Mobileciti Pty Ltd v Vodafone Pty Ltd & Anor

GILES JA : The central issue on appeal was whether Mobileciti Pty Ltd ("Mobileciti"), a Vodafone dealer, made "material misrepresentations" regarding a Vodafone mobile phone service plan, the Super Cap plan, in advertisements placed in Chinese community newspapers. For the reasons which follow, the trial judge correctly held that it did. Other issues in the appeal and cross-appeal do not arise. The appeal and the cross-appeal should be dismissed, with an order for costs against Mobileciti.

In March 2000 Mobileciti became a dealer in Vodafone mobile phone services under a dealer agreement with Vodafone Pty Ltd ("Vodafone"). In April 2004 Vodafone made Look Mobile Pty Ltd ("Look Mobile") its distribution manager under a Distribution Manager Partner Agreement ("the DMP Agreement"), whereby Look Mobile was interposed between Vodafone and its dealers. This required rearrangement of the direct dealership between Vodafone and Mobileciti. In July 2005 Mobileciti and Vodafone entered into a Transition Deed by which the direct dealership was terminated but Mobileciti remained entitled to trailing commissions so long as its dealership under Look Mobile was in force. Mobileciti and Look Mobile entered into a Look Dealer Agreement ("the LDA") making Mobileciti a Vodafone dealer under Look Mobile.

The DMP Agreement provided - "3.3 Vodafone may require removal of a Dealer (a) Vodafone may, by notice to [Look Mobile] and on reasonable grounds, require [Look Mobile] to terminate the appointment of a Dealer immediately. (b) The reasonable grounds referred to in clause 3.3(a) include, but are not limited to: ... (5) if there have been material misrepresentations by or concerning the Dealer. ... provided [Look Mobile] has a contractual right pursuant to its contract with the Dealer to terminate the Dealer's appointment."

Look Mobile did have the contractual right, as referred to in the proviso in cl 3.3 of the DMP Agreement, under the LDA. The LDA provided - "22.2 Termination for cause [Look Mobile] may, in its absolute discretion and without affecting the accrued rights and obligations of the parties as at the date of termination, terminate this agreement immediately by notice to [Mobileciti] if: (a) Vodafone requires [Look Mobile] to terminate [Mobileciti's] appointment on reasonable grounds, including but not limited to ... (4) if there have been material misrepresentations by or concerning [Mobileciti] ... ".

In the latter part of 2005 Vodafone undertook an investigation of the conduct of a number of Vodafone dealers, including Mobileciti. On 30 November 2005 it wrote to Look Mobile - "Vodafone's investigation into the activation activities of this dealer has now been completed. The investigation has revealed that this dealer has been engaged in making material misrepresentations regarding Vodafone's Super Cap plan to a substantial number of customers. In these circumstances, Vodafone requires you to terminate this dealer's appointment with immediate effect. This notice is given under clause 3.3(a) of our DMP Agreement."

On 2 December 2005 Look Mobile wrote to Mobileciti - "Vodafone has recently completed an investigation into your activation activities. Vodafone have concluded from this investigation that you have been engaged in making material misrepresentations regarding Vodafone's Super Cap plan to a substantial number of customers. In these circumstances, Vodafone requires us to terminate your dealership's appointment with immediate effect. This notice is given under Clause 22.2(a) of your Dealer agreement."

It was common ground that Look Mobile's letter terminated the LDA. As well as losing its dealership, by the terms of the Transition Agreement Mobileciti ceased to be entitled to trailing commissions as a result of the termination of the LDA. On 8 December 2005 Vodafone wrote to it so stating.

On 20 December 2005 Mobileciti brought proceedings against Vodafone and Look Mobile.

As against Vodafone, Mobileciti alleged that Vodafone engaged in misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (C'th). The misleading or deceptive conduct was Vodafone's assertion to Look Mobile in the letter of 30 November 2005 that Mobileciti had made material misrepresentations regarding Vodafone's Super Cap plan. On Mobileciti's case, it suffered loss by that conduct because Look Mobile acted on it in terminating the LDA, as it was obliged to do if required on reasonable grounds. Also as against Vodafone, Mobileciti alleged that the same conduct of asserting that it had made material misrepresentations regarding the Super Cap plan constituted breach of an implied term in the Termination Deed that Vodafone would not require Look Mobile to terminate the LDA except on reasonable grounds.

For both causes of action, it was necessary that Mobileciti had not made material misrepresentations regarding Vodafone's Super Cap plan. If it had, Vodafone's conduct was not misleading or deceptive; and, assuming the implied term, Vodafone's requirement that Look Mobile terminate the LDA was on reasonable grounds.

As against Look Mobile, Mobileciti alleged breach of the LDA by wrongful termination. On its case, the termination was wrongful because Mobileciti had not made material misrepresentations regarding Vodafone's Super Cap plan, and so Vodafone's requirement that Look Mobile terminate the LDA was not on the reasonable grounds of material misrepresentations.

Again, it was necessary for the cause of action that Mobileciti had not made misleading misrepresentations regarding Vodafone's Super Cap plan.

Over the material period Mobileciti, which also used the name Xian Da Telecommunications, had two shops in Parramatta. The material misrepresentations on which Vodafone relied were in advertisements placed in Chinese community newspapers circulating in the area.

There were a large number of advertisements. The proceedings focussed on advertisements placed after 22 July 2005, when the LDA came into effect, and the trial judge took one advertisement as a sample representative of the rest. On the same basis the argument on appeal was addressed to that advertisement, published in the Australian Chinese Weekly for the week 6-12 August 2005. It was not disputed that, if in that advertisement Mobileciti had made material misrepresentations regarding Vodafone's Super Cap plan, the misrepresentations had been made "to a substantial number of customers" as asserted in the letters of 30 November and 2 December 2005.

The advertisement was largely in Chinese with some parts in English. A copy of the full advertisement and a translation of the Chinese is annexed to the trial judge's reasons ( Mobileciti Pty Ltd v Vodafone Pty Ltd [2009] NSWSC 899), and I do not reproduce it.

The trial judge, Hamilton AJ, said of the advertisement - " [24] The advertisement, as contained in the annexure, is in black and white only. But the advertisement as published prominently featured the colour red. Red was used by Vodafone in its publicity and the evidence is that the staff of the Mobileciti shops dressed in red. The advertisement in its top right hand corner refers to Mobileciti, giving its telephone number and location. That reference is against the background of a large quotation mark, turned on its side. The quotation mark was a Vodafone logo. The advertisement contains numerous references to Vodafone. At the foot of the left hand column on the second page of the advertisement, containing 'Terms & Conditions' set out in English, is a Vodafone card and again the large quotation mark. [25] In the 'Terms & Conditions' it is stated that connection to a Vodafone mobile service is required. In a prominent position on the first page of the advertisement, under the reference to Mobileciti, there is a heading 'No Contract, no change of phone number', together with reference to existing Vodafone customers. In the bottom left hand corner of that page, is a reference to the Vodafone Super Cap plan. On the second page of the advertisement, in the large box second from the top, the following appears: ' Special price for access with BYO handset $0/month Free $20/month call cost (free for six full months) Free: only charge $79 cap for call value $500 Call rate $0.01/sec (calculated by per second), connection free $0.20 per call, minimum monthly spend $20, $130 refund at the end of six full months usage' After reference to a considerable number of available handsets, in the last box at the foot of the broad first column on the second page of the advertisement, the following appears: 'Including $80 / call cost (*20/month x 4 months *Need to pay upfront $80, refund after 4 months). Above mobile phones are on special, offered together with Vodafone Super Cap plan.'"

To this account may be added that -