Telstra v AAPT - [1999] NSWSC 853

NEW SOUTH WALES SUPREME COURT

CITATION: Telstra v AAPT [1999] NSWSC 853

CURRENT JURISDICTION: Equity Division Commercial List

FILE NUMBER(S): 50032/99

HEARING DATE{S): 5/05/99-7/05/99, 10 & 11May 1999

JUDGMENT DATE: 27/08/1999
PARTIES:

Telstra Corporation Limited v AAPT Limited

JUDGMENT OF: Bryson J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:
S. Rares QC, P. Wood and I. Pike for Plaintiff
M. Slattery QC, J. Durack and R. Dick for Defendant

SOLICITORS:
Mallesons Stephen Jaques for Plaintiff
Clayton Utz for Defendant

CATCHWORDS:
INJUNCTIONS
POST & TELECOMMUNICATIONS
TRADE PRACTICES - Telephone services - misleading and deceptive conduct - misrepresentations mandatory injunction - corrective advertising - extent of order - mandatory order for corrective letter to customers refused - public interest - permanent injunction - not justified - injunction for limited term (5 years) - declaratory order - not justified - no real effect.

ACTS CITED:
Trade Practices Act 1974 ss.80, 84(2), 86(1) and 52
Fair Trading Act 1987 ss.42 and 43
Supreme Court Act 1970 s.75

DECISION:
See para.59

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST
BRYSON J.
FRIDAY 27 AUGUST 1999
50032 of 1999 TELSTRA CORPORATION LIMITED v.
AAPT LIMITED
JUDGMENT

HIS HONOUR: Telstra as plaintiff claims various remedies against AAPT for misrepresentations and misleading or deceptive conduct in relation to arrangements with telephone subscribers to transfer their long distance and overseas telephone service from Telstra to AAPT. Telstra claims declarations establishing the conduct which has occurred, mandatory orders for remedial measures and an order permanently restraining the misrepresentations and conduct. AAPT does not dispute that there ought to be an injunction under s.80 of the Trade Practices Act 1974 to restrain misrepresentation and misleading and deceptive conduct. Telstra’s claim for damages was left for future determination and will be referred to arbitration.
The misrepresentations and conduct relate to AAPT smartChat, a telephone service provided to residential customers and marketed door to door and in shopping centres through AAPT’s dealer network, by sales staff of dealers. AAPT authorised its dealers to introduce business; the dealers were entitled to commissions related to the business produced by the customers they introduced. The entitlements of dealers’ sales staff depended on their arrangements with the dealers. Neither dealers nor their staff were employed by AAPT in a contract of service, and, while AAPT made detailed directions for what dealers were to do in their approaches to customers, and sent dealers streams of messages of advice, exhortation and direction, AAPT’s means of control were enforcement of the conditions on which commissions were payable, so that if dealers did not comply they risked not earning commissions; and AAPT could also terminate their authorisation as dealers.
After many decades during which Telstra and its predecessors were the only suppliers of telephone services, legislative changes meant that from 1992 Optus Communications was also a supplier of services, and then from 1 July 1997 AAPT and other suppliers entered the market. AAPT has other business apart from its smartChat residential service. Business obtained for smartChat through dealers was necessarily obtained by the customer’s transferring business from another supplier; in the great majority of cases, from Telstra. There have been large flows of business between Telstra and AAPT, as customers change their supplier of long-distance services: these flows are referred to in the industry as churns, and do not always move in favour of AAPT. There are lesser flows between other suppliers.
A subscriber may obtain smartChat service in either of two ways. In the first, the customer only becomes a customer of AAPTs for each call for which an override code,1414, is dialled before dialling the number to be called. Only calls for which the override code had been used would be billed to AAPT; other calls would continue to be billed to the customer’s preselected carrier. Alternately the customer could agree to be preselected to AAPT for long distance and overseas calls, in which case all long distance and overseas calls initiated by the subscriber were billed by AAPT and automatically carried by AAPT’s equipment, or by equipment which AAPT had arranged with Telstra to use. A preselected customer of AAPT may use the service of Telstra or any other supplier with which the customer has an arrangement by dialling that supplier’s override code, but in default of doing so will use the preselected service.
When AAPT entered the market with smartChat on 1 July 1997 preselection was not available at all locations throughout Australia. Progressively since then, preselection has become almost universally available. It is not AAPT’s commercial objective to obtain business through override dialling; its commercial objective is to obtain preselected customers. No doubt business obtained through the override code is acceptable.
It is clear on the evidence and from admissions made by AAPT and it is not disputed that misrepresentations were made to many persons who signed applications for AAPT’s smartChat service about the effect of signing the application form and using the override code. The admitted particulars in Pt.C Summary of the Plaintiff’s Contentions in the Amended Summons are as follows:
“4.         In the course of engaging in the conduct referred to above, AAPT has made to persons whose custom it has solicited, one or more of the following representations, being representations made in trade and commerce to the following or similar effect (‘the Representations’);
(a)          that if the Telstra customer signs a form proffered by or on behalf of AAPT, which constitutes an authority from the Telstra customer to AAPT to transfer his or her long distance telephone custom to AAPT (‘the Application Form’), the Telstra customer will remain with Telstra and Telstra will continue to supply long distance services;
(b)          that if the Telstra customer signs the Application Form they will not be transferring their services from Telstra to AAPT, but will be able to acquire AAPT services by dialling a four digit override code (‘the AAPT override code’) and will otherwise automatically continue to acquire long distance services from Telstra;
(c)          that the only effect of signing the Application Form is to enable the Telstra customer to access the AAPT Services by means of the AAPT override code;
(d)          that if the Telstra customer signs the Application Form, he or she will be authorising a creditworthiness check which is a necessary pre-requisite to being able to use the AAPT override code should he or she wish to acquire the AAPT Services;
(e)          that the only effect of signing the Application Form is to enable the Telstra customer to be placed on a mailing list or otherwise to enable him ro her to receive further information about the AAPT Services;
(f)           that the purpose of completing the Application Form is to conduct a market survey;
(h)          that the Application Form is an authority for the Telstra customer to obtain a discount on his or her telephone bill without altering their relationship with Telstra;
(i)           that the Application Form does no more than signify that an AAPT representative has visited the Telstra customer;
(k)          that AAPT’s prices for long distance telephone services:
(i)           are always or unconditionally cheaper than Telstra’s prices for long distance telephone services;
(ii)          are cheaper than Telstra’ prices by a specified percentage or amount;
(iii)        are such that the customer’s long distance telephone charges would be always or unconditionally lower with AAPT than Telstra;
where that is not so or where the comparison is with Telstra’s standard (undiscounted) charges or where the comparison does not take into account all Telstra discounts applicable to the customer;
(l)           that Telstra charges a specified price, which specified price is incorrect or out of date or otherwise not representative of the actual Telstra price;
(m)         that, in relation to the supply of long distance telephone services, AAPT is affiliated with, part of, represents or is working with Telstra in promoting or supplying such services;
(n)          that an Application Form can be signed by any person other than the customer in whose name the account is held with the existing supplier of telephone services or an authorised representative of the customer who is registered as such;
(o)          (when a customer complains to AAPT that he or she has been misled into signing an Application Form and the customer’s preselected long distance telephone services supplier has changed from Telstra to AAPT) that the customer’s preselection of AAPT can only be reversed and transferred back to Telstra for long distance telephone services if the customer presents to Telstra a carrier authority or similar form authorising the transfer; and
(p)          (when a customer complains to AAPT that he or she has been misled into signing an Application Form) that the customer will be taken to have given the authority set out in the Application Form, notwithstanding that his or her signature on the Application Form may have been induced by a belief that they only signed the form in order to become eligible to use AAPT’s override code when making long distance telephone calls, or for some purpose other than the transfer of the customer’s long distance telephone service supplier to AAPT.
Subparagraphs (g) and (j) were withdrawn.
The misleading conduct was very widespread and instances occurred throughout the period of sales activity, which began in October 1997 and were still continuing to occur when the proceedings were commenced in March 1999. Evidence including customer affidavits shows patterns of the misrepresentations and conduct complained of which must have occurred many more times than are actually illustrated by the evidence of customers; the breaches were widespread geographically, and occurred over the whole period of sales activity, and they were widespread among dealers. AAPT is responsible for the conduct of dealers and the staff of dealers for the purposes of obligations and remedies under the Trade Practices Act 1974; see subs.84(2). AAPT’s responsibility is not the less because those persons were less closely integrated into its organisation than its own management and employed staff.
AAPT has engaged in unlawful practices and the object of the injunction is to restrain AAPT from engaging in them again - cf. Mikasa (NSW) Pty Ltd v Festival Stores (1972) 127 CLR 617 at 651 (Gibbs J). An injunction restraining conduct is supported by severe penalties and is not a slight or restrained response to breaches of the Trade Practices Act 1974. Conduct of the kinds admitted ought to be restrained by injunction and it is not sufficient to leave the matters complained of to be remedied only by damages. The need for an injunction is clear from the nature of the conduct, and AAPT did not dispute this.
The power of the court conferred by s.80 of the Trade Practices Act 1974 extends to mandatory orders for remedial measures. “Section 80 is essentially a public interest provision” - per Lockhart J in ICI v Trade Practices Commission (1992) 38 FCR 248 at 255. The power is not punitive. The interests of the consumers, in this case those who may have become preselected AAPT customers through misrepresentation or misleading and deceptive conduct, are the primary focus of public interest considerations affecting a decision whether to order remedial measures.
The power has been held to extend to support an order for corrective advertising. See Janssen Pharmaceutical Pty Ltd v Pfizer Pty Ltd (1986) 80 PR 40-654 at 47, 295. Corrective advertising was also ordered in HCF Australia Ltd v Switzerland Australia Health Fund Pty Ltd (1988) ATPR 40-834. See too Australian Competition and Consumer Commission v Optell Pty Ltd & Ors (1998) ATPR 41-640 at 41,087. No doubt an order for a corrective letter is just as much within power as an order for corrective advertising. A mandatory order requiring remedial measures is not made as of course, and must be based on some grounds of sufficient weight to justify the intervention.
Telstra claims that there should also be mandatory orders which would control in detail important aspects of AAPT’s internal management and its methods of communicating with its customers and potential customers. These are based on contentions that the matters complained of do not arise only out of delinquent behaviour of dealers and dealers’ staff engaged in contact with potential customers, at customers’ homes and in shopping centres, but out of the working system or method of operation of AAPT itself.
The injunction claimed by the Plaintiff restraining misrepresentations is set out in Claim 1 of the Amended Summons. (The claims for interlocutory relief were adopted in claim 7 for permanent restraint). This would restrain misrepresentations about:
(a)          the effect of the form,
(b)          AAPT’s prices in comparison with Telstra’s prices,
(c)          Telstra’s prices
(d)          the relationship between AAPT and Telstra
(e)          who may sign an application
(f)           difficulties of changing back to a customers original long distance carrier ; and
(g)          the effect of a signature on an application form induced by misrepresentation.
The only contested question on this restraint related to a matter of detail. Telstra claims that in the introductory words the restraint should be directed to “AAPT by itself, its servants, agents, dealers, representatives or otherwise” whereas AAPT’s draft would limit the reference to AAPT “by itself, its servants or agents”. In my view the long-established formula for injunctions should be followed, as the introduction of references to dealers and representatives is unlikely to achieve any greater clarity and may give rise to doubt about the established application of the formula.
During argument I raised the question whether the order should be permanent or should be made for a limited term of years. It can be expected that the telecommunications industry will have a long future and that these parties will be present in it for a very long time. Serious as the matters admitted are, a time can be foreseen when they could not have any continuing impact on the conduct of customers or on the rights of Telstra. The industry is characterised by large and rapid change. I am of the view that an injunction which is to operate permanently would exceed what justice requires. In my judgment the appropriate time for the restraint to have effect is five years from 19 March 1999, the date of Rolfe J’s order; after five years the events which have been proved and admitted cannot reasonably be expected to have any continuing impact.
The orders sought in Claim 2 in the Summons would exercise detailed control over the application forms to be used by AAPT. Claim 2(a)(i) would restrain AAPT from providing to customers or obtaining a customer’s signature on an application form which purported to be an application to acquire long distance telephone services by use of AAPT’s override code. Exhibit A, which is the form used after July 1998, is not an application to use the override code.
Claim 2(a)(ii) is specifically directed to forbidding use of a form which requires the customer to indicate affirmatively that the customer does not elect preselection; however I see nothing wrong with the use of such a form, or with calling for the customer to indicate affirmatively an election against preselection. Offering a choice in that way would have no harmful effect unless it were misrepresented.
From July 1998 AAPT used the application form in Exhibit A; the form that had been used previously was withdrawn, though it was used thereafter in a few cases. The form in Exhibit A is reasonably clear when used by a person who gives attention to what it says. Its heading names AAPT smartChat and calls itself “Application for Service”. The first statement in its text is “You must dial 1414 before all national and international long distance numbers until we notify you otherwise.” After spaces for details of the customer’s name, contact telephone numbers, identification by driver’s licence and date of birth and some particulars of the customer’s addresses, there is a box headed “Connection details” introduced by the text “write your telephone and facsimile numbers in the boxes below, signifying AAPT Limited ACN052 082 416 (AAPT) as your preferred choice of telephone company for long distance calls.” Then in a box which the customer is to sign is the following:
“Acknowledgment and authority to change long distance telephone company.
I acknowledge that AAPT will bill me for national and international long distance calls (including calls to mobile phones when available) from the line (s) listed above.
1.AAPT will provide me with services subject to its Terms and Conditions overleaf, which I have read and understood.
2.I have the authority to make this change and that these details are correct. I understand that, after this request has been processed AAPT will supply both international and national long distance calls (including calls to mobiles when available) for the nominated telephone numbers above.
3.I authorise preselection to AAPT for services when available.”
The form also said, prominently, “This contract is subject to a cooling-off period of 10 days”.
A person who gave attention to the terms of the Application Form Exhibit A and then signed it would not reasonably understand that the telephone service was not going to be preselected to AAPT, and would not reasonably believe that it was only if the override code were dialled that AAPT services would be used. It is only if there were a positive misrepresentation about the effect of the form that a person would think that by signing the form he would gain the option of using AAPT Services by dialling the override code, but that otherwise his arrangements for long distance telephone service would remain unchanged, with Telstra or with whatever other supplier he then dealt. However it is clear that in a significant number of cases there was misrepresentation about the effect of the form. There were many complaints about misunderstanding produced in that way; many complaints were made to AAPT and many to Telstra, and Telstra produced affidavits of a number of telephone subscribers which proved plain cases of misrepresentation. AAPT does not dispute that misrepresentation and misleading and deceptive conduct occurred.
The form which was used prior to July 1998 offered a choice in question 3 in the following terms:
“3. I authorise preselection/non-code access to AAPT for services when available.
OR
I would prefer to continue to dial 1414 before using AAPT’s services and do not consent to being preselected ”
In the earlier form the potential customer was expressly offered an opportunity to opt out of preselection by ticking the box, so that the customer would have access to AAPT Services by dialling the override code but not otherwise. This followed AAPT’s perceived interest in obtaining pre-selected customers, not override customers. The meaning of the form is reasonably clear to anyone who gives attention to what it says, and the opportunity to elect against pre-selection is clear and not difficult to take.
In my view difficulties relating to the use of either form do not arise from the forms themselves but from accompanying misrepresentations by dealers, which could readily deflect a customer from understanding them.

At the time of the hearing AAPT was in the process of introducing a third form in which the words “Authority to change long distance telephone company” appear very prominently as the heading; this would be even less susceptible of misunderstanding, but would remain susceptible of misunderstanding if a misrepresentation were made about it.
In my view it would be inappropriate to restrain AAPT from using any of the application forms which it has used. What requires to be restrained is misrepresentation and misleading and deceptive conduct, and the forms are innocuous if properly used.
In Claim 2(b) restraint is sought against “accepting or processing an application form signed by a person other than a person who states that he or she is the person in whose name the account is held with the existing supplier of telephone services or authorised representative of the customer who is registered with such.” The forms used by AAPT contain a shorter statement which has the effect in substance of making just such a statement: “I have the authority to make this change and confirm that these details are correct.” Claim 2(c) would restrain AAPT from requesting Telstra to effect preselection (which must be carried out by technology in Telstra’s control) without a regularly signed application form. The claim is that the form must be “signed by a person who is, or purports to be, the person in whose name the account is held with the existing supplier of telephone service or signed by a person who is or purports to be an authorised representative of the customer … and which of the customer who is registered as such, and which also records the name of the alleged authorised representative and identifies the signatory as being an authorised representative.”
The circumstances in which a carrier in the position of AAPT may originate an authorisation for preselection to be changed from Telstra (or from some other carrier) are regulated by an Industry Protocol - Exhibit 9. I do not favour adding a further layer of regulation. There have in fact been misrepresentations, by sales representatives at residences or in shopping centres, about the need for authorisation of the telephone subscriber to sign an application form; these are dealt with by Order 1(e). There are obvious needs for AAPT to ensure that it actually has the authority of the telephone subscriber before originating a request to change preselection; an unauthorised change is likely to produce dissatisfaction and complaints, and preselections involve expense as AAPT must pay Telstra a fee for each change. A subscriber whose preselection has been changed without the subscriber’s actual authority incurs no contractual liability to AAPT for telephone calls made through the unauthorised preselection. There is, it seems to me, nothing but trouble for AAPT if it acts on an unauthorised application, and trouble of that kind has been encountered many times.
There are practical difficulties for a mandatory order requiring AAPT to take steps to establish that no deception has been practised on it. In his evidence Mr Matic narrated some practical difficulties which are encountered, one being that information published in the White Pages does not necessarily identify the subscriber, who may be a different person to the person whose name is published, while no names are published for many numbers and there are delays and inefficiencies caused by changes and alterations; AAPT does not have access to the whole body of information about the names of subscribers held by Telstra. On behalf of Telstra it was contended that AAPT should not accept an application without seeing the subscriber's last telephone account; this requirement would be impractical and would impede most sales in shopping centres and many door-to-door, and the contention was on the verge of the mischievous.
AAPT has a business routine of making verification calls before originating a request to change the preselection; this method is not perfect as the dealer is required to make a verification call, but may fail to do so or may not do it well; and AAPT does not continue if three attempts fail. The possibility of unauthorised preselection is also diminished by AAPT’s routine of communicating to the subscriber or apparent subscriber by posting out a “Welcome Kit”. AAPT also sent customers a letter confirming preselection, when that happened, and sent out other marketing material. Telstra also communicated with subscribers who were preselected away from it.
In almost all cases it will have been brought home to a customer whose telephone service was preselected to smartChat that preselection has taken place. For most of the period from October 1997 to March 1999 AAPT also had a procedure referred to as “the Safety Net” in which preselection was not effected until a customer had first made a call dialling override. This Safety Net routine was not followed between November 1998 and February 1999 but was reinstated in February 1999. AAPT posted the “Welcome Kit” to all customers, and sent bills for telephone services, repeated at intervals which varied with intensity of use. On behalf of Telstra it was submitted that “AAPT has done little, if anything to remedy the effect of its past conduct or to ensure that it does not occur again.” In my view the steps which AAPT has taken as a matter of routine, while not directed specifically to remedying the effects of misrepresentation, have been reasonably complete in pointing out to customers that a change in preselection has taken place; the message of receiving an account for whatever long distance calls have been made is unmistakable.
The possibility that a subscriber may be unwillingly preselected under an unauthorised application form and then fail to object when informed of the change does not appear to me to be large. There is a residue of room for customer inertia to operate, but it would be a strange and unusual customer who would receive communications and bills from a telephone company he did not want to deal with, yet do nothing about it.
AAPT’s methods, which include obtaining a representation of authority from the person signing the form, appear to me to be reasonably sufficient in a business context, although they leave open some possibility that an unauthorised preselection may occur. As a matter of strong probability the number of preselected AAPT customers who are well satisfied with their preselection outweighs by a very large preponderance the number who have been preselected as a result of deception but continue to be AAPT customers.
For the customer who did not want a change in preselection the remedy of contacting either AAPT or Telstra by telephone to reverse the situation is too obvious to require explanation. Telstra set up what it called a Slamming Hot Line to facilitate contacts from customers dissatisfied with other carriers. Some customers did contact Telstra by this means.
It is my judgment that intervention by the court as claimed in Claim 2 is not appropriate.
Claim 3 claimed an order prescribing in detail matters which must appear on the application forms so as to give greater prominence to the fact that the form operates to change the long distance telephone company with whom the subscriber is to deal. This claim was not pressed in final submissions.
Claim 4 is a claim for an order requiring AAPT to confirm by telephone with the customer some matters relating to the application. In fact it has been AAPT’s business practice to make three attempts to verify the customer’s position by telephone inquiry. This has operated cumulatively over other confirmation mechanisms; the dealer is required to make a confirmatory call before submitting the application form and is not entitled to commission otherwise, and written communications should alert the subscriber to the fact that there has been a change. The orders sought would go somewhat further in that it would prescribe in detail four questions which must be put, require a written record to be kept and forbid changing the preselection unless there were affirmative answers. The four questions are:
(1).         When you signed the Authority to Change Long Distance Telephone company, was the telephone service in your name?
(2)          Did you understand when you signed the Application Form that you were switching your long distance telephone company to AAPT?
(3)          Were you left a copy of the Application Form you signed together with a cooling-off form?
(4)          Did you understand when you signed that you do not have to switch to AAPT for particular long distance calls?
AAPT opposed the making of such an order but put forward an alternative form for question (4) if the court thought fit to require it.
An interlocutory order of the same nature as in claim 4 was made by the Court (Rolfe J) on 19 March 1999 on an urgent interlocutory application and has effect until the delivery of this judgment. In a general way, what this order requires is something which it is prudent for AAPT to do in its own interest and AAPT had a generally similar business routine. An altogether different dimension is introduced if the questions which must be asked are prescribed by court order; the action which would follow is also to be prescribed in detail in a way which leaves no leeway for discretion or business judgment, and compliance is enforceable by contempt procedures or penalties. Question 4 as proposed by Telstra is not well related to remedying any claim which Telstra makes, and it appears to me to go well beyond anything which AAPT could be expected to ask in its own interest, and to go so far as to be oppressive. It would require AAPT to make a point to the customer which Telstra would wish to make. I see no reason why the Court should expect or require AAPT to promote override business if it does not wish to.
The interlocutory orders have now been in force for some months and of themselves have probably had some remedial effect in the discipline in which they have imposed on AAPT and in the exposure to the questions and their implications of persons whose applications had not been processed when the interlocutory order was made and to those whose applications have been received since.
In my judgment, any period during which it was appropriate for the court actually to exercise control in detail over AAPT’s method of conducting confirmatory telephone calls has now expired, and the interlocutory order should not be continued.
Claim 5 is for a mandatory order requiring AAPT to send out a letter to each customer who AAPT’s records indicate has changed carrier from Telstra to AAPT since 1 July 1997 as a result of AAPT’s face to face marketing. The letter took various forms as the case progressed. In the form handed to me with final submissions AAPT was to state that the Court had ordered AAPT to write the letter, that complaints about misleading statements had been received and to clarify the position AAPT was to say:
“(1)        The AAPT Application for Service form is intended to authorise the change of your preselected long distance telephone company from Telstra to AAPT;
(2)          A person cannot sign the AAPT Application for Service form unless the telephone service is in their name or they are an authorised representative of that person;
(3)          AAPT’s long distance rates are not necessarily cheaper than those of Telstra. In order to accurately compare AAPT’s and Telstra’s prices, you will need to consider how long a call is, when it is made, where it is made from and where it is made to, as well as any applicable discounts or special offers;
(4)          AAPT is a competitor of Telstra in relation to the supply of long distance telephone services. AAPT is not affiliated with Telstra nor is it a part of Telstra.”
The letter was to conclude by enclosing a change of carrier form, apparently for a change to Telstra, and a reply paid envelope addressed to Telstra.
The information which such a letter would furnish is information which would become obvious to all but the irretrievably obtuse subscriber fairly early in the period after preselection as the subscriber received a series of communications including telephone accounts and claims for payments. Although it is a human truth that some customers respond with inertia to events in the telephone services market, the business is conducted, as is notorious from its advertising, on the basis that the customers, or the customers who are worth having, are aware of the balance of their interests and the significance of prices, which change frequently, and prices are a subject on which participants in the industry address customers and potential customers continuously and stridently. There may be some customers to whom the four statements in the proposed letter would actually communicate something previously unknown, but they can be very few and of no particular commercial significance.
The communication of new information to customers is unlikely to be a real effect of sending out letters of this kind. The true and only significant result which I expect would be achieved if this order is made is that AAPT would be required to post out to the customers it has gained over the last two years a form appropriate for them to change their preselection to Telstra accompanied by a Reply Paid envelope addressed to Telstra. This, in my judgment is altogether excessive, and it would be oppressive to require AAPT to communicate with its customers in this way. It is quite open to Telstra to communicate with customers, past customers and potential customers in any proper terms; it in fact does communicate with persons who have been preselected away from Telstra, and it can distribute its own information and forms.
In deciding which orders I should make I have to hold a balance so as to do justice and make an appropriate judicial response to the enormities and breaches of the law which have occurred, but not to intervene inappropriately in the workings of competition among participants in the industry. It is a concern of mine that in pressing for unusual remedies, Telstra may have gone further than seeking to attain justice and it may have sought to impose burdens and disadvantages on AAPT which will unduly disturb the competitive balance. I am concerned that the Court should not make an order which will have that effect.
In presenting Telstra’s claim for mandatory orders requiring remedial measures, Telstra’s counsel sought findings which would establish a high degree of involvement and responsibility of AAPT’s management in the misrepresentations and conduct complained of. The contention that AAPT has not done anything adequate to remedy the effect of the past conduct was part of this position. The most effective remedy is that the customer should understand what has happened; the consequential steps of deciding that the outcome is unsatisfactory and should be changed are steps for the customer and they are steps which a customer who believed that his business had been obtained by deception would be very likely to take. Sending out the “welcome kit” appears to me to have been as effectual remedial action as could well be devised.
Another aspect of the position taken by Telstra’s counsel was the contention that AAPT’s marketing campaign was inherently at risk of misleading and deceiving customers. In support of this contention Telstra’s counsel pointed to the forms of initial application for service and their “Opt Out” format, to the form in Exhibit A which is appropriate simply to effect a change of long distance carrier whenever preselection is available, and the confusion which it was submitted arose from simultaneously marketing both override access and preselection. In my view all these steps were reasonable measures to take in addressing the market and it was not correct to contend that the campaign was inherently at risk. The risk is created by dishonest behaviour of sales agents, and there is no reason to find that AAPT inspired or brought about that behaviour.
In this connection it was contended that AAPT’s controls over its dealers and their agents were completely ineffective, and that the signs in the evidence of endeavours to control their behaviour showed an absence of any true or effective effort. In my view this is quite incorrect as a matter of fact; there is no basis for finding that the offending conduct was tolerated, treated as acceptable, or regarded with complacency in view of perceived benefits derived from it. Any such benefits would be illusory as no trader could have any real interest in obtaining an alienated customer base. The evidence shows activity in attempting to exercise control; in retrospect various respects in which the activity could have been more intense can be suggested, but I see no basis for a finding that it was not sincerely undertaken.
Complaints about dealers were dealt with thoroughly. Some dealers were terminated. One was taken over by a reliable dealer. Mr Paul Glendenning was employed as Manager, National Dealers until his employment was terminated in January 1999. He was responsible for AAPT’s relations with dealers; he showed activity and vigour but he too was terminated for not being sufficiently effective. Telstra’s counsel was able to point to dealers who could well have been but were not terminated, but this hindsight is not an indication that the activity and control which did lead to the termination of some dealers were not sincerely intended, or were not effective.
The contention that the misleading and deceptive conduct was systemic throughout AAPT and was not confined to dealers was not made out; indeed in my view there is no real basis for that contention. Mr John Anthony Matic was the officer of AAPT with responsibility for the affairs with which this litigation deals: at the time of the hearing his position was Group Director, Commercial and Consumer Division. The manner in which cross-examination of Mr Matic was conducted constituted a vigorous attack on his sincerity and personal suitability for the conduct of AAPT’s affairs, and in my judgment this attack was entirely unsuccessful.
The incidence of complaints is not well represented in AAPT’s records; it seems clear that making a full written record of complaints received has never been an objective of AAPT’s management. When telephone verification procedures were carried out under this Court’s interlocutory orders and were carefully recorded about 10%, a surprisingly high proportion of the persons spoken to, gave a negative answer to Question 4. That is to say, they did not understand that the override code option was available to them; presumably only the preselection option was presented. The figure of 10% was presented in submissions as if it were a very far-reaching demonstration of the inadequacy of AAPT’s business methods. I do not see it in that way. As AAPT’s commercial object was to gain preselection customers it should be in no way surprising that a high proportion of the customers who signed application forms should not have been aware of the override option. The figure of 10% is not an indication that that proportion of customers have overall dissatisfaction with their dealings with AAPT.
The court-ordered questioning procedure showed that 37% of the subscribers spoken to indicated that they did not wish to give effect to the preselection forms which they previously signed. 21% wanted to continue as AAPT customers using the override code, but did not want to continue with preselection to AAPT. 16% did not want AAPT’s service at all. These proportions are strikingly high, but they are not proof that those proportions or a high proportion were subjected to deception. Mr Matic sought when challenged with the figure of 37% to make the best he could of the proportions who wished to adhere to their arrangements; this was the point of his greatest difficulty. The figure of 37% is not an indication of the proportion who believed they had been deceived; it includes all who after an interval said, for whatever reason, that they did not wish to adhere to the arrangement to change their preselected long distance carrier.

Telstra’s counsel contended that the maximum number of people potentially misled is nearly 200,000. This submission was quite incorrect and very greatly overstated. There is no way of coming to a clear view about the number of customers which AAPT has obtained through misrepresentation and misleading and deceptive conduct, but I infer that it is a small proportion of those obtained through the dealer network. The scale of the problem is that some thousands of customers have probably been obtained by misleading and deceptive conduct, they all have had the opportunity to realise that this is so and to complain; many have complained and the means of taking their business away from AAPT if they are truly dissatisfied are already to hand for them. This rather indeterminate conspectus of the numbers involved presents a very different view to counsel’s reference to a maximum of 200,000 potentially misled customers.
I accept AAPT’s evidence that AAPT on 5 May 1999 had 70,027 smartChat customers who came through the dealer network. 50,075 of these had completed application forms for preselection, and another 19,952 had completed application forms to obtain override dialling services and had later moved to preselection on their own initiative. In addition to those 70,027 customers a further 17,237 signed up for preselection but were never preselected because they did not ever in fact dial the override code. (The customers who signed up for preselection but did not ever dial the code are excluded under the Safety Net procedure; in the months when the Safety Net procedure was not in effect such customers were preselected.)
As well as action directly related to changing their long distance telephone company back to the supplier they wish for, customers have access to the Telecommunications Industry Ombudsman. Further, Telstra took and advertised initiatives to combat misleading conduct, so that customers who are concerned to complain had ready access to Telstra by telephoning its “Slamming Hotline.”
The likelihood is that customers who have been preselected to AAPT as a result of misrepresentation are aware of their opportunity to return to their previous carrier. There can be very few who are still labouring under the effects of misrepresentation. The barriers to corrective action are slight and any dissatisfied subscriber who was not completely inert would soon pass them. A subscriber must take some initiative to do so but the means to do so are as close as the telephone. The customer affidavits show instances of customers adverting to difficulties fairly readily and without much delay. It would usually be clear to the customer within a month or so at the most if the customer had been deceived.
This is a case where strong measures are clearly required to prevent misrepresentation and misleading and deceptive conduct. The injunction which I propose to make constitutes appropriately strong measures and to go further would be an excessive judicial response.
In Claims 5 and 5(a) in the Summons Telstra claims declarations which will establish that AAPT has, by engaging in conduct alleged in the Points of Claim, engaged in conduct that is misleading or deceptive in contravention of s.52 of the Trade Practices Act 1974 and ss.42 and 43 of the Fair Trading Act 1987 NSW. These declarations would simply state the legal effect of the facts on which the injunction is based.
The Supreme Court has jurisdiction to make binding declarations of right. In Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581 it was said, in the leading judgment, “It is now accepted that superior courts have inherent power to grant declaratory relief.” (Mason CJ, Dawson, Toohey and Gaudron JJ). This power is declared by s.75 of the Supreme Court Act 1970 and is available for exercise in the present proceedings where the court is invested with Federal jurisdiction by subs.86(1) of the Trade Practices Act 1974. The power is a discretionary power and is subject to limits stated in Ainsworth at 582 which do not prevent the Court from making a declaration in this case; the declaration sought is not abstract or hypothetical, and Telstra has a real interest in the subject matter. The making of the declarations claimed is, in my opinion, within power and is discretionary. Cf RAIA Insurance Brokers Ltd v FAI General Insurance Co. Ltd (1993) 41 FCR 164 at 177-178 (Beaumont and Spender JJ).
Declaratory orders are not made as of course when remedies are granted under the Trade Practices Act, and in my opinion they should not be. Telstra’s counsel referred me to observations in Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations (No.2) (1993) 41 FCR 289 at 100 (Shepherd J) and 107 (Hill J). The circumstances of that case were unusual; the applicant as respondent on appeal applied for and was granted a declaratory order although it did not recover any other substantial relief, having regard to the disposition of the appeal; the declaratory order established that the Tobacco Institute’s advertising was misleading and deceptive, this was the central issue in the case and had been opposed without success by the Tobacco Institute, and Shepherd J’s decision to make a declaratory order was based on the view that the matter involved public interest in the form of the health and well-being of the nation. It appears to me that the majority strongly disapproved of the Tobacco Institute’s conduct and that Australian Federation of Consumer Organisations’ success on the issue fought would not otherwise have been reflected in the court’s orders.
In the present case Telstra is entitled to remedies which vindicate its rights, that is, an injunction and orders which will establish its entitlement to damages and provide for their assessment. The factual basis for the assessment of damages is established by the terms of Telstra’s claim and AAPT’s admissions. A declaratory order is a form of relief, and should not be added to other relief granted to a party unless it has some real effect as relief. A declaratory order is not made only to give other remedies an air of completeness or of symmetry.
I must make my own approach to the exercise of the discretion involved and my decision is based on the view that there is not sufficient utility in a declaratory order to justify making it; Telstra has otherwise obtained appropriate remedies.
Counsel should bring in Short Minutes which will give effect to this decision by making an injunction according to Claim 1 as modified, dissolving the interlocutory orders, dismissing Telstra’s other claims for injunctions, and referring the assessment of damages to an agreed arbitrator or, in default of agreement, to an arbitrator whom I will appoint. I have not yet considered questions of costs.

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LAST UPDATED: 27/08/1999