Springfield City Group Pty Ltd v PIPE Networks Pty Ltd [2023] QCA 172

Michael Creedon |  Allie Flack  |  Samuel O’Loughlin

Key takeout

• The mere ‘use’ of another party’s property will not be an act of conversion in the absence of any intention to exercise dominion over the relevant property in question.

• Where an independent contractor mistakenly performs work that would otherwise amount to an act of conversion, it must be demonstrated that the head contractor intentionally directed this work to occur on property known to belong to another party to establish vicarious liability for conversion.

Facts

In 2005 Springfield City Group Pty Ltd (SLC) entered into two written agreements with PIPE Networks Pty Ltd (PIPE) for the installation of a fibre optic network between the Brisbane CBD and the Springfield CBD (SLC Network). The agreements, being an ‘Indefeasible Right to Use’ agreement (IRU Agreement) and a ‘Wholesale Fibre Service’ agreement (WFS Agreement), together provided that SLC would finance the construction by PIPE of the SLC Network in return for providing SLC a guaranteed ability to use the SLC Network for at least 15 years and that SLC would supply, and PIPE acquire, individual fibre services over the SLC Network.

Following completion of the SLC Network in or around 2008, PIPE installed its own fibre optic cable network in the same pits and conduits as those which housed the SLC Network to supply access to its own fibre optic network (Duplicate Network). This Duplicate Network resulted in independent contractors splicing into fibres of the SLC Network which SLC either owned or had an indefeasible right to use. In 2011 SLC discovered the existence of the Duplicate Network and that PIPE had been connecting customers since August 2009 to the Duplicate Network rather than the SLC Network.

SLC sued PIPE for damages for breach of contract, trespass and conversion. These claims, as well as others, were dismissed at first instance. SLC appealed this decision on the basis that the primary judge had erred:

• in finding that the IRU Agreement did not contain a term preventing PIPE from using or occupying any of the existing facilities (including the pits and conduits) of the SLC Network in order to preserve those facilities for SLC to upgrade the SLC Network (alleged Non-Occupation Term);
• in finding that the IRU Agreement and WFS Agreement did not contain a term preventing PIPE from competing with the existing SLC Network (alleged Non-Compete Term);
• in dismissing SLC’s claim for damages for trespass in relation to PIPE installing the Duplicate Network in additional infrastructure constructed by other contractors (Landcorp infrastructure) during a relocation of the SLC Network (ownership of Landcorp infrastructure); and
• in dismissing SLC’s claims for damages for trespass and conversion in relation to PIPE’s use of the SLC Network (PIPE’s use of SLC’s fibre capacity).

Decision

The Court of Appeal of Queensland dismissed SLC’s appeal in full.

Alleged Non-Occupation Term

The court initially considered that SLC had not established any error on behalf of the primary judge in finding that the language of the IRU Agreement and the WFS Agreement did not support the proposition that the alleged Non-Occupation Term was an express term of any agreement.

SLC had not challenged the finding of the primary judge that the IRU Agreement did not oblige PIPE to comply with requests by SLC to upgrade or enhance the SLC Network. Notably, the IRU Agreement did not extend further than requiring PIPE to provide an estimate as to the cost and duration of any proposed upgrades to the SLC Network.

Finally, the court did not accept the argument that either of the agreements were rendered ‘unworkable’ or were unable to ‘operate effectively’ due to the installation of the Duplicate Network. This determination was supported by various components of the IRU Agreement and WFS Agreement, including the ability of PIPE to provide estimates regarding the upgrade of the SLC Network through alternative mechanisms and that the evident goal of the IRU Agreement (to confer to SLC the guaranteed use of the SLC Network) would still be achieved.

Alleged Non-Compete Term

The court determined that the primary judge was correct in concluding that the alleged Non-Compete Term was neither implicit in the language of the IRU Agreement (which expressly excluded implied terms) nor necessary to give business efficacy to the IRU Agreement. In particular, the court noted the ability of SLC to itself negotiate and contract with potential customers of the SLC Network independently of PIPE. The agreements merely established a reciprocal arrangement whereby PIPE undertook to offer to connect customers to the SLC Network in return for SLC using its best endeavours to refer customers to PIPE.

Further, SLC was entitled to resell or sub-lease all of its capacity in the SLC Network to other service providers other than PIPE such that, in effect, PIPE would no longer be able to connect customers to the SLC Network. Accordingly, the court did not accept SLC’s contention that PIPE was the ‘single point of call’ for connecting customers to the SLC Network and customer, fault and billing issues.

Ownership of Landcorp infrastructure

The court upheld the primary judge’s ruling that the IRU Agreement and the WFS Agreement applied to the section of the SLC Network housed within the Landcorp infrastructure and was therefore subject to the contractual arrangements set out by these agreements. The court subsequently determined that the proper construction of the IRU Agreement demonstrated an objective intention by the parties to confer ownership of the Landcorp infrastructure to PIPE.

PIPE’s use of SLC’s fibre capacity

To establish the torts of trespass and conversion it was necessary to demonstrate that PIPE held the ‘intention to exercise dominion’ over the SLC Network by instructing its independent contractors to splice into the particular fibres of the SLC Network which PIPE knew to belong to SLC. This was directly contradictory to SLC’s submission that a party in good faith, under a mistake, could wrongly convert another person’s property and that, in the circumstances, PIPE was liable for conversion arising from the ‘use’ of the SLC Network notwithstanding any splicing activity mistakenly undertaken by independent contractors.

Whilst the court concluded that the primary judge had erred in concluding that SLC had failed to establish precisely which fibres it was allocated in the SLC Network, it ultimately determined that SLC had adduced insufficient evidence to demonstrate that PIPE’s use of the SLC Network intentional.