FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Bill Express Limited (ACN 090 059 564) (In Liq) [2009] FCA 1022

TRADE PRACTICES – third line forcing – meaning of “on the condition” – misleading and deceptive conduct – false and misleading representations

Trade Practices Act 1974 (Cth): ss 47(1), 47(6), 47(13)(a), 52, 53(g)

Australian Competition and Consumer Commission v Dukemaster Pty Ltd (ACN 050 275 226) [2009] FCA 682

Australian Competition & Consumer Commission v IMB Group Pty Ltd (ACN 050 411 946) (in liq) [2002] FCA 402

Castlemaine Tooheys Ltd v Williams and Hodgson Transport Pty Ltd (1986) 162 CLR 395

Dowling v Dalgety Australia Ltd (1992) 34 FCR 109

Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1980) 48 FLR 445

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82

Ku-ring-gai Co-operative Building Society, Re (No. 12) Ltd (1978) 36 FLR 134

Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101

Miller v Fiona’s Clothes Horse of Centrepoint Pty Ltd (1989) ATPR 40-693

SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516

Stationers Supply Pty Ltd v Victorian Authorised Newsagents Association Limited (1993) 44 FCR 35

The Paul Dainty Corporation Pty Ltd v The National Tennis Centre Trust (1990) 22 FCR 495

Trade Practices Commission v Radio World Pty Ltd (1989) 16 IPR 407

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v BILL EXPRESS LIMITED (ACN 090 059 564) (IN LIQUIDATION), TECHNOLOGY BUSINESS INTERNATIONAL PTY LTD (ACN 092 574 804) (IN LIQUIDATION), BNY TRUST COMPANY OF AUSTRALIA PTY LTD (ACN 050 294 052) and MOBIUS FINANCIAL SERVICES PTY LTD (ACN 099 088 365) (IN LIQUIDATION)

VID 894 of 2008

GORDON J

14 SEPTEMBER 2009

MELBOURNE

THE COURT DECLARES THAT:

1.         On each occasion, between 2003 and July 2008, on which the First Respondent (“BXP”) and the Second Respondent (“TBI”) entered into a contract with merchants substantially in the form of one of the contracts which are Exhibit “SG-5” to the affidavit of Shane Christopher Grosser sworn on 19 May 2009 and available for inspection at the Victorian Registry of the Federal Court of Australia (respectively, a “Merchant Contract” and a “Rental Contract”) they engaged in the practice of exclusive dealing as defined in s 47(6) of the Trade Practices Act 1974 (Cth) (“the TPA”) (as in force at the relevant time) in contravention of s 47(1) of the TPA, by offering to supply to merchants electronic products and services under a contract with BXP (“the Bill Express Payment System”), on condition that the merchants acquired other goods and services from TBI, a company unrelated to BXP.

2.         Between 2005 and July 2008, each of TBI and BXP engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the TPA, on each occasion when it stated to merchants and prospective merchants that if they acquired the Bill Express Payment System and entered into the Merchant Contract and the Rental Contract:

(1)        the “net cost” would be “$0”;

(2)        “the marketing subsidy will ensure you at least breakeven”;

(3)        “The marketing support program has been devised to ensure that all newsagencies are in a breakeven or better position whilst they grow the system”; and / or

(4)        “Cost to you = $0”;

without disclosing that, should BXP default on its contract, TBI (or any assignees) had the right to enforce the Rental Contract regardless and thereby cause a merchant who entered into a Rental Contract loss and damage.

3.         Between 2003 and July 2008, each of TBI and BXP made a false or misleading representation concerning the existence, exclusion or effect of a condition implied into the Rental Contracts by s 71 of the TPA and in relation to the merchants’ rights under the Rental Contracts, in contravention of s 53(g) of the TPA, on each occasion it entered into a contract that incorporated a term that purported to:

(a)        impose on the merchants an “absolute and unconditional” obligation to pay monthly rental amounts “in all events” notwithstanding “any defect” in the equipment the subject of the contract, and notwithstanding “the condition, operation or fitness for use” of the equipment, when such terms are void pursuant to s 68(1) of the TPA;

and

(b)        limit the merchants’ remedies under the Rental Contract for defects in the equipment or any other breach of the contract to a claim for damages when the merchants had other remedies available to them, including the right to rescind under s 75A of the TPA.

THE COURT ORDERS THAT:

4.         A copy of the reasons for judgment be retained on the Court file for the purposes of s 83 of the TPA.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

INTRODUCTION

1                          “The Bill Express Payment System” was an electronic distribution, promotion, sales and bill payment network made up of various brands including Dialtime, Bill EXPRESS, Bopo, XIP Media and Mobile EFT.  The system allowed consumers to pay various accounts and bills and to purchase products and services such as mobile phone credit at participating newsagents and merchants.  The Bill Express Payment System was provided by Bill Express Limited (ACN 090 059 564) (in liquidation) (“BXP”) to participating newsagents and merchants. 

2                          To obtain the Bill Express Payment System, participating merchants entered into two contracts, usually for a term of 60 months:  one with BXP to obtain the Bill Express Payment System on line (“the Merchant Contract”) and the second with the Second Respondent, Technology Business International Pty Ltd (ACN 092 574 804) (in liquidation) (“TBI”), for rental of the computer and other equipment required to deliver the Bill Express Payment System (“the Rental Contract”) (collectively the “Bill Express Contracts”).

3                          The Bill Express Payment System operated from 2003 until about July 2008.  During that period, between 3,500 and 4,500 merchants entered into the Bill Express Contracts. 

4                          The Applicant, the Australian Competition and Consumer Commission (“the ACCC”), contends that the circumstances surrounding the entry into, and further or alternatively the fact of entry into, the Bill Express Contracts by merchants in the period from mid 2003 until the demise of BXP in July 2008 amounted to:

1.         exclusive dealing, and in particular third line forcing as defined in s 47(6) of the Trade Practices Act 1974 (Cth) (“the TPA”), in contravention of s 47(1) of the TPA;

2.         misleading and deceptive conduct in contravention of s 52 of the TPA;

3.         false or misleading conduct in contravention of s 53(g) of the TPA.

5                          Each Respondent had notice of the hearing and nature of the orders sought by the ACCC.  BXP, TBI and the Fourth Respondent, Mobius Financial Services Pty Ltd (ACN 099 088 365) (“Mobius”), informed the Court that they did not intend to appear.  The Third Respondent, BNY Trust Company of Australia Ltd (ACN 050 294 052) (“BNY”), settled with the ACCC and executed terms of settlement.  Those terms of settlement, in part, are dependent on the outcome of this hearing.

6                          For the reasons that follow, I would grant declarations and make orders in the following terms:

THE COURT DECLARES THAT:

1.         On each occasion, between 2003 and July 2008, on which the First Respondent (“BXP”) and the Second Respondent (“TBI”) entered into a contract with merchants substantially in the form of one of the contracts which are Exhibit “SG-5” to the affidavit of Shane Christopher Grosser sworn on 19 May 2009 and available for inspection at the Victorian Registry of the Federal Court of Australia(respectively, a “Merchant Contract” and a “Rental Contract”) they engaged in the practice of exclusive dealing as defined in s 47(6) of the Trade Practices Act 1974 (Cth) (“the TPA”) (as in force at the relevant time) in contravention of s 47(1) of the TPA, by offering to supply to merchants electronic products and services under a contract with BXP (“the Bill Express Payment System”), on condition that the merchants acquired other goods and services from TBI, a company unrelated to BXP.

2.         Between 2005 and July 2008, each of TBI and BXP engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the TPA, on each occasion when it stated to merchants and prospective merchants that if they acquired the Bill Express Payment System and entered into the Merchant Contract and the Rental Contract:

(1)        the “net cost” would be “$0”;

(2)        “the marketing subsidy will ensure you at least breakeven”;

(3)        “The marketing support program has been devised to ensure that all newsagencies are in a breakeven or better position whilst they grow the system”; and / or

(4)        “Cost to you = $0”;

without disclosing that, should BXP default on its contract, TBI (or any assignees) had the right to enforce the Rental Contract regardless and thereby cause a merchant who entered into a Rental Contract loss and damage.

3          Between 2003 and July 2008, each of TBI and BXP made a false or misleading representation concerning the existence, exclusion or effect of a condition implied into the Rental Contracts by s 71 of the TPA and in relation to the merchants’ rights under the Rental Contracts, in contravention of s 53(g) of the TPA, on each occasion it entered into a contract that incorporated a term that purported to:

(a)        impose on the merchants an “absolute and unconditional” obligation to pay monthly rental amounts “in all events” notwithstanding “any defect” in the equipment the subject of the contract, and notwithstanding “the condition, operation or fitness for use” of the equipment, when such terms are void pursuant to s 68(1) of the TPA;

and

(b)        limit the merchants’ remedies under the Rental Contract for defects in the equipment or any other breach of the contract to a claim for damages when the merchants had other remedies available to them, including the right to rescind under s 75A of the TPA.

THE COURT ORDERS THAT:

4.         A copy of the reasons for judgment be retained on the Court file for the purposes of s 83 of the TPA.

7                          The form and content of these declarations and orders require further explanation. 

FACTS

8                          The facts are dealt with in two parts:  the relevant entities and their directors and then the Bill Express Contracts and the history of dealings between BXP and TBI and the merchants.

(1)        Relevant Entities

BXP

9                          BXP was incorporated on 21 October 1999.  Until 2 September 2004, BXP was called Dial Time Pty Ltd.  It became a public company on 3 September 2004.  Its ultimate holding company was On Q Group Limited (ABN 57 009 104 330).  On 8 July 2008, Craig David Crosbie (“Crosbie”) and Ian Menzies Carson (“Carson”) were appointed joint administrators of BXP.  On 12 December 2008, BXP was wound up and Crosbie and Carson were appointed joint liquidators.  Since incorporation, BXP’s directors have been and are:

10                        From 14 June 2002, its principal place of business was at 677 The Boulevard, Eaglemont, Victoria. 

TBI

11                        TBI was incorporated on 26 April 2000.  Prior to 10 April 2003, it was called On Q International Pty Ltd.  It had a sole shareholder – Technology Business Holdings Pty Ltd (“TBH”).  On 30 June 2008, TBI was wound up and Geoffrey Niels Handberg (“Handberg”) was appointed liquidator.  Since incorporation, TBI’s directors have been and are:

12                        From 14 June 2002, its principal place of business was also 677 The Boulevard, Eaglemont, Victoria. 

TBH

13                        TBH was incorporated on 11 April 2000.  Prior to 10 April 2003, it was called On Q Holdings Pty Ltd.  It is majority owned by Equip Rentals Pty Ltd.  Since incorporation, TBH’s directors have been and are:

14                        From 10 July 2002, its principal place of business has been and remains 677 The Boulevard, Eaglemont, Victoria. 

On Q Companies

15                        There are three companies:  On Q Group Limited, On Q Company Pty Ltd and On Q Technologies Pty Ltd.  At least from 2003, On Q Group Ltd was the ultimate holding company of On Q Company Pty Ltd and On Q Technologies Pty Ltd.  Each of Harold Christiansen, Ian Christiansen and Julian Little was a director of the following companies from the date specified:

16                        As the facts demonstrate, in the period between 2003 and 2008, BXP and TBI were not related as that term is defined in s 4A(5) of the TPA:  Dowling v Dalgety Australia Ltd (1992) 34 FCR 109 at 139 and The Paul Dainty Corporation Pty Ltd v The National Tennis Centre Trust (1990) 22 FCR 495 at 523.  During the relevant period, one was not the holding company or subsidiary of the other and BXP and TBI were not subsidiaries of the same holding company.  

Mobius and BNY

17                        Mobius was approached by TBI to provide finance to TBI for the equipment and installation costs.  Mobius is the trust manager of the Mobius ERT-W04, ERT-W05 and ELR-01 Trusts (“the Trusts”).  Mobius performed various managerial functions for the Trusts.  BNY is the trustee of the Trusts. 

(2)        AGREEMENTS AND HISTORY OF DEALINGS

18                        Notwithstanding that the Respondents did not appear at the hearing, Counsel for the ACCC sought to rely upon admissions made by BXP prior to the appointment of the administrator in July 2008.  Those admissions were contained in letters sent by BXP’s solicitors to the ACCC responding to complaints made to the ACCC about the Bill Express Payment System.  The first letter from BXP’s solicitors dated 4 June 2008 described the Bill Express Payment System and its operation.  Although the letter stated that it did not purport to provide a comprehensive overview of all of the matters in issue, I accept that it provides a useful summary of the structure, implementation and operation of the Bill Express Payment System at that time.  Except where noted, the following summary is extracted from that 4 June 2008 letter.

19                        The relevant events start in early 2003. 

20                        On 1 March 2003, BXP and TBI entered into a Heads of Agreement.  The Heads of Agreement was not referred to in the 4 June 2008 letter but in a subsequent letter from BXP’s solicitors dated 16 June 2008.  The recitals to that Agreement explained the business of BXP and TBI and their roles in the following terms:

A.   [BXP] is in the business of providing pre-paid and bill payment transaction management facilities to Merchants in return for transaction fees.

B.   [BXP] contracts with Merchants to build the business of prepaid and bill payment services and to earn the right to ongoing transaction fees by providing a combination of;

(B1)           Host based prepaid transaction management systems and associated support services around financial collections and settlements.

(B2)           Access to Point of Sale Terminal Systems.

C.   TBI is in the business of renting equipment and providing Point of Sale Terminal Systems with added functionality beyond “prepaid and bill payment systems” including arranging the required funding and contracting with the Merchants for the rental of such equipment.

…

F.    TBI carries the primary risk associated with contracting with the Financiers and the Merchants in terms of providing the physical Point of Sale Terminals.

G.   [BXP] wishes to Introduce Merchants to TBI in return for an Upfront Fee and the right to the ongoing “prepaid and bill payment” transaction fees, from Introduced Merchants.

21                        Under the Heads of Agreement, TBI were to pay BXP fees for the introduction of merchants to TBI.  Subject to the availability of acceptable finance, equipment and service agents, TBI undertook to use its “best endeavours” to provide satisfactory point of sale terminal equipment to merchants:  Annexure A to the Heads of Agreement.  Interestingly, BXP made no promise and provided no undertaking that its services would continue to be supplied to merchants. 

22                        As the Heads of Agreement recorded, BXP had operated “DialTime”, a distribution network of pre-paid telephony products.  “DialTime” apparently ceased in mid 2003 (noting that the company did not change its name until September 2004, see [9] above) when it was rebranded as “Bill Express”. 

23                        As noted earlier (see [2]), to obtain the Bill Express Payment System, participating merchants entered into two contracts, usually for a term of 60 months:  the Merchant Contract and the Rental Contract.

Merchant Contract

24                        The Merchant Contract (Schedule A) was subject to the terms and conditions set out in Schedule B.  Schedule B defined the “Agreement” or the “Merchant Contract” (cl 1) to mean the Merchant Contract and the Rental Contract.  I will deal with the Rental Contract shortly.

25                        Clause 2 of the Merchant Contract entitled “Introduction”stated:

[BXP] has created the Service through which Merchants purchase products (physical or electronic) and / or act as [BXP’s] agents to promote and sell products on behalf of selected Network Providers and suppliers.  Merchants participate in the Service by signing the Merchant [Contract] or the … Rental [Contract] and by agreeing to these Terms and Conditions.  These Terms and Conditions are subject to change by [BXP] from time to time by notice in writing to the Merchant, the Merchant’s continued use of the Service acknowledging the binding effect of such notice. 

(Emphasis added).

26                        Clause 6 entitled “Terminal Rebates” provided:

[BXP] agrees to pay to the Merchant monthly in arrears the rebates for Terminal Rental Fees as per Schedule D.  No rebate is payable for PC DialTime.

27                        The “Terminal” was dealt with in cl 7.  It provided, amongst other things that:

The Terminal(s) may be installed in any approved retail outlet in such position as required by the Merchant, but subject to such conditions of use specified from time to time in the Merchant Agreement.  The Merchant may, subject to this Agreement, use the Terminal for the Services.  The Merchant must not load, change, or modify the software or any other visual, physical or functional aspect of the Terminal(s) nor use the Terminal(s) to process transactions of any nature except as contemplated by this Agreement, without the prior written approval of [BXP].  [BXP] will not be liable to the Merchant with respect to any transaction conducted on the Terminal except in the manner set out in the documents relating to the Service.  The Merchant acknowledges that the Terminal may not operate with full functionality at all times.  In relation to any loss suffered by the Merchant or any other person as a result of the performance or non-performance of the Terminal(s) or any repairs or remedial work required, the liability of On Q [BXP] is limited to the general indemnity provided in Clause 28 of this Agreement or to replacing the Terminal(s). 

(Emphasis added).

28                        Clause 14 of the Merchant Contract specified the merchant’s obligations including that the merchant agreed to participate in the Bill Express Payment System by “observing any other obligation specified in this Agreement”:  cl 14(j) (or (i)).  As noted earlier (see [24]), “Agreement” was defined to mean the Merchant Contract and the Rental Contract.

29                        Finally, cl 44 entitled “No Set-off” stated that:

The Merchant waives all rights of set-off against the equipment rental company, and shall pay all amounts due to the equipment rental company under the equipment rental agreement in full, without set-off, counterclaim or other deduction. 

Rental Contract

30                        As is apparent, the Rental Contract was inextricably linked to the Merchant Contract and an integral part of the Bill Express Payment System.  The Rental Contract was between TBI and the Merchant. 

31                        Clause 2 entitled “Rental” provided:

2.1        During the Term [TBI] will rent to the Merchant and the Merchant will rent from [TBI] the Terminals on the terms and conditions contained in this Agreement.

2.2        [TBI] may assign or otherwise deal with its rights under this Agreement without the Merchant’s consent.

32                        Consistent with the terms of the Merchant Contract (see [25] – [29] above), cl 3 of the Rental Contract provided:

3.1        The Merchant will pay the Terminal Rental Fee as per the package selected in Schedule A or Schedule D (PC DialTime) to [TBI] throughout the Term by direct debit, monthly in arrears.  The Rent Start Date is the Acceptance date with rental payments due on the monthly anniversary of this date and payable on the 26^th day of each month or the next Business Day.

…

3.3        The Merchant’s obligations to pay the sums referred to in clause 3.1 and 3.2 are absolute and unconditional and will not be affected by anything which might otherwise affect them at law or in equity, including any defect in the Terminals or the Service or the condition, operation or fitness for use of the Terminals or the Services or any damage to or loss of the Terminals or Services or any lien or other encumbrance over or with respect to the Terminals or Services or any prohibition, interruption or other restriction of or against the Merchant’s use, operation or possession of the Terminals or the Services for any reason whatsoever.  It is agreed by the parties that the Terminals Rental Fee will continue to be payable in all events in the manner and at the times agreed.  In the event that there arises any defect in the Terminals or Services or any other breach of this agreement by [TBI] the Merchant shall not be entitled to terminate this Agreement and the Merchant’s sole remedy under this Agreement shall be to make a claim for damages against [TBI].

3.4        The Merchant indemnifies [TBI] from any liability for direct or consequential loss or damage, however arising. 

3.5        The Merchant waives all rights of set-off against [TBI], and shall pay all amounts due to [TBI] under this Agreement in full, without set-off, counterclaim or other deduction. 

(Emphasis added).

33                        Merchants were encouraged to enter into the Bill Express Contracts (see [2] above), by attending and viewing a presentation prepared by BXP.  The presentation explained how the Bill Express Payment System was structured and operated.  Various versions of the presentation were provided by BXP’s solicitors as attachments to the 4 June 2008 letter.  Although the content of the presentations varied over time, they contained common elements. 

34                        The first presentation is dated 1 and 2 May 2003.  At that time, BXP was still known as “DialTime”.  The presentation was entitled “DialTime Bill Express Newsagent Business Opportunity ‘Expanding through Electronic Retailing’”.  The presentation explained, amongst other things, that DialTime was an expandable multi-application device on one flexible technology platform which generated revenue to the merchant from “bill payment, pre-paid, Eftpos savings, telephony, email and internet”. 

35                        At that time, “three packages” were on offer.  Each package was said to have different costs, hardware and revenues.  The packages and their respective monthly costs were described in the following terms:

1.    Package 1 – PBE (Prepaid, Bill Payment & EFTPOS)                          $160

2.    Package 2 – PBEC (Prepaid, Bill Payment, EFTPOS, Account Cards)   $385

3.    Package 3 – PBECA (Prepaid, Bill Payment, EFT, Cards, Advertising)  $495

4.    Up front setup fees of $395 once off apply to Package 1 only

5.    All packages include physical installation costs paid by DialTime.

Most merchants selected Package 3 which obliged the merchant to pay TBI a rental fee of $495 plus stamp duty, plus GST per month, which was collected from the merchant by direct debit. 

36                        Under “Packages 2 and 3”, prospective merchants would “enjoy first 3 month 25% rental rebate off $385 & $495 while cards & advertising systems [were] installed, account card details loaded etc”.  The presentation reviewed the financial business case for each package.  For example, the “business case” for “Hi Volume Pack 3” described the “Summary Estimated Totals” to be (I have adopted the format used elsewhere in the presentation):

Each business case suggested that a merchant would not be out of pocket even allowing for what it described as a “50% error factor”.

37                        The presentation concluded with the heading “Next Steps – Snap Shot”.  The steps were said to be:

·           Fill Out an Expression of Interest today indicate preferred package

·           DialTime sales person will visit

·           Complete DialTime application kit

o     Merchant Application & Rental Agreement

o     ANZ Eftpos Application

·           Hardware installed (approx 37 days)

·           Start processing bill payments (approx 7 days)

38                        By June 2003, although the presentation continued to carry the DialTime logo, “Bill Express” was now the principal focus.  The relevant aspects of the presentation were substantially unaltered.  Three packages were again on offer.  However, the business case had been amended.  Now the presentation stated:

Package Summary

Break Even

·     Indicative Bill Pay Break Even – 5 to 10 bill payment transactions a day

Revenue Assumptions:

o    750 bills per month

o    $3,500 credit card per month @ 1.5%

o    750 debit cards at fee of $0.10 per transaction.

…

Bill Payment Revenue

·     Package 1

o    $0.50 + GST for the first 400 trans per month

o    $0.55 + GST for subsequent transactions

o    $395 initial joining fee

·     Package 2 & 3

o    $1.00 + GST for the first 250 trans per month

o    $0.55 + GST for subsequent transactions

o    No initial joining fee

The “next steps” remained substantially the same (see [37] above).

39                        During the course of 2003, all of the right, title and interest of TBI to the rental income payable under the Rental Contracts (then in existence) were assigned by TBI to BNY.

40                        By June 2004, the presentation had been amended but again not in any material way in respect of the business case or the “next steps”:  see [42] and [43] below. 

41                        By mid 2005, the position was quite different.  The substance of the presentation had been amended.  BXP was listed on the Australian Securities Exchange.  There was now one package on offer and it was summarised in the presentation as follows:

…

COST / INVEST PER MONTH*          $495

REBATE AVAILABLE                       $295

Marketing subsidy of up to                     $200

NET COST/ INVEST                             $0

Before GST, indicative revenues and rebates shown – use your actual store volumes for your decision purposes.

…

(Emphasis Added).

Rebates and a marketing subsidy were provided by BXP to merchants to cover the cost of the rental fee.  Merchant Contracts entered into during 2003 and 2004 required BXP to pay rebates to merchants of $295 per month.  From 2005, the Merchant Contract also required BXP to pay a marketing subsidy of $200 if the merchant carried out the certain marketing obligations (see [57] below).  The subsidy payable by BXP then totalled $495, the same amount as the equipment rental fee under the Rental Contract.

42                        The presentation was important because, from February 2005, Sales Representatives were required to obtain an acknowledgement from merchants that the presentation was viewed and the rebate structure understood by requiring them to sign the “Agreement Checklist”.  In para 1 of that checklist, merchants expressly acknowledged:

“I/we have seen the Bill Express presentation and understand the rebate structure”.

43                        In relation to the Marketing Subsidy, the Agreement Checklist also stated:

I / we understand that we will receive a Marketing Subsidy of up to $200 per month

As outlined below receipt of the Marketing Subsidy is dependant on:

Express Shop has formed a Marketing Support / Incentive program to offset costs to your business.  The incentive is equivalent to making up the shortfall of up to 200 bill payment transactions and is in recognition of your efforts in meeting the criteria outlined below and will effectively ensure that you are at a break even or better position.  In order to receive the Marketing Support / Incentive, Newsagents will be encouraged to actively:

·     Understand what bills can be accepted

·     Train staff to understand what bills can be accepted

·     Pay their own bills

·     Staff paying their own bills

·     Ensure the Advertising screen is on at all times

·     Ensure logging into the terminals correctly

·     Ensure all merchandising is visible and displayed both for BillEXPRESS and DialTime

·     Wear badges when supplied

·     Use Express Shop services including

·     Prepaid

·     EFTPOS

·     Bill Payment

·     Introduce Real Estate for bulk bill paying

·     Introduce local retailers for bill payment

·     Assist in growing bill payment transactions – Positively work with Express Shop on incentives and market to current customers

·     Read incoming faxes and newsletters which also informs of new billers coming on to the system.

44                        Each merchant was required to complete the “next steps” (see [37] above).  First, complete an application form.  The form directed merchants to use the checklist to assist them in completing the documents successfully.  The “documents” were the Merchant Contract (Schedule A & B), the Rental Contract (Documents 1-4) and “Package Options & Rebates” (Schedule D & E). 

45                        In the 4 June 2008 letter, BXP’s solicitors emphasised that “each Presentation clearly state[d] that [BXP] was only going to meet 25% of the Equipment rental costs for the first [three] months of the term” and that, in relation to rebates:

Although the pre-contractual representations set out in the Presentation was (sic) that merchants were only entitled to a subsidy equal to 25% of the Equipment rental for the first 3 months, as a good faith gesture and to assist merchants in a more meaningful way, [BXP] initially made available rebates to merchants on the following basis:

(a)        an Advertising Rebate of $210 per month;

(b)        a Marketing Subsidy of $200 per month subject to the merchant meeting certain obligations under the Merchant Agreement; and

(c)        $85 per month where sales of Pre-Paid product exceeded $3,000.

46                        BXP conducted an audit of merchants.  Problems were allegedly identified by BXP.  The merchants dispute these claims.  As a result, in March or April 2008, BXP decided to rationalise the existing rebate model (see [41] and [45]) and adopted a different model:

1.         to no longer pay the marketing subsidy to merchants as they did not meet the marketing subsidy obligations;

2.         to remove the advertising rebate as a variation to the Merchant Contract; and

3.         to remove the $85 rebate also as a variation to the Merchant Contract. 

47                        In consideration of those variations BXP agreed to waive its rights to seek repayment of the marketing subsidy which had historically been paid to merchants who were not performing the marketing tasks.  However, BXP reserved its right to reclaim overpaid marketing subsidies should the remodelled rebate structure be unwound.  BXP alleged it was entitled to claw back those payments pursuant to the non-waiver provisions in the Merchant Contract.  BXP also increased the overall transaction fees payable to the merchants.  Under the previous model, fees were only payable after 200 bill payments.

48                        On 8 July 2008, BXP advised merchants to suspend selling all prepaid products and processing all bill payment transactions until further notice.  BXP appointed administrators on that day.  The Bill Express Payment System effectively ceased on 8 July 2008.  The shareholders of TBI appointed a liquidator on 30 June 2008. 

49                        On about 17 July 2008, Mobius sent letters to the merchants informing them that their obligations under the Rental Contract remained unaffected by TBI’s liquidation.  The letters went on to state that all amounts payable by the merchants under the Rental Contract would continue to fall due each month pursuant to cll 3.1-3.3 of the Rental Contract.

50                        Unsurprisingly, after July 2008 a number of merchants complained to the ACCC – they were receiving no services or rebates from BXP but were still required to continue to pay TBI the rental fees due under the Rental Contract.  As noted earlier (see [32]), cl 3.3 of the Rental Contract required the merchants to continue to make the rental payments even if the BXP services were not provided. 

THIRD LINE FORCING

Legislation and case law

51                        Section 47(1) of the TPA provides that:

Subject to this section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing.

52                        Subsections (2) to (9) describe different ways in which a corporation engages in exclusive dealing.  Section 47(6) deals with a form of exclusive dealing known as third line forcing.  Section 47(6) was amended in 2007: Sch 7, Pt 2, cl 30, Trade Practices Legislation Amendment Act (No 1) 2006 (Cth).  Prior to 1 January 2007, s 47(6) was in the following terms:

A corporation also engages in the practice of exclusive dealing if the corporation:

(a)        supplies, or offers to supply, goods or services;

(b)        supplies, or offers to supply goods or services at a particular price; or

(c)        gives or allows, or offers to give or allow, a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services by the corporation,

on the condition that the person to whom the corporation supplies or offers or proposes to supply the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will acquire goods or services of a particular kind or description directly or indirectly from another person.

53                        By reason of the 2007 amendments, the phrase “not being a body corporate related to the corporation” was added to the end of s 47(6):  Sch 7, Pt 2, cl 30, Trade Practices Legislation Amendment Act (No 1) 2006 (Cth).  That amended form of s 47(6) applies to conduct engaged in after the commencement of the Part:  Sch 7, Pt 2, cl 33, Trade Practices Legislation Amendment Act (No 1) 2006 (Cth).  The Part commenced on 1 January 2007.  Contrary to the submissions of the ACCC, these proceedings concern s 47(6) in both its original and amended form.  Even though for present purposes the amendment does not alter the operation of the section in this proceeding, the fact that s 47(6) has been amended cannot be ignored. 

54                        Before turning to the legal analysis, something should be said about the amendments to ss 47(6) and (7).  The amendments incorporated only some of the recommendations arising from the Review of the Competition Provisions of the Trade Practices Act (“the Dawson Review”).  The only substantive amendment adopted was to ensure that related companies were treated as a single entity for the purposes of s 47(6):  Explanatory Memorandum, Trade Practices Legislation Amendment Bill (No 1) 2005 (Cth), Sch 7, Item 30, para 67. 

55                        The Dawson Review “considered that third line forcing is often beneficial and pro-competitive, and recommended that third line forcing should instead be subject to a substantial lessening of competition test, consistent with other forms of exclusive dealing:” Explanatory Memorandum, Trade Practices Legislation Amendment Bill (No 1) 2005 Cth), Sch 7, Pt 1, para 2.  Initially, the amendments proposed by the draft bill and the accompanying explanatory memorandum implemented that recommendation to bring the treatment of third line forcing into line with other forms of exclusive dealing by requiring that third line forcing be subject to a competition test:  Explanatory Memorandum, Trade Practices Legislation Amendment Bill (No 1) 2005 (Cth), Sch 7, Pt 1, para 3.  However, the draft bill was substantially amended in the Senate and the status quo was restored – a per se prohibition on third line forcing conduct:  Supplementary Explanatory Memorandum, Trade Practices Legislation Amendment Bill (No 1) 2005 (Cth), Outline, para 6.1 (sic) and Notes on Amendments, paras 1.140 – 1.147; Australia, Senate, Debates (2006) Vol S 244, p 127 – 128.  No doubt the decision to restore the status quo was, in large part, driven by pragmatic considerations.  Any corporation concerned about its supply arrangements could, and can still, seek authorisation from the ACCC and the ACCC apparently opposes very few of the hundreds of third line forcing notifications:  Explanatory Memorandum, Trade Practices Legislation Amendment Bill (No 1) 2005 (Cth), Sch 7, Pt 1, para 2 and Committee of Inquiry into the Competition Provisions of the Trade Practices Act 1974 (Cth), Review of the Competition Provisions of the Trade Practices Act, (Commonwealth of Australia, Canberra, 2003), p 129, http://tpareview.treasury.gov.au/content/report.asp.  However, the fact remains that the per se prohibition on third line forcing conduct precludes any examination of the competitive nature of the conduct by a Court with the result that unless authorisation was sought or the conduct notified to the ACCC, the third line forcing conduct contravenes the provision regardless of its effect on competition.  That is unsatisfactory. 

56                        Finally, in considering s 47(6) in both its original and amended form, reference must also be made to s 47(13)(a) of the TPA which provides:

In this section:

(a)        a reference to a condition shall be read as a reference to any condition, whether direct or indirect and whether having legal or equitable force or not, and includes a reference to a condition the existence or nature of which is ascertainable only by inference from the conduct of persons or from other relevant circumstances;

…

57                        Third line forcing has been considered by a number of Australian Courts: see for example Castlemaine Tooheys Ltd v Williams and Hodgson Transport Pty Ltd (1986) 162 CLR 395; The Paul Dainty Corporation Pty Ltd v The National Tennis Centre Trust (1990) 22 FCR 495; Australian Competition & Consumer Commission v IMB Group Pty Ltd (ACN 050 411 946) (in liq) [2002] FCA 402.  The applicable principles may be summarised as follows:

1.         third line forcing has been the subject of per se prohibition since its enactment.  There is no requirement that the conduct complained of be done for the purpose or effect or likely effect of substantially lessening competition:  IMB Group [2002] FCA 402 at [56];

2.         third line forcing requires two discrete products or services with the supply of the first being conditional on the purchaser acquiring another product or service directly or indirectly from a third person:  IMB Group [2002] FCA 402 at [72];

3.         however, where two products or services manufactured or supplied by different entities, are bundled and supplied as a bundled package by the lead supplier, exclusive dealing is not made out because the purchaser could have made separate arrangements for the acquisition of the different components of the package:  IMB Group [2002] FCA 402 at [72].

58                        As the second principle provides, the supply of the first must be conditional on the purchaser acquiring another product or service directly or indirectly from a third person.  Section 47(6) uses the phrase “on the condition”.  What that phrase in the context of s 47(6) actually means has not been fully explored.  That is unsurprising. 

59                        Some early decisions of the Full Court of the Federal Court considered whether it was necessary to prove an element of “compulsion” in s 47(6):  Re Ku-ring-gai Co-operative Building Society (No. 12) Ltd (1978) 36 FLR 134 and S.W.B. Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1980) 48 FLR 445.  In the first, Re Ku-ring-gai 36 FLR 134, Brennan J concurred with Deane J.  Bowen CJ dissented.  Deane J dealt with the issue in the following terms at 167-168:

(b)        Is the condition or requirement that the member insure with a particular nominated insurer within the scope of s. 47(6)?

The applicants argued that the condition or requirement that the member insure with a particular nominated insurer was not within the scope of s. 47(6) for the reason that the condition was not a condition imposed by the applicant and was not, in any event, a condition that the member “acquire services” within the meaning of the subsection.

…

The practice of exclusive dealing does not necessarily involve the imposition of any condition. It involves supply upon a condition.  The condition may well have been suggested by the recipient of supply.  It may have been imposed by some third party.  It may arise, by implication, from all the circumstances in which the goods or services were supplied. Even if the relevant condition upon which a loan was made was that contained in the rules of the applicants, a loan by an applicant to one of its members would, if that condition were applicable to it, be, for the purposes of s. 47 of the TPA, a supply of services upon that condition.  The section does not look to the origin of the condition upon which there is a supply of services. The section looks to the supply of services upon that condition.

(Emphasis added).

60                        Two years later in S.W.B. 48 FLR 445, a Full Court comprised of Smithers, Northrop and Sheppard JJ revisited s 47(6).  In that case, it was alleged that dealings between a
co-operative society and its members contravened s 47(6) of the TPA.  Smithers J quoted and applied Deane J’s test in Ku-ring-gai 36 FLR 134:  see S.W.B. 48 FLR 445 at 453.  Northrop J dealt with the issue in the different terms at 464 - 465:

It does not matter whether the condition is legally binding or not, see s. 47 (13) (a) of the [TPA], but in my opinion the condition must have some attributes of compulsion and futurity.  This can be expressed in the form “If we do this, you will (must) do that”.  A condition in the nature of an obligation must be imposed upon the person dealing with the corporation.  The condition to be complied with by that person must result from something done or to be done by the corporation imposing the condition.

…  This is illustrated by Re Ku-ring-gai Co-operative Building Society (No. 12) Ltd. (1978) 36 F.L.R. 134 and Trade Practices Commission v. Legion Cabs (Trading) Co-operative Society Ltd. (1978) 35 FLR 372.  In the former case the building society required members to whom it lent moneys on the security of an interest in real estate to insure that interest with a person nominated or approved by the society.  In the second case, the co-operative society required members who received the benefit of radio services provided by it to purchase petrol and oil from designated service stations.  In each case the requirement by the societies imposed an obligation upon the persons to whom they supplied a service to acquire goods or services from other persons designated or approved by the society and to the exclusion of persons carrying on similar businesses to those designated or approved by the society.  In each case the arrangement was in the form “If the society does this (supplies the service or offers to supply the service) then you will (must) do that (acquire services from a nominated insurer or acquire goods from nominated service stations)”.  In each case the requirement can be said to be a condition which has attributes of compulsion and futurity.  In each case persons competing with the nominated insurer or the nominated service station were affected adversely since the person upon whom the obligation was imposed was not free to acquire services or goods from them.

In the present case, the alleged condition or obligation has neither of the attributes of compulsion or futurity.  Persons competing with Alliance are not affected adversely in the requisite sense.  A member of the credit union desirous of acquiring travel services is free to deal with any person engaging in the travel agency business.  He is not required to perform a series of acts over an extended period.  He is not required by a condition or obligation to acquire the services of Alliance and Alliance only.  If he does acquire the services of Alliance he need not disclose his membership of the credit union.  If he does acquire the services of Alliance and discloses that he is a member of the credit union, then upon him paying the full costs of the travel services, and upon him entering on his travels, Alliance is required under its arrangement with the credit union to make a commission rebate to the credit union and the credit union then supplies its services to the member.  This arrangement is in the form: “If you do that we will (must) do this.” No condition in the nature of an obligation is imposed upon the person dealing with the corporation.  At no time is that person under any obligation to perform or observe the alleged condition.  Any obligation that may arise is imposed upon the corporation.  This conduct does not come within the conduct described by s. 47(6) of the [TPA].  It is not to be analysed in the same form as in the society cases.

61                        The ACCC submitted that Northrop J should not be taken as having introduced a requirement that an element of compulsion must be shown to have been imposed on the consumer of the third line forcing obligation.  Instead, the ACCC submitted the requirement was no more than that the condition must be one which imposed on the consumer the practical requirement (even if not legally enforceable) to contract with a third line forcing beneficiary.  This latter formulation was, the ACCC submitted, consistent with the decision of Ryan J in Stationers Supply Pty Ltd v Victorian Authorised Newsagents Association Limited (1993) 44 FCR 35 at 61 in which he stated that:

Section 47 prohibits exclusive dealing.  The question raised by the present application in the context of s 47(6) may be briefly stated.  Has Newspower Victoria supplied promotional services to advertising members on the condition that those newsagents will purchase goods of a particular kind or description from VNS?  The applicant identifies the goods as “promotional goods” or alternatively “general newsagent supplies”.  The two essential elements of the conduct struck at by s 47(6) are indicated by the phrases “on the condition that” and “will acquire goods or services”.  In SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1980) 48 FLR 445 the meaning of the words “will acquire” were considered by a Full Court of this Court.  In the course of his judgment Northrop J observed at 381:

“It does not matter whether the condition is legally binding or not (see s. 47(13)(a) of the TPA) but, in my opinion, the condition must have some attributes of compulsion and futurity.  This can be expressed in the form: “If we do this, you will [must] do that.”  A condition in the nature of an obligation must be imposed upon the person dealing with the corporation.  The condition to be complied with by that person must result from something done or to be done by the corporation imposing the condition.”

With one qualification, I respectfully agree with what was there said by his Honour.  It is not, in my view, necessary that the supplying corporation impose the condition.  The condition may be attached to the supply at the instigation of either party or, indeed, a third party; the essential requirement is the obligation on the recipient of the goods or services to acquire goods or services of a particular kind or description from another: see Re Ku-ring-gai Co-operative Building Society (No.12) Ltd (1978) 36 FLR 134 at 167 per Deane J.  The applicant must, in my view, establish an element of compulsion, not necessarily one that is legally enforceable, but one which goes beyond creating a mere hope or expectation in the person for whose benefit the condition has been attached.

(Emphasis added, some citations abridged).

62                        The ACCC contended that as a result of the development in the case law, the “so called compulsion” element need only rise higher than mere hope or expectation.  I reject that contention.  In my view, it not only ignores the words of s 47 (including ss 47(6) and (13)) but assumes (incorrectly) that all commercial arrangements must somehow fit into or match those which have gone before.  They do not.

63                        The starting point must be the words of the statute.  Under s 47(6), a corporation engages in the practice of exclusive dealing if the corporation:

(a)        supplies, or offers to supply, goods or services;

…

on the condition that the person to whom the corporation supplies … the goods or services … will acquire goods or services of a particular kind or description directly or indirectly from another person … .

(Emphasis added).

64                        Whether arrangements between a supplier and a purchaser contravene s 47(6) are tested against the words of the statute.  As the emphasised words make clear, there is an essential element – supply of goods or services to a purchaser “on the condition” that the purchaser will acquire goods or services of a particular kind or description from another.  So for example, in SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 at 527 (para [33]), Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ, in considering s 4L of the TPA (dealing with the question of severability) in the context of third line forcing, stated:

[T]he making of the loan contract … contravened the [TPA] by reason of the inclusion of the provision in the loan contract requiring AFS USA to direct certain work to the corporations that the lender directed.  Making the contract with that condition constituted engaging in the practice of exclusive dealing.  It was the inclusion of the condition obliging AFS USA to direct its work in that way that brought the lender’s supply of services within s 47(6). 

65                        Of course, the “condition” need not be legally enforceable or direct (see s 47(13)(a)) and the imposition of the “condition” may, for example, be a conclusion the Court inferentially draws from “the entire factual matrix”: Australian Competition & Consumer Commission v IMB Group Pty Ltd (ACN 050 411 946) (in liq) [2002] FCA 402 at [79].  It is therefore unsurprising that Courts have rejected the contention that infringement of s 47(6) of the TPA was determined by whether or not the supplier offered to enter into a single packaged contract with the purchaser or whether the arrangements involved the purchaser entering into separate contracts with the tying supplier and the tied supplier:  IMB Group [2002] FCA 402 at [79], [84] and [95]; Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1986) 162 CLR 395 at 403; The Paul Dainty Corporation Pty Ltd v The National Tennis Centre Trust (1990) 22 FCR 495 at 515.

66                        Whether in the present case the “the entire factual matrix” establishes the supply of goods or services to a purchaser “on the condition” that the purchaser acquire goods from another is an issue to which I shall now turn. 

Application of law to the facts

67                        The ACCC submitted that there was “an abundance of evidence” that a “condition” within the meaning of s 47(13)(a) of the TPA was imposed on merchants.  The “condition” being that in order to acquire the Bill Express Payment System from BXP, merchants had to simultaneously acquire equipment in the form of “computer hardware (etc)” from TBI. 

68                        Put another way, the ACCC submitted that the evidence established that it was a condition of:

1.         the offer by BXP to supply to the merchants the electronic products and services that formed part of the Bill Express Payment System; and / or

2.         the actual supply by BXP to the merchants of the electronic products and services that formed part of the Bill Express Payment System,

that the merchants acquire goods and services from TBI – namely, the lease of all of the equipment necessary to conduct the Bill Express Payment System.  I agree.  The reverse was also true.  It was a condition of the offer by TBI to lease the equipment necessary to conduct the Bill Express Payment System and / or the actual lease of the equipment necessary to conduct the Bill Express Payment System to the merchants that the merchants acquire goods and services from BXP – namely, the electronic products and services that formed part of the Bill Express Payment System. 

69                        What then was the evidence of the “condition”?  The ACCC relied upon a number of documents to support the existence of the “condition” and the application of s 47(6) of the TPA.  I have not included each fact and matter relied upon by the ACCC.  In my view, the contents of the following documents are sufficient to support such a finding.  First, cl 14 (either para (i) or (j)) of every Merchant Contract made it a condition of that agreement (which by definition included the Rental Contract) that the merchant observe each obligation specified in both of the Bill Express Contracts:  see [28] above. 

70                        Secondly, the cover page of the Merchant Contract and the Rental Contract was entitled “Express Shop Application Form” which stated “Please use this check list to assist in completing the attached documents successfully”:  see [44] above.  Both the Bill Express Contracts were listed as attached and were in fact attached.

71                        Thirdly, cl 2 of the Merchant Contract contained the “Introduction” identified earlier:  see [25].  Four versions of the Merchant Contract were tendered in evidence.  At some point over the life of the Bill Express Payment System, the wording of the sentence “Merchants participate in the Service by signing the Merchant [Contract] or the … Rental [Contract] and by agreeing to these Terms and Conditions” also read “Merchants participate in the Service by signing the Merchant [Contract] and the … Rental [Contract] and by agreeing to these Terms and Conditions”.  I accept the ACCC’s submission that the change in the wording does not materially alter the application of s 47(6) of the TPA because a merchant could only enter both Bill Express Contracts and by reason of cl 14(i) or (j) and the definition of “Agreement” in the Merchant Contract, each merchant was still bound by both Bill Express Contracts.

72                        Finally, not only were the Bill Express Contracts contractually linked they were also commercially linked.  As one document provided to at least some merchants (entitled “Bill Express Overview”) stated:

COSTS

24^th every month [BXP] will deposit in your account $495 + GST+ $6.05

27^th every month Mobius our financial partner withdraws $495 + GST

COST to you = $0.  [BXP] is fully subsidised for merchants

The $495 was the amount of the monthly rental payable to TBI under most of the Rental Contracts. 

73                        For those reasons, each of BXP and TBI contravened s 47(6) of the TPA.

OTHER PROVISIONS OF THE TPA AND CASE LAW

(1)        Section 52 of the TPA

74                        In relation to each merchant who entered into the Bill Express Contracts after 2005, the conduct complained of concerns statements (both oral and in writing) to merchants that in relation to the Bill Express Payment System each merchant would be “fully subsidised” because one or more of the following statements were made to them:

(1)        the “net cost” would be “$0”:  see [78(1)] below;

(2)        “the marketing subsidy will ensure you at least breakeven”:  see [78(2)] below;

(3)        “The marketing support program has been devised to ensure that all newsagencies are in a breakeven or better position whilst they grow the system”:  see [78(3)] below;

(4)        “Cost to you = $0”:  see [72] above.

75                        It is necessary to identify the conduct complained of and then identify the proper approach to the conduct which is sought to be impugned:  Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 87-90.

76                        As set out in Australian Competition and Consumer Commission v Dukemaster Pty Ltd (ACN 050 275 226) [2009] FCA 682 at [10], the principles may be summarised as follows:

1.         A contravention of s 52(1) of the TPA is established by “conduct” which is misleading or deceptive or likely to mislead or deceive:  Global Sportsman Pty Ltd 2 FCR 82, 87.  The “conduct”, in the circumstances, must lead, or be capable of leading, a person into error (Hannaford (trading as Torrens Valley Orchards) v Australian Farmlink Pty Ltd [2008] FCA 1591 at [252] citing Taco Company of Australia Inc v Taco Bell Pty Ltd(1982) 42 ALR 177 at 200;  Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd(1982) 149 CLR 191 at 198) and the error or misconception must result from “conduct” of the corporation and not from other circumstances for which the corporation is not responsible:  Global Sportsman Pty Ltd 2 FCR 82, 91.  “Conduct” is likely to mislead or deceive if there is a “real or not remote chance or possibility regardless of whether it is less or more than fifty per cent”:  Global Sportsman Pty Ltd 2 FCR 82, 87.

2.         Section 52(1) is concerned with the effect or likely effect of “conduct” upon the minds of that person or those persons in relation to whom the question of whether the “conduct” is or is likely to be misleading or deceptive falls to be tested.  The test is objective and the Court must determine the question for itself:  Global Sportsman Pty Ltd 2 FCR 82, 87.  Section 52 is not designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests:  Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 at 241.  Moreover, it would be wrong to select particular words or acts which although misleading in isolation do not have that character when viewed in context:  Elders Trustee 78 ALR 193 at 241 citing Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199.

3.         “Conduct” can, of course, include making a statement which is misleading or deceptive or likely to mislead or deceive:  Global Sportsman Pty Ltd 2 FCR 82, 88.

4.         By making a statement of past or present fact, a corporation’s state of mind is irrelevant unless the statement involved the state of the corporation’s mind:  Global Sportsman Pty Ltd 2 FCR 82, 88.  Contravention of s 52(1) does not depend upon the corporation’s intention or its belief concerning the accuracy of the statement of fact but upon whether the statement conveys a meaning which is false.  A false meaning will be conveyed if what is stated concerning the past or present fact is inaccurate but also if, although literally true, the statement conveys a meaning which is false.

…

Application of law to the facts

77                        As the factual analysis makes clear, although the ACCC alleged that the conduct complained of was both oral and in writing, I have only made findings in relation to the documentary evidence relied upon by the ACCC.  The nature of the case and the evidence adduced by the ACCC is not of the kind where, in the absence of an agreement as to the facts or adequate testing of the oral assertions, it is appropriate to make findings in relation to the alleged oral statements.

78                        The evidence disclosed that merchants to whom the Bill Express Payment System was promoted were given documents that expressly stated that the system would, in effect, be “fully subsidised”.  Those documents included:

1.         a printed slide kit with the BXP corporate logo entitled “Why should you bother with bill payment?” which was provided to some merchants and which stated that the “net cost” would be “$0”;

2.         a promotional document entitled “Introduction to Bill Express” printed on BXP letterhead and provided to some merchants which stated:

Marketing subsidy – providing you support for [sic] Bill Express, the marketing subsidy will ensure you at least breakeven.  You will not be out of pocket to install and [sic] will save on Eftpos rental and fees.

3.         a promotional document entitled “Bill Express” provided to some merchants which stated:

The marketing support program has been devised to ensure that all newsagencies are in a breakeven or better position whilst they grow the system.

4.         another promotional document provided to some merchants entitled “Bill Express Overview” which is set out at [72].

79                        I accept the ACCC’s submission that each of those statements represented to the merchants to whom they were made that the Bill Express Contracts they would enter to acquire the Bill Express Payment System ensured that they would be fully subsidised.  The merchants would at least break even financially.  As the factual analysis showed, that representation was misleading.  The Bill Express Contracts did not ensure that the merchants would at least break even financially because:

1.         the Merchant Contract contained a term that permitted BXP to unilaterally vary the Merchant Contract (see [25] above) which BXP in fact did in 2008 by withdrawing some of the rebates previously paid to merchants:  see [46] – [47] above;

2.         although the Bill Express Contracts were contractually linked, they were separate contracts which exposed the merchants to a risk of financial loss if BXP ceased to pay any rebates and / or supply the Bill Express Payment System because TBI (or its assignee) could and did continue to enforce the obligation of the merchant to pay rent to TBI under the Rental Contract:  see [32] and [49] above; and

3.         the Bill Express Contracts purported to bind each of the merchants to an undertaking that “it waive[d] all rights of set-off against [TBI]”.

80                        Put simply, the arrangements promoted by BXP and TBI:

1.         did not ensure that each of the merchants was in a breakeven or better position;

2.         did not ensure that the “net cost” of the Bill Express Payment System to the merchants was “$0”.

81                        Consistent with the principles earlier identified (see [76] above), the conduct, in the circumstances, lead or was at least capable of leading, a merchant into error.  As the ACCC submitted, these misleading representations were with respect to future matters.  There was nothing to suggest that BXP and TBI had reasonable grounds for suggesting a risk free future for merchants.  Accordingly, I accept that the conduct also contravened s 51A of the TPA although I note that no relief was sought in relation to a contravention of that section. 

(2)        SECTION 53(G) OF THE TPA

82                        Section  53(g) and its application to the facts in these proceedings was separately addressed by the ACCC.  Relevantly, s 53(g) headed “False or misleading representations” provides:

A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:

…

(g)        make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.

Application of law to the facts

83                        The Rental Contract contained a term (see cl 3.3 at [32] above) which contained two unusual aspects.  First, it purported to impose on the merchants an “absolute and unconditional” obligation to pay monthly rental amounts in all events notwithstanding:

1.         “any defect” in the equipment the subject of the Rental Contract;

2.         “the condition, operation or fitness for use” of the equipment.

84                        Clause 3.3 imposed on the merchants an “absolute and unconditional” obligation to pay monthly rental amounts “in all events” notwithstanding “any defect” in the equipment provided under the Rental Contract, and notwithstanding “the condition, operation or fitness for use” of the equipment.  Those terms are void pursuant to s 68(1) of the TPA. 

85                        Secondly, cl 3.3 purported to limit the merchant’s remedy under the Rental Contract for defects in the equipment or any other breach of the Rental Contract to a claim for damages.  That statement was false.  If the equipment was defective or not fit for a stated purpose, the merchant would be entitled to either rescind the contract and recover the price paid as a debt due from the supplier (s 75A of the TPA) or obtain relief under the TPA including possibly orders avoiding the merchant’s obligation to pay monthly rental fees. 

86                        As Counsel for the ACCC submitted, cl 3.3 of the Rental Contract was equivalent to a retailer asserting in store displays that the business has a “no refunds, exchange only” policy.  Such statements have been held to be false and in contravention of s 53(g) of the TPA because the remedies available under the TPA are not restricted to exchanges but include the right to rescind and be refunded the purchase price:  see e.g. Miller v Fiona’s Clothes Horse of Centrepoint Pty Ltd (1989) ATPR 40-693 and Trade Practices Commission v Radio World Pty Ltd (1989) 16 IPR 407.

87                        As noted earlier, cl 3.3 was included in the Rental Contract.  The Rental Contract formed part of the Merchant Contract (see [24] above).  The Bill Express Contracts were provided to merchants.  The Bill Express Contracts contained a false and misleading representation concerning:

1.         the existence, exclusion or effect of a condition implied into the Rental Contract by s 71 of the TPA; and

2.         the existence of other remedies available to the merchants including the right to rescind under s 75A of the TPA.

RELIEF

Declarations of contravention of the TPA

88                        The relief sought by the ACCC is primarily for declarations that each of BXP and TBI engaged in the practice of exclusive dealing as defined in s 47(6) of the TPA in contravention of s 47(1) of the TPA in the manner earlier identified and two further declarations dealing with the conduct contravening ss 52 and 53(g) of the TPA. 

89                        Those contraventions having been found, the question is whether the Court should make the binding declarations substantially in the form sought by the ACCC.  There was much discussion and debate during the course of the hearing about the form of the declarations.  I accept that the Court has power to make binding declarations (s 21 of the Federal Court of Australia Act 1976 (Cth)).  In the circumstances of the present case, there are important reasons for granting the declarations sought.  First, the fact that the proceedings were in reality undefended, there is some benefit to the public, the Respondents and the merchants that the contravening conduct be clearly identified. 

90                        Secondly, BNY has agreed to give an undertaking that if the Court finds that BXP and TBI engaged in the practice of exclusive dealing within the meaning of s 47(6) of the TPA, BNY will not take steps to recover any further money from merchants under the Rental Contracts and will use reasonable endeavours to repay to merchants the rental fees which BNY has collected but not yet paid over.

Declarations and Orders in relation to Rental Contracts

91                        The ACCC also sought a declaration that all Rental Contracts were void on the basis of unlawful third line forcing.  The ACCC submitted that the Rental Contracts were unlawful at common law because of the breach of s 47 of the TPA and thus void.  I would not grant such a declaration.  The ACCC could not and did not submit in evidence each of the thousands of Rental Contracts executed by TBI and the merchants.

92                        There are other reasons for refusing to grant a declaration of the kind sought by the ACCC.  First, I am not persuaded that contravention of s 47(6) necessarily gives rise to a finding that the contracts are infected by illegality and thus are void at common law:  Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101.  However, even if I was persuaded that there was illegality, what is illegal?  In the context of s 47(6), the ACCC submitted (properly in my view), that the third line forcing operated in respect of both the Rental Contract and the Merchant Contract.  In those circumstances, I do not consider that the form of declaration sought by the ACCC is appropriate.  I can see no basis for choosing one contract over the other – they are contractually and commercially linked.  In fact, the form of the first declaration proceeds on that basis. 

93                        Thirdly, BXP and TBI are in liquidation and BNY has given an undertaking in the terms earlier identified (see [90] above).  In those circumstances, it is by no means clear why such a declaration is necessary. 

94                        For the same reasons, I refuse to grant the order sought by the ACCC that the following Rental Contracts which were adduced in evidence were void, namely:

1.         the Rental Contract executed by HDF Nominees Pty Ltd (ACN 007 007 132) on 8 November 2005 and by TBI on 17 November 2005;  and

2.         the Rental Contract executed by Neil Brennan on 13 November 2006 and by TBI on 15 November 2006.

95                        If there is some compelling legal or other reason why such a declaration (or order in relation to the two Rental Contracts identified in [94]) is necessary, the ACCC may seek to have the matter relisted and I will consider the issue upon the receipt of further submissions.

Costs

96                        The ACCC made no submissions as to costs.  Again, if the ACCC seeks costs, it should file a submission (of not more than two A4 pages) by no later than 18 September 2009 directed at the question of costs.  In the absence of such a submission, there will be no order as to costs as between the ACCC and each of BXP, TBI and Mobius.

Associate:

Dated:         14 September 2009