Applicant Files Claims for Damages for Telephone System Failures
ProLearn v Kytec and Telstra [2022] VSC 5 (17 January 2022)
ProLearn sought Telstra to upgrade its current call centre telephone system. Telstra referred ProLearn to Kytec. ProLearn also entered into a contract with Kytec. ProLearn then sued Kytec and Telstra for damages and other relief in relation to major alleged failings in a telephone system supplied to ProLearn for use in its telemarketing business.
Facts:
In early 2011, ProLearn commenced a digital marketing business with its primary focus being the vocational education and training (VET) sector. Up until the end of 2016, the primary focus of ProLearn’s business was the provision of digital and telemarketing services to the Victorian education sector. This part of the ProLearn business came to an end on 31 December 2016, due to legislative changes that came into effect on 1 January 2017. By a Telstra Dealership Agreement between Telstra and Kytec entered into in or about mid 2010, Telstra appointed Kytec as a dealer to promote Telstra’s telecommunications services subject to the terms and conditions contained therein (the Telstra Dealership Agreement).
Telstra referred ProLearn to Kytec. Subsequently on 27 April 2015, ProLearn entered into an agreement titled ‘Telstra Business Systems — Corporate Services Agreement’ (the Equipment and Services Agreement); an agreement for the supply of telephone services by Telstra to ProLearn for a term of 36 months pursuant to which ProLearn agreed to pay Telstra a minimum sum of $35,000 per month (the Telephone Contract); and a contract with Telstra for the provision of data for a term of 36 months (the Data Contract).
On 7 October 2015, ProLearn also entered into a contract with Kytec entitled Managed Service Agreement (the Kytec Contract). By its Amended Statement of Claim dated 12 September 2018, ProLearn sues Kytec and Telstra for damages and other relief in relation to major alleged failings in a telephone system supplied to ProLearn for use in its telemarketing business (referred to as the NTS or the Solution).
ProLearn also claims damages against Kytec and Telstra on the basis that, in representing that the Solution was appropriate for ProLearn’s requirements, both those companies made false or misleading representations with respect to the performance characteristics, use or benefits of the Solution, and thereby contravened s 29(1)(g) of the ACL.
Kytec denies ProLearn’s claim, and counterclaims against ProLearn, seeking payment of contractual debts totalling $10,340. In the event that Kytec is liable to ProLearn, Kytec submits that it is entitled to have the amount of the counterclaim set off against amounts owing to ProLearn, in accordance with r 13.14 of the Supreme Court (General Civil Procedure) Rules 2015 (the Rules).
Telstra denies ProLearn’s claim, and counterclaims against ProLearn, seeking payment of debts totalling $516,313, owing under contracts for the supply of data and telephone calls, and other charges. Telstra also counterclaims against Kytec, seeking indemnity for any liability which it may have to ProLearn, pursuant to the terms of the Telstra Dealership Agreement.
Vicki Tutungi (Tutungi), the Managing Director of ProLearn, traversed the Expert evidence of Wolff, Wright and Green, and responds to the criticism of ProLearn’s case, in particular ProLearn’s causation case.
Doris Humunicki (Humunicki), Director of ProLearn, addressed in her witness statement, the background and implementation of the NTS, the problems and issues which soon arose with the NTS after installation, the attempts to remediate the practical operational problems with the NTS.
Michael Smith (Smith), a Chartered Accountant and Director of CFAS Advisory Pty Ltd. David Okulicz (Okulicz), the Managing Director of Kytec, addressed Kytec’s involvement with ProLearn and technical aspects of the NTS and its operational issues, their causes and the efforts to deal with ProLearn’s complaints about the NTS.
Issue:
Whether or not ProLearn is entitled to damages and compensation.
Applicable law:
Australian Consumer Law (ACL) s 236 - provides that if:
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravene a provision of Chapter 2 or 3; the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
(2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.
Australian Consumer Law (ACL) s 237 - provides that a court may:
(a) on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that:
(i) was engaged in a contravention of a provision of Chapter 2, 3 or 4; or
(ii) constitutes applying or relying on, or purporting to apply or rely on, a term of a contract that has been declared under section 250 to be an unfair term; or
(b) on the application of the regulator made on behalf of one or more such injured persons; make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct.
Australian Consumer Law (ACL) s 18 - provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Australian Consumer Law (ACL) s 29(1)(g) - provides that a person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:
(g) make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits.
Competition and Consumer Act 2010 (Cth) (CCA) ss 84(2) - pursuant to which Telstra submits that ProLearn’s s 84(2) case omits an essential element of deemed liability, in that conduct must be ‘on behalf of’ the body corporate.
Cook’s Construction v Brown (2012) 247 CLR 345- where a party has to prove something and prima facie has available evidence that would directly deal with the question, a court will be very hesitant in drawing an inference in that party’s favour from indirect and second-hand evidence, when the party doesn’t call the direct evidence that prima facie it could have called, at least unless some explanation is given, or the circumstances themselves provide an explanation.
Analysis:
Tutungi exhibited a deep and detailed knowledge of the ProLearn business and of the features, functions and usability of, and problems with, the Solution.
Okulicz’s evidence is less reliable and less persuasive on matters in issue when compared with the evidence of ProLearn’s witnesses Tutungi and Humunicki in relation to those same matters because in his evidence, Okulicz often attempted to give evidence which advocated Kytec’s case, and particular points in its case and similarly often strived to negate ProLearn’s case and parts of its case, rather than giving frank unembellished evidence on disputed matters and evidence representing the facts without spin, in an accurate way. From Okulicz’s apparent involvement in a hacking incident in relation to ProLearn’s server, it can be inferred that he was willing to go to unacceptable lengths in what he saw as the need to impugn and combat ProLearn.
Kytec submitted that ProLearn’s failure to call Roberts or anyone else from SWSI to explain why ProLearn’s business would have defied the VET market downturn, means that the Court can infer that Robert’s evidence would not have assisted ProLearn on this point.
Telstra also submit that ProLearn’s attempts to draw a distinction between the courses sold by SWSI and TAFE NSW should be rejected because, amongst other reasons, ProLearn failed to call Roberts who could have been expected to give evidence about SWSI’s sales during the Loss Period, any differences in sales as compared with TAFE NSW as a whole and the reasons why the extent of ProLearn’s sales changed from time to time.
Kytec and Telstra wrongly and in contravention of the ACL represented to ProLearn that:
- the Solution would be able to automatically create Personal Call Back Lists (Representation ‘A’);
- the Solution would be able to be used by 83 agents (Representation ‘B’);
- the Solution would enhance ProLearn’s productivity (Representation ‘E’); (
- the Solution was appropriate for the ProLearn Requirements (Representation ‘F’); and
- the above representations were based on reasonable grounds (Representation ‘G’).
In making the Representations, Kytec did so both directly and also as Telstra’s agent and with Telstra’s consent or agreement within the meaning of both s 84(2)(a) and s 84(2)(b) of the CCA, because those representations were made within the actual or apparent scope of Telstra’s authority and were made with Telstra’s implied consent and agreement.
Conclusion:
The Court concluded that ProLearn’s reliance on Tutungi’s evidence and ProLearn’s contemporaneous records and recorded instances of failures and difficulties with the Solution, including ProLearn’s written communications in that regard to Kytec and Telstra, formed a body of persuasive evidence which established that the Solution suffered from material and significant defects and deficiencies.
The Court rejected Kytec’s submission that there was a deficiency in ProLearn’s case that it did not call expert evidence concerning the Solution and its recommendation and operation, but relied on Tutungi’s evidence.
Tutungi’s evidence as to the Solution’s problems, defects, and deficiencies, was admitted into evidence and was probative and persuasive.
ProLearn is entitled to damages and compensation in the total sum of $2,679,557 against both Kytec and Telstra pursuant to s 236 and s 237 of the ACL.
