Law v MCI Technologies Pty Ltd [2006] VCAT 415

Law v MCI Technologies Pty Ltd [2006] VCAT 415 - VCAT 2006 case summary — Zoe

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The documents served included a notice that a hearing would be held on 9 February 2006.

9 By letter dated 16 January 2006 Mr Peter Ellis, Resolutions Manager of MCI, wrote to the tribunal, attaching detailed evidentiary material addressing the claim. In the covering letter Mr Ellis stated that MCI was unable to attend the hearing due to "geographical restrictions, jurisdictional issues and the fact that we have no video conferencing facilities available". Accordingly he applied to be represented at the hearing by a telephone hook-up. The reference to jurisdictional issues was explained in the attached material. In essence it turned on a clause, said to be contained in a licence agreement for the Star Trader software package, that the licence was governed exclusively by the laws of Queensland. It is necessary that I deal with this matter in more detail; and I do so later.

10 On 18 January 2006 Deputy President Levine considered the request to have a hearing by telephone and refused the request. In his (in chambers) order Deputy President Levine noted that he relied upon the nature and value of the claim in forming the view that a hearing by telephone or video conference was not appropriate.

11 On 24 January 2006 Mr Ellis wrote to me, as president of the tribunal, effectively asking me to overturn the procedural order made by Deputy President Levine. I decided not to intervene. In the first instance I doubt whether I would have had the power to have intervened in the circumstances. But, second, I agreed that the matter was not well suited to a telephone hearing; and that it was preferable to conduct an oral hearing in the normal fashion. There were several reasons for this view. First, there was a potential conflict in relation to matters of fact, which would have been more difficult to determine if one party was participating by telephone. Second, the jurisdictional issues that had been raised by MCI were of general importance. Third, it was likely that this was not a one-off circumstance in which MCI was supplying goods in Victoria to residents of Victoria; hence it was not unreasonable that MCI attend in Victoria to contest the case. I stress that the conduct of a hearing where one party appears by telephone can be problematic, especially when issues of credibility arise. MCI was informed of the fact that I did not intend to intervene or override the procedural order made by Deputy President Levine in two ways. First it was sent a letter to that effect on 1 February 2006 via facsimile transmission. Second, the same letter was forwarded by post that day.

12 On 8 February 2006 MCI informed the tribunal that it did not intend to be represented at the hearing the following day.

13 The hearing proceeded on 9 February 2006 with Mrs Law being sworn and giving evidence about the transaction. At about 10:30am this hearing was adjourned to enable Mrs Law to read the response lodged by MCI (with its letter dated 16 January 2006). At 11:30am the hearing resumed and Mrs Law gave further evidence and made submissions in relation to that material. In both instances I asked her a series of questions in order to elicit her evidence. At about 11:45am I instructed my associate to ring Mr Ellis so that, if he was available, he could add to his written material, if he wished. Unfortunately he was unavailable and the telephone call only elicited an automatic voice recording.

14 Although MCI was not represented at the hearing, notwithstanding having had a reasonable and full opportunity to do so, it is appropriate that I have full regard to the material lodged under cover of the letter dated 16 January 2006. Indeed, the factual findings I make draw on that material.

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15 At about 9:50am on 9 June 2005 Mrs Law received a telemarketing call from a salesperson acting on behalf of MCI. That phone call was short, but led to a call later in the day at about 4:38pm. It is likely that Mrs Law requested the telemarketer to ring back later as she was busy. In the phone call on the afternoon of 9 June 2005 the salesperson - most likely a person named "Alan" - spent about half an hour explaining the virtues of the Star Trader program. He explained to Mrs Law that the software was easy to use, involved only 7 to 20 minutes per day on average to operate and could produce substantial profits. He explained that the regular price of the software was $8,900; but he could offer it to Mrs Law for a down payment of $5,900 (with the balance only payable if Mrs Law made a profit of more than $30,000 in the first 12 months of using the software).

16 Mrs Law gave evidence to the tribunal that she did not initiate the first call made to her. Indeed, she told the tribunal that she did not initiate any calls to MCI. In its written submission, MCI stated that, generally, its first contact with a potential customer arises in response to junk mail or a mail out, unless MCI has heard about a respondent by other means, such as word of mouth or newspaper advertisement. Mr Ellis of MCI says that, in the present case, Mrs Law was "referred to the company" and received a call as a result. I accept the evidence given by Mrs Law that she did not initiate the contact, but was contacted by MCI as part of a telemarketing campaign. It is unnecessary to decide how MCI targeted Mrs Law - and what may have been the precise form of "referral". The significant finding is that Mrs Law did not initiate the telemarketing call in any way.

17 After the initial sales pitch in the afternoon call on 9 June 2005 a further call was made by MCI to Mrs Law on 10 June 2005. On this occasion Mrs Law said that she had not made any decision about purchasing the software and would be away until 15 June 2005. She suggested that MCI call back at that time. On 15 June 2005 MCI phoned Mrs Law and offered to provide detailed written information about the Star Trader software. Mrs Law agreed to receive such information and this was forwarded on that day.

18 The letter dated 15 June 2005 from MCI explained that the retail price of the Star Trader software was $8,900. It also explained that Mrs Law could buy the software for $5,900; but that this offer was strictly limited and only lasted seven days. The letter outlined that the Star Trader package involved software on a CD ROM, a user manual and various other ancillary documents. The letter also explained that, at an additional cost of $42.90 per month, Mrs Law could obtain daily prices of shares to be used in conjunction with the Star Trader software. (As a practical matter, I suspect that it would be burdensome to operate the Star Trader software without the electronic delivery of daily stock prices). The letter concluded by asking Mrs Law to contact MCI "about our amazing product".

19 MCI also sent another letter to Mrs Law, also dated 15 June 2005, that provided assistance in relation to certain taxation matters that would arise if the Star Trader program was purchased and used. One aspect of this letter was to the effect that the cost of the Star Trader software program may be tax deductible expenditure.

20 On 17 June 2005 MCI contacted Mrs Law once again, ostensibly to see if the letter had arrived. On this occasion Mrs Law told MCI that she had made no decision, as she wished to talk to her husband.

21 On 21 June 2005 Mrs Law was contacted by MCI yet again. On this occasion Mrs Law clearly stated to MCI that she was not interested in purchasing the Star Trader program.

22 On 1 August 2005 another sales team within MCI initiated telephone contact with Mrs Law. It is likely that this sales team had been provided with a list of persons who had shown some interest in the Star Trader software, but who had decided not to purchase the software. On this occasion the MCI salesperson once again talked up the virtues of the share trading program. The MCI salesperson - a woman - said that she, too, had young children and she wished that she had known about Star Trader when she was still at home. This sales representative explained that there was a further "special offer" in relation to the Star Trader software. The special offer was that, although the recommended retail price of the Star Trader package was $8,900, Mrs Law could purchase the software for a $3,000 down payment, with the balance only payable if she made more than $30,000 in her first year of trading. The salesperson explained that this "special offer" was limited to the first 100 clients to accept the offer. On this occasion it is likely that Mrs Law expressed some interest in the software, but did not make any commitment to purchase the software.

23 Also on 1 August 2005 the customer service team of MCI forwarded a letter to Mrs Law further explaining its revised "special offer" of $3,000.

24 It is possible that on 2 August 2005 a salesperson with MCI called Mrs Law to follow up the matter; but I make no finding to this effect.

25 On 3 August 2005 the MCI salesperson called Mrs Law yet again. On this occasion the salesperson explained that the "special offer" was due to expire and that the purchase needed to be made on that day. On this occasion Mrs Law stated that she would accept the offer, notwithstanding that her husband was against it, and provided credit card details to pay for the software.

26 By letter dated 4 August 2005 MCI congratulated Mrs Law on her decision to purchase the Star Trader program. The letter enclosed the software on a CD ROM, a manual and other ancillary documents. There was also enclosed a short book on charting share prices.[4] Also enclosed with the letter was a tax invoice in the sum of $3,000, together with a credit card receipt.

27 One of the documents received with the software was a document called a "license agreement" [sic]. This document commenced by stating that:

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Section 109(2) sets out a range of considerations that the tribunal may have regard to in determining whether a term of a contract is unjust. The section defines what is meant by a "consumer dispute" and a "trader-trader dispute".[12] Essentially a consumer dispute means a dispute relating to the supply of goods or services to a consumer, without any monetary limit; whereas a "trader-trader dispute" is a dispute in relation to the supply of goods or services in trade or commerce, but this is limited to disputes that involve a sum not exceeding $10,000.[13]

39 The powers available to the tribunal under section 108(2) and 109(1) are extremely broad. In giving the tribunal such broad powers, the Parliament should be taken as intending that in determining a consumer and trader dispute, a consumer dispute, or a trader-trader dispute (as the case may be), the tribunal should be able to make orders that are fair in all the circumstances. In determining what is fair in all the circumstances the tribunal will be guided by, but not confined to, provisions of the FTA which identify unfair practices or regulate trading practices.

40 In relation to a "consumer dispute" and a "trader-trader dispute" the fact that the tribunal has a specific power to "make any order it considers fair" indicates that, in determining this type of dispute, the tribunal is not bound by the principles of the common law or by statutory provisions; although such principles and provisions may provide guidance. In relation to a "consumer and trader dispute" that is not a "consumer dispute" or a "trader-trader" dispute, the position is less clear. But the range of powers available to the tribunal under section 108(2) of the FTA - including the power to vary any term of a contract and to order a refund of any money paid under a contract - may mean that it is Parliament's intent that such a dispute also be determined by reference to the general principle of fairness.

41 Neither section 108 nor 109 is a procedural provision of the type considered by the Full Court of the Supreme Court of Victoria in Walsh v Palladium Car Park Pty Ltd.[14] Rather these sections seek to overlay the common law (and actions based on contravention of statute) with substantive principles - based on fairness - pursuant to which certain disputes may be resolved.

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42 As I have explained, VCAT has jurisdiction under two different sections of the FTA. The jurisdiction under section 159 of the FTA is to hear and determine actions for damages as a result of a contravention of a provision of the FTA. The jurisdiction under section 108 of the FTA is to hear and determine a "consumer and trader" dispute.

43 The FTA is a law enacted by the Parliament of Victoria. Section 6 of the FTA provides that the Act applies "within and outside Victoria"; and that it applies outside Victoria "to the full extent of the extra-territorial legislative power of the Parliament". This may mean that the FTA only operates in relation to subject-matter that has a relevant connection with Victoria, although the extent of the connection is to be considered liberally.[15] Thus it is unlikely that the (Victorian) FTA would have application to the supply of goods or services where this is exclusively a Queensland transaction: that is, both the supplier and the purchaser of the goods or services are resident in Queensland and where the supply occurs in Queensland. However where the supply, or possible supply, of goods or services occurs, or is proposed to occur, in Victoria, the (Victorian) FTA applies to any dispute or claim arising in relation to such a supply or possible supply. The Victorian Parliament may pass a law regulating the supply of goods to Victorian purchasers - at least where the goods are supplied in Victoria - whether the supplier is resident in Victoria or not.

44 The jurisdiction of VCAT to hear an action for damages under section 159 of the FTA, or to hear and determine a consumer and trader dispute, does not depend upon the existence of a contract. The word "contract" does not appear in section 159; nor does it appear in section 107 of the FTA. Rather it turns on whether there has been a contravention of the FTA or a supply of goods or services in Victoria. Hence VCAT's jurisdiction cannot depend upon the place in which a contract is made, or a provision in a contract that the contract is formed in a particular location, or that a named jurisdiction is to be the exclusive jurisdiction for determining disputes under the contract.

45 In Oubani v MCI Technologies Pty Ltd[16] Master Harrison of the New South Wales Supreme Court dealt with this question in the context of the Consumer Claims Act 1998 (NSW). The Supreme Court proceeding concerned a dispute which had been before the New South Wales Consumer, Trader and Tenancy Tribunal concerning the purchase of the software program "Blue Chip Trader" for $5,900 from MCI. Oubani, who was aged 17 years at the time of the purchase, changed his mind after receiving the software and sought a refund. MCI submitted that the Consumer, Trader and Tenancy Tribunal did not have jurisdiction to determine that matter, as the relevant contract provided that Queensland courts had exclusive jurisdiction. In order to determine this jurisdictional issue Master Harrison had to consider the definition of the term "consumer claim" in the relevant New South Wales legislation, which provided (relevantly) that a consumer claim means:

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57 Having considered all the evidence, I conclude that it is fair that the transaction between Mrs Law and MCI be reversed: that is, that the money be refunded and the goods returned.

58 The nature of the transaction between the parties was such that it had many similarities to a telephone marketing agreement as defined in section 67A of the FTA. Hence the de facto imposition of a cooling off period - during which time the purchaser may change their mind - might be thought to be appropriate as a matter of fairness in trade and commerce in the context of a purchase made after a cold call to a domestic customer. But this is not the only reason for my conclusion.

59 It is relevant that the purchase made by Mrs Law on 3 August 2005 was not just the result of an unprompted telephone call, but followed eight such calls. Some of these repeat calls were justified, as Mrs Law sought further information and expressed interest in the share trading software. But in determining whether it is fair for a purchaser to change their mind and obtain a refund one relevant factor will be the extent to which the supplier hounded them or, to put it more kindly, seduced them into submission. It needs to be emphasised that Mrs Law emphatically rejected the initial advance made by MCI - yet MCI came back and had a second try. The facts have some of the elements of wearing down the customer.

60 A further relevant factor is the selling strategy that was adopted by MCI. The first part of this strategy was to maintain that the price of the software was $8,900, whereas it could be purchased with a down payment of only $5,900. The "special" nature of the offer was underscored by a statement in the MCI letter of 15 June 2005 that the offer was "strictly limited" and would only last seven days. Both of these propositions seem inherently unlikely.[25] The subsequent offer made to Mrs Law - to the effect that the software could be bought with a down payment of $3,000 - further demonstrates that the initial offer which was "strictly limited" and "only lasted seven days" was neither of these things. In turn, the revised "special offer" of $3,000 was said to be available only to the first 100 purchasers. Further, when she was called on 3 August 2005 Mrs Law was told that this special offer would expire on that day. Whether or not this strategy amounts to a high pressure strategy is unnecessary to determine. However I have no doubt that the strategy was intended to, and did, build pressure on Mrs Law to agree to purchase the software. Further, I find that the strategy was disingenuous. Neither of the offers were truly limited in the way MCI represented.

61 A further relevant factor in forming my conclusion is the short time that passed between the receipt of the software and Mrs Law indicating that she wished to seek a refund. Further, during this time, I find that Mrs Law did not use the software. The essential nature of the transaction between the parties involved a bargain about the use of intellectual property. It did not so much relate to payment to compensate for the marginal cost of producing the software which was supplied (together with an element of profit). In such circumstances it seems highly relevant that a person did not actually take advantage of the intellectual property. The fact that the software package was opened is not to the point. Whilst it might technically trigger some form of contractual obligation, it has little bearing on what is fair if the software was not actually used.

62 A further consideration which informs my conclusion is the nature of the product which MCI persuaded Mrs Law to purchase. It is notorious that share trading, unlike share investing, is a risky and uncertain endeavour. It has been described as a zero sum game: that is, for every winner there will be a loser.[26] Share traders seek to buy cheap and sell dear. But for every buyer, buying cheap, there will be a seller; and for every seller, selling dear, there will be a buyer. The market is replete with full-time professional traders, with sophisticated software and huge resources. No doubt some amateurs may be able to make handsome profits from trading shares, whether or not using MCI software, but it seems inherently unlikely that this could be consistently achieved by a complete amateur in less than 20 minutes per day. Rather it is likely that successful share trading depends upon a substantial understanding of the share market. Even if successful share trading is enhanced by software such as the Star Trader software, it is apparent from reading the manual accompanying the software package that considerable knowledge and skill is required to "drive" the software. Most ordinary people contacted cold over the phone will not have, nor be able to easily acquire, such knowledge and skill.

63 Given the various factors I have set out, I think it is fair to allow a person in Mrs Law's position to change her mind, before using the software, and to obtain a refund. In turn she should return the software package to MCI.

64 In reaching my conclusion I have not relied upon any of the representations made by MCI after Mrs Law requested a refund. However I am concerned about MCI's repeated references to "Justice Hogan Doran". It is important that major companies avoid deceptive conduct, even if unintentional.

At a glance

Court

Decision date

Before

Source

Judgment (68 paragraphs)

Law v MCI Technologies Pty Ltd [2006] VCAT 415 (22 March 2006)

Parties

Legislation Cited (1)

Cases Cited (1)