AUSTRALIAN newsagents could be spared from paying millions of dollars of lease payments for useless Bill Express equipment after the competition watchdog launched legal action against the failed electronic payments company.
More than 900 newsagents are paying $495 a month for Bill Express equipment that has not worked since the network was shut down by the company's administrators in July.
The lease payments form a revenue stream worth a minimum $10 million a year being paid into three trusts established by Bank of New York Trust Company of Australia and managed by Mobius Financial Services.
In documents lodged in Federal Court the Australian Competition and Consumer Commission is claiming that Bill Express and equipment supplier Technology Business International engaged in conduct that was misleading or deceptive, by requiring Bill Express outlets to enter into two separate lease agreements - one with TBI, on which they paid a monthly $495 lease, and one with Bill Express, which paid a $495 rebate to newsagents to cover the lease.
When Bill Express collapsed under $250 million of debt earlier this year, the monthly rebate halted, but Mobius still demanded that the $495 lease payment continue to be paid.
The right to that lease payment transferred to a company called Pepper Homeloans on October 1.
More than 900 newsagents continue to make the monthly payment, on advice from the Australian Newsagents' Federation, which was a strong supporter of the Bill Express business.
Between 3500 and 4500 businesses, mostly newsagents, entered the contract agreements with Bill Express and TBI between 2003 and 2008. As of September 4 this year, 2791 business contracts with merchants had not expired.
That's a potential revenue stream of $16.57 million a year in lease payments on useless Bill Express equipment. The ultimate beneficiaries of the three trusts receiving the revenue streams - called Mobius ELR-01, Mobius ERT-W04 and Mobius ERT-W05 - has not been revealed.
The ACCC alleges that Bill Express, TBI, BNY Trust and Mobius contravened sections 47(1), 52 and 53(g) of the Trade Practices Act to acquire services from TBI.
Due to those contraventions, ACCC alleges that the contracts "were and are void", and says that "exclusive dealing" meant that Bill Express forced merchants to also acquire services from TBI.
The ACCC is seeking a declaration that "TBI and Bill Express engaged in conduct that was misleading or deceptive … by stating to customers and prospective customers that if they acquired the Bill Express payment system and entered in to the BXP contract and TBI contract, the customers would at least break even financially, when in fact there was a real risk (which in fact materialised) that Bill Express might default on its contract."
The ACCC is also seeking:
â– An order for the contracts of newsagents at Balwyn and Heidelberg Heights be made void.
â– An order for repayment of all fees paid by those two newsagencies since February 2008.
â– An injunction requiring a permanent ban for BNY requesting or claiming payments from contracts.
â– That BNY and Mobius be jointly liable for ACCC costs.
The ACCC statement of claim alleges that the trust companies - BNY and Mobius - knew of the breaches in the contracts and misrepresentations made by Bill Express and TBI to merchants, but nevertheless engaged in transactions that jeopardised the merchants. The ACCC states that Mobius was "knowingly concerned in the contraventions referred to". Continued…
