FEDERAL COURT OF AUSTRALIA Dai v Telstra Corp Ltd [2000] FCA 379 TRADE PRACTICES – unconscionable conduct – application alleging wrongful disconnection of telephone service for non-payment for calls allegedly not made and alleged systematic deception and delay in investigation of complaint – purported appeal from summary dismissal of application – whether leave required – whether jurisdiction in Federal Court – whether conduct alleged arguably unconscionable within s 51AB of the Trade Practices Act 1974 (Cth) – whether factual dispute rendering final judgment inappropriate WORDS AND PHRASES – "unconscionable conduct" Federal Court Rules O 20 r 2(1) Telecommunications Act 1997 (Cth) s 479(2) Trade Practices Act 1974 (Cth) ss 51AB, 87(1A) Alan Roy Hancock v Visy Board Pty Ltd (unreported, 13 February 1997, R D Nicholson J) mentioned Weatherall v Satellite Receiving Systems (Australia) Pty Ltd [1999] FCA 741 applied Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 applied Blomley v Ryan (1956) 99 CLR 362 mentioned Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 mentioned Louth v Diprose (1992) 175 CLR 621 mentioned Marks v GIO Australia Holdings Ltd (1998) 158 ALR 333 applied DAI RONG-HUA v TELSTRA CORPORATION LIMITED N 1083 of 1999 HILL, HEEREY and HELY JJ 31 MARCH 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1083 OF 1999 ON APPEAL FROM A JUDGE OF THE FEDERAL COURT BETWEEN: DAI RONG-HUA Appellant AND: TELSTRA CORPORATION LIMITED (ACN 015 775 556) Respondent JUDGES: HILL, HEEREY and HELY JJ DATE OF ORDER: 31 MARCH 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appellant have leave to appeal. 2. The appeal is allowed. 3. The order of 6 September 1999 is set aside and in lieu thereof it is ordered that the respondent's motion by notice dated 24 May 1999, insofar as it sought summary judgment, be dismissed. 4. Save as aforesaid the said motion be remitted to the trial judge for such orders and further directions as may be appropriate. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1083 OF 1999 ON APPEAL FROM A JUDGE OF THE FEDERAL COURT BETWEEN: DAI RONG-HUA Appellant AND: TELSTRA CORPORATION LIMITED (ACN 015 775 556) Respondent JUDGEs: HILL, HEEREY and HELY JJ DATE: 31 MARCH 2000 PLACE: SYDNEY REASONS FOR JUDGMENT THE COURT 1 The appellant brought an application based on the alleged wrongful disconnection of his telephone service by the respondent Telstra Corporation Limited ("Telstra") and its subsequent conduct in dealing with his complaints. 2 On 6 September 1999 a judge of this Court dismissed the application under Federal Court Rules O 20 r 2(1). His Honour held it was apparent the application must fail. His Honour noted that there was doubt as to the Federal Court's jurisdiction but did not dispose of the matter on that basis. Background facts 3 The appellant was a subscriber for telephone service no (02) 9759 6028. In an account dated 21 June 1998 Telstra claimed $64.88 for four calls allegedly made on 19 June 1998 from that number to overseas telephone number 0011 248 204 065, a Chinese language phone service in the Seychelles. According to Telstra's records the calls were made at 2.09 am (19 mins 57 sec), 8.29 am (12 sec), 8.31 am (1 min 56 sec) and 8.34 am (2 min 27 sec). Telstra says that undisputed calls were made from the appellant's number shortly before and after the four disputed calls. 4 On 29 June 1998 the appellant contacted Telstra's billing service and claimed no such calls were made. A number of investigations were made by Telstra which it says confirmed the validity of the charges. On 28 October 1998 the appellant's service was disconnected for non-payment of the disputed amount. The service was cancelled on 20 November 1998. 5 The appellant wrote to the New South Wales Office of Fair Trading ("OFT") on 1 September 1998 in relation to the billing dispute and the pending disconnection. The OFT forwarded the letter to the Telecommunications Industry Ombudsman ("TIO") on 16 October. In the period from October to December correspondence passed between the TIO and the appellant in which the TIO sought to clarify the nature of the complaint and obtain information from him in support of his claims. Following contact from the TIO, Telstra conducted a further investigation into the matter and in a letter dated 29 January 1999 confirmed to the TIO that the call charges were correct. The TIO wrote to the appellant on 2 February 1999 stating that without further evidence it would be unable to recommend that Telstra amend its charges. The appellant having disputed that decision, the matter was referred to a TIO Investigations Manager who, in a letter dated 22 February, reaffirmed the decision. The Investigations Manager stated that without further evidence there were no grounds for a further investigation of the appellant's complaint. The appellant's claim 6 On 29 March 1999 the applicant filed an application in this Court. At all times the applicant has been legally unrepresented. The application is stated to be made under "Telecommunications Act (Commonwealth) 1975". Under the heading "Details of Claim" in the printed form the following appears: "1. Having failed to provide reliable services Telstra has been harassing the applicant by indulging systematically in deceptive and concealing practices against evidence in an attempt to delay resolving the dispute and evade compensation even when the applicant's life and work have been severely affected by the disconnection. Telstra is liable for $250,000 in compensation for its persistent cover-up, deception and harassment. 2. Telecommunication is a basic means in modern daily life. The disconnection compelled the applicant and the applicant's roommates to purchase mobile phones, consequentially, causing unnecessarily excessive mobile phone bills. The applicant's books writing and Internet-related businesses have been significantly disrupted Because of Telstra's lengthy denial and evasive behaviour, the applicant has been forced to spend numerous hours preparing the case, severely affecting the applicant's individual life and public involvement. Telstra is liable for $100,000.00 in compensation for time and effort spent and inconvenience experienced by the applicant and the applicant's roommates. 3. The applicant does not have any non-payment with any phone companies in Australia or overseas. The applicant would not dispute the four (4) "Adult Fantasy" calls to Seychelles for the amount of less than $60.00 should they be true. Telstra's arrogance and attitude are an insult to the applicant's character. The relations between an individual and a large corporation reveal the applicant's genuine determination in pursuit of justice and truth. Given the nature of the case, fault history of the service, Telstra's mismanagement, harassment and misconduct in dealing with the dispute, Telstra is liable for $100,000 in compensation for such insult." 7 In an affidavit filed on the same day the appellant disputed the four calls in question and alleged "severe irregularities and abnormalities" in Telstra's Call Charge Analysis System ("CCAS"). 8 On 25 May 1999, during the first directions hearing of the matter, Telstra filed in court a motion dated the previous day seeking orders: "1. That the Application be dismissed generally on the basis that it is embarrassing, discloses no reasonable cause of action and is otherwise an abuse of the Court's processes under Order 20 rule 2 of the Rules. 2. Further or in the alternative, that the Application be struck out on the basis that it is embarrassing, discloses no reasonable cause of action and is otherwise an abuse of the Court's processes under Order 11 rule 16 of the Rules. 3. That the Applicant pay the Respondent's costs." His Honour stood the motion over and directed written submissions be filed. 9 On 28 May 1999 the applicant filed a purported statement of claim. Paragraph 1 of this document refers to the procedural progress of the matter including the first directions hearing on 25 May and Telstra's notice of motion. Paragraph 2 alleges "Telstra's whole set-up, from equipment to personnel is fraud. Telstra knowingly and purposefully treats the applicant under this set-up". 10 Under the heading Particulars of Fraud some thirteen allegations appear relating to the investigation. For example it is alleged that Telstra "knowingly and purposefully lied in the investigation", "knowingly and purposefully covered up the cause of the cancellation of this connection", "unlawfully charged the (appellant) for an amount of $87.10 inaccurate", and "knowingly and purposefully covered up in its lengthy investigation the faulty history on the (appellant's) phone line by denying the availability of CCAS report full of irregularities being archived". 11 Under paragraph 3 it is alleged "Telstra humiliates the applicant". Under the heading "Particulars of harassment, mistreatment, mismanagement and etc" there are some thirteen items. These allege, for example, that before the dispute was finalised Telstra cut off the appellant's phone service twice, kept sending overdue notices, charged a "floating amount of overdue", "resisted to resolve the dispute with the (appellant) and connect the appellant's phone service under TIO's direction", and "being a monopoly, not attempting to resolve the dispute, Telstra harassed the (appellant) by taking legal action". Under the heading "Relief Sought" a claim is made that "Given the grave nature and circumstances in particulars of fraud and particulars of harassment, mistreatment, mismanagement etc in the above and supporting document, the (appellant) seeks relief for $1,000,000". A further claim is made for a "legal costs of $525,067.80 plus disconnection days at $40.00 per day and refund of twenty local calls per month back in 1989". Also "the (appellant's) roommates seek relief of a full refund of mobile phone expenses plus inconvenience". Finally the appellant requests the Court for permission "to have all the hearings broadcast live to the public, given its entire fraud set-up and resultant impact on the public should Telstra resist to admit its unlawful practices and apologise in writing to and accepted by the (appellant)". Judgment of the primary Judge 12 After outlining the nature of the appellant's claim his Honour said: "The motion for summary judgment does not in terms challenge jurisdiction but the Court must still be satisfied that jurisdiction exists. The applicant's claim is so diffuse that it must be doubted whether this Court does have jurisdiction to deal with it in its present form. Rather than dealing with the matter on that basis I prefer to proceed by assuming jurisdiction." 13 His Honour noted evidence by a Telstra forensic analyst that Telstra's records did not show any fault report having been lodged against the appellant's telephone service and no record of any alteration to the service since it was connected. The analyst recorded that at the time of the disputed calls there were two persons in addition to the appellant residing at the premises. Calls, other than local calls, were made during the period from the service. An inspection four months after cancellation showed plant and cabling associated with the service were still intact. The number had not been reallocated to another customer. There was no evidence of tampering or interference with cabling and no indication of current or past multiple connection. 14 The appellant produced evidence from the two other residents to the effect that they did not make calls to the Seychelles and did not hear anyone else making them. There were other undisputed calls made in close proximity to the disputed calls. 15 His Honour noted that Telstra relied on the contractual terms governing the supply of services by it to all customers. The standard form of agreement under s 479(2) of the Telecommunications Act 1997 (Cth)included General Terms and Conditions ("GTC"). Section 7.1 of GTC states: "The Customer is liable to Telstra for all charges in relation to a Service whether or not the Customer authorised the particular use of that Service by another person." 16 Section 10.3 of GTC relevantly states that: "Telstra may suspend, limit or cancel a service if … · the Customer does not pay a bill by the date due for payment." 17 His Honour stated that the appellant " …has not challenged this legal basis for Telstra's claim of entitlement to terminate his service. Nor has he presented any evidence that the disconnection of the (appellant's) telephone service was carried out in breach of Telstra's General Terms and Conditions which bound him in the situation. There is therefore no basis for his claim that his telephone service was wrongfully terminated." 18 His Honour referred to Alan Roy Hancock v Visy Board Pty Ltd (unreported, 13 February 1997) where R D Nicholson J said: "The question which the Court must decide is not whether the applicant would probably succeed in his action, but whether the material now before the Court is such that the action should not be permitted to go to trial in the ordinary way because it is apparent it must fail: Webster v Lampard (1993) 177 CLR 598 at 547. The power of dismissal is one the Court should exercise with 'exceptional caution'." 19 His Honour then concluded: "In my view this case is in the rare category identified by his Honour. The applicant has not pleaded a claim that Telstra has acted in breach of its contract with him in disconnecting his telephone service. If he had done so, the matter would not, without more, have been within this Court's jurisdiction. On the matters he has pleaded, the (appellant) has evidenced nothing which could even raise an issue, let alone substantiate, that he is entitled to any relief under or pursuant to the Telecommunications Act. The case as pleaded must therefore fail." Notice of appeal 20 The appellant filed a notice of appeal alleging that (i) The Court had "wrongfully exercised its jurisdiction under Telecommunications Act 1975 (Cth) whilst Telecommunications Act 1997 (Cth), Trade Practices Act 1974 and Crimes Act 1914 etc are in force". (ii) The judgment was "groundless". (iii) "The judicial error … in this application is unforgivable and damaging. The justice system has failed to advance the true meaning of law and justice when there is a real question to be determined of deception, fraud, negligence and profiteering through and serving a purpose even if there had not been those Acts in the above". Leave to appeal 21 Counsel for Telstra submitted that dismissal of an application under O 20 r 2(1) is interlocutory and that leave is required. This is correct: see Weatherall v Satellite Receiving Systems (Australia) Pty Ltd [1999] FCA 741 and the cases therein cited. However, his Honour's order effectively disposes of the appellant's case and would thus result in substantial injustice if wrong. For the reasons hereafter mentioned, we think the order was wrong. Leave should be granted: Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397. Conclusion on appeal 22 At the hearing of the appeal the Court was primarily concerned with the issue of jurisdiction. In the Court's view, if a jurisdictional issue is raised it should be resolved one way or the other. 23 In essence the appellant's case alleged that Telstra (i) breached its contract with him by disconnecting his service on the purported ground of non-payment for calls when those calls had not in fact been made and (ii) did not investigate his complaint properly but engaged in a wrongful and deceptive coverup. 24 However skilfully pleaded, neither of those claims would enliven any jurisdiction conferred on the Federal Court under the Telecommunications Act, the only Federal legislation on which the application on its face relies. 25 But the Court gave the appellant leave to file written submissions. The appellant faxed submissions to the Court and Telstra's solicitors on 28 February 2000. These submissions relied on s 51AB of the Trade Practices Act 1974 (Cth) which provides: "(1) A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, engaged in conduct that is, in all the circumstances, unconscionable. (2) Without in any way limiting the matters to which the Court may have regard for the purpose of determining wether a corporation has contravened subsection (1) in connection with the supply or possible supply of goods or services to a person (in this subsection referred to as the "consumer"), the Court may have regard to: (a) the relative strengths of the bargaining positions of the corporation and the consumer; (b) whether, as a result of conduct engaged in by the corporation, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the corporation; (c) whether the consumer was able to understand any documents relating to the supply or possible supply of the goods or services; (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the corporation or a person acting on behalf of the corporation in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent goods or services from a person other than the corporation. (3) A corporation shall not be taken for the purposes of this section to engage in unconscionable conduct in connection with the supply or possible supply of goods or services to a person by reason only that the corporation institutes legal proceedings in relation to that supply or possible supply or refers a dispute or claim in relation to that supply or possible supply to arbitration. (4) For the purpose of determining whether a corporation has contravened subsection (1) in connection with the supply or possible supply of goods or services to a person: (a) the Court shall not have regard to any circumstances that were not reasonably forseeable at the time of the alleged contravention; and (b) the Court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section. (5) A reference in this section to goods or services is a reference to goods or services of a kind ordinarily acquired for person, domestic or household use or consumption. (6) A reference in this section to the supply or possible supply of goods does not include a reference to the supply or possible supply of goods for the purpose of re-supply or for the purpose of using them up or transforming them in trade or commerce (7) Section 51A applies for the purposes of this section in the same way as it applies for the purposes of Division 1 of Part V." 26 The Federal Court has jurisdiction to make orders by way of injunction (s 80) and other relief (s 87) consequent upon a breach of, inter alia, s 51AB. Damages under s 82 would however not be available. 27 We agree with counsel for Telstra that its only conduct which the appellant may arguable rely upon to support his assertion of a breach of s 51AB is the alleged misconduct with respect to the manner in which it dealt with the investigation. 28 However counsel went on to argue: "Merely because (Telstra) conducted an investigation of the appellant's complaint, and reached a conclusion with which the appellant did not agree, does not make the respondent's conduct 'unconscionable' within the meaning of s 51AB. In order for 'unconscionable' conduct to exist, two elements must at least be present: (a) a party to the transaction must be under a special disability or serious disadvantage in dealing with the other party; and (b) the other party must take unfair advantage of the disability or disadvantage. Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 at 460. On an outline of the evidence, there is nothing to suggest that the manner in which (Telstra) investigated the dispute put the appellant at a serious disadvantage. The appellant availed himself of a statutory procedure for investigation of complaints (Telecommunications Ombudsman Scheme). There is no evidence that (Telstra) has taken unfair advantage of its position. The evidence suggests the contrary, as (Telstra) conducted no less than three investigations of the appellant's complaint." 29 The language of s 51AB is very broad. The factors listed in sub-s (2) are expressly stated to be non-exhaustive and may arguably take the s 51AB concept of unconscionability beyond that developed by courts of equity. For example, "the relative strengths of the bargaining positions of the corporation and the consumer" may comprehend a degree of disadvantage which would not amount to the "special disability" or "special disadvantage" spoken of in the High Court authorities Blomley v Ryan (1956) 99 CLR 362, Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 and Louth v Diprose (1992) 175 CLR 621. Again, equitable relief on the ground of unconscionability has traditionally turned on some vulnerability of a personal kind suffered by the plaintiff such as illiteracy, drunkenness or emotional dependence. Arguably at least, s 51AB is not so restricted. 30 On the issue of jurisdiction a court is not concerned with the merits of the claim in fact or law or whether it is adequately pleaded. Suffice it to say that a complaint that Telstra "has been harassing the (appellant) by indulging systematically in deceptive and concealing practices against evidence in an attempt to delay resolving the dispute and evade compensation" alleges conduct · in connection with the supply of services (telephone services) · of a kind ordinarily acquired for personal, domestic or household use or consumption (a domestic telephone service) · which is unconscionable (systematic deception and delay being unconscionable) 31 As already noted, a claim under s 51AB could not result in relief by way of damages. Section 82, which confers on the Court the power to award damages, is limited to loss and damage caused by contraventions of a provision of Pt IV or Pt V. Section 51AB is contained in Pt IVA. 32 However under s 87(1A) the Court can, in the case of a contravention of a provision of Pt IVA, make "such order … as the Court thinks appropriate against the person who engaged in the conduct … if the Court considers that the order … will compensate the person who made the application … in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered by such a person." 33 Compensation under s 87(1A) may be "applied to widely differing contraventions of the [Trade Practices] Act" including some "which find no ready analogies in the common law or equity": Marks v GIO Australia Holdings Ltd (1998) 158 ALR 333 at par [43] per McHugh, Hayne and Callinan JJ. The loss or damage to be compensated is not confined to economic loss: Marks at par [46]. (In the future conduct of this case the appellant will need to make it clear how he calculates the compensation sought under s 87(1A) and how it relates to the unconscionable conduct complained of.) 34 The complaint as to the wrongful disconnection itself, although contractual, would be within the accrued or pendant jurisdiction of the Court. 35 In fairness to the learned primary judge, we should point out that s 51AB was not relied on before him. Nevertheless, now that it has been identified we are satisfied that the Court has jurisdiction. The factual basis of the appellant's claim appeared in his original application and again in his statement of claim, albeit in a generalised way and in a form which certainly does not comply with the rules of pleading. 36 Turning to the merits of the claim, we do not think that Telstra met what his Honour rightly accepted as the high standard needed to warrant summary judgment. 37 We do not quite understand his Honour's observation that the appellant had not challenged the "legal basis for Telstra's claim of entitlement to terminate his service". In his application and statement of claim, and certainly in his appearance before us, the appellant strenuously contested the validity of the disputed charges and subsequent disconnection. Insofar as his Honour appeared to accept Telstra's argument based on the GTC (which counsel for Telstra repeated before us), we think we should say that we would have serious doubt that as a matter of construction s 7.1 has the effect contended for. It would be an extreme reading of that clause to hold that it made a subscriber liable for a charge for a call which had not in fact been made. Rather, as the plain language suggests, it makes the subscriber liable for all calls made from that service, whether or not the persons making these charges were authorised to use the service by the subscriber. 38 The complaints of the appellant as to Telstra's investigation raised factual issues, not appropriate to be disposed of on summary judgment. 39 Having found that the claim was bound to fail his Honour did not deal with Telstra's alternative claim that the appellant's pleading was defective and should be struck out. We think this aspect is more appropriately dealt with when the matter returns to his Honour's docket. Orders 40 There will be orders granting leave to appeal and allowing the appeal. The Order of 6 September 1999 will be set aside and in lieu thereof it will be ordered that the respondent's motion of notice dated 24 May 1999 insofar as it sought summary judgment be dismissed. Save as aforesaid the said motion will be remitted to the trial judge for such orders and further directions as may be appropriate. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court. Associate: Dated: 31 March 2000 Counsel for the Appellant: The appellant appeared in person Counsel for the Respondent: Mr I Pike Solicitor for the Respondent: Blake Dawson Waldron Date of Hearing: 24 February 2000 Date of Judgment: 31 March 2000