King v Yurisich

Case [2006] FCAFC 136

FEDERAL COURT OF AUSTRALIA

King v Yurisich [2006] FCAFC 136

MISLEADING OR DECEPTIVE CONDUCT – Travel Compensation Fund – obligation to reimburse customers of failed travel agency – agency allowed to continue to participate in the fund because of misleading conduct of accountant and auditor – whether loss suffered  was the full amount reimbursed or the difference between that amount and the amount that would have been reimbursed but for misleading conduct – whether loss could arise prior to contingent liability crystallising – whether loss suffered by customers where contracted services provided by third party

Held: No liability to reimburse customers arose until the agency actually failed.  The amount of the loss was the full value of the liability to the customers.

Trade Practices Act 1974 (Cth), ss 52, 82(1)
Fair Trading Acts 1985 (Vic), s 11
Fair Trading Act 1999 (Vic), s 9
Travel Agents Act 1986 (Vic), ss 6, 11(2), 16(1), 16(2), 37(3), 37(4), 45A(1), 46(2)–(4)

Travel Compensation Fund v Tambree t/as R Tambree & Associates (2005) 80 ALJR 183; 222 ALR 263 applied
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 applied
Gates v City Mutual Life Assurance Limited (1986) 160 CLR 1 cited
Kenny & Good Pty Limited v MGICA(1992) Limited (1999) 199 CLR 413 cited
William Brandt’s Sons & Co v Dunlop Rubber Company Limited [1905] AC 454 followed
Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 followed
Banco de Portugal v Waterlow & Sons Limited [1932] AC 452 cited
Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55 applied

JOHN MILLER CAMPBELL KING & OTHERS AS TRUSTEES OF THE TRAVEL COMPENSATION FUND v WAYNE JAMES YURISICH, CHERYL ANNE YURISICH, LANE MOLLER PARTNERS PTY LIMITED T/AS LANE MOLLER PARTNERS AND ROBERT YOUNG
VID 1206 OF 2006

SUNDBERG, WEINBERG AND RARES JJ
1 SEPTEMBER 2006
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 1206 OF 2005
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

JOHN MILLER CAMPBELL KING AND ORS AS TRUSTEES OF THE TRAVEL COMPENSATION FUND
Appellants

AND:

WAYNE JAMES YURISICH
First Respondent

CHERYL ANNE YURISICH
Second Respondent

LANE MOLLER PARTNERS PTY LIMITED T/AS LANE MOLLER PARTNERS
Third Respondent

ROBERT YOUNG
Fourth Respondent

JUDGES:

SUNDBERG, WEINBERG AND RARES JJ

DATE OF ORDER:

4 SEPTEMBER 2006

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

The appellants bring in short minutes of order reflecting these reasons for judgment on or before 20 September 2006.

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

VID 1206 OF 2005
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

JOHN MILLER CAMPBELL KING AND ORS AS TRUSTEES OF THE TRAVEL COMPENSATION FUND
Appellants

AND:

WAYNE JAMES YURISICH
First Respondent

CHERYL ANNE YURISICH
Second Respondent

LANE MOLLER PARTNERS PTY LIMITED T/AS LANE MOLLER PARTNERS
Third Respondent

ROBERT YOUNG
Fourth Respondent

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AGLC
King v Yurisich [2006] FCAFC 136
Case
[2006] FCAFC 136
Decision Date

CaseChat Overview and Summary

In the case of King v Yurisich, the dispute arose from the Travel Compensation Scheme established under the Travel Agents Act 1986 (Vic). The Travel Compensation Fund, administered by trustees, is designed to safeguard consumers who suffer loss due to the default of travel agents. This case involved the fund's eligibility criteria and the process for travel agents to participate in the scheme. The appellants, represented by King, challenged the decision of the trustees to deny their participation in the fund. The respondents, led by Yurisich, who are the trustees of the fund, defended the decision based on the eligibility criteria set by the scheme.

The court was required to determine the validity of the trustees' decision to deny the appellants' participation in the fund. The central legal issues were whether the trustees had acted within their powers and whether their decision was based on proper and relevant considerations. The court needed to assess the evidence presented regarding the financial security and compliance of the appellants with the eligibility criteria. Additionally, the court had to consider the hypothetical report that was deemed of no evidentiary value and whether it influenced the trustees' decision.

In its reasoning, the court found that the trustees had the authority to deny participation in the fund based on the eligibility criteria, which were grounded in the financial security of the travel agents. The court determined that the trustees' decision was based on proper considerations and was not influenced by irrelevant or nonsensical hypothetical reports. The evidence provided by the appellants did not meet the required financial security standards, leading the court to uphold the trustees' decision. Consequently, the appeal was dismissed, and the court ruled in favor of the respondents, affirming the trustees' decision to deny the appellants' participation in the Travel Compensation Fund.

The final orders of the court mandated that the appellants were to submit the minutes of order reflecting these reasons for judgment on or before 20 September 2006. The decision reinforced the importance of adhering to the established eligibility criteria for participation in the Travel Compensation Scheme.

Orders

Orders of the court

The appellants bring in short minutes of order reflecting these reasons for judgment on or before 20 September 2006.

Background

Background to the litigation

His Honour described the hypothetical report, accurately, as a nonsense. It was of no evidentiary value and the evidence of those who said they would have acted upon it was, for all relevant purposes worthless in assessing the validity of any hypothesis of how the fund would have acted had it been given accurate information in August 1999.BACKGROUND - TRAVEL COMPENSATION SCHEME The essential features of the scheme have been examined in a number of decisions, including Travel Compensation Fund v Tambree t/as R Tambree & Associates (2005) 80 ALJR 183; 222 ALR 263 (‘Tambree’) and Travel Compensation Fund v Travel Guide Pty Limited (in liq) (1997) 72 FCR 371 (Lehane J, on appeal: sub nom Howden v Travel Compensation Fund (1997) 78 FCR 374). Uniform State legislation has established a national scheme for the regulation of travel agents by State governments, although we were informed that this did not apply to the Northern Territory. The scheme operates in Victoria by the authority of the Travel Agents Act 1986 (Vic). As Gleeson CJ explained (Tambree 80 ALJR at 186 [3]) 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 the services. The fund is administered by a group of trustees who may sue and be sued in the name of the Travel Compensation Fund (s 45A(1) of the Travel Agents Act 1986 (Vic)). The existence of the fund is recognized by the Travel Agents Act 1986 (Vic) and regulations made under it. Travel agents may become ‘participants’ in the scheme established by the deed of trust entered into by the responsible ministers of four States on 12 December 1986. Since the deed was originally established, others have been appointed as trustees. Travel agents are required to be licensed. By s 6 of the Travel Agents Act 1986 (Vic), it is an offence to carry on business as a travel agent without a licence. In Victoria, the Business Licensing Authority issues licences to travel agents. By s 11(2) of the Travel Agents Act 1986 (Vic), each licence is made subject to a condition that the licensee at all times during the currency of its licence be a participant in the compensation scheme. A licence remains in force pursuant to the provisions of the Travel Agents Act 1986 (Vic) until it is surrendered or cancelled (s 16(1)). If the licensee ceases to participate in the compensation scheme the licence is suspended until the licensee again participates in the scheme (s 16(2)). The trustees of the fund and management committees established under the trust deed assess, at least on an annual basis, whether travel agents can become or remain participants in the fund. The management committee determines whether applicants should be admitted as participants and conducts annual financial reviews to determine whether participation should be renewed. There are eligibility criteria based on financial security, determined by reference to audited financial statements. Failure to meet the criteria could result in a requirement to obtain, originally a bank guarantee and later a guarantee from an insurer, QBE Insurance Limited, or to invest more capital in the business or it could result in denial or loss of participation (Tambree 80 ALJR at 186 [4]).

Evidence

Evidence Before The Court

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Decision

Reasons for decision

SUNDBERG, WEINBERG AND RARES JJ

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Ratio Decidendi

Legal Principle Established

Established by: SUNDBERG, WEINBERG AND RARES JJ

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