Judge Alton sitting as a judge of the High Court25 April 2005
- Contracts – Specific performance – Discretion to order specific performance – Construction of interconnect agreement – Claimant company involved in 'self-dialling' – Self-dialling call traffic amounting to 'artificial inflation of traffic' – Effect of such traffic on parties' rights to relevant revenue payments – Consideration of relevant evidence.
The claimant company was a terminating network operator (TNO) within the meaning of telecommunication standard agreements. It commenced proceedings against the first defendant, claiming specific performance of an obligation by the first defendant, in a pay when paid type of agreement, to use reasonable endeavours to recoup premium rate service (PRS) revenues from the second defendant, BT, the transit operator in contract with the first defendant pursuant to a standard interconnect agreement (SIA) entered into between the first defendant and BT. PRS revenues were described in Annex D of the SIA as an entertainment or information service accessed by means of a call and consisting of, or including the sending of speech, music, other sounds or signals to the calling party. Annex D further described an artificial inflation of traffic (AIT), as a situation where the flow of calls to any particular revenue share service was as a result of any activity on or behalf of the party operating the revenue share service disproportionate to the flow of calls which would be expected from good faith commercial practice and usage of the network. Paragraph 14A of the SIA imposed upon both parties to the agreement obligations to take reasonable endeavours to agree adequate safeguards to detect, identify, notify and prevent AIT. Annex E reiterated the parties' obligations pursuant to cl 14 and required notification, inter alia, by the TNO of information concerning suspected AIT to the transit operator and the originating network operator. Annex E gave the parties the right to suspend payment obligations in the event of the entertainment of suspicions which did not amount to proof of AIT.
BT contended that it had the right to withhold those PRS revenues on the basis that it was suspected that the utilisation of the PRS numbers by the ultimate number user, T Ltd, amounted to AIT within the meaning of the SIA. BT was subsequently joined as a co-defendant to the action. BT cross-claimed on the basis that, together with the claimant, the first defendant had committed wrongs against BT by conspiring to commit wrongful acts, namely, breaches of the SIA. BT further alleged that the claimant had induced the first defendant to breach its obligations pursuant to that SIA.
The main issues were: (i) whether the telecommunications traffic were AIT for the purposes of the SIA, (ii) if the relevant traffic was AIT, whether the first defendant was in breach of its obligations pursuant to the SIA, (iii) if so, whether BT was entitled, either pursuant to the terms of Annex E of the SIA, or independently of it, to withhold payment in respect of that traffic, and (iv) if that traffic was AIT, whether there were grounds for BT's cross-claim, and whether BT had proved damage.
The court ruled:
On the express wording of the standard interconnect agreement between the first and second defendants, and particularly having regard to the definition of artificial inflation of traffic (AIT), there was no requirement that dishonesty be proved as a necessary element of the activity by the premium rate service provider in order for that activity and the resultant flow to be taken outside the concept of good faith commercial practice and usage.
On the evidence, T Ltd had not been providing any form of service within the ordinary meaning of that word and the relevant traffic had either been wholly or very substantially self generated. The setting up of a PRS range of numbers, the sole or predominant purpose of the use of which had been not to provide any service to a third party user at all, but to self dial in order to maximise call traffic and hence potential profits, could not be regarded as good faith commercial practice and usage. It followed that dishonesty was not an essential ingredient of AIT. In the circumstances, the first defendant had acted in breach of its obligations arising pursuant to the SIA. Since the relevant traffic had not been PRS traffic, the first defendant could not establish any right to payment for that traffic pursuant to the SIA. Accordingly, BT had been entitled, both pursuant to Annex E and independently of it, to refuse to pay for that traffic. Whilst BT had proved its claim both in respect of conspiracy and inducement of breach of contract to include the fact of damage, it had failed to prove the quantification of that damage with sufficient precision so as to justify the making of a financial award.