The Federal Court has found that the corporations trading as SoleNet and Sure Telecom engaged in unconscionable conduct during the supply of telecommunications services, along with the companies' director James Harrison.
The Federal Court said that during 2013 to 2015, Harrison's companies were restructured in order to evade paying debts to regulators as well as regulatory sanctions. Customers were then transferred from SoleNet to Sure Telecom without their knowledge or consent, and were made subject to early termination or cancellation fees as a result.
"I do not think there is any doubt that Mr Harrison was well aware of each of the elements of the system of conduct or pattern of behaviour ... he was aware that the transfers involved, at best, a lack of transparency or, at worst, trickery or deception, vis-à-vis customers," Justice Moshinsky said on Tuesday.
The companies were also found to have engaged in undue harassment of customers in regards to the payment of these services.
The Harrison companies and the Australian Competition and Consumer Commission (ACCC) are required to file submissions on relief by February 10, with the court to decide penalties subsequent to this.
The ACCC launched Federal Court proceedings against the Harrison telcos in April this year for breach of Australian Consumer Law.
"This outcome sends a clear message to companies and directors that they cannot avoid their obligations under the Australian Consumer Law by corporate restructures which involve transferring customers without their consent," ACCC Chairman Rod Sims said on Tuesday.
According to the ACCC's case, the Harrison telcos referred their customers' debts to a debt collection agency and law firm, which sent letters demanding the payment of fees from transferred customers.
Justice Moshinsky made a freezing order against Harrison and his companies on March 11, extending it on March 16 to cover assets controlled by Kelly Harrison, after the ACCC filed an interlocutory application seeking a freezing order preventing Harrison from removing from the country, disposing of, diminishing the value of, or otherwise dealing with any of the companies' assets in Australia.
In December last year, the Australian Communications and Media Authority (ACMA) published the findings of its investigation into the activities of the Harrison telcos, reporting that they had repeatedly failed to comply with the Telecommunications Consumer Protection (TCP) Code.
SoleNet breached the TCP Code on 24 instances between April 14 and May 5, 2015, with the ACMA finding that it had failed to obtain informed consent from consumers before transferring their services from SoleNet to Sure Telecom; failed to provide consumers with important information about interruptions to its service during the transfers; failed to inform consumers that penalty or cancellation fees may have to be paid; failed to notify customers of the completion of the transfer; misrepresented the nature of calls made to its customers; made misleading and inaccurate assertions; and omitted key information.
The ACMA had already directed the company to comply with the TCP Code on April 9, 2015, when a previous investigation -- undertaken due to a "disproportionately large" number of complaints to the Telecommunications Industry Ombudsman (TIO) about the telco -- found that it had breached the code.
"What is particularly disturbing in this case is that this is the second occasion in recent times that the ACMA has found the company engaging in behaviour which failed to meet important consumer protections in the TCP Code," said former ACMA chairman Chris Chapman at the time.
"The ACMA also notes around the time that SoleNet changed its name to Comms Service Ops, four new companies were registered. These four companies -- Tech Group Aus, Tech Group NSW, Tech Group Qld, and Tech Group Vic -- have the same sole director as Comms Service Ops, and each trades under the name SoleNet. The sole director of all these entities was also the sole director of Sure Telecom, which itself clocked up multiple breaches of the code in 2014."
Last year's ACMA findings amounted to the telco breaching its previous direction to comply back in September 2014, when Sure Telecom was found to have breached 19 separate clauses of the code during March 2014.
"The extent of non-compliance with some of the most important telecommunications consumer safeguards is very disturbing," Chapman said in October 2014.