Credit Cards and Taxicab Fares - Australia

Federal Court of Australia

CAB TAB AUSTRALIA PTY LTD
v.
AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD
AND MASTERCARD AUSTRALIA LTD


(T/as MasterCard International) No. NG 554 of 1996 FED No. 722/96 Interlocutory Injunction

COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
FOSTER J
HRNG
SYDNEY, AUSTRALIA
9 July 1996
#DATE 9:7:1996
#ADD 5:9:1996
Counsel For The Applicant:
G.M. Colman

Instructed By:
G.H. Healey and Co

Counsel For The First Respondent:
J.S. Wheelhouse

Instructed By:
Norton Smith and Co

Counsel For The Second Respondent:
I.E. Davidson

Instructed By:
Coudert Brothers

ORDER

THE COURT ORDERS THAT:

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1 - FOSTER J

This is an application for an interlocutory injunction in these proceedings brought on behalf of the applicant. It has been brought on in some haste. However, the first and second respondents to the proceedings, namely the Australia New Zealand Banking Group Limited ("the Bank") and MasterCard Australia Limited ("MasterCard"), have been represented and have put arguments that no injunction be granted.

2. As the application is one for an interlocutory injunction only, the ordinary questions arise, namely whether the existence of a serious issue to be tried has been demonstrated, and where the balance of convenience would lie in the circumstances where the first question is answered in the affirmative.

3. I should say at the outset that the proceedings themselves are presently at an embryonic stage. An application and accompanying statement of claim have been served, however, no pleadings have been filed on behalf of either of the respondents, although defences, of course, have been adumbrated in the arguments that have been put before me. The matter is urgent, as a step has been taken very recently which, on the evidence placed before me, could have very serious consequences for the viability of the applicant's business.

4. The applicant's business is to provide users of taxi cabs with access to credit card facilities not otherwise available in the cab. This is done by the use of a docket, upon which the particular credit card being used by the occupant of the cab is imprinted. The price on the docket is made up of the cab hire fare shown on the meter, plus 10 per cent, the latter described as a "service fee".

5. The dockets are then processed by the applicant. By dint of an Agreement between the applicant the Bank, to which I shall refer shortly, the amount of the fare is paid to the cab owner. The service fee is divided three ways, the Bank obtaining a commission of some 5 per cent, the cab owner 3 per cent, and the balance going to the applicant as its return on the transaction which has resulted from the system that it has set up.

6. The applicant and the Bank entered into a written arrangement, described as a "Merchant Agreement" ("the Agreement"), on 27 October 1994. It provided the basic financial arrangement under which the applicant's business would operate. An argument has been put that one looks farther afield than the Agreement to establish what were the true contractual arrangements between the parties. This argument, of course, cannot be decided finally in these interlocutory proceedings.

7. The Agreement was set out in a lengthy written document, which is annexure A to the affidavit of Mr David Musgrave, a director of the applicant company. The Agreement provides that it may be terminated by either party, at any time, giving written notice. I assume, without having to decide at the moment, that that notice must be reasonable notice.

8. According to the affidavit of Mr Musgrave, a conversation between the representatives of the Bank and the applicant took place on or about 17 October 1994, some 10 days before the Agreement was signed. In that conversation, and following upon prior conversations, representations were allegedly made by the Bank's officer, one Rahn Wood, that the Bank had sent and received letters to card scheme providers, explaining the proposal the applicant was making for entering into the business which I have described. It was specifically said that neither Visa nor MasterCard, they being two of the card scheme providers who were to play an anticipated role in the carrying out of this operation, had raised any objections to the Applicant's proposal. In those circumstances the Bank indicated that it was prepared to introduce the relevant merchant facility with the applicant, on the basis that it would receive fees of 5 per cent on takings, payable once per month. It is also alleged that during that conversation it was made known to Mr Musgrave on behalf of the applicant that it would be necessary for the applicant's business accounts to be operated through the Bank, rather than through the Westpac Bank, as previously.

9. It was also represented, it is said, that provided the applicant operated within the terms of the Merchant Agreement, the Agreement would continue indefinitely. At the time when it is alleged the Agreement was actually signed, the question of its duration was once again raised on behalf of the applicant. The Bank's representative replied by indicating that the Agreement would normally stay in force until the company closed or there was a change of ownership, but that if there was any breach of the Agreement it would be terminated. After the Agreement was entered into, a further letter was forwarded on 30 December 1994 by the Bank to the applicant, which confirmed approval of the particular credit card voucher that had been devised by the applicant for use in the cabs. The letter made specific reference to the inclusion on the face of the voucher of the 10 per cent surcharge to be applicable on the acceptance of the voucher by either the Bank, Visa, or MasterCard. It was further said that the charge was acceptable to the Bank. There was also some reference to the way in which the vouchers would be processed.

10. The operation contemplated by the applicant was apparently successful and, although commencing as a small business, it has grown to a stage where it can be seen as a small competitor in a growing market for this type of operation, a market which, previously, had largely been occupied by a single successful operator.

11. Problems emerged, however, when it was ascertained by the Bank that there were objections on the part of the second respondent, and also on the part of the Visa organisation, to the application of surcharges in respect of the use of the credit cards. Evidence has been placed before me which indicates that there exists contractual terms purportedly binding the Bank to refuse the application of surcharges in respect of the use of the credit cards of those two organisations. There is no need for me to set out the detail of those terms here.

12. This realisation led to a letter being forwarded on 5 June 1995 to the applicant by the Bank, in which it was indicated that both Visa International and MasterCard International had issued instructions that "the imposition of such a surcharge by our merchants is in breach of their operating rules and regulations, and that the practice must cease". It was said that the Bank had no option but to comply with this instruction, despite the fact that a long debate had been carrying on on the issue. The applicant was accordingly requested to immediately "make arrangements to stop imposing a surcharge on all Visa, MasterCard and Bankcard transactions". It was recognised that a reasonable time would be required, and a limit to 31 December 1995 was set.

13. Quite clearly there were communications passing between the parties after that particular difficulty had arisen. Ultimately a letter was sent on 1 May 1996 from the corporate solicitor of the Bank to the applicant, which gave notice of termination of the Merchant Agreement between the applicant and the Bank as of 5 pm on Thursday, 16 May 1996. This is the letter which is referred to in the first claim in the application in these proceedings. Thereafter time was extended, and the final result of such extensions is that the Agreement has purportedly been cancelled as of 4 July 1996. It is this cancellation which has produced the application to the Court and this claim for interlocutory relief.

14. I am satisfied on the evidence that the cancellation of the Agreement is, for practical purposes, to cause such business difficulties for the applicant as probably to produce its cessation of business.

15. In relation to the notice of termination, a declaration is sought in the first paragraph of the application that the notice is not effective to bring about the termination of the Agreement between the applicant and the Bank. That question is the alleged serious issue to be tried, which is advanced as being the foundation for the interlocutory relief sought.

16. It has been put to me, on behalf of the Bank, that the existence of this issue is simply not demonstrated. That submission is put on the basis that the conversations to which I have made reference preceded the signing of the Agreement, and that consequently should be regarded as subsumed in the subsequent Agreement, or at least rendered nugatory by it.

17. Having regard, however, to the provisions of the Trade Practices Act 1947 (Cth), and its effect upon that type of argument, I have come to the conclusion that I cannot so easily dispose of the question of whether a serious issue to be tried has been demonstrated. In my view there is a serious issue. There can be a question, which in fact is not yet the subject of pleading, as to whether the circumstances were such that the written Agreement should be rectified to nullify, or at least substantially alter, the provision as to its being brought to an end simply by the giving of reasonable notice on either side. There may well be arguments as to whether terms should not be implied, or indeed imposed, to give effect to understandings or representations that the Agreement would be cancellable only on the basis of default of the kind referred to in clause 2 of the Agreement. The Agreement was, of course, of a very substantial nature, and backed up by assurances on the part of the bank that it had cleared these matters with the credit card providers.

18. I do not find it necessary to go into detail in my considerations of this aspect. I consider that enough has been shown to indicate that there is a serious issue to be tried. Indeed, these issues for trial will obviously become capable of greater definition as the matter proceeds.

19. On the question of balance of convenience, the strongest argument that has been put in favour of the respondents is, in my view, that the granting of the injunction as sought, even in a limited way, may indeed force the Bank into a situation of being in breach of contract with the second respondent, or with Visa International.

20. This has occasioned me some concern. There is however a great lack of evidence on this particular aspect of the matter at this stage. It does seem abundantly clear, though, that when the second respondent, and no doubt Visa International, first became aware of the surcharge that was being imposed as part of the commercial operations of the applicant and the Bank, neither of them took positive steps to cause those arrangements to come to an end. Indeed, the second respondent has put on no evidence in this application, although I have heard submissions made on its behalf.

21. The question obviously hovers as to whether or not some waiver may have taken place in relation to that contractual term. The situation, as I see it at the moment, is that I cannot be satisfied that the imposition of interlocutory relief will necessarily force the Bank into a situation of being in breach of contract. In so saying I should make it clear that I do not intend to grant interlocutory relief other than until the further order of the Court. This will enable the matter to be brought back before the Court if the serious consequences currently foreshadowed in relation to breach of contract eventuate. The Court would then be in a better position than it is now to adjudicate on those particular problems.

22. It has also been put by the second respondent that the imposition of interlocutory relief might occasion some illegal activity. All that has been put before me in this regard, however, is some material from the Passenger Transport (Taxi-cab Services) Regulations 1995. These Regulations appear to require drivers of taxi cabs not to demand more than the authorised fare for the hiring of the taxi cab. As presently advised I cannot see that the type of transaction currently being undertaken by the applicant would bring the driver of a taxi cab within the mischief of these Regulations, nor would it involve the providers of credit in any breach of them. I do not see the submission as having any significant weight at this stage. If it becomes of any significance it can of course be raised again on another occasion.

23. I have come to the conclusion that the balance of convenience favours the making of the order sought which, as I have already indicated, is not an order that is to subsist until the hearing of the litigation but only until the further order of the Court. Accordingly, I make an order restraining the Bank from acting upon the notice referred to in paragraph 1 of the application and extensions of that notice given up to and including 4 July 1996 until the further order of the Court.

24. I note that the interlocutory relief has been granted on the usual undertaking as to damages given on behalf of the applicant. As regards costs, it is my view that the costs of this interlocutory hearing should be costs in the cause.

25. I cannot make an order for expedition as requested. I think I can only express a view that, having regard to the urgency of the situation that has arisen, and to the problems to which I have adverted as to whether or not the effect of this order may be to cause the Bank to be in breach of contract, that this is an appropriate matter for expedition.


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