Inquam Telecom (Holdings) Ltd v Primus Telecommunications Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix,Lord Justice Thomas,Lord Justice Pill |
| Judgment Date | 31 July 2007 |
| Neutral Citation | [2007] EWCA Civ 1033 |
| Docket Number | Case No: A3/2007/0443 |
| Date | 31 July 2007 |
| Court | Court of Appeal (Civil Division) |
[2007] EWCA Civ 1033
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR JUSTICE AIKINS)
Lord Justice Pill
Lord Justice Rix and
Lord Justice Thomas
Case No: A3/2007/0443
A3/2007/0443(B)
Mr T Dutton QC and Mr S Brown (instructed by Messrs Mayer Brown Rowe & Maw LLP) appeared on behalf of the Appellant.
Mr P Roberts (instructed by Messrs Bryan Cave) appeared on behalf of the Respondent.
This is an appeal from the judgment, dated 7 February 2007, of Aikens J, [2007] EWHC 181 Con. It arises out of a dispute between two telecommunications operators, namely the claimants (and in this court the appellants), Inquam Telecom (Holdings) Limited, also referred to as ITHL, which I will refer to as Inquam, and the defendants below (and in this court the respondents), called Primus Telecommunications Limited, whom I shall call Primus.
These two parties entered into an agreement called a Service Agreement on 12 May 2005, under which Inquam agreed to pay to Primus the tariff amounts set out in Schedule 1 by reference to payments of so many pence per minute of telephone traffic relevant to their agreement, separated into three different rates: peak, off-peak and weekend. The amounts scheduled in that agreement were 7.9 p in respect of peak, 6.7 p in respect of off-peak and 2.45p in respect of weekend.
I can take, for the purposes of this appeal, the basic facts directly from the skeleton argument of Mr Kenneth Roberts, who has appeared here, as he did at trial, on behalf of Primus. Thus, the business opportunity underlying the Service Agreement arose due to the complimentary experience and resources of Inquam and Primus. Primus is part of what is said to be a large multinational telecommunications group and has the experience and ability to terminate international core traffic and promote this service in the United Kingdom. Inquam had valuable assets in the form of a range of 1.2 million UK mobile numbers, which it had acquired following the demise of another enterprise. Putting their resources together, Inquam and Primus were able to offer inexpensive mobile telephone calls to international destinations on numbers within Inquam's range, and when those Inquam numbers were dialled they would prompt upon connection the dialling of an international number sought.
The attraction of this scheme to the general public was further enhanced by the availabilities of so called “bundled minutes”. Customers in the United Kingdom who own and use a mobile telephone subscribe directly or indirectly to one of the United Kingdom mobile telephone networks, such as Vodafone and O2, also Orange and T Mobile etc. In May 2005 and today, the majority of subscription packages offered by such networks include a “bundle” of “free” (that is to say included in the monthly price) cross-network minutes. This meant that where Inquam's range of numbers were within the range of permissible bundle numbers on any given mobile network, callers would effectively be able to make “free” international calls.
The structure of call routing and payment flow envisaged at the date of the Service Agreement was as follows. The caller customer of the mobile operator would call the mobile operator, who would connect with BT, who would connect with Inquam, who would connect with Primus, who would connect with the international operator, who would ultimately connect with the call recipient. The flow of payments was in the same direction as those call connections. In effect, the bundle of revenue generated by the customers of the mobile network operators produced a total sum, which was then shared out between those principally involved in the interconnections, namely the interconnector, BT, Inquam, Primus and the international operator. In this way, each party providing a service to the other passed down a share of the total generated revenue.
Thus, the figures scheduled in the parties' Service Agreement gave the amounts, per peak, off-peak and weekend minute, that Inquam would pay to Primus. At the date of the Service Agreement BT was the only interconnect provider routing call traffic to Inquam. This meant that all calls, regardless of which mobile network they originated from, were channelled through BT.
Subsequently to the Service Agreement, however, two further mobile network operators not previously involved in this telephone traffic came upon the scene. The first was Orange and the second was T Mobile. So far as Orange was concerned, it rivalled, if that is the right word, BT in providing its own interconnect channels. Thus, calls generated by Orange customers were not routed through BT, but went through Orange's own system. For the purposes of Orange's interconnect agreement with Inquam, Inquam used an associate company called Core as an intermediary. It was Core that received the royalty payment provided by Orange as the interconnector, and it passed over to Inquam most of that royalty or fee, a little of it remaining with Core.
For the purposes of Inquam's dispute with Primus as to how much of that payment received by Core and/or Inquam should be passed over to Primus, no distinction was made at trial between Core and Inquam. They were associate companies; it was entirely within their own disposal as to how they operated the payments between themselves, and thus it was that it was agreed at trial by Mr Anthony Greaves, who is the Chief Executive Officer of Inquam, that no distinction should be made between those payments received by Core and/or Inquam. Thus, it is sufficient to look simply at the payment received by Core.
So far as T Mobile is concerned, the position was a little different. T Mobile did not have its own interconnect system, but like other operators such as Vodaphone or O2, used the BT interconnect system. Nevertheless, T Mobile was not prepared to agree on an arrangement with Inquam, other than on terms that part of the BT royalty or fee passed over to Inquam should be shared with T Mobile in the form of a rebate.
The respective figures turn out to be as follows. The published BT rate, some 95% or 98% of which, as we have been told, was passed as a royalty or fee to Inquam, was at the time of the Service Agreement 15.6p for peak minutes, 10.7p for off-peak minutes and 2.51p for weekend minutes. That compared with the Schedule 1 royalty or fee to be passed down the line to Primus under the Service Agreement, which I have already given, of 7.9p peak, 6.7p off-peak and 2.45p weekend.
The rates agreed with Orange and T Mobile, to be paid to Core/Inquam in the case of Orange, and Inquam in the case of T Mobile were, respectively, for Orange 9p peak, 7.5p off-peak and 2.51p weekend, and in the case of T Mobile, applying the net figure after the rebate in favour of T Mobile had been taken into account: 9.08p peak, 8.204p off-peak and 2.51p weekend.
Inquam's agreements with Orange, as I have said, follow or are subsequent to its Service Agreement with Primus, and led to a dispute between Inquam and Primus as to how the revenue generated in Core/Inquam's hands should be dealt with down the line vis a vis Primus. It was Inquam's contention that the Orange traffic was part and parcel of the Service Agreement to which I have referred, and that therefore Inquam could use Clause 5.2 of that Service Agreement to amend the rates payable to Primus under Schedule 1 in the light of changing conditions in the market.
When, at a still later date the agreement with T Mobile was made, just before or just after the commencement of proceedings by Inquam against Primus, Inquam brought into those proceedings, subsequent to their issue, the T Mobile traffic as well, again contending that the rates to be paid to Primus in respect of the T Mobile traffic, just as the rates to be paid to Primus in respect of the Orange traffic, were to be governed by the tariff amendment Clause 5.2, in the Service Agreement. Effectively, Inquam was arguing that when comparison was made between the schedule figures, the tariff figures in Schedule 1 of the Service Agreement and the background BT Rates, a similar pro rata reduction should be made in respect of the Orange and T Mobile rates, so as to generate tariff payments payable to Primus lower than the tariff within Schedule 1.
Thus, it was common ground at trial that the tariff rates in Schedule 1 of the Service Agreement were respectively 50.58%, 62.15% and 46.23% of the interconnect rates, interconnect royalty or fee rates paid by BT to Inquam. And so Inquam contended, in relation to the Orange and T mobile traffic, that similar percentages should be applied to the lower interconnect rates payable to Inquam under their agreements with Orange and T Mobile respectively.
Inquam's primary argument was that that application of those percentages to the Orange and T Mobile rates should be applied as a matter of contract under the Service Agreement. Primus, however, contended that the Orange and T Mobile traffic fell outside the Service Agreement and if any downstream royalty payment was to be made to Primus, which they said it was, that had to be arrived at by the application of the principles of quantum meruit. There was also an intermediate dispute between the parties as to whether, as Primus contended, some interim arrangement had been arrived at in relation to Orange traffic by oral express variation of the Service Agreement. Subject to that...
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