ORBIT TRAVEL SERVICES PTY. LTD. V. TRUSTEES - TRAVEL COMPENSATION FUND & ORS. [2000] NSWSC 990

New South Wales Supreme Court

CITATION : ORBIT TRAVEL SERVICES PTY. LTD. V. TRUSTEES - TRAVEL COMPENSATION FUND & ORS. [2000] NSWSC 990 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 3647/96 HEARING DATE(S) : 6 October 2000 JUDGMENT DATE : 26 October 2000

Orbit Travel Services Pty. Ltd. - plaintiff and 1st cross-defendant Trustees - Travel Compensation Fund - 1st defendant and cross-claimant PARTIES : Minister for Fair Trading - 2nd defendant Bassilios Abdul-Karim - 2nd cross-defendant Katia Abdul-Karim - 3rd cross-defendant Vera Nemes - 4th cross-defendant JUDGMENT OF : Hodgson CJinEq at 1

COUNSEL : S. Levitt, solicitor for plaintiff and 2-4 cross-defendants N. Francey for 1st defendant & 1st cross-claimant SOLICITORS : LMG Solicitors & Attorneys, Darlinghurst for plaintiff & 2-4 cross-defendants Minter Ellison, Sydney for 1st defendant and cross-claimant CATCHWORDS : CONSUMER PROTECTION - TRAVEL AGENTS - EVIDENCE - ONUS OF PROOF - PRINCIPAL AND AGENT. Quantification of claim by Travel Compensation Fund against travel agent and directors, pursuant to judgment given on 24 March 1998 and following dismissal of appeal from that judgment. DECISION : See end of judgment

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

CORAM: HODGSON, CJ in Eq.

Thursday 26th October 2000

NO. 3647 OF 1996 ORBIT TRAVEL SERVICES PTY. LTD. V. TRUSTEES - TRAVEL COMPENSATION FUND & ORS.

JUDGMENT

1 In my judgment in this matter dated 24th March 1998, I set out declarations which I was prepared to make on the Fund's cross-claim, and noted that, if there was a dispute as to the amount to which the Fund was entitled against Orbit and Mr. and Mrs. Abdul-Karim, this could be dealt with by me or referred to a Master. Since then, the Fund has made payments of around $800,000.00 to claimants, and called up the bank guarantee of $173,500.00. The Fund now claims from Orbit and Mr. and Mrs. Abdul-Karim $746,625.00 paid under cl.15.1 of the deed, and $1,040.00 paid under cl.15.2, less the $173,500.00, plus interest. Orbit and Mr. and Mrs. Abdul-Karim dispute some of the amounts paid to claimants and allegedly recoverable against them, and this matter has been heard by me. 2 Mr. Levitt, solicitor for Orbit and Mr. and Mrs. Abdul-Karim, submitted that what could be recovered by customers, and therefore by the Fund, was limited to their loss from failure to account; and there was a loss only if the totality of the value of what they received was less than the totality of what they paid. It was not appropriate to look at an individual contract or arrangement, but rather the whole course of dealings, particularly in circumstances where the customers ought to have realised that the balance of the cost of the travel arrangements, for which they were paying about half price, would have to be made up in some way or another. 3 To some extent, this matter was dealt with on pp.32-34 of my earlier judgment. However, it is convenient to analyse three situations, which between them substantially account for the areas of dispute which remain. 4 The first situation is where the customer has already completed travel worth (say) $14,000.00, for which the customer previously paid Mrs. Nemes $7,000.00; and the customer subsequently pays $7,000.00 to Mrs. Nemes in return for a promise of further travel arrangements worth around $14,000.00. In my opinion, at the time of the later payment of $7,000.00, the customer is under no liability to Orbit to pay it $7,000.00 in order to make up the $14,000.00 which Orbit paid for the previous travel. That previous transaction is complete, with no outstanding liabilities either in customer or in Orbit, although Mrs. Nemes would have been under a liability either to Orbit or to some other customer whose money she used to make up the $14,000.00 for the earlier travel. Accordingly, in that situation, the customer is entitled as against Orbit to either a return of $7,000.00 or to receive value to the extent of $7,000.00. 5 However, if this customer later received value from Orbit of $7,000.00 or more, entirely unconnected with the travel promised by Mrs. Nemes in relation to the later payment of $7,000.00, prima facie in this second situation the customer has received value from Orbit and has no further claim against Orbit. Thus, for example, if the customer first paid $7,000.00 to Mrs. Nemes in return for a promise of travel to the value of $14,000.00, next paid $7,000.00 in return for a promise from Mrs. Nemes of additional travel to the value of $14,000.00 at some later time, and subsequently received travel to the value of $14,000.00 ostensibly in return for the first payment, then in my opinion the customer has no further claim against Orbit. 6 A problem arises in relation to some of the disputed cases because the customer has, after making the payment in respect of which a claim is made, received apparently unrelated travel from Orbit, and there is no evidence as to how much the plaintiff had previously paid for that unrelated travel. From my general knowledge of the case, I could infer that the customer probably paid about one-half of the value of that travel, so that if the value of that travel was at least double the value of the payment in respect of which a claim was made, I would consider that full value had been received for that payment. In some cases however, the value of the travel received after the payment in respect of which the claim is made is somewhat less than double the amount of the payment. However, at that stage, in my opinion, the onus has well and truly shifted to the customer to prove what payment was previously made, and to prove the extent to which the value of the travel received after the payment is not to be treated as value received for the later payment. 7 The third general situation which arises in these cases is where a customer has paid (say) $7,000.00 for promised travel, and where subsequently a relative or close associate of the customer has received travel from Orbit worth in excess of $7,000.00. Again, from my general knowledge of the matter, I would assume that this relative or associate, or perhaps the customer, had previously paid approximately one-half the value of that travel. The question is whether the provision of that travel to the relative or associate, in so far as that value exceeded the amount previously paid to Mrs. Nemes for it, is to be treated as pro tanto value received by the customer. In my opinion, unless there is evidence that the customer authorised money provided by the customer to be applied for the benefit of the close associate or relative, this would not count as value provided to the customer. 8 There are two small variations of this third scenario that appear in the disputed cases. There are cases where two associated persons have made two separate payments of (say) $3,500.00, and subsequently travel to the value of $7,000.00 is provided to one and not to the other. In my opinion, in that situation, the travel should be considered as value received by the person receiving it, but should not be considered as any value received by the other person. 9 However, there are also cases where a single payment of (say) $7,000.00 is made by a husband and wife, and subsequently just one of them receives the benefit of travel to the value of (say) $7,000.00 or more. I have treated that situation as being one where value has been received by the person or persons who are considered as having paid the $7,000.00. 10 This is a case where, because of the large number of relatively small claims, it has been appropriate to deal with the matter without detailed examination of the facts of each individual case. In those circumstances, it is in my opinion appropriate to act on the principles I have indicated, even though a detailed examination of individual cases may have suggested a different approach. I will now deal in turn with each of the disputed cases. 11 In the case of Agoston, there was originally a claim for a total of $18,785.00, but that claim has been reduced to $14,000.00, and there is no dispute as to that amount. 12 In the case of Berger, the claim is for $7,500.00, paid on 26th April 1996. It appears that Eva Berger, the mother of one of the claimants, had the benefit of travel to the value of $8,119.00 in May and June 1996. There is no evidence that the claimants authorised the application of their money for this purpose, and I uphold the claim for $7,500.00. 13 In the case of Boyer, there is a claim for $7,000.00, paid on 17th December 1995. There is evidence that one of the claimants received travel to the value of about $7,800.00 in January 1996, and a son of the claimants received travel to the value of around $8,500.00 in about December 1995 or January 1996. I think these circumstances are enough to place an evidentiary onus on the claimants to prove that they did not receive value for the $7,000.00, and I reject the claim in respect of that $7,000.00. 14 In the cases of Conrad and Downes, the only value received by the claimant is in respect of travel provided before the relevant payments, and I uphold those claims in full. 15 There is mention of a claim by Fabian and Chandler, but there is no such claim now pursued by the Fund. 16 The cases of Farkas and Feldman are cases where the only value provided was in respect of travel received before the relevant payments, and I uphold both those claims in full. 17 In the case of Fox and Iranyi, the original claim was for $5,000.00, but now the Fund only claims $2,500.00. There were in fact two separate payments of $2,500.00, and Mrs. Iranyi, who made one of those payments, subsequently received travel to a value in excess of $2,500.00; and it is her claim which is now abandoned. There being no evidence that Mr. Fox authorised the application of his money for the subsequent travel by Mrs. Iranyi, I uphold the claim for $2,500.00. 18 In the case of Goldstein, there was apparently a single payment of $4,400.00 for two tickets for a husband and wife. Subsequently, the husband received travel to the value of $6,795.00; and in those circumstances, in my opinion there would be an onus on the claimants to prove that they did not receive value in respect of their payment of $4,400.00. The current claim is only for $2,200.00, but in the circumstances I reject that claim. 19 The case of Handelsmann is one where $14,000.00 was paid on 17th August 1995, upon a promise of four tickets. Two tickets were subsequently issued in September 1995 and December 1995, to a value of around $16,000.00. The claim is made for $7,000.00, but in my opinion the claimant has received full value for the whole of the $14,000.00, and I reject the claim for $7,000.00. 20 In the case of Katz, there was originally a claim for $7,000.00, but there is now no claim made, and no dispute. 21 In the case of Kern, there is a claim for $4,500.00. After payment of that amount, there was travel provided to Dr. Kern's son, but there is no evidence that Dr. Kern authorised the use of his money for his son's travel; and I uphold the claim for $4,500.00. 22 Next, there is the case of Keri. The claim is for $16,400.00. After $5,900.00 of that was paid, the claimant received travel to the value of around $32,000.00, and I reject the claim for that $5,900.00. As regards the balance of $10,500.00, this was paid after any relevant travel, and I uphold the claim for $10,500.00. 23 In the case of Lenart, the claim is for $4,000.00. Subsequently to the payment of $4,000.00, travel to the value of $18,000.00 was provided to the claimant's daughter and son-in-law, but there is no evidence that the claimants authorised the application of the $4,000.00 for the benefit of the daughter and son-in-law, and I uphold the claim in respect of the $4,000.00. 24 In the case of Lendvay, there is a claim for $8,000.00. Of this amount, $2,000.00 is in respect of a payment of $8,000.00, upon the promise of four tickets, in respect of which three tickets issued. Those three tickets were to a value of more than $8,000.00, and I reject the claim for $2,000.00. No benefits were received following the payment of the other $6,000.00, and I uphold the claim for $6,000.00. 25 In the case of Lever and Sachs, the claim is for $8,800.00. $4,400.00 of this was paid in January 1996, and one or other of the claimants received travel to the value of $11,700.00 in February and March 1996. The other $4,400.00 was paid on 23rd April 1996, and one or other of the claimants received travel to the value of $4,800.00 at around that time. I am not satisfied that the claimants did not receive full value for the payments, and I reject the claim for $8,800.00. 26 In the case of Markus, there is a claim for $6,000.00. However, it appears that the claimant received travel to the value of over $17,000.00 after this payment was made, and I reject the claim for $6,000.00. 27 In the case of Pal, $4,000.00 is claimed, an amount paid in August 1995. It appears that the claimant received travel to the value of $5,834.00 in February 1996, and in my opinion, there would be an onus on the claimant to prove that the claimant did not receive value for the $4,000.00. In those circumstances, I reject the claim in respect of that $4,000.00. 28 In the case of Katz and Pentland, the claim is for $6,800.00. It appears that the claimants received travel for the value of more than $18,000.00 after this payment, and I am not satisfied that they did not receive value in return for the payment of $6,800.00, and I reject this claim. 29 In the case of Roussos, the claim is for a total of $10,000.00. $3,000.00 was paid in December 1995, and it appears that subsequently the claimants received travel to a value greatly in excess of $3,000.00. I reject the claim for $3,000.00. $7,000.00 was paid subsequently, and it does not appear that any value has been received for the later payments. I uphold the claim for $7,000.00. 30 In the case of Rowland, the claim is for $4,000.00. There is evidence of value being given to associated persons, but I am not satisfied that the claimant authorised this application of the money. I uphold the claim for $4,000.00. 31 In the case of Schey, the claim is for $7,000.00. It appears that the claimants received travel to the value of $19,000.00 after making the payment, and I am not satisfied that they did not in that way receive value for the $7,000.00. I reject this claim for $7,000.00. 32 In the case of Springer, the claim is for $6,600.00. There was travel supplied subsequently to associates, but there is no evidence that the claimant authorised this. I uphold the claim for $6,600.00. 33 In the case of Tate, the claim is for $6,000.00. No value was received subsequently to the payment, and I uphold the claim for this payment. 34 In the case of Virag, the claim is for $7,000.00. $2,355.00 of this is conceded. After the payment, the claimant received travel to the value of $4,645.00. In my opinion, there is an onus on the claimant to show that this was not value received for the $7,000.00, and I reject the claim to the extent of $4,645.00. 35 In the case of Rosenfeld, the claim is for $6,000.00. Travel was subsequently provided to associates of the claimant, but there is no evidence that this was authorised by the claimant. I accept that this claim was lodged within the relevant time for making claims. I uphold the claim for $6,000.00. 36 In the case of Dwyer, there was originally a claim for $5,000.00, but now no sum is claimed; and there is no dispute. 37 Finally, in the case of Vince, the claim is for $7,500.00. The only value alleged is in respect of travel previously provided, and I uphold the claim for $7,500.00. 38 In the result, there needs to be deducted from the amount now claimed by the Fund the following amounts: Boyer $7,000.00 Goldstein $2,200.00 Handelsmann $7,000.00 Keri $5,900.00 Lendvay $2,000.00 Lever and Sachs $8,800.00 Marcus $6,000.00 Pal $4,000.00 Katz and Pentland $6,800.00 Roussos $3,000.00 Schey $7,000.00 Virag $4,645.00 TOTAL $64,345.00 39 Accordingly, the amount for which judgment will be entered, apart from interest, is $746,625.00 plus $1,040.00, that is $747,665.00; less $173,500.00 plus $64,345.00, that is, $237,845.00; giving a net figure of $509,820.00. I would invite the parties to send to my Chambers agreed Short Minutes of Order which include the appropriate interest calculations. 40 The costs of this assessment should in my opinion be paid by Orbit and Mr. and Mrs. Abdul-Karim. They were successful in some of the cases, but the Fund has been successful in obtaining relief greater than that conceded, and there is no suggestion that any severable item in respect of which the Fund did not succeed has significantly added to the costs. *********