Australian Competition and Consumer Commission v Harrison

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FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Harrison [2016] FCA 1543

File number: VID 277 of 2016
Judge: MOSHINSKY J
Date of judgment: 20 December 2016
Catchwords: CONSUMER LAW – unconscionable conduct in trade or commerce – where respondents provided telecommunications services to consumers – where respondents transferred customer contracts from one company to another without the customer’s consent – where transferee company demanded payment of early termination fee if customer wanted to terminate contract – where transferee company referred matter to debt collection agency or lawyers if customer did not pay – whether system of conduct or pattern of behaviour – whether unconscionable conduct in all the circumstances – whether respondents used undue harassment or coercion – whether director was person “involved” in contraventions
Legislation:

Australian Communications and Media Authority Act 2005 (Cth)

Australian Securities and Investment Commission Act 2001 (Cth), ss 12CB, 12CC

Competition and Consumer Act 2010 (Cth), ss 51ACA, 137H, 155, Sch 2, Australian Consumer Law, ss 2(1), 21, 22, 31, 50, 224

Competition and Consumer Legislation Amendment Act 2011 (Cth)

Corporations Act2001 (Cth), s 471B

Evidence Act1995 (Cth), s 128

Telecommunications Act 1997 (Cth)

Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth)

Trade Practices Act 1974 (Cth), s 75B
Cases cited:

Australian Competition and Consumer Commission v EDirect Pty Ltd [2012] FCA 1045

Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] ATPR 42-447; [2013] FCAFC 90

Australian Competition and Consumer Commission v Maritime Union of Australia (2001) 114 FCR 472

Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8

Australian Securities and Investments Commission v Accounts Control Management Services Pty Ltd [2012] FCA 1164

Australian Securities and Investments Commission v Kobelt [2016] FCA 1327

Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) 148 FCR 132

Cornell v The Queen (2007) 231 CLR 260

McMahon v National Foods Milk Ltd (2009) 25 VR 251

NRM Corporation Pty Ltd v Australian Competition and Consumer Commission [2016] FCAFC 98

Paciocco v Australia and New Zealand Banking Group Ltd (2016) 333 ALR 569

Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199

Rafferty v Madgwicks (2012) 203 FCR 1

Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53

Yorke v Lucas (1985) 158 CLR 661
Date of hearing: 21, 22, 28 July and 11 August 2016
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Regulator and Consumer Protection
Category: Catchwords
Number of paragraphs: 140
Counsel for the Applicant: Dr O Bigos
Solicitor for the Applicant: Johnson, Winter & Slattery
Counsel for the First, Second and Fifth to Eleventh Respondents: Mr A Bell
Solicitor for the First, Second and Fifth to Eleventh Respondents: New Legal Pty Ltd
Counsel for the Third and Fourth Respondents: The Third and Fourth Respondents did not participate in the hearing

ORDERS

VID 277 of 2016
BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant
AND:

JAMES LEE HARRISON

First Respondent

TELCOLLECT…

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Details
Case
[2016] FCA 1543
Decision Date

CaseChat Overview and Summary

In the case of Australian Competition and Consumer Commission v Harrison, the Australian Competition and Consumer Commission (ACCC) sought to establish that the Harrison Companies had engaged in unconscionable conduct under the Australian Consumer Law, particularly concerning the transfer of customer contracts without consent. The dispute centered on whether these transfers were lawful and whether the subsequent demands for early termination fees and recourse to debt collectors constituted unconscionable conduct.

The central legal issues revolved around the validity of the customer contract transfers, whether the conduct amounted to unconscionable behaviour, and if a director was implicated in these contraventions. The court had to determine if the transfers were effectively executed under an implied novation and whether the Harrison Companies used undue harassment or coercion in their dealings with customers.

The court found that the transfers were not validly executed due to the lack of customer consent and notification, dismissing the respondents' argument of implied novation. The court concluded that the conduct of the Harrison Companies constituted unconscionable behaviour, particularly in how they handled contract transfers and enforced fees. However, the evidence did not sufficiently show that the director was aware of the specific conduct in relation to certain customers, thus absolving him from personal involvement in the contraventions.

The court ordered that submissions on relief, form of orders, and costs be filed and served by specified dates, with liberty to apply for further orders as necessary.

Orders

Orders of the court

1. By 4.00 pm on 10 February 2017, each party file and serve a written submission (not exceeding 10 pages) on relief, the form of orders and costs.

2. By 4.00 pm on 17 February 2017, each party file and serve any written submission (not exceeding 2 pages) in response.

3. There be liberty to apply.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The essential elements constituting a contravention of the Australian Consumer Law will necessarily depend upon the terms of the provision that has been contravened: Rafferty v Madgwicks (2012) 203 FCR 1 at [254] per Kenny, Stone and Logan JJ. See also at [255]-[257].Application of principles to the facts of this caseUnconscionable conduct The ACCC contends that the Harrison Companies engaged in a system of conduct or pattern of behaviour in relation to customers whose contracts were transferred which was unconscionable in all the circumstances, in contravention of s 21 of the Australian Consumer Law. In particular, the ACCC contends that the customer contracts were not validly transferred from one Harrison Company to another because the contracts were transferred without the knowledge or consent of the customers. In these circumstances, the ‘transferee’ company had no right to demand payment of moneys from the customer, including early termination fees. This is because, the ACCC contends, the ‘transferee’ company was not in a contractual relationship with the customer. Indeed, it was the ‘transferor’ company that had terminated the contract early, by going out of business. The ACCC also contends that the Harrison Companies contravened the TCP Code in transferring the customer contracts without giving proper notice to, and seeking consent from, the customers; and that the Harrison Companies’ conduct involved deception in that they disguised the fact that the transfers had taken place and did not make clear to customers that they had a choice whether or not to contract with the new company. A threshold issue to be determined is whether the transfers were valid and effective to transfer the customer contracts to the ‘transferee’ company. The respondents contend that the transfers were effective on the basis of an implied novation, in that, having become aware of the transfers the customers paid monthly fees to the new company and can thereby be taken to have agreed to a novation of the contract such that the ‘transferee’ company was substituted for the ‘transferor’ company. The respondents rely on the discussion of implied novation by Nettle JA (as his Honour then was), with whom Neave and Dodds-Streeton JJA agreed, in McMahon v National Foods Milk Ltd (2009) 25 VR 251 at [77]. The respondents’ contention is premised on the factual proposition that notifications of the transfers were sent to customers. However, I have found, at [88] above, that the Harrison Companies did not send notifications of the transfers to customers. In light of this finding, the implied novation contention is very difficult to sustain. It is likely that most customers were not aware of the change of company and thus cannot be taken to have agreed to the change. (Even in respect of the second transfer, where the trading name changed, many customers may not have appreciated that the company providing the services – as distinct from the trading name – had changed.) Further, even if a customer did notice that the company on an invoice was different, and then paid one or more monthly invoices, I doubt that this is sufficient to find an implied novation. I think it would need to be shown that the customer knew that it was proposed to transfer the customer’s contract from one company to another and that the customer had a choice whether or not to agree to the transfer. Unless the customer had that knowledge, I do not think it is possible to imply a novation from the customer’s conduct because the element of consent would be absent. It is not established as a general proposition that customers had such knowledge. In these circumstances, I reject the implied novation contention. It follows that I conclude that, apart from individual cases where there may be particular facts and circumstances, the customer contracts were not validly transferred from one Harrison Company to another.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

However, I do not think the evidence establishes that he was aware of the particular conduct in relation to the six customers who gave evidence in the proceeding. As my conclusion in relation to s 50 of the Australian Consumer Law is based on particular conduct in relation to four of the customers, it follows that I am not satisfied that he was “involved” in the contraventions of s 50.Conclusion For these reasons, I have concluded as set out in [10] above. As noted above, the respondents requested that I publish reasons on liability and then provide an opportunity for the parties to put on further written submissions on relief; and the ACCC did not oppose this course. The liquidators for the third and fourth respondents also sought the opportunity to be heard on whether any orders should be made with respect to those respondents. I will therefore make orders for the filing and service of submissions on relief, the form of orders and costs.

Ratio Decidendi

Legal Principle Established

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