Australian Competition and Consumer Commission v Telstra Corporation Ltd - [2001] FCA 896

FEDERAL COURT OF AUSTRALIA
ACCC v Telstra Corporation Ltd [2001] FCA 896
TRADE PRACTICES – misleading and deceptive conduct – interlocutory injunction – representation to former customers of One.Tel that early termination fees may be payable if they do not transfer to respondent
Trade Practices Act 1974 (Cth) s 52, 53(f) and (g), 80 (4)
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v TELSTRA CORPORATION LTD
V 711 OF 2001
HEEREY J
6 JULY 2001
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

V 711 OF 2001

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

TELSTRA CORPORATION LTD
RESPONDENT

JUDGE:

HEEREY J

DATE OF ORDER:

6 JULY 2001

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:
1.Pending the hearing and determination of this application, or further order, the respondent whether by itself, its servants or agents, or otherwise howsoever be restrained from making representations to the effect that;
(a)One.Tel customers who transferred to a mobile telephone service provider other than the respondent would be, or would be like to be, may be, or could be, liable to One.Tel customers for an early termination or disconnection charge;
(b)One.Tel customers who did not transfer to the respondent as their mobile telephone service provider would be, or would likely to be, may be or could be, liable to One.Tel for an early termination or disconnection charge; or
(c)One.Tel customers who did not transfer to the respondent as their mobile telephone service provider prior to a certain date would be, would be likely to be, may be or could be, liable to One.Tel for an early termination disconnection charge.

THE COURT DIRECTS THAT:
2.The respondent file and serve its defence on or before 20 July 2001.
3.The applicant file and serve any reply on or before 27 July 2001.
4.The applicant file and serve any further affidavits upon which it relies on or before 3 August 2001.
5.The respondent file and serve any affidavit upon which it relies on or before 24 August 2001.
6.The applicant file and serve any affidavit upon which it relies by way of reply on or before 3 September 2001.
7.The application be adjourned to a directions hearing on 20 August 2001.
8.Costs are reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

V 711 OF 2001

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

TELSTRA CORPORATION LTD
RESPONDENT

JUDGE:

HEEREY J

DATE:

6 JULY 2001

PLACE:

MELBOURNE

REASONS FOR JUDGMENT

This proceeding arises out of the collapse of the mobile phone company One.Tel. The respondent Telstra Corporation Ltd took over a large number of customers who had subscribed to One.Tel’s “Next Generation” mobile phone service. The applicant Australian Competition and Consumer Commission alleges that Telstra have engaged in misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) (the Act) by informing former One.Tel customers that if they do not subscribe to Telstra's service they may incur early termination fees (ETFs) to One.Tel. The Commission seeks an interlocutory injunction.
Administrators were appointed to One.Tel on 29 May 2001. On 6 June the administrators entered into an agreement with Telstra under which it paid $3 million in consideration of the administrators providing details of One.Tel’s customer list. There was a meeting on the following day, 7 June, attended by representatives from Telstra, the administrators and the Commission. There are some disputed versions as to what was said on that occasion, but I think the most likely conclusion, insofar as ETFs were concerned, is that no charge was to be made to One.Tel customers who went to Telstra but that no agreement was reached as to ETFs for One.Tel customers generally. In the context of negotiations between Telstra and One.Tel’s administrators it is less likely that the administrators would have been talking about ETFs generally, regardless of whether One.Tel customers went to some provider other than Telstra or to none at all.
If I could just go ahead a little, I think that construction is confirmed by an open letter which the administrators published by way of advertisement on 15 June. This said in part:
“The Administrators have now completed negotiations with a number of carriers and service providers, which provide you with an opportunity of assuring continuity of services.
Most of these packages include an agreement to pay a consideration for each former One.Tel customer who chooses to take up one of these offers. Also, we have agreed to waive any termination charge otherwise payable by a customer that takes up one of these offers.
The numbers to call for more information about these offers are listed below. We’d urge you to consider them when it comes time for you to make up your mind.” (Emphasis added)
In the meantime One.Tel ceased providing service on 7 June.
The next major step occurred on 28 June when the administrators published another open letter which said, amongst other things:
“If you move or have moved to any other service provider after the date on which you ceased to be provided with a service, you will not be required to pay termination fees. The relevant dates on which services ceased are relevantly, for present purposes –
…
One.Tel Next Generation Mobile Service, 9 June 2001.
…
If you terminated your contract prior to the appointment of the administrators or prior to the cessation of services as detailed above, you may still be required to pay a termination fee.”
There is evidence of a number of One.Tel subscribers who, prior to 28 June, called Telstra, or in some instances were called by Telstra, and were told, in effect, that they may be liable for One.Tel ETFs if they went to new providers other than Telstra. For the purpose of granting an injunction, I am not persuaded that the situation was so clear prior to 28 June that it was misleading and deceptive for Telstra to answer inquiries in that way. It was not for Telstra to speculate to inquirers about the contractual rights of the administrator vis‑a‑vis One.Tel subscribers who might go to other providers.
However, from 28 June onwards the position was substantially different. As a result of complaints, the Commission wrote to Telstra on 29 June, admittedly referring to complaints going back for the whole period since 9 June. The letter included this:
“The Commission has received a number of complaints alleging that, post 9 June 2001, Telstra has represented to One.Tel Next Generation mobile customers (or former customers) that they would, or that it was likely that they would, be liable to pay ETFs on their One.Tel contracts if they:
·signed up with a mobile service provider other than Telstra; or
·failed to sign up as a Telstra mobile service customer prior to a specified date.
These representations were made both in circumstances where Telstra contacted the customer directly and also where the customer initiated the contact.”
The letter alleged that Telstra’s conduct raised "serious and ongoing issues" in relation to ss 52 and 53(f) and (g) of the Act, and indicated that proceedings would be issued unless Telstra gave certain undertakings.
Telstra replied by a letter from its solicitors Mallesons Stephen Jaques dated 2 July 2001. After pointing out, reasonably enough, that they had had limited time to seek information and instructions as to these allegations, Mallesons set out their client’s instructions. These referred to the administrators’ notice of 28 June that I have already mentioned, and said this:
“After the Administrators’ announcement, instructions to Front of House staff were amended so that staff were instructed to inform Next Generation Customers that:
‘The One.Tel Administrator has stated that … Any Next Generation One.Tel customers who have moved to another service provider after 9 June 2001 will not be required to pay any termination fees.’
The revised script was circulated under cover of an email which emphasised the importance of the effect of the announcement on ETFs. This instruction was reinforced in an email bulletin sent to all Telstra staff on Saturday, 30 June 2001.”
Mallesons’ letter continues:
“The Administrators did not clarify until 28 June the position to be adopted generally in relation to ETFs. In circumstances where there was considerable uncertainty about the issue, Telstra was and is of the view that it was prudent to inform Next Generation Customers that they ‘may’ still be liable for ETFs if they transferred to a service provider other than Telstra, and that they should make their own inquiries in this regard.”
There was, however, evidence of statements made by Telstra personnel to inquirers on and after 28 June which suggested that it was at least possible that One.Tel customers who went to service providers other than Telstra might still be liable for ETFs.
On 28 June at about 2.45 pm Ms Erica Cumming of the Commission telephoned Telstra, enquired about a supposed friend who was a One.Tel customer, and asked
“What would happen if he went to another carrier?”
The Telstra person said,
“He would have to pay a fee to the One.Tel Administrators.”
On 2 July at 2.57 pm Ms Cumming again telephoned, spoke to another Telstra officer, and said that her younger brother had a Next Generation mobile. She said his phone was now not working and she had told him she would try and find out what the situation was. After being told that if her brother went to Telstra it would cancel the One.Tel contract Ms Cumming asked:
“What would happen if he went to someone else like another carrier?”
The Telstra person said:
“They would probably cancel the contract also but I’m not sure and I don’t know if they would cancel the fees.”
Ms Cumming asked:
“So he would basically have to go somewhere to cancel the One.Tel contract?”
The reply was:
“Yes. If he comes to Telstra we would definitely cancel the contract. If he does nothing he may get a termination fee from One.Tel.”
On 4 July at 3.58 pm Ms Cumming phoned Telstra and said her little sister had a One.Tel next Generation mobile which was not working. In the course of the discussion the Telstra person said:
“There are no termination fees if Telstra takes over the service. Telstra and Optus have an arrangement for One.Tel customers.”
Ms Cumming asked:
“So what if she goes to Vodafone or somewhere else?”
The answer was:
“There could be a termination fee. I couldn’t say yes or no for sure, but if she comes to Telstra, there won’t be.”
There is also an affidavit sworn by Mr Ian McCulloch of Wynnum, Queensland who had a telephone conversation with Telstra on 2 July. The Telstra person said words to the effect that she had read her latest e-mail and there would be no ETFs for One.Tel customers transferring to Telstra. Mr McCulloch said:
“Are you saying that if I don’t go to Telstra that I will have to pay the early termination fee?”
She said:
“No, that is what you’re saying.”
Mr McCulloch said:
“Yes, but is that true?”
She said:
“Yes, I guess so.”
Senior counsel for Telstra very fairly conceded, and I think correctly, that there was a triable issue as to whether statements made on or after 28 June constituted misleading and deceptive conduct. He submitted, however, that no injunction should be granted. There was evidence of steps made through the Telstra system to advise its call staff of the new position, and that had been, as the evidence showed, tested by the responsible Telstra officer by making telephone inquiries and receiving what should have been the proper information. Counsel also pointed out that the time limit for the offer of Telstra to take over One.Tel customers expired on 28 June and in the future there will only be residual inquiries.
There is substance in those arguments, but nevertheless I think this is an appropriate case for an injunction. I have regard to s 80(4) of the Act, which provides that:
“The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised:
(a)whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind;
(b)whether or not the person has previously engaged in conduct of that kind; and
(c)whether or not there is an imminent danger of substantial damage to any person if the first‑mentioned person engages in conduct of that kind.”
There are a very large number of former One.Tel customers, some 200,000 persons. Likewise Telstra is a large organisation. So the possibility of people being misled in the future, as some at least have been on and since 28 June, is not insignificant. I should emphasise, however, that this is an interlocutory application. The material has not been tested on cross‑examination. I am not involved with making any findings of fault or attributing blame, and in any event, I think in fairness it should be said that the evidence does not suggest any corporate plan on the part of Telstra to deceive people in any unconscionable way. If there has been fault, it has been an inadequate enforcement in a practical way of what Telstra accepted was the position as at 28 June.
I will therefore order that:
1.Pending the hearing and determination of this application, or further order, the respondent, whether by itself, its servants or agents, or otherwise howsoever, be restrained from making representations to the effect that:
(a)One.Tel customers who transferred to a mobile telephone service provider other than the respondent would be, or would be likely to be likely to be, may be or could be, liable to One.Tel for an early termination of disconnection charge;
(b)One.Tel customers who did not transfer to the respondent as their mobile telephone service provider would be or would be likely to be, may be or could be liable to One.Tel for an early termination or disconnection charge;
(c)One.Tel customers who did not transfer to the respondent as their mobile telephone service provider prior to a certain date would be, would be likely to be, may be or could, be liable to One.Tel for an early termination disconnection charge.
I do not propose to make an order in terms of par 2 of the draft which requires preservation of records. The material of that sort is kept in the ordinary course of Telstra’s business and there is no ground for thinking that it would not be retained.

I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.
Associate:
Dated: 11 July 2001

Counsel for the Applicant: T J Ginnane

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the Respondent: P W Almond QC with CC Macaulay

Solicitor for the Respondent: Mallesons Stephen Jaques

Date of Hearing: 6 July 2001

Date of Judgment: 6 July 2001

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 711 OF 2001

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	TELSTRA CORPORATION LTD RESPONDENT
JUDGE:	HEEREY J
DATE OF ORDER:	6 JULY 2001
WHERE MADE:	MELBOURNE

JUDGE:	HEEREY J
DATE:	6 JULY 2001
PLACE:	MELBOURNE

Counsel for the Applicant:	T J Ginnane
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the Respondent:	P W Almond QC with CC Macaulay
Solicitor for the Respondent:	Mallesons Stephen Jaques
Date of Hearing:	6 July 2001
Date of Judgment:	6 July 2001