FEDERAL COURT OF AUSTRALIA

Technology Leasing Ltd v Lennmar Pty Ltd [2012] FCA 709

THE COURT ORDERS THAT:

1.    Within 14 days of this order the parties formulate the declarations and orders arising from this decision.

2.    The proceedings be listed for the making of orders on 20 July 2012.

3.    Liberty to apply.

4.    Costs be reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

TABLE OF CONTENTS

REASONS FOR JUDGMENT

INTRODUCTION

1    The applicant, Technology Leasing Limited (‘TLL’), seeks unpaid instalments allegedly owing under a rental agreement (‘the rental agreement’) which TLL claims was made between TLL and the first respondent Lennmar Pty Ltd (‘Lennmar’) or about 19 December 2007 for the rental of one NEC IPK II Digital Telephone System. The value of the equipment was quoted by the respondent as $25,405.30. The equipment was to be used in conjunction with communication services which were by agreement entered into simultaneously with Fresh Telecoms (‘Freshtel’).

2    The rental agreement is alleged to be signed on behalf of Lennmar by the second respondent, Mr Glenn James Parton, who guaranteed the obligations of Lennmar under the rental agreement.

3    TLL alleges that Lennmar’s failure to pay monthly rental payments under the agreement amounted to a repudiation of the rental agreement by Lennmar and that in consequence of such repudiation TLL was entitled to, and in fact did, terminate the rental agreement on 21 September 2010. TLL also alleges that Mr Parton is in breach of his guarantee for failing to pay the amounts owed by Lennmar to TLL. Accordingly, TLL seeks the following relevant orders:

(a)    Damages in the sum of $31,531.46;

(b)    Interest pursuant to section 100 of the Civil Procedure Act 2005 at the prescribed rate;

(c)    The Applicant’s costs of these proceedings on a full indemnity basis pursuant to Clause 17.1(b) of the Agreement or pursuant to s 98 of the Civil Procedure Act 2005

4    The existence of the rental agreement and the alleged breaches of the rental agreement are denied. A cross-claim has been filed by Lennmar and Mr Parton against TLL.

SUMMARY OF FINDINGS

5    Over time, these proceedings have metastasised into a series of complex issues. For this reason, it is convenient to set out a summary of the Court’s findings on the various issues raised by the parties. Each issue is discussed hereunder.

(a)    Lennmar did enter into a valid agreement with TLL.

(b)    The contract between Lennmar and TLL was not frustrated.

(c)    Although Freshtel did make misleading and deceptive statements, Freshtel was not TLL’s agent and thus TLL cannot be held liable on this basis.

(d)    However, TLL is jointly and severally liable for Freshtel’s misrepresentations by virtue of s 73(1) Trade Practices Act 1974 (Cth) (‘TPA’).

(e)    TLL aided and abetted Freshtel’s misleading and deceptive conduct and thus contravened s 75B of the TPA.

(f)    TLL did not contravene s 47(6)(a) of the TPA by engaging in third line forcing. However, TLL aided and abetted Freshtel’s contravention of this section.

(g)    TLL contravened s 12CA(1) of the Australian Securities and Investment Commission Act 2001 (Cth) (‘ASIC Act’) by engaging in unconscionable conduct.

(h)    Relief should be granted under s 7 Contracts Review Act 1980 (NSW).

BACKGROUND

6    TLL is engaged in the business of providing equipment leasing, that is, purchasing certain equipment at the request of customers and leasing such equipment to those customers.

7    At all relevant times Lennmar managed a medical surgery in Capalaba, Queensland known as ‘Capalaba Surgery’ which was used by three medical practitioners. Mr Parton and a third party are the directors of Lennmar Pty Ltd. Mrs Kieren Parton, the wife of Mr Parton, is the practice manager of the Capalaba Surgery, but not a director of Lennmar.

8    Freshtel was a telecommunications services provider. In November 2007 Freshtel represented to the respondent that Freshtel could supply the respondents with telecommunications services and telephone equipment (‘the equipment’) for use in the conduct of the Capalaba Surgery. According to the Partons’ evidence the representative of Freshtel represented that Freshtel rented telephone capacity from large communications companies such as Telstra and could provide telephone services at the same charges as that which Lennmar was currently incurring. Freshtel would pass on its savings to its customers in the form of equipment.

9    Relying upon such representations, Lennmar, by its director Mr Parton, duly signed a Services Agreement with Freshtel. Unknown to Mr Parton, the papers he signed also included a rental agreement with TLL (‘the rental agreement’). The obligations under both agreements were guaranteed by Mr Parton.

10    After Mr Parton signed the service agreement and rental agreement, Freshtel transmitted it to Bower Finance Pty Ltd (‘Bower Finance’). Bower Finance was in the business of preparing leasing proposals. It acted as a broker, who referred applications from customers to financers including TLL. If the leasing proposal was approved by the financer, Freshtel would prepare an invoice in respect of the equipment to be leased and forward such invoice to Bower Finance, who would forward it on to TLL. In consideration for these services, TLL paid Bower Finance a brokerage fee.

11    Lennmar was unaware of Bower Finance’s role in these business arrangements. As will become apparent, Bower Finance plays no significant role in the proceedings.

12    Between December 2007 and July 2008 Freshtel supplied communications services to Lennmar. However, in July 2008 Freshtel ceased trading, and consequently Lennmar received no further telecommunications services from Freshtel. Lennmar continued to make monthly payments under the rental agreement with TLL until July 2009 when Lennmar terminated the payments.

DEFENCE AND CROSS-CLAIM

13    By their amended defence Lennmar and Mr Parton (who for convenience will hereafter be collectively referred to as ‘the respondents’ or as ‘Lennmar’) do not admit the existence of the rental agreement as alleged. In the alternative Lennmar submits that the agreement stipulated that Freshtel’s telecommunications service and the equipment would be supplied as a ‘bundled package’ and that the continued provision of telecommunications services for the duration of the agreement was a necessary condition of the rental agreement. Lennmar claims that upon cessation of telecommunications services the rental agreement between TLL and the respondents was frustrated.

14    By their third further amended statement of cross-claim (‘the cross-claim’) filed on 23 March 2012, the respondents allege that in its dealing with Lennmar, Freshtel acted as TLL’s agent. The respondents also allege that TLL or alternatively TLL by its agent Freshtel, contravened s 52 of Trade Practices Act 1974 (Cth) (‘the TPA’) and/or s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (‘the ASIC Act’) and engaged in misrepresentation within the meaning of s 73 of the TPA. The respondents (cross-claimants) also allege that TLL engaged in misrepresentation, unconscionable conduct, exclusive dealing contrary to s 47 of the TPA and aided and abetted misrepresentations made by Freshtel.

15    Damages are claimed pursuant to s 73 or s 82 of the TPA or s 12GF of the ASIC Act in quantum equal to any current liability for which the respondents may be liable under the rental agreement, in addition to amounts already paid by the respondents under the agreement. Further the cross-claimants seek a declaration that the rental agreement is void ab initio or should be set aside pursuant to s 87 of the TPA.

16    In the further alternative, the respondents seek a declaration pursuant to s 41 of the Federal Court of Australia Act 1976 (Cth) that the agreement was frustrated or became void or unenforceable from 18 July 2008 (being the date that Freshtel ceased providing telecommunications services) and that the respondents ceased to have obligations under the agreement after this date.

Evidence

17    Lennmar’s evidence consists of the testimony and affidavits of Mr and Mrs Parton. The Partons claim that Lennmar agreed to accept telephone services from Freshtel for five years on the basis of a number of representations made by Freshtel. Those representations were to the following effect: That Lennmar would be liable to meet only the cost of telephonic charges in excess of its existing monthly telephonic charges; that Lennmar was required to use equipment supplied by Freshtel as part of the ‘package’; that Lennmar could purchase the equipment for a cost of $1 at the end of the contract period or return the equipment; that Lennmar was only entering into one contract; and that such contract was with Freshtel.

18    In early November 2007 Mrs Parton had learnt that Freshtel had offered to an acquaintance a favourable contract for the supply of telephone services. As she believed it might be attractive, she contacted Freshtel. Later she received a phone call from Mr Howard Alexander of Freshtel. During the conversation Mrs Parton was asked the current charges being incurred by Lennmar for telephone charges and she informed Mr Alexander that Lennmar operated eight land lines and four mobile phones for the Capalaba Surgery and spent approximately $570 per month on phone calls. She said words to the following effect to Mr Alexander:

We have 8 land lines and 4 mobiles and our monthly spend is approximately $570.00. We will see you on the 19th [of November 2007]. Also, we are not interested in getting any equipment, but getting cash instead. We are aware of someone else who got this sort of a deal.

19    On or about 19 November 2007, Mr Alexander visited Mr and Mrs Parton (‘the Partons’) at their home office. Mr Alexander said words to the following effect:

Fresh Telecoms are a telecommunication company who can provide customers with cheap telephone calls and free equipment. We basically rent telephone lines from Telstra or another big company and rent them to customers for cheaper rates which enables Fresh to give to you goodies like plasma’s [sic] and laptops. I know that when I spoke with Kieren the other day. She said you guys had a monthly spend of approximately $570.00 per month and you will get a credit of $570.00 per month over the equipment.

Further, Mr Alexander stated:

When you make your monthly payments each month, you will get credits which will offset your equipment cost each month. That way, you will only pay one invoice per month for the phone bill, keeping in mind that the equipment you will be getting is free.

The TLL proposal

20    Mr Alexander had prepared a proposal in writing which he brought to the meeting. A letter dated 19 November 2007 on the letterhead of Fresh Telecoms addressed to Glenn and Kieran Parton was attached to the proposal. The letter relevantly stated:

RE: TELECOMMUNICATIONS PROPOSAL

Thank you for the opportunity to provide a proposal for the telecommunications equipment.

The rental on the system is based on our exclusive “Billing Credit” financing.

The “Fresh Billing Credit” package allows you to offset the cost of your new equipment with the call usage that you are currently making. It actually gives you a substantial return for all those communications dollars that you have to spend to run your business.

The call rates associated with this package are more than competitive with Telstra, Optus and others, in many cases, cheaper.

We look forward to welcoming you as a client.

In the meantime should you have any queries, please contact me on the number below.

Yours faithfully,

Howard Alexander

Sales Executive

21    Attached to the letter was the ‘Proposal’. The following pages bore the letterhead of Freshtel and contained various information.

22    One page was entitled ‘Pricing’. It provided:

PRICING

We are pleased to provide the following finance offer. Our Billing Credit package will be as follows:

•    Monthly payments will be direct debited from your nominated account, for 60 months

•    Total amount payable is monthly rental specified above times total term of agreement.

•    Does not include costs associated with the connection of new lines.

•    Billing Credit offered may exceed actual monthly expenditure

•    The monthly Call Credit value will be credited to your new Fresh Telecoms monthly telecommunications account for local, national, fixed wire to mobile, mobile and international calls; line rentals, numbers held for diversions, outbound calls to 1300, 0019, 0015, 1900 numbers, call connect, fax stream, directory assistance/operator connected calls, centel city-wide and message bank based on standard rates. The “billing credit” is based on Fresh Telecoms standard call charge rates, which will form part of the agreement.

•    This quote is valid for 30 days, from the date shown on the covering letter and subject to credit approval.

•    All pricing quoted is subject to 10% GST.

23    The following page is entitled ‘Advantages of Billing Credit Rental’. It provided:

Advantages of “Billing Credit” Rental

Billing credit is a new form of financing that enables businesses to acquire office technology cost effectively rather than tying up cash and helps overcome equipment obsolescence.

Fresh Billing Credit gives you all the benefits of the equipment without the risk of ownership.

Representations made

24    Mrs Parton’s affidavit stated that there was a discussion concerning the proposal. In particular she noticed that a telephone system had been included in the proposed arrangement. She told Mr Alexander that a new telephone system was not required as they were already using one. Mr Alexander responded ‘To get any deal, you have to have a telephone system. You can hand it back at the end of the deal or buy it for $1 plus GST’. Mr Alexander added, ‘Because of your call spend, you are able to get other equipment for the surgery’.

25    Mr Alexander later said:

When you make your monthly payments each month, you will get credits which will offset your equipment cost each month. That way, you will only pay one invoice per month for the phone bill keeping in mind that the equipment you will be getting is free.

26    Mrs Parton recalled looking at the words ‘rebate’ contained in the proposal and noticed that there was a cash amount of $8,500 referred to. Mr Parton asked whether another cash amount could be provided instead of the telephone system. However, Mr Alexander was adamant that a new telephone system had to be supplied.

27    The proposal and papers were left with the Partons. After some days Mrs Parton telephoned Mr Alexander and told him that they wished to proceed. Accordingly a meeting at their home was fixed for 4 December 2007. Mr Alexander said he would bring a copy of the agreement for signature.

28    Lennmar alleges that in the representations made to it by Freshtel there was no reference to the necessity to enter into any rental agreement or lease for the supply of equipment; that the name of TLL was not mentioned; that it was misled by Freshtel as to the true nature of the agreement and that had it known the true position, it would not have entered into the agreement with Freshtel. Lennmar further claims it only became aware after the agreement was entered into that it had in fact entered into a rental agreement and that Lennmar had not known of the existence of TLL until after the agreement had been terminated.

Execution of Agreements

29    On or about 4 December 2007 Mr Alexander returned to the Partons’ home office and brought a copy of an agreement. The document had been completed, except for signatures. A meeting then took place between Mr Alexander and the Partons. In answer to a question whether she had read the proposal, Mrs Parton said:

I mean we would have flicked through them and I would have noticed in the start that the deal was as Howard explained which is the details there on page 13 detailing the equipment and the cash, and the next page 14, detailing that it was effectively a five year contract at the $570 a month.

30    According to Mrs Parton’s evidence, Mr Alexander ‘flipped through’ the documents and indicated where Mr and Mrs Parton should sign. Mr Alexander did not specifically refer to any of the terms and conditions associated with the document, but said ‘These are just standard terms and conditions that you would get with any telecom deal; I will just flip over the page’.

(a) Application for Telephone Service

31    The agreement which was produced by Mr Alexander for signature was in fact a document described as ‘Application for Telephone Service’. The customer information appearing recorded the trading name as Capalaba Surgery. A section of the form referred to the ‘Fresh Rate Plan’. In that section it referred to ‘Billing Credits’ and against that entry, a ‘yes’ was circled; it identified an amount per month of $627 including GST; and a term of 60 months.

32    Other details relating to call rates and business telecommunications details were included in the form. Significantly, the amount of the ‘Fresh Telecoms billing credit’ equalled the amount specified under the ‘Fresh Rate Plan’. It also equalled what the Partons told Mr Alexander was Lennmar’s current expenditure on telephone services. The Application for Telephone Service bore the logo of Freshtel.

33    The application was signed by Mrs Parton. However, Freshtel required the signature of a director of Lennmar. This error was noticed some day later, and the documents were sent by facsimile from Bower Finance to Lennmar for Mr Parton’s signature.

(b) Freshtel’s Terms and Conditions

34    Attached to the application was a page entitled ‘Fresh Telecoms Terms & Conditions for Telephone Services’. This document consists of three pages of closely printed material, which is barely legible. The pages do not bear the signatures of either of the Partons.

(c) Acknowledgement

35    Another page of the proposal was entitled ‘Fresh Telecoms’ Customer Check and Acknowledgment’. This form contains a series of boxes which have been ticked. Mrs Parton denies that the marks on the form indicated by a tick were made by her and she does not recall ever having seen such page. Mrs Parton states that no explanation was given by Mr Alexander as to the form’s contents. She recalls that he asked her ‘very quickly, without explaining the page to me’ to ‘just sign there’ at the bottom of the page headed ‘Tax Invoice Queries and Resolutions’. Such form purports to deal with any instance where a dispute arises concerning any transaction in the current billing period. That form was signed by Mr Parton on 4 December 2007.

(d) Order Specification

36    Another form is enclosed on the letterhead of Fresh Telecoms entitled ‘Order Specification’. Under the heading ‘RENTAL OPTION’ the following appears:

Monthly rental payment (incl GST) $627

Term in months – 60 months

Fresh billing credit (incl GST) $627

Line Rental incl: Yes

37    This form was also signed by Mrs Parton, and there is no evidence that Mr Parton signed.

(e) Pack Contents

38    Thereafter, there follows a series of documents, each under the letterhead of Technology Leasing and with the following titles: Cover and Instructions; Direct Debit, Service Agreement, Application Agreement; Terms and Conditions; Privacy Form; and Direct Debit Request. These will be referred to collectively as the ‘pack contents’.

39    The coversheet is a document bearing the heading ‘Technology Leasing’. TLL is named on the top corner of the document. The document provides customer details and director/guarantor details. It has been signed by Mr Parton on an unspecified date.

40    The next document is described as a ‘SIGNATURE PAGE’. The words ‘SIGNATURE PAGE’ are in large letters in a prominent position centred at the top of the page as a heading. To the left of those words and in small print is the words Rental Agreement. To the right are the words ‘Technology Leasing’. Beneath the heading a space for the equipment details to be inserted is provided under the heading ‘Equipment Description’. No details have been inserted, and when Mrs Parton signed the form this section was left blank. Beneath that is a summary of the proposal. It records that the rental agreement duration is 60 months at an amount of $627 per month. This document was signed on 4 December 2007 by both Mr and Mrs Parton and by Mr Alexander.

41    The next document is entitled ‘Terms & Conditions of TLL’. It contains three pages and bears no signatures.

42     A page described as ‘Important Privacy Notice and Privacy Authority’ follows and bears one signature of Mr Parton dated 11 December at its conclusion.

43    A Direct Debit Request follows bearing the name of Lennmar and has been apparently signed by Mr Parton and dated 4 December 2007.

44    The Court observes that no original documents which are said to comprise the agreement between TLL and Lennmar have been provided to the Court. Documents which have been tendered are all photocopies of pages, some of which are copies of faxed pages. In many, the text is illegible. The Court has endeavoured to reconstruct an apparent order for such documents. The parties have apparently done their best to present the documentation but this absence of original documentation has placed both the parties and the Court in a disadvantageous position.

Evidence relating to the execution of the agreement

45    Mrs Parton testified that when Mr Alexander met the Partons on 4 December 2007 she remembered looking at the Order Specification page. She understood, based on Mr Alexander’s representations, that this was the formal agreement with Freshtel and that the other pages which she signed were for Freshtel’s internal purposes. Mrs Parton recalled seeing a list of equipment and a reference to the rebate cheque.

46    Mrs Parton deposed that the rental agreement contained in the ‘Pack Contents’ was never shown to her. She stated that at the time she signed the pages she was shown, Mrs Parton recalled that Mr Alexander had his hand on the documents at the top of the pages. She says that at no time did she see the words ‘Technology Leasing’ or ‘Rental Agreement’. She was only shown the lower part of the page where her signature was required.

47    Mrs Parton said the main element of the document headed ‘Customer Details’ she recalled was that it asked for her business insurance details. As to the document entitled Signature Page bearing the heading of TLL (the rental agreement) Mrs Parton deposed that she saw the lower three quarters portion of the document but noticed that the ‘Equipment’ section was left blank. Mrs Parton recalled Mr Alexander referring to the middle of the document in which the total monthly rental of $627 was referred to and remembered him saying: ‘As you can see, it still has the term and the amount per month the same. Just sign’.

48    Mrs Parton did not recall seeing the terms and conditions page of TLL but she had a recollection that Mr Alexander said words to the effect: ‘Once again, these are just standard terms and conditions’.

49    She recalls seeing the document entitled ‘Important Privacy Notice’ and ‘Privacy Authorities’. She remembered Mr Alexander saying ‘this is a standard privacy notice so that we can call your referees’.

50    Mrs Parton recalls asking Mr Alexander, after he had obtained both her and Mr Parton’s signatures, whether she could make a photocopy of the documents for her records to which Mr Alexander replied, ‘No need, we will send you one’.

51    Mrs Parton deposed that her understanding was that she was signing an agreement pursuant to which Freshtel would provide telecommunication services at better rates than other providers and at a better rate than was currently in place. In her oral evidence she stated that she recalled Mr Alexander saying ‘You will basically pay $570 per month and you will get a credit of $570 per month over the equipment’. Mrs Parton said that no reference was made by Mr Alexander to TLL, nor was there any mention that the telephone equipment to be used in conjunction with Freshtel’s service would be leased to the Partons under the rental agreement.

Glenn Parton’s evidence

52    Mr Parton’s affidavit relating to the meetings with Mr Alexander is in similar terms to that of Mrs Parton. Mr Parton recalled Mr Alexander telling him:

You will get monthly call credits which offset your equipment cost each month. That way, you will only pay one invoice per month for the phone bill.

53    Mr Parton deposed that he was not directed to any Terms and Conditions by Mr Alexander. He said that Mr Alexander flicked through the pages very quickly and did not give Mr Parton an opportunity to read them. Mr Parton did not recall seeing the words ‘Technology Leasing’ when he signed the documents.

54    Mr Parton also gave oral evidence on 2 December 2011 in which he said he ‘just thought we [Lennmar] were signing up for a phone deal – to get a better price on the phone calls’, and that when he did sign them he was relying on what was said by Mr Alexander when he met him and Mrs Parton in early December 2007. Mr Parton’s evidence was that he did not understand he would be renting anything when he signed the agreement.

55    Mr Parton also stated that the handwriting contained in the Signature Page of the rental agreement is not his handwriting. He further stated that he did not know the identity of ‘Sharon McMahon’ who had purportedly witnessed his signature on the agreement.

56    In cross-examination it was put to Mr Parton that under the arrangement Lennmar would be renting the equipment for a price equivalent to an amount calculated on his past phone bills. Mr Parton rejected such submission stating that renting equipment was never discussed. He confirmed that he believed that the arrangement was purely for a ‘phone deal, to get a better price on the phone calls’ and that he relied upon what he was told by Mr Alexander. Mr Parton also said that only approximately on 20 December 2007 did it come to his attention that payments were being made by Lennmar to Technology Leasing. In the months prior to that he believed that payments debited to Lennmar were for phone calls.

Events post-meeting

57    On or about 7 December 2007 Mrs Parton received a telephone call from a person who identified himself as Mr David Beat from Bower Finance. Mrs Parton did not understand the involvement of Bower Finance and assumed it was an internal matter involving Freshtel. Mr Beat said that the documents provided by the Partons required Mr Parton’s signature also since he was a director of Lennmar.

58    On 7 December 2007 Bower Finance transmitted the proposal by facsimile on Freshtel’s letterhead to the Partons. Included within that fax were the following documents: Customer Details form; the Signature Page; Terms and Conditions of TLL; ‘Important Privacy Authority’; and a Direct Debit form.

59    Mr Parton signed each of such documents on 11 December 2007, with the exception of the Terms and Conditions of TLL and they were returned by facsimile approximately four days later to Bower Finance.

60    The Signature Page which was signed by Mr Parton now included the following description of equipment: ‘NEC IPX II Digital Telephone System’. Mr Parton said such item was not included on the Signature Page when it was signed by him.

61    On or about 10 December 2007 an email was received by the Partons from Ms Nardine Brown of Freshtel thanking the Partons for joining Freshtel. The letter made no mention of TLL or of Bower Finance. The letter relevantly stated:

I just wanted to confirm you understood everything in your 60 month contract; you will be directly debited each month for the amount agreed to on the paperwork. This will only come out after the equipment has been installed; you should receive shortly a welcome letter with a hard copy of your contract and any other documentation. Please advise once you have received the equipment and have been installed if there is anything else I can do. We always like to get our valued client’s feedback.

62    Also dated the same day is another letter sent by email to the Partons from Freshtel advising them that a technical co-ordinator would be in contact to arrange for the equipment to be installed. The letter relevantly stated, inter alia:

–    Our technician will attend your premises to install your new phone system and ensure you are correctly billing onto the Fresh billing platform.

–    Your first payment will be deducted from your nominated bank account on the next business day after settlement is received from the finance company and once you have received all of your equipment.

–    Your monthly Fresh Telecoms billing credit will be applied once we have received settlement.

–    Any unused Fresh Telecoms billing credit will be available for use at the end of the term of your contract with Fresh Telecoms.

–    Should your monthly Fresh Telecoms Tax Invoice exceed your allocated “Billing Credit” you will be required to pay the outstanding amount by the due date.

63    On or about 14 December a document entitled ‘Certificate of Acceptance’ was provided to the Partons with a request that it be signed and returned. Mrs Parton was told by Mr Joshua Richardson of Freshtel that the form was necessary ‘to complete the Fresh process’. On or about 19 December a request was made to the Partons by Bower Finance to provide copies of insurance documents.

Lennmar’s first awareness of TLL

64    On or about 19 December 2007, Mrs Parton noticed that there was a debit on the Lennmar bank statement. It showed a debit to TLL for the same amount as that which she would be paying to Freshtel before allowance of the ‘Calling Credit’. Mrs Parton telephoned Freshtel to enquire the reason for such debit and she was told words to the following effect

That is the payment for the equipment provided through Fresh Telecoms. That is the only amount that you have to pay. There will not be another amount you will have to pay.

65    On or about 24 December 2007 at the request of Freshtel, Lennmar raised an invoice for the amount of $8,500 addressed to Freshtel described as ‘Rebate Cheque for Phone System’. Mrs Parton shortly thereafter received the amount of $8,500 by way of cheque from Freshtel.

66    In cross-examination Mrs Parton rejected the statement put to her by counsel for TLL that what she had been told was that she had to pay for the equipment and she would receive a monthly billing credit for payment of the phone bills. Mrs Parton responded ‘I was purely paying for my phone services’.

67    Mrs Parton testified that she had experience running a doctor’s surgery on a day-to-day basis and had previously signed contracts. However, she reiterated her belief that the order specification constituted the whole of the contract because it had all of the relevant details on it, including the amount they were to pay monthly and the term of the agreement. Mrs Parton said that she did not consider it suspicious to sign the document while Mr Alexander was obscuring part of it. Mrs Parton stated:

We had signed three or four pages before that… I was not concerned it was anything out of the ordinary… nothing that I thought was unordinary.

DEFENDANT/CROSS-CLAIMANTS’ EVIDENCE

68    Mr John Wesley Harrison, Credit Manager of TLL, was originally employed in about July 2005 as a Credit Analyst for TLL and in early 2008 he was appointed TLL’s Customer Service Credit Manager. In July 2010 he was appointed to his current role as Team Manager Recoveries, the title of which position was changed on 18 October 2011 to Credit Manager.

69    Mr Harrison’s affidavit attaches photocopies of the documentation held by TLL. The relevant documents attached to Mr Harrison’s affidavit appear to be essentially the same documents as contained in the affidavits of Mr and Mrs Parton, except for the addition of a termination notice dated 21 September 2010 and addressed to Lennmar and a document of the same date addressed to Mr Parton, entitled ‘Exercise of Guarantee’ (amended). The latter document requires Mr Parton, as guarantor of Lennmar Pty Ltd, to pay the alleged debt of $31,531.46.

70    The records of TLL confirm that Lennmar’s application was approved on 19 December 2007. TLL commenced debiting Lennmar’s account by $627 per month (the contract amount plus GST) until 20 July 2009, when a debit for that amount was dishonoured by the First Respondent’s bank. Mr Harrison stated in his affidavit that to this date, the respondents had made no payment of the amount claimed by TLL in the termination notice. Mr Harrison stated that TLL did not keep any originals of the rental agreements.

71    Mr Harrison acknowledged that when he received applications for equipment finance from Freshtel via Bower Finance there was no way for him to know whether the customers had seen the terms and conditions attached to the agreement. Mr Harrison also stated that at the point when he received the application, he was not concerned with whether the customers had seen the terms and conditions sheets. He also acknowledged that some of the faxed pages he had received were illegible and that he could not be sure that the customers received legible documents.

72     Mr Harrison’s evidence also described the way in which Freshtel was remunerated by TLL for referring applications to it. He said that once the Settlements Department in TLL received all of the documentation, it would send the information on to the Finance Department, who would make the payment to Freshtel of the amount of Freshtel’s invoice. A brokerage fee was paid by TLL to Freshtel and was subsequently added to the customer’s bill. Mr Harrison acknowledged that there was nothing in the leasing documentation that indicated that a brokerage fee would be paid by the customer.

73    Mr Harrison acknowledged that there was no description of the equipment that would be rented under the agreement on the rental agreement Signature Page that Technology Leasing received from Bower Finance. Mr Harrison stated that such information would be contained in another part of the documentation that Bower Finance faxed to TLL. Mr Harrison said he could not verify that the Partons had seen the page that listed the equipment, or any of the Terms and Conditions pages of the documentation.

DID LENNMAR ENTER INTO AN AGREEMENT WITH TLL?

74    Lennmar submits that the Court could not be satisfied that any binding agreement was concluded between Lennmar and TLL for the following reasons. First, it submits that the Signature Page provided by TLL to Lennmar comprised the rental agreement, but contained no reference to any equipment at the time it was executed by Mrs Parton on behalf of Lennmar. Furthermore at no time did TLL prove that the equipment to be leased by Lennmar was actually identified in the rental agreement at the time the agreement was concluded. Consequently, Lennmar submits that the documents provided to Lennmar cannot constitute offers to rent equipment and that the failure to nominate the equipment constituted the omission of an essential term such that the contract is void for uncertainty.

75    Lennmar relies upon the observations of Kaye J in ANZ Banking Group v Frost Holdings [1989] VR 695 at 701 in which his Honour observed that a court would not imply a term into a bargain for the purpose of making the bargain enforceable. Reliance was also placed on the observations of the House of Lords in May & Butcher Ltd v R [1934] 2 KB 17, which determined that terms will only be implied by courts to give commercial effect to contracts which are already legally enforceable.

76    Secondly, Lennmar submits that because Mrs Parton states in her affidavit that certain ticks placed on one of the papers were not made by her or Mr Parton, and that Mr Parton claimed that the signature on the signature page of the rental agreement is not in his handwriting, the Court would not be satisfied that such agreement was made by them.

77    TLL does not challenge the fact that the equipment was not specified in the Signature Page when signed by Mrs Parton. However, the list of equipment was included when Mr Parton signed another copy of the document on 11 December 2007 and returned it to Bower Finance. Further, on 14 December 2007 Mrs Parton received a telephone call requesting her to sign a document provided by TLL entitled ‘Certificate of Acceptance’. She read the document and then handed it to Mr Parton. Mr Parton recalls Mrs Parton saying to him words to the effect:

I spoke with Joshua Richardson about this and he said we need to sign it so that Fresh can get delivery of our equipment.

78    Mr Parton signed the form and returned it.

79    On 19 December 2007 TLL countersigned the rental agreement and sent a copy to Lennmar on 20 December 2007.

Finding

80    Based on these facts, the Court concludes that even though the equipment was not listed in the Signature Page signed by Mrs Parton on 4 December 2007, it was included in the version sent to Mr Parton by facsimile and signed by him on 11 December 2007 and returned by facsimile to Mr Beat. Mr Beat made it plain that since Mr Parton was a director of Lennmar, it was necessary for him to sign the document. Further, Mrs Parton knew that for the equipment to be delivered, it was necessary for the Certificate of Acceptance to be signed; otherwise the equipment would not be supplied. Mr Parton signed such form on behalf of Lennmar and returned the form to Bower Finance. Further, the Court is persuaded that even if Mrs Parton did not place the ticks on the order form, the ticks were inserted with her tacit approval.

81    The Court is satisfied that Lennmar, by its director Mr Parton, knew that the equipment contained in the Certificate of Acceptance would be supplied to it and understood that such equipment was to be delivered under the arrangement. In these circumstances, the Court is satisfied that the challenge to the agreement based on uncertainty because of the absence of equipment specifications in the original form signed by Mrs Parton prior to the acceptance by TLL is not a ground which establishes the absence of any agreement.

82    Lennmar also submits that even if there were any agreement between itself and TLL, the document described as ‘Terms & Conditions’ of TLL was not included in it. Mrs Parton did not recall seeing the terms and conditions pages of the TLL document and Mr Parton said that Mr Alexander did not direct his attention to any terms and conditions. Reliance is also placed by Lennmar upon the assertion that the jumbled manner in which the documents were provided to the Court as constituting an agreement are such that the Court could not be satisfied that in fact TLL’s terms and conditions had ever formed part of the alleged agreement between Lennmar and TLL. Lennmar relies upon the fact that no original documents have been produced.

Findings as to the alleged agreement

83    The Court is required to satisfy itself that the terms and conditions of TLL were incorporated into the contract. The Court has considered the submissions of Lennmar that take into consideration unchallenged facts. First, the TLL Terms & Conditions are positioned immediately following the Signature Page. The Signature Page bears, inter alia, the following statement: ‘This document and the section entitled ‘Terms & Conditions’ constitute the entire Rental Agreement’. A space is provided directly beneath such a statement for the signature of a lessee. In this instance both Mr and Mrs Parton have signed the document. Mrs Parton signed, although without the equipment being listed, on 4 December 2007. Both Mr and Mrs Parton (even though she was not a Lennmar director) signed the Signature Page on 11 December 2007 when the equipment was identified in the Signature Page.

84    In addition, Mr Parton signed the Technology Leasing Customer Details page which incorporated a declaration which stated:

By signing this form you acknowledge that you have received and read the attached Privacy Consent form and the Terms and Conditions. You Certify [sic] that the information you have provided is true and correct and you acknowledge that technology Leasing [sic] is relying on this Information to assess this application.

85    TLL has relied upon the observations of the High Court in Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at [40] (‘Alphapharm’). In that decision the High Court found that if a person signed a document which was intended to affect legal relations and knew it contained contractual terms, that person is bound by those terms in the absence of any vitiating element and that it was immaterial that the person had not read the document. Further, in those circumstances the other party was not required to show that due notice had been given of such terms.

86    At [40] the High Court said:

This Court, in Pacific Carriers Ltd v BNP Paribas [(2004) 218 CLR 451], has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.

87    At [52] their Honours said:

What more Finemores could have done to give Richard Thomson notice of the terms and conditions than requiring their representative to sign a document, and to place his signature immediately below a request that he read the conditions on the reverse side of the document before signing, is difficult to imagine.

88    The High Court stated its critical conclusion in [57] as follows:

If there is a claim of misrepresentation, or non est factum, or if there is an issue as to whether a document was intended to affect legal relations or whether, on the other hand, it was tendered as a mere memorandum of a pre-existing contract, or a receipt, or if there is a claim for equitable or statutory relief, then even in the case of a signed document it may be material to know whether a person who has signed it was given sufficient notice of its contents. The general rule, which applies in the present case, is that where there is no suggested vitiating element, and no claim for equitable or statutory relief, a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document. L'Estrange v Graucob explicitly rejected an attempt to import the principles relating to ticket cases into the area of signed contracts. It was not argued, either in this Court or in the Court of Appeal, that L'Estrange v Graucob should not be followed.

89    Counsel for the respondents sought to distinguish Alphapharm from the present matter on the basis that the Terms and Conditions on the invoice in Alphapharm were clearly understandable and were easily located on the reverse of the invoice, and that in contrast the Terms and Conditions in the case at hand are not printed on the reverse of the document. It was also submitted that it is unclear whether the expression ‘Terms & Conditions’ contained on the Signature Page refers to the document that bears the title ‘Terms & Conditions’, or whether it refers to every contractual term on every page of the bundle of documents.

90    The phrase ‘Terms & Conditions’ appears on the Signature Page. A document with precisely that title (including the same capitalisation and ampersand) appears on the page after the signature page. A reasonable person in the position of the respondent would understand such phrase to refer to the document of that title. When Lennmar signed to acknowledge that they had read and understood the ‘Terms & Conditions’, a reasonable person in the position of TLL would have understood this as meaning exactly that; that Lennmar had read and understood the ‘Terms & Conditions’: see Alphapharm at [40].

91    So considered, the Court concludes that Lennmar’s submissions that TLL knew that Lennmar had no familiarity with the TLL documents; and that TLL knew that the documents had been signed without the supervision of TLL or its agents or officers cannot be sustained in view of the overriding principle referred to in Alphapharm.

92    In summary, the Court finds that the documents which were signed by Mr Parton were:

(a)    the Customer Details form;

(b)    the Signature Page (i.e. the rental agreement);

(c)    the Important Privacy Notice and Privacy Authorities;

(d)    the Direct Debit Request;

(e)    the Certificate of Acceptance.

93    Neither the Terms and Conditions of either Freshtel or TLL were signed. However, they were apparently included with other documents which were signed, since both Lennmar and TLL held copies of such Terms and Conditions.

94    Whilst Mr Parton did not recognise his signature on the Signature Page, there is a marked similarity between the signature purporting to be that of Mr Parton on the Signature Page compared to his acknowledged signature on the Customer Details form. Further, the Signature Page bears the facsimile name of ‘G. & K. Parton’, as appears on the other documentation sent by Mr Beat of Bower Finance to Mr Parton for signature, and returned to Bower Finance. Further, no handwriting expert has been called to testify that the signature is not that of Mr Parton.

95    In these circumstances, the Court finds that a written agreement was entered into by Lennmar with Freshtel for the supply of telephonic services. In making such finding, the Court is not suggesting that Mr Parton’s evidence is deliberately false, but rather that with the passage of time his recollection on this question is unreliable.

FRUSTRATION OF CONTRACT

96    Lennmar submits that if an enforceable rental agreement exits between itself and TLL, it included an implied term to the effect that Lennmar’s obligation to perform its contractual undertakings was conditional upon the continued supply of telephone services by Freshtel. Since those services ceased in August 2008, the contract was thereupon frustrated by the withdrawal of those services.

97    In support of such submissions, Lennmar relies upon the fact that the offer made by Freshtel concerned telephone services; that TLL only approached Lennmar via Freshtel; that the provision of equipment was an adjunct to the provision of the telephone services; and that Lennmar was told that it would receive equipment and telephone services as part of a single package.

98    Lennmar also relies upon an agreement made between Freshtel and TLL which purports to regulate their relationship known as the ‘Vendor Referrer Agreement’. This agreement is more fully referred to hereunder in the Agency section. Clause 3.1 to 3.3 of such agreement made contains the following relevant provisions:

3.1    The Vendor [i.e. Freshtel] acknowledges that the Service provided to the Customer by the Vendor are an essential part of the package offered to the Customers to induce them to enter into Contracts and the Vendor undertakes to use its best endeavours to ensure that, for each Customer, the Services are provided to the Customer at all relevant times throughout the term of the Contracts.

3.2    The Vendor will use its best endeavours to ensure that any ongoing arrangements with third parties who provide the Services (if any) are maintained throughout the term of the Contracts and, in the event the Vendor becomes insolvent, goes into liquidation, makes any arrangements with creditors or suffers any other form of financial distress, the Vendor will use its best endeavours to assign the Services to a Reputable third party capable of providing the Services.

3.3    If, at any time during the period of TLL’s contract with a Customer, the Vendor fails to meet its contractual obligations to that Customer in relation to the supply of the Services then the Vendor will use its best endeavours to remedy the relevant contractual breach.

99    ‘Service’ is defined in Schedule 1 of the Vendor Referrer Agreement to include service, plans and charges.

100    Lennmar submits that clauses of the Vendor Referrer Agreement demonstrate that the provision of ‘Services’ was a critical component of the basis upon which the parties entered into the rental agreement, such that cessation of services by Freshtel frustrated the contract between Lennmar and TLL. Lennmar relies upon the observations of the High Court of Australia in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 and also upon British Movietonews v London and District Cinemas Ltd [1952] AC 166. In the latter decision Simon VC discussed the concept of a ‘fundamentally different’ situation and said at 185:

The parties to an executory contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate–a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. Yet this does not in itself affect the bargain they have made. If, on the other hand, a consideration of the terms of the contract, in the light of the circumstances existing when it was made, shows that they never agreed to be bound in a fundamentally different situation which has now unexpectedly emerged, the contract ceases to bind at that point–not because the court in its discretion thinks it just and reasonable to qualify the terms of the contract, but because on its true construction it does not apply in that situation.

Consideration

101    There exists a ‘close analogy’ between the doctrine of frustration of contract, and avoidance of a contract resulting from mutual mistake: see Chitty on Contracts, General Principle (26 Ed) at [350]. In this claim however, Lennmar has specifically eschewed any issue of mistake.

102    Frustration exists when, without the fault of any contracting party, the contractual obligations are unable to be fulfilled because the circumstances in which the obligations are to be performed are so radically different from those contemplated by the parties that performance of the contractual obligations would render a thing radically different than that contemplated by the parties: see Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 357.

103    The rental agreement between Lennmar and TLL does not suggest that its performance was contingent upon a condition that Freshtel would continue to provide telephone services to Lennmar. The agreement between TLL and Lennmar was one which related to the rental of office equipment, whereby TLL would lease rental equipment to Lennmar in consideration for Lennmar paying a specified amount every month. The fact that the amount that Lennmar was required to pay was in some way linked to the amount that Lennmar spent on phone services did not make the performance of the agreement conditional upon the continued performance of the agreement between Lennmar and Freshtel.

104    Furthermore, cl 22 of the ‘Terms & Conditions’ states:

22. SERVICES

If services of any description are to be provided by any person (whether that person be the supplier of the Equipment or otherwise) in connection or in conjunction with the Equipment including without limitation any maintenance, repairs, insurance, software, communications, consumables, information, data, replacement packs, updates, licenses or other matters (‘Services’) and notwithstanding that without the provision of such services the equipment is or may become wholly, substantially or partially inoperable to be used for any purpose for which it is designed or purchased, then you specifically acknowledge that:

a. Neither Technology Leasing Limited nor any of its associated persons, corporations or entities has any responsibility whatsoever to the client for the provision of such services;

b. Any failure by any person to provide such services (either wholly or in an incompetent or unsatisfactory manner) or any dispute which you might have with the provider of such Services will not in any way release the client from the equipment [sic: obligation] for the client to pay the rent and other moneys which the client has agreed to pay to Technology Leasing Limited under the Rental Agreement or the observance and performance of the client;

c. No representation, undertaking, understanding or agreement has been made with or given to the client prior to the Rental Agreement being entered into that any such Services would be provided to the client by Technology Leasing Limited or any of its associated persons, corporations or entities.

105    This clause clearly indicates that the potential failure of a third party to provide a communication service related to the equipment was within the contemplation of both parties at the time the agreement was entered into. The agreement specifies the consequences should that event occur and the Court is not in a position to substitute those consequences with its own.

106    Lennmar’s reliance upon the Vendor Referrer Agreement has no bearing upon the contractual obligations made between Lennmar and TLL. The Vendor Referrer Agreement regulated the relationship between TLL and Freshtel. There is no evidence that any part of that agreement could be said to comprise any part of the relationship between Lennmar and TLL. Any agreement between TLL and Freshtel does not affect the agreement between TLL and Lennmar.

107    For the above reasons, the Court rejects Lennmar’s submission that the rental agreement was frustrated by reason of the withdrawal of Freshtel’s services.

108    It follows from the above findings that Lennmar’s defences to TLL’s claim all fail.

THE CROSS-CLAIM

DID FRESHTEL ENGAGE IN MISLEADING AND DECEPTIVE CONDUCT?

109    Lennmar has pleaded that the conduct of Freshtel was misleading and deceptive contrary to the provisions of s 52 of the TPA. Such section states:

Misleading or deceptive conduct

(1)    A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

(2)    Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1).

Consideration

110    In Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 625, McHugh J said at [109]:

The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document. [Footnotes omitted]

111    His Honour’s observations were cited with approval by the majority (Gummow, Hayne, Heydon and Kiefel JJ) in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [102]. French CJ at [35] observed:

The term "conduct which is misleading or deceptive or likely to mislead or deceive" is apt to cover a large variety of possible circumstances in which the conduct of one has a tendency to lead another into error. There is no reason in principle why the fact that a false statement is contained in a contractual document thereby takes the use of that statement in the document out of the scope of "misleading or deceptive conduct". Whether the proffering of a contractual document containing a false statement amounts to a misrepresentation or to misleading or deceptive conduct, is a matter of fact to be determined by reference to all the circumstances. The circumstance that such a representation is the subject of a contractual warranty does not, as a matter of law, exclude the making of it from the purview of the statutory prohibition. This is consistent with the observation by Lockhart and Gummow JJ in Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd: “the making of a statement as to a presently existing state of affairs, if false, may be the engaging in misleading or deceptive conduct, where the statement is embodied as a provision of a contract.” [Footnotes omitted]

112    In Watson v Foxman (1995) 49 NSWLR 315 McLelland CJ in Eq said, inter alia, at 318:

Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described [sic] as “misleading”) within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances.

113    All the representations made by Freshtel and the documentation provided to Lennmar suggest that there was no financier involved and that Freshtel would provide the equipment directly. The telecommunications proposal dated 19 November 2007 and provided to Mr and Mrs Parton relevantly provides:

RE: TELECOMMUNICATIONS PROPOSAL

Thank you for the opportunity to provide a proposal for the telecommunications equipment.

The rental on the system is based on our exclusive “Billing Credit” financing.

The “Fresh Billing Credit” package allows you to offset the cost of your new equipment with the call usage that you are currently making. It actually gives you a substantial return for all those communications dollars that you have to spend to run your business.

The call rates associated with this package are more than competitive with Telstra, Optus and others, in many cases, cheaper.

We look forward to welcoming you as a client.

114    Significantly, the billing system and billing credits and the rental is portrayed as being provided by Freshtel as ‘Our Exclusive Billing Credit’ financing.

115    The Freshtel brochure referred to in the email above refers to a ‘bundled package to upgrade your office technology’. It contains statements such as:

What will it Cost

By selecting a bundle to update your office technology you could be paying no more than your currently monthly telephone account.

116    The brochure refers to the fact that equipment might be provided without the need to spend any additional capital. It provides details of the call systems available and gives examples of the phones available. Nowhere does the brochure refer to a rental or rental agreement with TLL, or indeed with any other financier.

117    Lennmar submits that various representations made by Mr Alexander to the Partons were misrepresentations and Lennmar was induced by these misrepresentations to enter into agreements with TLL and Freshtel. Those alleged misrepresentations included representations that the outlay per month by Lennmar on telephone services from Freshtel would be $570 plus GST but that a billing credit of $570 per month plus GST would be made available so that the equipment provided would be free and that Lennmar could hand back the equipment at the end of the term or purchase it for $1 plus GST.

118    In Taco Company of Australia v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202-203, Deane and Fitzgerald JJ stated general principles for the determination of whether statements or conduct are misleading or deceptive:

First, it is necessary to identify the relevant section (or sections) of the public (which may be the public at large) by reference to whom the question of whether conduct is, or is likely to be, misleading or deceptive falls to be tested (Weitmann v Katies Ltd (1977) 29 FLR 336, per Franki J at 339–40, cited with approval by Bowen CJ and Franki J in Brock v Terrace Times Pty Ltd (1982) 40 ALR 97 at 99.

Second, once the relevant section of the public is established, the matter is to be considered by reference to all who come within it, “including the astute and the gullible, the intelligent and the not so intelligent, the well educated as well as the poorly educated, men and women of various ages pursuing a variety of vocations”: Puxu Pty Ltd v Parkdale Custom Built Furniture Pty Ltd (1980) 31 ALR 73, per Lockhart J at 93: see also World Series Cricket v Parish, supra, per Brennan J (16 ALR at 203).

Thirdly, evidence that some person has in fact formed an erroneous conclusion is admissible and may be persuasive but is not essential. Such evidence does not itself conclusively establish that conduct is misleading or deceptive or likely to mislead or deceive. The court must determine that question for itself. The test is objective (see, generally, Annand & Thompson Pty Ltd v Trade Practices Commission (1979) 25 ALR 91 per Franki J at 102; Sterling v Trade Practices Commission (1981) 35 ALR 59, per Franki J (with whom Northop J agreed) at 66 and per Keely J at 69; Snoid v Handley (1981) 38 ALR 383, per the court (Bowen CJ, Northrop and Morling JJ); and Brock v Terrace Times, supra per Bowen CJ and Franki J).

Finally, it is necessary to inquire why proven misconception has arisen: Hornsby Building Information Centre v Sydney Building Information Centre (140 CLR at 228). The fundamental importance of this principle is that it is only by this investigation that the evidence of those who are shown to have been led into error can be evaluated and it can be determined whether they are confused because of misleading or deceptive conduct on the part of the respondent.

119    TLL submits that the Court should not accept the respondents’ evidence that neither Mr Parton nor Mrs Parton read the documentation provided to them by Mr Alexander. In support of such submission, TLL observes that Mrs Parton was a business manager; that she read all of the Certificate of Acceptance and that by 20 December 2007 both Mr and Mrs Parton were aware that Lennmar had entered into a rental agreement with TLL, yet no protest was made. Accordingly it is submitted that their lack of understanding is highly improbable.

120    The Court does not accept TLL’s submission. Whilst Mrs Parton may have had some business experience, the Court is satisfied that that experience was limited to the daily management of the activities relating to the professional rooms. Contracts of the kind provided to Mrs Parton by Mr Alexander were highly complex documents involving numerous pages of closely typed terms and conditions purporting to create onerous financial obligations lasting several years. Even though Mrs Parton may have previously signed contracts, there is no evidence that Mrs Parton had any experience with loan or rental agreements of this type previously.

121    Mr Parton is an electrician by trade. There is no evidence that he was familiar with any rental or financial documentation. The Court is satisfied that both Mr and Mrs Parton were naÏve and inexperienced in the matters put before them by Mr Alexander and that they relied wholly upon the truth of statements made by him both as to the very nature of the transaction which was being offered to them and also the financial obligations which they were being asked to assume.

122    TLL did not call Mr Alexander to rebut the allegations. Further, having had the benefit of assessing both Mr and Mrs Parton, the Court finds that they were witnesses of truth; that representations were made to them by Mr Alexander on behalf of Freshtel as they claimed; that those representations were made for the purpose of inducing Lennmar to enter into the arrangement proposal put before Mr and Mrs Parton, that the representations were false; that no reference was made by Mr Alexander of the rental of any equipment; that TLL was not mentioned by Mr Alexander; nor was it apparent that the Signature Page in fact comprised the rental agreement and that Mr Alexander did not provide the Partons and Lennmar with any information which suggested that they were entering an agreement for rental of equipment. The Court is satisfied that in not accepting the evidence of the Partons concerning the execution of the documents, such rejection arises from the respondents’ mistaken recollections and does not reflect on their character or truthfulness as witnesses.

123    The Court accordingly accepts the evidence of Mr and Mrs Parton that at the time they signed the documents, the nature of the transaction was misrepresented to them by Mr Alexander, and that each of the misrepresentations relied upon by the respondents were made to them by Freshtel.

124    Accordingly, the Court finds that Lennmar entered into the arrangements for the supply of telephone services and the rental agreement being wholly misled as to the very nature of the transaction and believing that the payments it was required to make under the agreement related solely to the provision of telephone services. They were led to believe that they would receive a ‘billing credit’ for the full amount of their monthly telephone charges and that they would only be liable for the cost of telephone calls if it exceeded those charges.

125    The misrepresentations of Mr Alexander, and therefore Freshtel, took place in trade and commerce: cf Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; and were misleading or deceptive as provided by s 52 of the TPA and of s 12DA of the ASIC Act.

AGENCY

126    Lennmar has submitted that Freshtel was acting as an agent of TLL when it concluded the contracts with Lennmar and consequently Lennmar has submitted that TLL is liable for the misrepresentations made by Freshtel. Lennmar submits that this agency could be established in two ways. Either there was an agency based on implied agreement, whereby both TLL and Freshtel impliedly consented to Freshtel acting as TLL’s agent for the purposes of entering TLL into an agreement with Lennmar, or there was an agency based on ostensible authority, whereby TLL’s dealings with Freshtel amounted to a representation that Freshtel was TLL’s agent, which Lennmar subsequently relied upon to its detriment.

The relevant evidence

127    Before considering the relevant principles of law, the Court turns to consider the factual matrix in these proceedings.

The Vendor Referrer Agreement

128    Lennmar bases its claim that Freshtel had implied authority to act as TLL’s agent on a number of factors. The first of these is the Vendor Referrer Agreement. This is an agreement between Freshtel and TLL which was made on or about 20 June 2007, as referred to previously. A number of provisions of the Vendor Referrer Agreement are relevant to this and these are set out below. For completeness, cl 3.1 to cl 3.3 (set out earlier in this decision) are reproduced again:

1.5 If TLL credit approves a Customer’s application, TLL will send to the Vendor [Freshtel] a Contract for signing by the Customer.

1.6 The Vendor will send to TLL the Contract duly signed by the relevant Customer together with the Vendor’s invoice…

1.7 Following receipt by TLL of the signed Contract and the Vendor’s Invoice, TLL will issue a notice authorising release of the Equipment to the Customer…

[…]

2. Duties and Responsibilities of the Vendor

2.1. The Vendor will use its best endeavours to achieve the Product Volume Targets set out in Item 3 of Schedule 1 but makes no guarantee in relation to that. It is at the discretion of the Vendor to publicise the availability of TLL finance for Products in all of the Vendor’s promotional material, including the Vendor’s web site and directly through its employees and consultants to potential Customers.

[…]

2.3. The Vendor:

(a)     will ensure that its Products and associated services as set out in Item 8 of Schedule 1 (“Services”) are at all times entirely separated from TLL’s financing services and documentation; and

(b)     acknowledges that the Products and Services are the sole responsibility, and provided at the absolute discretion, of the Vendor.

[..]

2.7. At the expiry of the initial term of a Contract, the Vendor undertakes to use its best endeavours to encourage the Customer to extend the term of the Contract or to enter into a new Contract for new Equipment supplied by the Vendor with TLL.

[..]

3. Services

3.1. The Vendor acknowledges that the Services provided to the Customer by he Vendor are an essential part of the package offered to the Customers to induce them to enter into Contracts and the Vendor undertakes to use its best endeavours to ensure that, for each Customer, the Services are provided to the Customer at all relevant times throughout the term of the Contracts.

3.2. The Vendor will use its best endeavours to ensure that any ongoing arrangements with third parties who provide the Services (if any) are maintained throughout the term of the Contracts and, in the even the Vendor becomes insolvent, goes into liquidation, makes any arrangement with the creditors or suffers any other form of financial distress, the Vendor will use its best endeavours to assign the Services to a reputable third party capable of providing the Services.

3.3. If, at any time during the period of TLL’s Contract with a Customer, the Vendor fails to meet its contractual obligations to that Customer in relation to the supply of the Services, then the Vendor will use its best endeavours to remedy the relevant contractual breach.

[…]

3.5. The Vendor will indemnify TLL from any claims, costs and expenses arising out of or in connection with the supply by the Vendor of the Services including for the avoidance of doubt any failure by the customer to pay monies owing under a Contract due to the failure by the Vendor to provide the Services.

3.6. The Vendor must:

(a)    not make any promises, representations, warranties, guarantees or statements to Customers in relation to a Contract or equipment the subject of a Contract except as provided in writing by TLL;

(b)     not engage in any conduct which is false or misleading or unconscionable in respect of Customers;

(c)     take all reasonable care to ensure the information provided by Customers to TLL is true, complete and accurate;

(d)     comply with TLL’s reasonable directions with regard to obtaining information from Customers and fixing any errors or omissions in documentation and with any other reasonable instructions as may be advised by TLL from time to time;

(e)     not use TLL’s name, branding or logo or other identification including any trade mark connected to TLL or any related company without prior written consent from TLL.

The TLL Emails

129    Lennmar submits that further evidence of the implied authority can be found in a series of emails between TLL, Freshtel and Bower Finance (‘the TLL emails’). The relevant emails span a time period of April 2007 to November 2007 and give some insight into the formation of the Vendor Referrer Agreement and another agreement known as the Broker Referrer Agreement (‘BRA’).

130    The BRA was entered into between TLL and Bower Finance in or about June 2007 and provided for the payment of commissions by TLL to Bower Finance for successful introductions of new customers.

131    On 26 April 2007 a representative of Bower Finance reviewed the draft BRA and emailed TLL with Bower Finance’s objections. These objections included an objection to cl 2.1 of the BRA, which referred to Bower Finance as the ‘agent’ of TLL. Bower Finance’s objection was as follows:

Cl 2.1. We would prefer not to be an agent of TLL. This imposes various legal obligations/exposures on Bower (and indeed on TLL which I am surprised TLL would want). We would however desire being an authorised referrer to do all of the things indicated in this agreement.

132    Mr Nathan Chambers of TLL responded to Bower Finance’s objections in an email dated 3 May 2007. In that email TLL proposed changing the word ‘agent’ to ‘Authorised Referrer’ in cl 2.1. The term ‘Authorised Referrer’ became the term used in the final agreement.

133    Bower Finance also objected to the formulation of cl 2.2, which at the time required Bower Finance to ask all of its customers to enter into a financing agreement with TLL. Bower Finance’s objection stated:

Cl 2.2. requires Bower to ask all prospective equipment customers to enter into a lease with TLL. We may prefer not to if TLL is not competitive/suitable. Therefore we prefer that Cl 2.2 refers to Bower “considering introducing” or similar. This non-exclusive promotion approach should also be reflected in cl 4.1, 4.2 etc.” [Emphasis added]

134    In response to Bower Finance’s objection, Mr Chambers responded:

Clause 4.1 states “each request by a customer… for use of equipment from TL”. This clause is dependent on the customer’s request and preference (therefore Bowers and Vendors preference) which reflect a non-exclusive approach. [Emphasis added]

135    The emails identify the intention of Bower Finance and TLL that Bower Finance would not be obligated to refer applications it received from Freshtel exclusively to TLL and that Bower Finance and Freshtel retained discretion in determining which of the customers’ applications it received would be forwarded to TLL.

136    There is further evidence of this discretion. An email dated 28 November 2007 from Ms Sharon McMahon of Bower Finance to Mr Chambers of TLL stated in part:

After a big month for Tech Leasing in October, Macquarie were not happy that things weren’t going their way, so Fresh poured everything their way.

137    The inference clearly arises that Freshtel had a discretion in determining the choice of which of the two financers, TLL or Macquarie Equipment Leasing, Freshtel would refer its customers.

138    Notwithstanding this discretion, Mr Chambers replied to the above email on 29 November 2007 by expressing his dissatisfaction with the amount of business TLL was receiving. He stated in his email:

I appreciate the honest feedback but I am also disappointed and feel like we are being treated as a secondary funder. Both Fresh and Bower Finance are clearly aware of our reservations in dealing in this industry and the work that was involved in initially establishing this partnership. To have this approved there were certain commitments made prior to entering this relationship and one of those was that business volumes be split approx 50/50 with Macquarie Leasing. October was an improved month ($266K) but was in line with Technology Leasing’s prior expectations.

139    The only other reference to an arrangement of splitting the business between TLL and Macquarie Leasing is that contained in an email from Mr Beat of Bower Finance to Mr Chambers on 24 April 2007, in which Mr Beat discusses the allocation of leasing business as follows:

Lets say 8 [deals] per month, and allow 2 months to arrange the split between Macquarie Bank and yourselves.

Mr Harrison’s evidence

140    Mr Harrison gave one piece of evidence relevant to this issue. He acknowledged that as a matter of logic, some person at Freshtel or Bower Finance would have had a method of determining what the final price that TLL charged the customers would be.

Submissions

141    Lennmar submits that the role of Freshtel in relation to TLL’s business went beyond that of a ‘mere introducer’; that Freshtel was responsible for promoting TLL’s business and for informing customers about the package that the customer would receive if it signed on with it and TLL.

142    Lennmar submits that there was consequently an implied agency. The scope of the agency gave Freshtel the authority to obtain the signatures of the directors of Lennmar on the rental agreement form and direct debit agreement form; the authority to obtain on behalf of TLL the signature of Mr Parton as guarantor of the obligations imposed by the rental agreement; authority to undertake general sales and marketing of the rental agreement; authority to inform potential customers of the basis upon which they would receive the equipment that would be supplied to them by TLL if the rental agreement was signed; and the authority to inform potential customers concerning the terms of the arrangement under which they would receive the equipment supplied to them by TLL under the rental agreement.

143    In closing submissions, Lennmar argued that the TLL emails were evidence that Freshtel intended to merely work on TLL’s behalf and direct as much business to TLL as the agreement between TLL and Bower Finance specified and that this demonstrated that Freshtel had little control over its own business. Furthermore, an inference could be drawn that TLL knew the extent of the business Freshtel was directing to it as opposed to other financers, which again demonstrated the amount of control and connectivity between the entities, which supports a finding that Freshtel was the agent of TLL.

Consideration

144    Distinguishing between implied agency and ostensible agency is important. The distinction was clearly elucidated by Diplock LJ in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502-503:

It is necessary at the outset to distinguish between an ‘actual’ authority of an agent on the one hand, and a ‘apparent’ or ‘ostensible’ authority on the other. Actual authority and apparent authority are quite independent of one another… An ‘actual’ authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties. To this agreement the contractor is a stranger; he may be totally ignorant of the existence of any authority on the part of the agent. Nevertheless, if the agent does enter into a contract pursuant to the ‘actual’ authority, it does create contractual rights and liabilities between the principal and the contractor.

…

An ‘apparent’ or ‘ostensible’ authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal authority, so as to render the principal liable to perform any obligations imposed upon him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. [Emphasis added]

The ostensible agency claim

145    Lennmar alleges that by providing Freshtel representatives with blank TLL lease agreements and allowing Freshtel to provide these agreements to customers and procure their signatures, TLL represented that Freshtel was TLL’s agent and was authorised to make representations about the content of the agreements. Lennmar referred to Pacific Carriers v BNP Paribas (2004) 218 CLR 451 (‘Pacific Carriers’) and submitted that the act of giving TLL forms to Freshtel representatives, when combined with the business relationship between TLL and Freshtel, amounted to ‘representational conduct’ sufficient to ground an agency based on ostensible authority.

146    In oral submissions counsel for Lennmar stated that even if Lennmar was unaware of the existence of TLL when the Partons signed the agreement with Freshtel, the structure of the business was such that the Partons would have known that there was a principal involved, i.e. the Freshtel representative was not contracting with them personally. It did not matter that the Partons could not identify the precise principal.

147    In Pacific Carriers, a shipping company (Pacific Carriers) transported a cargo of peas from Australia to India. The shipping company was obliged to deliver the cargo without its bill of lading and sought an indemnity from the seller of the cargo against any loss or damage resulting from discharging the cargo without the bill of lading. Ultimately, the shipping company received two indemnity letters from the seller’s bank (BNP Paribas). These letters were signed and stamped by an officer of the bank, Ms Dhiri, who did not have authority to bind the bank to any indemnities. The seller became insolvent and Pacific Carriers sought to enforce the indemnities. The High Court concluded that Ms Dhiri had authority from the bank to sign documents (although not for the purpose of giving an indemnity) and that she had been armed with a bank stamp without any further instructions regarding the circumstances in which it may and may not be used. By doing so, the bank put Ms Dhiri in a position which created a representation that she was authorised to grant the indemnities; a representation that Pacific Carriers subsequently relied upon in releasing the cargo. At 469 the Court observed that it would be unjust to permit BNP to depart from the assumption that it engendered and thus the Court decided the indemnities were binding upon the bank.

148    Ostensible authority requires a representation to be made by a principal that another party is acting as its agent and subsequent reliance upon that representation – see the extract from Freeman & Lockyer above at [143]. There are authorities which have held that a party’s conduct in providing another with blank forms or other tools to enter into contractual arrangements could create that representation: see Pacific Carriers, Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72 at 80 and Royal-Globe Life Assurance Company Ltd v Kovacevic (1979) 22 SASR 78 at 82.

149    The doctrine of ostensible authority is related to estoppel, in the sense that it is intended to prevent parties from acting inconsistently with representations they have made about another’s authority that others have relied upon to their detriment. Without the element of reliance, ostensible authority cannot arise. In A.L. Underwood Ltd v Bank of Liverpool [1924] 1 KB 775, a sole trader incorporated and then committed a fraud by paying company cheques into his personal account. The bank credited his personal account and was subsequently sued for conversion. Scrutton LJ stated at 792:

But in the present case A.L. Underwood in asking the bank to collect and pay the proceeds into his private account was not purporting in this transaction to act as agent for his company, or to create privity between them and the bank, he was acting and purporting to act for himself as principal. Just as you cannot ratify the act of an agent who did not profess to act for you, so in my view you cannot rely on the apparent authority of an agent who did not profess in dealing with you to act as agent. [Citation omitted].

150    In Farquharson Brothers & Co v King & Co [1902] AC 325 a rogue named Capon used an authority of his principal to appropriate goods for himself. The Earl of Halsbury LC stated at 331:

Capon was unknown; the appellants were unknown; nobody dreams of suggesting that the respondents here acted upon the faith of Capon being invested with that authority. They never heard of Capon, they never heard of the appellants, but the clerk who has committed the fraud, ingeniously availing himself of his power of signing orders for delivery, gave a delivery order to change the name in which the goods were stored in the dock company’s books to the name of Brown… and Brown in turn procures these goods to be delivered to the present respondents; and, forsooth, it is said that that establishes an estoppel. My Lords, I am bewildered at the absurdity of such a suggestion; I really do not understand in what possible way it can arise.

151    In Boulas v Angelopoulos (Unreported, New South Wales Court of Appeal, 18 October 1991, Gleeson CJ, Kirby P and Samuels JA), Kirby P applied Farquharson Brothers and said at [21]:

For the appellant to succeed, the onus was upon him to show, as a matter of inference, that the circumstances of the case were such as to justify the inference that he had acted upon the 'holding out'.

152    These cases demonstrate that a distinction is to be drawn between situations in which a party is aware that a person is acting on behalf of a principal, but where that party is not able to identify who the principal is, compared to situations in which a party contracts on the assumption that the other side is contracting with them in their personal capacity and there is no reason to believe they are acting as an agent.

153    Lennmar has not established any reliance by the Partons upon any representation made (expressly or impliedly) by TLL that Freshtel was TLL’s agent. For all the Partons knew at the time, they were contracting with Freshtel and Freshtel alone and there was no principal and no agent.

154    The evidence establishes that at the time the agreements were entered into the Partons assumed that they were contracting with a known party, namely Freshtel, and not TLL nor Mr Alexander. No evidence establishes any reliance by the Partons on any contrary assumption. Therefore, the ostensible agency claim is not made out.

The implied agency claim

155    In addition to the evidence already canvassed in the discussion of the ostensible agency claim, Lennmar relies upon the statement in cross-examination of Mr Harrison, where he agreed with a proposition that someone at Bower Finance or Freshtel knew sufficient of TLL’s profit margins to be able to determine the amount that TLL would charge the customer for the equipment rental. Lennmar submits that such knowledge indicated the closeness of the relationship between Freshtel and TLL. Lennmar submitted that in essence the relationship between Freshtel and TLL was that of a joint venture.

156    In answer to Lennmar’s submissions as to the creation of agency between Freshtel and TLL by implied agreement, TLL denied that it had given Freshtel the authority to negotiate contracts on its behalf. TLL submits that customers were merely invited to make applications to TLL on the application forms provided to them. TLL referred to cl 3.6 of the Vendor Referrer Agreement, which prohibited Freshtel from making any statements regarding the contract with TLL without the authorisation of TLL, as establishing that Freshtel did not have its consent to represent TLL in its dealings with the customers.

157    The Court considers that for Freshtel to be TLL’s agent on the basis of an implied agreement, it must be shown that Freshtel consented to be TLL’s agent and TLL consented for Freshtel to be its agent.

158    Assent on the part of the principal can be established if the principal’s words and conduct that, within the knowledge of the agent, are such as to lead to the reasonable inference that he is authorising the agent to act for the principal: Field v Shoalhaven Transport Pty Ltd [1970] 3 NSWR 96 at 103; Pole v Leask (1863) 8 LT 645, 648. It does not matter that the parties have not formally described their relationship as an agency. As Pearson LJ stated in Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1968] AC 1130 at 1137:

The relationship between principal and agent can only be established by the consent of the principal and agent. They will be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognise it themselves and even if they have professed to disclaim it.

159    Importantly, an agency can still be inferred by a court even if a contract between the parties stipulates that the relationship between them is not one of agency. This is relevant to the provisions of the Vendor Referrer Agreement which purport to disdain a relationship of agency between TLL and Freshtel. In South Sydney DRLFC v News Ltd (2000) 177 ALR 611 at 645-646, Finn J stated:

The parties cannot by the mere device of labelling, no matter how genuinely intentioned, either confer a particular legal character on a relationship that it does not possess or deny it a character that it does posse Ex parte Delhasse, above, at 532; see 2A Corpus Juris Secundum, “Agency”, §7; see also the observations of Lord Denning in Massey v Crown Life Insurance Co quoted in the Australian Mutual Provident Society case, above, at 389

Save where an express labelling provision is shown to be a sham, the provision itself (as a manifestation of the parties’ intent) must be given its proper weight in relation to the rest of their agreement and such other relevant circumstances as evidence the true character of their relationship. This may lead to its being disregarded entirely: Ex parte Delhasse, above; Board of Trade v Hammond Elevator Co, above; or to its being given full force and effect: Australian Mutual Provident Society v Chaplin, above. And such will depend upon whether, given the actual incidents and content of the relationship (that is, “the factual relation”) to which the parties have consented, they have consented “to a state of fact upon which the law imposes the consequences which result from agency”: Branwhite's case, above, at 587; Restatement, Second, Agency, §1 comment b.

160    Counsel for both parties referred the Court to several cases relevant to the question of implied agreement. It is useful to summarise them briefly.

161    In Branwhite v Worcester Works Finance Ltd [1969] AC 552, a customer traded in a car at a car dealership. The customer and the manager of the dealership agreed on a price for the new car the customer wished to purchase. The customer signed a hire-purchase agreement with the respondent finance company. The customer did not read the form, but signed it without the price stated. The manager said he would fill it in afterwards. The customer paid a deposit (the value of the car traded in). When the manager filled in and submitted the form to the finance company, he substituted a much higher price for the new car than that which was agreed with the customer. The customer refused to make any payments and sought to recover the deposit from the dealer. One of the questions was whether the dealer was acting as agent for the finance company in holding the deposit. The majority in the House of Lords (Morris of Borth-Y-Gest, Guest and Upjohn LLJ) decided that the dealer was not an agent for the finance company. Lord Upjohn stated at 577-578:

It is argued that in having possession of the finance company’s forms and the ability to settle and fill in all these essential figures he showed that he was acting in the transaction generally as the agent of the finance company. But I do not myself think that this is a realistic approach. A motor dealer must have, if he is to be successful, one or more finance companies willing to enter into the ordinary bona fide hire-purchase agreements with purchasers, many of whom cannot pay the cash price. They must, therefore, supply him with forms and tell him as a matter of common sense the terms upon which they are prepared to do business… But I cannot see that this makes [the dealer] an agent of the finance company… He is a principal acting on his own behalf…

162    Branwhite was subsequently considered by Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 (‘NMFM’). In NMFM, a negative gearing financial strategy was offered to individual investors whereby investors would mortgage their homes to Citibank and then use the loan received to invest in a property trust. K was a financial adviser who received commissions from Citibank and NMFM from referring customers to their products. K made misrepresentations to customers in relation to NMFM’s package. K also failed to warn investors of the dangers involved in such a product. K and the other advisors had Citibank mortgage application forms, which they or their customers filled out and which the customers signed. Citibank knew that the advisers had these forms and that they were recommending their product as part of the negative gearing package, but Citibank did not know all of the details of the package. The question for the Court was whether the advisers were the agents of Citibank.

163    Lindgren J followed Branwhite and decided at [562] that the supply of Citibank forms and the advisers’ roles in relation to the completion, signing and forwarding to Citibank of them did not, per se, characterise the advisers as agents of Citibank. By merely providing the forms, Citibank did not put the advisers in a position to make the misrepresentations: see NMFM at [567]. Furthermore, although K had an agency agreement with Citibank, the scope of statements that K was authorised by Citibank to make was very small: see NMFM at [760]. The statements made by K were outside those that Citibank authorised him to make.

164    Lindgren J also considered whether there was any actual authority outside of the agency agreement that might encompass the making of the misrepresentations: His Honour stated at [1023] that:

No doubt, a mere introducer of business to Citibank could become an agent of Citibank without, or prior to, the formality of a written agency agreement. But since actual authority depends on consensus, due respect must be accorded to Citibank’s intention that there be a distinction between mere introducers and its appointed agents, a distinction that I infer was known to the other Advisers because of the practice according to which their clients’ applications could be and were forwarded by them to Kelly for submission to Citibank.

165    His Honour also relevantly stated at [1025]:

What is to be looked for in this chapter [on actual authority outside of the agency agreement] is not simply evidence that Citibank knew that an Adviser was following a systematic course of introducing his or her clients for the purpose of their obtaining Mortgage Power accommodation, or that Citibank knew that an Adviser was recommending that Mortgage Power was suitable to enable acquisition of a NM investment product, or that Citibank profited from the Adviser’s introductions, or that the Adviser was familiar with Citibank’s requirements and policies. What is to be looked for is evidence that Citibank actually authorised the Adviser to act as Citibank’s representative or for Citibank or on behalf of Citibank in selling Mortgage Power. [Emphasis in original]

166    Lindgren J considered both whether Citibank knew what representations the advisers were making and whether the advisers were authorised to make those misrepresentations. His Honour defined ‘authorisation’ at [1032]:

In my view, the notion of “authorisation” relates to a point of time prior to the making of the statement in question and requires at least that the Adviser was not entitled to make the statement if Citibank objected, that is, that Citibank was entitled to prevent the Adviser from saying what he or she was about to say…

167    His Honour concluded at paragraphs [1188]–[1196] that the advisers were not ‘the voice of’ Citibank and that there were no sources of actual authority outside of the agency agreement.

168    Reference was also made to Tonto Homeloans Australia Pty Ltd v Tavares [2011] NSWCA 389. Such case involved a mortgage provider, ANZ, who employed a mortgage originator, Tonto HL, to find new clients. Tonto HL in turn employed a number of sub-introducers to find customers for it, including S-Loans. In the course of obtaining new customers for Tonto HL, S-Loans made a number of misrepresentations. The relevant question was whether S-Loans was the agent of Tonto HL. The ‘Introduction Deed’ signed by S-Loans and Tonto HL stipulated that S-Loans did not have the power to bind Tonto HL or ANZ to any loans and that the deed did not create a relationship of agency between the parties. Allsop P noted at [182]–[183] that the existence of such terms was not determinative of the question of agency.

169    Furthermore, his Honour noted that the Introduction Deed stated that S-Loans would use its ‘best endeavours’ to introduce customers to Tonto HL. However, his Honour stated at [187]:

The obligation of “endeavour”, thus understood, may lead to elements of assessment and choice as to whether S Loans should, conformably with its obligations to its customers, to Tonto HL and taking into account its own interests, refer any particular loan application to Tonto HL. These are not obligations to act in the interests of Tonto HL, and not ones of a fiduciary character.

170    Allsop P concluded that the trial judge erred in finding that S-Loans was the agent of Tonto HL. His Honour said at [191]–[194]:

Taken as a whole, the Introduction Deed and the other agreed arrangements did not provide for an arrangement under which S Loans would act on behalf, and in the interests, of Tonto HL in the respects found by the primary judge. The reasoning of the primary judge commenced with the recognition that Tonto HL did not undertake interviews with the prospective borrowers and played no part in collecting and submitting relevant information. All those tasks, in respect of these borrowers, and any others introduced to Tonto HL by S Loans were done by S Loans. Thus, there was an entrusting of the organisational or enterprise tasks in that respect to S Loans. In these circumstances, and given the obligations of the deed, the primary judge saw no room for S Loans to act for its own customers.

That approach has two principal flaws. First, it elevates the organisational or enterprise structure of the relevant business and activity as a key factor in determining agency. Tonto HL, as the instigator of the business structure, is seen to have placed Streetwise in the position of collecting all relevant information for the conduct of the lending enterprise. Therefore the tasks that are part of the operation of the organisation or enterprise are to be viewed as entrusted with S Loans as agent: see generally Seavey op cit at 883–885; the discussion in F M B Reynolds, W Bowstead and M Graziadei Bowstead and Reynolds on Agency (17 th Ed, Sweet & Maxwell, 2001) at 21–22, and Lord Wilberforce in dissent in Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552 at 585–586. This approach deflects attention from the correct task — ascertainment of the legal content of the consensual agreement between the parties.

Secondly, the approach fails to place the Introduction Deed in its commercial context. It was an agreement between two entities each of which had its own business. One was to endeavour to introduce business from its own customer base for the mutual commercial advantage of both.

Agency is to be determined by an analysis of the consensual legal relations between the parties, it is not merely a conclusion drawn from the performance by A of a function important, even necessary, to the operation or functioning of the business enterprise of P in question.

171    The Court respectfully adopts the approach of Allsop P. The considerations referred to by his Honour apply, by analogy, to the present circumstances.

Finding as to implied agency

172    It is convenient to dispose of Lennmar’s submissions relating to the TLL emails at this point. The difficulty with such submissions is that any agreement between TLL, Bower Finance and Freshtel relating to business volumes and how they would be divided between the parties does not appear to have been formalised in the BRA or Vendor Referrer Agreement. No evidence has been tendered of any response from Mr Thomas David Ford or any other employee of Freshtel to the concerns relating to the purported agreement referred to in the email from Mr Chambers dated 29 November 2007. Furthermore, such email was between TLL and Bower Finance; Freshtel appears not to have been copied in. The only response to the email was from Mr Beat, who indicated that the low volume of business that TLL received was a ‘one-off’.

173    In summary, although the emails shed some light on the relationship existing between TLL and Bower Finance, they do not indicate the nature of the business relationship between TLL and Freshtel.

174    The burden of proof is upon Lennmar to establish that Freshtel was TLL’s agent: see Geissler v Accro Motors Pty Ltd (1956) 73 WN (NSW) 31 at 33. For the reasons below, the Court finds that the respondent has not satisfied this burden.

175    The observations of Lindgren J in NMFM at [1025] are instructive. They confirm that in determining whether agency by implied agreement existed, the question is one of actual authorisation. In this instance what matters is not whether Freshtel knew about TLL’s operations, nor that TLL profited from Freshtel’s activities, but whether TLL ‘actually authorised’ Freshtel to act ‘as TLL’s representative or for TLL or on behalf of TLL’. Therefore, the evidence indicating the closeness of the business relationship between TLL and Freshtel is not of paramount significance in determining the existence of agency.

176    The determinative evidence is that which indicates what Freshtel was expressly or impliedly authorised to do on behalf of TLL. Clause 3.6(a) of the Vendor Referrer Agreement purports to constrain Freshtel from making any representations with respect to the contracts between TLL and the customers, except for those authorised by TLL in writing. This is evidence of the absence of TLL’s consent to the creation of agency. Furthermore, there is little from the circumstances of the parties’ business relationship to counter such evidence. No evidence was tendered to establish that TLL was aware of statements that Freshtel was making in relation to the purported contracts between TLL and Freshtel. The fact that the organisational structure was such that Freshtel was put in a position to potentially make statements about the purported contract between TLL and Lennmar is not determinative of this issue: see Tonto at [194]. It follows that Freshtel was not TLL’s agent.

Scope of agency

177    If the conclusion that Freshtel was not TLL’s agent should be found to be incorrect, the question of the scope of the agency would then arise. As Young J stated in Netage Pty Ltd v Cantley (1985) 6 IPR 200 at 213:

It is never sufficient as a matter of law to simply say that X is an agent – one must look further and say X is an agent to do what?

178    As part of determining the scope of any agency, the Court must determine what the terms of any agency agreement between TLL and Freshtel are, including what can be implied from all of the circumstances and what can be implied from the functions of the putative agent.

179    As stated above, the Vendor Referrer Agreement expressly prohibited Freshtel from making any statements about the contracts between TLL and its customers except those statements expressly authorised by TLL. In NMFM at [563]–[603] Lindgren J discussed in depth Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-Operative Assurance Company of Australia Ltd (1931) 46 CLR 41; a decision in which the High Court held that a company was liable for misrepresentations made by a director who was given authority by the company to be its agent in business negotiations. Lindgren J distinguished Colonial from the circumstances in NMFM and stated at [602]–[603]:

Colonial is not authority for the proposition that where P [principal] entrusts or confides to A [agent] the function of soliciting new business for P, making him P's “voice” in that respect, P necessarily gives A actual authority, that is, authority, even as against P, to conduct himself in any manner of his choice, including a manner that renders P liable to TP [third party]. In Colonial the High Court was not dealing with any issue as between CML [the company] and Ridley [the agent]. It should not be assumed that if CML had cross-claimed against Ridley for indemnity, it would have failed. Indeed, nothing in the case suggests otherwise than that CML would have succeeded.

It is notorious in agency cases that judgments must be read in the context of the nature of the issues, as between P and TP or as between P and A, calling for decision. While particular sentences in the judgments in Colonial, taken in isolation, can be read as supporting the proposition for which NM contends, they do not do so when read in context. In the present case as in others, the measure of A's actual authority depends on the consensual arrangement between P and A, or, more accurately, on how A was entitled reasonably to understand the authority given to him by P.

180    If Freshtel was TLL’s agent, then Freshtel could only reasonably have understood the scope of its agency as not extending to the making of statements other than those that TLL authorised it to make.

181    The Court concludes that due to the absence of such consent, there was no implied agency and even if there were, it did not extend to the making of the statements that found the respondent’s allegations of misrepresentation. That is, the people of any agency specifically entitled the making by Freshtel of any statements binding on TLL.

182    It follows from such findings that Lennmar’s claim of the existence of agency between TLL and Freshtel fail.

IS TLL LIABLE FOR FRESHTEL’S MISLEADING AND DECEPTIVE CONDUCT ON THE BASIS OF BEING A LINKED CREDIT PROVIDER?

183    Lennmar claims that TLL is liable to compensate it for its loss pursuant to s 73 TPA as a result of the misrepresentations made by Freshtel to Lennmar.

184    Section 73(1) of the TPA relevantly provides:

Liability for loss or damage from breach of certain contracts

(1)    Where:

(a)    a corporation (in this section referred to as the supplier) supplies goods, or causes goods to be supplied, to a linked credit provider of the supplier and a consumer enters into a contract with the linked credit provider for the provision of credit in respect of the supply by way of sale, lease, hire or hire-purchase of the goods to the consumer; or

…

and the consumer suffers loss or damage as a result of misrepresentation, breach of contract, or failure of consideration in relation to the contract, or ass a result of a breach of a condition that is implied in the contract by virtue of section 70, 71 or 72 or of a warranty that is implied in the contract by virtue of section 74 of this Act or section 12ED of the Australian Securities and Investment Commission Act 2001, the supplier and the linked credit provider are, subject to this section, jointly and severally liable to the consumer for the amount of the loss or damage, and the consumer may recover that amount by action in accordance with this section in a court of competent jurisdiction.

185    Section 73 is limited to consumers of goods. A consumer is defined in s 4B(1)(a)(i) of the TPA as one who acquires goods worth less than $40,000. In this case, the value of the goods is less than that amount. Thus, Lennmar is a consumer for the purposes of this section.

186    ‘Linked credit provider’ is defined in s 73(14) of the TPA as follows:

Linked credit provider, in relation to a supplier, means a credit provider:

(a)    with whom the supplier has a contract, arrangement or understanding relating to:

(i)    the supply to the supplier of goods in which the supplier deals;

(ii)    the business carried on by the supplier of supplying goods or services; or

(iii)    the provisions to persons to whom goods or services are supplied by the supplier of credit in respect of payment for those goods or services;

(b)    to whom the supplier, by arrangement with the credit provider, regularly refers persons for the purpose of obtaining credit;

(c)    whose forms of contract or forms of application or offers for credit are, by arrangement with the credit provider, made available to persons by the supplier; or

(d)    with whom the supplier has a contract, arrangement or understanding under which contracts or applications or offers for credit from the credit provider may be signed by persons at premises of the supplier.

187    Lennmar submits that Freshtel was a supplier within the meaning of that expression as used in s 73 of the TPA and that TLL was for the purpose of dealing with Freshtel and with Lennmar a ‘linked credit provider’ within the meaning of s 73 of the TPA.

188    Lennmar relies upon the following facts:

(a)    Freshtel’s method of business which included the offer of a ‘package’ such that the customer would be required not only to accept the telephone services provided by Freshtel but also the equipment to be leased to the customer by TLL or Macquarie Equipment Rentals. Mrs Parton testified that the equipment was part of the package and that it had to be used in order to obtain the ‘call credits’.

(b)    The customer was required to sign a direct debit authority for a monthly debit in favour of the finance company, either TLL or Macquarie Equipment Rentals for the duration of the contract.

(c)    There was also a requirement that they comply with the financial criteria set by the financier, Macquarie Equipment Rentals or TLL.

(d)    Freshtel would purchase the equipment which the rental agreement indicated was being rented; would then sell the equipment to TLL with a mark-up on its purchase price and that the amount which the renter had agreed to pay for the term of the rental agreement would be added to the marked-up price which would then be financed by TLL. Accordingly, Freshtel’s income was largely derived from payments from finance companies, namely TLL and Macquarie Equipment Rentals, the other financier regularly used by Freshtel.

189    Under the provision of the Vendor Referrer Agreement, Freshtel regularly referred its customers to TLL for credit. It is clear that TLL is a linked credit provider according to the terms of s 73(14)(b).

Does s 73 of the TPA apply?

190    TLL submits that by Freshtel arranging for the respondents to apply for or acquire the financial product (TLL’s credit) via the rental agreement, Freshtel dealt with a financial product within the meaning of s 12BAB(7) and s 12BAB(8) of the ASIC Act. Therefore, in dealing with that financial product Freshtel was providing a financial service for the purpose of Division II Part 2 of the ASIC Act: subsection 12BAB(1)(b). TLL submits that consequently, as the conduct complained of by Lennmar involved a supply of financial services within the meaning of Division II of Part 2 of the ASIC Act, it follows that by operation of s 51AF of the TPA none of the provisions of Pt V of the TPA apply, including s 73.

191    Section 73 of the TPA is contained in Pt V – Consumer Protection of that Act. Section 51AF of the TPA, being the first section within Pt V thereof, relevantly provides:

(1)    This Part does not apply to the supply, or possible supply, of services that are financial services.

192    TLL relies upon the findings of Madgwick J in ACCC v Original Mama’s Pizza & Ribs Pty Ltd [2008] FCA 370 at [84]-[102] which found that the operation of s 51AF of the TPA operated to exclude a lease from the provisions of s 73 of the TPA.

193    Lennmar submits that the decision on Original Mama’s Pizza is erroneous and should not be followed and that subsequent decisions have held to the contrary. Lennmar relies upon the finding of Logan J in Prosperity Group International Pty Ltd v Queensland Communication Company Pty Ltd (No 3) [2011] FCA 1122 in which Logan J concluded at [73] that the term ‘financial product’ in s 12BAA of the ASIC Act did not readily apply to rental contracts analogous to those relied upon by TLL. His Honour concluded that s 73 was not excluded by s 51AF of the TPA and concluded that s 73(4) of the TPA was available to the lessees by way of defence to the claim by the lessor. It does not however appear that his Honour referred to the decision of Original Mama’s Pizza.

194    Lennmar also relied upon ASIC v Bank of Queensland Ltd (2011) 86 ACSR 258, in which Foster J considered an application to strike out the defence that the claim could not succeed since the provision of finance fell within s 51AF of the TPA and was therefore excluded from a claim under s 73 of that Act.

195    In ASIC v Bank of Queensland Foster J refused to strike out such a defence, commenting that ‘to read s 73 in a way the respondents urged upon the Court would render s 73 incapable of any application’. Again his Honour’s decision does not record that either of the above authorities, namely the judgments of Madgwick J and Logan J, were referred to. However Foster J accepted the submission of the applicant that s 73 should be interpreted so as to allow it to operate ‘harmoniously with the rest of Part V of the TPA’ (See [45]).

Finding

196    At [45]–[47] Foster J considered the submissions of ASIC and concluded:

46.    In my judgment, the submissions of ASIC constitute the preferred interpretation of s 73 when read with s 51AF of the TPA. The initial fundamental engagement of the section is brought about by a consumer suffering loss or damage “… as a result of misrepresentation, breach of contract, or failure of consideration in relation to the contract, or as a result of a breach of a condition that is implied in the contract by virtue of [certain specified sections of the TPA] or section 12ED of [the ASIC Act] … The section does not confine the source of that description of primary liability on the part of the supplier to contraventions of Pt V of the TPA. The description of the primary contravening conduct is very broad and is apt, in my view, to cover common law and statutory contraventions as well as breaches of contract.

47.    The only Pt V provisions which are excluded by s 51AF(1) from operation in respect of financial services are those which impose what I have called “primary liability” upon persons. In this case, the statutory liability of Storm directly to the Doyles for misleading and deceptive conduct would have to be anchored in a provision in the Corporations Act and could not have been litigated pursuant to s 52 of the TPA. An applicant is not prevented by s 51AF(1) of the TPA from suing a linked credit provider in respect of conduct of the relevant supplier which is not alleged to be a contravention of Pt V of the TPA. If the liability of the suppler is founded upon general law or statutory rights otherwise covered by the text of s 73(1) which I have extracted at [46] above, s 73 will be available as a means of rendering liable the linked credit provider.

197    The Court respectfully adopts his Honour’s reasoning. As his Honour observed, such interpretation prevents s 73 from being rendered incapable of any application and allows s 73 to enmesh with the provisions of Pt V of the TPA.

198    Arising out of the findings referred to above, namely that s 73(1) is available to a party who has suffered loss or damage arising from conduct which constitutes misrepresentations under the general law or a breach of statute, and from the findings that Freshtel engaged in unconscionable conduct within the meaning of s 12CC of the ASIC Act, the question then arises whether s 73(1) creates a liability to TLL to Lennmar. It is important to recognise that such liability does not arise through any breach of any provision contained in Pt V of the TPA but independently of any provision contained in that Part of the TPA. Section 73(1) will apply if TLL is a linked credit provider.

199    The Court finds that TLL is a linked credit provider. This is clearly established by virtue of the provisions of the Vendor Referrer Agreement and of the emails passing between TLL and Freshtel referred to earlier in this decision.

200    It follows from the above that TLL is liable by virtue of s 73(1) jointly and severally to Lennmar for the amount of loss or damage sustained by Lennmar in engaging in the transaction as a result of Freshtel’s conduct, including the diminution or extinction of the liability which would otherwise exist.

WHETHER TLL AIDED AND ABETTED FRESHTEL’S MISLEADING AND DECEPTIVE CONDUCT

201    Lennmar submits that TLL aided and abetted a breach of both the TPA and of the ASIC Act and calls into operation the provisions of s 75B of the TPA (contained in Pt VI of the TPA) and of s 12GB of the ASIC Act. Those sections, which are relevantly identical make liable a person who aids, abets, counsels or procures another to contravene the relevant statute; or who induces or attempts to induce a person to do so, or is otherwise directly or indirectly knowingly concerned in or a party to the contravention. In each case the statute makes it an offence and in the case of the TPA, imposes pecuniary penalties under s 76 thereof and under s 12GBA of the ASIC Act.

202    Lennmar submits that there is sufficient evidence to establish that TLL knew of the conduct in which Freshtel was engaged when soliciting orders from new customers, in this instance from Lennmar. It submits that the critical conduct occurred when Mr Alexander induced Lennmar to enter into the arrangements on or about 4 December 2007.

203    The conduct relied upon comprised the fact that the ‘order specification’ was on Freshtel’s letterhead; no mention was made of TLL in the documentation; the impression was given that the equipment and telephone services were being provided by Freshtel as part of the one deal or package; the impression was given that the monthly rental payment that would be made was for the rental of telephone lines, not for the rental of equipment and that the order was signed by Lennmar to conclude a legally binding contract. Lennmar submits that such facts created the false impression in Lennmar that Freshtel was the only company with whom it would be dealing; that Freshtel would be providing services and equipment.

204    The facts relied upon to prove TLL’s role as an aider and abetter are derived from several sources. The first source comprises the contents of para 3.1 of the Vendor Referrer Agreement referred to above at [97] and [127].

205    The second source is an email dated 18 April 2007 written by Mr Beat of Bower Finance to Mr Ford of Freshtel. It reported a meeting between Mr Beat and Mr Ford concerning a meeting with TLL. The email suggests that TLL was fully aware of the manner in which Freshtel was marketing its services to potential customers. The message relevantly states:

Tom all went well, they would love to catch up with you – I was thinking Friday before lunch down at Manly – @ 11.

They [TLL] just want to know a bit about the agreements etc, before I arrived they had a look at your booklet that we have on display in the board room – they asked about the “Working Examples” – “Call Credit”

Call rate $185pm over 36 months

Actual cost after rebate – NIL

But all went well, and they liked the first deal with all equipment checking off with their rrp.

206    The Freshtel brochure (referred to previously) was used by Freshtel with the tacit approval of TLL. In addition, TLL was well aware that sales of ‘bundled packages’ by Freshtel would benefit TLL’s business. Indeed the evidence shows that TLL was urging Freshtel to direct more of its business towards TLL, and complained that business was also being allocated to Macquarie Equipment Rentals, another financier. Such conclusion is made plain by the email dated 29 November 2007 referred to at [137] above.

207    TLL submits that it was not aware of the services provided by Freshtel, but such submission can be readily rejected. Clause 2.3 of the Vendor Referrer Agreement referred to the ‘Products and associated services’ being provided by Freshtel. They are defined in Schedule 1 of part 8, as referred to previously in this decision, to include installation as well as ‘Service plans and charges’. Although the submission was made by TLL that the service refers to purely maintenance, there was no evidence to support such submission and the Court concludes, as referred to previously, that the ‘Services’ referred to in the Vendor Referrer Agreement was intended to refer to telecommunication services to be provided by Freshtel to the customer (i.e. Lennmar) and was known to TLL.

208    By way of defence, TLL relied upon the provisions of cl 3.6(a) of the Vendor Referrer Agreement as providing protection to TLL. That clause provided:

The vendor [Fresh] must not make any promises, representations, warranties, guarantees or statements to customers except as provided in writing.

209    However, the representations relied upon by Lennmar were in writing and were contained in the brochure which TLL had seen and of which TLL had knowledge. Therefore, cl 3.6(a) provides no assistance to the applicant.

Finding

210    The Court is mindful of the observations of the High Court of Australia in Yorke v Lucas (1985) 158 CLR 661 in which the High Court, referring to the operation of s 75B of the extant TPA referred (at 670) to the fact that there could be ‘no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention’. Furthermore in Yorke v Lucas the High Court emphasised at 667 that a person is only liable under s 75B if that person intentionally aids, abets etc. a violation of the TPA. This requires proof of a guilty mind, although this does not require proof that the abettor intentional aided or abetted the conduct: Yorke v Lucas.

211    The Court is satisfied that TLL did have knowledge of the essential elements of the contravention, namely Freshtel’s conduct in conveying to prospective customers the fact that the arrangement was a ‘bundled package’ and that Freshtel’s brochure made no mention of the fact that it was mandatory to have a supply of telephonic equipment which would be financed by TLL. TLL’s ‘guilty mind’ is evidenced by the emails exchanged between TLL and Freshtel which indicate that TLL was aware of the representations that were being made in the brochure and implicitly consented to such representations being made.

212    Taking all these matters into consideration, the Court is satisfied that, having the knowledge which TLL possessed of the brochure issued by Freshtel, which made no mention of TLL, and to the provision of services which it knew was dependant upon the provision of equipment to be supplied by Freshtel and financed by TLL, that TLL did in fact aid and abet and was knowingly concerned in Freshtel’s conduct.

213    Even if it could not be said that TLL aided and abetted Freshtel’s misleading and deceptive conduct, TLL was clearly knowingly concerned in Freshtel’s contravention. To be knowingly concerned, it is enough if TLL is aware of the representations made and that TLL is aware of the true position: see Collins Marrickville Pty Ltd v Henjo (1987) 72 ALR 601 at 614. As stated above, TLL was at least aware of the representations contained within the brochure. It knew that these representations did not correspond with the true legal consequences of the customer entering into the agreement with TLL. For these reasons, TLL can be taken to be knowingly concerned in Freshtel’s contraventions of the TPA and ASIC Act.

214    The Court finds that TLL has been indirectly a party to the misleading and deceptive conduct by operation of both s 75B of the TPA and of s 12CC of the ASIC Act.

EXCLUSIVE DEALING

215    Lennmar submits that TLL engaged in exclusive dealing within the meaning of s 47(6)(a) of the TPA. Such submission is put in two ways: that TLL contravened the section directly and/or aided and abetted Freshtel’s breach of s 47(6) of the TPA. The type of exclusive dealing alleged is commonly referred to as ‘third line forcing’. A brief statement of the relevant principles is necessary.

216    Third line forcing occurs where a corporation supplies goods or services on the condition that the acquirer obtain other goods or services from another person: see SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 at [13]. Third line forcing is a per se contravention. That has the consequence that to establish the offence it is not necessary to prove that the conduct in question substantially lessened competition: see Australian Competition and Consumer Commission v IMB Group Pty Ltd (in liq) [2002] FCA 402 (‘IMB’) at [56]. However, that is not to say that conduct which has absolutely no impact on competition is prohibited by this section. Section 47(6) is located within the chapter concerning restrictive trade practices and the section addresses the mischief generated by restrictive trade practices: see Australian Competition and Consumer Commission v Link Solutions Pty Ltd (No 2) [2010] FCA 919 at [70] (‘Link Solutions 2’).

217    Package arrangements, where one or multiple companies contribute different elements of a package of goods and/or services which is then offered to the customer, do not constitute third line forcing, even if the customer could have arranged for all of the elements of the package to be obtained separately and even if there is no reason for insistence on a package except for the supplier’s requirement: see Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1986) 162 CLR 395 and Paul Dainty Corporation Pty Ltd v National Tennis Centre Trust (1990) 22 FCR 495. However, a court must be careful to distinguish between a legitimate package arrangement that does not contravene the prohibition on third line forcing and a sham or artificially contrived package that is structured to circumvent the prohibition on third line forcing: see IMB at [78].

218    For a breach of s 47(6) to be proven, it must be established that the offender knew that an offer of its goods and services was being made to customers and that the offer was conditional upon the customer’s acquisition of goods or services from a specific third party or member of a ‘panel’ of third parties: see Link Solutions 2 at [97]–[102]. It is not enough to establish that the offender knew that the offer was conditional upon acquisition of goods or services from any particular third party.

Parties’ submissions:

219    In support of its claim that TLL directly contravened s 47(6) of the TPA, Lennmar states that TLL supplied equipment financing to Lennmar on condition that Lennmar agreed to receive telephone services from Freshtel. The bundled package comprised services and equipment and Lennmar was never offered the option of receiving equipment without services. Lennmar submits that the terms of cl 3.1 of the Vendor Referrer Agreement make this clear.

220    As to the submission that TLL has engaged in aiding and abetting of exclusive dealing, Lennmar submits that there is abundant evidence to show that TLL knew that upon receipt of an application from Bower Finance or Freshtel in the form of a signed rental agreement, Lennmar had not selected TLL to be the financier, but rather Freshtel had appointed TLL. No choice was offered to Lennmar and TLL knew itself to be one of two finance companies whose documentation would be put to Freshtel customers.

221    In support of its submissions Lennmar relies upon the decision of Bennett J in Link Solutions 2. This judgment was one in respect of an application for summary judgment, however Bennett J observed at [100] that in order for third line forcing to be proved it was necessary for it to allege and establish that each of the alleged contraveners knew of the existence of a panel of financiers, of which that company was a member, or that the customer was directed to it as the Finance Company of the Telco’s choice.

222    Lennmar also refers to cl 3.1 of the Vendor Referrer Agreement and to the emails passing between Bower Finance and TLL to support its submissions. These emails refer to a possible arrangement between Macquarie Equipment and TLL to split the business referred to it from Freshtel via Bower Finance. These emails have been previously discussed in this decision.

223    TLL submits it is necessary for Lennmar to prove that the offer from Freshtel to Lennmar for the supply of telephone services was conditional upon TLL providing financing for the equipment and that Lennmar’s entry into the agreement for services with Freshtel and into the rental agreement with TLL does not establish that one was conditional upon the other. Further, TLL submits that Lennmar did not provide evidence that they were aware of TLL’s existence; that it is necessary for Lennmar to establish that TLL knew that Freshtel was engaging in any alleged exclusive dealing conduct; and that there is no evidence that TLL knew that it was the only finance company placed before the respondents; or that TLL was part of a select panel of financiers. Furthermore, even if TLL had knowledge that it was the only finance company involved in financing Freshtel’s contracts, such knowledge does not transpose into knowledge that Freshtel was imposing a condition upon Lennmar obtaining its telephone services that the customer must obtain finance from TLL.

224    TLL also relies upon the fact that Macquarie Equipment Rentals was also engaged as a financier for Freshtel. TLL submits that the same issues which are raised by Lennmar were considered in Link Solutions 2 as referred to above. That is, it must be established that TLL knew of the existence of a panel of which it was a member or that the customer was being directed to it as the financier of Freshtel’s choice.

225    As to the assertion that TLL contravened s 47(6) of the TPA itself, TLL submits that there is no evidence that the finance was suppled only on condition that Lennmar would acquire Freshtel’s telephone services. Further, it is submitted that Freshtel was not TLL’s agent for the purpose of making any such statement.

Findings

Did it matter that Lennmar was not aware of the existence of TLL?

226    The fact that Lennmar was unaware of the relationship between Freshtel and TLL or was unaware that TLL even existed is irrelevant for the purposes of determining whether Freshtel and/or TLL breached s 47(6) of the TPA. There is no requirement in s 47(6) of the TPA that a person be aware that their acquisition of goods or services is contingent upon them acquiring goods or services from a third party. This provision is not concerned with the knowledge of the customer; rather it is concerned with the knowledge of the supplier of the goods or services.

Were Freshtel’s goods and services and TLL’s services part of a legitimate package?

227    In Tooheys, retailers of the appellant’s beer in Northern Queensland had two options for acquiring the beer. They could either purchase and collect the beer directly from a regional depot, or they could arrange to have the beer shipped to them from the appellant’s premises in Brisbane. If a retailer chose the latter option, the beer would only be delivered by the appellant’s chosen shipping company. A retailer could not choose another shipping company.

228    The High Court considered that this was not a contravention of s 47(6) TPA. Gibbs CJ stated at 400:

The condition was not that the retailer should accept the services of [the appellant’s delivery service]. The condition was that the appellant should arrange the carriage of the beer and should deliver it to the retailer, not at the brewery, but at the retailer’s premises or some other place in North Queensland. In other words, the condition was that the appellant would deliver the beer which it sold to its destination in North Queensland. It was of course clear that if the appellant had itself carried the beer there would have been no exclusive dealing within s 47. The position was not altered when the appellant arranged for a third person to carry on its behalf.

229    Wilson J agreed with the view of Gibbs CJ that the transaction between the retailer and the brewery did not involve the separate provision of a delivery service. His Honour stated at 403:

The beer was to be supplied at the premises of the retailer. Each supply was a single transaction which could not be broken up into its several elements of sale and delivery without doing violence to the reality. Delivery to the premises was an essential and therefore inseparable concomitant of the supply of the beer. In different circumstances it might well be appropriate to characterise the delivery of the goods as the supply of a service. But not here. No question of supplying a service arises.

230    In Paul Dainty the appellant, a concert promoter, wished to hire the respondent’s venue for some concerts. The respondent required the appellant to exclusively use the respondent’s chosen provider of ticketing services for the concerts, instead of the appellant’s chosen provider. There would not be a contractual arrangement between the appellant and the ticket provider. The appellant argued that this constituted third line forcing.

231    The Full Court concluded that such an arrangement did not violate s 47(6). It stated at 515:

There is, in our opinion, nothing in these agreements between the venue and the promoter, or the venue and the ticket-seller, to support the appellants’ arguments that tickets for a performance, of their very nature, must be sold on behalf of the promoter or entrepreneur who arranges the performance. There is nothing unlikely or contrived about the arrangements set out. The respective interests of spectators, promoter, venue and ticket seller are all catered for in a perfectly reasonable way, which does no violence to principles of law or common sense.

There is, in our view, no reason to assume that a relationship of principal and agent arises between promoter and venue for the purposes of ticket sales. The contract for the hire of the venue is, on its face, a contract between principals for the hire of a ticketed venue – one which provides all its own ticketing facilities. It is a ‘package deal’ which, in addition to ticketing, covers such matters as catering, program selling and security services.

232    The Court considers that the circumstances of the matter at hand can be distinguished from these cases. In Tooheys, there was no contractual relationship between the retailer and the delivery company. The contractual relationship was between the brewery and the delivery company and the retailers received the benefit of this arrangement. Similarly in Paul Dainty there was no contractual relationship between the ticketing service and the concert promoter. The contractual relationship was between the ticketing service and the trust which operated the venue. The significance of the manner in which goods and services are acquired was highlighted by Lindgren J in Australian Automotive Repairers’ Association (Political Action Committee) Inc v Insurance Australia Ltd (No 6) [2004] FCA 700 at [94]–[110]. In contrast to these cases, there is a contractual arrangement between Lennmar and TLL.

233    The circumstances of these proceedings are far more analogous to the circumstances of Link Solutions 2. In that case, Bennett J stated at [90]–[91]:

The Commission accepts that if the Telcos’ and Finance Companies’ services were intrinsically related such that there was a genuine commercial connection between the two suppliers, the arrangements would fall outside the scope of s 47(6). The Commission submits that this forms no part of the pleaded case and that the evidence makes it clear that the equipment offered and supplied included equipment that had nothing to do with telephony. The Commission submits that if CIT maintains this argument, there is a clear dispute on the pleadings and on the evidence and that it is a matter that should go to trial.

I accept the Commission’s submissions. While it is pleaded that the equipment was originally supplied by the Telco to the Leasing Company, the Commission and the proposed pleading characterise the transaction as the customer acquiring equipment under a lease from the Leasing Company, being “another person” under s 47(6). The fact that the equipment was ultimately sourced from the Telco is not, at present, sufficient to render the Commission’s case unarguable. As Drummond J recognised in IMB at [78], there is a good deal of room for judgment in determining how to characterise arrangements of this kind and at this stage. The Commission’s characterisation discloses an arguable case. Accordingly, the pleading is not liable to be struck out on this basis under O 11 r 16.

234    In the present proceedings, there are two separate arrangements. One is between Lennmar and Freshtel for the provision of telephone services. The other is between Lennmar and TLL for the provision of financing for equipment rental on a hire-purchase basis. Freshtel and TLL intended for these agreements to be kept separate, as indicated by cl 2.3 of the Vendor Referrer Agreement. The separate nature of the agreements is also indicated by the fact that TLL seeks enforcement of its contract with Lennmar despite the complete failure of the contract between Lennmar and Freshtel caused by the latter’s cessation of phone services and subsequent liquidation.

235    Because of the degree of separation between the agreements, a common sense approach reveals that the agreements were not part of a legitimate package in the vein of Tooheys, Paul Dainty or IMB.

Did TLL directly contravene s 47(6) TPA?

236    Applying Link Solutions 2, for TLL to have directly contravened s 47(6) TPA it must be established that TLL knew that its services were being offered and such offer was conditional upon the acceptance of goods and services from Freshtel or from a panel of suppliers, of which Freshtel was a member.

237    The Court finds that the respondent has failed to establish that the services provided by TLL were conditional upon the acceptance of the telephonic services or equipment from Freshtel. There was no evidence provided as to how many companies with whom TLL may have had equipment financing arrangements. Although a customer might ordinarily have no reason to contact TLL directly and seek equipment financing from them, there is nothing to suggest that TLL’s equipment financing service would only be provided if the customer agreed to acquire the equipment from a particular equipment vendor or one of a group of equipment vendors, as was the case in KAM Nominees v AGC Ltd (1994) 51 FCR 338.

Did Freshtel contravene s 47(6) TPA?

238    The evidence reveals that Freshtel informed its customers that to obtain the telephone credits, it was obliged to acquire equipment. In order to acquire the equipment, a customer was obliged to obtain financing. The financing was provided by one of two companies, TLL or Macquarie Leasing. The Vendor Referrer Agreement and the emails exchanged between Freshtel and TLL demonstrate that Freshtel knew that it was offering its services conditionally upon the acquisition of equipment financing provided by the panel of TLL and Macquarie Leasing. The entire business model of the ‘Freshtel Billing Platform’ is inherently dependent upon the customer acquiring equipment financing. If no equipment financing was acquired, there would be nothing for the credit to set-off.

239    By conducting its business in this manner, Freshtel contravened s 47(6) TPA.

Did TLL aid and abet Freshtel’s contravention of s 47(6) TPA?

240    In Link Solutions 2, Bennett J stated at [92]:

There is no dispute that, in order to be found liable under s 75B of the Act, it has to be established as against each of EFS and CIT that it had actual knowledge of all of the essential facts that established the contravention of the Act by the Telco (Yorke v Lucas (1985) 158 CLR 661 at 670; Rural Press at [48]; Houghton v Arms (2006) 225 CLR 553 at [17]). Constructive knowledge is not sufficient, although there may be circumstances where knowledge may be inferred if that is the only rational inference available (Genocanna Nominees at [278] per Lander J).

241    At [99] her Honour stated:

I do not accept that the Commission is required to establish knowledge of the offer of or giving of call credits to all of the Telco’s customers. Each Finance Company would know of each customer that approached it for finance. The allegation is that, for that customer, the nominated Finance Company was the third person. It is not suggested that EFS or CIT knew of offers of, or the giving of call credits to, customers who did not apply to that company for a lease agreement. However, it is an essential element of the alleged contravention that the offering or giving of call credits was on condition that the customer will acquire a lease agreement from “another person”. It is not the fact that all customers were referred to a single finance company. The allegation is that each Finance Company was aware or knew of the business method. That method with respect to each customer to whom the offer was made involved a selection by the Telco of the nominated finance company from a panel. It follows that the Commission must plead and establish that each of EFS and CIT knew of the existence of a panel, of which that company was a member, or that the customer was directed to it as the Finance Company of the Telco’s choice. It is not clearly pleaded by the Commission that either EFS or CIT had such knowledge. It is not necessary that they knew the identity of the other members of the panel.

242    The Court finds that TLL had actual knowledge of the fact that Freshtel offered telephone services to customers on the condition that the customer acquire equipment from Freshtel and financed the acquisition of the equipment via TLL or Macquarie Leasing. This actual knowledge is evidenced by the fact that representatives of TLL viewed Freshtel documentation that discussed the Freshtel billing platform and that TLL entered into a Vendor Referrer Agreement after a period of negotiation with Freshtel.

243    It can also be determined that TLL had actual knowledge of the fact that it was on a panel consisting of it and Macquarie Leasing. This is seen in the email of Mr Chambers of TLL of 29 November 2007, extracted above at [137]. In this email, Mr Chambers refers to an agreement that the business volume generated by Freshtel would be split 50-50 between TLL and Macquarie Leasing. This is clear evidence that TLL knew that it was on a panel consisting of it and Macquarie Leasing.

244    For this reason, TLL was knowingly concerned in Freshtel’s contravention of s 47(6) of the TPA.

WHETHER TLL ENGAGED IN UNCONSCIONABLE CONDUCT

245    Lennmar submits that TLL was guilty of unconscionable conduct as provided by s 12CA(1) of the ASIC Act.

246    Lennmar relies upon evidence provided by Mr Harrison that TLL did not know and had no reason to assume that customers had seen TLL’s Terms and Conditions; that TLL ‘knew or was at least reasonably suspicious’ of Freshtel’s sales method because of its misleading ‘billing credits’ brochure, which representatives of TLL had seen; that the brochure made no reference to TLL nor to the necessity to lease any equipment; that Freshtel had told customers that they were being offered a single ‘deal’ comprising telephone services plus equipment; that the amount of fees paid by way of brokerage to Bower Finance was undisclosed; that although the terms and conditions referred to possible brokerage, such clause did not relate to payment to Bower Finance and the terms and conditions were not part of the contract or were not shown to customers and were never explained to them and the fact that brokerage fees was paid to Bower Finance without the knowledge or approval of Lennmar. Lennmar also relies upon the provisions of cl 3.1 of the Vendor Referrer Agreement.

247    Lennmar also relies upon the unchallenged evidence of Mr and Mrs Parton that they were not taken to the terms and conditions and accordingly Lennmar submits that cl 20.6 of the Terms & Conditions which refers to payment of brokerage cannot be relied upon by TLL. Clause 20.6 of the special conditions provides:

If the client was introduced or referred to the owner in relation to the transaction by a third party, the client consents to the owner paying commission to that third party and to the inclusion of that commission in the calculation of rent payable under this agreement.

248    Mr Harrison testified that he was not aware of any way in which Lennmar would have been aware of the brokerage charge being paid. Further, the customer (i.e. Lennmar) had no way of knowing that the broker charge was paid, not to the introducing party, namely Freshtel, but to another party, namely Bower Finance.

249    TLL alleges that Mr and Mrs Parton were experienced business people; there was no special disadvantage on the part of Lennmar; there was no undue influence, pressure, coercion or the like; and that the rental agreement is not a complex document; and that legal advice could have been obtained by Lennmar if required.

250    TLL also relies upon the fact that any representations were not made by TLL, or an agent of TLL; that the reference to services in the Vendor Referrer Agreement in no way establishes the fact that TLL had reason to believe that the rental agreement was signed by Lennmar on the basis of an incorrect belief; that there was no secret commission, since the possibility of commission was referred to in cl 20.6 of the Terms & Conditions; and that TLL had a basis for assuming that Lennmar accepted the terms and conditions and were aware of them since both Mr and Mrs Parton, as directors, certified that they had seen and understood the Terms & Conditions. In these circumstances TLL submits that the respondents’ allegation that TLL engaged in ‘sharp practices’ is not established.

Finding

251    To constitute unconscionable conduct, it is necessary that more be shown than that the behaviour is misleading or deceptive or would otherwise constitute a breach of some provision of the TPA. The behaviour must be so unacceptable that it can properly be described as unconscionable: see ACCC v 4WD Systems Pty Ltd (2003) 200 ALR 491 at [185] per Selway J. In Attorney-General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557 Spigelman CJ said inter alia at [124]:

The Parliament was careful to ensure that the amorphous and ambiguous term, “unconscionability”, did not come to completely override the legal rights and obligations created by the lease relationship. Parliament did not intend that “unconscionability” claims could be made so readily as to virtually take the place of retail tenancy claims. They needed to meet a high standard of moral obloquy.

252    As has also been said, the expression ‘imports a pejorative moral judgment’: see Hurley v McDonalds Australia Limited [1999] FCA 1728 at [22]. There must be a deliberate or reckless act: see Selway J in ACCC v 4WD Systems Pty Ltd at [185], where his Honour said:

Normally it might be expected that this involve either a deliberate act, or at least a reckless act. Mere unreasonableness or unfairness may not be sufficient, at least in the absence of some moral fault.

253    The conduct of Freshtel referred to would readily qualify as unconscionable conduct. However, to succeed under the claim for unconscionability, Lennmar must establish that TLL was a party to such conduct. On the facts, the evidence does not establish that the relationship of principal and agent between TLL and Freshtel existed in respect of the soliciting of the business by Freshtel. In the absence of any such agency, there must be evidence establishing that TLL directly engaged in conduct that was unconscionable.

254    The evidence does not establish that TLL knew of the statements being made to Mr and Mrs Parton. However, the evidence does establish that TLL was aware of the brochure being provided to prospective clients of Freshtel and was also aware of the billing credit system which purportedly gave 100% credit for the telephone charges being made by Freshtel. It follows that TLL must have been aware that the so-called ‘billing credits’ were in effect disguised as a charge for the rental of the equipment being provided. This last conclusion arises from the email already referred to in this decision in which Mr Beat reported to Mr Ford on 18 April 2007 that TLL were aware of the actual cost to the customer after rebate was ‘nil’. Further, an email of 20 June 2007 from Mr Chambers of TLL to Mr Beat states:

Hi David / Tom,

It is with great pleasure that I announce Bower Finance is officially accredited with Technology Leasing. As a result the Fresh Telecom vendor submission was also approved by the relevant management team today. It has been a long road, and given our Telco history most the delay has been convincing the TL shareholders to consider doing business is [sic] this market again.

Tom – I have quickly put together a Technology Leasing badged Fresh Telecom combo agreement (application & settlement) for your review (see attached)

Is this logo acceptable, size and positioned to your satisfaction? If not please provide any feedback on your requirements or how we can improve. I have also attached our credit guidelines which have been issued previously.

255    In addition, TLL were aware that Freshtel were to provide to customers a brochure which included paragraphs: ‘How Does It Work?’ and ‘Call Credit System Financing’. Nowhere in that brochure does it mention that the person entering into the arrangement with Freshtel would need to lease equipment as a term of the agreement and that the equipment will be financed by TLL.

256    The Court also observes that in the actual process of marketing, the unchallenged evidence of Mr and Mrs Parton as to the circumstances in which the documents were signed confirmed that the oral representations of Mr Alexander led them to believe that the arrangement they were entering into was entirely different to what they signed. As the Court has already observed, whilst the Partons had some business knowledge, that knowledge was limited and they relied essentially upon the statements made to them by Mr Alexander when determining to enter into the arrangement with Freshtel. The purport of the rental agreement and the other documents were explained in a deliberately misleading manner by Freshtel. Further, whilst TLL claims that it can rely upon the fact that the Partons signed an acknowledgement that they had accepted the terms and conditions, TLL had no way of knowing whether in fact they had understood the complex terms.

257    Furthermore, the Court observes that the Partons had no knowledge of the involvement of Bower Finance or TLL when Mr Alexander consulted with them. At a later stage they became aware that there was a company named TLL involved, but understood that to be some kind of internal arrangement between Freshtel and the company and that the arrangement did not involve Lennmar directly.

258    Lastly, the Court observes that the Partons had no knowledge of the payment of any commissions to Bower Finance, nor was it authorised even under cl 20.6 of the Terms & Conditions, as Bower Finance was not the ‘introducer’.

259    Because of TLL’s knowledge of Freshtel’s method of operations in the solicitation of business the Court is satisfied that TLL, no doubt to improve its own financial position, willingly participated in Freshtel’s method of soliciting business. Those marketing activities were unfair and did not inform potential customers of the real nature of the obligations under the ‘bundled package’. In this sense, TLL has engaged with Freshtel in unconscionable conduct. At least, the conduct of TLL was reckless and TLL was therefore liable for engaging in unconscionable conduct by reason of its participation in the marketing practice of Freshtel.

260    Therefore, the Court finds that TLL engaged in unconscionable conduct.

261    In passing, the Court observes that the aiding and abetting provision contained in s 12GB of the ASIC Act applies with respect to contravention of a provision of Subdivision D. Section 12CC (Unconscionable conduct in business transactions) is contained in Subdivision C of the ASIC Act. Accordingly there is no scope for the aiding and abetting provisions provided by s 12GB to apply to a finding of unconscionable conduct by another under s 12CC.

WHETHER RELIEF SHOULD BE GRANTED UNDER THE CONTRACT REVIEW ACT

262    Lennmar alternatively claims relief under the provisions of s 7 of the Contracts Review Act 1980 (NSW) (‘Contracts Review Act’). Section 9(2) describes circumstances which may give rise to the grant of relief under s 7. Under s 9(2)(j) the Court must consider:

Whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act:

(i)    by any other party to the contract;

(ii)    by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or

(iii)     by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract,

263    Lennmar refers the Court to decisions relating to the interpretation and application of s 9 such as Perpetual Trustees Victoria v Longobardi [2009] NSWSC 654; West v AGC (Advances) Ltd (1986) 5 NSWLR 610 and Ashfind Pty Ltd v McDonald (1989) 5 BPR 11, 244.

264    The conduct relied upon by Lennmar under this course of action is the same as that referred to under the heading of ‘unconscionability’.

265    TLL submits that relief cannot be granted since it was not a party to the contract with Freshtel, nor was Freshtel purporting to act for it or would possess the requisite knowledge required under s 9(2)(j)(iii).

Findings

266    The Contracts Review Act has been described by Kirby P (as he then was) in West v AGC (Advances) Ltd as ‘beneficial legislation’ to be ‘interpreted liberally’ (see p 611). The scope of the Act is broad and enables the Court to consider whether ‘the contract or one of its provisions is the product of unfair conduct on his part either in the terms which he has imposed or in the means he has employed to make the contract’: see McHugh JA at 622.

267    For these reasons which have already been described above at [250]–[259], Lennmar has established that TLL engaged in conduct within s 9(2)(j) which is unconscionable. It follows that relief may be granted pursuant to s 7 of that Act.

CONCLUSION

268    The Court has found that TLL succeeds in its claim, but that Lennmar and Mr Parton succeed in their cross-claim with respect to several issues.

269    Significantly, Lennmar and Mr Parton are entitled to rely upon the provisions of s 73(4) of the TPA to offset its liability to TLL. The sum of $8,500 received by Lennmar was paid by Freshtel, not by Lennmar, and accordingly this sum is not relevant to the calculation of TLL’s loss and damage.

270    The Court directs the parties to confer to formulate declarations and orders which will reflect the findings of the Court.

Associate:

Dated:    6 July 2012