Essay by yuivyUniversity, Bachelor's September 2008

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FACTS: The First Appellant, Kooee Communication was owned by Second Appellant, SP Telemedia Ltd. In 2000, the Appellants entered into an agreement with the Respondent, Primus Telecommunication Pty Ltd in order Primus to provide telecommunication services under Kooee's name and agreed to pay Kooee 8% of revenue. In 2005, SP Telemedia sell its shares in Kooee to another telecommunication provider in which existing agreement is to be terminated; but a separate deed is executed in which shows that Kooee is entitled to collect and retain outstanding debts, in return of a lump sum to Primus. Primus brought against Kooee in relation to calculation of various payments under the deed. Which Einstein J gives judgment to Primus in an amount of $2,647,832 and ordering Kooee to pay 75% of cost for proceedings in the Equity Division. The appeal was brought by Kooee in relation to the calculation of amount of outstanding debt owe to Primus.

Primus also cross-appealed in which interest should run on payments under the separation deed.

ISSUES: Is the trial judge erred in rejecting the construction of the "net debtors" provision proposed by Kooee; admitting and relying upon extrinsic evidence in constructing the contract? Whether Primus was entitled to interest on "collections", "migration cost" and "revenue share" in the cross-appeal?TEST: The Court adopted a passage from Lord Hofmann in Investors Compensation Scheme Ltd v West Bromwich Building Society whether "something must have gone wrong with language" which also has echoes that adopted in Fitzgerald v Masters despite by applying a test of "business commonsense".

OUTCOME: The Court of Appeal held that in consideration of business commonsense, the language used in the deed were unambiguous and clear, and is related to the calculation of the amount payable for net debtors, thus, the trial judge erred in holding that the language used in the deed is a "strong aura of commercial unreality". The evidence may be admissible if the words of the written document are ambiguous or unclear. The use of Primus' bad debt policy can only treated as background fact, which is not admissible. Therefore, the construction proposed by Kooee was correct and should apply in the calculation of amounts owed.

The Court point out that Primus is not entitled to interest on collections as it did not provide a notice to Kooee that would trigger the obligation of Kooee to make payment of net debtors. Evidence of migration cost that Primus provided did not satisfy the Court, Kooee have no obligation to reimburse for those cost, thus, Primus is not entitled to interest for migration cost. Lastly, Primus is also not entitled to interest on revenue share as the amount of revenue share was known to Primus.

It is concluded that Appeal is allowed and Cross-appeal dismissed. The judgment of Einstein J is set aside in which Court of Appeal give new judgment to Primus in an amount of $1,391,040.