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Cite as: [1997] IEHC 178, [1998] 3 IR 287

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Zockoll Group Ltd. v. Telecom Eireann [1997] IEHC 178; [1998] 3 IR 287 (28th November, 1997)

THE HIGH COURT
No. 1995 9781P
BETWEEN
THE ZOCKOLL GROUP LIMITED DYNO-ROD PLC AND
PHONE NAMES LIMITED
PLAINTIFFS
AND
TELECOM EIREANN
DEFENDANT

JUDGMENT of Mr. Justice Kelly delivered the 28th day of November, 1997.

INTRODUCTION

1. Easily memorised telephone numbers have long been used by commercial concerns as a marketing tool. Everybody is familiar with the use of such numbers by, for example, taxi companies. Over the years the use of such numbers has increased. The introduction of a freephone facility whereby a customer or potential customer can use such numbers without charge has further enhanced their attraction.

2. This case is concerned with a refinement to this concept. Anyone who has visited the United States of America in the last few years will be familiar with it. It is called alpha-numeric numbering. It works as follows:

3. Each of the numbers on a telephone keypad (with the exception of 1 and 0) convert into letters. There is in existence an international standard for alpha-numeric keypads which has been adopted in all of the major industrial countries. It reads as follows:-


1:-
2:ABC
3:DEF
4:GHI
5:JKL
6:MNO
7:PQRS
8:TUV
9:WXYZ
0:-.

4. The use of such a keypad enables a number to be translated into a word. Consequently a person who wishes to avail him or herself of a particular service does not have to memorise the telephone number of such a service but merely has to remember a word associated with it. So if one is in the United States and becomes ill it is possible to telephone for the services of a doctor by ringing a free phone number as follows: 1-800 DOCTOR. A person using an alpha-numeric telephone keypad who dials that number will (probably without knowing it) dial 1800362867. Hopeless romantics may avail themselves of the services of a florist by dialling 1-800 FLOWERS. This number has a particular relevance to this case for reasons which will become apparent.

5. An individual doctor or florist would be unlikely to be able to deal with the number of calls that might be made to their individual practice or business if they succeeded in having the alpha-numeric numbers to which I have just alluded. So what has occurred in the United States is, of course, that many of these services are provided on group or franchise bases.

6. The alpha-numeric concept although widely used in the United States is virtually unknown as yet in this country. It is only a matter of time before the concept becomes as popular here as it is in the United States.


THE PARTIES AND THEIR FUNCTIONS

7. Each of the Plaintiffs are limited companies with registered offices at Surrey in England. James Zockoll is the Chairman of each of the companies. The first Plaintiff (the Zockoll Group) owns the trade marks "Dyno" and "Dyna". The second Plaintiff (Dyno-Rod) is a wholly owned subsidiary of the Zockoll Group. It has a licence from the Zockoll Group in respect of the two trade marks which I have just mentioned. Dyno-Rod in turn licences the use of the trade marks to other companies. Dyno-Rod is a drain cleaning franchise business which has been trading in the United Kingdom for about thirty-three years and in Ireland for about twenty-five years . It has about a hundred licensed franchisees in the United Kingdom and Ireland. It also has an operation in California which has been underway for about the last nine years.

8. Whilst the Dyno-Rod business is the flag-ship of the Zockoll Group's fleet, that company has also established franchise businesses in other services and indeed in other countries. It has such businesses in Germany and the Benelux countries for a variety of services ranging from ice-cream sales on the one part to silencer shops and mobile car tuning.

9. The third Plaintiff (Phone Names) is also a wholly owned subsidiary of the Zockoll Group. It has been set up to promote and market the alpha-numeric concept. That involves the education of consumers concerning the use of standard telephone keypads and the production of templates to fit over existing keypads which do not have an alpha-numeric facility. The Zockoll Group leases telephone numbers from service providers and licences them to third parties through Phone Names. Phone Names identifies companies' products and services which fall into a specific business sector for example Building Societies. It then identifies the generic words used everyday in that business such as 'mortgage' or 'home loans'. It then requests from a service provider the telephone number on an alpha-numeric keypad that corresponds to the letters making up the words 'mortgage' and 'home loans'. When that number is secured, it creates service marks and marketing slogans (known as "strap lines") allied to the Building Society. These ideas are then packaged and presented to Building Societies to be operated on foot of a licensing arrangement. The Plaintiffs have been working on this concept and its development in the United Kingdom by making presentations and attempting to interest other parties in the business.

10. The Defendant is a limited company which was set up pursuant to the provisions of the Postal and Telecommunications Services Act, 1983 (the Act). That Act brought about a fundamental reorganisation of the postal and telecommunications services of the State. The principal objects of the Defendant, pursuant to the provisions of Section 14 of the 1983 Act, are:


(a) to provide a national telecommunications service within the State and between the State and places outside the State,
(b) to meet the industrial, commercial, social and household needs of the State for
comprehensive and efficient telecommunications services and, so far as the company
considers reasonably practicable, to satisfy all reasonable demands for such services
throughout the State, and
(c) to provide such consultancy, advisory, training and contract services inside and outside
the State as the company thinks fit.

Under Section 15 of the same Act there is a general duty imposed upon the Defendant to conduct its affairs so as to ensure that charges for services are kept at the minimum rates consistent with meeting approved financial targets and that revenues of the company are not less than sufficient to meet its charges, generate a reasonable proportion of capital needs and remunerate capital and repay borrowings. Nothing in either of those two sections is, however, to be construed as imposing on the Defendant, either directly or indirectly, any form of duty or liability enforceable by proceedings before any Court to which it would not otherwise be subject. Some further statutory provisions are relevant from the Defendant's point of view.
Under Section 87 of the Act it is given the exclusive privilege of offering, providing and maintaining telecommunications services for transmitting, receiving, collecting and delivering telecommunications messages within the State up to and including a connection point in the premises of a subscriber for any such service. That privilege is granted to it in view of its primary purpose of providing a national telecommunications service and of the general duty imposed on it by Section 15. The privilege is furthermore provided in recognition of the fact that a privilege of this kind is appropriate having regard to the area and population of the State and the state of development of telecommunications technology and furthermore because a viable national telecommunications system involves subsidisation of some loss-making services by profit-making services.
Section 90 of the Act entitles the Defendant to make, as respects any of the telecommunications services provided by it, a scheme providing for the charges which are to be made by it and also the other terms and conditions which are to be applicable to the services provided by it. Any such scheme made by the company under the section may revoke or amend a previous scheme. A scheme once promulgated by the Defendant comes into operation on such date as is specified therein. The only fetter which is placed upon the Defendant in bringing such a scheme into operation is that it may not increase any charge without the concurrence of the relevant Minister. It is clear therefore that the Defendant has power by statute to, in effect, write its own terms and conditions which will be applicable to services provided by it. Finally, under Section 96 of the Act certain powers are given to the Defendant for the control of telecommunications services. The one which is relevant for the purposes of this litigation is the power to suspend or interrupt a telecommunications service or refuse to implement or terminate an agreement with a subscriber to such a service or with an applicant for such a service where the subscriber or applicant fails to comply with or contravenes a scheme under Section 90 or any provision of the Act.

11. There was, at the time of the incidents with which I have to deal in this judgment, in force a scheme known as the Telecommunications Scheme, 1994 (Statutory Instrument No. 177 of 1994). It contains a number of provisions which have a relevance to these proceedings.

12. Under Article 9 thereof it provides that a subscriber shall not, except with the written consent of the Defendant, assign an agreement in full or in part or any benefit or advantage thereunder and neither shall he, without such consent, make any arrangement concerning anything to which the agreement or service relates.

13. Article 51 of the Scheme provides that a subscriber shall have no proprietary interest in any telephone number, freephone 1800 number, 1850 number, freephone name, terminating number, Eircell number, telex number, telex answer back code, network user identity, network user address or any other name, code or number whatsoever allocated by the Defendant from time to time to a subscriber for use in connection with any telecommunications service. Under Paragraph 2 of Article 51 it provides that the Defendant reserves the right at its absolute discretion at any time to alter or replace the exchange serving a subscriber, or to alter the subscriber's telephone number, freephone name, freephone 1800 number, 1850 number, terminating number, Eircell number, telex number, telex answer back code, network user identity, network user address or any other name, code or number whatsoever allocated by the Defendant from time to time to a subscriber for use in connection with any telecommunications services.

14. Under sub-paragraph (c) of Article 51 (2) the Defendant reserves the right at its absolute discretion without prejudice to any other provision of the Scheme to give such instructions concerning the use of telecommunications services, telecommunications lines and fixtures and accessories as it may decide from time to time in the interest of safety, of the quality of service, of other subscribers, or of telecommunications services as a whole or for any other reason which the Defendant deems sufficient and any such instructions while they are in force shall be deemed to form part of the scheme.


FREEPHONE NUMBERS

15. The Defendant is a service provider of, inter alia , freephone numbers. These numbers are supplied on request. The Defendant issues telephone numbers and not generic phone names. A customer in Ireland has the opportunity of requesting either a "random" 1800 freephone number or a "choice" freephone number. In the former case the number will be chosen for the customer by the Defendant and is charged at a lower rate than a "choice" number. In the case of a "choice" number the customer is given the opportunity of informing the Defendant of the number he wants and must pay a higher "choice" rate. A "choice" number would obviously be one which is easy to remember. So a customer may choose for example 1800 123 456 or in the case of one which is now well established in the public mind 1800 28 28 20.

16. There has been little realisation on the part of customers in Ireland that the conversion of a number into a generic phone name may in time be of much greater value than an easily memorised number. I am satisfied that there is a considerable lack of awareness of this concept in this State. Alpha-numerics are not offered nor do they form any part of the service of the Defendant at present. The Defendant is of course already answering the demand for telemarketing services by the supply of freephone numbers. But it is only in relatively recent times that the Defendant has begun to provide alpha-numeric telephone sets. To use the phrase of Mr. Noel Donnelly, the head of Consumer Marketing with the Defendant, a realistic service of this type would require the existence of key enablers which are absent at present. Even so, I have no doubt but that the alpha-numeric concept will become well established and well known in this jurisdiction in a relatively short period of time. The absence of alpha-numeric telephones can be overcome in the short-term by the use of the templates which can fit over existing keypads thereby providing an alpha-numeric facility.

17. Insofar as the supply of the telephone service and telephone numbers are concerned the Defendant provides these on a first come, first served basis. All of the expert witnesses who gave evidence before me approved of that system. So also do the various regulatory documents from the United States which were put in evidence.


THE EVENTS OF MAY 1995.

18. In May 1995, Mr Paul Radley, an official of the Plaintiffs, contacted the Defendant and made enquiries regarding the availability of a freephone 1800 service. On the 16th of May 1995, Ms. Margaret Clarke, in the freephone section of the Defendant, responded to Mr Radley. She sent him a brochure giving details of the service and of the options available on freephone. Her letter pointed out that delivery time for either a 1800 or 1850 service would be a maximum of five working days from receipt of the application form which she also enclosed.

19. On the 19th May 1995 Mr Radley sent a fax to Ms. Clarke indicating that he required multiple 1800 numbers to complement the Plaintiffs' services in the UK. He indicated that the Plaintiffs wished to obtain the parallel of their existing 0800 numbers which they had in the UK in the 1800 format in Ireland. Eight numbers were specified in his fax as being numbers required by the Plaintiffs. The fax went on to point out that the receiving offices for the calls would be one of the Plaintiffs' subsidiary companies namely the drain cleaning company Dyno-Rod which has various offices throughout the country. He further pointed out that the Plaintiffs were a rather new entrant into business directly with the Defendant and would therefore be happy to pay connection charges and annual rental charges in advance of the numbers becoming operational.

20. The numbers requested were available and on the 31st May 1995 the Plaintiffs authorised the Defendant to connect the eight choice freephone numbers to the office line of Dyno-Rod as and from the 12th June 1995.

21. An application form was filled out in respect of each of these eight numbers. The applicant in each case was the first Plaintiff with its registered address in Surrey. In each case its business description was given as 'property services' and the reason for using the service was described as 'marketing'. In no case did the first Plaintiff seek either a telephone directory entry or a directory enquiry entry in respect of the numbers. As I have already said each of the numbers was a choice number specified by the Plaintiffs. On the second page of the application the following terms were set forth in each case:-


"1. The undersigned, (hereinafter referred to as the "subscriber") hereby offer to hire from Bord Telecom Eireann (hereinafter referred to as Telecom Eireann) the 1800/1850 Service specified in the application form attached subject to the provisions of Telegraphs Acts (sic) 1863 to date, the Postal and Telecommunications services (sic) Acts 1983 and 1984 and the schemes made thereunder and any other legislation (including statutory instruments) applicable here to (sic) (altogether hereinafter referred to as "the legislation").
2. I agree to pay at such time and in such manner as may be specified by Telecom Eireann such sums as may be fixed from time to time by Telecom Eireann in accordance with legislation as the appropriate charges for the 1800/1850 service.
3. At least fourteen days notice will be given to the subscriber of any alteration in the charges for the 1800/1850 service.
4. The agreement, is for an indefinite duration, shall be terminable by either party be giving the other twenty eight days notice in writing".

22. In the case of each of the numbers in question the service duration sought by the Plaintiffs and granted by the Defendants was indefinite.

23. From the time that the Defendants agreed to and in fact did provide the eight numbers in question the Plaintiffs paid the appropriate fees including rentals for each of the numbers in question. As all the numbers were "choice" numbers an additional charge was payable to the Defendants and was discharged by the Plaintiffs.

24. The eight numbers supplied by the Defendant on foot of the agreements were:


25. A. 1800 356 747 which translates into the word 'florist' in alpha-numeric form.

26. B. 1800 737 842 which translates into the word 'service' in alpha-numeric form.

27. C. 1800 347 328 which translates into the word 'direct' in alpha-numeric form.

28. D. 1800 372 467 which translates into the word 'drains' in alpha-numeric form.

29. E. 1800 396 676 which translates into 'Dyno-Rod' in alpha-numeric form.

30. F. 1800 467 873 which translates into the word 'insure' in alpha-numeric form.

31. G. 1800 662 453 which translates into the word 'mobile' in alpha-numeric form.

32. I. 1800 356 937 which translates into the word 'flowers' in alpha-numeric form.


33. Following the provision of these numbers the Plaintiffs continued to discharge all of their liabilities to the Defendant in respect of them.


THE EVENTS OF NOVEMBER 1995 (PART I)

34. On the 6th November 1995 the Plaintiffs received a letter from the Defendant dated the 3rd November 1995 (which was the preceding Friday). It is an important letter and I therefore reproduce it in its entirety. It was addressed to Mr Radley the Network Business Manager of the first named Plaintiff at the Companies address in Surrey. It is as follows:


"Re: Freephone numbers 1800 356 747, 1800 732 842, 1800 347 328,
1800 372 467, 1800 396 676, 1800 467 873, 1800 662 453,
1800 356 937.

Dear Mr Radley,
As you are aware, your agreement for the above freephone numbers is subject to the regulations which includes the telecommunication scheme, 1994. Article 51 of the said scheme provides as follows:

51(1) the subscriber shall have no proprietary interest in any telephone number, freephone 1800 number, 1850 number, freephone name, terminating number, Eircell number, Telex number, Telex answer back code, network user identity, network user address or any other name, code or number whatsoever allocated by Bord Telecom Eireann from time to time to a subscriber for use in connection with any telecommunications service.
2. Bord Telecom Eireann reserves the right, at its absolute discretion:
(a) at any time, to alter or replace the exchange serving a subscriber, or to alter the subscribers telephone number, freephone name, freephone 1800 number, 1850 number, terminating number, Eircell number, Telex, number, Telex answer-back code, network user identity, network user address or any other name, code or number whatsoever allocated by Bord Telecom Eireann from time to time to a subscriber for use in connection with any telecommunications service.....
Bord Telecom Eireann hereby gives you notice that with effect from 30th November 1995 that it will be withdrawing service on the above freephone numbers. We know that there has been little usage of these numbers, however, we propose to offer you alternative numbers and will be in contact with you shortly to discuss your requirements.
If you have any queries, please contact me on 01 701 4623.
Yours sincerely,
Dorothy O'Byrne,
Business Manager,
Telemarketing Services. "

35. Following receipt of that letter Mr James Zockoll attempted to make contact with Ms. O' Byrne on a number of occasions. He did not succeed in that quest until late on the afternoon of the 7th November 1995. Meanwhile he sent a letter to her in the following terms:-


Dear Ms. O' Byrne,
It would have been nice to have received a call from you before you sent your letter, explaining why and on what grounds you have taken the action you have.

With this in mind you will not be surprised that upon receipt of your letter we have instructed our Solicitors Field, Fisher Waterhouse. The contact at Field, Fisher Waterhouse for you and/or your legal department is Mr N. Rose
(Tel. No. 0171 4814841-Fax No. 0714880084).

In the meantime you should understand and have no doubt whatsoever that we are not going to sit by idly and accept you taking away the 1800 numbers to which we are the subscribers. Indeed, the clause you mention refers to altering the numbers, not withdrawing them completely, leaving us with nothing.

These 1800 numbers are parallel to our existing 0800 numbers in the UK and are fundamental to the growth and expansion of our UK businesses into Eire. This was all explained verbally and was confirmed in our letter to Margaret Clarke of the freephone section.
It is most important that we get this settled amicably and I am expecting to hear from you by return.
Yours sincerely,
J.F. Zockoll,
Chairman.

36. Subsequent to that letter being sent by fax, contact was established between Mr Zockoll and Ms. O'Byrne by telephone. In the course of that telephone conversation I am satisfied on the evidence that a number of matters were discussed. First, Mr Zockoll wanted to know why the Defendant was taking the numbers in question back and why the Defendant had not contacted him before then. The response to this was an explanation by Ms. O' Byrne that the letter was the means of advising the Plaintiffs that the numbers were being taken back. The reasons which she gave for the numbers being taken back were four in number. First, she explained that the numbers were being taken back for operational reasons and that alternative numbers would be given. By that she meant that she had obtained legal advice to the effect that it was within the powers of the Defendant and indeed they were obliged to take the numbers back in circumstances where they had a suspicion that the numbers were being used in a way that was not in accordance with the terms of the agreements. Secondly, she explained that there was little usage on the numbers. Only one or two calls had been made on all of the eight numbers she said. She said that the numbers were not being used and, furthermore, as they all terminated on a single number she was satisfied that they were not actually being used. This was particularly so when the terminating number was a fax machine. Thirdly, she mentioned that she was aware that the numbers were useful vanity numbers and that topic was being looked at at the time by the Defendant. Finally she said that the Defendant believed that the Zockoll Company was brokering the numbers.

37. The evidence satisfies me that Ms. O' Byrne knew of only one number of the eight as being a vanity number at that time namely that which corresponds with the word 'flowers'. As to how she was aware of this I will deal with in a moment.

38. The conversation went on with Ms. O' Byrne indicating that she had information that the Zockoll Company was involved in brokering numbers and that that was contrary to the terms and conditions of service.

39. Mr Zockoll did not accept that the Defendant could behave as it did and he denied any brokering or wrongful activity on the Plaintiffs' part. The conversation concluded with him giving her the name of Mr Rose who was his London Solicitor.


THE EVENTS OF NOVEMBER 1995 (PART II)

40. At this stage the battle lines were drawn between the parties and the war of letters began on the 9th November, 1995 when a letter was sent by the Plaintiffs' London Solicitors to Ms. O'Byrne with a copy being sent to Ms. Anne Donnelly of the Legal Department of Telecom Eireann. The letter to Ms. O'Byrne was as follows:-


"Dear Madam
Re: Freephone numbers - 1800 356747, 1800 737842, 1800 347328,
1800 372467, 1800 396676, 1800 467873, 1800 662453, 1800 356937.
We act on behalf of the Zockoll Group Limited. Our clients have passed to us a copy of your letter dated 3 November, 1995 (sent by DHL), together with copies of other documents relating to their agreement for the above freephone numbers.

You have since spoken to Mr. Zockoll of our clients and we understand the three main reasons you have given, for your purported withdrawal of these numbers, has been:-
(i) that your company now wishes to use these freephone numbers for their own purposes, that your company wishes to introduce vanity numbers (Phonenames) into Eire and that this is probably the reason why our clients wanted them. This is true and the numbers are to be used by independent companies within our clients' organisation. It is a fact that virtually every 1-800 number has several vanity meanings (over 700 possibilities). It is unlawful for you to withdraw only our clients' numbers after they have been connected and in use since June. Why are you retrospectively isolating their numbers?

(ii) that our clients will be engaged in 'brokering' the numbers. This is a suggestion which our clients emphatically deny, nor is there any reason why you should make such an allegation. We will be insisting on ascertaining the source of this allegation.

(iii) that our clients have made little or no usage of some of the above numbers. Paul Radley, a member of our clients' staff, discussed this matter with Margaret Clarke of Telecom Eireann and he informed her that there would be little or no usage on the numbers. You cannot possibly expect there to have been any usage prior to the publication of Golden Pages. When the Golden Pages are published the volume will increase.
If usage is the issue our clients will instruct their Dublin offices to implement usage immediately.

You did not consult our clients prior to sending your letter dated 3 November which we find surprising, bearing in mind that your company was told of the importance of these numbers to our clients. It is our belief that you are withdrawing the numbers from our clients based solely on the allegation that it is our clients' intention to 'broker' numbers. Our clients requested choice numbers (a fact that is reflected in the contract). Therefore your company was and is aware that our clients required these numbers for a specific purpose. You also stated in your conversation with Mr. Zockoll that your company is aware of the alpha-numeric names representing the above numbers and for that reason your company wants them back for its own use. Could you please advise us of your interpretation of the numbers and the use your company intends to make of them.

Our clients have explained to your their requirement for the parallel version of existing 0800 numbers in the UK, in the 1-800 format in Eire. You were also specifically advised that the receiving offices for the calls for these numbers would be through Dyno-Rod which has various offices throughout Eire. We refer to our clients' letter to you dated 19 May and to subsequent telephone discussions.

Your company is in the business of supplying and renting telephone numbers on a first come first served basis. Our clients have an agreement for these numbers and yet you now say that you want to use these names for your own purposes, regardless of the commercial consequences for our clients' business.

Quite apart from the contractual position (and the provision you refer to in your letter duly allows you to 'alter' the number, not to withdraw it), you have a monopoly on the supply of freephone numbers in Eire and are therefore in a dominant position for the purposes of European Competition Law.

You should be aware that under established case law the termination by you of the right to use the freephone numbers, having created the expectation by our clients that they have the right to continue to use these numbers, constitutes an abuse of a dominant position under the provisions of the Treaty of Rome.

Accordingly we must ask you to reconsider your decision and to provide us with confirmation within seven days from the date of this letter that none of these numbers will be withdrawn, failing which our clients will take appropriate legal action against you to protect their rights.

On the other hand our clients are more than happy to meet with you in Dublin to settle this matter amicably.
Yours faithfully
Field Fisher Waterhouse".

41. On the 17th November, 1995 the Defendant's Solicitors responded as follows:-


"Dear Sirs
Yours of the 9th inst., addressed to Ms. Dorothy O'Byrne, Business Manager, Telemarketing Services, Telecom Eireann, Clarendon House, 36/37 Clarendon Street, Dublin 2 has been passed to me for attention.

I am instructed that Bord Telecom Eireann does not propose to withdraw freephone services from your client, it merely wishes to alter the numbers on which freephone services are provided to your client. This has become necessary for operational and commercial reasons.

As indicated to your client in Ms. O'Byrne's letter of 3rd inst., your client's agreement for freephone services is made subject to the Postal and Telecommunications Services Act, 1983, and any Scheme or Schemes made thereunder. The power to alter freephone numbers provided to your client is contained in Article 51 of the Telecommunications Scheme, 1984 (S.I. No. 177 of 1984) (copy attached). This statutory instrument was made pursuant to the powers conferred on Bord Telecom Eireann by Section 90 of the Postal and Telecommunications Services Act, 1983 (copy attached). Article 51 provides, inter alia, that:

(i) Bord Telecom Eireann is entitled to alter the freephone numbers provided to subscribers; and
(ii) subscribers have no proprietary interest in the freephone numbers allocated to them.

Your client, therefore, could have had no expectation of having the right to use the freephone numbers provided to them indefinitely or otherwise. Furthermore, the decision to alter the numbers on which freephone services are provided to your client is not an abuse of a dominant position. Freephone services will be provided to your client on alternative numbers.

Bord Telecom Eireann notes your concerns in relation to the commercial consequences for your client's business, however, I am instructed that Bord Telecom Eireann is not prepared to reconsider its decision.

Please note that every effort will be made to accommodate your client with suitable alternative freephone numbers and your client is invited to contact Ms. O'Byrne to make the necessary arrangements.
Yours faithfully,
Ann Donnelly
Solicitor"

42. This letter was in turn responded to by the Plaintiffs' London Solicitors in the following fashion on the 23rd November, 1995:-


"Thank you for your letter dated 17th November upon which we have now had the opportunity of taking our clients' instructions.

Our clients do not accept your reasons for the withdrawal of the freephone numbers set out in your letter. Article 51, which you refer to, is not relevant. The freephone numbers which our clients have are not being altered, they are being withdrawn without justification. Further, it is not necessary for a complainant to have a proprietary interest in the products which it wishes to market in order to bring a complaint under Article 86 of the Treaty of Rome. We refer you to the Magill litigation, with which you are no doubt familiar.

You have refused to reconsider your decision and our clients therefore intend to take action to protect their rights, including seeking injunctive relief and sending a complaint to the European Commission.

You have threatened to withdraw the freephone numbers as from the 30 November. Would you please let us have an undertaking by no later than 5.30 p.m. tomorrow, Friday 24 November, that you will not reissue the freephone numbers to any third party after 30 November, and that if you withdraw the freephone numbers on that date they will be held by you so that all of the eight freephone numbers will be available to be reissued to our clients in the event that our clients are successful in their legal action against you. In the meantime all our clients' rights are reserved".

43. On the 24th November, 1995 the Defendant's Solicitor acknowledged this letter and indicated that she was taking instructions in the matter and hoped to be in a position to respond early in the following week. On the same day the Plaintiffs' London Solicitors wrote as follows:-


"Thank you for your fax. Unfortunately you have failed to give us the undertaking within the required deadline. Our clients will suffer severe prejudice if it is your intention to re-issue the numbers to another third party as from 30 November 1995 and we are surprised that you have not given us the undertaking we requested.

We are therefore taking immediate steps to prepare for an application for an injunction against your company in the Dublin High Court. If we receive the undertaking by 4 p.m. on Monday, 27 November we will not proceed with the application. However, if we do not have the undertaking by that deadline proceedings will be served on you without any further notice to you".

44. On the 27th November, 1995 the Defendant's Solicitor wrote as follows:-


"Yours of 24th inst. and previous correspondence in this matter refers.

I hereby undertake that the freephone numbers at issue in this matter will not be withdrawn before 30th November, 1995 and, after that date, if Telecom Eireann withdraws the relevant freephone numbers they will be held by Telecom Eireann pending the outcome of any legal proceedings in this matter.

I have forwarded the relevant papers in this matter to Senior Counsel and I would hope to be in a position to revert shortly".

45. On the 29th November, 1995 the Plaintiffs' London Solicitors wrote again to the Defendant's Solicitor in the following fashion:-


"Thank you for your fax dated 27th November.

We note the undertaking given. However, you have still not confirmed to us whether or not the numbers at issue will be withdrawn on 30 November 1995. As you are aware, our clients do not accept that you have any right to withdraw the numbers, and your undertaking not to reissue the numbers still does not resolve our clients' concerns.

We spoke to you yesterday when you initially confirmed that the numbers would not be withdrawn without giving us a lengthy notice period but then you indicated that you were uncertain as to your intention. We asked you to let us have your confirmation as soon as possible as to whether or not the numbers will be withdrawn on 30 November and we have not yet heard back from you.

We telephoned you again at 3.15 p.m. today to obtain this confirmation but you were unavailable.

Could you please let us have your confirmation by 5.30 p.m. today that the numbers will not be withdrawn tomorrow. If we do not receive this, we will be applying for injunctive relief to protect your clients' rights as soon as possible. For that purpose, please note that we have retained Solicitors in Dublin (Messrs Beauchamps) and Senior Counsel.
We await hearing from you as a matter of urgency".

46. On the 30th November, 1995 the Defendant's Solicitor replied as follows:-


"My conversation of 29th inst. with Mr. Nicholas Rose and previous correspondence in this matter refers.

I have taken further instructions in this matter and confirm that the freephone numbers at issue will not be withdrawn before Wednesday, 13 December, 1995".

47. The next letter in this sequence came from the Plaintiffs' London Solicitors and was dated the 1st December 1995. It is an important letter and reads as follows:-


"We refer to our previous correspondence and discussions earlier this week, (Donnelly/Rose).

We understand that you are seeing Senior Counsel tomorrow to discuss this matter. You have agreed to notify us of your position on Monday and, as you know, we are not prepared to wait beyond that time before issuing proceedings to protect our clients' position. Can we please have your response setting out your position by no later than 2 p.m. on Monday 4th December. You advised us on the telephone last night that the eight choice numbers will not be withdrawn before close of play next Wednesday 6th December in any event.
Our clients' position therefore is that, in the absence of satisfactory undertakings by 2 p.m. next Monday, proceedings will be issued for injunctive relief, albeit that it will not be necessary for there to be a hearing before next Wednesday. Furthermore, a complaint will be submitted to the European Commission and this has already been drafted.

So that you are in no doubt as to the nature of our clients' complaint, we summarise below some of the points which will be made to the Commission, and indeed to the Court in Dublin:-

1. Telecom Eireann is in a dominant position for the purposes of Articles 86 and 90 of the Treaty of Rome. You are seeking to exercise the right to alter or replace freephone 1800 numbers at your absolute discretion. In the absence of any objectively justifiable reason for the termination of our clients' right to use the choice freephone numbers which have been applied for, allocated and a premium paid for, your decision to terminate constitutes abusive conduct. Each of the choice eight numbers applied for has a phone name significance and each were specifically chosen for the intended purposes of our clients' business.

2. You have admitted to Mr. Zockoll that the reason for terminating the right to use the numbers subscribed is that you intend to use the numbers for your own purposes in competition with our clients. This is in clear breach of EC Competition Rules under which the termination of services to a customer for entering into competition with a supplier is not justifiable. It is not enough for you to say that you will issue our clients with alternative numbers. Our clients are not interested in being allocated random numbers from you. Our clients required choice numbers due to their phone name significance and paid the required higher premium for that privilege.

3. These freephone numbers are akin to a raw material and the refusal to supply constitutes an abuse (see the Commercial Solvents case).

4. Your refusal to allow our clients to retain these numbers will prevent a new market being established in Eire, ancillary to your primary market of providing telecommunications services. As we have previously told you, our clients have identified a market for the licensing of alpha-numerically significant phone names and you are preventing our clients from developing that new market in Eire. You cannot seek to shut our clients out of the market, to the benefit of yourselves nor indeed in order to give preference to any competitor.

5. There are no other sources of supply for freephone numbers in Eire and, as you intend to reserve the secondary market for phone names to yourselves, this is plainly abusive conduct, in accordance with the Magill principles. You cannot avoid the implications of this by offering alternative numbers. The market, as we have emphasised, is in choice numbers. Telecom Eireann offer this service at a higher monthly premium. Our clients are therefore entitled to select choice numbers without any restrictions imposed on them.

6. Our clients have an established business in the UK and wish to expand their business into Eire. The market is in its very early stages of development in Eire and it is believed that there are very few freephone numbers in use and telephones using the alpha-numeric keypad have hardly entered the market. Our clients intend to develop this market, to educate telephone manufacturers, and consumers alike, as to the benefits of using generic phone names. No other company is in a position to do this at the present time. It is anticipated that our clients, through their considerable investment, will be generating new employment in Eire, particularly through the establishment of telemarketing bureaux. Your actions constitute a restriction on services, in breach of Article 59 of the Treaty.

In summary, we cannot see any possible justification for your threats to withdraw these numbers. Our clients would intend to challenge any statutory right which you seek to rely on as a justification for giving you such a discretion to act in this way. On Monday therefore, we must have undertakings from you that:-

1. None of these numbers will ever be withdrawn, unless you can provide an objectively justifiable reason for doing so.

2. Our clients will be allocated any other choice numbers which they apply for legitimately in the future. The only reason for withholding allocation would be if numbers have already been allocated to an independent third party (unconnected in any way with you) in which case our clients will require verifiable evidence of such an allocation.

We look forward to hearing from you within the time stipulated next Monday".

48. A flurry of correspondence took place on the 4th December, 1995. It is not necessary to recite it all in the course of this judgment. The Defendant's Solicitor confirmed that the freephone numbers would not be withdrawn before Thursday, the 11th January, 1996. She furthermore indicated that any application which the Plaintiffs might wish to make for further freephone numbers would be considered and dealt with in the usual manner. The Plaintiffs' London Solicitors indicated that a request for further freephone numbers would in fact be sent shortly. They did this in the context of reminding the Defendant of the Plaintiffs' intention to invest in their business in this country and of the Defendant's stated intention to use the numbers for its own purposes. The Plaintiffs were as good as their word and on the 4th December, 1995 Mr. Zockoll sent a fax to Ms. Clarke of the Defendant in the following terms. He said:-


"We have checked and rechecked the availability of the 1-800 numbers set out in the attached schedule and are satisfied that, with very few exceptions, they are available for allocation in our name. Could you please, therefore, assign the enclosed list of choice numbers to the Zockoll Group.

We are aware that they are choice numbers and are prepared to pay the higher premium. It is imperative that these numbers are allocated, or at the very least, reserved in the above name by 1700 hrs tomorrow which should be more than enough time for you to check their availability.

We cannot risk waiting until 11 January without the security of knowing these numbers are held exclusively for us pending the outcome of our legal dispute. If you cannot give us this assurance by the above deadline then we will need to seek an injunction to protect our position".

49. Attached to this fax was a schedule of some 270 choice numbers.

50. On the 5th December, 1995 the Defendant's Solicitor replied to the Plaintiffs' Solicitors in the following terms:-


"Your two facsimile messages of 4th inst. are to hand and the contents of both messages are noted.

Quite frankly we fail to see what the extreme urgency in this case is. My clients are dealing with the matter and will be in further contact with you as soon as may be. However, under no circumstances can the two undertakings requested by you in yours dated 1st December, be given without having due consideration for all the matters involved and, my clients will use their best endeavours to let you have a comprehensive reply as soon as possible".

51. On the same day that fax was replied to in the following terms:-

"Thank you for your fax received this afternoon.

With respect, we had thought that we had explained the urgency to you in previous correspondence and on the telephone yesterday. Our clients do not wish any of the numbers on the schedule sent to you yesterday to be allocated to any other competitor, including your company. The loss of any number will result in damage to our client's business, quite possibly irreparable damage. We know that all the numbers on the schedule are available with only one exception.

As regards the withdrawal of the eight freephone numbers previously allocated to our clients, you have already given the undertaking we requested until 11 January, 1996.

As regards the second undertaking, namely to reserve for our clients all other numbers which our clients request from you pending the outcome of any legal dispute, we cannot see what possible prejudice this can cause you if you give such an undertaking. We have made it clear that our clients would like these additional numbers to be allocated to them, but if you are not willing to do so then they must at least be reserved for our clients, and not allocated to any other competitor, until this matter has been dealt with. This is the minimum protection our clients need for their business.

If we do not receive this undertaking we will apply for injunctive relief as a matter of urgency".

52. The present proceedings were then commenced on the 12th December, 1995. A Notice of Motion seeking interlocutory relief was made returnable before the Court on the 15th January, 1996 and was adjourned from time to time to enable Affidavits to be exchanged. At the conclusion of this exchange of Affidavits, the President was persuaded to list the matter for hearing on the basis that it was urgent and that the hearing of the motion should be treated as the trial of the action. It was represented to the Court that the matter would take of the order of four days to hear. In fact, of course, it has taken five times that length. The hearing was hampered by the lack of pleadings, by the necessity to have the trial adjourned to enable proper discovery to be made and by reason of the gross underestimate which was made as to its duration. It ultimately concluded before me last term. I am by no means satisfied that the case had about it anything of the urgency which was originally represented to the Court and it would, in my view, have been far better to have allowed the matter to proceed with an exchange of pleadings and full discovery in the ordinary way.


PRE-TRIAL DEVELOPMENT

53. A short time before the action commenced before me, the Defendant restored two of the original eight numbers to the Plaintiffs. These are the numbers which translate into the words "Dyno-Rod" and "Drains". These were restored on the basis that the Defendant accepted that the Plaintiffs had a bona fide interest in those numbers and were therefore entitled to maintain them. Consequently, they are no longer in issue in these proceedings. What does remain in issue of course was the Defendant's entitlement ever to seek to remove those numbers from the Plaintiffs.




THE LEGAL BASIS FOR THE PLAINTIFFS' COMPLAINTS

54. The Plaintiffs seek to restrain the Defendant from withdrawing the remaining six of the original eight numbers which were allocated to them. They also seek to have allotted to them the other 270 numbers which were sought by Mr. Zockoll in his fax of the 4th December, 1995. A number of different bases are put forward by the Plaintiffs upon which they say they ought to be entitled to these reliefs. They can be summarised as follows.

55. Insofar as the original eight numbers are concerned, the Plaintiffs say that they had the benefit of a contract with the Defendant. The terms of that contract were contained in the Defendant's terms and conditions of trading. Nothing in those terms or conditions entitled the Defendant to withdraw the numbers in the circumstances which arose. The reasons which have been advanced to justify the withdrawal of these numbers are not made out either in fact or at law. The decisions to withdraw these numbers and to refuse to allocate further numbers were based on a limited amount of information provided by a competitor of the Plaintiffs, namely, a Mr. McCann. The information supplied by him was in fact incorrect. Far from the Plaintiffs seeking to sell the 1-800 Flowers numbers to Mr. McCann, Mr. Zockoll in fact resisted attempts by Mr. McCann to buy that number. Thus it is said the information upon which Mr. Donnelly based his decision was not correct. In addition the procedure which was adopted by the Defendant in withdrawing the numbers was unfair and unreasonable.

56. Insofar as the refusal to allocate the remaining 270 numbers is concerned, the Plaintiffs contend that the Defendant holds itself out as making numbers available to the public on a first come first served basis and in accordance with the terms of its standard conditions of trading. It therefore makes a unilateral offer to the public to allocate to such members of the public who apply for numbers any available number requested. That offer is accepted when a member of the public applies for such numbers and such an applicant then has a contractual entitlement to be allocated the numbers. Such an applicant is entitled to the benefit of the Defendant's statutory obligation to make the service accompanying such numbers available. In refusing to allocate these additional numbers, the Defendant is in breach of contract and in breach of its statutory obligations.

57. A further basis for the Plaintiffs' complaints is to be found in competition law, both domestic and European. The Plaintiffs contend that the Defendant occupies a dominant position in the market for the supply of telephone services in the State. The withdrawal of the original eight numbers and the refusal to allocate further numbers constitutes an abuse of that dominant position unless there are objective reasons justifying such decisions. The onus, it is said, rests on the Defendant to establish such objective justification. The Plaintiffs contend that none of the reasons advanced by the Defendant amount to such objective justification. Indeed, it is said that most of them were not in fact relied upon by the Defendant. The Plaintiffs contend that insofar as there is an allegation made by the defence that the Plaintiffs were likely to sell whatever rights they might have consequent upon an allocation of telephone numbers to them, no evidence was called on its behalf to explain or justify why such sale or resale is offensive from a regulatory point of view. On the contrary, say the Plaintiffs, virtually every witness who was asked to comment on this aspect of the matter, including the Defendant's own expert witnesses, both in the fields of telecommunications and economics, confirmed that far from such resale being objectionable, such a resale was in fact desirable and a well recognised practice.


THE DEFENDANT'S CONTENTIONS

58. The Defendant contends that it was fully justified in withdrawing the original numbers and in refusing to allocate the further 270 numbers requested by the Plaintiffs. It says that in so doing it was not in breach of any law, domestic or European. It says that it was objectively justified in withdrawing the numbers (as distinct from the service) in respect of the original eight numbers and that given the views which it had formed as to the Plaintiffs' behaviour, it was also justified in refusing to allocate the remaining 270 numbers. It goes further. It says that to do so would be wholly inappropriate since it would be allotting numbers to a person who has no bona fide professional, social or commercial interest or affinity with the industry or market with which the 270 vanity numbers are intended to serve. Random examples chosen from the 270 numbers display words such as "Doctor", "Optician", "Lenses", "Solicitor" and "Legal Aid".

59. Insofar as a case is made under competition law, the Defendant accepts that it is an undertaking occupying a dominant position in both national law and Community law. It further accepts that the relevant market is the provision of 1-800 numbers within the State. However, it submits that having regard to the terms of the relevant legislation, there is no lawful market or trade in the trafficking, brokering or licensing of such numbers. It says that it is a matter of public policy and is reflected in the legislation. It furthermore says that at all material times the actions taken by it were objectively justified both in respect of the original eight numbers and the 270 numbers which were sought. It denies that any abuse of a dominant position has occurred.


THE DEFENDANT'S BASIS FOR THE DECISIONS MADE

60. Before I analyse the legal arguments which have been made, whether under contract law, statutory duty, or domestic or European competition law, the first thing which I must do is ascertain the factual basis upon which the Defendant operated in making the decisions which it did. The crucial evidence concerning the Defendant's decision was given by Mr. Noel Donnelly, who, as I have already said, is the head of Consumer Marketing with the Defendant. He it was who authorised the removal of the numbers. It is to his evidence that one must turn with a view to ascertaining the basis upon which the Defendant did what it did.

61. Notwithstanding the various reasons which were given both in correspondence emanating from the Defendant and in the written submissions which were initially put before this Court at the commencement of the case at my direction, I am satisfied and find that the decision arrived at by Mr. Donnelly concerning the withdrawal of the eight telephone numbers was arrived at for a single reason which might be legally justified. That was the belief on the part of Mr. Donnelly that the Plaintiffs were engaged in brokering telephone numbers. His understanding of what is meant by the term "brokering" is to be found in the answer to Question 191 of the transcript of Friday, the 6th December, 1996. He understood it to mean "where a number will be rented from us for onward sale or rent to another customer" . I am satisfied from a consideration of his evidence and find as a fact that the other reasons which have been put forward as justifying the actions of the Defendant both in correspondence and in the submissions played no part in his decision to withdraw the original eight telephone numbers. His belief was that brokering, as he understood it, was being carried on, was against the law and justified him in making the decision which he did.

62. I reject any attempt on the part of the Defendant to rely on other grounds to justify what it did since it appears to me to be plain from his evidence, as the person who authorised the decision in question, that these other considerations played no part in his thinking.

63. Not merely was there just one matter in his mind at the time when he authorised the withdrawal of the eight numbers, but it is clear from his evidence that some of the reasons which were attempted to be relied upon by the Defendant as justifying this decision cannot be stood over at all. For example, the fact that there was little usage upon the lines could never have formed a legitimate basis for the numbers being withdrawn. There was no policy in the Defendant to survey the numbers and the level of their usage, still less one that such numbers should be withdrawn if their use was below a certain minimum level. I must now ascertain whether in fact the Defendant's belief that the Plaintiffs were brokering numbers was correct and if it was, whether such a belief would justify the actions taken by the Defendant.


THE BROKERING ALLEGATIONS

64. At the time he made his decision, Mr. Donnelly's staff had reported to him that there was evidence that Mr. Zockoll's companies were involved in brokering telephone numbers in the United Kingdom. Unfortunately no submission in writing was presented to Mr. Donnelly. On his own admission, his day-to-day involvement in the case was a very limited one. He had not personally seen all of the relevant documentation but he trusted the information given to him by his colleagues and his subordinates within the telemarketing services division of the Defendant. Apparently it is not unusual in the Defendant that decisions of the magnitude involved in this case are made without the existence of any written submissions. He told me that Telecom Eireann "tend to try and take decisions fairly quickly and to empower people as close as possible to the person who would be applying to take such decisions" . The recommendation to make the decision which he did was made to Mr. Donnelly by Ms. Dorothy O'Byrne, having had legal advice. It would appear that he relied almost entirely upon the oral recommendations of Ms. O'Byrne and he told me that that was not unusual. He was, he told me, determined that he would understand the case and the quality of the analysis that had been carried out. I have come to the conclusion that he did not have a proper understanding of the case at the time when he made his decision. It appears to me that his conclusion that the Zockoll companies were engaged in the business of brokering numbers was based on the fact that (1) they had accumulated numbers which

65. Mr. Donnelly thought did not relate to the Zockoll business, (2) they had made little use of the numbers and (3) they had accumulated numbers in other countries. Furthermore, it appears to me that he had an imperfect understanding of what was and what was not prohibited by the legislation. For example I cannot conceive of a situation where the matter which was put to him at Question 279 of the transcript of the 6th December, 1996 could be regarded as unlawful. The proposition was put to him that if the Plaintiffs were to obtain a freephone number from the Defendant and persuade fifty plumbers to set up and utilise the number on an origin-dependant routing service while the Plaintiffs remained the subscriber on the line and granted and operated a franchise to and with these plumbers, it would be considered brokering and unlawful. He considered that it was prohibited under the existing legislation. If that was so, it is strange indeed that the Defendant was prepared to give back the numbers which related to Dyno-Rod prior to the trial because it is clear from the evidence that the Plaintiffs were actually operating the Dyno-Rod franchise under the origin-dependant routing service and structured in exactly the way which Mr. Donnelly considered to be prohibited under the existing legislation. This is but an example of the confused thinking which appears to have been abroad in the Defendant at the time when the decision in suit was made.

66. I am satisfied on the evidence that the Plaintiff companies are and were at all times engaged in a bona fide franchising business. I am furthermore satisfied if the Defendant had properly and accurately assessed the situation, it would have come to the conclusion that the business activities of the Plaintiffs were bona fide insofar as the provision of franchising was concerned.

67. It seems to me that on his own admission Mr. Donnelly had little or no knowledge of what the Zockoll businesses actually were. For example, he had no knowledge of Mr. Zockoll's extensive franchise businesses throughout the world or the manner in which Mr. Zockoll proposed to set up the franchise businesses. It is clear from the evidence that such a franchise business could be set up through a master franchisee or directly by using the alpha-numeric concept. Indeed, at the time that Mr. Donnelly made his decision, he was not aware of Mr. Zockoll's involvement in Dyno-Rod. He learned about this subsequently and then arranged for the two numbers which were related to the Dyno-Rod franchise to be returned immediately prior to the hearing. He was not aware of the fact that Mr. Zockoll had set up franchises in America, Germany, France, Hong Kong and Singapore. He did not know of the Zockoll franchises in relation to "Piggyback Trailers", "While-You-Wait Pit-Stop Silencers", "One Day Car Respray Shop", "Mobile Car Tuning", "Thirty-four Flavour Ice-Cream Shops", etc.

68. All that he appears to have been aware of was the fact that the Zockoll Group had accumulated the eight numbers with no usage on them and what he had been told by Ms. O'Byrne concerning her dealings with Mr. McCann which was to the effect that Mr. Zockoll had tried to sell Mr. McCann the 1-800 Flowers number in the United Kingdom. He was not aware at the time that it was possible, quite lawfully, to assign a number from one subscriber to another in the United Kingdom with the consent of the service provider. Such is the case in this jurisdiction and has always been so.

69. Ultimately it transpired in the course of the cross-examination that the only two items which affected his decision were (a) the information which had been obtained by Ms. O'Byrne concerning Mr. McCann, and (b) the fact that the eight numbers had little or no usage. The defects attendant on the latter point have already been pointed out.

70. It is convenient at this stage to summarise the position in relation to

71. Mr. McCann. Towards the end of 1995 the Defendant organised a conference on telemarketing for its major customers. It was a half-day conference. It had the intention of bringing together business people so as to demonstrate how they could use telemarketing services more effectively. Ms. O'Byrne was the main person responsible for organising this conference. She approached a number of speakers. One of these was a Mr. Jim McCann. He was described in evidence as the keynote speaker. The Defendant was aware of the 1-800 Flowers service in the United States. That is a business which is owned by Mr. McCann.

72. Ms. O'Byrne was of the view that he would be a very effective speaker to have at the conference because of his experience and knowledge of using the telephone as an integral part of his business in the States.

73. Mr. McCann was persuaded to come to Dublin and to speak at the conference. He did not give evidence before me.

74. He spoke at the conference and it was very successful. It is clear from the evidence that even before he came to the conference he was already expressing interest in obtaining in this jurisdiction the 1-800 Flowers number for himself and the Defendant appeared to be attempting to facilitate him in that regard. On the 19th October, 1995

75. Ms. O'Byrne wrote a letter to Mr. McCann at his address in Westbury, New York. She said as follows:-


"Dear Jim
Many thanks for taking my call on Tuesday. Telecom Eireann are delighted that you have accepted our invitation to speak at our first telemarketing conference in Dublin on 15th November.

We have reserved accommodation in the Shelbourne Hotel for you and your family for the duration of your visit and will confirm the necessary arrangements with your assistant, Rachel Witkon. We also hope shortly to forward to you a proposed itinerary for your stay in Dublin.
With regard to the securing of the freephone number 1800 Flowers we have written to the company who currently are renting, but not using the number, to advise them that we are retrieving the number from them. Our legal advice is that it is within our company powers to do this and we would hope to be in a position to confirm that the number is available to you shortly.

As discussed I am currently preparing a brief for you on our half-day conference the theme of which is 'Telemarketing 2000 the future is calling'. I will forward the brief including details of the issues we would like you to address in your keynote speech tomorrow".

76. It is clear of course that it was the Plaintiffs who had the 1-800 Flowers number in this country at the time that letter was written. Ms. O'Byrne told me in evidence that as a result of the conversation which preceded the issue of that letter, she investigated the number. She established that it was in use but that there appeared to have been no calls made over the period that the number had been connected. She also obtained information that the Zockoll Group were a company with similar numbers in the UK and it was believed were brokering those numbers. She contacted her Solicitors and explained the situation that they had a customer whom she felt had those numbers, that they were going to broker the numbers and that they had a customer who was interested in taking one of those numbers. She told me that the legal advice which she obtained was that no customer owns a phone number and that if she had a concern that there was a customer who was trying to assign a number over to another party, such was contrary to the terms and conditions of the agreements with the Defendant and they could not do it. This then was what ultimately led to the letter of the 3rd November being sent.

77. Later on further information came into the hands of the Defendant. As it is of some importance I set it out fully. There was a letter of the 30th November, 1995 from

78. Mr. McCann to Ms. O'Byrne in the following terms:-


"Dear Dorothy
I would like to thank you for your efforts to date in helping us to start operating our business in Ireland. As you and I have spoken, we have been trying to establish a presence in the UK and Ireland for some time now.

The only thing blocking us in the UK to date has been attaining the 0800 356937 number from BT. We were contacted by a person by the name of Jim Zockoll approximately one year ago who had the 0800 356937 number and wanted to sell it to us. We have been trying to reach an agreement with
Mr. Zockoll during the course of this past year, until such time when we realised that the laws governing brokering of telephone numbers in the UK are quite different than they are here in the US. Upon finding this out, recently we have ceased to contract with Mr. Zockoll and are pursuing other routes. It was also brought to our attention when we requested the corresponding number from Telecom Eireann for use in Ireland that Jim Zockoll was an impediment to our establishing our business in Ireland as well.

Once the hurdles of attaining these numbers are overcome, we plan to move ahead in establishing a point of presence for our business in the European Community, specifically starting off with Ireland and then the UK. It is our intent to open up retail stores as well as telecentre operations. In Ireland, specifically, we would look to establish a small telecentre to start that could handle local Ireland traffic, but also hopefully handle some US calls as well. In this manner we would be able to build the processes and the underlying engine of our business while we focused on building the Irish and European markets.

These letters are sent with the understanding that they will not be shown to any third party except your solicitor and should not be used for any purpose other than review by you and your solicitor, without the express prior written permission.

In hopes of moving this process along, I am enclosing some evidence of the discussions we have had with Mr. Zockoll. Hopefully this will be useful to you and your legal counsel. Dorothy, thanks for all of your help, and I look forward to hearing from you".

79. The copy letters which accompanied that communication from Mr. McCann showed a course of dealing between his company and Mr. Zockoll. The interpretation put on that by the Defendant was that Mr. Zockoll was engaging in an unlawful activity insofar as the United Kingdom was concerned and that there was a likelihood that he would engage in a similar activity here.

80. Particular reliance was placed by the Defendant upon a letter of the 8th June, 1995 from the Plaintiffs to Mr. Gallagher of 1800 Flowers. It was as follows:-



"Dear Gerry
Subject to Contract
I now have some time to pick up where we left off.

I have re-read the correspondence between our two companies. It appears that for one reason or another we are drifting away from our original proposal contained in my letters of the 26th August and 5th December.

It is only fair that we tell you this now so that you do not feel we are close to an agreement. You stand a better chance of getting an agreement by accepting the main issues of our original proposal, i.e. 800 Flowers Inc. agrees to license from us the number they wish to have on certain commercial grounds involving an up-front payment, a subsequent per transaction payment, some agreement as to how the telephone number is itself marketed and consent to our other registration.

Please note that neither our proposals nor our phone name licence agreements have expiry dates. As long as you continue to use the phone numbers and/or the phone names and pay the monthly minimum the agreement is valid. We are not interested in capping. To amplify on the above:
1. We transfer to 800 Flowers Inc. the ownership of the folowing phone numbers:
0800 356937 (0800 Flowers)
0800 227538 (0800 Baskets)
0800 226343 (0800 Candies)
0800 225556 (0800 Balloons)
0800 466343 (0800 Goodies)
0800 833343 (0800 Teddies)
0800 800356 (0800 800 Flowers)
0800 443846 (0800 Gifthouse).

2. In addition we agree to remove our objections to your registration of 800 Flowers. In return we require the following:
(a) 800 Flowers Inc. take a licence for the following phone names:
0800 Flowers
0800 Baskets
0800 Candies
0800 Balloons
0800 Goodies
0800 Teddies
0800 800 Flowers
0800 Gifthouse
(b) 800 Flowers Inc. pay an upfront fee of $75,000.
(c) 800 Flowers Inc. pay a minimum monthly royalty of $1,500 or $1 for every order taken in the UK plus 50 cents for every order entering the UK whichever is the higher of the two.
(d) 800 Flowers Inc. refer to being a 'user of phone names' in all their advertising.
(e) 800 Flowers Inc. give consent to all our registered trademarks other than the ones listed below which we will de-register.
SCHEDULE


(f) We will also withdraw the following 0500 Flowers registration marks. However we will use them as phone numbers:
SCHEDULE


(g) We will remove all reference to 0500 Flowers from the following trademarks. However the rest of the marks remain our property and we will be allowed to proceed to registration.

Classes 31 39
Trademark Flowers by Phone 0500 Flowers with finger and keypad device to be amended to Flowers by Phone with finger and keypad device.

(h) None of the remaining registered trademarks have any reference what so ever to freephone, 0800 or 'Flowers' thus giving 800 Flowers Inc. the monopoly on the Flowers. However we do want to register all the remaining trademarks.

(i) The remaining numbers that have not been registered will only be used as phone name numbers associated with a company name i.e. Kelly Flowers 0500 Flowers.

(j) Other than in respect of the 0800 Flowers number (355937), 800 Flowers Inc. will reimburse us in full for all associated telephone and trademark costs incurred up to the date of the agreement.

Gerry, as I pointed out in one of my letters to you or Chris, trying to reach an agreement by letter and from this distance is going to take up a lot of time and nothing is ever going to be settled. If you or Chris do not want to come to the UK, then I suggest that if you agree in principle to the main issues I will fly over and we can tie up the loose ends in New York. If you cannot agree to the main issues then I am afraid I just cannot afford the time to continue as we have been.
Yours sincerely
1 Jim Zockoll
Chairman".


81. Curiously enough, Mr. Donnelly had no recollection of ever even seeing that letter before it was put to him in cross-examination by Mr. Collins S.C. He conceded that the letter put a construction on the relationship which existed between Mr. McCann and

82. Mr. Zockoll which was different to his understanding at the time that he made the decision in suit. Mr. Donnelly confirmed in cross-examination that the sole and exclusive reason he withdrew the numbers from a legal point of view was because he was of the view that numbers were being brokered. The sole and exclusive commercial reason was because the Defendant wanted to give the 1-800 Flowers to Mr. McCann.

83. I am satisfied that his understanding of the commercial arrangements which were discussed between Mr. McCann and Mr. Zockoll was incorrect. The real position concerning the dealings that Mr. Zockoll had with Mr. McCann was that Mr. Zockoll had been attempting to set up a number of franchises in the United Kingdom based on the alpha-numeric system. He was endeavouring to try to create brand value in these alpha-numeric numbers. He approached British Telecom to see if they would put resources into the education of the public in the alpha-numeric system. He had not got a commitment from them other than the fact that they were prepared to give him numbers to see what he could do with them. He made presentations to thirty major companies with a view to trying to get them to advertise on the 1-800 system. Among the franchises which he was interested in setting up in England was 1-800 Flowers. He applied for the trademark in England for 1800 Flowers. Subsequent to that the American Corporation 1800 Flowers, which was

84. Mr. McCann's company and trades under that name in the United States, attempted to apply for trademark registration but found that Mr. Zockoll had beaten them to it. He had his application in first. There were some other trademarks and brands that Mr. Zockoll had, related to 'Flowers', that Mr. McCann wanted. Mr. McCann had certain registrations that

85. Mr. Zockoll wanted. Mr. Zockoll was prepared to enter into a franchising arrangement with Mr. McCann in the United Kingdom whereby Mr. Zockoll's companies would provide certain services which were outlined in the correspondence. In return for those services Mr. McCann was to pay a fee. The actual right of use of the number, that is the numeric equivalent of 1-800 Flowers, would be transferred from Mr. Zockoll to Mr. McCann provided the service provider so consented. This history was unknown to Mr. Donnelly at the time he made his decision and, in my view, there is nothing in it which would justify a determination that the arrangements which were to be embarked upon in this jurisdiction by the Plaintiffs were unlawful. Indeed, I believe that had the true facts been investigated and made known to

86. Mr. Donnelly prior to the decision in suit, it is likely that he would not have made that decision.

87. It goes without saying that there could be no legal justification for removing the numbers from the Plaintiffs simply because the Defendant decided that it wished to give them to Mr. McCann with whom they had formed a good relationship.

88. In my view the decision to remove the original eight numbers was largely based on a misunderstanding of Mr. Zockoll's method of trade together with a desire on the part of the Defendant to accommodate the commercial concerns of Mr. McCann. It follows, therefore, that there was no factual basis to justify the decisions in suit. I am of opinion that what was being engaged upon by Mr. Zockoll was perfectly legitimate and was part and parcel of the normal franchising arrangements which he has utilised in the past and intends to utilise in the future.

89. The Defendant may well have had a suspicion concerning the Plaintiffs' activities but suspicion is not enough to make the serious and far-reaching decisions of the type that are questioned in these proceedings. Mr. Zockoll has already acquired substantial quantities of phone numbers in the United Kingdom and his evidence before me is to the effect that it is his intention to enter into franchise arrangements in respect of these numbers in due course. Insofar as the 270 numbers in this jurisdiction are concerned, it will be many years before he fully utilises all of these. The fact that he has acquired so many and will take such a long time to exploit each and every one of them may well have caused some further suspicion in the minds of the Defendant. But that suspicion must be assuaged by the fact that the Plaintiffs have given to this Court undertakings concerning their future conduct which are capable of being summarily enforced. I myself put it to Mr. Donnelly that if the Plaintiffs were prepared to give undertakings to the Court that they would not broker the telephone numbers, should that not solve the Defendant's problem? At first he agreed with me that such an undertaking would satisfy the Defendant. An undertaking in those terms was proffered and continues to be proffered by the Plaintiffs. The undertaking of course is on the basis that the Plaintiffs would be entitled to set up their franchise operations as described, including the transfer of the phone name and phone number to a single master franchise but notwithstanding that, the Plaintiffs' undertaking is not accepted by the Defendant. I do not consider that the Defendant has acted reasonably in rejecting these undertakings.

90. In my view the furnishing of this undertaking removes any doubts concerning the bona fides of the Plaintiffs. Such an undertaking is capable of being enforced in a summary way and, if breached, would have very serious consequences for the Plaintiffs.

91. Insofar as the Defendant contends that it was not attempting to withdraw the service but merely to alter the numbers on the lines in question, I reject such an argument. The letter of the 3rd November, 1995 makes it quite clear that the Defendant intended to withdraw service on the freephone numbers. Even if I am wrong in this and all that was sought to do was to alter the numbers, such an alteration was predicated on the misunderstanding which I have already identified and does not appear to me to justify the action which was sought to be taken.


THE EXERCISE OF THE DEFENDANT'S POWERS

92. In the course of this judgment I have set forth in a brief form the genesis of the Defendant. Its roots are to be found in the Act. In that regard it is, in my view, placed in a not dissimilar position to that of the Voluntary Health Insurance Board. In the course of his judgment in Callanan v. Voluntary Health Insurance Board (unreported 22nd April, 1993) Keane J. (then a Judge of the High Court) in dealing with that entity stated:-


"The VHI is not a private commercial organisation; it is a public body established by the Oireachtas with statutorily defined objects and powers. While the enabling Act undoubtedly confers on the VHI a wide discretion, under the ultimate control of the Minister, as to how it carries out those objectives and the manner in which it uses its powers, in common with other bodies of this nature it must use the powers entrusted to it fairly and reasonably. That obligation which must, if necessary, be enforced by the Courts, exist not merely in the case of its subscribers and potential subscribers but also in the case of the providers of health care".

93. He went on to hold that while the actions of the VHI "might have been unexceptional in legal terms in the case of a private commercial firm vigorously protecting its own interests, they were not, however, a fair and reasonable use of the powers entrusted expressly and by implication to the VHI by the Oireachtas for the common good and I am, accordingly, satisfied that the plaintiffs are entitled to appropriate relief in respect of those actions". In my opinion this view of Keane J. has equal application to the present case. It appears to me that in exercising such discretion as it has in relation to the withdrawal of telephone numbers which have been allocated to a customer, the Defendant must use the powers entrusted to it fairly and reasonably.

94. Support for this view in the context of the telecommunications industry is to be found in the judgment of the Court of Appeal in Timeload Limited v. British Telecom Plc (30th November, 1993). In that case the Court of Appeal upheld the decision of the Court below granting an injunction restraining the defendant from terminating the plaintiff's use of a certain telephone number. The plaintiff was the subscriber to the number 0800-192192. In the United Kingdom the number 192 is the number for Directory Enquiries. The plaintiff was offering a freephone service to the public whereby members of the public could dial this number in order to find out the names and telephone numbers of persons offering particular services, for example, the names and telephone numbers of local plumbers in the caller's area. The defendant was of the view that that number had been procured by the plaintiff by misrepresentation. Furthermore it was of opinion that the use which the plaintiff was making of the number amounted to passing-off on the basis that by using the number 192 the public would be led to believe that there was some connection between the service offered by the plaintiff and the Defendant's Directory Enquiry service. The defendant thus withdrew the number from the plaintiff and terminated the contract. In so doing it relied upon a number of provisions in the contract of service between it and the customer including an express general power to terminate the contract or the provision of any service on one month's notice. No reason for the notice had to be given. It also had express power to change the terms and conditions at any time. There was also a reference in the contract of service to a minimum period of service of 12 months but this was expressly stated not to prevent the defendant from exercising its rights to terminate the contract. The defendant thus argued that it was within its rights in terminating the contract. Sir Thomas Bingham M.R. (as he then was) stated:-


"It is therefore correct, speaking very generally, to regard BT as a privatised company, no longer a monopoly but still a very dominant supplier closely regulated to ensure that it operates in the interest of the public and not simply in the interest of its shareholders should those be in conflict. Against that background I am, for my part, by no means sure that the classical approach to the implication of terms is appropriate here. As Lord Cross pointed out in Liverpool City Council v. Irwin 1977 AC 239 at page 257, implied terms can find their way into contracts either because the law lays down a general rule that in contracts of a certain type a certain obligation should be implied, or on grounds of necessity for business efficacy. Thus, pure necessity is not the only ground on which a term can be implied and I can see strong grounds for the view that in the circumstances of this contract BT should not be permitted to exercise a potentially drastic power of termination without demonstrable reason or cause for doing so.

I also share the learned Judge's view that it is not altogether easy to reconcile Clause 6 enabling BT to suspend only for operational reasons, with Clause 18 enabling it apparently to exercise the more drastic power of termination without any reason at all. It is in fact reasonable to suppose that Timeload would not have committed themselves to very substantial expenditure and indeed to found their business of the possession of a telephone number of which they could be deprived at a month's notice. In my judgment the Courts must be wary of accepting a construction which so obviously flies in the face of what one party at least must be taken to have intended".

95. In my view the principles outlined in these two cases apply to the interpretation of the Telecommunications Scheme and the terms of the contract between the Plaintiffs and the Defendant in this case. It follows therefore that the "absolute discretion" given to the Defendant to alter the subscriber's telephone number may only be exercised if it can be shown

(a) that the subscriber is in breach of his contract with the Defendant, or
(b) circumstances exist which in the interest of some revision of the Telecommunications Service it is necessary to change the subscriber's telephone number.

96. As there were no such reasons on the present case, it follows that the Defendant was not entitled to take the action which it did.


THE PROCEDURES FOLLOWED BY THE DEFENDANT

97. The Plaintiffs take issue with the procedure which was followed in the present case. They say that it was in breach of natural justice. The decisions were taken on the basis of information supplied by a competitor of the Plaintiffs where that information was never put to the Plaintiffs nor was any opportunity given to respond to it or clarify it. It is clear from Ms. O'Byrne's evidence that she did not discuss the matter with Mr. Zockoll prior to informing Mr. Donnelly of the position as she understood it to be or indeed prior to

98. Mr. Donnelly's decision. The letter of the 3rd November, 1995 speaks for itself. It gave notice that the Defendant would be withdrawing service on the freephone numbers in question. In evidence there was an attempt made to suggest that during that 30 day period the Plaintiff could attempt to reverse the decision. If the rules of natural justice apply in this situation then the procedure as outlined so far clearly would not comply with the audi alteram partem principle. It is true to say that in the course of his evidence Mr. Donnelly seemed to distance himself from the procedure followed and to accept that it was not the way the Defendant would do business.

99. I am not persuaded that public law principles apply to the commercial relationship which exists between the Defendant and its customers. Furthermore, the remedy sought in these proceedings is not one of public law. However, I am quite satisfied that the procedure adopted by the Defendant in this case could not be regarded as a fair or reasonable use of the powers entrusted to it. As I have already held that such powers must be exercised fairly and reasonably, it follows that the procedure adopted by the Defendant in the instant case was fatally flawed. In my view there was no entitlement to serve the notice in question without at least affording the Plaintiffs an opportunity to explain their position in the light of the information that the Defendant had in its possession.

100. In these circumstances I am quite satisfied that the Plaintiffs are entitled to have reinstated to them the remaining six of the original eight numbers. I also find that there was no justification for the removal of the service on the two other numbers.


THE REMAINING 270 NUMBERS

101. As is clear from the evidence of Mr. Donnelly, the only basis upon which the Defendant has refused to allocate further numbers to the Plaintiffs is the allegation of brokering. I have already found that the Plaintiffs are not engaged in brokering and that the Defendant had an imperfect understanding of the business activities of the Plaintiffs.

102. The Defendant's statutory responsibility is to provide a public telephone service by making telephone numbers and associated services available to any member of the public who applies for the service and who is prepared to abide by its terms and conditions. The Defendant provides 'choice' numbers as part of such service. The Plaintiffs applied for such 'choice' numbers but the Defendant has made it clear that it will not provide them because of its belief concerning the alleged brokering activities of the Plaintiffs.

103. The evidence satisfies me that in common with practically every service provider in the United States and the United Kingdom, the Defendant operates a policy of allocating numbers on a first come first served basis. There is no suggestion in the evidence before me that any of the 270 numbers which were applied for by the Plaintiffs had already been allocated to another entity. One such number does not appear to be available but for another reason.

104. The weakness of the Plaintiffs' case on this aspect of the matter is that it did not and does not have any contractual nexus with the Defendant. In this regard the 270 numbers sought by it differ from the eight numbers already allocated to it. Nonetheless, the Plaintiffs contend that they are entitled to the numbers. In my view they are correct in this contention.

105. In my opinion the Defendant is under a statutory duty to allocate the numbers to the Plaintiffs save and except where such numbers might already have been allocated to another person or where there are other good and objectively justifiable reasons present. The Defendant, in my view, is in breach of its statutory obligation by failing to allocate the numbers to the Plaintiffs and continuing to maintain that it will not do so.

106. This approach to the matter is but another aspect of the application of the obligation which is placed upon the shoulders of the Defendant to exercise its powers and entitlements in a fair and reasonable way. It can demonstrate a fair and reasonable exercise of this power if it can show a good reason for refusing to allocate the additional 270 numbers to the Plaintiffs. In my view it has not. The only reason relied on is precisely that which was used to justify the withdrawal of the eight numbers already referred to in this judgment. That was not and is not a good or valid reason for refusing to allocate these additional numbers. In my opinion the Plaintiffs are entitled to succeed on this aspect of the case also.

107. It is not necessary for me to decide whether or not the position between the Plaintiffs and the Defendant is akin to that alluded to in Carlill v. Carbolic Smokeball Limited (1893) 1 QB 256, since I have already decided that the Plaintiffs as applicants for the exercise of the statutory powers of the Defendant are entitled to have them exercised in a fair and reasonable manner. They were not so exercised and consequently the Plaintiffs are entitled to these numbers. There is of course one exception to this. In my view it is open to the Defendant to refuse to allocate a number which, although not already allocated to somebody else, is one which is of national importance, e.g. an emergency number. In the course of the hearing the Plaintiffs made it clear that they would not insist upon having such a number allocated to them recognising, as they do, the strategic importance of such numbers.


COMPETITION LAW

108. As I have already found in favour of the Plaintiffs in respect of the Defendant's actions, it is not necessary for me to consider the arguments which were advanced to me under either domestic Competition Law or European Law. I considered whether, notwithstanding the fact that it was not strictly necessary to do so, I ought to express an opinion concerning the arguments which were put to me on this aspect of the matter. I have concluded that I ought not to do so. It seems to me that were I to do so, any comments that I would have to make would be entirely obiter. While such comments can often be of assistance, I do not think that such is the case in the present litigation. The whole world of telecommunications is changing at an extraordinarily rapid pace. The expert testimony that I had, particularly from the United States, demonstrates the very fast pace of change in the industry. It would, I think, be unhelpful to express views concerning aspects of Competition Law in such circumstances. I also bear in mind the ability of the Defendant to change its terms and conditions at the stroke of a pen by making a new scheme under the Act. Accordingly I will not express any opinion on this part of the case.


CONCLUSION

109. In the result the Plaintiffs succeed in their action. I will consider with Counsel the form of Order to be made to give effect to this judgment.


© 1997 Irish High Court


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