Enterprise Finance Solutions Pty Limited v Austec Pty Limited - [2013] FCA 491 - FCA 2013 case summary — Zoe

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Enterprise Finance Solutions Pty Limited v Austec Pty Limited

[2013] FCA 491

Federal Court of Australia|2013-05-24|Before: Nicholas J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2013-05-24

Before

Nicholas J

Source

Original judgment source is linked above.

Judgment (39 paragraphs)

[1]

INTRODUCTION 1 These are my reasons for judgment in three proceedings which were heard together. The applicant in each matter is a finance company that claims to have entered into rental agreements with the corporate respondents for the hire of communications, audio-visual and office equipment. The other respondents are directors of one or the other of the corporate respondents. Each of the directors is sued by the finance company in his or her capacity as a guarantor of the corporate respondent's obligations under one or more of the relevant rental agreements. 2 In each proceeding, the corporate respondent which is alleged to have entered into the relevant rental agreement asserts (inter alia) that it is entitled to a set-off equal to the whole of the amount claimed against it. Such a set-off is said to be available as a result of misrepresentations made to them by third party suppliers who are alleged to have induced the corporate respondents to enter into the rental agreements. The applicants are said to have been linked credit providers for the purposes of s 73 of the Trade Practices Act 1974 (Cth) (the TP Act) and liable to the corporate respondents pursuant to that section. In each proceeding the respondents have filed cross-claims against the applicants. 3 Besides the claim based upon s 73 of the TP Act, the respondents have also made direct claims against the applicants for alleged contraventions of the TP Act and for aiding and abetting such contraventions by others. For reasons which will be explained in detail, the respondents' claims based upon s 73 of the TP Act succeed. All other claims based upon the applicants' alleged contraventions of the TP Act fail. This is largely because the allegations of agency upon which the latter claims were founded have not been made out.

[2]

[6]

RELEVANT STATUTORY PROVISIONS 14 Some of the key statutory provisions relevant to these proceedings are set out below. The Australian Consumer Law (ACL), which is found at Schedule 2 to the Competition and Consumer Act 2010 (Cth) (the new name of the TP Act), took effect on 1 January 2011. However, when I refer in these reasons to the TP Act, it is to the TP Act as it stood at relevant times, which was prior to the ACL taking effect. 15 Section 52(1) in Pt V, Div 1 of the TP Act, provides that "[a] corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." Section 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) provides that "[a] person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive." 16 Section 51AF of the TP Act, also in Pt V, Div 1, provides: (1) This Part does not apply to the supply, or possible supply, of services that are financial services. (2) Without limiting subsection (1): (a) sections 52 and 55A do not apply to conduct engaged in in relation to financial services; and … 17 Section 4 of the TP Act provides that, unless the contrary intention appears, "financial service" has the same meaning as in Div 2 of Pt 2 of the ASIC Act. The expression "financial service" is defined in a rather elaborate way in the ASIC Act. 18 Section 12BAB(1) of the ASIC Act states that a person provides a financial service if they (inter alia) "deal in a financial product". Sections 12BAB(7) and (8) relevantly provide: (7) For the purposes of this section, the following conduct constitutes dealing in a financial product: (a) applying for or acquiring a financial product; (b) issuing a financial product; … (8) Arranging for a person to engage in conduct referred to in subsection (7) is also dealing in a financial product, unless the actions concerned amount to providing financial product advice. 19 Section 12BAA(7)(k) of the ASIC Act provides that a "credit facility (within the meaning of the regulations)" is a financial product. The Australian Securities and Investments Commission Regulations 2001 (Cth) (the ASIC regulations) include Reg 2B which relevantly provides: (1) For paragraph 12BAA(7)(k) of the Act, each of the following is a credit facility: (a) the provision of credit: (i) for any period; and (ii) with or without prior agreement between the credit provider and the debtor; and (iii) whether or not both credit and debit facilities are available; … (3) In this regulation: credit means a contract, arrangement or understanding: (a) under which: (i) payment of a debt owed by one person (a debtor) to another person (a credit provider) is deferred; or (ii) one person (a debtor) incurs a deferred debt to another person (a credit provider); and (b) including any of the following: (i) any form of financial accommodation; (ii) a hire purchase agreement; (iii) credit provided for the purchase of goods or services; (iv) a contract, arrangement or understanding for the hire, lease or rental of goods or services, other than a contract, arrangement or understanding under which: (A) full payment is made before or when the goods or services are provided; and (B) for the hire, lease or rental of goods - an amount at least equal to the value of the goods is paid as a deposit in relation to the return of the goods; … 20 Section 73 of the TP Act is in Pt V, Div 2 of the TP Act. Subsections 73(1), (3), (7) and (14) relevantly provide: (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 (b) a consumer enters into a contract with a linked credit provider of a corporation (in this section also referred to as the supplier) for the provision of credit in respect of the supply by the supplier of goods or services, or goods and services, to the consumer; 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 as 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 Investments 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. … (3) A linked credit provider of a particular supplier is not liable to a consumer by virtue of subsection (1) in proceedings arising under that subsection if the credit provider establishes: (a) that the credit provided by the credit provider to the consumer was the result of an approach made to the credit provider by the consumer that was not induced by the supplier; (b) where the proceedings relate to the supply by way of lease, hire or hire-purchase of goods by the linked credit provider to the consumer, that: (i) after due inquiry before becoming a linked credit provider of the supplier, the credit provider was satisfied that the reputation of the supplier in respect of the supplier's financial standing and business conduct was good; and (ii) after becoming a linked credit provider of the supplier, the credit provider had not had cause to suspect that: (A) the consumer might be entitled to recover an amount of loss or damage suffered as a result of misrepresentation or breach of a condition or warranty referred to in subsection (1); and (B) the supplier might be unable to meet the supplier's liabilities as and when they fall due; … (7) The liability of a linked credit provider to a consumer for damages or a sum of money in respect of a contract referred to in subsection (1) does not exceed the sum of: (a) the amount financed under the tied loan contract, tied continuing credit contract, lease contract, contract of hire or contract of hire-purchase; (b) the amount of interest (if any) or damages in the nature of interest allowed or awarded against the linked credit provider by the court; and (c) the amount of costs (if any) awarded by the court against the linked credit provider or supplier or both. … (14) In this section: credit provider means a corporation providing, or proposing to provide, in the course of a business carried on by the corporation, credit to consumers in relation to the acquisition of goods or services. 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 provision 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. … 21 Section 4B of the TP Act relevantly provides: (1) For the purposes of this Act, unless the contrary intention appears: (a) a person shall be taken to have acquired particular goods as a consumer if, and only if: (i) the price of the goods did not exceed the prescribed amount; or (ii) where that price exceeded the prescribed amount - the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption or the goods consisted of a commercial road vehicle; and the person did not acquire the goods, or hold himself or herself out as acquiring the goods, for the purpose of re-supply or for the purpose of using them up or transforming them, in trade or commerce, in the course of a process of production or manufacture or of repairing or treating other goods or fixtures on land; and (b) a person shall be taken to have acquired particular services as a consumer if, and only if: (i) the price of the services did not exceed the prescribed amount; or (ii) where that price exceeded the prescribed amount - the services were of a kind ordinarily acquired for personal, domestic or household use or consumption. (2) For the purposes of subsection (1): (a) the prescribed amount is $40,000 or, if a greater amount is prescribed for the purposes of this paragraph, that greater amount; (b) subject to paragraph (c), the price of goods or services purchased by a person shall be taken to have been the amount paid or payable by the person for the goods or services; (c) where a person purchased goods or services together with other property or services, or with both other property and services, and a specified price was not allocated to the goods or services in the contract under which they were purchased, the price of the goods or services shall be taken to have been: (i) the price at which, at the time of the acquisition, the person could have purchased from the supplier the goods or services without the other property or services; (ii) if, at the time of the acquisition, the goods or services were not available for purchase from the supplier except together with the other property or services but, at that time, goods or services of the kind acquired were available for purchase from another supplier without other property or services - the lowest price at which the person could, at that time, reasonably have purchased goods or services of that kind from another supplier; or (iii) if, at the time of the acquisition, goods or services of the kind acquired were not available for purchase from any supplier except together with other property or services - the value of the goods or services at that time; (d) where a person acquired goods or services otherwise than by way of purchase, the price of the goods or services shall be taken to have been: (i) the price at which, at the time of the acquisition, the person could have purchased the goods or services from the supplier; (ii) if, at the time of the acquisition, the goods or services were not available for purchase from the supplier or were so available only together with other property or services but, at that time, goods or services of the kind acquired were available for purchase from another supplier - the lowest price at which the person could, at that time, reasonably have purchased goods or services of that kind from another supplier; or (iii) if goods or services of the kind acquired were not available, at the time of the acquisition, for purchase from any supplier or were not so available except together with other property or services - the value of the goods or services at that time; and (e) without limiting by implication the meaning of the expression services in subsection 4(1), the obtaining of credit by a person in connection with the acquisition of goods or services by him or her shall be deemed to be the acquisition by him or her of a service and any amount by which the amount paid or payable by him or her for the goods or services is increased by reason of his or her so obtaining credit shall be deemed to be paid or payable by him or her for that service. (3) Where it is alleged in any proceeding under this Act or in any other proceeding in respect of a matter arising under this Act that a person was a consumer in relation to particular goods or services, it shall be presumed, unless the contrary is established, that the person was a consumer in relation to those goods or services. …

[7]

Factual Background 22 On or about 19 December 2007 Mr Rodney Dadson and a colleague visited Austec's premises at Eagle Farm, Queensland and spoke to Mr and Mrs Harrison. Mr Dadson told the Harrisons he was from Technix (Technix) which "was part of Queensland Communication Company." He handed over a business card which indicated he was a Regional Manager for Technix. 23 A business name search of Technix Australia (Qld) is in evidence. It reveals that the business name Technix Australia (Qld) was registered to Queensland Communication Company Pty Ltd (QCC) from 1 April 2008 to 3 February 2011. The nature of the business carried on under the registered business name is described in the registration as Telecommunication Services, and places of business are shown as Suite 32, Ashmore Commercial Centre, 207 Currumburra Road, Ashmore, Queensland and 3 Balaclava Street, Woolloongabba, Queensland (Ex 3). The latter address is that which appears on Mr Dadson's business card. 24 A company search of QCC reveals that it went into liquidation in June 2009 and was deregistered in February 2011. The same search reveals that QCC's registered office between June 2007 and September 2008 was Level 1, 66-76 Dickson Avenue, Artarmon, NSW (Dickson Avenue) and that Mr Mark Nesbitt was a director of QCC during the same period. Another company search reveals that between June 2007 and November 2007 Australian Equipment Rentals Pty Ltd (AER) had its registered office at Dickson Avenue and that Mr Nesbitt was a director of AER between June 2007 and October 2008. 25 During the course of his visit to Austec's premises, Mr Dadson told the Harrisons that he could offer Austec a better telephone package than that which was currently being provided to Austec by its then telecommunications supplier. Mr Dadson told them that he could reduce their telephone bill from $1,200 per month (which is what it was at the time) to $900 per month. He also told them that the call costs would be fixed and capped so that Austec would only ever have to pay the fixed amount each month. 26 Mr Dadson also talked to the Harrisons about the desirability of securing some extra telephone lines which would be available to them in future should they be needed. Having obtained the Harrisons' agreement to take up two additional mobile telephone lines, Mr Dadson then had a conversation with the Harrisons to the following effect: Mr Dadson: With this package - you are already eligible for a PABX phone system and a couple of free printers. Mrs Harrison: What do you mean 'free', nothing in this world is free. How can you give away free equipment? Mr Dadson: Let me explain Lynette. The deal is, we ask you to tell your friends about the deal that we have just given to you. They hopefully will sign up. Where the big companies advertise we make our money through word of mouth. We give you incentives such as the free equipment. You get a capped account which helps you with your future budgeting and this way you know what your future quantity is. Hopefully you spread the word and this is how our business grows - from word of mouth. Mr Harrison: Why would we need them when we are an IT company - we get wholesale prices for this equipment. We are more interested in the telecommunications and keeping the cost as low as possible. Mr Dadson: The goods are part of the deal - why wouldn't you have them. They are updated and current up to date models. With the PABX it has more enhanced features than the one you already have. And it is not costing you anything. 27 Mr Dadson's colleague performed some calculations and advised the Harrisons that the monthly cost would be $907.50. This amount represents a monthly charge of $825.00 plus GST of $82.50. Mr Dadson then prepared some paperwork which he apparently asked the Harrisons to sign. Before they did so Mr Dadson said to the Harrisons words to the following effect: Mr Dadson: With the billings - you will receive two invoices. One is the equipment and one is the telephone calls. The equipment will be $907.50 and the phone calls will be $0.00 per month. But you will see the offset in your phone account. The Harrisons were provided with various documents by Mr Dadson for their signature. 28 The documents signed by Mr Harrison include a form headed "Application for Axis Telephone Service" (the AATS). This form identifies five telephone lines then being made available to Austec by Telstra. The AATS purports to record the terms and conditions pursuant to which Axis Telecoms Pty Ltd (Axis), also of Level 1, 66 Dickson Avenue, Artarmon, New South Wales, would provide telecommunications services to Austec. 29 Another document signed by Mr Harrison was headed "Sales Order Specification" (the Sales Specification). The name and trade mark of QCC appears at the top of the document. The customer is identified in the document as Austec. 30 The Sales Specification is by no means self-explanatory. Among other things, it specifies various figures in respect of "Monthly Rental" (shown as $825 x 60 months), "AXIS Telecoms Plan" (shown as $825 per month), "AXIS Telecoms Plan Credits" (also shown as $825 per month), "Business Plan Credits" (shown as $475) and "Mobile Plan Credits" (shown as $350). 31 The Sales Specification refers to telephone equipment (including a Panasonic TDA 30) and, in an attachment, various other items of equipment. These other items of equipment include a Fuji Xerox colour copier, an "FS1118" copier, a NEC 42" plasma display, a NEC 32" LCD display and a wall bracket. 32 The Sales Specification contains some printed terms which appear under the heading "Mobile Payouts/Finance Payouts". The relevance of these terms to the transaction between Austec and QCC is not readily apparent. Immediately above Mr Harrison's signature on the first page of the Sales Specification, the following appears: PLEASE NOTE THAT "COOLING OFF PERIODS" ARE NOT APPLICABLE TO THIS AGREEMENT Please supply and install the above telephone equipment and deliver any other equipment which is included in the agreed rental. I agree to the Terms and Conditions. I acknowledge that I have the authority to enter this Agreement. I acknowledge that the Rental Agreement will be settled on delivery of the equipment and not delayed by the provisioning and supply of telephone services. 33 The documents signed by the Harrisons also included a document headed "Australian Equipment Rentals Pty Ltd - Rental Schedule & Tax Invoice" (the RSTI). What appears to be an ABN number - 50 126 049 376 - also appears at the top of each page of the document. There is a company search in evidence which shows that this is the ABN number of AER. On 10 April 2008, AER changed its name to Service AER Pty Ltd. 34 Austec, trading as the Austec Technology Trust, is identified in the RSTI as the hirer. The equipment referred to in the Sales Specification is also identified in the RSTI. The RSTI refers to a monthly rental instalment of $907.50 (including $82.50 GST) for 60 months. 35 The RSTI is signed by the Harrisons on behalf of Austec as hirer, and by the Harrisons as guarantors. At the bottom of the same page there is a "Business Purpose Declaration" which is also signed by the Harrisons. 36 A set of standard terms and conditions also form part of the RSTI. At the top of the second page of the RSTI the name of AER again appears together with a statement that "THIS AGREEMENT IS ONLY MADE WHEN WE ACCEPT IT IN ACCORDANCE WITH CLAUSE 2 OF THE LEASE AND RENTAL TERMS". 37 The RSTI includes a section entitled "Authorisation by Applicant/Guarantor". This section of the RSTI includes a clause (cl 1) which relevantly provides that the applicant/guarantor acknowledges that AER: … may enter into the Hiring Agreement with You as agent or subagent for a principal … or may assign our interest under this Hiring Agreement or Guarantee to anyone … or as part of a securitisation arrangement; 38 Clauses 2 and 10 of the standard terms and conditions in the RSTI also provide as follows: 2. Agreement 2.1 You may offer to lease or rent Goods from us by giving a signed Hiring Schedule (which can be either a Lease Schedule or a Rental Schedule). You may only withdraw or vary this offer with our consent. If we accept an offer made by You in a Lease Schedule, then we will enter into a Lease Agreement with You. If it is a Rental Schedule, then we will enter into a Rental Agreement with You. 2.2 Our acceptance of Your offer will occur when we notify You that we also have signed the Hiring Schedule or when we agree with the supplier of the Goods to acquire them for the purposes of the Hiring Agreement, whichever occurs first. 2.3 These are the only ways in which we will accept Your offer. Neither the payment by You of any money on account of rent (even if we accept it) or any representations made by the supplier of the Goods, even if we have an arrangement with the supplier for providing finance for the supplier's products, nor any agreement which we make with the supplier can be relied upon to establish the Hiring Agreement. 2.4 Our acceptance of Your offer may be subject to a guarantee given by someone nominated by us and in the form of the annexed Guarantee Schedule. ... 10. Our Ownership and Rights 10.1 The Goods are our property. You are a bailee of the Goods only and have no right to purchase or acquire any interest in them. 10.2 You agree that we may have entered into Hiring Agreement in any capacity we chose and may, in any way, charge assign, transfer or otherwise deal with our rights or interests in the Hiring Agreement without notice to You. We may provide information about this Hiring Agreement, You and any of your related bodies corporate (as defined in the Corporations Act) to any person with whom we have dealings in relation to the Hiring Agreement. 10.3 You must ensure that we have access to the Goods, at any time, in order to exercise any of our rights, including testing the Goods or otherwise checking whether You have complied with Your obligations. You authorise us to enter any premises where the Goods are located for these purposes. We will give You reasonable notice before doing so, unless we consider we must act quickly in order to protect our interest in the Goods. 39 As is apparent from cl 2 of the standard terms, the arrangement entered into by Austec, at least at the time of execution of the relevant documents by the Harrisons on 19 December 2007, involved them making an offer to enter into a hiring agreement and related guarantee that, according to cl 2.1, could only be withdrawn or varied with the consent of AER. 40 There is evidence which indicates that Austec's offer was accepted by AER for the purposes of cl 2 of the RSTI on 12 February 2008. On that date a person referred to only as an authorised officer of AER signed and dated a form of acceptance. By that time it is clear that AER was acting as an agent for Enterprise Finance Solutions (EFS) albeit that this was not something then known to Austec or the Harrisons. 41 The Austec offer was submitted by AER to EFS on or about 20 December 2007 and approved by EFS on that date. I infer that EFS notified AER on or about that date of the approval and that AER proceeded from that point forward on the basis that EFS would provide the funds in the amount of $35,000 so that it could acquire the rental equipment that was to be hired to Austec, and that EFS would be AER's undisclosed principal for the purpose of any rental agreement made between AER and Austec. 42 It appears that the amount of $35,000 was paid by EFS to the equipment supplier, QCC, on or about 14 February 2008. The rental equipment was delivered to Austec on or about that date. There is no acknowledgment signed by Mrs Harrison around this time that confirms the delivery of the equipment. 43 The AATS, signed by Mr Harrison on 19 December 2007, states: AXIS Telecoms Pty Ltd. ABN 69 076 807 718 of Level 1, 66 Dickson Avenue, Artarmon NSW 2064 ("AXIS Telecoms"). By executing this Application for Telephone Service ("Application"), you agree to the terms and conditions by which AXIS Telecoms will provide you with the Services. … 44 The same document includes a section headed "ACKNOWLEDGMENT, CONSENT AND SIGNING". Included in this section are 15 conditions written in small print and in a form and style that makes them extremely difficult to read. I have no doubt that they were not read by either of the Harrisons before Mr Harrison signed the document. The task of reading and understanding the terms is not one that Mr Dadson could possibly have expected Mr Harrison or Mrs Harrison to perform in the time they spent together. 45 The conditions that are most relevant are as follows: - You acknowledge reading a copy of the AXiS Terms and Conditions for Telephone and/or Broadband services and agree to its terms (cl 3); - You acknowledge that, (i) AXIS Telecoms will bill you for all Services under this Agreement; (ii) you have received a copy of the Tariff Schedule or Rate Card(s) and understand and accept those to be the rates to be charged; (iii) the services will be provided in accordance with the Telecommunications Act 1997 (Cth) and the Terms and Conditions for Telephone and Broadband Service; (iv) AXIS Telecoms may select a Service Provider(s) to provide the services; (v) AXIS Telecoms and the Service Provider(s) may exchange your call charging information and your telecommunications details for the purposes of providing the services; (vi) You will be liable for any charges arising out of this Agreement even if part of this Agreement does not continue to apply; (vii) in the event that any associated agreement for the rental, lease, hire purchase or other financing method for the acquisition of equipment is not approved for any reason whatsoever, that Call Plan Credits, Monthly Call Plan Credits and Included Calls will not apply to these arrangements and you acknowledge by signing below that you will become a customer of AXiS Telecoms Pty Limited for Telephone Services only and at rates equal to or better than the rates referred to in this Application; (viii) if you are currently a customer of another service provider, it may take up to 120 days to fully transfer your services to AXiS Telecoms; (cl 4) - AXiS Telecoms makes no representation to you that your monthly bill will be lower than your previous supplier or will be for any amount other than as described in this Application; (cl 13) - This is the whole agreement between us and You acknowledge that this written expression supercedes all prior representations and agreements, whether verbal or written, in connection with this Application for Telephone Services; (cl 14) 46 On or about 20 February 2008 Austec received an invoice from Axis in respect of telephone calls and service and equipment charges in the amount of $564.11. Thereafter, Austec began receiving invoices not from Axis, but from Clear Telecoms (Clear) which appears to have taken over the Axis' business around this time. The invoices issued by Clear to Austec between March 2008 and July 2008 were as follows: 6 March 2008 $463.09 9 April 2008 $356.23 6 June 2008 $1,167.27 10 July 2008 $1,036.02

[12]

The misrepresentation case 58 The representations which Austec and the Harrisons allege Mr Dadson made to them include the following: (a) what was being offered was a single package or deal comprising equipment and telephony services; (b) the monthly cost of the package being offered ($907.50) would be cheaper than the monthly cost of payments under Austec's existing telephony services agreement, being about $1,200 per month (including line rental); (c) the monthly payment of $907.50 was a "capped payment" for telephone calls, meaning that regardless of telephone use, Austec would not pay more than $907.50 per month; (d) the equipment that Austec would receive as part of its package would be free; and (e) the bills that Austec would receive each month (being one bill for equipment and one bill for telephony services) would off-set each other. 59 I am satisfied that Mr Dadson represented that Austec would be charged on a monthly basis for telecommunication services and for equipment rental, and that payments made in relation to the equipment rental would be credited against telecommunications charges such that the net amount payable by Austec in respect of both telecommunication services and equipment rental would not exceed $907.50 per month. 60 I am also satisfied that Mr Dadson represented to the Harrisons that Austec would not be required to pay more than $907.50 per month for telecommunication services and that this amount would also include the cost of the equipment which was to be supplied to Austec. 61 Most of the pleaded representations made by Mr Dadson relate to future matters. Whether or not these representations were misleading or deceptive, or likely to mislead or deceive, depends upon whether Mr Dadson knew them to be false at the time they were made, or whether he lacked reasonable grounds to believe that such representations were true at the time they were made. 62 Mr Dadson did not give evidence and, consequently, I am left to draw inferences as to his state of mind at the time of his dealings with the Harrisons. 63 One inference I draw is that Mr Dadson would have been familiar with the terms and conditions of the documents which he invited Austec and the Harrisons to sign. In particular, I infer that Mr Dadson would have been aware at the time he made the relevant representations to the Harrisons that: the proposed rental agreement which would come into existence if the Austec offer was accepted by AER did not make any provision for crediting payments in relation to rental equipment against telecommunications charges; the terms and conditions upon which Axis agreed to supply telecommunication services to Austec did not make any provision for crediting payments in relation to rental equipment against telecommunications charges imposed by Axis; Austec was contractually obliged under the terms of the written agreement between Axis and Austec to acquire telecommunications services from Axis for a period of 60 months even if AER did not accept Austec's offer to enter into a rental agreement. 64 I am satisfied that each of the representations referred to in para [58] above was misleading and deceptive. I am satisfied that each such representation was made in circumstances where Mr Dadson did not have any reasonable grounds to believe that the commercial arrangements which he invited the Harrisons to enter into on behalf of Austec would ensure that Austec received both telecommunication services and the rental equipment for no more than $907.50 per month. In this respect, I am satisfied Mr Dadson misrepresented the nature and effect of the various documents that he invited the Harrisons to sign.

[13]

Ostensible Agency 65 The Austec cross-claim alleges that QCC and/or Axis were ostensible agents of EFS or AER because: (a) Austec had no dealings with EFS or AER (except via the rental agreement itself) but dealt only with Mr Dadson and, through him, with his employer, QCC and/or Axis; (b) EFS or AER armed Mr Dadson with blank rental agreements and direct debit authority forms for the purpose of putting QCC and/or Axis into a position where it could obtain the signatures of potential business customers on those forms as part of a process of agreeing to receive business equipment and telephony services; (c) no reference was made to EFS or AER by Mr Dadson - the only reference to EFS or AER was where AER's name appeared on the rental agreement; (d) a reasonable person in the position of Austec would have assumed that Mr Dadson had been authorised to make binding representations about the offer that AER was making to Austec or the nature of the commercial arrangements that Austec would enter if AER agreed to deal with Austec. 66 The first of the matters relied upon assumes Mr Dadson was employed by QCC and/or Axis. As to this, I am satisfied that Mr Dadson was an employee or, at least, an authorised agent of QCC. The evidence does not reveal whether he was also an employee or an authorised agent of Axis. 67 However, even if Mr Dadson was an employee or authorised agent of both QCC and Axis, the question that must be decided is whether Mr Dadson, QCC or Axis were ostensible agents of AER. All of the matters relied upon in support of the case based upon ostensible agency, with one exception, involve inaction on the part of EFS and AER. A key proposition underpinning this aspect of Austec's pleaded case seems to be that AER was under a duty to provide supervision and training of various kinds to Mr Dadson. Counsel's submissions did not identify the legal basis for imposing any such duty upon AER. There is no basis upon which to find that any such duty arose. 68 The one exception concerns the provision of forms by AER to QCC or Axis. The mere provision by AER of blank rental agreements and direct authority forms to QCC or Axis - something which I am prepared to infer occurred at least as between QCC and AER - is insufficient in the circumstances of this case either alone, or taken together with any of the other matters referred to in the cross-claim, to support a finding that QCC or Axis had ostensible authority to make any representations to Austec or the Harrisons on behalf of AER or EFS: see Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552; NMFM Property Pty Ltd v Citibank Ltd (No 10) (2000) 107 FCR 270; Quikfund (Australia) Pty Limited v Prosperity Group International Pty Limited (In Liq) (2013) 295 ALR 472. 69 The case brought by Austec and the Harrisons against EFS and AER based upon ostensible agency fails.

[14]

Section 73 70 The submissions made on behalf of EFS and AER in relation to s 73 of the TP Act were brief and to the following effect: Broadly speaking, s 73 of the TP Act has the effect of making both the supplier and financier liable in certain circumstances where a consumer suffers loss or damage in relation to goods or services the consumer has acquired from the supplier with finance provided by the financier. Section 73 is within Pt V of the TP Act. By reason of s 51AF, Pt V "does not apply in relation to financial services". The rental agreement between EFS/AER and Austec "is a financial service". Section 73 has no application to the issues in these proceedings. 71 However, s 51AF does not provide that Pt V "does not apply in relation to financial services". Section 51AF is more specific. The language in s 51AF(1) ("does not apply to the supply, or possible supply") and in s 51AF(2) ("conduct engaged in") picks up language used in s 53 and s 52 of the TP Act respectively. This tends to suggest that s 51AF is concerned only with those provisions in Pt V which proscribe conduct of a corporation: see, for example, ss 52-64. Section 73 is not such a provision. 72 If the submission of EFS and AER was correct, it would follow that a financier providing financial services by way of a lease or rental agreement in respect of goods acquired by a consumer might never be liable to the consumer under s 73 of the TP Act even where the alleged misrepresentation related to a particular characteristic of the goods. The point is well illustrated by the facts of this case in which the Harrisons allege that the supplier of the goods made misrepresentations as to the price of the goods. 73 There is a question as to whether s 73(1) can apply to misrepresentations that relate to characteristics of goods (in particular price) if they also relate to financial services because the goods are to be acquired by a consumer using finance made available under a lease, rental or other credit contract or arrangement. 74 In my view, s 51AF operates to exclude the operation of Pt V of the TP Act in cases involving contraventions of any of its provisions only in so far as such conduct relates to financial services. To the extent that such conduct also relates to something other than financial services then Pt V of the TP Act is not excluded. Thus, conduct which, as in this case, relates not only to the financial services (the provision of finance under a rental contract) but also to a characteristic of goods (the price of the goods) may in fact be actionable under both the TP Act and the ASIC Act. 75 In the course of a discussion with a consumer a supplier of goods or services may make a misrepresentation concerning the condition or characteristics of goods or services. In the course of the same discussion the supplier may make a misrepresentation as to the availability of finance, or the terms or conditions upon which finance might be obtained by the consumer. 76 I do not see why a misrepresentation of the former kind might not be actionable under the TP Act on the basis that the supplier had contravened s 52(1) of the TP Act. No doubt the supplier may have made other misrepresentations during the course of such a discussion to which s 12DA of the ASIC Act might apply because the supplier had thereby engaged in conduct "in relation to financial services". But it does not follow that every misrepresentation that may have been made by the supplier in discussions with the consumer must be "in relation to financial services". Whether any such misrepresentation was made "in relation to financial services" must depend upon the facts of any given case. 77 There is certainly no reason to think that the legislature intended by the introduction of s 51AF to deny s 73 any operation in cases involving misrepresentations made to consumers by suppliers concerning goods or services acquired using finance made available pursuant to a lease, rental or other credit contract. On the contrary, the references to s 12ED of the ASIC Act were introduced into s 73 at the same time as s 51AF was introduced into Pt V of the TP Act: see Financial Sector Reform (Consequential Amendments) Act 1998 (Cth), Sch 2, Items 27, 28 and 29. 78 Similar arguments to those advanced by EFS and AER were addressed by Foster J in Australian Securities and Investments Commission v Bank of Queensland Limited (2011) 86 ACSR 258. In that case, the argument advanced in support of an application to strike out the statement of claim filed by the applicant (ASIC) was that s 73 could not apply to the supply, or possible supply, of services that are financial services. As in the present case, the respondents' arguments seem to have been founded on the simple proposition that s 51AF deprives s 73 of any operation if the representations in issue relate to financial services. 79 Foster J considered these arguments by reference to ASIC's response to them. His Honour said at [45]: [45] ASIC countered these arguments with the following submissions: (a) Section 73 of the TPA is predicated upon the existence of a linked credit provider. For s 73 of the TPA to apply to any set of circumstances, a linked credit provider must have provided credit under some form of contract in relation to a supply of goods and/or services. Providing credit under a contract (including a home loan contract or a margin loan contract) amounts to providing financial services within s 4(1) of the TPA, s 12BA of the ASIC Act and s 12BAB of the ASIC Act. Therefore, a claim under s 73 of the TPA will always involve the supply of financial services. To read s 73 in the way that the respondents urge upon the Court would render s 73 incapable of any application. ASIC urged an interpretation of s 73 which allowed it to operate harmoniously with the rest of Pt V of the TPA. (b) Section 12ED of the ASIC Act is specifically referred to in s 73(1) of the TPA. Section 12ED is confined in its operation to a contract for the supply of financial services by a person to a consumer in the course of a business. Accordingly, s 73 of the TPA must be capable of applying to a contract for the supply or possible supply of financial services at least in so far as there is implied into such a contract the warranties specified in s 12ED of the ASIC Act. (c) Section 51AF(1) restricts the operation of Pt V of the TPA only when a provision of Pt V would otherwise "apply to the supply, or possible supply of … financial services" (emphasis added). As a result, the only provisions of Pt V which are affected by s 51AF(1) are those which have as their subject matter some aspect of the actual supply or possible supply of financial services. There are many sections which have that operation: for example, s 52 and s 53 would operate where a misrepresentation or false statement was made in relation to the supply or possible supply of financial services. Section 73 of the TPA is not such a provision. Section 73 merely attaches the liability of the actual supplier to such persons as fall within the definition of "linked credit providers". Section 73 of the TPA merely creates extended rights and remedies after there has been a supply of goods or services financed by a linked service provider. 80 His Honour then said at [46]-[47]: [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 s 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 supplier 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. 81 I respectfully agree with his Honour's reasoning. Cowdroy J also agreed with Foster J's reasoning when considering similar arguments in Technology Leasing Ltd v Lennmar Pty Ltd [2012] FCA 709. Both Foster J's and Cowdroy J's decisions on this point were referred to by the Full Court in Quikfund (Australia) Pty Ltd v Prosperity Group International Pty Ltd (In Liq) (2013) 295 ALR 472 at [96] and [128] without disapproval. 82 Applying this interpretation of s 51AF in this case, s 51AF did not operate to exclude liability on the part of EFS or AER for a misrepresentation made by Mr Dadson in the course of his discussions with the Harrisons even if those representations were made in relation to financial services. 83 If other relevant requirements of s 73 are satisfied, then it will apply in the circumstances of this case. In this regard, it was ultimately accepted by EFS that, for the purposes of s 73(1), Austec was a "consumer" and EFS was a linked credit provider of QCC. 84 EFS and AER relied upon a number of defences provided for in s 73(3). The first is based upon s 73(3)(a). The argument seems to be that the credit provided to Austec by EFS and AER was "the result of an approach made to the credit provider that was not induced by the supplier". There is nothing in the evidence before me to support a finding to that effect. On the contrary, as my previous findings make clear, QCC (through Mr Dadson) induced Austec to enter into the rental agreement with AER and EFS. The defence based upon s 73(3)(a) must therefore be rejected. 85 The second of the defences relied upon by EFS and AER was based upon s 73(3)(b). Evidence in support of this defence was given by Mr Stavros Athanasiou and Mr Charbel Rizk. In my view their evidence does not make out a defence under s 73(3)(b). I explain why in paras [186]-[193] below. 86 To this point my views in relation to the contest between EFS/AER and Austec may be summarised as follows. QCC contravened both s 52(1) of the TP Act and s 12DA of the ASIC Act by making misrepresentations to Austec which induced it to enter into the rental agreement. Had the misrepresentations not been made, Austec would never have entered into the rental agreement. Section 73(1) applies to all such misrepresentations. The other requirements of s 73 are made out. None of the defences provided for in s 73(3) is made out. AER, EFS and QCC are jointly and severally liable to Austec for loss and damage suffered by it by reason of QCC's misrepresentations.

[17]

The Contracts Review Act 1980 (NSW) 93 The Harrisons each gave guarantees in favour of AER and EFS in respect of Austec's obligations under the rental agreement. The Harrisons seek relief under the Contracts Review Act 1980 (NSW) (the Contracts Review Act) in relation to these guarantees. 94 In fact the guarantees given by the Harrisons create rights and obligations of indemnity and guarantee. 95 Clauses 26-28 of the rental agreement (which incorporate the terms of the relevant guarantee and indemnity) provide: 26. GUARANTEE The Guarantor unconditionally and irrevocably guarantees to us the due and punctual: 26.1 Payment by the Customer of all money that is or may become payable by the Customer under the Hiring Agreement; and 26.2 performance of all the Customer's obligations under the Hiring Agreement, in each case including any variation of payment or other terms under the Hiring Agreement as provided in it or as agreed from time to time by us, with or without the Guarantor's consent. 27. INDEMNITIES 27.1 The Guarantor indemnifies and will keep us wholly indemnified against any loss, damage, cost, charge, expense or other liability directly or indirectly incurred by us in any way in connection with or arising from: (a) any actual or attempted breach or default by the Customer of any of its obligations under the Hiring Agreement; or (b) any inability by us to enforce the Hiring Agreement against the Customer for any reason, including that the Hiring Agreement or any part of it may be void, voidable or declared unenforceable. 27.2 Each of the indemnities given in clause 27.1. (a) is separate and distinct from the other and from the guarantee under clause 26; and (b) must not be construed otherwise or read down or limited in its effect or otherwise varied by virtue of its inclusion in the same document as the guarantee and any of the other undertakings given by the Guarantor. 28. GUARANTOR'S OBLIGATIONS 28.1 The Guarantor must pay any money due to us under this Guarantee and Indemnity on demand and without prior notice being given. 28.2 The Guarantor's obligations and our rights and remedies against the Guarantor will continue until all guaranteed money has been paid and discharged in full and this Guarantee and Indemnity has been released and will not in any way be affected by: (a) any release or variation of any obligation under the Hiring Agreement at any time; (b) any time, concession, indulgence, waiver, compromise, abandonment or transfer (whether with or without consideration) of: (i) any right of any person under this Guarantee and Indemnity or any obligations under the Hiring Agreement; or (ii) any other of our rights against the Customer, the Guarantor or any other person; (c) any acquiescence, delay, act, omission, neglect or mistake on our part or by any other person to enforce the Hiring Agreement or this Guarantee and Indemnity; (d) the Customer, the Guarantor or any other person: (i) being or becoming bankrupt, insolvent, placed under administration or in liquidation; or (ii) dying or being dissolved or deregistered or otherwise ceasing to exist, whether or not us [sic] assents to this or receives or accepts any dividend from any trustee, administrator or liquidator; (e) any incapacity or change in the legal capacity of the Customer or any other Guarantor including any change in the membership of any firm (whether or not this involves dissolving an existing partnership and forming another) which is the Customer or the Guarantor or of which the Customer or the Guarantor is a member; (f) any amounts guaranteed by this Guarantee and Indemnity being or becoming irrecoverable against any person for any reason; (g) any provision of the Hiring Agreement or any guarantee and indemnity being or becoming void, voidable or unenforceable against any person; (h) any assignment or transfer of any rights in respect of the Hiring Agreement or this Guarantee and Indemnity by us, the Customer, the Guarantor or any assignee of them or any other person; (i) any judgment or order being made against any person; (j) the amount of the guaranteed money increasing or being reduced to nil or otherwise varied; (k) the failure to give notice to or the lack of consent of the Guarantor before or after the happening of any acts or events referred to in this clause; or (l) any other act, omission or default by any person or any other matter or thing which, but for this clause, might discharge, reduce, abrogate, prejudice or otherwise affect the liability of the Customer or the Guarantor. 28.3 The Guarantor's obligations are continuing obligations under this Guarantee and Indemnity and are unconditional and irrevocable, remaining in full force and effect until the whole of the guaranteed money has been paid or satisfied and this Guarantee and Indemnity released. 96 Section 7 of the Contracts Review Act relevantly provides: (1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, … (2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order. … 97 Section 9 specifies the matters that must be considered by the Court in determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made. Pursuant to s 9(1) the Court must have regard "to the public interest and to all the circumstances of the case" including those arising in the event of compliance or non-compliance with the provisions of the contract. 98 Section 9(2) of the Contracts Review Act specifies particular matters to which the Court must have regard to the extent they may be relevant. These include: where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed [s 9(2)(g)]; whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act [s 9(2)(h)]; the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect [s 9(2)(i)]; whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act:

by any other party to the contract,
by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or
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; [s 9(2)(j)] the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party [s 9(2)(k)]; and the commercial or other setting, purpose and effect of the contract [s 9(2)(l)]. 99 I have had regard to all of the matters referred to in s 9(1) and s 9(2) including those referred to in the immediately preceding paragraph of these reasons. They are, in my view, considerably significant in the circumstances of this case. 100 By a series of misrepresentations, the Harrisons were induced to sign the document which, upon acceptance of Austec's offer by EFS, provided the written record of the guarantee and indemnity. 101 The representations that were made to the Harrisons misrepresented the nature and effect of the commercial arrangements which Austec was later to enter into with Axis, and with AER in fundamental respects. Had the representations not been made and relied upon by the Harrisons, Austec would never have entered into any such arrangements with either Axis or AER. 102 The Harrisons did not receive legal advice before executing any of the documents signed by them. 103 I am satisfied that neither Mr Harrison nor Mrs Harrison understood the legal or practical effect of the guarantee and indemnity granted by them to AER. I accept that each of them most likely understood that they were giving a guarantee to AER of Austec's obligations, but they were, in my view, fundamentally mistaken as to the nature and extent of Austec's obligations to Axis and AER and, by implication, their own potential liability as guarantors of Austec's obligations to either Axis or AER. 104 Section 9(2)(j) refers to (inter alia) unfair pressure or unfair tactics exerted on or used against the party seeking relief under the Contracts Review Act by (inter alia) a person acting or purporting to act or appearing or purporting to act for or on behalf of any other party to the contract. 105 In the present case I have concluded that QCC (through Mr Dadson) was not the ostensible agent of AER. Nevertheless, it seems to me that Mr Dadson certainly gave the appearance of acting for all other parties to the contract or contracts which he induced Austec and the Harrisons to enter. And on any view Mr Dadson engaged in both unfair pressure and unfair tactics in an effort to induce the Harrisons to sign (inter alia) the guarantee and indemnity given by them to AER and EFS. 106 I should note that AER and EFS submitted that, even if such a finding was made, the Harrisons were still not entitled to relief under the Contracts Review Act because the contract of guarantee and indemnity entered into by each of them was entered into in the course of or for the purpose of a trade or profession carried on by each of them: see s 6(2) of the Contracts Review Act. I reject this submission. There is nothing to suggest that either of the Harrisons was carrying on a business in his or her own right. 107 In all the circumstances, I am satisfied that the contract of guarantee and indemnity made between AER and EFS, and each of Mr and Mrs Harrison, was unjust in the circumstances relating to the contract at the time it was made. 108 In my opinion the relief that is appropriate in this case is to declare the contract of guarantee and indemnity void with effect from the time it was made.

[18]

Factual Background 109 Mr and Mrs Gonsalves gave evidence of dealings they had with a Mr Joe Rizcallah in August 2008. Mrs Gonsalves gave an account of a meeting with Mr Rizcallah that occurred on or about 6 August 2008 which she and Mr Gonsalves attended. 110 Mr Rizcallah visited Airmark's office. He told the Gonsalves that he was from Link Solutions. He had a conversation with the Gonsalves in which he said words to the following effect: My name is Joe Rizcallah. I am from Link Solutions and am here to try and save you some money. Can I have a look at some telephone bills to determine an amount that we might be able to save you. We have a great deal that finishes soon, so you really should take a look at what we have to offer. 111 Mrs Gonsalves gave Mr Rizcallah some telephone bills. Mr Rizcallah then had a conversation with the Gonsalves which was, according to Mrs Gonsalves, to the following effect: Mr Rizcallah: You are paying too much for your phone bills. I can cut your phone bills in half. Also if you sign up today, that will allow me to give you free office equipment in exchange for call credits. Mrs Gonsalves: What are call credits? Mr Rizcallah: It is like points. You get points for the amount of telephone calls you make, both nationally and internationally. They give you credits and those credits go toward the free equipment. Mr Gonsalves: Where is the catch - how much is this going to cost? Mr Rizcallah: You will be in a much better position with me after you sign up, I am here to reduce your costs. Your phone bills will be much less than what you are paying plus you will get free equipment. You must sign up today to get the free equipment - this special ends today. Mrs Gonsalves: What sort of equipment can we get? Mr Rizcallah: You can get plasmas, telephones, printers, monitors, photocopiers - any electronic equipment. It is very similar to the mobile phone type deals i.e., where you pay for the mobile phone plan and get a free mobile with it. Mrs Gonsalves: Why are you giving away this equipment? How can you afford to do this? Mr Rizcallah: We buy the call rates from Telstra for about 2 cents and we on sell to you, the customer at 5 cents. We buy them at a wholesale price and we make money from the difference and still save you money. Mrs Gonsalves: This sounds like a good deal - we will sign up. We would be silly to miss out. Mr Gonsalves: I agree. Let's sign up. 112 During the course of the discussions between Mr Rizcallah and the Gonsalves, Mr Rizcallah indicated that he was not in a position to inform the Gonsalves what equipment they might obtain. According to Mrs Gonsalves, Mr Rizcallah said: I am not trained to work out which equipment or the credits you should receive for your phone bills, someone else will have to work this out and they will send the document back to you. I think you can get about $600-$800 worth of free equipment. 113 There were various documents signed by Mr Gonsalves on 6 August 2008. One of these was a document entitled "Understanding the Arrangements" (the Understanding Document). This document was in these terms: Sonofon appreciates your business and for the avoidance of any misunderstanding, our staff and customers must acknowledge that the key elements of the arrangements have been explained. The key elements of our arrangements are as follows: - EQUIPMENT RENTAL AGREEMENT Monthly Rental inc GST [550] x Term [60] = Total Rental inc GST [$33,000] • All equipment and products are rented through Quikfund Australia Pty Ltd. • Options at the end of term are: - ° Purchase the equipment outright at fair market value ° Continue to rent the equipment ° Return the equipment and upgrade under new agreement • Monthly Rental Amount will be debited in advance from your nominated account. • Monthly Plan Credits for telephony services will coincide with the commencement of the Equipment Rental Agreement. • Although Quikfund Australia Pty Ltd is able to provide the finance required you may choose to organize your own financing arrangements. TELEPHONY SERVICES Monthly Plan Fee ex GST [500] Monthly Credits ex GST [500] Term [60] • Telephony services will now be delivered and billed monthly by Clear Telecoms Aust P/L in accordance with the Rate Plan also signed by me. I acknowledge that I have read the Terms and Conditions. • Call Plan Credits will be credited on the telephone bill at the end of every calendar month. • Call Plan Credits for fixed line services are based on eligible calls only. Eligible calls are Local calls, National calls, International calls and calls to mobile phones. • Call Plan Credits for mobile phone services are based on different eligible calls. Eligible calls for mobile phones are Mobile to Mobile calls and Mobile to Fixed Line calls. Other charges apply. • SMS, MMS, Premium SMS, Connect 2, GPRS (data usage), Mobile Fax, WAP, Directory and Information services, Global Roaming and other types of mobile services will be charged in addition to this arrangement (if applicable). • Line Rentals and other carrier charges (examples include Calls to 13 numbers, Directory charges, calls to Sensis, or other Information calls) will be charged monthly in addition to this arrangement. THIS IS THE ENTIRE AGREEMENT It is understood that these two written agreements supersede all prior representations, whether verbal or written, and they accurately describe the whole of the arrangements between us. There are no other expectations of (Company Name), Quikfund Australia P/L or Clear Telecoms Aust P/L. 114 The numbers in the boxes all appeared in handwriting which I infer is that of Mr Rizcallah. Mr Gonsalves and Mr Rizcallah each signed and dated the document in a box at the foot of the page which includes various acknowledgments. The acknowledgment made by Mr Gonsalves was as follows: I acknowledge that the Salesperson has explained all of the key elements of the arrangements. I have had the opportunity to ask questions and am satisfied that I understand the arrangements. The acknowledgment made by Mr Rizcallah was in these terms: I acknowledge that I have explained the key elements of the arrangements to the customer to the best of my ability. I have provided a copy of the documents to read and they have been properly completed and signed. 115 Also on 6 August 2008 Mr Gonsalves signed a rental agreement on behalf of Airmark, and on his own behalf as guarantor. It is likely, in my view, that the rental agreement was signed by Mr Gonsalves in blank. At the very least, it did not include any description of the equipment that was to be rented nor did it specify the price or value of any of the equipment. All other details of the equipment to be rented that appear in the document were included some time after Mr Gonsalves signed it and after Mr Rizcallah had taken it away. At no time was any information as to the price or value of the goods included in the document. 116 The rental agreement includes in handwritten form a reference to the rental term of 60 months and a monthly rental of $500 which, with GST, required Airmark to make monthly payments of $550. It is not clear whether these details were included in the document at the time it was signed by Mr Gonsalves. 117 Mrs Gonsalves gave evidence, which I accept, that about a week after she and her husband met with Mr Rizcallah, she had a telephone conversation in which she discussed with Mr Rizcallah the various types of equipment that Airmark might choose to receive. Mrs Gonsalves said, and I accept, that she chose equipment that "would make good gifts" and that she later gave the equipment away to family and friends. The equipment was delivered to Airmark (less two missing GPS devices) about a month after the Gonsalves had their initial discussion with Mr Rizcallah. Mrs Gonsalves said, and I accept, that there was no installation carried out by the equipment supplier. 118 Mrs Gonsalves gave evidence, which I also accept, that neither she nor her husband was ever provided with a copy of any of the documents signed by them in August 2008 until much later the following year. She said that in November 2009 she spoke with a person working for Clear Telecoms who provided her with copies of various documents allegedly signed by the Gonsalves. These documents included a version of the rental agreement signed by Mr Gonsalves in August 2008 and two other rental agreements allegedly signed by the Gonsalves in December 2008. I will say more about the agreements said to have been signed in December 2008 shortly. 119 Mr Gonsalves also signed a delivery acknowledgment on Quikfund letterhead. The original of the documents is not in evidence, but a facsimile copy is, which appears to have been sent by Link Solutions to Quikfund on 2 September 2008. This date coincides with the acceptance date shown on the rental agreement. I am satisfied, on the balance of probabilities, that this document was signed by Mr Gonsalves sometime between 8 August and 2 September 2008. It is more likely than not that it was signed by Mr Gonsalves sometime after Mrs Gonsalves had her conversation with Mr Rizcallah in which they settled on a list of equipment. 120 The delivery acknowledgment signed by Mr Gonsalves does not include any details of the equipment the subject of the purported acknowledgment. The document merely states: Dear Sir/Madam RENTAL AGREEMENT DATED 06/08/2008 I/we refer to the above agreement and advise that all of the items listed as per the Rental Agreement, as ordered by me/us are installed or arrangement has been made for installation to my/our satisfaction and I/we hereby authorise Quikfund (Australia) Pty Ltd to commence my/our Rental Agreement and release the funds to the supplier(s). 121 The rental agreement was accepted on behalf of Quikfund on 2 September 2008. By this time a description of the rental equipment had been inserted. This information consisted of a brief description of the equipment as well as relevant serial numbers. It is not necessary to list all of the equipment referred to in the rental agreement but it included two personal computers, three GPS devices, a laptop, a mobile phone and a 26" LED monitor. The Gonsalves accept that all of this equipment was delivered to Airmark save for two of the three GPS devices, as to which they maintain, and I accept, only one was delivered. 122 There is a copy of an invoice in evidence apparently issued by a company called Sonofon Pty Ltd (Sonofon), the company referred to in the Understanding Document on whose behalf it was apparently signed by Mr Rizcallah. The invoice is dated 2 September 2008, and is for an amount of $22,650.41. It is addressed to Quikfund, and was apparently paid by Quikfund on that date. 123 If the Gonsalves are to be believed, events took a bizarre and sinister twist in late 2008. According to Mrs Gonsalves, Mr Rizcallah telephoned her in November 2008. She says that Mr Rizcallah told her that "the office has lost the forms you signed [and] unless we have proper forms for our records there is a chance you could lose your phone connection." Mr Rizcallah said that he would arrange for someone to visit Airmark with documents that could be re-signed. 124 According to Mrs Gonsalves, a man by the name of Mark Carroll turned up with documents for the Gonsalves to sign a few days after she was contacted by Mr Rizcallah. After introducing himself to Mrs Gonsalves, Mr Carroll told her that he had been sent by Mr Rizcallah with the documents to be signed. Mr Gonsalves was in a meeting at this time. Mrs Gonsalves' evidence of what happened next was as follows: Mark Carroll had some documents attached to a clipboard which he said to me "there are two documents here that need to be signed" to which I responded "do we both need to sign them?" and he responded "I do not know, you spoke to Joe, maybe both of you sign to be on the safe side". I called Mark out of the meeting. The papers on the clipboard had stickers adjacent to where we had to sign. As soon as I saw the documents, I said "these are blank" to which he responded "I know nothing about them, I am just the messenger. I thought you had already spoken to Joe about this". 125 There were two rental agreements signed by both Mr and Mrs Gonsalves and Mr Carroll. Both were signed by the Gonsalves at the same time and in the presence of Mr Carroll. Both rental agreements were signed by Mr Carroll as witness to Mr and Mrs Gonsalves' signatures. At the time that the two agreements were signed they were only partially completed. They included, on the first page, the name of Airmark, together with an address and telephone number. The address and phone and fax numbers were incorrect; they were an old address and old phone and fax numbers. The address and numbers of Airmark at this time were as shown in the first rental agreement signed in August 2008. This indicates that the person who inserted this information into the second and third rental agreements is unlikely to have had access to the first rental agreement which contained the correct information. The first rental agreement had, I infer, been forwarded to Quikfund by Link Solutions in August or September 2008. 126 At the time the second and third rental agreements were signed by Mr and Mrs Gonsalves, Mrs Gonsalves drew Mr Carroll's attention to the error in the phone and fax numbers. Mr Carroll corrected these (in blue pen) and his corrections were initialled by Mr Gonsalves (in black pen). Similar corrections were made to the third page of the document where the address, phone and fax numbers also appeared. As on the first page, the incorrect address was shown. I infer that Mr Carroll made a correction to the address on the third page of the document (in blue pen) which Mr Gonsalves then initialled (in black pen). 127 In light of the Gonsalves' evidence, and having regard to the form of the two rental agreements that are in evidence (including the different handwriting that is included in these documents) I am satisfied on the balance of probabilities of a number of matters. 128 First, the section in which the equipment is identified in each such document was blank at the time it was signed by the Gonsalves. The relevant schedule that identifies the equipment was completed at a later date. I infer this occurred on or prior to 15 January 2009 which is the date the agreements were accepted by Quikfund. 129 Secondly, neither the Gonsalves nor Mr Carroll dated either document at the time it was signed. Both documents show 18 December 2008 as the date upon which the Gonsalves signed but I infer that this date was inserted at a later date. 130 Thirdly, the details of the rental term and the monthly payments did not appear in either document at the time it was signed by the Gonsalves. Similarly, the banking details forming part of the direct debit authority included in each document were not included at the time it was signed by the Gonsalves. 131 The first of the two rental agreements signed by the Gonsalves and Mr Carroll (Ex D) provides for monthly payments of $706.20 over 60 months. The equipment referred to in the relevant schedule to this agreement is as follows: Quantity Description 19 19" LCD Monitors 1 F-FXP3290 Colour Copier

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133 Mr Gonsalves and Mr Carroll also signed a document in terms that closely reflect the Understanding Document signed by Mr Gonsalves and Mr Rizcallah in August 2008. The document (the Second Understanding Document) is dated 18 December 2008 and refers to Link Solutions in place of Sonofon. The handwritten numbers in the boxes appearing under a heading "EQUIPMENT RENTAL AGREEMENT OR OUTRIGHT PURCHASE" shows monthly rental of $1,938.20 (inclusive of GST), a term of 60 months, and total rental of $116,292 (inclusive of GST). The handwritten numbers in the boxes under the heading "TELEPHONY SERVICES" show monthly credits of $1,828.20 per month (inclusive of GST), a term of 60 months, and total credits of $109,692 (inclusive of GST). 134 The monthly equipment rentals figure shown in the Second Understanding Document of $1,938.20 corresponds to the total of the two rental agreements signed by Mr Gonsalves and witnessed by Mr Carroll ($706.20 + $1,232). 135 There are two invoices which appear to have been issued by Select Telecoms Pty Ltd (Select Telecoms), both dated 13 January 2009, that relate to the equipment referred to in the rental agreements signed by the Gonsalves in Mr Carroll's presence. Both are addressed to Quikfund. One of these, in the amount of $28,498.79, was paid on 16 January 2009, and the other, in the amount of $48,238.06, was paid on 20 January 2009. This was said by Quikfund to show that Select Telecoms was the supplier of the goods the subject of these two rental agreements. However, there is other evidence on this issue which I will return to later in these reasons. 136 Mr and Mrs Gonsalves each gave evidence that none of the equipment referred to in the rental agreements signed by them in Mr Carroll's presence was received by Airmark. In deciding whether to accept this evidence it is necessary to consider some other evidence relied upon by Quikfund. 137 This evidence includes a copy of a delivery acknowledgment dated 23 December 2008. It is in the same terms as that referred to at paras [119]-[120] above except that it refers to a rental agreement dated 18 December 2008. There are fax machine markings on the document which indicate that it was faxed between fax numbers in New South Wales and Queensland on 13 and 14 January 2009. One of these fax numbers plainly belongs to Airmark. The other, I infer, belongs to Link Solutions. 138 The evidence relied upon by Quikfund also includes an audio recording and a transcript of a telephone conversation - or at least a portion of a telephone conversation - between Ms Lana Paul and Mr Gonsalves. Mr Gonsalves did not dispute that he had such a conversation with Ms Paul. Based upon the fax markings on the delivery acknowledgment and the discussion that took place between Ms Paul and Mr Gonsalves concerning that document, I infer this conversation took place on or about 13 January 2009. 139 The conversation between Ms Paul and Mr Gonsalves, which he accepts took place, was as follows: Ms Paul: Turning that feature on now. Ok so my name is Lana, I'm calling on behalf of Quikfund (Australia) Pty Limited. So were the finance company, that you will be renting your new office equipment from, delivered by Link Solutions. If I can confirm that I am speaking with Mark Gonsalves? Mr Gonsalves: Yep. Ms Paul: And Mark you are one of the two directors of Airmark Consolidators Pty Limited? Mr Gonsalves: That's right. Ms Paul: Ok Mark before proceeding I have to advise that this conversation is being recorded for quality assurance and verification purposes. Is that ok? Mr Gonsalves: Yeah that's fine. Ms Paul: Lovely now we have two rental plans signed by you. The rental plans are for rental of the following equipment ordered by you. Now I will just read out the equipment as per the rental plan. On one plan you have six Nokia N73 mobile phones, which came with bluetooth and cases, two Nokia N95 mobile phones with Bluetooth and cases, we have 1 6515 laptop ah four DX7400 desktops, with nineteen inch monitors and two Blackberry curves. Mr Gonsalves: Mhmm Ms Paul: Ok on the other agreement you have nineteen nineteen inch LCD monitors, ah one Fuji 3290 copier and the voip installation. Mr Gonsalves: Right Ms Paul: Ok now were about to receive your signed delivery acknowledgment advising that you have received all of the equipment and it has been installed to your satisfaction. Is that correct? Mr Gonsalves: That's correct yes. Ms Paul: Ok you will authorise Quikfund to commence the rental plan and release the funds to Link Solutions? Mr Gonsalves: Mhmm Ms Paul: Now we have confirmed that you are in receipt of all the equipment. Can I please confirm that the equipment is located at number 7, 443 West Botany Road, Rockdale? Mr Gonsalves: No we moved from there Ms Paul Oh is it Shed 5 Mr Gonsalves: 5 1 A Ms Paul: Ok so just confirming that the equipment is located at Shed 5, number 1 A hail street Botany? Mr Gonsalves: Correct Ms Paul: And Mark what's your mobile number? Mr Gonsalves: [Mr Gonsalves then gave his mobile number] Ms Paul: Ok and I have your email details um ok so please note that your monthly payments now you do have two agreements so on the first agreement it's $1,232.00 which includes GST on the other agreement it's $706.20 which also includes GST. That amount will be drawn for a period of sixty months. Now that total amount combined. Ill just read that back to you Ill just add them all up. It's $1,938.20. Mr Gonsalves: Ok Ms Paul: Ok now Mark we will submit the application um as soon as that DA is faxed back to me Mr Gonsalves: Mhm Ms Paul: And I'll finalise the certificate of currency with your broker. So the application will be submitted for settlement um once that happens your rental plan will commence within forty eight hours Mr Gonsalves: Ok. Ms Paul: Ok. Thanks very much Mr Gonsalves: Thanks Ms Paul: Alrighty bye Mr Gonsalves: bye (errors in original) 140 There are a number of observations I would make about this conversation. First, it is apparent from the opening words that what was recorded and transcribed may have been preceded by some other discussion between Ms Paul and Mr Gonsalves. Mr Gonsalves, as I will explain, claimed to have little or no recollection of the conversation. What else was said during the course of the conversation he could not say. But I do accept that other things were likely to have been said before Ms Paul turned on the audio recorder. 141 Secondly, Ms Paul told Mr Gonsalves that she was calling on behalf of Quikfund. There was other evidence that shows Ms Paul worked for Link Solutions rather than Quikfund. This perhaps explains why Ms Paul said she was calling "on behalf" of Quikfund. Mr Gonsalves said, and I accept, that he had at least two conversations with Ms Paul before this one in her capacity as a representative of Link Solutions. Ms Paul referred to equipment being "delivered by Link Solutions". She also sought Mr Gonsalves' authority to "commence the rental plan and release the funds to Link Solutions". 142 Thirdly, there is no evidence to indicate that Mr Gonsalves knew what equipment was to be supplied to Airmark under the two rental agreements that were signed by the Gonsalves in November or December 2008 apart from the record of his telephone conversation with Ms Paul. I am satisfied that the Gonsalves were never provided with copies of the documents they signed in Mr Carroll's presence until November 2009 when they obtained copies of the documents in completed form. Nor were they provided with copies of the invoices issued in relation to the equipment that was sent to Quikfund. 143 Fourthly, the evidence does not explain how, if Mr or Mrs Gonsalves selected the equipment the subject of these rental agreements, they actually did so. It was not suggested to them that they had a conversation with either Mr Rizcallah (as Mrs Gonsalves accepted she had in the case of the first rental agreement) or Mr Carroll, in which they selected the additional equipment. 144 Fifthly, the evidence does not explain why Mr and Mrs Gonsalves would have wished to sign two rental agreements on the same day for equipment that could have all been the subject of one rental agreement. Similarly, it was not apparent from their evidence why, if they selected more equipment beyond what was acquired in August 2008, they selected what they did. 145 One possibility is that Mrs Gonsalves wanted more equipment that she could give away to friends and relatives, or perhaps, Airmark's customers. Another possibility is that this equipment was selected because it could be put to use in Airmark's business. None of these possibilities was explored in cross-examination of the Gonsalves. 146 Another possibility that I have considered is that the Gonsalves wanted to enter into a new rental agreement pursuant to which they might acquire some additional equipment beyond that which they received in August 2008. Under this scenario, Mr Carroll, or someone else responsible for the completion of the blank forms, may have taken it upon himself to prepare a second document that made reference to still more equipment (such as the 19 x 19" LCD monitors and the colour copier) which were never ordered or selected by the Gonsalves. Again, a difficulty I have with this view of the facts is that it was not something taken up in cross-examination of the Gonsalves. Nor does it reflect Mr and Mrs Gonsalves' account of what occurred. 147 None of the parties suggested that the case might be decided on the basis that some of the equipment said to be the subject of these two rental agreements was ordered and delivered while other equipment was not. I think I should therefore approach the case on the basis that either all or none of the equipment the subject of the second and third rental agreements was delivered to Airmark. 148 There is no doubt that the conversation between Ms Paul and Mr Gonsalves is of considerable significance. On its face it would seem to contradict most of the Gonsalves' evidence as to their dealings with Mr Carroll and the non-receipt of the equipment the subject of the second and third rental agreements. 149 Nevertheless, there are other features of the dealings between the Gonsalves, Link Solutions and Quikfund which have led me to closely scrutinise the evidence relied upon by Quikfund. As previously mentioned, Quikfund cannot point to any document which was ever presented to Airmark (at least not before November 2009) that identifies the equipment that Quikfund alleges it agreed to rent to Airmark, the cost of that equipment, or the total amount that was financed. 150 Moreover, Quikfund apparently left it to Link Solutions to obtain confirmation of delivery of the equipment. If an equipment supplier was acting fraudulently by arranging to obtain payments from a financier in respect of equipment that the supplier never intended to deliver, then the financier who left it to the supplier to obtain such an acknowledgment may leave both itself and its customer exposed. 151 There is also evidence (discussed below) which indicates that the prices charged by Link Solutions for the equipment allegedly supplied to Airmark were highly inflated, to the point that Link Solutions, or at least one or more of its employees, was quite likely perpetrating a fraud on Quikfund for whom the equipment constituted the principal, or at least important, security for the amount financed under each rental agreement. 152 I must now come back to the terms of Mr Gonsalves' telephone conversation with Ms Paul. Mr Gonsalves' evidence of his telephone conversation with Ms Paul, even if accepted, does not really explain why he made the statements he made in that conversation. His evidence was that he was most likely busy and that he may have been distracted into thinking that he was participating in a customer survey of some description. But to my mind that still does not explain why he made the statements he did. Among other things he expressly confirmed that the equipment, which Ms Paul specifically described, was located at Airmark's premises at Hale Street, Botany. 153 Mr Gonsalves suggested that he may have "zoned out" during the conversation with Ms Paul. He also suggested that he believed Ms Paul was calling to do a "customer satisfaction report". He said in an affidavit in reply: 15. Having considered the matter, I believe the reason I do not recall what is in the transcript is that I was not listening closely to what she saying. Because I believed that Lana Paul was calling to do a 'customer satisfaction report', I believe I would have assumed that Lana Paul was just 'going through the motions' and going over things that had already happened. Also, I believed I would have assumed that what was being said to me was a formal exercise for Link Solutions' benefit. As is generally my attitude to these types of phone calls, I would have wanted the process to end as quickly as possible. Putting the matter colloquially, I believe I would have been 'zoning out.' 16. Also, having considered the matter, I recall that my understanding of the situation regarding equipment at the time of the third phone call I had with Lana Paul was that Airmark had already received the equipment we were supposed to receive under our deal with Link Solutions. Given that this was my understanding, I believe that another reason I did not listen closely to what Lana Paul was saying was that she was just listing the equipment that we had already received - again in a 'going through the motions' way. 17. Further, having considered the matter, I recall that I did not have a good awareness of what equipment we had already received from Link Solutions. It was Dolores who had spoken to Joe Rizcallah about what equipment we would be getting. I was focusing on other matters in the business. I believe that because I did not have a good awareness of what equipment we had already received from Link Solutions, I would not have been alert to the fact that what Lana Paul was reading out to me was a completely different list of equipment. 18. Having considered the matter further, I recall that at the time of my third conversation with Lana Paul, I had no idea that we might have entered two further rental agreements with two more lists of equipment. I would therefore not have been alert to the possibility that Ms Paul might say things that were completely different to my understanding of what had occurred. 154 I have listened to the audio recording (Ex G) of the conversation between Ms Paul and Mr Gonsalves several times to see whether it suggests that Mr Gonsalves was confused or distracted at the time of his conversation with Ms Paul. The conversation seems to be clear and lucid and there is no suggestion, based upon my listening, that Mr Gonsalves might not have been listening to what Ms Paul said. The fact that he corrected the address which she read out to him suggests that he was paying close attention. 155 Mrs Gonsalves was quite emotional when giving evidence, and was adamant that her version of events was correct. This included her account of dealings with Mr Carroll and her evidence to the effect that no equipment was received by Airmark from Link Solutions beyond what was delivered in August 2008. She insisted that she would have known if additional equipment had been delivered. 156 I do not accept Mr and Mrs Gonsalves' evidence concerning their dealings with Mr Carroll in so far as it was to the effect that they were merely being asked to sign documents which would serve as replacements for documents which were said to have been lost. I am inclined to think that the Gonsalves, especially Mrs Gonsalves, feel that they were badly treated by Link Solutions, Clear Telecoms and Quikfund and that they (the Gonsalves) have seen fit to engage in a significant amount of reconstruction and embellishment. It is apparent that they adopted a position (to the effect described) in both pleadings and affidavits filed in the proceedings brought against Airmark and Mr Gonsalves long before Quikfund produced the audio recording of the conversation with Ms Paul. 157 As previously mentioned, there are two invoices issued by Select Telecoms to Quikfund dated 13 January 2009. The first of these (no 24473), which is that which includes the 6 Nokia N73 mobile phones, includes an amount of $6,000 for installation, delivery and training. The evidence does not allow me to undertake a price comparison for every item of equipment that was sold to Quikfund and rented to Airmark. However, there is evidence from which I infer that the equipment supplied to Airmark was sold to Quikfund at highly inflated prices. I set out in the following table a comparison of the invoiced price of some of the equipment sold to Quikfund and what was, at relevant times, the price at which such equipment could be obtained through well known retail outlets: Equipment Invoice Price Retail Price 6 x N73 Nokia Mobiles $12,376 $2,874 1 x HP 6515 Laptop $3,200 $899 4 x DX 7400 Desktop Computers and 4 x 19" LCD Monitors $15,838 $4,788 2 x Blackberry Curves $3,650 $1,596

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158 Although I am satisfied the equipment referred to in the relevant invoice was delivered to Airmark, I am also satisfied that no installation or training was provided. The total value of this invoice (no 24473) including the amount of $6,000 is $43,852.78 (exclusive of GST). Hence, the rental agreement (which makes no reference to delivery, installation or training) is calculated on the basis of an invoice that charges highly inflated amounts for the equipment which was supplied to Airmark and installation and training services that I am satisfied were never supplied. 159 The position is similar for the second of the invoices (no 24474) dated 13 January 2009. According to the evidence, a 19" LCD monitor could be purchased at well known retail outlets for $298. This invoice included nineteen 19" LCD monitors at a total cost (exclusive of GST) of $17,657.99. The cost of the same monitors through well known retail outlets would have been $5,662 (exclusive of GST). In the case of this invoice, an additional charge of $5,000 was included for installation and delivery. 160 Attached to Mrs Gonsalves' affidavit were two bills from Clear Telecoms to Airmark for the months of August 2008 and July 2009. The first of these bills, the August 2008 bill, is for the amount of $2,487.76. The second, the July 2009 bill, is for $2,037.56. In her affidavit Mrs Gonsalves said that she did not include Clear Telecoms' bills for the months of September 2008 to June 2009 because there was over 350 pages of material. No objection was taken to this evidence nor was she cross-examined in relation to it. In particular, it was not suggested to Mrs Gonsalves that the Clear Telecom bills were not representative of Clear Telecom's billings both before and after Airmark commenced renting equipment from Quikfund in September 2008. 161 The evidence also includes copies of various bank statements in respect of Airmark's account with the Commonwealth Bank issued in the period 3 December 2008 to 29 October 2009. These show that from December 2008 to October 2009, a monthly direct debit of $550 was paid to Quikfund each month. They also show that beginning in January 2009, running through to October 2009, two additional direct debits, one for $706.20, and one for $1,232.00 were debited and paid to Quikfund each month. Thus, between January 2009 and October 2009, direct debits totalling $2,488.20 were paid each month to Quikfund out of Airmark's account. 162 At the same time as these direct debits were being paid to Quikfund, substantial amounts were, I infer, also being paid by Airmark to Clear Telecoms for telephone services. The bank statements in evidence (which are incomplete) show the following payments were made to Clear Telecoms: 20 March 2009 $1,616.15 20 April 2009 $2,166.70 20 May 2009 $1,950.28 21 July 2009 $2,009.50 20 August 2009 $2,037.56 21 October 2009 $1,851.87

[23]

Airmark and Mr Gonsalves' defences 165 It was contended by Airmark and Mr Gonsalves that, so far as the first of the rental agreements relied upon by Quikfund is concerned, no binding rental agreement came into existence as between Airmark and Quikfund because: first, the rental agreement signed by Mr Gonsalves on behalf of Airmark and on his own behalf was blank; second, Mr Gonsalves did not read the whole of the rental agreement signed by him, including, in particular, various printed terms and conditions. 166 There is no substance to either argument. By signing the rental agreement in blank, Mr Gonsalves should be taken to have authorised its completion in accordance with later discussions between Mr Rizcallah and Mrs Gonsalves. The fact that Mr Gonsalves may not have read the document signed by him closely, or at all, did not detract from its effect as a written offer which Mr Gonsalves left to others to complete prior to acceptance by Quikfund. 167 It was not contended by Airmark and Mr Gonsalves, that the rental agreement signed by him in August 2008 was incapable of giving rise to an offer open for acceptance by Quikfund by reason of any misrepresentation said to have been made by Mr Rizcallah. Nor was it contended that any agreement that came into existence as a result of Quikfund's acceptance of any such offer had been rescinded by Airmark. 168 So far as the other two rental agreements relied upon by Quikfund are concerned, Airmark's and Mr Gonsalves' case raises what are, in substance, allegations of fraud against Mr Rizcallah. These allegations are most clearly asserted in various paragraphs of the cross-claims which I refer to below. In substance, Airmark and Mr Gonsalves assert that Mr Rizcallah sought and obtained Mr Gonsalves' signature on blank forms upon the strength of a representation that the forms would be used as replacements for lost documents whereas it was Mr Rizcallah's intention to use them for a different (fraudulent) purpose. Implicit in this is an allegation that Mr Gonsalves never gave his authority to Mr Rizcallah or anyone else to complete these rental agreements for that different (fraudulent) purpose.

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The misrepresentation case 170 The misrepresentation allegations fall into two categories. The first (the para 17 allegations) relate to Mr Gonsalves' dealings with Mr Rizcallah in August 2008, while the second (the para 22 allegations) relate to Mr and Mrs Gonsalves' dealings with Mr Rizcallah and Mr Carroll in November 2008. 171 The para 17 allegations specify representations alleged to have been made by Mr Rizcallah to Mr Gonsalves on or about 6 August 2008. Paragraph 17 asserts: Prior to: (a) the signing of the Quikfund rental agreement by Airmark and Mark Gonsalves (the latter as guarantor) on or about 6 August 2008; and (b) to that rental agreement (to the extent that it was an application for rental) being accepted by Quikfund on or about 2 September 2008 Rizcallah made representations to Airmark and Mark Gonsalves to the following effect: (c) What was being offered was a single package or deal comprising equipment and telephony services; (d) The monthly cost of the package would be about half of the monthly cost of payments on Airmark's existing telephony services agreement; (e) the equipment that Airmark would receive as part of its package would be free; (f) The telephony services would be supplied by way of 'call credits', which would 'go towards' the free equipment; (g) The reason free equipment could be supplied as part of the offer was that Link Solutions purchased telephone air time at cheap wholesale rates from Telstra; (h) The equipment that Airmark would receive was a bonus for signing up (this representation was made to Dolores Gonsalves, a director of Airmark and wife of Mark Gonsalves); and also (i) did not mention any rental of any equipment and did not mention Quikfund. According to para 19 of the cross-claims the representations were misrepresentations, and constituted conduct that was misleading or deceptive for the purposes of s 52 of the TP Act and s 12DA of the ASIC Act. 172 The para 22 allegations raise serious allegations against Mr Rizcallah. Paragraphs 22-28 of the cross-claims assert: 22. In or about November 2008, Rizcallah told Airmark (and, in particular, Dolores Gonsalves, a director of Airmark and the wife of Mark Gonsalves) that: (a) because Link Solutions had lost the forms that they had signed on or about 6 August 2008, Airmark would need to sign some new forms in respect of the deal they had already agreed to accept. (b) If Airmark did not sign the new forms, Airmark might lose its phone connection. 23. On or about 18 December 2008, Mark Carroll attended the premises of Airmark and said he had been sent by Joe Rizcallah to obtain the signatures of Airmark and Mark Gonsalves on the forms that Joe Rizcallah had referred to in his November 2008 telephone conversation with Dolores Gonsalves. 24. Relying on the representations of Joe Rizcallah referred to in paragraphs 17 and 22 above, Airmark and Mark Gonsalves signed (the latter as guarantor) the signature pages of the two Quikfund Tax Invoice and Rental Schedule forms and two Quikfund direct debit request forms that are referred to in paragraph 8 above. 25. The representations of Joe Rizcallah referred to in paragraph 22 above were misrepresentations and further, or in the alternative, were conduct that was misleading or deceptive for the purposes of s.52 of the TPA and s. 12DA of the ASIC Act because: (a) The forms signed on or about 6 August 2008 had not in fact been lost; (b) The new forms that Rizcallah wished Airmark and Mark Gonsalves to sign (and which Mark Carroll provided to Airmark and Mark Gonsalves to sign) were not forms in relation to the deal that Airmak [sic] had already agreed to or in respect of the equipment it had already agreed to receive; (c) It was the intention of Rizcallah or his principal to use the new Quikfund forms signed by Airmark and Mark Gonsalves to record (what were purported on those forms to be) two new agreements between Quikfund and Airmark, for the rental of two new sets of equipment. Particulars After Airmark and Mark Gonsalves signed the two new sets of Quikfund documents and after they were taken away by Carroll, the balance of those otherwise blank agreements was completed by someone other than Airmark and Mark Gonsalves so as to appear to record: (a) An agreement for rental of 8 Nokia mobile phones, 1 HP laptop, 4 desktop computers, 4 x 19"LCD monitors, 2 blackberry mobiles, the rental payment being $1232 per month including GST; (b) An agreement for the rental of 19 x 19" inch LCD monitors and a colour copier, the rental payment being $706.20 per month including GST. 26. None of the goods ultimately referred to in the Quikfund Tax Invoice and Rental Schedule documents that were signed by Airmark and Mark Gonsalves on or about 18 December 2008 were delivered to Airmark. 27. Quikfund has commenced against Airmark and Mark Gonsalves another set of proceedings (i.e., not the present proceedings) (Federal Court Proceedings NSD 1206) for debt or loss (including under alleged guarantees of Mark Gonsalves) by reason of what Quikfund alleges is the breach of one of the two rental agreements and associated guarantees of Mark Gonsalves referred to in paragraph 24 above. 28. To the extent that any of rental agreements relied on by Quikfund in the present proceedings or in Federal Court Proceedings NSD 1206 are enforceable and to the extent that Airmark is liable to pay Quikfund any sum by reason of any of the rental agreements, any such liability is a loss to Airmark caused by that conduct of Rizcallah (paragraphs 17 and 22 above) that amounted to misrepresentation and further, or in the alternative, was misleading or deceptive conduct for the purposes of s.52 of the TPA. 173 Paragraph 28 is significant for present purposes. It plainly alleges that the loss and damage suffered by Airmark as a result of entering into any of the rental agreements (assuming them to be enforceable) was caused by (inter alia) the misrepresentations alleged to have been made by Mr Rizcallah to the Gonsalves in August 2008.

[27]

What representations were made to the Gonsalves? 175 I do not regard Mrs Gonsalves' account of her conversation with Mr Rizcallah in August 2008 as wholly reliable. I think she has engaged in a significant amount of reconstruction so I certainly am not persuaded that I should accept all that she has said about her dealings with Mr Rizcallah in August 2008. Further, in light of the evidence of Mr Gonsalves' conversation with Ms Paul, I am not prepared to accept either Mrs Gonsalves' or Mr Gonsalves' evidence concerning their conversations with Mr Rizcallah and Mr Carroll in November and December 2008 or their evidence to the effect that the equipment referred to in the second and third rental agreements was never received by Airmark. 176 However, it does not follow that I do not accept any of Mrs Gonsalves' or Mr Gonsalves' evidence. On the contrary, there are important parts of their evidence that ring true and which I do accept after making allowance for some exaggeration and embellishment by Mrs Gonsalves. In particular, I accept Mrs Gonsalves' evidence to the effect that Mr Rizcallah told Mr and Mrs Gonsalves at their meeting in August 2008 that communications, audio-visual and office equipment could be obtained by Airmark from Link Solutions at no additional cost beyond what Airmark would have to pay to Clear Telecoms in respect of telephony services. This is what I understood Mrs Gonsalves to mean when she referred to "free equipment". It is an expression which I am satisfied Mr Rizcallah is likely to have used in his discussions with the Gonsalves. I think it more likely than not that Mr Rizcallah explained to the Gonsalves that if Airmark "signed up" it would receive free equipment - free in the sense that it would not cost Airmark anything after allowing for "credits" or "points" that would be available to pay any charges that might otherwise have been payable in respect of such equipment. 177 Further, I am satisfied that the Gonsalves were induced by these representations to cause Airmark to enter into the rental agreement which Mr Gonsalves signed in August 2008. I do not see what advantage they would have seen in entering into the rental agreement but for the enticement of what Mr Rizcallah described as "free equipment". 178 The position in relation to the second and third rental agreements is more complicated because the Gonsalves have, in my view, given a false account of the circumstances in which those agreements came to be signed. But the fact that the second and third rental agreements were signed in blank strongly suggests to me that they did so in the expectation that Airmark would receive yet more "free equipment". Again, I do not see what advantage Mr and Mrs Gonsalves would have seen in signing these rental agreements but for the enticement of "free equipment". 179 It was not suggested by the Gonsalves in their evidence that the same representation as that which I have found was made to them in August 2008 was made to them again in December 2008. However, in my view it is more probable than not that the representation first made by Mr Rizcallah in August 2008 induced them to enter into the further agreements. I say this in circumstances where I am satisfied that they were never made aware of the purchase prices of any of the equipment they rented from Quikfund, and where Mr Gonsalves signed the Second Understanding Document, which was to substantially the same effect as that which he had signed in Mr Rizcallah's presence in August 2008.

[29]

Who was the supplier? 181 In the case of the first rental agreement the supplier of the equipment was either Link Solutions or Sonofon. The conversation between the Gonsalves and Mr Rizcallah suggests that Link Solutions was the supplier of the equipment the subject of the rental agreement signed in August 2008. However, the Understanding Document suggests otherwise, as does the invoice issued by Sonofon to Quikfund on 2 September 2008. That invoice contains a reservation of title (Romalpa) clause in favour of Sonofon. However, even if Sonofon was the actual supplier of this equipment, it is clear that Link Solutions (by whom Mr Rizcallah was most likely employed) was the corporation that caused the relevant equipment to be supplied to Quikfund so that it could in turn hire such equipment to Airmark. On this view of the facts, s 73(1)(a) of the TP Act can apply to either Sonofon (if it is the actual supplier) or Link Solutions (on the basis that it arranged the supply). Even if it is assumed that Mr Rizcallah was authorised to represent Link Solutions but not Sonofon (which I think is unlikely) then s 73 still applies to Link Solutions on the basis that it was the corporation that arranged for the supply of the equipment to Quikfund. 182 In determining which company supplied the equipment to Quikfund in the case of the two rental agreements witnessed by Mr Carroll, I have taken into account the recorded conversation between Ms Paul and Mr Gonsalves in which Ms Paul claimed to be representing Quikfund. I am satisfied that she was, at the time she had her conversation with Mr Gonsalves, representing Quikfund and that she was authorised to speak on its behalf. In her conversation with Mr Gonsalves, Ms Paul made statements that clearly indicate that Link Solutions was the supplier. Why Select Telecoms came to invoice Quikfund for the equipment was never satisfactorily explained in the evidence. However, in light of the very clear admissions made by Ms Paul, I am satisfied that Link Solutions was the supplier of the equipment the subject of the two rental agreements witnessed by Mr Carroll. And even if (contrary to my finding) Link Solutions was not the supplier, then it was, at the least, a corporation that caused the relevant equipment to be supplied to Quikfund.

[32]

The s 73(3)(b) defence 186 Evidence was given by Mr Charbel Rizk in support of a defence under s 73(3)(b) of the TP Act which was relied upon in all three proceedings. Mr Rizk is a director of both Quikfund and EFS. Mr Rizk gave evidence that there were a number of companies that forwarded "finance applications" to Quikfund and EFS. In June 2007 these included Link Solutions, Sonofon, Oryzon Pty Ltd (which later changed its name to Select Telecoms Pty Ltd) and QCC. 187 Mr Rizk said that in June 2007 he received a report from Mr Stavros Athanasiou dated 29 June 2007. He claimed to have relied upon this report for the purposes of forming a view as to the financial standing of the relevant businesses. In his affidavit Mr Rizk said: 9. I recall reading the report on or about the time I received it. I recall I formed the view at the time that the businesses referred to in the report had, in my view, had good financial standing and as a result I did not doubt that any of the companies could not meet any of their liabilities. 10. I had no doubts about the financial standing of any of the businesses referred to in the report until about April or May 2009. I was aware from about July 2007 to April 2009 the businesses known to me as Link Solutions Pty Limited, Sonofon Pty Limited, Oryzon Pty Limited (which had changed it [sic] name to Select Telecoms Pty Limited) and Queensland Communications Company Pty Limited had referred some applications for rental finance to Quikfund and on occasions to EFS. 188 There is a fundamental difficulty with Mr Rizk's evidence in so far as it is relied upon to support a defence based upon s 73(3)(b). To make good such a defence, the credit provider must establish that before becoming a linked credit provider, it "was satisfied that the reputation of the supplier in respect of the supplier's financial standing and business conduct was good". Whatever might be said of the financial standing of the relevant companies, it is not apparent to me that Mr Rizk turned his mind to the reputation of any of the companies in terms of their "business conduct" with a view to forming a view as to whether it was good or bad or somewhere in between. 189 Mr Athanasiou's report indicates that it was prepared for the purposes of assessing the financial position of various businesses including, in particular, their solvency. Beyond this, his report is best described as a risk assessment. Indeed, it is entitled "Quikfund Fair Trading (trade practices) Compliance Risk Assessment". 190 The nature of Mr Athanasiou's report may be gleaned from both its introduction and conclusion, which are in the following terms: Introduction The purpose of this risk assessment is to inform the development of compliance procedures for a number of equipment lease originators to Quikfund. In particular we have sought to provide a risk based framework for process, training and accountability arrangements and to assist in the general awareness and management of fair trading and antitrust and associated business risks across the Australian operations. As we understand it Quikfund intends to acquire leases originated from a number of newly aggregated companies, said companies having acquired businesses from other entities with the businesses to be run by the same management. Each of the entities has run its business relatively independently to date albeit with similar business, product and go to market arrangements. During our review we visited several businesses - Fuszion, Link QCC, Telecom 1 Sonofon, Axsiom Victoria and Asxiom. We interviewed staff in those businesses, received sales calls and sales presentations and examined procedures for sales, controls, complaints handling and fulfilment arrangements. … Conclusion It is apparent that some trade practices and fair trading risks exist for the finance originators in the day to day operations and management of their business. We note that this risk assessment cannot be taken in isolation from the broader risk management processes and operating standards of Quikfund. When managed within the proposed compliance program we believe these risks and critical risk points should fall within the risk appetite of the company. In some cases new procedures, systems and controls may be required. In others it will be necessary to strengthen existing systems. When managed effectively using compliance systems and related effective management arrangements - typified by standard business practices and controls - the company should be able to conduct its business within the risk appetite of the organisation. It is important to note that all of the sales entities had compliance programs in place and that reasonable processes are in place to avoid situations where sales have been made on basis of false or misleading representations, the key risk to Quikfund. Given these compliance programs minimal risk resides with Quikfund resulting from the leases originated by the sales entities the subject of this review. (emphasis added) 191 Mr Athanasiou, who also gave evidence, was not a witness whose evidence I found helpful, principally because I did not consider his evidence to be reliable. His evidence, like his report, was expressed in general terms that told me very little about the nature of the businesses he claimed to have investigated. However, one matter of particular interest that arose out of his oral evidence concerned the matter of "free equipment". In the course of his cross-examination Mr Athanasiou referred to "free equipment". The evidence (T 50-51) was as follows: MR CROSSLAND: But what you're talking about here is these post sale processes is that you wanted to processes up [sic] or the businesses should set processes up that stopped people and made it difficult for them to say they had been misled. That's what that sentence is about?---No, no, no. That's not what it's about at all. What it's about is that there are sufficient controls in place (a) to make sure that should people deviate from the standard training and presentation rules of the company. There is something there to ensure that it's caught before it goes further. One of the consistent principles that has existed within this business, businesses, is that you don't represent that equipment is free, for example, so - - - HIS HONOUR: Sorry, can I just ask you this: why are you referring to that representation?---Well, because it's a specific one that has come up over a number of years, your Honour. But were you aware of that at the time you made this report?---I was aware of it as being a possible issue since 2003. I see, that people were being told that they were being supplied equipment for free?---Or the people had formed a view that it was free. Is that dealt with anywhere in here?---In the report, no, your Honour, specifically no. But that was a particular problem that you saw in relation to these companies, was it?---It was a particular - it was something that I had been aware of as being a view that some customers had taken for some time. And did you tell the gentleman who retained you to prepare the report?---I felt that - I felt that I didn't need to tell him because the practice of voice recording had been in existence for some time prior to my writing the report. Does voice recording [sic] at the time people are being signed up to contracts or subsequently?---Prior to the installation of the equipment. I see?---So, in essence, before the equipment gets installed and they start paying for it, say, "Hi, it's me, I'm coming out to install it" gets recorded. "Hi, we're about to start deducting payments" it gets recorded. MR CROSSLAND: Are you saying that you know that Mr Rizk was well aware that there was a risk - that in the course of doing business, these businesses would represent to people that the equipment was free?---No, I didn't say that at all. HIS HONOUR: No, I don't think he did say that. I think in fairness to the witness he said, as I understood his evidence, that people had claimed that such representation had been made to them. Is that right?---That's correct, your Honour. All right, thank you. MR CROSSLAND: So you say you don't know whether Mr Rizk knew that or not?---No, I don't know whether Mr Rizk knew that or not. (emphasis added) 192 It is important to make clear that Mr Athanasiou was speaking about his understanding as at July 2007 when he prepared his report, which was well before the Harrisons or the Gonsalves had anything to do with QCC and Link Solutions. This suggests that they were not the first people to complain about offers of free equipment. 193 In the result, I am not persuaded that either Quikfund or EFS, through Mr Rizk or otherwise, was satisfied, before becoming a linked credit provider to the businesses or companies referred to in Mr Athanasiou's report, that any such business or company, had a good reputation in terms of business conduct.

[37]

The Contracts Review Act 1980 (NSW) 202 It remains to consider the claim for relief under the Contracts Review Act made by Mr Gonsalves in relation to the guarantees given by him in respect of Airmark's obligations under the three rental agreements it entered into with Quikfund. I have already set out relevant provisions of the Contracts Review Act and summarised (at para [98] above) in connection with the Harrisons' case some of the matters referred to in s 9(2) of the Contracts Review Act that I also regard as particularly significant in the context of Mr Gonsalves' case. However, I have had regard to all matters referred to in s 9(2) of the Contracts Review Act to the extent they may be relevant. 203 In Mr Gonsalves' case I find that each of the contracts of guarantee and indemnity was unjust in the circumstances relating to such contract at the time it was made. My reasons for so finding may be briefly stated. 204 First, Mr Gonsalves was induced to sign the guarantees by Mr Rizcallah's misrepresentation. If it were not for that misrepresentation, I am satisfied that Mr Gonsalves would not have given any of the guarantees he gave to Quikfund. 205 Secondly, the invoice price of the equipment the subject of the rental agreements guaranteed by Mr Gonsalves substantially exceeded the retail value of the goods concerned. The value of the equipment was significant so far as Mr Gonsalves' guarantees were concerned, because it directly impacted upon whether, and if so to what extent, any of his guarantees might be called upon in the event of a default by Airmark. 206 Thirdly, the invoice price of the equipment was never disclosed to Airmark or Mr Gonsalves by the equipment supplier's representatives, including Ms Paul in the telephone conversation which she had with Mr Gonsalves on Quikfund's behalf. At no other stage did Quikfund confirm with Mr Gonsalves what his understanding was as to the invoice price of the equipment being financed by Quikfund. Mr Gonsalves never inquired about the price of the equipment or the amount being financed by Quikfund because, I infer, he had been led to believe that it was "free" in the sense previously discussed. 207 Fourthly, at Mr Rizcallah's request, the rental agreements, at the time they were signed by Mr Gonsalves, were left blank in significant parts, including those parts that provided for the description of the equipment to be rented, and the monthly rental charges. Further, the rental agreements did not include any statement of the total amounts to be financed by Quikfund or the interest rates that were being charged by it. I consider this was a feature of the form of agreement used by Quikfund that would have worked to Mr Rizcallah's advantage in the deception of Mr Gonsalves. 208 Quikfund made a similar submission in relation to Mr Gonsalves' claim for relief as that which was put on behalf of AER and EFS based upon s 6(2) of the Contract Review Act. Again, in the case of Mr Gonsalves, there is nothing to suggest that he was carrying on a business in his own right. 209 I am satisfied that there should be a declaration that each of the guarantees and indemnities given by Mr Gonsalves to Quikfund is void with effect from the time it was made.

Enterprise Finance Solutions Pty Limited v Austec Pty Limited

At a glance

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Judgment (39 paragraphs)

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Legislation Cited (7)

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