About Image Limited v Advaro Limited - [2019] NZCA 337

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA710/2018
[2019] NZCA 337

BETWEEN	ABOUT IMAGE LIMITED AND OTHERS Appellants
AND	ADVARO LIMITED First Respondent ADVARO FUNDING LIMITED Second Respondent

CA775/2018
BETWEEN	ABOUT IMAGE LIMITED AND OTHERS Appellants
AND	ADVARO LIMITED First Respondent ADVARO FUNDING LIMITED Second Respondent

Hearing:	25 June 2019
Court:	Miller, Venning and Dunningham JJ
Counsel:	D M Fraundorfer and T J Conder for Appellants D H McLellan QC and B K McLay for Respondents
Judgment:	26 July 2019 at 2.15 pm

JUDGMENT OF THE COURT

AThe appeals are dismissed.
BThe cross-appeal in relation to CA775/2018 is dismissed.

_____________________________________________________________________

REASONS OF THE COURT

(Given by Miller J)

Introduction

The appellants were small business customers of a telecommunications services provider called Intagr8 Ltd. Intagr8 sold them a package deal under which:
(a)it sold new telecommunications equipment to a financier, usually the first respondent Advaro Ltd (Advaro);
(b)Advaro rented the equipment to each appellant on (usually) five-year terms in exchange for monthly rental payments under a “Master Rental Agreement” (MRA); and
(c)Intagra8 sold each appellant telecommunications services (essentially, calls and data) on terms which delivered them a credit or rebate approximately equal to the rental payments they made to Advaro.
Intagr8’s sales pitch was that its customers could put their telecommunications spend to good use, getting new equipment while paying about the same for calls and data. Its business model was said to be viable because it got discounted rates from large telecommunications suppliers, who benefited from the volume of business and reduced customer churn.
Intagr8’s business model appears to have been flawed. The company went into liquidation on 17 December 2015 and ceased to provide either the services or the rebates, leaving the appellants with obligations under their MRAs with Advaro.
The appellants brought this proceeding together. Originally there were 64 of them; 14 remain. They say they validly cancelled their rental agreements and they seek a refund of money paid. Advaro Funding Ltd (the second respondent) counter‑claimed for outstanding rent and claimed under personal guarantees.
The appellants’ case is that the arrangements with Intagr8 and Advaro were “fundamentally interlinked”, creating a single tripartite contract that they might, and did, cancel for non-provision of the services and credits. Alternatively, the arrangements were marketed as to create a misleading and deceptive impression that they were interlinked, justifying relief under s 43 of the Fair Trading Act 1986.
The trial of the proceeding has been split.[1] In the first part, which was intended to address issues common to all appellants, Jagose J answered questions posed by the parties under r 10.15 of the High Court Rules 2016.[2] The Judge found that the MRA stood alone. He answered “maybe”, and so left open, the question whether Intagr8 might have acted as Advaro’s agent so as to found liability under s 9 of the Fair Trading Act. The CA775/2018 appeal and cross-appeal are brought from that judgment. The balance of the proceeding has not yet been tried.

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] NZCA 337
Decision Date: 26 July 2019

CaseChat Overview and Summary

The Court of Appeal dismissed the appeals brought by About Image Limited and other appellants against Advaro Limited and Advaro Funding Limited. The appellants were customers of Intagr8 Ltd, a telecommunications services provider, which sold them a package deal involving equipment rental, telecommunications services, and credits. Intagr8 went into liquidation, leaving the appellants with obligations under their rental agreements with Advaro. The appellants sought refunds and argued that the arrangements with Intagr8 and Advaro were either a single tripartite contract or created a misleading impression. The Court found that the Master Rental Agreement (MRA) stood alone and did not form a single contract with Intagr8’s services and credits. The court also held that Intagr8 might have acted as Advaro’s agent, but this did not affect the outcome of the appeal. The Court of Appeal upheld the High Court's decision, dismissing the appeals and the cross-appeal, and costs were to lie where they fell.

Orders