Meridian Communications Ltd & Cellular Three Telecommunications Ltd v Eircell Ltd

• Jurisdiction: Ireland
• Judge: MRS. JUSTICE McGUINNESS
• Judgment Date: 27 April 2001
• Neutral Citation: [2001] IESC 42
• Court: Supreme Court
• Docket Number: No. 109/01
• Date: 27 April 2001

[2001] IESC 42

THE SUPREME COURT

McGuinness, J.

Hardiman, J.

Fennelly, J.

No. 109/01

MERIDIAN COMMUNICATIONS LTD & CELLULAR THREE TELECOMMUNICATIONS LTD v. EIRCELL LTD

BETWEEN

MERIDIAN COMMUNICATIONS LIMITED AND CELLULAR THREE

TELECOMMUNICATIONS LIMITED

APPELLANTS/PLAINTIFFS

AND

EIRCELL LIMITED

RESPONDENT/DEFENDANT

Citations

COMPANIES ACT 1963 S214

CAMPUS OIL V MIN FOR INDUSTRY (NO 2) 1983 IR 88

O MURCHU T/A TALKNOLOGY V EIRCELL LTD UNREP SUPREME 21.2.2001

TRUCK & MACHENERY SALES LTD V MARUBENI KOMATSU LTD 1996 1 IR 12

Synopsis

INJUNCTIONS

Balance of convenience

Telecommunications - Winding-up petition - Contract - Mobile telephony services - Equity - Application for injunction - (109/2001 - Supreme Court - 10/5/01)

Meridian Communications v Eircell

The proceedings concerned the termination of an agreement whereby the defendant supplied the plaintiff with mobile telephone lines. The defendant was intent on bringing a winding-up petition in order to recover monies allegedly owed. The plaintiff sought a interlocutory injunction to protect its position pending a sale of business assets. The application was refused in the High Court. On appeal the Supreme Court held that the balance of convenience would be served by granting the injunction sought accompanied by a number of conditions. The appeal would be allowed.

MRS. JUSTICE McGUINNESS

1 This is an appeal from an order of Lavan J. whereby he refused the Appellants/Plaintiffs application for interlocutory relief.

2 By notice of motion dated the 18th April 2001 the Appellants/Plaintiffs, Meridian Communications Limited and Cellular Three Telecommunications Limited ("Meridian") sought the following injunctive reliefs:-

3 2 "(1)An injunction restraining the Defendant by itself its servants or agents or otherwise howsoever from terminating the delivery of the supply of mobile telephony to the Plaintiff or any or its subscribers without the prior agreement of Meridian Communications Limited the first named Plaintiff.

4 (2)An order directing Eircell to recommence provision of international call services and premium services to Meridian pending further order.

5 (3)An order directing Eirecell to reconnect disconnected numbers pending further order.

6 (4)An order restraining Eircell from presenting a petition to wind-up Meridian without the leave of this honourable court."

7 On 18th April 2001 the Plaintiffs made an ex-parte application to Herbert J. who made an interim order in the terms of paragraphs 1 and 4 of the Notice of Motion. The Plaintiffs gave the normal undertaking as to damages and in addition undertook not to transfer, assign or otherwise dispose of all or any part of their subscriber base pending the hearing of the interlocutory application for an injunction.

8 The matter then came on for hearing before Lavan J. on the 25th April 2001. The learned judge refused the relief sought and discharged the interim order made by Herbert J. The Appellants/Plaintiffs appealed to this Court. The appeal was heard as a matter of urgency on the 27th April 2001. Following the hearing the Court granted an interlocutory injunction in the terms of paragraphs 1 and 4 of the original notice of motion, such injunction to remain in force for a period of two weeks only expiring at 4 p.m. on Friday the 11th day of May 2001. A number of conditions, as set out in the order of this Court, were attached to the injunction. The matter was listed for mention on the 10th May 2001. Owing to the lateness of the hour when the hearing concluded and the order of this Court was made, the Court reserved to a later date the statement of the reasons for its decision.

9 The dispute between the parties has been lengthy and complex. The original proceedings between them were at hearing before O'Higgins J. in the High Court for ninety five days. Following a number of interim judgments the proceedings culminated in a lengthy (158-page) judgment delivered by O'Higgins J. on 5th April 2001. The learned High Court judge then put the matter back for mention to permit the parties and their legal advisers to read and study his judgment and to make submissions. On the 24th April it was agreed that submissions on costs and other issues should be heard by O'Higgins J. on 15th May 2001. This Court is informed that it is the intention of Meridian to appeal against a number of the aspects of the decision of the High Court in these proceedings.

10 In the meantime the events which gave rise to Meridian's present application for injunctive relief occurred.

11 The background and history of the commercial relations between the parties is set out fully and with admirable clarity by O'Higgins J. in his judgment of 5th April 2001. There is no need to repeat it here. For the purposes of the present dispute a summary of the bare bones of the matter is sufficient. From in or about 1997 onwards a Volume Discount Agreement (VDA) existed between Meridian and Eircell. This agreement enabled Meridian to rent mobile telephone lines in bulk from Eircell at a considerable discount. Meridian then rented these lines on to individual subscribers at an overall price which was lower than that normally charged to subscribers by Eircell but which enabled Meridian to make a profit on the transaction. It appears that at the time when the injunction proceeding came before this Court Meridian had a base of some 20,000 subscribers.

12 For reasons which can readily be appreciated Eircell was not particularly happy with the expansion of Meridian's business which had occurred from November 1998 onwards and sought to bring the VDA to an end when the then current agreement expired. Meridian brought proceedings to require Eircell to continue to supply air time at a discount on the expiry of the VDA. A number of other issues also arose in the proceedings. In the first judgment of O'Higgins J. which was delivered on 4th April 2000 he heldinter alia that the Plaintiffs were not entitled to enforce the renewal of the VDA. The proceedings before O'Higgins J. continued at hearing to deal with a number of other issues including breach of contract and breach of competition law. In his judgment of the 5th April 2001 O'Higgins J. held for the Plaintiffs on some of the breach of contract issues but against the Plaintiffs on the main competition law issue.

13 In the interim Eircell had continued to supply mobile telephone services to Meridian on the basis of an undertaking given to this Court in October 1999 that they would continue the service until the determination of the proceedings in the High Court.

14 Over time and during the currency of the proceedings in the High Court there have been continuing disputes between Eircell and Meridian over levels of billing for the lines operated by Meridian subscribers. Meridian allege that there is a high level of error in billing and that virtually all such errors have been in favour of Eircell. Meridian also assert that billing difficulties have been exacerbated by Eircell's refusal to bill Meridian electronically and its insistence on issuing individual paper based bills in bulk. Eircell on the other hand assert (which is admitted) that a number of recent direct debit payments due to them by Meridian have remained unpaid due to cancellation by Meridian of the direct debits involved. At present the level of indebtedness of Meridian to Eircell for telephone services remains in dispute.

15 During the Easter Vacation Eircell moved against Meridian by terminating the ability to send international calls on their lines or to ring premium numbers. Correspondence, which it is unnecessary to detail here, was exchanged between the parties and there was some direct contact between executives of the two companies. On 13th April 2001 (Good Friday) Eircell issued a letter pursuant to Section 214 of the Companies Act1963(as amended) in preparation for bringing a petition to wind-up the Plaintiff company. On Tuesday 17th April 2001 Eircell cancelled a proposed meeting with Meridian and indicated that termination of telephone service to Meridian subscribers was imminent. Meridian made enquiries and confirmed that Eircell intended to terminate service the following day. Termination of lines to some subscribers began on 18th April.

16 On 18th April 2001 Meridian applied for and obtained the interim injunction from Herbert J. (sitting in the Vacation). As has already been mentioned, on the 25th April Meridian's application for an interlocutory injunction was refused by Lavan J.

17 By the time the appeal from this refusal came on for hearing before this Court the factual situation had somewhat changed. It was acknowledged by Meridian that its business as dependant on the VDA could not continue. Senior Counsel for Meridian, Mr Gordon, explaining the situation, said that it was Meridian's intention to wind-up this business and to sell the one major asset which Meridian still possessed-its"subscriber base". This had already been somewhat reduced by Eircell's action in cutting of international and premium calls but was, he submitted, still worth up to ten million pounds. Negotiations to sell this subscriber base to one of Eircell's competitors were at an advanced stage; a contract for sale could be signed virtually immediately if Meridian were to be released from the undertaking given to be Herbert J. and the process of the transfer of the business to the new owners could be completed in two weeks. Any indebtedness to Eircell and other creditors could be met from the proceeds of sale following negotiations to establish the true amount of monies owed. It would then also be possible for Meridian to pursue their appeal to this Court against the judgment and orders of O'Higgins J.

18 Mr Gordon submitted that Eircell's action in endeavouring...