of the contract”.
- In its closing submissions, SLC made no attempt to develop a case that it was entitled to damages for breach of the contractual provisions as to confidentiality. Rather, its case proceeded largely by way of assertion rather than any conventional demonstration that particular information had the character of being confidential; had been dealt with in a way which amounted to breach of contract; and that SLC would have been measurably better off had the agreement been performed according to its terms. So far as its written closing submissions were concerned, assertions of breach of cl 15 seemed to appear only in an undifferentiated discussion concerning wilfulness of alleged breach. Only two particular assertions of breach were made. I will deal with them specifically.
- Clause 15 relevantly provided:
15.1 Confidential Information
Each party agrees in relation to the Confidential Information of the other party:
- (a)to keep confidential the Confidential Information;
- (b)to use the Confidential Information solely for the purposes of the performance of its obligations and the exercise of its rights under this agreement; and
- (c)to disclose the Confidential Information only to those of its employees, advisors, related entities and shareholders who have a need to know (and only to the extent each has a need to know) and who are aware and agree that the Confidential Information must be kept confidential.
To avoid doubt, nothing in this clause 15.1 prevents or hinders SLC from exercising the rights granted in clause 4.1, including by providing or permitting the provision of information about the Network to parties to whom Fibre Capacity is provided under clause 4.1.
The obligations of confidentiality under this agreement do not extend to information which (whether before or after this agreement is executed):
- (d)is disclosed to a party under this agreement, but at the time of disclosure is rightly known to that party and not subject to an obligation of confidentiality on that party;
- (e)at the time of disclosure is within the public domain or after disclosure comes into the public domain other than by a breach or breaches of any obligation under this clause 15; or
- (f)is required by law or the rules of any securities exchange to be disclosed and the party required to make the disclosure ensures that information is disclosed only to the extent require.
- Clause 1.1 defined “Confidential Information” in these terms:
Confidential Information of a party means all confidential information given or made available by that party to the other party including:
- (a)technology or intellectual property owned or licensed to the party;
- (b)industry information, plans, trade secrets, commercially sensitive information and confidential know-how; and
- (c)financial information.
- I make the following observations as to the proper construction of the terms.
- First, the party seeking to establish breach of cl 15 would need to establish that the information fell within the definition of Confidential Information. As to this:
- (a)Putting to one side the specific inclusions, that means it would be necessary to demonstrate that the information was provided in circumstances of confidence.
- (b)I think that was probably necessary even in relation to the specific inclusions because it could hardly be thought that all “financial information” could be regarded as falling within the definition without the need to prove that there was something about the particular type of information which suggested it should be regarded as confidential.
- (c)The reference to “plans” in specific inclusion “(b)” is a reference to a party’s “plan” in the sense of its confidential intentions, not in the sense of “plan” as a drawing, unless the nature of the drawing is such as to make it fall within the first sense of “plan”.
- Second, each of SLC and PIPE were permitted to use Confidential Information for the purpose of “the exercise of its rights under this agreement”. PIPE’s rights under the agreement included the ownership rights as conferred by cl 4.1(d) and cl 4.1(f).
- Third, the obligation is subject to specific exceptions including (1) of information rightly known to the party and not subject to an existing confidentiality obligation and (2) of information which is at the time of the disclosure in the public domain.
- In its pleading, and in this context, SLC sought to suggest that in the course of constructing and managing the Network, PIPE acquired the following information from SLC :
- (a)the precise location of the western and eastern paths of the Network;
- (b)the infrastructure associated with the Network, including splicing cannisters, the available duct space and the existence of any sub-ducting;
- (c)the permissions, notices and agreements necessary or commercially desirable to construct the Network;
- (d)the cost of construction of the Network and each component of the Network;
- (e)the identity of existing and potential customers for the Network;
- (f)the amounts paid by customers for use of the Network;
- (g)the existing and anticipated level of demand for use of the Network; and
- (h)the existing and proposed telecommunications infrastructure at SLC.
- In its pleading, SLC alleged that that information was commercially sensitive to SLC, valuable “know how” in relation to the Network, and Confidential Information for the purposes of cll 1.1 and 12.1 of the WFS Agreement and cll 1.1 and 15.1 of the IRU Agreement and subject to an equitable obligation of confidence.
- That PIPE had information which could be so described may be accepted. That it came from SLC cannot because much of it came from PIPE. In any event, if SLC was seriously to run a breach case in respect of those broad categories, it would need in each case to address the matters I have identified at ,  and . It did not.
- I turn first to address the general categories. Then I will address the two particular categories of documents in respect of which SLC made a particular submission of breach.
- As to the general categories, I adopt with some modification the submissions which PIPE made that I should reject the contention that the categories described information which could be regarded as confidential as set out in the table below. It is a sufficient response to the undifferentiated assertions advanced by SLC.
The precise location of the western and eastern paths of the Network
The infrastructure associated with the Network, including splicing cannisters, the available duct space and the existence of any subducting
The permissions, notices and agreements necessary or commercially desirable to construct the Network
The cost of construction of the Network and each component of the Network
Category 1 would apply to at least some information in that category.
3. There was no evidence called to suggest that the costs associated with constructing the Network were any different from those which PIPE otherwise used to construct fibre optic networks. Hence the information was already within PIPE’s knowledge or it was information which PIPE could have ascertained in the general operation of its business.
The identity of existing and potential customers for the Network
As per reason 1 for Category 1. In particular, there was no evidence called to suggest that the existing and potential associated customers on the Network were any different from those which PIPE otherwise dealt with in connection with fibre optic networks it constructed. Hence the information was already within PIPE’s knowledge or it was information which PIPE could have ascertained in the general operation of its business.
The amounts paid by customers for use of the Network
As per reason 1 for Category 1. In particular, there was no evidence called to suggest that the amounts paid by customers for services on the Network were any different from those which PIPE agreed in connection with fibre optic networks it constructed and there was no evidence called that the prices were kept confidential by SLC or PIPE. Hence the information was already within PIPE’s knowledge or it was information which PIPE could have ascertained in the general operation of its business.
The existing and anticipated level of demand for use of the Network
As per reason 1 for Category 1. In particular, there was no evidence called to suggest that the demand for services on the Network was kept confidential by SLC or PIPE. Hence the information was already within PIPE’s knowledge or it was information which PIPE could have ascertained in the general operation of its business.
The existing and proposed telecommunications infrastructure at Springfield
- I turn now to the two particular categories of documents in respect of which SLC made a particular submission of breach. SLC submitted that (footnotes omitted):
Fourthly, PIPE used information which was plainly “Confidential Information” in two respects. Initially, to facilitate the construction of the Duplicate Network. Mr van Hecke explained the advantages which he (and therefore PIPE) gained from the use of the Network plans. Some or all the information contained in those plans was given, or made available, to PIPE for the purposes of the IRU. Two examples suffice. One, the plan of the inner Springfield loop (Ex. 1) disclosing the Landcorp infrastructure. While further information, such as cable lengths and “loop” measurements was added to the original plan, that plan was plainly made available by SCG (as it bears Springfield on the face of the document) to PIPE to enable the path of the western route to be changed as it was in 2008. The second plan was of Polaris which is evidently a SCG document given to PIPE to enable it to install the 72 core cable in the Off-Rail section from the LandCorp ducts and lead-in pits into the Polaris BEP and along the cable trays into CIR 1 and CIR 2.
That Confidential Information was used, the Court should find deliberately, to gain an advantage for PIPE. Mr van Hecke identified that it reduced the costs of the installation by removing the need for any “buffer” which would otherwise have been required in the length of cable.
- SLC’s assertion cannot be accepted. “Plans” of the nature identified are not within the scope of the specific inclusion. Both documents fall within Category 1 in the table above.
- SLC’s case concerning breach of cl 15 fails.
- SLC’s case seeking damages for breach of contract fails.
The conversion and trespass case
The physical state of the Network and the Duplicate Network as at November 2009
- It is necessary to recapitulate the facts concerning the physical state of the Network and the Duplicate Network, as at the completion of the Duplicate Network in November 2009.
As to the Network
- The cable forming part of the Network was installed and spliced by PIPE’s independent contractor, Optilinx. Mr Van Hecke was personally involved.
- The On-Rail route of Phase One (namely the western route) is depicted on the drawing referred to at  above and involved that part of the western Network route from Brisbane to Goodna. On that part of the Network, SLC shared part of a 216f cable. That cable was not owned by SLC. Of that 216f cable, 72f were allocated to Queensland Rail, 72f were allocated to PIPE and 72f were allocated to SLC. In this regard see (a), (a) and  above.
- The Off-Rail route of Phase One is also depicted on the drawing referred to at  above and involved that part of the western Network route from Goodna to Springfield. It involved a single 72f cable which was owned by SLC. In this regard see (b), (b) and  above. That cable initially terminated at the World Knowledge Centre but was later relocated so as to terminate at the Polaris Data Centre.
- Phase Two (namely the eastern route) is depicted on the as-built drawing referred to at  above.
- As to that part of the eastern Network route from Brisbane to Hill Crest:
- (a)The initial PIPE proposals clearly contemplated that a large part of that route was intended to be categorised as On-Rail: see  to  and  to  above.
- (b)The drawing which was Schedule 1 to the IRU Agreement was very similar to the drawings attached to those proposals, so it seems legitimate to conclude that the original contractual contemplation may have been that a large part of the eastern route would be On-Rail.
- (c)If that was the original intention, and it had been vindicated, the cable north of Hill Crest would be regarded as owned by PIPE. However, it is difficult to see how that could be the proper conclusion given the evidence as to the as-built nature of the route.
- (d)A comparison between Schedule 1 and the as-built drawings referred to at  and  above suggest that the actual route of Phase Two diverted considerably from what had been contemplated. The evidence is that the cable route from Brisbane to Hill Crest was contained in Telstra conduit on a Telstra lease. Who may be the owner of the land is not made clear, but the evidence does not establish that it was Queensland Rail.
- (e)On that part of the eastern Network route, according to Mr Van Hecke, SLC shared part of a 144f cable. Of that 144f cable, 72f were allocated to PIPE and 72f were allocated to SLC. In this regard see (a), (a) and  above.
- (f)On the evidence, therefore, in my view the 72f of the existing cable allocated to SLC would be regarded as owned by SLC because it fell within the ambit of “Title-Relevant Element” as defined, used in cl 4.1(d) of the IRU Agreement.
- There is no equivalent doubt concerning that part of the eastern Network route from Hill Crest to the Polaris Data Centre. It is to be regarded as Off-Rail. It involved a single 72f cable which was owned by SLC. In this regard see (b), (b) and  above.
- At the time it was finished and tested, the 72f eastern Network route comprised the 36 circuit fibre pairs identified as CQ3515 to CQ3550 from Level 1, IDF 1 QB3758.FTP1 Ports 1-72 in the Polaris Data Centre, Springfield to QL0234/S2 Fibres 1-72 at the Makerston St Handoff Joint in Brisbane CBD: see  above. The route was comprised of the 72f cable from the Polaris Data Centre to Hill Crest and then 72 particular fibres out of the 144f cable from Hill Crest to the Brisbane CBD.
- At the time it was finished and tested, the 72f western Network path comprised the 36 circuit fibre pairs identified as CQ163, CQ176 and CQ212 to CQ245 from Level 1, IDF 2 QB3758.FTP2 Ports 1-72 in the Polaris Data Centre, Springfield to QL0021/S Fibres 1-54 and 67 to 84 at the Ann St Handoff Joint in Brisbane CBD: see  above. The route was comprised of the 72f cable from the Polaris Data Centre to Goodna and then 72 particular fibres out of the 216f cable from Hill Crest to the Brisbane CBD.
- At the time of completion, the fibre circuits were tested by Optilinx and were demonstrated to work satisfactorily.
As to the Duplicate Network
- The new 216f cable forming part of the Duplicate Network was installed by PIPE’s independent contractor Optilinx in about November 2009. Mr Van Hecke was personally involved.
- It was not literally a duplicate of the Network because it was comprised of 216f cable, rather than 72f cable and, further, because it did not involve any new hauling of cable in the western Network route from Brisbane to Goodna or the eastern Network route from Brisbane to Hill Crest. PIPE already had its own cable on those parts of the western and eastern routes. Indeed, the parts of the 72f Network on those paths involved SLC sharing cable with PIPE from the outset: in this regard see  to  above.
- On the western side the new 216f cable ran from Goodna to the Polaris Data Centre and on the eastern side it ran from Hill Crest to the Polaris Data Centre. In this regard, see (c) and (c) above.
- Mr Van Hecke explained that PIPE never instructed Optilinx to splice the Duplicate Network which Optilinx constructed by November 2009 into any parts of SLC’s 72f Network. If there is some part of the Duplicate Network installed by Optilinx in which the 216f cable is spliced into any of SLC’s 72 fibres that could only have occurred by mistake.
- Optilinx was involved from time to time in the years after the Network was originally installed and also in the years after the Duplicate Network was originally installed in carrying out maintenance on cables. It was not the only independent contractor which did such work. Although Mr Van Hecke, who was a contractor experienced in this work, found it difficult to imagine why an instruction would be given by PIPE which would involve splicing new cable into an existing operative network, one would have to acknowledge that it would be theoretically possible that such an instruction was made.
SLC failed to prove the critical factual foundation of its case
- SLC’s case in relation to the intentional torts relied on the following allegations in the statement of claim:
12. At a time that the plaintiff is unable to better particularise, save to say that it likely commenced in about late 2009, the defendant installed a duplicate network of fibre-optic cable within, or alternatively utilised the fibre capacity in, the Network and/or its pits and conduits ("the Duplicate Network").
12A. The Duplicate Network was completed by November 2009.
12AAA. The Duplicate Network was installed in the [Landcorp infrastructure] which was owned and paid for by the plaintiff without the knowledge or consent of the plaintiff.
14NA. Since at least April 2006, the defendant has:
- (a)supplied fibre connections to customers;
- (b)supplied fibre connections to entities related to the defendant;
- (c)used fibre connections for its own benefit;
- (d)provided managed services to customers for fibre connections, using fibre optic cores in the plaintiff’s Network, or the Fibre Capacity in the plaintiff’s Network, and continues to do so.
The Revenue Data Schedule records the details of the customers who used fibre capacity on the Network (fibre connections), and the details of and revenue derived from their use of fibre capacity on the Network.
In so far as the defendant used fibre connections for the purposes pleaded in paragraph 14NA, the details are more particularly contained in items 1, 6, 12, 13, 35, 38, 44, 55, 56, 67, 83, 85, 96, 97, 106, 107, 108, 117, 148, 154 to 163, 165 to 166, 168 to 194, 196 to 197 and 200 to 202 of the Revenue Data Schedule.
14NB. The defendant:
- (a)has been paid fees for the fibre connections referred to in paragraph 14NA above at the rates set out in the items of the Revenue Data Schedule particularised in paragraph 14NA above; and
- (b)where no rate is set out in the items of the Revenue Data Schedule particularised in paragraph 14NA above, has received the commercial benefit of the use of the fibre connections referred to in paragraph 14NA above.
14NI. The defendant's conduct pleaded in paragraph 14NA above was undertaken:
- (a)without the plaintiff’s knowledge or permission; and
- (b)without any compensation or payment to the plaintiff, whether by the defendant, the customers referred to in the items of the Revenue Data Schedule particularised in paragraph 14NA above, or otherwise, for that use of the Network[.]
14NJ. By reason of the matters pleaded in paragraphs 14NA, 14NB and 14NI above, the defendant:
- (a)breached the fiduciary duties pleaded in paragraph 14U;
- (b)further or alternatively, engaged in trespass or conversion in relation to the plaintiff’s property in the Network;
- (c)further or alternatively, breached clause 3.4 of the IRU;
- (d)further or alternatively, breached clause 4.1(b) of the IRU;
- (e)further or alternatively, breached clause 4.1(d) of the IRU.
- It was impossible to identify from those pleaded facts what was the precise nature of the use or interference committed by PIPE which was said to amount to the commission by PIPE of the intentional torts of trespass or conversion. Nor was that identification much assisted when regard was had to the Revenue Data Schedule (RDS).
- I observe that:
- (a)The RDS alleged that, using the Duplicate Network, PIPE supplied a particular fibre circuit to a particular identified person (either itself or some third party) and that PIPE did so between particular identified dates. The fibre circuits concerned were each identified by the use of a unique circuit identifier number e.g., CQ5510, CQ9200, CQ11742. None of the circuit numbers were the same as those which were identified as the circuit numbers making up either the western or eastern routes of the 72f network.
- (b)The RDS alleged that each of the particular circuits so identified utilised Fibre Capacity from SLC’s Network between particular identified joints. The joints concerned were identified by a unique joint number. The location of the joint numbers referred to in the RDS can be identified by cross-referring the identified number to the position of the joint as depicted on the as-built drawing referred to at  above.
- (c)The RDS records PIPE’s various admissions that:
- particular circuits identified by particular circuit identifier numbers were connected between particular identified joints during particular identified periods; and
- the particular circuits used particular numbered fibres on particular identified cables.
- (d)The RDS also recorded PIPE’s denials that the particular circuits utilised SLC’s Network.
- Save that the alleged interference involved utilisation of Fibre Capacity from SLC’s Network in particular circuits or joints, the nature of the alleged interference was not clarified by the pleadings as elaborated upon by the RDS.
- However, the nature of the interference said to have been committed by PIPE was referred to as a general proposition in the course of the trial and clarified in commendable, albeit excruciating, detail in SLC’s closing written submissions, which also conveyed that SLC only pressed its allegations in relation to 19 items in the RDS, namely items 1, 6, 12, 13, 35, 38, 44, 55, 56, 67, 83, 85, 96, 97, 106, 107, 108, 117, and 148.
- The following written submissions expressed SLC’s case and PIPE’s response to it:
- (a)SLC’s “closing” submissions dated 18 August 2021;
- (b)SLC’s “supplementary submissions” dated 27 August 2021;
- (c)PIPE’s “submissions in response to [SLC’s] supplementary submissions” dated 6 September 2021; and
- (d)SLC’s “reply outline” dated 13 September 2021.
- So far as the case in trespass was concerned, SLC’s case was that PIPE had spliced into fibres which were part of SLC’s 72f Network and that it had done so without SLC’s knowledge or permission. So far as the case in conversion was concerned, SLC’s case was that PIPE had spliced into those fibres and used the Fibre Capacity which those fibres provided for its own purposes and that it had done so without SLC’s knowledge or permission.
- In order for those propositions to be made good, I would need to find at least these three facts, all of which were disputed.
- First, that the particular fibres which were the subject of the alleged splicing activity were the fibres of which SLC’s 72f Network was comprised. That is critical because (1) on the western route from Brisbane to Goodna both PIPE and Queensland Rail each had their own cable and fibres before and after the western leg of the Network was constructed; (2) PIPE had its own fibres on the 216f cable from Goodna to the Polaris Data Centre from November 2009; (3) on the eastern route from Brisbane to Hill Crest before and after the eastern leg of the Network was constructed PIPE had 72 fibres and so did SLC; and (4) PIPE had its own fibres on the 216f cable from Goodna to the Polaris Data Centre from November 2009. SLC needed to demonstrate that at the time of the alleged splicing activity the fibres which were the subject of its allegation were its fibres and not PIPE’s fibres which it already had in place or which it added to its network at some subsequent time. It would not avail SLC if the fibres dealt with by PIPE were PIPE’s own fibres or the fibres of someone else other than SLC.
- Second, that PIPE instructed an independent contractor to perform the acts which constituted the tortious interference with SLC’s rights. That is important because PIPE did the hauling and splicing work on its network by using independent contractors. As a general proposition, PIPE would not be vicariously liable for the torts of its independent contractors: see Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at  per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ and Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161 at 167 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ. If, for example, the independent contractor had been instructed by PIPE to splice into a particular fibre (not SLC’s fibre), but the independent contractor had mistakenly spliced into SLC’s fibre, PIPE would not be rendered liable in tort by the independent contractor’s conduct. But it would be different if PIPE had instructed the independent contractor to perform the very act said to constitute the tortious interference with SLC’s rights, namely PIPE had instructed the independent contractor to splice into the particular fibre (which in fact was SLC’s fibre). The intentional instruction to splice into the particular fibre would be a sufficient foundation to render PIPE liable for the intentional tort, and it would not be necessary for SLC to prove that PIPE realised that the fibre was SLC’s fibre. In Westpac Banking Corporation v Hughes  1 Qd R 581 at 597 Chesterman JA cited with approval the description of the second element of the tort of conversion set out in Salmond and Heuston on the Law of Torts 18th ed:
An intention in so doing to deny that person’s right which in fact is inconsistent with such right. But the word ‘intention’ refers only to the intentional commission of the act.
- Third, that the independent contractor so instructed actually carried out the acts as instructed so that PIPE’s fibres were actually spliced into SLC’s fibres, thereby committing the trespass, and thereby enabling the subsequent use, which committed the conversion.
- SLC sought to prove that the fibres which were the subject of its allegation were part of SLC’s 72f Network. This was a foundational proposition.
- SLC’s reasoning followed this logic:
- (a)One started with the completion pack for the route as initially constructed. From that completion pack one could identify the CQ numbers which identified the circuit pairs making up SLC’s 72f Network. (Some additional complexity was involved for the western route because SLC started with the initial completion pack and overlooked the completion pack which was provided in relation to the western route as relocated.)
- (b)One assumed that:
- “To identify each continuous core between Brisbane to Springfield, PIPE identified and mapped each continuous path of the Network in “fibre line diagrams”.” (That was the proposition advanced in SLC’s supplementary submissions at .)
- The fibre line diagrams were accurate and reliable as to the situation in the ground.
- (c)One identified the appropriate fibre line diagram for each of the CQ numbers identified in the completion pack.
- (d)One interpreted the fibre line diagram in the manner which SLC’s expert opined was the appropriate way to interpret it, namely:
- (e)By interpreting the fibre line diagrams in that way, one identified the path of the relevant CQ fibre pair all the way from the Polaris Data Centre to Brisbane, including:
- the particular fibre numbers on the particular cable which was associated with the particular CQ number; and
- particular joints through which the fibre pair must have passed.
- (f)The result was a complete accurate and reliable identification of the 36 fibre pairs constituted SLC’s 72f Network when it was completed and handed over to SLC by PIPE.
- Having established the accuracy of that foundational proposition SLC then sought to prove the conduct which amount to tortious interference with particular fibres which it contended must have been the fibres which it owned, by an analogous process.
- The problem was that SLC failed to prove the assumptions referred to in (b).
- For the western route, SLC relied on the following documents:
Court book document description
CQ163: Line diagram (Version 1)
CQ176 (2 fibres for the Western Leg)
CQ212-245 (66 fibres for the Western Leg)
CQ163 (version 2) (2 fibres for the Western Leg)
CQ176: Line Diagram (Version 2)
ISOW for RT57909 – I0059
- For the eastern route, SLC relied on the following document:
Court book document description
Fibre diagram for RT57907 – CQ3515-50 – Springfield Land Corp – Makerston St to Polaris Data Centre
- True it was that PIPE had, in compliance with its disclosure obligations, disclosed each of the fibre line diagram documents on which SLC now relies. Pursuant to UCPR r 227(2) they were admissible in evidence against PIPE as relevant and being what they purported to be. But the fibre line diagrams did not on their face purport to be documents which were the outcome of such a purposive activity by PIPE as would justify the assumptions referred to in (b) above. So far as the fibre line diagrams were concerned there was no evidence that to identify for each continuous core between Brisbane to Springfield, PIPE had identified and mapped each continuous path of the Network in “fibre line diagrams”. Nor was there evidence that the documents concerned were the outcome of such a purposive activity. Nor was there evidence that the details in the documents were accurate and reliable as to the situation in the ground. SLC argued that a Jones v Dunkel inference should be drawn against PIPE because PIPE failed to call anyone to negate the inference which SLC sought to draw. But SLC had the onus of proof. The mere existence of the documents did not justify the inference which SLC sought to draw. In my view SLC’s evidence did not rise to the stage where it could be said that the inference for which SLC contended was open or that there was a case requiring an answer by PIPE. Had it reached that stage then the absence of any evidence to the contrary from PIPE’s witnesses might have been important.
- The truth of the matter was that there was a Jones v Dunkel inference to be drawn, but it was one adverse to SLC. I make the following observations:
- (a)The fibre line diagrams on which SLC relied, which are identified at  to , concerned the period in which the relevant hauling and splicing and labelling of cable was done by Optilinx. SLC called Mr Van Hecke of Optilinx. He was personally involved in all this work. Yet counsel for SLC did not take Mr Van Hecke to any of those documents, or seek to have him identify them, explain what they meant (or at least what they meant to the independent contractor which, on SLC’s case, must have been acting on them), or otherwise seek to support the assumptions referred to in (b) above. This failure was notable and unexplained. I would infer that his evidence would not have assisted SLC’s case concerning the fibre line diagrams.
- (b)I reach that inference based on SLC’s failure to question Mr Van Hecke on any of these matters in chief: cf Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418.
- (c)I observe that the inference gets further support from the following:
- As I have already mentioned – see  to  above – Mr Van Hecke was cross-examined by PIPE on how it could have come to pass that some part of the Duplicate Network cable had been spliced into the Network cable by Optilinx, if that had in fact happened. His evidence was that it could never have occurred deliberately and, certainly, PIPE had not instructed Optilinx to do so. He found it difficult to imagine why an instruction would be given which would involve splicing new cable into an existing operative network.
- PIPE sought to have Mr Van Hecke extend his observations to parts of the work which might have been done by contractors other than Optilinx. I accept his evidence in relation to the work which Optilinx did. I ruled in favour of an objection that Mr Van Hecke could not be asked to speculate about work that he had not identified that he did, namely work which might have been done by other contractors.
- Mr Van Hecke, who was a knowledgeable and helpful witness, was present in the witness box when this exchange and that ruling occurred. The following excerpt from the transcript records SLC’s objection to the question; my ruling; that at the very end of the cross-examination, Mr Van Hecke volunteered to clarify what he thought was “a misunderstanding of terms”; and neither counsel seeking his clarification:
MR HANDRAN: Your Honour, I object. He’s asking the witness to speculate about work that he hasn’t identified he did. He can’t give evidence about the intentions or otherwise of some other contractor.
HIS HONOUR: It becomes a little hypothetical. Is it suggested that that has in fact happened?
MR COUPER: It’s part of our learned friend’s trespass of conversion case. In fact, it rests on the proposition that that type of splicing is the foundation for the trespass of conversion claim for the misuse of Springfield’s network.
HIS HONOUR: I thought it was the use of the conduit.
MR COUPER: No, your Honour. No. The revenue data schedule which our learned friend hasn’t given your Honour yet, that aspect of the trespass conversion claim which is on the basis that there are sections where pipe has spliced its cable to part of what’s said to be the Springfield cable, some online, some offline, and therefore, it’s said we have converted that section of their cable and therefore, the whole of their cable.
HIS HONOUR: What I’m just not clear on is whether you’re suggesting – we know when this witness says that his company did it, and if there are sections where his company did it, then you really, to be fair to the witness, say, “Well, this is – it’s said this happened. That must be a mistake.” But you can’t ask him to speculate upon the possibility that someone else might have done it and it might be a mistake by someone else.
MR COUPER: I accept that, your Honour. I think I’ve asked the questions I can ask of this gentleman about what his instructions were, whether he [indistinct] but I won’t seek to have him give evidence about what other people might or might not have done.
WITNESS: This is a misunderstanding of terms.
HIS HONOUR: No. Just - - - MR HANDRAN: No. Just - - -
HIS HONOUR: No. Just – you’ve got to – you’ve got to wait to be asked a - - -?---Okay.
- - - question?---Yep.
MR COUPER: That’s the cross-examination, your Honour.
HIS HONOUR: Mr Handran.
MR HANDRAN: No re-examination, your Honour. May the witness be excused?
HIS HONOUR: Yes. Thank you for your attendance. You’re excused?---You don’t want to clarify that last - - -
No. Apparently he doesn’t, so we’ll be left about that?---It’s important. Okay.
Anyway, that’s – thank you for your assistance?---Thank you.
- (d)It seems to me that a Jones v Dunkel inference may be drawn from the failure of SLC’s counsel to seek clarification from Mr Van Hecke of the misunderstanding.
- I am not prepared to accept the correctness of the conclusion which SLC contends for based on its analyses of the documents because it requires me to draw inferences about the documents which I am not prepared to draw. I do not reach the requisite state of positive satisfaction as required by the principles referred to at  to  above.
- The failure by SLC to establish the starting point as to the correct and precise identification of the particular fibres which made up SLC’s 72f Network means that the subsequent elaborate analyses which attempt to show (1) that PIPE gave instructions to carry out splicing activity in relation to particular fibres which must be regarded as SLC’s fibres; and (2) the particular fibres which were the subject of the alleged splicing activity must have been SLC’s fibres, must also fail. At its highest the subsequent analysis relies on admissions by PIPE that particular fibre pairs which it admittedly used were fibre pairs which used particular numbered fibres on a particular identified cable in particular joints. If SLC cannot prove that the particular fibres on that particular cable were the fibres owned by it in the first place, the fact that PIPE used the fibres is not relevant. PIPE might be expected to use the fibres if the fibres were theirs.
- The trespass and conversion case fails at the threshold because SLC failed to persuade me to make findings consistent with its foundational proposition.
SLC did not establish relevant rights to the Landcorp infrastructure
- Further, and in any event, SLC did not establish that it had such rights in relation to the Landcorp infrastructure as would support a trespass or conversion case.
The breach of fiduciary duty and unconscionable conduct case
- SLC alleges that SLC and PIPE were in a fiduciary relationship and that the fiduciary duties owed by PIPE were:
- (a)“to refrain from pursuing, obtaining or retaining for [PIPE] any collateral advantage in relation to the Network without the knowledge and informed consent of [SLC]”; and
- (b)“to not place itself in a position where its obligations to [SLC] and its private interests may conflict.”
- SLC alleges PIPE breached the alleged fiduciary duties by:
- (a)constructing the Duplicate Network;
- (b)connecting the Duplicate Network to the Polaris Data Centre;
- (c)operating the Duplicate Network for its own benefit; and
- (d)operating the Duplicate Network in competition with SLC’s telecommunications business.
- SLC contends the same conduct was unconscionable on the part of PIPE.
The alleged fiduciary duties did not exist
- It is unnecessary to embark upon a treatise on the law of what constitutes a fiduciary relationship. It suffices to note that PIPE correctly contended (footnotes in original):
The critical feature of a fiduciary relationship is that the fiduciary “undertakes or agrees to act for or on behalf of or in the interest of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense”. The phrase “for or on behalf of” and the phrase “in the interest of” must be understood in a reasonably strict sense.
“Where a term to like effect as the suggested fiduciary obligation cannot be implied, it will be very difficult to superimpose the suggested fiduciary obligation upon that limited contract.”
- The proposition that SLC and PIPE were in a fiduciary relationship cannot be accepted. They were not.
- First, one must have regard to the nature of the relationship between the parties at the time they entered into their contractual relationship. It did not have any of the hallmarks which might justify the conclusion that PIPE was a fiduciary so as to justify the contended for duties. To the contrary, as I have earlier remarked, the parties were both sophisticated commercial actors who had embarked upon a process (with the assistance of legal and other advisers) of negotiating for and entering arms-length commercial contracts in which they both realised and expected that the other was free to seek to maximise its own commercial interests. Their conduct towards each other in relation to their contemplated contract must be taken to have evidenced the contemplation that the extent to which they sought to constrain that freedom was something which would be dealt with by their contract. The result was that, so long as their conduct did not breach their contractual promises to each other, each was entitled to maximise its own commercial interests without regard to the interest of the other. The purpose of the contemplated relationship was the promotion by each party of their own commercial interests.
- Second, what I have just observed seems to me to reflect an objective assessment of the way in which the parties conducted themselves leading up to their entering into their contract. But, as I turn explain, it also reflected at least the actual intentions of Ms Sinnathamby, whose significance in the decision-making and intentions of SLC has already been identified. She was cross-examined as to the nature of SLC’s intention at the time of contracting, so far as the character of its relationship with PIPE was concerned.
- She was taken to:
- (a)cl 19(b) of the IRU Agreement which provided:
For the avoidance of doubt, nothing in this clause 19 shall have effect to prevent, limit or otherwise adversely affect the ability of SLC to resell or sub-lease Fibre Capacity on the Network acquired under this agreement to another person.
- (b)cl 6 of the IRU Agreement which governed resale or sub-lease of Fibre Capacity, which relevantly provided:
- Right to resell or sub-lease
Subject to this agreement, SLC has the right to resell or sub-lease any part or all of its Fibre Capacity to a Fibre Capacity User for a period not exceeding the Term on the terms set out in this clause 6 and the [WFS Agreement].
- Access to wholesale pricing
- (a)PIPE undertakes to offer Fibre Capacity Users and SLC its wholesale (Carrier) pricing in respect of connections to the Network Access Points.
- (b)SLC must use its best endeavours:
- to introduce PIPE to potential Fibre Capacity Users which require connection to the Network Access Points; and
- to encourage potential Fibre Capacity Users to consider the terms of an offer made by PIPE in respect of connection to the Network Access Points.
and agreed that SLC’s intention was that it could sell some fibres to PIPE, it could sell fibres to anybody else that it chose, and PIPE couldn’t stop SLC doing that, qualifying that acknowledgement by explaining that SLC assumed that what would happen was that PIPE would really work with SLC to sell the fibre.
- Her attention was also drawn to cl 2 of the WFS Agreement and agreed that it was SLC’s intention at the time the agreement was signed that if PIPE had submitted an order to SLC for use of an IFS, SLC could simply respond by saying that it did not agree to PIPE using the IFS.
- Her attention was drawn to cll 6(a) and (b) of the WFS Agreement, which provided:
Our wholesale relationship
- (a)This agreement does not create a relationship of employment, agency or partnership between the parties.
- (b)PIPE must not represent that PIPE is an agent or dealer of SLC.
- I interpolate that, although she was not taken to cl 17 of the IRU Agreement, it is in identical terms to cl 6(a) of the WFS Agreement. Ms Sinnathamby agreed that it was SLC’s intention at the time that the WFS Agreement was signed that PIPE would not be an agent or partner of SLC, and that PIPE would not be regarded as a dealer for SLC.
- It is difficult to accept that latter proposition at face value, given the obviousness of the wording of the clause. Although, I have generally accepted that she was attempting to give her evidence honestly, by that stage of the cross-examination, I think she was descending into advocacy a little, and that rendered her evidence unreliable. That much became perfectly clear in the immediately following passage of cross-examination when she asserted an incredible proposition about her belief as to whether there was an ability to extend the operation of the WFS Agreement. When pressed on that she retreated to state she had that belief “to the best of my recollection”. And when pressed further about whether she could really say that was her belief given the wording of the relevant terms, she retreated still further to the proposition “I believe it didn’t cross our mind to put the extension in this here, in this clause.” When pressed still further she agreed that she knew that there was no term arranged for extension but said only she could not recall whether it was deliberate or merely an omission.
- I observe that Mr Sharpless made some attempt in his evidence to characterise the relationship in a way which would suit SLC’s argument, by referring to PIPE as SLC’s business partners, but I do not accept that evidence. It flew in the face of the express terms of the relevant contracts and was a self-serving statement by an interested witness. In the context of this case, I would treat such uses of the term “partner” by a lay person as having no significant weight in relation to the question before me.
- Third, the next and clearest indications against a conclusion of a fiduciary relationship can be found in the terms of the contractual arrangements between the parties. They contained the clauses expressly negativing any conclusion that their relationship should be characterised as one of employment, agency or partnership. Whilst fiduciary relationships can be found to exist other than in relationships which can be so characterised, these express clauses were, to my mind, a very clear indication against the conclusion for which SLC contends.
- I completely accept PIPE’s submission that the two agreements to which PIPE and SLC are parties set out in detail their rights and obligations regarding the installation and management of the cable and that no terms of the agreements or other features of their relationship supported the characterisation of the relationship as fiduciary.
- As there was no fiduciary relationship, it is unnecessary further to consider SLC’s various contentions as to alleged breach of the duties which might have existed if the relationship had been fiduciary.
PIPE’s conduct was not unconscionable
- SLC founds its case in alleged contravention by PIPE of the obligation expressed in s 51AC of the Trade Practices Act 1974 that:
(1) A corporation must not, in trade or commerce, in connection with:
- (a)the supply or possible supply of goods or services to a person (other than a listed public company); or
- (b)the acquisition or possible acquisition of goods or services from a person (other than a listed public company);
engage in conduct that is, in all the circumstances, unconscionable.
- SLC’s complaint has been outlined in  above.
- In Barboza v Blundy  QSC 68 at  to , I considered the nature of the evaluative judgment called for by an equivalent statutory provision. I do not apprehend that there is anything in the discussion of principle by the Court of Appeal in Adani Abbot Point Terminal Pty Ltd v Lake Vermont Resources Pty Ltd  QCA 187 at  to  to suggest any error in that discussion.
- It will be apparent from what I have previously written in these reasons that I regard PIPE merely to have taken commercial advantage of the ownership rights which it had expressly and explicitly bargained for. There was neither an express term nor an implied term of either the IRU Agreement or of the WFS Agreement which expressly constrained it against so doing. The bargain was struck at arms-length between properly advised sophisticated commercial actors. There was no predation or trickery revealed in the manner by which PIPE went about securing to itself the bargain. There is nothing in PIPE’s taking advantage of the rights which it had secured for itself which could attract the evaluative judgment which SLC seeks to have me form.
- In its closing submissions SLC contended that the features of PIPE’s conduct which should attract that judgment were these (emphasis in original):
First, the construction and connection of the Duplicate Network to Polaris was conduct undertaken by PIPE when it was managing the Network for [SLC]. PIPE knew of the location and route of the Network and used that information in order to construct the Duplicate Network. It was not conduct which undertaken in any open or transparent way and at a time after [SLC] was locked into a long term contract and PIPE had used its position viz a viz the Network to secure tenant space at Polaris.
Secondly, the pretence upon which PIPE was allowed to connect its cables to Polaris was that those cables would provide “additional options to Springfield for future capacity”. That statement was false, knowingly so, and was intended to conceal, rather than reveal, the purpose for which access was being sought. PIPE has not called one witness to say that the Duplicate Network was installed to provide [SLC] with any additional fibre capacity.
Thirdly, SCG was evidently in a position of economic and commercial vulnerability in the sense that it had retained PIPE to operate and maintain the Network for up to 30 years. If the conduct of PIPE was not in breach of contract, [SLC] remained captive to PIPE should it find the installation and operation of the Duplicate Network insulting and unworkable.
Fourthly, [SLC]remained captive to PIPE by reason of it continuing to be the “face” of the Network and the interface between [SLC]and its customers. Under the IRU and the NCD that PIPE secured, [SLC] had nowhere else to go. All the while, PIPE remained able to exploit confidential information and the customer relationships which it was permitted to develop under the IRU, and [SLC]remained essentially powerless to know if or how that was occurring; PIPE was obliged (but from about 2013 failed) to provide any revenue reports to [SLC]. The sharp practice associated with PIPE building and operating the Duplicate Network thus enabled it to directly or indirectly secure a commercial advantage, which could be used detrimentally against [SLC].
- There is nothing in any of those propositions. They are merely an emotively-expressed mishmash of propositions I have already rejected. I observe:
- (a)I have explained why SLC failed to demonstrate any breach of contract by use of Confidential Information.
- (b)And there was nothing wrong with PIPE securing tenant space at the Polaris Data Centre. To the contrary, the parties had agreed that it would use its best endeavours to do so: see cl 3.2(a) of the IRU Agreement.
- (c)I have explained that I reject SLC’s attribution of misleading conduct and trickery to PIPE’s conduct in arranging access to the Polaris Data Centre.
- (d)The suggestion that SLC was “locked into” anything is spurious in this context and for this argument. SLC had no vulnerability in the sense suggested. It was not captive in any sense. It could, and the evidence reveals did, use the Fibre Capacity for which it had contracted and for the purposes which it had contemplated. Ultimately when that capacity had almost reached 100%, it built further fibre capacity.
- I agree with PIPE’s argument that SLC’s unconscionable conduct case is without substance.
Other equitable claims
Breach of duty of confidence
- As previously identified, although SLC had pleaded a case based on breach of an equitable duty of confidence, it was not pursued.
Claim based on a claim for equitable estoppel.
- In its written opening, SLC suggested that:
PIPE’s conduct gave rise to a reasonable expectation, on the part of [SLC], that PIPE would not compete with [SLC]. PIPE’s conduct for the purpose of this estoppel is the same conduct that is relied upon in order to establish the representations by omission referred to above. PIPE cultivated this expectation and encouraged [SLC] to act upon it.
- SLC made no attempt to support an estoppel claim in its closing submissions. And, as I have rejected its misleading and deceptive conduct cases, its breach of fiduciary duty case, and its unconscionable conduct case, there is no merit in my attempting to analyse the case through the lens of estoppel when SLC has not sought to persuade me that any different result might be obtained by that mechanism, if the other cases failed.
Claims for breach of statutory duty
- SLC had pleaded a claim that the effect of the statutory provisions referred to in (a) above was to impose a duty on PIPE to give notice in the terms required by Schedule 3, s 17 of the Telecommunications Act to SLC and its related entities before accessing their land and doing work on the Off-Rail sections of the Network. That claim must fail for the reasons expressed in (b) above.
Claims for injunctive relief and declaratory relief
- SLC’s pleading sought an injunction restraining PIPE, by its agents or otherwise, during the Term of the IRU Agreement from:
- (a)being engaged, concerned or interested, in any business or undertaking as a telecommunications asset owner offering competitive fibre cable capacity to wholesale suppliers or end-users of telecommunications services to Springfield;
- (b)further or alternatively, using any infrastructure relating to the Off-Rail section of the Network, including any cable situated therein comprising the Duplicate Network.
- Both claims fail because SLC has neither established that any equitable or legal right which it might have needs protection by any such order, nor that such an order is necessary to prevent any legal or equitable wrong being done or threatened to be done to it. In any event the Term of the IRU Agreement has expired.
- SLC also sought an order that PIPE remove the Duplicate Network from the conduit owned by SLC. This claim fails for the same reasons. In particular, the conduit is not owned by SLC.
- SLC also sought an injunction restraining PIPE from interfering with, or removing, any of the customers on SLC’s Network, other than on the instructions of the plaintiff, for the remaining duration of the IRU Agreement. This claim fails for the same reasons.
Claim for declaratory relief
- SLC’s pleading sought a declaration that, on the proper construction of the IRU Agreement and the WFS Agreement:
- (a)the Term of the IRU Agreement may be extended under cl 13.1(c) by either party unilaterally; and
- (b)the Term of the WFS Agreement ends at the end of the Term under the IRU Agreement.
- No such declaration should be made.
- As to the first part, even if cl 13.1(c) expressed a certain and enforceable obligation (which, for reasons previously expressed, it does not) the declaration sought would not express the proper construction of the clause. The Term would only be extended if the clause was engaged and the negotiation was successful.
- As to the second part, cl 10.1 of the WFS Agreement plainly expressed a fixed Term not so expiring, and SLC abandoned any attempt to persuade me that there was any other construction of the agreement.
- There should be judgment for PIPE on SLC’s claims. There presently appears to me to be no reason why costs should not follow the event, but in case there are considerations not presently before me which might affect the form of any costs order, I will hear the parties as to costs.
Conclusion and orders
Appendix 1 – Rulings on unresolved objections to Court book
Cost of Springfield to Brisbane fibre build
Undated (estimated 2005)
This document is relevant and requires the Court’s consideration. This document has been disclosed by PIPE, which is recorded by the “DLOD” reference in the “Disclosure reference” column. Per r 227 of the UCPR, it is plain that the document is disclosed by PIPE and therefore relevant and admissible
PIPE had by disclosing the document admitted that it tended to prove or disprove a fact in issue. I am not persuaded to take a different view by an objection which merely asserts a change of mind. Objection overruled
Submission Sheet from Pipe Networks to USQ – Provision of High-Speed External Link to Springfield Campus
As per item 48
As per item 48
Email from Chris Schroor to Bevan Slattery and others – USQ Tender
As per item 48
As per item 48
Email from Chris Schroor to Rob Boogers and Brendan Hemmings – Springfield Data Centre
As per item 48
As per item 48
Email chain ending between Bevan Slattery, Chris Schroor, Mike Andrea and Brent Paddon – RE: Contracts
As per item 48
As per item 48. Further, the nature of the document explains some aspects of the timing of what occurred during the final negotiation of the salient contracts and may be regarded as relevant for that reason
Polaris Data Centre Information Memorandum
As per item 48
As per item 48
Pipe Networks Limited Invoice to Springfield Land Corporation – First Progress Payment (25%) on Phase 1 Dark Fibre Installation
As per item 48
As per item 48
Pricing spreadsheet [5 tabs]
As per item 48
As per item 48
Email chain between Chris Schroor, Maha Sinnathamby, David Henry, Bob Sharpless, Michael Kerry, Russell Luhrs and Con Sciacca – Data Centre 0 Dr Leo Kelleher
This document is relevant and requires the Court’s consideration. In that regard, it is referred to in the plaintiff’s case. The email chain is directly relevant to the allegations in [16(b)] and [23A] of the Statement of Claim
As per item 48
Budgetary Pricing for Services to Springfield
As per item 48
As per item 48
Diagrams of cable laid in Springfield
Undated (estimated 2007)
DSLOD 12 (pages 1-14)
Description: This document has been incorporated
The plaintiff agrees that all 14 pages of this document can be dealt with in one entry, being
I accept SLC’s submission. Objection overruled
over two entries (documents 186 and 199). The defendant submits that this document ought to be included in one entry.
document 199 of the Court Book Index, and does therefore not resist PIPE’s objection to the duplicate document 186. PIPE’s objection to this document should therefore be overruled
Letter from Pensar Pty Ltd to Cardno – Sinnathamby Boulevard
This document is relevant and requires the Court’s consideration. In that regard, it is referred to in the plaintiff’s case. This invoice is being relied upon as evidencing SLC’s ownership of the LandCorp infrastructure and is therefore directly relevant to the allegations in [3B] of the Statement of Claim
The document is relevant because it tends to support the conclusion that relevant infrastructure was constructed via engagement of an independent contractor. It does not establish SLC’s ownership of the LandCorp infrastructure for reasons canvassed in the body of my reasons, but that does not make it inadmissible
Letter from Pensar Pty Ltd to Cardno – Sinnathamby Boulevard – Contract 2 – Progress Claim No. 30 – May 2008
As per item 217
As per item 217
SBDF Network Pricing
As per item 48
As per item 48
Email Chain between David Collyer, Andrew Perkins, Mike Andrea, Reggie Naik, Danny
As per item 48
As per item 48
Brady, Wayne Springer and Robert Lee – RE: Mid-path fibre access
Revenue Data Documents
Certificate of Practical Completion – CQ5895
As per item 48
As per item 48
Circuit Summary Extract: CQ5895
As per item 48
As per item 48
Sales order for CQ35677
Relevance: This document relates to revenue received by a company that is not the defendant. It does not relate to a contract involving the defendant
As per item 48
I uphold the objection for the reasons advanced by PIPE
Sales order for CQ23344
Relevance: As per item 611
As per item 48
As per item 48
Contract with Datacom
Relevance: The document is a contract that constitutes Managed Service Agreement 5934 not 5394. Managed
As per item 48
As per item 48. I am unable to understand the significance of the additional submission advanced by PIPE
Service Agreement 5934 is not in dispute
Service ID – 9037 – Historical Extract
Relevance: This document is a service extract provided pursuant to Managed Service Agreement 5934 not 5394. Managed Service Agreement 5934 is not in dispute
As per item 48
As per item 989
Contract with Datacom
Relevance: The document is a contract that constitutes Managed Service Agreement 5954 not 5395. Managed Service Agreement 5935 is not in dispute
As per item 48
As per item 989
Contract with Datacom
Relevance: As per item 991
As per item 48
As per item 989
Service ID 12507 – Historical Extract
Relevance: This is a document service extract which relates to services provided pursuant to Managed Service Agreement 5935 not 5395. Managed Service Agreement 5935 is not in dispute
As per item 48
As per item 989
Service ID – Historical Extract
Relevance: As per item 993
As per item 48
As per item 989
Contract with Datacom
Relevance: This document relates to Managed Service Agreement 4944 not 8363. Managed Service Agreement 4944 is not in dispute
As per item 48
As per item 989
Contract with Datacom
Relevance: This document relates to Managed Service Agreement 8437 not 10931
As per item 48
As per item 989
 I use here the acronym for the plaintiff’s former name, which was the acronym used in relevant contractual instruments. I use the acronym rather than “Springfield” in order to avoid confusion with the use of the term as a location description.
 This description derives from the oral evidence of relevant witnesses. It conflicts in some respects with the company search, but I have preferred the evidence of the witnesses.
 Information and Communications Technology.
 This short form of the defendant’s name was the form used to refer to the defendant in relevant contractual instruments.
 In large parts of the Off-Rail part of the Network, SLC’s 72f cable was part of an existing shared cable of 144f where 72f were allocated to SLC, but ownership of the remaining 72f was retained by PIPE.
 Murray v Murray (1960) 33 ALJR 521 at 524 per Dixon CJ, cited with approval by Gageler J in Henderson v Queensland (2014) 255 CLR 1 at .
 Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5 per Dixon, Williams, Webb, Fullagar and Kitto JJ, also cited with approval by Gageler J in Henderson v Queensland at .
 Re Day (2017) 91 ALJR 262 at .
 Henderson v Queensland at  and  per Gageler J.
 Footnotes in original, but footnote numbers altered.
 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 per French CJ, Nettle and Gordon JJ at  to , internal citations omitted.
 Victoria v Tatts Group Ltd (2016) 90 ALJR 392 per French CJ, Kiefel, Bell, Keane and Gordon JJ at .
 The phrase used by Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd  AC 1101 at  is as apposite here as it was when adopted by Spigelman CJ in Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council  NSWCA 64 at .
 I quote from the compilation of the Act prepared on 21 October 2005, taking into account amendments up to Act No. 119 of 2005, as that version was the version in force at the time the IRU Agreement was executed.
 Court Book at 10164 to 10179. The Court Book dates the document at 3 March 2005. Whether it was before or after PIPE’s 18 March 2005 letter does not matter.
 Court Book at 10170, 10171, 10174.
 Court Book at 10253 et seq.
 Court Book at 10262 et seq.
 Disaster recovery.
 Court Book at 10276 et seq.
 In context, this was a reference to the income which would be derived from PIPE (via its lease of a fibre pair), from USQ (via a similar lease) and from all other customers who sought access to the SLC network.
 In context, this was a reference to the contemplated leases to PIPE and USQ of fibre optic pairs.
 Court Book at 10289 to 10321.
 The email in the Court Book (item 93 at 10562) did not include the attachment. The next item in the Court Book was a version of the IRU Agreement but it was not the same as the version which was attached to the email sent by Mallesons Stephen Jaques to PIPE on 11 October. It is not safe to assume that it is the attachment.
 This was evidently a reference to the 21 July 2005 order form contract.
 See the discussion under the heading “SLC becomes aware of the Duplicate Network in 2011” below.
 The transcript erroneously records her as naming the lawyers as “Nelsons”: Transcript Day 5 at 60.31.
 The terms say “the fifteenth anniversary of the Phase One RFS Date”, but it was common ground that date was 16 February 2021.
 The term says “the 30th anniversary of the Phase One RPS Date”, but given the common ground in relation to the date for cl 13.1(a), logically 16 February 2036 must be the date for cl 13.1(d).
 Transcript Day 1 at83.40 to 84.1.
  NSWCA 309 at , in a passage also cited with approval in Wormald v Maradaca Pty Ltd  NSWCA 289 at  per Bell P (with whom Bathurst CJ and Payne JA agreed).
 See the analysis under the heading below “SLC becomes aware of the Duplicate Network in 2011”.
 Court Book at 11331 et seq.
 Court Book at 11364.
 Transcript Day 2 at 101.
 Transcript Day 2 at 102.
 Court Book at 11368 to 11378 and 11407 to 11415.
 Court Book at 11416 and 11417.
 Transcript Day 2 at 101.
 Transcript Day 2 at 102.
 Transcript Day 2 at 69 to 72. A marked-up version of the diagram was subsequently tendered and became Exhibit 1.
 See SLC’s statement of claim (SOC) at [3A] and , admitted by PIPE.
 Court Book at 11827 to 11828.
 Court Book at 12125 to 12131.
 Court Book at 12132 to 12137.
 Court Book at 12027.
 Court Book at 12086.
 Court Book at 12096.
 Court Book at 12053 to 12058
 Admitted on the pleadings: SOC at [1B].
 Court Book at 12125 to 12137.
 See the various Springfield Fibre Reports and related emails providing them and seeking information concerning them.
 See the drawing identifying those distances as so referable in Court Book at 12173.
 Court Book at 12455 to 12457 and 12461 to 12462 and Transcript Day 2 at 97 to 98.
 Exhibit 5: Transcript Day 5 at 53.36-40.
 SOC at [2QAA].
 Clause 9.3 of the WFS Agreement expressed a similarly worded clause.
 Defence (DEF) at [4I(a)(vi)].
 Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 404, citing BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 52 ALJR 20 at 26.
 (2009) 238 CLR 304 at 358  per Gummow, Hayne, Heydon and Kiefel JJ and 330  per French CJ agreeing. See also Beerens v Bluescope Distribution Pty Ltd (2012) 39 VR 1 at 37  per Tate JA (with whom Redlich JA agreed).
 Campbell v Backoffice Investments Pty Ltd (2008) 66 ACSR 359 at 450 .
 (1998) 43 NSWLR 104 at 124-125.
 Commonwealth Bank v Barker (2014) 253 CLR 169 at .
 Implication of terms in fact may properly be described as an exercise in construction: Commonwealth Bank v Barker (2014) 253 CLR 169 at .
 SLC’s SOC referred to these obligations as the implied obligations of good faith, but they are more accurately identified as founded on the implied duty to co-operate.
 SOC at [2O(a)(b)] and [2Q(a)(b); DEF at [4L(b)] and [4N(b)].
 SOC at [2O(c)] and [2Q(c)]; DEF at [4L(c)] and [4N(c)].
 (1998) 43 NSWLR 104 at 124-125. See also Adaz Nominees Pty Ltd v Castleway Pty Ltd  VSCA 201 at - per Whelan JA and Riordan AJA and -,  per McLeish JA; Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd (2015) 237 FCR 534 at 560-561 - per Middleton, Foster and Gleeson JJ; New Standard Energy PEL 570 Pty Ltd v Outback Energy Hunter Pty Ltd (2019) 135 SASR 469 at  per Nicholson J (Kourakis CJ relevantly agreeing at  and Lovell J agreeing at ); Wellington v Huaxin Energy (Aust) Pty Ltd  QCA 114 at - per Philippides JA (Morrison JA agreeing at  and Ryan J agreeing at ).
 Transcript Day 2 at 106.25-28.
 IDF is a reference to “intermediate demarcation frame”. FTP is a reference to a “fibre termination point”.
 Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 at 96-97; John Alexander’s Clubs Pty Ltd v White City Tennis Club Limited (2010) 241 CLR 1 at  – .
 John Alexander’s Clubs at .
- Published Case Name:
Springfield City Group Pty Ltd v Pipe Networks Pty Ltd
- Shortened Case Name:
Springfield City Group Pty Ltd v Pipe Networks Pty Ltd
 QSC 255
18 Nov 2022
- White Star Case: