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Michael writes on emerging markets, architecture and engineering. He has served as a correspondent in Tokyo, London and Johannesburg and has written for Reuters, the Financial Times, The Age and The Sydney Morning Herald.

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ispONE fires back counter-claim at Kogan Mobile

Published 18 April 2013 09:03, Updated 26 November 2013 18:35

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The battle between retail entrepreneur Ruslan Kogan and telecommunications wholesaler ispONE took a sharp new turn this week.

ispONE, which Kogan Mobile has taken to court for suspending some of its users’ accounts, hit back at Kogan Mobile with a counter-claim accusing Kogan’s company of breaching its own contractual obligations.

“There are two breaches,” ispONE counsel Peter Bick QC told the Victorian Supreme Court on Wednesday. “The first is failing to take reasonable steps to ensure that Kogan Mobile’s customers comply with our acceptable use policy.”

The second accusation was a contravention of the agreement managing the relationship between Kogan Mobile, which sells sim cards and contracts and ispONE, which resells prepaid access to the Telstra mobile network, Bick said.

“They have breached another provision of the master wholesale agreement by misrepresenting their plans to be in effect unlimited or subject to certain specified limitations when in fact they are far more limited than that,” Bick said, according to a transcript of the day’s hearing.

ispONE’s move, which Kogan Mobile’s counsel Norman O’Bryan SC called an “offensive tactic,” came after the service provider received further documents from Kogan Mobile on Friday last week. The two parties had first met in court last Wednesday when Kogan Mobile secured an injunction requiring ispONE to lift the suspensions on accounts it had already made pending the trial.

On Wednesday this week, ispONE said the new material from Kogan Mobile exposed wider issues in the case. The move certainly risks lengthening the case. A trial initially expected to conclude after just one day’s hearing has now been extended by up to four more days, unless the two sides can resolve their differences in the meantime.

Banging heads together

Kogan Mobile and ispONE will on Friday enter into court-mediated negotiations, after Justice James Judd instructed them to do so.

“It seems to me, if I may be so bold, to be the kind of case that screams out for somebody to sit down and bang some heads together and say you have got to arrive at a solution to a very practical problem,” Judd said on Wednesday.

The fight that has dogged the new business venture started with ispONE’s decision to suspend about 600 accounts it deemed to be using data excessively. Earlier this month it had slated another 2000 accounts – of Kogan Mobile’s 56890 active accounts – for suspension until the injunction prevented it from freezing these as well.

Kogan Mobile complains that the suspensions have damaged not only it, but the wider Kogan brand. It wants the service provider to apologise to the affected users and recompense it for the money it has spent on the legal action.

The latest development, however, shows that Kogan Mobile has a fight on its hands.

“We seek a declaration that Kogan Mobile has been in breach of … the master wholesale agreement by engaging in misleading and deceptive conduct in falsely representing that its mobile phone access plans were unlimited when in fact they are limited in a number of ways,” Bick said.

Of course, this tack carries dangers for ispONE. By making such accusations, the wholesaler will have to show that it was not fully aware of, or complicit in, the game it says Kogan Mobile was playing. Separately, the judge has already questioned whether ispONE was entitled to take action against Kogan Mobile’s end users even though it had no formal relationship with them.

Poor language

Much of the dispute has come about because of a loosely drafted wholesale agreement between the two sides. The two sides cannot agree on what constitutes ‘excessive’ use of access to the network or even the procedure for suspending accounts deemed to be using it excessively.

It is a new agreement – signed as recently as November – but if it were a car, it would no doubt be declared a lemon. Last week Judd called it “about as vague as one could possibly be in the use of the English language”.

That document isn’t the only one under scrutiny. In mid-March, after discussions with ispONE, the company of BRW Young Rich Lister Kogan clarified its acceptable use policy to limit all customers from downloading or uploading more than 400MB of data on a single day.

Technology lawyer Peter Moon said Kogan Mobile’s acceptable use policy - the fine print for users - was “unclear and ambiguous.”

The poor state of the legal text the two sides had relied on as they started their business relationship was a point Judd reinforced this week when he sent Kogan Mobile and ispONE off to try and negotiate a settlement.

“I would have thought this is a mediation in which the participation of some drafting lawyers might be well able to assist the parties,” Judd said. “That is people that might have the necessary skills to refashion terms of the agreement and policies and the like.”

Some SIM agreement

The two sides at least are showing a willingness to work together. While Kogan Mobile had sought a further injunction requiring ispONE to hand over 50000 micro sim and 1500 nano sim cards it had ordered but which ispONE had not delivered, they seemed to reach an agreement on that issue at least on Wednesday.

“We will not seek to agitate that any further because are hopeful, Your Honour, that that issue will have gone away before the trial commences,” Kogan Mobile’s counsel said.

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