Telecommunications Industry Ombudsman v Best Internet and Telecom Pty Ltd
[2014] VCC 619
•19 May 2014
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-13-02798
| TELECOMMUNICATIONS INDUSTRY OMBUDSMAN LTD | Plaintiff |
| v | |
| BEST INTERNET & TELECOM PTY LTD | First Defendant |
| and | |
| BEST TELECOM PTY LTD 144 987 422 | Second Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 5-6, 15 May 2014 | |
DATE OF JUDGMENT: | 19 May 2014 | |
CASE MAY BE CITED AS: | Telecommunications Industry Ombudsman v Best Internet & Telecom Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 619 | |
REASONS FOR JUDGMENT
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Subject: CONTRACT.
Catchwords: CONTRACT – agency relationship – identification of principal.
Legislation Cited: Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth).
Cases Cited:Commissioner of State Revenue v Viewbank Properties Pty Ltd (2004) 55 ATR 501; Sin Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199.
Judgment: Judgment for the plaintiff against the defendants, and dismissal of the defendants’ counterclaim.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Fary | Collins & Stephens Lawyers |
| For the Defendants | No appearance |
HIS HONOUR:
Issue
1 This case concerns the recovery of fees which the plaintiff (“TIO”) claims from the first defendant (“BIT”) and the second defendant (“BT”) for the period from 15 July 2008 to 4 July 2012 in respect of services rendered by the TIO for or on behalf of BIT and/or BT.
Background
2 In 1993, the TIO was established as a company limited by guarantee. It is a dispute resolution service for small business and residential customers who have a complaint about their telephone or internet service within Australia. Under legislation relating to the TIO, each carrier and each eligible carriage service (as those terms are defined in the Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth) (“the Act”)) must enter into a scheme providing for such a dispute resolution service (“the Scheme”). The TIO, in accordance with the contract between it and its members and, consistently with the provisions of its Memorandum of Association, charges members for the services which it provides.
3 In this case, the TIO seeks an order for payment of outstanding amounts owed by BIT and BT in respect of charges for the relevant:
(a)Volume Related Costs applicable to each defendant;
(b)Operating Costs applicable to each defendant; and
(c)Capital Expenditure Costs applicable to each defendant.
4 The TIO seeks to recover charges in respect of three periods, the first two of which overlap:
(a)15 July 2008 to 8 November 2011 – $19,502.75
(b)1 July 2010 to 11 November 2011 – $47,081.47
(c)7 December 2011 to 4 July 2012 – $36,136.17
5 The claims for each period are based upon invoices which the TIO produced in respect of the services it provided.
Legislation
6 Parts of the Act are relevant to this case as follows:
“126 Simplified outline
The following is a simplified outline of this Part:
•Certain carriers and carriage service providers must enter into the Telecommunications Industry Ombudsman scheme.
•The membership of the scheme must be open to all carriers and carriage service providers.
•Carriers and carriage service providers must comply with the scheme.
127 Eligible carriage service providers
For the purposes of this Part, an eligible carriage service provider is:
(a) a carriage service provider who supplies:
(i) a standard telephone service, where any of the customers are residential customers or small business customers; or
(ii) a public mobile telecommunications service; or
(iii)a carriage service that enables end-users to access the internet; or
(b) a carriage service intermediary who arranges for the supply of a service referred to in subparagraph (a)(i), (ii) or (iii).
128 Telecommunications Industry Ombudsman scheme
(1) Each carrier and each eligible carriage service provider must, in association with other carriers and other eligible carriage service providers, enter into a scheme providing for a Telecommunications Industry Ombudsman.
Note: Section 129 provides for exemptions from subsection (1) of this section.
(2) The scheme is to be known as the Telecommunications Industry Ombudsman scheme.
(3) To avoid doubt, there is only one Telecommunications Industry Ombudsman scheme, namely, the scheme operated by Telecommunications Industry Ombudsman Limited (ABN 46 057 634 787).
(4) The scheme must provide for the Telecommunications Industry Ombudsman to:
(a) investigate; and
(b) make determinations relating to; and
(c) give directions relating to;
complaints about carriage services by end-users of those services.
(4A) An end-user of a carriage service is not liable to pay any fee or charge (however described) to the provider of the carriage service in respect of a complaint made by the end-user about the carriage service.
(5) The following is an example of such a complaint: a complaint about billing, or the manner of charging, for the supply of carriage services.
(6)The scheme must not provide for the Telecommunications Industry Ombudsman to investigate complaints about:
(a) the levels at which tariffs charged for the supply of carriage services are set; or
(b) the content of a content service.
(7) The membership of the scheme must be open to all:
(a) carriers; and
(b) carriage service providers.
…
132 Members of scheme must comply with scheme
A carrier or carriage service provider who is a member of the Telecommunications Industry Ombudsman scheme must comply with the scheme.
Pleadings
7 BIT admits that it was incorporated on 25 September 2007 and applied on 5 October 2007 to become a member of the Scheme. BT admits that it was incorporated and applied on 11 November 2011 to become a member of the Scheme.
8 The defendants contend that the terms of the agreements between the TIO and BIT and BT respectively, as alleged in the Statement of Claim, applied only from the dates on which each of the defendants was accepted as a member of the Scheme. BT in particular denied that it could have any liability for services or charges to the TIO incurred before it actually joined the Scheme and became a member.
9 The defendants also claim a set-off against the TIO in respect of the allegations made against the TIO in their counterclaim. The defendants filed a counterclaim by leave given on 20 February 2014. The counterclaim raised a variety of issues including breaches of contract by the TIO, breaches of its duty of care, breach of statute and its own constitution. The defendants focussed particular attention on alleged breaches by the TIO in failing to properly deal with or address complaints lodged regarding telecommunications services supplied by the defendants. The significant allegations included an alleged failure to develop procedures for the resolution of complaints and an alleged failure to deal fairly and reasonably with such complaints by:
· failing to give the defendants reasonable time to resolve the complaint
· accepting complaints within 10 days of the defendants being notified of the compliant
· by accepting complaints which were frivolous, vexatious or not in good faith
· by accepting complaints in which the complainant did not have a sufficient interest
· by accepting complaints in which there was an absence of proper detail
· by accepting complaints where the relief sought was not available from, or was outside the control of, the defendants.
· by accepting complaints where the complainant was not authorised to make the complaint
· by accepting complaints where the complainant was not verified to be an individual consumer or small business.
10 Ultimately, because the defendants did not appear at the trial, call any evidence or make submissions, I have not had to address the detail of the allegations made in the pleadings. However, having examined the documentation in the court book, I have identified cases where the allegation in the pleading was, in my view, clearly unsupported by the evidence concerning the particular complaint.
TIO Membership Form
11 TIO claims that the agreement between BIT and itself is constituted by a document entitled “TIO Scheme Membership Form (executed by Timothy Bolot of BIT on or about 5 October 2007).
12 The TIO Scheme Membership Form which BIT signed provides that the applicant agrees at all times while it is a member of the TIO to be bound by the terms and conditions set out on the form. The major terms and conditions are as follows:
“The applicant hereby agrees at all times while it is a member of the TIO to be bound by the terms and conditions set out hereunder:
1.DEFINITIONS
1.1‘Articles’ means the articles of association of the TIO Ltd as amended from time to time.
1.2‘Constitution’ has the meaning ascribed in article 12.12 of the Articles.
1.3‘Memorandum’ means the memorandum of association of the TIO Ltd.
1.4‘Services’ means the ordinary business activities of the TIO Ltd conducted as part of its obligations under the TIO Scheme.
1.5‘TIO Scheme’ means the Telecommunications Industry Ombudsman Scheme, operated by TIO Ltd (ACN 057 634 787).
2.AGREEMENT
2.1The Applicant shall comply in every respect with the memorandum, articles and constitution of the TIO Ltd.
2.2The TIO Ltd agrees that it will provide the services to the Applicant.
13 BT signed a similar form on 18 November 2011.
TIO Articles of Association
14 For the purposes of this proceeding, relevant articles include articles 2, 3, 4 and 5 which are in the following terms.
“Article 2 of the 2005 articles states:
MEMBERS OF TIO LIMITED
The members of TIO Limited shall consist of:
the subscribers to the Memorandum; and
such other persons who agree in writing to become members of TIO Limited and who are admitted to membership pursuant to these Articles from time to time, for so long as those persons have not withdrawn their membership or been expelled from membership in accordance with these Articles.
Article 3 of the 2005 articles states:
MEMBERSHIP
3.1 A person shall be eligible to be a Member only if the person
(a) is:
(i) a Carrier; or
(ii) a Carriage Service Provider or Carriage Service Intermediary;
(b) completes an application for membership in the form prescribed by the Board at the time the application is made and submits the application to the Secretary; and
(c) ….
…
Acceptance of Applications
3.3The Secretary shall submit each application for membership from an applicant other than a Carrier or Eligible Carriage Service Provider to the Board. The Board may accept or reject any such application at its discretion.
3.4An application for membership shall be accepted by TIO Limited if:
(a) the applicant is required by the Act to participate in a Telecommunications Industry Ombudsman Scheme;
(b) the application is in the form the Board prescribes (if any); and
(c) any fees determined by the Ombudsman under Article 4.1 are paid.
Transferability
3.6 The rights and privileges of a Member shall not be transferable.
…
Article 4 of the 2005 articles states:
4. ANNUAL VOLUME RELATED AND OPERATING COSTS
4.1Each Member agrees to pay such annual Volume Related Costs and Operating Costs as are determined by the Ombudsman as being applicable to the Member in four tranches at three monthly intervals (or such other times as determined by the Board).
4.2The annual Volume Related Costs and Operating Costs shall be based on the amount required to fund the Budget for the relevant year.
4.3Volume Related Costs applicable to a Member are:
(a) those costs which directly relate to the number and relative cost of complaints registered by the Ombudsman against the Member in each quarterly period; and
(b) any additional costs relating to legal, technical or accounting advice incurred by the Ombudsman in investigating a complaint against the Member.
4.4Operating Costs applicable to a Member are those overhead costs which:
(a) are based on the Member's estimated percentage share (in accordance with a formula unanimously approved by the Board from time to time) of the total number of complaints (in accordance with a formula unanimously approved by the Board from time to time) registered by the Ombudsman in the previous quarter; and
(b) do not include any part of the costs in article 4.3(b).
4.5For the purposes of article 4.2 the Ombudsman shall estimate a Member’s Volume Related Costs and Operating Costs:
(a) in arrears at the expiration of the first full three month period occurring after the Member joins the Scheme; and
(b) thereafter in advance for each successive quarter.
4.6All Volume Related Costs and Operating Costs shall be due and payable 30 days after the date on which the Member is notified of the amount to be paid.
Adjustments
4.7The Ombudsman shall each quarter (or at such other interval as may be determined by the Board) reconcile the actual number of complaints (in accordance with a formula approved unanimously by the Board from time to time) against each Member as a proportion of the total number of complaints (in accordance with a formula approved unanimously by the Board from time to time) made against all Members and handled by him or her against the numbers estimated under article 4.5(b).
4.8If as a result of the Ombudsman’s determination in article 4.7:
(a) a Member has paid a greater share of the Volume Related Costs and Operating Costs than it should have, the amount of the excess shall (if not already paid) be credited against the Volume Related Costs and Operating Costs to be paid by that Member in the forthcoming quarter; or
(b) a Member has paid a lesser share of the Volume Related Costs and Operating Costs than it should have, the amount of the shortfall shall (if not already paid) be added to the Volume Related Costs and Operating Costs to be paid by that Member in the next quarter.
Article 5 of the 2005 articles states:
5. CESSATION OF MEMBERSHIP
5.1Any Member may withdraw from TIO Limited by giving to the Secretary not less than three months' notice to that effect and its membership shall cease on expiry of such notice.
5.2If any Member (“Defaulting Member”) neglects or wilfully refuses to comply with the provisions of the Memorandum or these Articles, the Constitution, or any rules of TIO Limited the Directors may pass a resolution recommending the expulsion of the Defaulting Member from TIO Limited. The Directors must, within 21 days of the resolution of Directors being passed, convene a meeting of Members and the recommendation must be put before the Members to determine whether or not to adopt the Directors' recommendation and expel the Defaulting Member.
5.3Any person who ceases to be a Member of TIO Limited shall forfeit all and any rights and privileges of membership as at the date of cessation of membership and shall have no further rights against or claim upon TIO Limited or the property or funds of TIO Limited, except rights or claim as a creditor (if any), and any right or claim arising from actions or omissions during the period of membership.
5.4Any person who ceases to be a Member shall:
(a) continue to abide by the provisions of the Articles of Association and the Constitution so far as they are applicable to the particular complaints which are being investigated by the TIO Ltd at the time the person ceases membership (including for example complying with any determination made in respect of such a complaint); and
(b) without limiting (a), continue to abide by the provisions of the Articles of Association in relation to the payment of Volume Related Costs and Operating Costs and any other such levies as may fall.”
15 While the TIO’s constituent documents have been amended from time to time, these provisions set out above have remained in substantially similar form throughout the period in respect of which the claim is made.
Evidence
16 The TIO relies upon the evidence of Jon Whitehead, Shobini Mahendra, David Ross and Daniel Fisher.
(a) Whitehead
17 Whitehead is a senior management accountant at the TIO, a position he has held since May 2012. He says that the TIO is an industry funded, not for profit company, which, among other functions, provides dispute resolutions services for disputes about telecommunications services. He says that the Act provides that the Scheme must provide for the Telecommunications Industry Ombudsman to investigate, make determinations relating to, and give directions relating to complaints about carriage services by end users of those services.
18 The TIO recovers the cost of delivering its services by billing members for the complaints it receives from their customers. At all relevant times, the TIO’s Articles of Association have provided that the TIO may charge and members must pay various charges, being Volume Related Costs, Operating Costs, Special Levies and Capital Expenditure Costs (as each is defined).
19 TIO classifies complaints at one of four levels. When TIO registers a complaint against a member or escalates a complaint to a higher classification, the member incurs a Volume Related Cost. The member’s proportionate share of Volume Related Costs determines its liability to pay other costs.
20 At all relevant times, Article 4.3 of the TIO Articles has provided that the Volume Related Costs applicable to a member are:
·those which directly relate to the number and relative cost of complaints registered by the Ombudsman against the member in each billing period; and
·any additional costs relating to legal, technical or accounting advice incurred by the Ombudsman in investigating a complaint against a member.
21 Administratively, a Volume Related Cost is triggered by a designated action in the TIO’s complaint management system. This system is currently known as Radar and was previously known as Cosmos. The complaint management sends data to the TIO’s SAP B1 system, which in turn is used to generate invoices.
22 The provision regarding operating costs is set out in article 4.4 of the TIO Articles of Association. Essentially, Operating Costs include approved and budgeted support and infrastructure costs such as expenses relating to governance, office facilities, general systems and telecommunications costs, promotional and publication costs.
23 Pursuant to the Articles of Association, the TIO was entitled to bill Volume Related Costs and Operating Costs in advance or in arrears. The Articles created a mechanism for billing in advance whereby the TIO could estimate a member’s likely costs in advance for each billing period and invoice on that basis. Then it would later reconcile the estimate against the actual data and make an adjustment on the next invoice. Until July 2010, TIO invoiced all members quarterly in advance using the estimate and adjustment model described. In 2010, the TIO changed its billing practices and began to issue invoices monthly in arrears. This change was performed gradually across the TIO membership in several phases. BIT was issued quarterly bills in advance for the period until June 2010 and was issued monthly bills in arrears from July 2010. TIO has always billed BT monthly in arrears.
24 At all relevant times, TIO has operated a policy giving all members full discounts with respect to a number of complaints each year. If a complaint charge is discounted under the complaint charge waiver policy, it is not counted as a Volume Related Cost. This has a consequential effect in reducing the member’s liability to pay Operating Costs or Capital Expenditure Costs. Where all complaint charges are discounted during a particular billing period, TIO issues the member with a discount notice instead of an invoice.
25 Between 15 July 2008 and 4 July 2012, TIO issued 29 invoices and one discount notice to BIT. Whitehead reviewed the breakdown of the charges in each invoice and says that the breakdown reconciles with the invoices and the other information in TIO’s computer system. He believes the description of the charges on each invoice is accurate. He says that BIT owes an amount of $19,502.75 in respect of which TIO now claims payment.
26 Similarly, between 7 December 2011 and 4 July 2012, TIO issued a number of invoices to BT. Whitehead has reviewed the breakdown for the charges for each of the invoices and says that the breakdown reconciles with the invoices and the other information in the plaintiff’s computer system. He believes that the description on each invoice for the charges is true and accurate. He further says that BT has not made payment in respect of the invoices totalling $83,217.63 the subject of TIO’s claim. This amount includes the sum for fees owing in respect of the period between 1 July 2010 and 11 November 2011. This sum was reallocated from BIT to BT, as discussed later.
27 In a further affidavit (in addition to another one in which he gave some evidence and corrected two errors), Whitehead gave some more detailed evidence about the process for calculating and allocating Volume Related Costs and Operating Costs and the production of invoices for Scheme members.
(b) Mahendra
28 Shobini Mahendra is the policy and research manager of TIO. Since February 2009, her responsibilities have included maintaining and updating TIO’s complaint handling procedures. Over time, TIO has developed a series of documents which are collectively described as the TIO Complaint Handling Procedures. At all relevant times, TIO staff were directed to follow these procedures in addressing complaints received from customers.
29 At all relevant times, TIO procedures have provided that:
(a)TIO will generally register complaints in the name of the member who is billing the consumer, or in the case of a complaint involving the transfer or connection of a service, the member who is gaining the consumer’s service; and
(b)TIO retains an operational discretion in relation to the policy and is able to register a complaint against a member who is neither billing the consumer nor gaining their service.
30 At all material times, clause 3.2(c) of the TIO constitution provided that complaints may be made to the TIO on behalf of a complainant by an authorised representative of the complainant. Likewise, TIO procedures have relevantly provided that TIO will generally accept a verbal or informal confirmation from a person that he or she is authorised to act on behalf of the complainant at first contact – that is, before registering a level one complaint. Under the TIO procedures, TIO will generally request a representative provide an express written authorisation from a complainant before TIO will escalate a complaint from level one to level two. The TIO files regarding complaints received not uncommonly refer to the person lodging the complaint as the authorised representative of the individual or company affected. The evidence filed on behalf of TIO explained the distinction between an enquiry and a complaint and the significance of criteria delineating the various grades of complaint.
(c) Ross
31 Ross is a senior investigations officer at TIO. He reviewed the files and records maintained by TIO for complaints received about the telecommunications services provided by the defendants. In particular, he reviewed the complaints filed regarding the matters set out in paragraphs 13 and 14 of the counterclaim. In the absence of cross examination by, and argument from, the defendants, I am not in a position to reject the evidence given by Mr Ross. His affidavit revealed the strong reliance he placed upon the contents of the detailed files maintained by TIO in preparing his affidavit material.
(d) Fisher
32 Fisher is a senior financial accountant at the TIO and was involved from the outset in pursuing the defendants for the fees claimed to be owing including those reallocated from BIT to BT. Fisher verified the accuracy of a supplementary submission tendered by the TIO at court on 15 May 2014. It explained facets of the voluminous material submitted by the plaintiff, including how the amounts claimed were calculated in respect of each of the periods set out in paragraph 4 above. This matter had become more complicated as a result of the two errors made in the Whitehead material. Fisher verified the accuracy of the amounts claimed against the defendants in respect of the period from July 2008 until July 2012.
33 I accept that the TIO can rely upon the provisions of the Evidence Act to tender invoices which emanated from, or comprised part of, its business records. The TIO contends that if its invoices are accepted as evidence that the complaints comprising the invoiced charges were properly registered or escalated in accordance with the TIO’s classification and escalation procedures, then in the absence of any evidence from the defendants, the TIO’s assessment as recorded in the invoices ought to be accepted. I accept this submission. I note also that TIO has exhibited file notes which explain or set out the basis upon which complaints were escalated and/or classified.
Consideration
34 There is one area of particular contention between the parties. The defendants adverted to it in the defence, namely, that BT cannot be sued for fees allegedly incurred at time before it joined the Scheme.
35 In this context, the TIO draws attention to a meeting which took place on 24 August 2011 between two representatives of TIO, Vicki Saray and Simon Holmes, and a representative of BIT, Timothy Bolot. After the meeting, Ms Saray prepared a summary of the meeting and circulated the summary to various parties including the other attendees. There was no subsequent communication from Mr Bolot which called into question the accuracy of the summary.
36 The memo recorded the following matters in connection with the meeting:
·“You advised us that the membership we have for Best is for Best Internet ACN 127 715 360. You advised that the services in this membership have been ‘sunsetted’ in that, as the contract has come to an end, the consumers are recontracted under a new entity called Best Telecom ACN 144 987 422 (or they leave). You advised the old company will be liquidated in the near future.
·You advised that the activation of Best Telecom as a carriage service provider was as a response to a slew of natural disasters that hit Queensland and NSW and, subsequently, Best Internet. You advised that, as many customers lost everything, they were unable to pay their bills and there was a cash flow problem exacerbated by most debts being unrecoverable. Best Internet requested an extension from Best creditors and these creditors became secured. You claim they made a decision to write off part of the debt to enable the company to keep trading but as restructured company hence the activation of Best Telecom as a carriage service provider. You advised that some of the directors of the old entity have left. You advised that Best Telecom ACN 144 987 422 is paying the debts of Best Internet ACN 127 715 360.
·We advised that you will be required to fill out a new membership form for the new entity and it may be the case that some complaints may well have to be reclassified under the new membership.
·We advised you that there were over $50,000 in outstanding TIO charges and that you should contact Karishma Ray at TIO Receivables.”
37 On 29 November 2011, Said Jahani of Grant Thornton wrote to Ms Saray in his capacity as joint and several manager and receiver of BIT. He was appointed together with Paul Billingham on 14 November 2011. His letter included the following:
“Following my appointment I was advised by the company’s management (Timothy Bolot) that the company acted as agent for Best Telecom Pty Ltd (ABN 12 144 987 422) (“Newco”) and therefore was not a direct supplier to customers nor a party to customer agreements. I have been provided with a copy of an agency agreement which purportedly evidences a transfer of the customer contracts held by the company as at 1 July 2010 to Newco.
I am in the process of investigating this alleged transaction and the events subsequent to the signing of the agency agreement to determine its authenticity.”
38 The thrust of the receiver’s letter was to the effect that from 1 July 2010:
·BIT did not directly supply carriage services to consumers.
·BT was the relevant carriage service provider.
·BIT was not party to any of the customer contracts; BT was the party to the agreements with customers.
·BIT in relation to these matters acted as the agent of BT.
·The customer contracts held by BIT as at 1 July 2010 were transferred to BT. This transfer took place pursuant to a client novation, agency and management services agreement dated 1 July 2010 (“the Novation/Agency Agreement”).
39 The definition of “customer” in the Novation/Agency Agreement referred to any third party purchaser of the Services (as defined) who obtained such services from or through the agent, BIT, including all customers owned by the agent to 1 July 2010. The said Agreement provided that those customers were transferred by virtue of the agreement from the agent to the Company as defined, namely, BT. This definition, insofar as it related to the issue of agency, was consistent with the letter subsequently sent by the receiver and manager to the plaintiff on 29 November 2011.
40 Other terms in the Novation/Agency Agreement also seemed to be consistent with the letter from Grant Thornton. I refer in particular to clauses 2.1, 2.3, 9.1, 9.2, 13, and 17.1. Attached to the Agreement was a lengthy schedule setting out lists of active and inactive clients/services transferred by BIT to BT.
41 One unusual document to which the plaintiff properly drew my attention was a memorandum between BIT and BT dated 12 July 2010. The memorandum referred to the Novation/Agency Agreement and said that BT was unable to complete all aspects of effecting operational transfer of the customers from BIT to BT. In the circumstances, BIT had agreed to continue to trade the business for BT for a maximum of 24 months from 1 July 2010.
42 The memorandum provided for BIT to continue trading until such time (presumably up to 1 July 2012) as BT could complete the operational transfer. Clause 4 of the memorandum stated that until the parties had completed the operational transfer of customers from BIT to BT, the parties agreed to reverse the sales agency aspect of the 1 July 2010 deed so that BT was entitled to receive commission in lieu of BIT.
43 Although the plaintiff contended that the effect of the memorandum was to undo or reverse the earlier agreement, in my view the change purportedly made was limited to clause 7 regarding the payment of commission and did not have a broader effect on the earlier Novation/Agency Agreement.
44 On the issue of BT’s liability in the period before it formally became a member of the scheme, the TIO contended that from 1 July 2010:
·BIT acted as agent for BT in its dealings with customers and TIO; or
·BT was obligated to pay the reasonable value of services rendered by TIO for BT’s benefit; or
·BIT was obliged to pay the disputed charges.
45 By letter dated 27 April 2012, TIO reallocated the charges in the period between 1 July 2010 and 11 November 2011 from BIT to BT. TIO provided details of the 103 complaints reallocated from BIT to BT including complaint references and associated charges. TIO made the reallocation decision on the basis of information supplied to it. Firstly, TIO relied on the information given by Bolot at the meeting with the TIO representatives in August 2011. Secondly, TIO relied upon the information supplied by the receivers and managers of BIT in the letter to TIO dated 14 November 2011.
46 TIO’s view was that BT was obliged to join and comply with the Scheme from the date it first began providing carriage services to consumers. The evidence indicated that BT commenced this activity by 1 July 2010.
47 TIO’s view was influenced by the agency relationship which existed between BIT and BT. It seems clear that BT as an undisclosed principal can be sued on a contract made on its behalf by its agent, BIT, acting within the scope of its actual authority.[1] Evidence is admissible to show who is the real principal in order to charge that person or entity on the contract.[2]
[1] Sin Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199, 207 quoted by Nettle JA in Commissioner of State Revenue v Viewbank Properties Pty Ltd (2004) 55 ATR 501 at [46]
[2] F Reynolds, Bowstead & Reynolds on Agency (Sweet & Maxwell Ltd, 16th ed, 1996) at [8-069] (3).
48 The evidence disclosed that BIT was acting as agent for BT for the period after 1 July 2010. Neither defendant adduced any evidence to suggest that the arrangement embodied in the Novation/Agency Agreement terminated any sooner than 11 November 2011. That being so, I am satisfied on balance that it is appropriate to find that BT should be responsible for the various costs and charges incurred in connection with the services provided by TIO under the Scheme in the period from 1 July 2010 to 11 November 2013. Even if BT had not applied to join and was not a member of the Scheme for the whole of the period to which the charges apply, it seems to me that in circumstances where as principal it was using BT as its agent to act as a carrier, BIT cannot rely upon this stratagem to avoid its obligations under the Act. If this were allowed, other entities could remain non-members of the Scheme while using an agent.
Conclusion
49 I am satisfied that the TIO has proved its entitlement to recover monies from the defendants in respect of various costs associated with the operation of the Scheme insofar as it related to the defendants’ customers.
50 Accordingly, subject to hearing further from the plaintiff regarding the form of orders, I propose to order that:
a) The plaintiff have leave to file an amended statement of claim in the form of the draft amended statement of claim contained in the Court Book and consented to by the defendants.[3]
[3] The draft is found at CB12. The defendants consented to the amended pleading. See CB522.
b) There be judgment for the plaintiff against the first defendant in the sum of $22,778.35 comprising principal of $19,502.75 and interest of $3,275.60.
c) There be judgment for the plaintiff against the second defendant in the sum of $97,194.53 comprising principal of $83,217.64 and interest of $13,976.89.
d) The defendants’ counterclaim be dismissed.
e) The defendants jointly and severally pay the plaintiff’s costs of the proceeding including the claim and counterclaim:
i. up to and including 13 May 2013 on the Magistrates’ Court Scale; and
ii. from 13 May 2013 on the County Court Scale
such costs to be taxed in default of agreement.
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