Technology Leasing Limited v Colan Bros Pty Ltd
[2013] NSWSC 751
•12 June 2013
Supreme Court
New South Wales
Medium Neutral Citation: Technology Leasing Limited v Colan Bros Pty Ltd [2013] NSWSC 751 Hearing dates: 12 June 2013 Decision date: 12 June 2013 Before: McCallum J Decision: Appeal dismissed
Catchwords: CONSUMER PROTECTION - leasing agreement - whether lessee a consumer within the meaning of the Trade Practices Act Legislation Cited: Local Court Act 2007
Trade Practices Act 1974 (Cth)Category: Principal judgment Parties: Technology Leasing Limited (CAN 071 702 264) (plaintiff)
Colan Bros Pty Ltd (ACN 002 642 168) (first defendant)
Jorja Investments Pty Ltd (ACN 120 846 022) (second defendant)Representation: Counsel:
S Goodman (plaintiff)
A Crossland (defendants)
Solicitors:
HAL Group (plaintiff)
Attwood Marshall (defendants)
File Number(s): 2013/94838 Publication restriction: None
Judgment
HER HONOUR: This is an appeal under s 39 of the Local Court Act 2007 against a decision of the Local Court. The appeal is on a question of law and accordingly lies as of right.
The plaintiff in the appeal, Technology Leasing Limited, was the plaintiff in the proceedings below. It brought five separate proceedings in the Local Court to recover payments outstanding under rental agreements for telephone equipment and to enforce guarantees under those agreements. The five proceedings raised similar issues and so were heard together. The appeal concerns only two of the defendants, Colan Bros Pty Ltd and Jorja Investments Pty Ltd.
The only ground of appeal pressed at the hearing was that the learned magistrate erred in law in holding that each of those companies was a consumer within the meaning of sections 4B and 73 of the Trade PracticesAct 1974 (Cth).
Circumstances in which the issue arose
The magistrate's findings may be summarised as follows. Technology Leasing provides rental leases of IT and general office equipment (at [3] of the judgment). It had an agency agreement with another company, Technology Fund Management Ltd. The effect of the arrangements between those entities was in contest in the proceedings below but is not relevant for present purposes.
The Magistrate held that Technology Leasing had an arrangement with a company referred to in the judgment as Network Techs, which was involved in the sale, installation and maintenance of telephone systems. At the time of the hearing, Network Techs was deregistered.
Each of the defendants in the proceedings below was a small business (a courier business, a pest management service, an automotive service and repair business, two suburban Italian restaurants and a canvas manufacturer).
In summary, the arrangement between Technology Leasing and Network Techs was that Network Techs would approach the small business operators, offering them a better telephone deal. In the case of Colan Bros the principal of that company, Mr Colantonio, was offered a brand new telephone system with a capped monthly phone bill of $753.39 (at [32]). In the case of Jorja Investments, the directors of that company were offered a five-year contract with payment of $772.03 per month, the provision of free telephone equipment and payment out of their existing telephone rental contract (at [37]).
In each case, Network Techs sold the relevant telephone equipment to Technology Fund Management Ltd (as agent for Technology Leasing), which then leased the equipment to the small business. In the case of Jorja Investments, Network Techs sent an invoice to Technology Fund Management Ltd in the sum $23,045 (at [38]). The judgment does not record the amount of the invoice for Colan Bros.
The customers then entered into a five-year lease agreement with Technology Fund Management Ltd. In the case of Colan Bros, the lease agreement was entered into in January 2009. On 10 August 2009, Network Techs advised that it would no longer supply telephone services and Mr Colantonio arranged to stop making payments under the lease agreement (at [34]). In the case of Jorja Investments, the lease agreement was entered into in December 2008. In August 2009, one of the directors of Jorja Investments received a call informing him that another company had taken over the telephone services. He contacted Network Techs who confirmed that they had ceased trading. Technology Leasing sent Jorja Investments a termination notice and an "exercise of guarantee" shortly afterwards.
The magistrate found (at [123]) that the telephone system acquired by the defendants could have been purchased for $6,650 in the case of Colan Bros and $5,800 in the case of Jorja Investments. The total rental payable under the rental agreement was $45,293.40 in the case of Colan Bros and $46,321.80 in the case of Jorja Investments.
The magistrate held that there was, in each case, a binding contract between Technology Fund Management Ltd as undisclosed agent for Technology Leasing on the one hand and the relevant corporate defendant (in each case) on the other hand (at [64]). Her Honour further found that, when each of the defendants stopped making payments under the relevant rental agreement, a default event occurred and each defendant was taken to have repudiated the contract, entitling Technology Leasing to take action to recover the outstanding rental payments (at [70]).
However, the magistrate was satisfied that Technology Leasing was liable in accordance with cross-claims brought by the defendants to pay damages to each defendant under s 73 of the Trade Practices Act. That liability extinguished each defendant's liability to Technology Leasing. Specifically, her Honour held that there had been misleading and deceptive conduct on the part of Network Techs; that each defendant was a consumer within the meaning of s 4B of the Act; that Technology Leasing was a linked credit provider within the meaning of s 73 of the Act; that each defendant suffered loss or damage as a result of misrepresentation in relation to the rental agreement and that Technology Leasing was accordingly liable in damages to each defendant. In accordance with s 73(4) of the Act, her Honour assessed the damages to which each defendant was liable as the amount equivalent to the amount claimed by Technology Leasing (at [149]).
As already noted, the only challenge to those findings is the contention that her Honour erred in finding that Colan Bros and Jorja Investments were consumers within the meaning of s 4B and s 73 of the Act.
It is appropriate to set s 4B out in full. The section provides:
Consumers
(1) For the purposes of this Act, unless the contrary intention appears:
(a) a person shall be taken to have acquired particular goods as a consumer if, and only if:
(i) the price of the goods did not exceed the prescribed amount; or
(ii) where that price exceeded the prescribed amount-the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption or the goods consisted of a commercial road vehicle; and the person did not acquire the goods, or hold himself or herself out as acquiring the goods, for the purpose of re supply or for the purpose of using them up or transforming them, in trade or commerce, in the course of a process of production or manufacture or of repairing or treating other goods or fixtures on land; and
(b) a person shall be taken to have acquired particular services as a consumer if, and only if:
(i) the price of the services did not exceed the prescribed amount; or
(ii) where that price exceeded the prescribed amount-the services were of a kind ordinarily acquired for personal, domestic or household use or consumption.
(2) For the purposes of subsection (1):
(a) the prescribed amount is $40,000 or, if a greater amount is prescribed for the purposes of this paragraph, that greater amount;
(b) subject to paragraph (c), the price of goods or services purchased by a person shall be taken to have been the amount paid or payable by the person for the goods or services;
(c) where a person purchased goods or services together with other property or services, or with both other property and services, and a specified price was not allocated to the goods or services in the contract under which they were purchased, the price of the goods or services shall be taken to have been:
(i) the price at which, at the time of the acquisition, the person could have purchased from the supplier the goods or services without the other property or services;
(ii) if, at the time of the acquisition, the goods or services were not available for purchase from the supplier except together with the other property or services but, at that time, goods or services of the kind acquired were available for purchase from another supplier without other property or services-the lowest price at which the person could, at that time, reasonably have purchased goods or services of that kind from another supplier; or
(iii) if, at the time of the acquisition, goods or services of the kind acquired were not available for purchase from any supplier except together with other property or services-the value of the goods or services at that time;
(d) where a person acquired goods or services otherwise than by way of purchase, the price of the goods or services shall be taken to have been:
(i) the price at which, at the time of the acquisition, the person could have purchased the goods or services from the supplier;
(ii) if, at the time of the acquisition, the goods or services were not available for purchase from the supplier or were so available only together with other property or services but, at that time, goods or services of the kind acquired were available for purchase from another supplier-the lowest price at which the person could, at that time, reasonably have purchased goods or services of that kind from another supplier; or
(iii) if goods or services of the kind acquired were not available, at the time of the acquisition, for purchase from any supplier or were not so available except together with other property or services-the value of the goods or services at that time; and
(e) without limiting by implication the meaning of the expression services in subsection 4(1), the obtaining of credit by a person in connection with the acquisition of goods or services by him or her shall be deemed to be the acquisition by him or her of a service and any amount by which the amount paid or payable by him or her for the goods or services is increased by reason of his or her so obtaining credit shall be deemed to be paid or payable by him or her for that service.
(3) Where it is alleged in any proceeding under this Act or in any other proceeding in respect of a matter arising under this Act that a person was a consumer in relation to particular goods or services, it shall be presumed, unless the contrary is established, that the person was a consumer in relation to those goods or services.
(4) In this section, commercial road vehicle means a vehicle or trailer acquired for use principally in the transport of goods on public roads.
The critical issue for the magistrate's determination was whether the defendants were to be taken to have acquired particular goods or particular services "as a consumer" as required under s 4B(1). That requirement was satisfied if and only if the price of the goods did not exceed the prescribed amount ($40,000) or the price of the services did not exceed that amount.
Section 4B(2) sets out the ways in which the price of goods or services is to be determined, according to the circumstances. The magistrate evidently approached that issue in accordance with s 4B(2)(d)(ii) and on the basis that the goods (the telephone systems) were acquired "otherwise than by way of purchase". Her Honour said (at [123]):
The evidence supports a finding that the price of the goods did not exceed the prescribed amount. Mark Preditis (the director of a company that specialises in buying and selling telephone systems) gave evidence (see his affidavits dated 28 April 2011) that the goods could have been purchased at the relevant time, and the price for which the goods could have been purchased, namely:
$2,488 (Eyre proceedings)
$3,080 (21st Century proceedings)
$6,650 (Colan Bros proceedings)
$5,800 (Jorja proceedings)
$2,100 (Shade and Shelter proceedings)
The plaintiff submitted that her Honour should rather have determined the matter in accordance with s 4B(2)(e) and on the basis that what was acquired was services (the provision of credit). Mr Goodman, who appeared for the plaintiff, submitted that the analysis of that issue should begin with a consideration of the terms of s 73 of the Act, since that was the context in which the issue of whether the defendants were consumers arose. It was common ground at the hearing before me that, with reference to that section, Network Techs was the supplier of goods (the telephone system) and that the plaintiff was a linked credit provider of the supplier. Further, it was common ground that each defendant had entered into a contract with Technology Leasing as the linked credit provider for the provision of credit in respect of the supply of the goods by way of lease to each defendant.
Mr Goodman submitted that, since the magistrate was concerned with the provision of credit by a credit provider, her Honour ought to have approached the matter by determining the amount "paid or payable" by each defendant for the relevant service (the provision of credit) in accordance with s 4B(2)(e). He further submitted that, applying that analysis, there was no "amount payable" by either defendant for the telephone system; the amount by which the amount paid or payable by each defendant for the telephone system was increased by reason of obtaining credit was the sum of the rental instalments and that in each case that amount exceeded $40,000. Mr Goodman submitted accordingly neither defendant was a consumer within the meaning of the Act.
The difficulty with that submission is that it assumes a false dichotomy. It was implicit in the submission that if the amount deemed to be paid or payable for the acquisition of the service of providing credit exceeded $40,000 the defendants could not be consumers within the meaning of the Act.
In my view, nothing in either s 73 or s 4B dictates that analysis. In particular, I note that s 73 is primarily or at least equally concerned with the goods supplied. I see no reason why the issue whether a person is a consumer within the meaning of that section should not be determined by reference to the "price" of those goods.
In the present case, leaving aside the application of s 4B(2)(e), it was plainly open to the magistrate to determine in accordance with s 4B(2)(d) that each defendant acquired goods (the relevant telephone system) otherwise than by way of purchase and that the price of those goods in each case was in accordance with the findings at [123] of the judgment (set out above). To approach the issue in that way accords with the object of the Act (stated in s 2), which is "to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection".
As already noted, I find no support for the contrary approach in the terms of the section. Further, that approach would lead to an absurd result in the present case. Each defendant entered a lease agreement under which it was required to make rental payments exceeding $40,000 to lease goods which could have been acquired for around $6,000. The magistrate found that the supplier of the goods engaged in misleading and deceptive conduct and that finding is not challenged. To deny the defendants the protection of s 73 on the basis that, whilst the price of the goods fell below the prescribed amount, the handsome rental payments did not would be a triumph of form over substance.
For those reasons, I am not persuaded that her Honour erred in finding, on an application of s 4B(2)(d) of the Act, that each defendant was a consumer within the meaning of the Act. The appeal should be dismissed with costs.
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Decision last updated: 13 June 2013
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