Verizon UK Ltd v Swiftnet Ltd

This case is essentially a dispute about telecommunications charges. The Claimant, Verizon U.K. Limited (formerly MCI WorldCom Limited) which I shall refer to as "MCI", and the Defendant, Swiftnet Limited, which I shall refer to as "Swiftnet", are both telecommunications companies. MCI is a telecommunications network operator and Swiftnet is a supplier of telecommunications services to end users.

Swiftnet operates a service which switches call minutes and other features for the benefit of its customers. Like many other telecommunications carriers, Swiftnet needs to use other carriers in order to terminate some or all of its call traffic. Its switch uses software that automatically chooses carriers based on price and quality. Thus, if carrier A would terminate a call for Swiftnet to a mobile in New York at a lower rate that carrier B, then subject to any issues as to quality, Swiftnet's switch will automatically route the call over A's network and not B's.

Between 1998 and 2005, Swiftnet used MCI's network to transmit large volumes of its clients' calls for termination at destinations in various different countries under the terms of a Wholesale Master Services Agreement dated 20 July 1998.

MCI alleges that Swiftnet has failed to pay what is due to it in respect of those calls, and claims £1,554,515.71 in respect of unpaid invoices. Swiftnet denies liability for those unpaid invoices. It says (i) that those invoices are overstated by £307,094.70 and (ii) that it is entitled to a credit against those unpaid invoices amounting to £671,110.86 which it alleges that it overpaid on past invoices.

Swiftnet also has a counterclaim against MCI. The legal basis of the counterclaim was originally obscure and provoked an application by Mr. Lazarus on behalf of MCI on the first day of the trial that it should be dismissed. In responding to MCI's application, Mr. Kirk explained that the basis of the counterclaim was a contractual term to be implied into the contract between the parties for reasons of business efficacy or obviousness. Mr. Kirk applied for permission to amend the Defence in order to plead this term, which was granted. In the event he produced a pleading on the second day of the trial called "Further Particularisation of Counterclaim paragraphs 19-22 and Rejoinder to Reply". This alleged an implied term that MCI would render to Swiftnet invoices which accurately reflected an application of agreed rates for services rendered.

It was said in this further pleading that, in breach of the alleged implied term, MCI failed to render accurate invoices to Swiftnet with the result that Swiftnet had suffered a variety of different losses. The first category of loss was in respect of the value of management time which, it was alleged, had been expended in checking and recalculating MCI's invoices. Swiftnet limited this part of its counterclaim to 110 invoices each of which, it said, demanded 15 hours of management time for which it should be reimbursed at a rate of £135 per hour. This part of its counterclaim amounted, therefore, to £222,750 (as compared with the sum of £684,450 which Swiftnet had pleaded in its original Defence). The second category of loss amounted to £20,000 which Swiftnet claimed to be additional accountancy costs incurred as a result of the inaccuracies in MCI's invoices. The last category of loss claimed by Swiftnet to have been suffered as a result of the alleged breach was in an unspecified amount and was said by it to have been suffered because, as it put it, "its credit worthiness [had been] damaged by the provision it made [in its financial statements] in respect of erroneous invoices at a time when it was seeking floatation in the United States markets".

MCI also used Swiftnet's network to transmit some of its own clients' calls. The last part of Swiftnet's counterclaim concerns telecommunications traffic that MCI had sent to Swiftnet for termination in Israel and for which MCI has not paid. There was no dispute between the parties as to the existence of this traffic or as to the fact that MCI was indebted to Swiftnet in respect of it but there was an issue as to the amount. After the hearing had been completed, the parties were able to agree the sum in question and, by letter dated 5 March 2008, Swiftnet's solicitors informed me that the agreed outstanding amount in respect of the Israeli traffic was £275,573.74.

MCI's claim for unpaid invoices totalling £1,554,515.71 relates to seven accounts. The breakdown and detail of the claim are set out in Schedules A and B to MCI's Particulars of Claim. There is no apparent dispute between the parties as to the amount of telecommunications traffic in question or as to the time for which MCI has charged. Swiftnet takes issue, however, with many - but not all - of the rates that MCI has applied to the traffic. The accounts and the differences between the parties in relation to them can be described briefly as follows:

In his closing submissions on behalf of MCI, Mr. Lazarus articulated seven issues which he identified as being the only remaining issues between the parties (apart from any questions then arising, and which have since disappeared, in respect of Swiftnet's counterclaim relating to Israeli traffic). While Mr. Kirk had not prepared his argument along the lines of those seven issues, in his closing address he accepted that those seven issues represented a helpful summary of the remaining differences existing between the parties. Those seven issues (the first three relating to MCI's claim and Swiftnet's counterclaim for repayment of charges, and the last four relating to Swiftnet's counterclaim for damages) are as follows:

The dispute in relation to the GIS Account concerns traffic in and between July 2004 and August 2005. The rates contended for by MCI appear in a Pricing Schedule dated 9 February 2004. That Schedule suggests on its face that it had been accepted by the "Customer" (i.e. Swiftnet) but, more significantly, in an email dated 15 February 2005 Mr. Torode of MCI sent that Schedule to Mr. Iddo Keinan of Swiftnet, describing it as the original pricing for the GIS Account and requesting Mr. Iddo Keinan to confirm that it "still stands until you have been updated with the new pricing". Mr. Torode asked Mr. Iddo Keinan to confirm this by email so that there could be no reason for error. Mr. Iddo Keinan responded by email dated 16 February 2005 and expressly confirmed that pricing.

For its part, Swiftnet submits that the applicable rates are those contained in an earlier Pricing Schedule produced by MCI in respect of Swiftnet GIS traffic dated 15 December 2003. One would have thought that this Pricing Schedule would have been superseded by that which succeeded it in terms of time and, indeed, that is MCI's case. However, Swiftnet is able to point to the fact that, at a meeting on 9 November 2004 and by a Payment Plan Agreement dated 1 July 2005, a substantial credit was agreed to be given by MCI to Swiftnet in relation to all disputes on the GIS account up to and including traffic in June 2004 which was calculated on the basis of the 15 December 2003 Schedule. This credit was the result of a failure by MCI's systems to distinguish between calls from mobiles and landlines to Spain and it amounted to some £519,000 (exclusive of VAT).

It is not clear from the submissions made on behalf of Swiftnet precisely what Swiftnet's case is in relation to this earlier Schedule other than the fact that it was used to settle a dispute between the parties in relation to a period up to and including traffic in June 2004 and, presumably, an inference that, if it had been used for that period, it should bind the parties also in respect of the period now in dispute or it must have been agreed as applicable to traffic in the period now in dispute. Mr. Abraham Keinan gave evidence that Mr. Roberts of MCI had agreed the December 2003 rates and had confirmed that those rates were those applicable to the traffic in the period for which credit was agreed. However, this was never pleaded, Mr. Roberts was not cross examined on this topic, and Swiftnet never attempted to explain the exchange of emails in February 2005 from which it is clear that Mr. Iddo Keinan of Swiftnet accepted the February 2004 Pricing Schedule as the applicable Schedule. Swiftnet adduced no evidence from Mr. Iddo Keinan and produced no explanation as to why he was not being called as a witness.

In his Closing Submissions, Mr Kirk did not appear to rely on Mr. A. Keinan's oral evidence as to any agreement or confirmation by Mr. Roberts (although, if he had done so, I would have rejected the submission). He relied on a variety of other matters which I find unconvincing.

It is clear to me from the documents and the evidence that the applicable rates are those set out in MCI's Pricing Schedule dated 9 February 2004. Not only do they post-date those for which Swiftnet contends but they were also sent to Mr. Iddo Keinan and expressly confirmed by him in February 2005 as still applicable – the implication being that they were then applicable and, moreover, had been applicable since the time when they had been issued. The fact that MCI and Swiftnet agreed a credit on the basis of an earlier Pricing Schedule in respect of traffic up to and including June 2004 is, on one view, inconsistent with MCI's case but it is, to my mind, insufficient to dislodge the clear confirmation by Mr. Iddo Keinan on behalf of Swiftnet in February 2005. Accordingly, I conclude that MCI's claim in respect of the GIS Account succeeds.

It is in relation to the Direct and Indirect Accounts where the main dispute between the parties lies and in respect of which most of the written and oral evidence was directed. I have heard evidence from a number of witnesses. As with the GIS Account, the dispute between the parties is as to the applicable rates to be charged.

The starting point of the inquiry is that it is common ground between the parties that, in respect of the Direct accounts, rate cards were issued by MCI for each month in advance and that, if Swiftnet then used MCI's network to transmit its clients' calls in that following month to any particular destination, the rates set out for that destination in the applicable rate card would apply. The only exception to this rule, it was accepted, was if there had been agreement between the parties to apply a special rate (what became known as a "special") in respect of calls to any one destination during that month. If a special was agreed in respect of any one destination, then that special would apply to calls made to that destination in the particular month. It was common ground also that, in the event that any special for any destination had been agreed between the parties for any one month, it was superseded by the rate set out in the subsequent month's rate card for that same destination unless the agreement of that special was renewed or another special rate for the particular destination was agreed.

As to the Indirect Account, rate cards were not issued monthly. They were issued at irregular intervals, sometimes many months apart. However, like in relation to the Direct Accounts, the rates issued by MCI in respect of the Indirect Account applied to any relevant traffic transmitted through MCI's switch unless a special rate was agreed in respect of any particular destination. If a special was agreed, it was liable to be superseded by any new rate card issued by MCI unless it was renewed or replaced by another special for the same destination.

In relation to the Direct and Indirect Accounts, therefore, the issue between the parties is whether certain of the rates set out in MCI's rate cards were altered by the agreement of specials. Swiftnet contends that they were, and it is on that basis that it has calculated what it claims to be overstated charges on unpaid invoices and overpayments of charges on paid invoices.

In addressing this issue, it seems to me that one has to distinguish between two periods. This is because the account manager within MCI who was responsible for Swiftnet's account with MCI and for dealing with Swiftnet changed in April 2004. Mr. George Roberts was the account manager for the Swiftnet business from January 2000 until April 2004 when he was promoted and replaced by Mr. Jan Torode. Therefore the first period that one has to consider is between February 2003 and April 2004 and the second period is between April 2004 and July 2005.

Mr. Roberts gave evidence before me. He was, in my view, patently an honest witness.

The way in which Mr. Roberts dealt with Swiftnet in his capacity as its account manager was straightforward. He would periodically receive from the MCI Pricing Department a rate sheet setting out the future standard non-discounted rate per minute that MCI would apply to calls made across its network by end user customers to various destinations. He would forward these rate sheets to his customers such as Swiftnet. In the case of Swiftnet, he would expect to telephone Swiftnet and discuss some of the rates. He might receive requests from Swiftnet for variations to these standard rates (i.e. requests for special rates) either over the telephone or during the course of meetings – at all events orally and not in writing. Thus, in his mind the rate sheets effectively formed the basis for negotiation by Swiftnet of special discounted rates for certain destinations. He appreciated throughout these discussions that the telecommunications market was highly competitive and that, in respect of any one destination, Swiftnet would choose the operator whose switch offered the cheapest price. However, Mr. Roberts had no authority to agree rates without higher authorisation. Once he had received a request from Swiftnet for a special rate or rates, he would need to and would pass this on to MCI's Pricing department. That department would decide whether it could accept Swiftnet's request and, even if it could not, what alternative discounted rate or rates it could offer in respect of the destinations in question. Mr. Roberts, himself, lacked the authority within MCI to decide which requests for discounted rates should be accepted and, if not accepted, what alternative discounted rates should be offered. Once the Pricing department had made its decision, it would communicate the special rates that it could accept or offer to Mr Roberts in writing, usually by email. Mr. Roberts in turn would forward those special rates to Swiftnet also in writing and also usually by email. If Swiftnet was content with MCI's response, then it would confirm those rates or some of them to Mr. Roberts. That confirmation was almost invariably communicated only orally. Once Mr. Roberts had received Swiftnet's confirmation, he would pass that on to the Pricing Department for inputting into the billing system.

It appears that some members of the Pricing department would implement the agreed special rate notwithstanding that Swiftnet had not confirmed it in writing while other members of the same department would not implement the agreed rate unless it had been confirmed by Swiftnet in writing. As Mr. Roberts put it in his second witness statement, paragraph 46: "Where any agreed special rates were not implemented onto the account this was therefore predominantly because Swiftnet had not confirmed to me by email that they wanted a particular special rate applied. As a result, when a dispute was raised by Swiftnet over the acceptance and subsequent implementation of those special rates it was not possible for them to provide proof that any particular special rate offered by MCI had been accepted by them, as was required, even if they were able to provide the initial email setting out the offer rate for them to consider."

Mr. Roberts was clear in his evidence that any agreement by the Pricing department to the special discounted rates which Swiftnet had requested, and any offers of special discounted rates which the Pricing Department was prepared to make to Swiftnet, were communicated by him to Swiftnet in writing and not orally. As he said in the course of his oral evidence:

Mr. Roberts also explained that, in the process of discussion on rates following the sending out of rate cards for the following month, the customer might indicate that he anticipated having a number of minutes for a particular destination and had a target rate in mind. It was Mr. Roberts' practice to revert to his Pricing Department and put that target rate to it. The Pricing Department's response would be either to accept the target rate or to reject it or to offer a rate falling somewhere between that set out in the rate card and the customer's target. Mr. Roberts explained that he would then submit the Pricing Department's response to the customer. He would do so by email. As he put it in his evidence (Day 2 transcript page 150):

Mr. Roberts readily accepted that during the period when he was Swiftnet's account manager, special discounted rates for certain destinations which had been agreed by him with Swiftnet to be applicable in respect for traffic for certain periods had not been implemented by MCI's billing department. He also readily accepted that, as a result, invoices issued to Swiftnet by MCI did not always record those special rates but charged higher rates than had been agreed. This meant that, if and when Swiftnet queried those invoices, there had to be a re-calculation of the amounts due to MCI by Swiftnet in respect of the traffic in question and appropriate credit notes had to be raised in Swiftnet's favour. Mr. Roberts also accepted that, while the MCI procedure which he should have followed was to insist that Swiftnet should put in writing its acceptance of any offer by MCI of special rates, an oral agreement by Swiftnet of any such offer was binding even though unconfirmed by Swiftnet in written form.

If and when Swiftnet questioned an invoice with Mr. Roberts, the task of checking invoices against specials that Swiftnet said it had agreed was initially undertaken within MCI by Mr. Stuart Gilmore from MCI's Credit and Collections department. Mr. Roberts accepted that, each time when Swiftnet questioned an invoice and it was double-checked by Mr. Gilmore, it resulted in a credit note being raised in Swiftnet's favour. As Mr. Roberts stated in paragraph 52 of his second witness statement: "These credits were calculated by Stuart Gilmore .. using evidence of the specific special rates being offered by me to Swiftnet that Swiftnet claimed had been accepted by it but not implemented on the accounts, albeit that there was no documentary evidence of the acceptance of those rates." In other words, the oral acceptance that Swiftnet claimed it had given to the special discounted rates which MCI had offered in writing was treated by MCI as sufficient. According to paragraph 48 of Mr. Roberts' second witness statement, Swiftnet was in effect "given the benefit of the doubt" in those cases where "MCI had no proof that the special rates [which it had offered in writing] had been accepted by Swiftnet".

It is important to note in this context that Mr Roberts confirmed in his oral evidence (Day 2 transcript pages 152-154) that the credits were always permitted only on the basis of documentary evidence of offers having been made by Mr. Roberts to Swiftnet, specifically by email. It was a clear theme of Mr. Roberts' evidence, which I accept, that any offers or agreements by MCI of specials would be recorded by him in emails that he sent to Swiftnet.

Mr. Jan Torode took over from Mr. Roberts as the account manager within MCI responsible for Swiftnet's account in April 2004. He gave oral evidence at the trial of this action and, in my view, was also a patently honest witness. He was clear in his evidence that, while he had many conversations with Mr. Iddo Keinan (and also some, but far fewer, with Mr. Abraham Keinan and Mr. Nissenson of Swiftnet) during which specials were requested and discussed, and while he tried to obtain offers of specials from the Pricing Department, he was hardly ever in a position to offer any. This was, he said, because MCI's pricing had become (in his words) "tougher" and the "flexibility was not quite as [it] was before". When pressed in cross examination on the subject of offers of specials , he gave the following evidence:

One of the examples to which Mr. Kirk was referring in the question quoted above related to Polish traffic. The email exchanges and other documents in relation to this example are, to my mind, illuminating.

The differences between the rates in relation to Poland which I have referred to above were not put to Mr. Torode in the course of his evidence. However, Mr. Kirk did ask Mr. Torode about the differences on other destinations in relation to other months. Mr. Kirk specifically took Mr. Torode to the rates charged in MCI's April 2005 rate card for destinations in India and compared those with the specials said by Swiftnet to have been agreed in respect of the same destinations for that month. Mr. Torode was asked whether he might have agreed specials in relation to India after the rate card had been sent out. Mr. Torode's answer was, in my judgment, significant not only in the context of Indian destinations but also in the context of other destinations (such as Poland) in respect of which Swiftnet contends that specials were agreed. He said (day 3 transcript pages 72 and 73):

The answers that Mr. Kirk elicited from Mr. Torode in connection with calls to India were echoed by Mr. Hills, MCI's Director of Wholesale Pricing, in a different context. Mr. Hills gave evidence about the comparative exercise that he had carried out in relation to the rates in MCI's rate cards and those alleged by Swiftnet to be specials in respect of traffic for the months of April and June 2005. He found that the specials contended for by Swiftnet all fell below cost price to MCI: in other words, if they had been agreed with Swiftnet, MCI would have made a loss since, in the case of each destination in respect of which it was alleged that a special discounted rate had been agreed, the cost to MCI in acquiring the minutes in question was higher than the alleged special sale price to Swiftnet. Mr. Hills was able to conclude, on that basis, that the specials would not have been approved within MCI.

I am constrained to say that the evidence adduced by Swiftnet was, in large part, unconvincing. Swiftnet's principal witness was Mr. Abraham Keinan. He is and was Swiftnet's Chairman. I found the substance of much of his evidence on the important factual issues implausible and, when tested in cross examination, some of his answers were unsatisfactory and, on occasion, evasive. As to his demeanour while giving evidence, it is perhaps sufficient for me to say that it was particularly unimpressive when he was being asked about the authenticity of certain important documents. Swiftnet's second witness was Mr. Nissenson. I also found much of his evidence to be unsatisfactory, particularly in those instances where it was difficult to reconcile it with contemporaneous documents.

Mr. A. Keinan was adamant that he agreed specials with Mr. Torode on several occasions but he was nevertheless unable to identify any one specific occasion when he had done so. Given the importance that Swiftnet attached to these specials, I am surprised by Mr. A. Keinan's apparent lack of recollection. Mr. A. Keinan also suggested that Mr. Roberts and Mr. Torode begged him to give MCI traffic. He went on to assert – and in this regard, was supported by Mr. Nissenson when Mr. Nissenson came to give evidence - that, when he negotiated specials with Mr. Roberts and Mr. Torode over the telephone, they were able to agree them instantly without having to revert to anyone within MCI to check. I have to say that Mr. Roberts and Mr. Torode did not strike in the least as being the sort of persons who would beg for business in the manner that Mr. A. Keinan suggests, and such documents as exist in relation to the agreement or offers of specials support the accounts of Mr. Roberts and Mr. Torode that they had to obtain authority from MCI's Pricing Department before making offers of or agreeing to special discounted rates. Of course, it is not impossible for Mr. Roberts and Mr. Torode to have obtained such authority before engaging in discussions with Swiftnet and Mr. A. Keinan or Mr. Nissenson in particular but, having heard the evidence from those two individuals and considering the careful and reflective manner in which they gave their evidence – particularly under cross-examination - I accept their evidence on this subject in preference to that of Mr. A. Keinan and Mr. Nissenson.

The most striking, and least plausible, aspect of Mr. A. Keinan's evidence concerns 24 emails that he says he sent on different dates between September 2003 and June 2005 to Swiftnet's Operations Department. Each of those emails contained an instruction to the Operations Department to load Swiftnet's switch with what Mr. A. Keinan said were the rates agreed with MCI (including specials) on the Direct and Indirect Accounts. Those rates are to be found in documents printed from Swiftnet's server, the content of which originated from the rate cards that MCI had originally sent out to Swiftnet in an Excel spreadsheet which Mr. A. Keinan says he revised according to the specials that MCI and Swiftnet had agreed. There are some remarkable features of these 24 emails:

The difficulty, as I perceive it and as I am certain that Mr. A. Keinan appreciated, is that, apart from these emails and the documents printed from Swiftnet's server, there is a striking paucity of contemporaneous documentary evidence to support Swiftnet's case on specials. There is hardly anything in writing passing between Swiftnet and MCI in respect of specials being offered, let alone agreed. There is hardly anything in MCI's internal records about specials being offered or agreed.

If specials had been agreed, as Swiftnet contends, the absence of documents crossing the line between Swiftnet to MCI and the absence of documents within Swiftnet other than the alleged emails and those printed from Swiftnet's server, is surprising for a number of further reasons.

In the first place, it was not only Mr. Abraham Keinan who agreed specials with MCI. According to Mr. Abraham Keinan, Mr. Iddo Keinan and Mr. Nissenson (who also gave evidence at the trial) also agreed specials. Those specials would obviously have had to be notified to Swiftnet's Operations Department so that they could be loaded onto the switch for the relevant month. Communicating the specials to that Department was apparently Mr. A. Keinan's responsibility. According to Mr. A. Keinan's evidence, Mr. Iddo Keinan and Mr. Nissenson would telephone him and tell him what specials had been agreed and at what rate. There could be anything from 50 to about 80 specials in any one month. Mr. A. Keinan said that he could not remember whether the call would take 10, or 20, or even 30 minutes. In any event, the communication of specials to Mr. A. Keinan by the other two was, according to his evidence, never put in writing. It was always done over the telephone. I find it curious that, over the period of some two years with which this action is concerned, there is not one piece of paper within Swiftnet that records or minutes or notes the communication of agreed specials between Mr. A. Keinan, Mr. Iddo Keinan and Mr. Nissenson.

In the second place, even assuming that communicating by paper or electronically was not the norm within Swiftnet, I find it even more curious that there is no written document passing from Swiftnet to MCI recording any of the specials for which Swiftnet claims in this action and which Swiftnet contends was agreed. I say this for the following reasons:

There were other aspects of Mr. A. Keinan's evidence and Swiftnet's case which I found unconvincing.

Swiftnet also called Mr. Nissenson to give evidence at the trial. As with every case in which there is a serious dispute as to what was said by one person to another, or as to what was orally agreed by one person with another, several years before trial, sometimes the most illuminating and helpful evidence is not so much the oral testimony that is given at trial as such inferences as might properly be drawn from contemporaneous written material or even from the absence of contemporaneous written material bearing on the subject.

This case cannot be said to have been overburdened with substantive written communications passing between the parties. Where it is plausibly said by one party, and implausibly denied by the other, that any alleged agreement, if it had been made, would have been evidenced by an email sent by the former to the latter, the absence of any such email clearly implies the absence of any such agreement. The absence of emails sent by MCI (Mr. Roberts or Mr. Torode) to Swiftnet containing or evidencing specials either being offered or being agreed at the rates contended for by Swiftnet in this action, in circumstances where I am satisfied that, if any such specials had been offered or agreed by MCI, they would almost invariably have been recorded by MCI in email traffic to Swiftnet, suggests strongly to me that no such specials were offered or agreed.

In this context, there are three sets of documents in this case (an email dated 9 November 2004 from MCI to Swiftnet, an exchange of emails between the parties dated 11 and 12 November 2004, and an email from Swiftnet to MCI dated 17 January 2005) which have assisted me in evaluating Swiftnet's case, and specifically Mr. Nissenson's evidence. The first of these documents is an email from Kristy Perez to Mr. Nissenson (copied to, among others, Mr. Roberts and Mr. Torode) timed 1648 and dated 9 November 2004. It purported to contain summary notes of discussions that had taken place earlier in the afternoon on that day. Being in the nature of a summary, it was probably not a complete account of what had been discussed. Under the heading "Pending Credit Issues", it identified the accounts that are relevant to this trial.

Although there was no written response to this email, and certainly no email from Mr. Nissenson disputing the accuracy of its contents, Mr. Nissenson claimed in his oral evidence at trial that he had disputed it. He says that the principal focus of the meeting had been the GIS Account and that, in respect of the Direct Accounts, he had never said that there was no dispute. On the contrary, he says that he was told by those participating at the meeting on behalf of MCI that everything was going to be "fine".

While it might be that the GIS Account issue was a significant part of the meeting, I am firmly persuaded that Mr. Nissenson was confused in his recollection about what is recorded to have been said about the Direct and Indirect Accounts. There are three particular matters that cause me to come to this conclusion.

That last email of 17 January 2005 has further significance that should not be overlooked. It provides significant support for Mr. Roberts' evidence that, whenever he offered or agreed specials with Swiftnet, he did so by email and not – or not just – orally.

Reverting to the Direct Accounts, it is clear from Mr. Nissenson's email of 12 November 2004 to which I have referred above, that Swiftnet considered the position on the Direct Accounts to be fine and that the last bill that had been checked had been found to be satisfactory. Putting to one side his evidence at trial that the check which he had carried out into the last bill that he had looked at had mistakenly been confined to standard rates and had not extended to specials – evidence which I regard as so implausible as to be unacceptable – Mr. Nissenson's conduct at and after the meeting of 9 November 2004 is, to my mind, inconsistent with any issue or dispute in relation to the Direct Accounts and the rates that MCI had charged. The amount that Swiftnet now disputes in relation to the Direct Accounts was at least £330,000 on the invoices received by Swiftnet before 9 November 2004. It is not easy to comprehend how, if such a significant amount was potentially in dispute, it was not known about or at least seriously suspected. That disputed amount increased at rates of between £25,000 and £60,000 in the subsequent months into the first half of 2005 and yet it appears from the documents that it was not until June 2005 that Mr. Nissenson asserted a dispute on all Swiftnet's accounts with MCI, including the Direct Accounts.

Even thereafter, Mr. Nissenson's conduct towards MCI in relation to the Direct and Indirect Accounts was not exactly straightforward. As Mr. Lazarus submitted, a customer who was able to produce the material on which Swiftnet now relies in this action (a detailed spreadsheet, the rates downloaded from its server showing the specific specials for which it contends and the emails said to have been sent contemporaneously by Mr. Keinan to his own Operations Department), would have provided far more or better support for its case than the comparatively little that Mr. Nissenson was prepared to disclose to MCI in the Summer of 2005.

On the basis of the evidence that I have heard and evaluated, I come to the following conclusions:

In the light of my conclusion on specials, this issue does not arise. However, since it has been argued, albeit briefly, I shall deal with it (with equivalent brevity).

MCI's case in opening was that it had been made clear by Mr. Roberts and Mr. Torode to Swiftnet that, before any specials could be binding on MCI, they had to be confirmed by Swiftnet in writing. In closing, MCI accepted that, in the light of Mr. Roberts' evidence, it could not pursue this point in relation to the period before Mr. Torode replaced Mr. Roberts as Swiftnet's account manager in April 2004. The point, therefore, arises only in relation to the period after April 2004.

I am not satisfied on the evidence that it was ever agreed between MCI and Swiftnet that no orally agreed specials were contractually binding unless and until they had been confirmed by Swiftnet in writing. This might have been MCI's procedural preference, and it might be (although there is some serious doubt) that Swiftnet received from MCI Mr. Torode's email dated 18 November 2004 which he sent to all his customers in which Mr. Torode stated that any customer of MCI to whom Mr. Torode offered specials was required to respond in writing in order to secure their imlementation. However, I do not construe this, or for that matter any other exchange between Swiftnet and MCI, as a contractually binding arrangement between them to exclude all and any orally agreed specials of which there was no confirmation in writing by Swiftnet. I am of the view that, if specials were agreed orally between Swiftnet and MCI, that was sufficient to bind MCI. If Swiftnet chose not to confirm any agreement in writing, that might cause it problems in being able to satisfy MCI that such an agreement had been made but that, in my judgment, is as far as the point goes.

Swiftnet has pleaded that it was an implied term of the Wholesale Master Services Agreement that MCI would render to it invoices which accurately reflected an application of agreed rates for the services rendered by MCI to Swiftnet for the usage by Swiftnet of MCI's services. It is alleged that this term is to be implied "as a result of it being sufficiently obvious to the parties that such invoices were necessary for the effective administration of [Swiftnet's] business".

I suspect that, despite the way in which the term has been pleaded, Swiftnet intends to rely not only on obviousness but also on business efficacy. In so far as Swiftnet intends to rely on business efficacy, I reject its argument. The contract was perfectly capable of working without the term.

As to obviousness, in order to be implied the term must have been so obvious to the parties at the time when, in 1998, they entered into the Agreement, that it went without saying that, if a third party had suggested it, both parties would have said that it was obviously part of their bargain. Swiftnet did not adduce any evidence and argument to the time when the Agreement was made but, in any event, I do not consider that the term contended for by Swiftnet was so obvious. It is, I would have thought, highly improbable that MCI would ever have agreed such a term. It would mean that, even if MCI innocently made an error, it could be exposed to a claim for breach of contract. It could even be subjected to liabilities of uncertain but potentially significant size, depending on how Swiftnet went about recalculating any inaccurate invoice, (subject to the principles of mitigation) for up to 6 years after the rendering of each invoice.

Moreover, it seems to me that the implication of the term contended for by Swiftnet would be inconsistent with the principle, established in Concord Trust v The Law Debenture Trust Corporation [2005] 1 W.L.R. 1591. A demand made without any basis for making it is not in reality a demand at all. It is a request for payment that can be acceded to or refused as the person to whom it is made may choose: Borealis AB v Stargas Ltd. [2002] A.C. 205. If this is the case for a wholly invalid demand for payment, then in my view, it is equally be true for an invoice for an excessive amount to the extent of the invalid excess. It was open to Swiftnet to pay the amount admitted as due and to refuse to pay that part of the invoice which it claimed to be inaccurate. There is, in my view, no legal justification for the alleged implied term.

In order to recover damages for wasted management time, Swiftnet would have to show that the relevant breach of contract caused "some significant disruption to the business; in other words that staff have been significantly diverted from their usual activities": see Standard Chartered Bank v Pakistan Shipping Corp. [2001] EWCA Civ 55, R+V Versicherung AG v Risk Insurance and Reinsurance Solutions SA [2006] EWHC 42 (Comm).

Even were this issue to be relevant – which it is not, in view of my conclusion in respect of the alleged implied term – I would reject Swiftnet's case on management disruption. I reject the suggestion that it took Swiftnet's management 15 hours to check each invoice for inaccuracies. That suggestion is, to my mind, wholly exaggerated. I infer, as indicated above, that Swiftnet made it in order to ensure that its counterclaim overtopped MCI's claim. I could, I suppose, hazard a guess as to how long it might have taken someone in Mr. Keinan's position to check a standard invoice but, if I were to do so, it would be entirely speculative. The burden was on Swiftnet to prove each of the constituent elements of its counterclaim. It has failed to discharge that burden in respect of this issue.

I do not consider that Swiftnet would be estopped either by convention or by representation or otherwise from claiming for breach of contract (if breach could be proved, which, in my view, it cannot) in respect of any inaccurate invoices. There was never any unequivocal representation by Swiftnet foregoing its legal right to claim, and it does not seem to me that both parties conducted themselves towards each other on the basis that Swiftnet was not entitled to claim or was surrendering any right that it might have to do so either in relation to paid invoices or in relation to any unpaid invoices.

Swiftnet's pleaded counterclaim is in respect of accountancy costs allegedly incurred including in relation to the production of figures for submission in quarterly submissions to the SEC; and for unspecified damages caused by the undermining of its creditworthiness when it was allegedly seeking to float in the United States.

There are a number of answers to these counterclaims:

Swiftnet's case cannot be described as having been explained or developed in its submissions to the court. The best that Mr. Kirk was able to do in his written Opening was to assert that Swiftnet "has had to pay enhanced accountancy fees and to suffer the detriment arising from this contingent debt for over two years, all of which are the natural and foreseeable consequences of C's conduct and approach to this matter." As for Mr. Kirk's written Closing, it was confined to the following: "[91] The fact that it took D's US and UK accountants longer to reconcile bills which were overbaked or unpaid because of C's practices was still more obvious and natural a consequence, and certainly C would have been aware of the effect on a public company of carrying this burden on its accounts. However it is accepted that the evidence of the precise loss is a little sketchy because these will have formed part of ongoing accountancy costs for which no particularisation is available. [92] It is similarly submitted that the effect of this contingent liability on D's value and ability to raise capital is obvious, foreseeable and by its nature difficult to quantify. It is impossible to know what investors were put off by the position with D's accounts, or the consequences of the same. Nevertheless the Court is invited to enter a reasonable sum to reflect the inevitable loss and damage arising."

So far as I could ascertain, the only evidence concerning this part of Swiftnet's counterclaim was to be found in the witness statement of Mr. Nissenson at paragraph 28: "As being the CEO of Swiftnet's parent company, Xfone, entrusted with raising finance for the group, I experienced on many times, the concerns of potential investors about having the WorldCom claim on the books of Swiftnet for the inflated invoices.." There was also a passing reference in the next paragraph of Mr. Nissenson's witness statement to the "incurring of additional accountancy costs" and a remark by Mr. A. Keinan in his first witness statement that the reconciliation and production of accurate figures "involved our agreeing first with Swiftnet's auditors and then Xfone Inc American auditors and implementing a special nominal code on our accounting system with amounts provisioned for credit due."

I have no hesitation in rejecting Swiftnet's counterclaim. In so far as one could tell, it was based on alleged losses to Xfone, not Swiftnet, and, in so far as a claim in respect of any auditing or accounting charges incurred by Swiftnet is concerned, there was no satisfactory or sufficient evidence to support it. It is also too remote to be recoverable in law.

It follows from the above that MCI's claim succeeds and, save as to the issue of Israeli traffic, Swiftnet's counterclaim fails. I shall, in the first instance, invite the parties to seek to agree quantum and interest, and the appropriate terms of the order to be made by the court consequent upon my judgment. If the parties are unable to agree, I shall of course hear argument on any issues that arise in relation to these matters and in relation to costs.