Dominello v Travel Compensation Fund

[2008] NSWSC 678

CITATION:	Dominello v Travel Compensation Fund [2008] NSWSC 678
HEARING DATE(S):	4 June 2008
JUDGMENT DATE :	7 July 2008
JURISDICTION:	Common Law
JUDGMENT OF:	Harrison AsJ
DECISION:	(1) The appeal is allowed. (2) The judgment of her Honour Magistrate Haskett dated 31 August 2007 is affirmed except the date that the payment is due is varied to be 28 days from today in lieu of 28 September 2007. (3) Costs are reserved.
CATCHWORDS:	APPEAL - Local Court Magistrate - interpretation s 40 Travel Agents Act 1986
LEGISLATION CITED:	A New Tax System (Goods and Services Tax) Act 1999 Local Court Acts 1982 Travel Agents Act 1986
CATEGORY:	Principal judgment
CASES CITED:	Allen v Kerr & Anor [1995] Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Carr v Neill [1999] NSWSC 1263 Devries v Australian National Railways Commission (1993) 177 CLR 472 Fountain v Alexander (1982) 150 CLR 615 Gorczynski v Beilby [2005] NSWSC 884 Housing Commission (NSW) v Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378 Inland Revenue Commissioners v Maple & Co (Paris) Ltd (1908) AC 22 Jung v Son [1998] NSWCA 120 Orbit Travel Services v Travel Compensation Fund (1999) NSWCA 63 Pettitt v Dunkley (1971) 1 NSWLR 376 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 R L & D Investments Pty Ltd v Bisby [200] NSWSC 1082; (2002) 37 MVR 479 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 Stateside Credit Corporation Pty Ltd v Hudson (1989) VR 519 State Rail Authority of New South Wales v Earthlkine Constructions Pty Ltd (in Liq) (1999) 160 ALR 588 Stocker v Adecco Gemvale Constructions Pty Ltd & Anor [2004] NSWCA 449 Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627
TEXTS CITED:	Macquarie Dictionary 4th ed (2005)
PARTIES:	Belinda Dominell (Plaintiff) Travel Compensation Fund (Defendant)
FILE NUMBER(S):	SC 14934/2007
COUNSEL:	R Sofroniou (Plaintiff) L S Einstein/A Korakis (Defendant)
SOLICITORS:	Colin Biggers & Paisley (Plaintiff) Piper Alderman (Defendant)
LOWER COURT JURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):	4812/2005
LOWER COURT JUDICIAL OFFICER :	Haskett LCM
LOWER COURT DATE OF DECISION:	31 August 2007

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

ASSOCIATE JUSTICE HARRISON

MONDAY, 7 JULY 2008

14934/2007 - BELINDA DOMINELLO v TRAVEL
COMPENSATION FUND

JUDGMENT (Appeal decision of Local Court Magistrate
- interpretation of s 40 Travel Agents Act
1986)

1 HER HONOUR: In 2001, an Under 18 Panthers rugby league team were going on a playing tour to the United Kingdom, Ireland and France. To that end the Panthers paid to Natar Pty Limited (“Natar”) a substantial sum of money so that Natar could make travel and accommodation arrangements. Natar never made those arrangements, nor did it refund the money to the Panthers. Money was paid to the Panthers from the Travel Compensation Fund. The Travel Compensation Fund seeks to recover some of this money from Ms Dominello, a licensed travel agent.

2 By amended summons filed 13 December 2007, the plaintiff seek firstly, an order that the decision and orders made by the Local Court of New South Wales, Downing Centre, on 31 August 2007 in proceedings 4812/2005 be set aside in whole; and secondly, an order that judgment be entered in favour of the plaintiff.

3 The plaintiff is Belinda Dominello (“Ms Dominello”) now Ms Orsini. The defendant is the Travel Compensation Fund (“Travel Compensation Fund”). In the Local Court the plaintiff was the Travel Compensation Fund and the defendant was Ms Dominello. For convenience I shall refer to the parties by name.

4 Travel Compensation Fund commenced proceedings in the Local Court seeking to recoup from Ms Dominello a portion of the compensation paid to the Panthers pursuant to s 40 of the Travel Agents Act 1986 (the Act).

5 On 31 August 2007, her Honour Magistrate Haskett delivered judgment and made an order that the defendant pay to the plaintiff the sum of $60,000 within 28 days together with interest to be assessed. This quantum is not the subject of dispute.

Appeal to this Court

6 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 73 of the Local Courts Act 1982 permits a party who is dissatisfied with a judgment as being erroneous on a point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor [1995] Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill [1999] NSWSC 1263 and R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479. The judicial officer cannot act on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588.

7 Section 75 of the Local Court Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Court for determination in accordance with the Supreme Court’s directions, or (d) by dismissing the appeal.

Grounds of appeal

8 Ms Dominello appeals the whole of the decision of her Honour Magistrate Haskett made on 31 August 2007 on the grounds firstly, that the Magistrate erred in failing to provide sufficient or adequate reasons for her decision; secondly, the Magistrate erred in finding that Ms Dominello was liable to Travel Compensation Fund pursuant to the Act; thirdly, the Magistrate erred in construing subs 40(3)-(7) of the Act; fourthly, the Magistrate erred to the extent that she found that the relevant “act or omission”, for the purposes of s 40(3) of the Act, was other than the failure by Natar to account for moneys received from the Panthers; fifthly, the Magistrate erred to the extent that she found that Travel had provided Natar with goods or services “in relation to which the act or omission occurred” for the purposes of s 40(6) of the Act; and sixthly, the Magistrate failed to apply properly the decision of the New South Wales Court of Appeal in Orbit Travel Services v Travel Compensation Fund ]1999] NSWCA 63.

The Local Court proceedings

9 The facts in the Local Court were as follows:

(a) Travel Pty Limited (Travel), of which Ms Dominello was a director from 26 June 2001, carried on business as a franchisor;

(b) In the course of its business Travel made available to franchisees certain goods and services which would enable those franchisees to operate as travel consultants. I shall refer to the agreement and the manual later in this judgment;

(c) Gino Ventura, now deceased, (“Mr Ventura”) carried on business through his company Natar which involved the arranging of travel and accommodation on behalf of its clients;

(e) Travel held a license to carry on business as a travel agent under the Act, but Natar and Mr Ventura did not;

(f) In 2001 the Panthers footballers wanted to send a under 18 rugby league team for competition games in United Kingdom, Ireland and France. The Panthers paid Natar a substantial amount of money so that Natar could pay for and book the necessary travel and accommodation;

(g) Natar never made the travel arrangements nor did it refund the money to the Panthers. Mr Ventura committed suicide;

(h) The Panthers made a claim for compensation on a statutory fund set up under the Act known as the Travel Compensation Fund. That claim was successful and in September 2003 a payment was made of $125,020 to compensate the Panthers for their loss.

10 Uniform State legislation has established a national scheme for the regulation of travel agents. The relevant New South Wales legislation is the Travel Agents Act. One aspect of the regulatory scheme involves a compensation fund designed to safeguard people who suffer loss by reason of an act or omission of a travel agent. One form of such loss involves paying in advance for travel services and, through default on the part of the agent, not receiving these services – see Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627.

11 In the Local Court, the Travel Compensation Fund sought to recoup from Ms Dominello a portion of that payment through the machinery set out within the Act.

12 The key issue to be determined by the Magistrate was the proper construction and interpretation of s 40 of the Act and in particular subsections 40(3) to (6).

13 Section 40 of the Act reads:

“40. Compensation scheme trustees to have certain rights by subrogation and otherwise

(1) in this section:
"unlisted person" means a person (other than an exempted person or the holder of a licence) who carries on business as a travel agent under a name or names that is not included in a list in force under subsection (2).
(2) …
(3) Where a payment is made to a claimant under the compensation scheme by reason of an act or omission by a person carrying on business as a travel agent, the compensation scheme trustees are subrogated to the rights of the claimant in relation to the act or omission.
(4) Where the rights conferred by subsection (3) on the compensation scheme trustees are exercisable against a body corporate, those rights are enforceable jointly against the body corporate and the persons who were its directors at the time of the act or omission and severally against the body corporate and each of those directors.

(5) Where it is proved that an act or omission by a body corporate occurred without the knowledge or consent of a director of the body corporate, rights are not enforceable as provided by subsection (4) against the director in relation to the act or omission.

(6) Where an act or omission referred to in subsection (3) was the act or omission of a person who, at the time of the act or omission, was an unlisted person, any other person who, in the course of carrying on a business, provided the unlisted person with goods or services in relation to which the act or omission occurred shall, for the purposes of subsections (3), (4) and (5) but in relation only to the act or omission in so far as it involved those goods or services, be deemed to have, at the time of the act or omission, carried on business as a travel agent in partnership with the unlisted person.
(7) A person who, in the course of carrying on a business, provides an unlisted person with goods or services for disposal in a manner that would constitute the carrying on by the unlisted person of business as a travel agent shall be deemed to have aided, abetted, counselled and procured the carrying on by the unlisted person of business as a travel agent.
(8) Subsection (6) does not have effect in relation to an act or omission that occurs in relation to goods or services, and subsection (7) does not have effect in relation to goods or services, that are provided at a time when there is no list in force under subsection (2).“

14 The Magistrate in her extempore reasons pages 1 to 22 dated 31 August 2007, summarised the submissions of both parties. At transcript 22 to 23, the Magistrate concluded:

“It was clear that both the plaintiff and the defendant when they initially argued the matter before the court were taking very different views of the interpretation of the legislation. But after some adjournments when the parties were required to respond and reply, both parties, as I have indicated, replied and responded to the various submissions that were made. It has clearly been a difficult matter for the court to interpret, but in looking at the submissions that have been made by both of the parties, I find that I am more persuaded by the arguments for the plaintiff as to the interpretation of the legislation. To my mind it is more persuasive in terms of looking at the conduct and the history of the franchise relationship between Natar and Travel, and in my view it deals with the legislature’s underlying intention in dealing with intermediary or principals who facilitate services by unlicensed agents.
So as to s 40 subs (3) I find that the Travel Compensation Fund trustees paid out the Panther’s claim and that as a consequence they became subrogated to the Panther’s right against Natar. As to subs (6) of s 40 I find those rights are also enforceable against Travel as a deemed partner of Natar, and as to s 40 subs (4) I find that because the defendant was a director of Travel the same rights are enforceable against her.
Although there was that other argument relating to the wider interpretation where the court was looking at certain respects and events leading to the actual omission, to my mind that cannot really be the correct interpretation because one has to look at the defalcation of the funds and the acts of Natar in respect of that. So with respect to that other argument I find that that is not as persuasive as initially was thought. So as I have said I accept and adopt the submissions made by the plaintiff in preference to those made by the defendant.”

Duty to give sufficient reasons

15 Both parties submitted that the Magistrate did not provide sufficient reasons for her decision.

16 The duty of a judicial officer to give reasons for his or her decision is uncontroversial (see Pettitt v Dunkley (1971) 1 NSWLR 376; Housing Commission (NSW) v Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378 at 385–6 per Mahoney JA; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247). The duty does not require the judicial officer to spell out in minute detail every step in the reasoning process or refer to every single piece of evidence. It is sufficient if the reasons adequately reveal the basis of the decision, expressing the specific findings that are critical to the determination of the proceedings (see Stoker v Adecco Gemvale Constructions Pty Ltd & Anor [2004] NSWCA 449 per Mason P, Sheller and Santow JJA; Gorczynski v Beilby [2005] NSWSC 884 Kirby J at [96-97]). To paraphrase, reasons should include firstly, the what, where and when of the matter; secondly, the evidence that goes to liability; thirdly, the findings on the evidence; and fourthly, an indication, where there is conflict, why some rather than other evidence is preferred.

17 In Jung v Son [1998] NSWCA 120 (18 December 1998), Stein JA concluded:

“…While a judge does not have to state reasons for every aspect of the case, his reasons must be sufficient to satisfy the requirements of Pettit v Dunkley [1971] 1 NSWLR 376. The reasons must be sufficient to enable an appellate tribunal to gain a proper understanding of the basis of the verdict. Not to do so is an error of law (Asprey JA at 382 and Moffitt JA at 388). Failure to give reasons also makes it impossible for an appellate tribunal to give effect to a plaintiff’s right of appeal. Issues critical to the case, as these were, must be dealt with by reasons (Samuels JA in Mifsud v Campbell (1991) 21 NSWLR 725 at 728).”

18 In short, the judicial officer should make it clear what he or she is deciding and why.

19 From the reasons given, it is my view that it is difficult to discern how s 60 and in particular ss 40(3) and (6) were interpreted and why they were interpreted by the Magistrate in the way they were. It is my view that ground of appeal is made out.

20 The parties have requested that this Court determine the matter rather than remit it to the Local Court for determination according to law.

Interpretation of s 40 of the Travel Agents Act

21 As a starting point, in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 the High Court stated that the primary objection of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined “by reference to the language of the instrument viewed as a whole” and the legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals (at 381-382). Reconciling conflicting provisions will often require the court “to determine which is the leading provision and which the subordinate provision, and which must give way to the other” (at 382). Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme. Furthermore, a court construing a statutory provision must strive to give meaning to every word of the provision.

22 Before I examine s 40 of the Act, it is necessary to refer to the explanatory note, the second reading speech and some other provisions of the Act.

The explanatory note

23 The explanatory note says that the object of the bill is to establish a system of licensing persons who carry on business as travel agents and otherwise to regulate the carrying on of the business of travel agent. The Bill also gives recognition to a trust proposed to be created by deed and having for its object the payment of compensation to persons who suffer loss or damage because of an act or omission by a travel agent. The trust is referred to in the proposed Act as “the compensation scheme”.

The second reading speech

24 The second reading speech relevantly highlights two points. They are firstly, that the proposed legislation has been introduced because of the need for the travel industry to take more regulatory action, and because of the need for consumer protection from fly by night operators in the travel industry, and bargain travel agents who, with bargain basement prices, have been able to attract potential customers but then have failed to meet their commitments. The second is that the Government is concerned, that people who have not met character and financial viability checks and yet set themselves up or continue as travel agents face meaningful penalties. Those intermediaries or principals who facilitate services by unlicensed agents will be liable to the same penalties. While the latter reference is to penalties, it can be seen that this legislation is intended to apply to principals who facilitate the services of unlicensed agents.

25 The explanation in relation to clause 40 (now s 40) was as follows:

“Clause 40 has effect where the compensation scheme trustees pay compensation to a client of a travel agent as a result of an act or omission of the travel agent and -
(a) confers on the trustees, to the exclusion of the client, any rights that the client had in relation to the act or omission;
(b) where those rights are exercisable against a body corporate – enable the trustees to proceed against directors of the body corporate; and
(c) where the travel agent was unlicensed – enable the trustees to proceed against persons who assisted the travel agent in certain respects in events leading to the act or omission.”

26 Importantly, s 40 was intended to enable trustees to proceed against persons who assisted the travel agent in certain respects in events leading to the act or omission.

27 It is common ground that neither Natar nor Mr Ventura had obtained a travel agent’s licence. In these current proceedings, it is common ground that Natar failed to account for the money.

Other provisions of the Act

28 Sections 4, 6 and 7 of the Act read:

“4 Business as travel agent

(1) For the purposes of this Act but subject to this section, a person carries on business as a travel agent if the person carries on a business (whether or not in the course of, or as incidental to, or in connection with, any other business) of:


(a) selling tickets entitling another person to travel, or otherwise arranging for another person a right of passage, on a conveyance other than a prescribed conveyance,

(b) selling to, or arranging or making available for, another person rights of passage to, and hotel or other accommodation at, one or more places:
…


(c) purchasing for resale the right of passage on a conveyance other than a prescribed conveyance, or

(d) carrying on an activity prescribed for the purposes of this paragraph,

or if the person holds out or advertises that the person is willing to carry on any activity referred to in paragraph (a), (b), (c) or (d).


(2) A person does not carry on business as a travel agent by reason only of doing in the course of his or her employment anything referred to in subsection (1).

(3) A person does not carry on business as a travel agent:


(a) in respect of any activity referred to in subsection (1) (a) if the person carries on that activity in respect of a conveyance of which the person is the proprietor,

(b) in respect of any activity referred to in subsection (1) (b) if the person carries on that activity in respect of a conveyance and place of accommodation of which the person is the proprietor, or
(c) by reason only of carrying on an activity prescribed for the purposes of this paragraph or such an activity in circumstances so prescribed.

(4) A person does not carry on business as a travel agent by reason only of holding out, or advertising, that the person is willing to carry on an activity as referred to in subsection (3).

…


6 Travel agents to be licensed

(1) A person shall not:


(a) carry on business as a travel agent otherwise than in accordance with the authority conferred on that person by a travel agent’s licence, or

(b) carry on business as a travel agent in partnership with a person who is not the holder of a travel agent’s licence.


Penalty: 500 penalty units.

…

7 Unauthorised use of licence

(1) The holder of a licence shall not transfer or lend, or attempt to transfer or lend, the licence to another person or allow another person to use the licence.

(2) A person shall not obtain the transfer of, or borrow or use, or attempt to obtain the transfer of, or attempt to borrow or use, a licence of which the person is not the holder.
Penalty: 50 penalty units.”

29 Ms Dominello refers to these provisions as being a relevant factor in her interpretation of s 40(3) to (6). I shall refer to these provisions later in this judgment.

30 Both parties referred Tambree and Orbit Travel.

31 In Tambree Gleeson CJ (at [4]-[6]) in describing how the Travel Compensation Fund is administered said:

“[4] The Travel Compensation Fund ("the Fund") is administered by a group of trustees, originally the responsible Ministers in a number of states, who were appointed pursuant to a deed of trust ("the deed") dated 12 December 1986. By virtue of s 52 of the Travel Agents Act the trustees may sue and be sued in the name of the Fund. The existence of the Fund is recognised by the Travel Agents Act and the regulations made under that Act. Travel agents may apply to become "participants" in the scheme established by the deed. A participant is, by definition, a travel agent licensed under a State Act who meets certain prescribed eligibility requirements. Participation is on an annual basis. A management committee determines whether applicants should be admitted as participants, and conducts annual financial reviews to determine whether participation should be renewed. The eligibility criteria are based on financial security, determined by reference to audited financial statements. Failure to meet the criteria could result in a requirement to obtain a bank guarantee, or to invest more capital in the business, or it could result in denial or loss of participation. The Travel Agents Act requires all travel agents to be licensed (s 6). It is a condition of all licences that the licensee be a participant in the compensation scheme (s 11(2)).

[5] Clause 15 of the deed provides:

15.1 Subject to this deed, the Trustees shall pay compensation out of the Fund to a beneficiary-

(a) who is a client; and

(b) who has suffered or may suffer pecuniary loss arising directly from a failure to account for money or other valuable consideration by a participant-

where —

(c) the failure to account arises from an act or omission by the participant or an employee or agent of the participant; and

(d) the client is not protected against the loss by a policy of insurance.

15.2 The Trustees may in their absolute discretion:

(a) pay compensation to a beneficiary under clause 15.1 in relation to any consequential pecuniary loss suffered by reason of a failure to account; and
(b) pay compensation, including compensation in relation to any consequential pecuniary loss suffered by reason of a failure to account, to a person to whom they are not required to pay compensation under clause 15.1.

[6] The word "beneficiary" is defined to include a person who entrusts money to a travel agent. The trustees hold the Fund on trust for the Crown in right of the States and for every person who entrusts money to a travel agent in connection with travel arrangements if the travel agent fails to account for the money. In such a context, failure to account includes, and typically involves, failure to apply money for the purpose for which it was entrusted to the agent.”

32 This explanation is relevant as references are made to clauses 15.1 and 15.2 in Orbit Travel.

33 Orbit Travel considered the operation of s 40(3) and (4) to a lesser extent s 40(6). In Orbit Travel there were three issues to be decided. They were firstly, whether Orbit was liable to account to the claimants under the general law; secondly, whether the Fund was entitled under the Act and the compensation scheme to recover from Orbit the amount paid by the Fund to the various persons who had dealt with Mrs Nemes; and thirdly, whether Mr and Mrs Abdul-Karim had any personal liability pursuant to s40(4) of the Act. In the current case before me, Ms Dominello did not rely on s 40(4). It is the second issue which is relevant here.

34 In Orbit Travel the facts were that Mrs Nemes was Orbit's agent to receive moneys from travellers. Her usual practice was to pay to Orbit the moneys which she had received. Orbit issued receipts in respect of payments totalling $1.47 million in the names of the persons who had paid the money. The trial judge concluded that it was clear that over a period of a year or more, Mrs Nemes was offering to provide travel arrangements at about half price. It was common ground that the trial judge could infer that the persons for whom the $1.47 million worth of travel arrangements were made paid only about half that amount for those arrangements. The other half of the amount paid for those arrangements came from a sum in excess of $800,000 paid by Orbit in the proceedings. The important point of all this is that the whole of the $1.47 million came from Orbit's bank account, Orbit having received it in various payments made by Mrs Nemes. Mrs Nemes was an unlisted person in accordance with s 40(1).

35 In Orbit Travel Sheppard AJA (with whom Sheller and Powell JJA agreed) in referring to s 40(3) stated:

“[150] Next needs to be considered the question of subrogation provided for in s40(3). It provides that, where a payment is made to a claimant under the compensation scheme by reason of an act or omission by a person carrying on business as a travel agent, the compensation scheme trustees are subrogated to the rights of the claimant in relation to the act or omission. I have earlier referred to the provisions of the deed and particularly to cl15.1 and cl15.2. Here payments have been made pursuant to those clauses. Some of the payments have been made under cl15.1 which is not discretionary and some under cl15.2 which is. I agree with submissions made on behalf of the respondents that it matters not whether the payments were made under cl15.1 or cl15.2. In either case the payments are made under the compensation scheme. This case is really concerned with two persons carrying on business as a travel agent. One is Mrs Nemes who is unlisted and the other is Orbit which is licensed. The act or omission referred to in s40(3) was, however, in the circumstances of this case, in relation to the operation of s40(3), the relevant act or omission is that of Orbit, not Mrs Nemes. It is its failure to account for the moneys paid by potential travellers to it through the agency of Mrs Nemes which is the failure in question. Accordingly, the trustees are subrogated to the rights of the various claimants who paid money but have not received any benefit from their payment or any accounting in respect of it. The trustees are thus subrogated to the rights of those claimants. The answer to this question does not depend on Mrs Nemes being an unlisted person within s40.

36 In Orbit Travel it was Orbit that failed to account through the agency of Mrs Nemes.

37 The factual situation giving rise to this appeal differs. Ms Dominello never received the moneys. The moneys never passed through her bank account. While Natar’s act or omission was that it failed to account for the moneys it cannot be said that Ms Dominello failed to account for the moneys as she never received them nor did they ever pass through her company’s account.

38 In Orbit Travel, because the act and omission was that of the licensed Travel Agent there was no need to resort to s 40(6) which I will refer to as the deemed partner provision. However, Sheppard AJA in Orbit Travel did comment upon s 40(6) and I shall refer to it shortly.

39 It is common ground that firstly, Travel Compensation Fund paid out the Panthers’ claim; secondly that as a consequence the trustees became subrogated to the Panthers rights against Natar; thirdly, by virtue of subsection 40(4), the same rights were enforceable against Ms Dominello as she was a director of travel; and fourthly that Natar Pty Ltd is an unlisted person.

40 The divergence of views between the parties centres upon whether Travel (and Ms Dominello as a director of Travel) was, relevantly an “other person who, in the course of carrying on a business, provided the unlisted person with goods or services in relation to which the act or omission occurred” [emphasis added] and thereby, under this provision, a ‘deemed partner’ of the defalcating Natar and thereby liable to Travel Compensation Fund.

41 Ms Dominello acknowledged the consumer protection objectives of the Act, but submitted that they do not mean that the section may be read to ‘punish’ someone giving a franchise to an unlisted travel agent, simpliciter, regardless of the actual wording of sub-section 40(6). According to Ms Dominello the policy of the Act regarding the discouragement of unlicensed agents in the interests of consumer protection is in fact provided for by the penalty sections of the Act, not by making a licensed franchisor automatically liable for loss and damage caused to third party, regardless of involvement in such loss and damage. According to Ms Dominello such a view ignores the fact that the legislature has bothered to set out the parameters within which s 40(6) is to apply. I disagree.

42 The first point to be made is that the definition of a person who carries on the business of a travel agent is very wide. If a person sells tickets, arranges a right of passage on a convenience for another person or sells arranges or makes available hotel or other accommodation (s 4) that person falls within the definition of “a person who carries on the business of a travel agent.”

43 The second point is that while the penalty provisions are aimed to discourage unlicensed persons from carrying on the business of a travel agent (s 6). The penalty provisions are also designed to discourage those licensed travel agents from allowing unlicensed travel agents to use their licence (s 7). The Act has another purpose. It is to provide travellers who have paid money but have not received any benefits with a means of recovering moneys from the Travel Compensation Fund. The trustees of the Fund can in turn seek to recover those moneys from the licensed travel agents.

44 The explanatory note so far as s 40 is concerned (reproduced earlier in this judgment) envisages that in a situation where the travel agent is licensed, the trustees can proceed against persons who assisted the unlicensed travel agent. The legislature clearly intended this section to have far reaching consequences.

45 Ms Dominello submitted that if subsection 40(6) applied to render a franchisee liable for all acts of an unlicensed defaulting agent or franchisee, it would have said so. Ms Dominello says that some mere ‘but for’ test cannot be appropriate, as then the language used is so wide that it has the potential to make even the provider of photocopy equipment or telephony to an unlisted person liable as an ‘other person’ if such products were used in the course of the default giving rise to compensation from the fund. However, it is unlikely the provider of a photocopier or telephone service holds a travel agents licence and to activate s 40, that person has to be the holder of a travel agents licence (s 40(3)).

46 Counsel for Ms Dominello suggested that a sensible way of reading the subsection is that the acts of the ‘other person’ in subsection 40(6) be appropriately related to the act or omission by the defaulting party and that none of the actions of Travel can be said to amount to “providing goods and services” which relate to the Panthers claim for compensation.

47 As to the “goods and services” provided by Travel, these were summarised by Travel Compensation Fund for the Magistrate as follows:

(a) the provision of the Independent Procedure Manual dated 1 February 2002: (Bundle 809-863). A review of this document reveals that if effectively contained an A to Z guide in relation to the franchise arrangement, namely -

· A step by step guide to the setting up by Natar of its business in the travel industry (Section 12 – Bundle 812-814);

· Marketing advice including advice as to how Natar could ‘jump start’ its business (Section 13 – Bundle 826-828);

· The provision of advertising advice (Section 14 – Bundle 829);

(b) a requirement [para 14.1 – Bundle 829] that Natar hold itself out and clothe itself as a travel agent by the use of the words:

“This travel consultancy is an independent franchise consultancy owned and operated under licence from Travel Pty Limited by Travelling Made Easy.”


(b) the provision of Galileo Computer Reservation System program and training (Bundle 832-833);

(d) conduct consistent with Travel’s advertising brochure (Bundle 803) promising the following:

· “By purchasing a TRAVEL franchise you can build your own travel business at home, from your office or you may wish to open your own shop front;

· The business is a very simple one. You, as the consultant will make the necessary bookings for your client with the system that will be fully installed on your computer;

· When starting your consultancy you will be fully trained on all procedures, you will be able to make bookings from your own computer;

· “YOU WILL NEVER BE LEFT ON YOUR OWN”;

· We will support you all the way.”

48 Counsel for Ms Dominello submitted that not only were Natar’s actions in receiving the moneys not the actions of Travel Pty Ltd or Ms Dominello, nor actions to which Travel Pty Ltd had provided Natar with goods and/or services, they were in fact actions so outside what was permitted pursuant to the franchise arrangement and thereby so removed from the franchisor that they were sufficient to entitle Travel to terminate the franchise relationship.

49 The manual, so far as collecting money was concerned, warned:

“ NB: Consultants are NOT to collect any money, cheque etc from clients.
…
Have your clients make all cheques out to the ticketing office. Do not accept cheques written out to you or your company name. This will be in breach of your Agreement and the Travel Agents Act. We will not hesitate in terminating your contract.”

50 And paragraph [10] of the manual (B 22), reads “it is absolutely not permitted to accept a payment of any kind from the client.”

51 Nevertheless, on a “Travelling Made Easy” letterhead on 26 March 2001, Mr Ventura wrote to Ms Dominello advising:

“Re: NSW Football tour October 2001
We have today booked 60 people on a one-way fare from Toulouse to Paris on the 17 October 2001.
The net fare quoted was $160 per person. The total cost to Air France is $9,600.00 which a 10% deposit is required to hold the booking.
I have enclosed a copy of the letter sent to Air France for your records.”

52 The footer of the letter reads:

“Helping Your Travel Dreams Come True”
________________________________________________
This travel consultancy is an independent franchised consultancy owned and operated unde licence from Travel Pty Ltd by Travelling Made Easy”

53 Mr Ventura’s letter to Air France, also dated 26 March 2001, enclosed a cheque for $960.

54 In reply, Ms Dominello merely referred to the cheque Mr Ventura sent to Air France and advised him that the cheque had to be a cheque from Travel Pty Ltd and all payments by suppliers must come through head office.

55 On 30 July 2001, Mr Ventura forwarded to Ms Dominello an excel spreadsheet with the names and addresses of the Panthers participants and some details of their flights. There were five cheques addressed to Natar Pty Ltd drawn by Panthers Juniors Development Fund in evidence. They are dated 8 March in the sum of $29,788; 22 May 2001 in the sum of $15,000; 6 July 2001 in the sum of $18,500; 1 August 2001 in the sum of $29,000; and 30 August 2001 in the sum of $32,732. These cheques did not go through the bank account of Travel Pty Ltd.

56 Ms Dominello submitted that by merely giving to Natar (as franchisee) a franchisee’s procedure manual, a step by step guide or access to a ticket reservation system even if accepted as having occurred, were not goods and services provided in relation to the act or omission within the terms of section 40(3); that is, they were not shown to have been involved in Natar’s defaulting of the Panthers.

57 The Travel Compensation Fund submitted that whether Travel in the course of carrying on business provided Natar with the goods and services in relation to which the act or omission occurred is answered by the evidence and the proper construction of the words “goods or services” and “in relation to which the act or omission occurred’.

58 Whether Ms Dominello is deemed to be in partnership with Natar turns on whether she provided Natar “with goods or services in relation to which the act or omission occurred”. The omission is the failure to account for the moneys.

59 So far as the words “in relation to” Travel Compensation Fund referred to Fountain v Alexander (1982) 150 CLR 615, Inland Revenue Commissioners v Maple & Co (Paris) Ltd (1908) AC 22 and Stateside Credit Corporation Pty Ltd v Hudson (1989) VR 519. The latter two cases refer to the meaning of “relating to”. In Fountain v Alexander, Mason J (at 629) said:

“…’in relation to’ being an expression of wide and general import, it should not be read down in the absence of some compelling reason for so doing.”

60 Travel Compensation Fund submitted that having regard to the judicially recognised wide and general import of the words “in relation to” it was put to the Magistrate there can be no serious doubt that the services were provided by Travel to Natar and that they were services “in relation” Natar’s wrongful conduct.

61 The words “goods or services” are not defined in the Act. Those words should be given their natural meaning. “Goods” can be defined as any form of tangible property – see s 1951 A New Tax System (Goods and Services Tax) Act 1999. Goods are tangible, transportable supplies. The Macquarie Dictionary 4th ed (2005) defines “Services” as “noun: an act of helpful activity; and the supplying or supplier of any articles, commodities, activities, etc., required or demanded.” Services are intangible supplies or effort. While the definitions of “goods” or “services” are wide, they must be in relation to the act or omission that occurred. Here the goods or services are in relation to the failure to account for moneys.

62 In Orbit Travel so far as s 40(6) is concerned Sheppard AJA explained:

[151] Then there is s 40(6). The operation of s 40(6) in the circumstances of this case may not add much to the conclusions at which I have already arrived. That was his Honour's view. Subject however, to one matter of difficulty, it is capable of operating independently of the matters I have so far relied upon to create a liability in Orbit. I have said that the act or omission referred to in s 40(3) was relevantly the act or omission of Orbit. But it is also the act or omission of Mrs Nemes who was an "unlisted person" within the meaning of s 40. The section goes on to say that, in those circumstances, any other person who, in the course of carrying on a business, provided the unlisted person with goods or services in relation to which the act or omission occurred, shall, for the purposes, inter alia, of s 40(3), but in relation only to the act or omission insofar as it involved those goods or services, be deemed to have, at the time of the act or omission, carried on business as a travel agent in partnership with the unlisted person. It may be difficult to take the view that Orbit provided Mrs Nemes with goods or services in relation to which the act or omission occurred. It certainly provided her with goods or services in the sense of supplying her with tickets in blank. But she did not use these for the benefit of those whose money was applied to the travel of others. If the section applied, Orbit and Mrs Nemes would be deemed to be in partnership and Orbit would be liable for Mrs Nemes' default as her deemed partner. But I have reservations about whether the section has any application at all to the circumstances of this case. His Honour did not decide the question and I do not find it necessary to reach a conclusion on it either.”

63 In Orbit Travel, the act by Orbit was that it provided Mrs Nemes with blank tickets “but she did not use these for the benefit of those whose money was applied to the travel of others.” That is why Sheppard AJA had reservations as to whether s 40(6) applied.

64 Travel provided the means for Natar to conduct the business of a travel agent without the necessity for Natar to hold a travel agents licence. In fact Travel advertised itself as providing a means to build up a travel business (B 624). The only limitation on conducting the business seems to be that Natar was not permitted to accept cheques written out to it.

65 Travel provided Natar Pty Ltd with access to the Galileo Computer Reservation system which it utilised to book the Panthers plane tickets and accommodation. Natar was able to prepare a very detailed final itinerary and running sheet that contained details of the departure times of specific flights, check in times and events arranged for each day of the of the trip (B661-669). Natar also provided a budget (B 670). It was the access and use of the Galileo system that enabled Natar to arrange the Under18 Panthers’ tour. Without the supply of these services Natar would not have received funds from the Panthers. The omission namely the failure to account for the funds could not have occurred. It is not to the point that the contractual agreement between Travel and Natar stipulated that Natar should not receive payment.

66 It is my view that Travel in the course of carrying on business provided to Natar the services to which the omission occurred. Ms Dominello is a director of Travel Pty Ltd and by operation of s 40(4) the trustees’ rights are enforceable against her. By the operation of s 40(6), Ms Dominello is deemed at the time the omission occurred to have carried on business as a travel agent in partnership with Natar Pty Ltd. Thus, Ms Dominello is liable to pay the Travel Compensation Fund the sum of $60,000 within 28 days.

67 The appeal is allowed. However, the result is the same. The judgment entered by her Honour Magistrate Haskett on 31 August 2007 is affirmed. Costs are reserved.

The Court orders

(1) The appeal is allowed.

(2) The judgment of her Honour Magistrate Haskett dated 31 August 2007 is affirmed except the date that the payment is due is varied to be 28 days from today in lieu of 28 September 2007.

(3) Costs are reserved.
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