Yemat Tutors paid thousands for phone equipment that never worked

The issue

BranchTel* approached Yemat Tutors and pitched a four-year deal for NBN phone and internet services as well as phone equipment. Even though it was offered by BranchTel, the phone equipment agreement was with another company, FoneHouse*. This type of agreement functions like a lease and is called an equipment finance agreement. Yemat Tutors agreed to the deal, signing up to both agreements. 

After BranchTel installed the equipment, Yemat Tutors found that it didn’t work, and decided to return the equipment and transfer the NBN phone and internet services to their previous telco. BranchTel refused Yemat Tutors’ request to cancel the NBN phone and internet services without termination fees and said the phone equipment worked with only minor issues. BranchTel also said Yemat Tutors was not entitled to cancel the services without giving notice. FoneHouse charged Yemat Tutors a $7,300 termination fee for cancelling the equipment finance agreement.

The investigation

Yemat Tutors contacted the TIO after being unable to resolve its complaint. The complaint reached our conciliation stage and, after considering both sides, the TIO issued a recommended outcome. We recommended BranchTel release Yemat Tutors from both agreements and waive the $7,300 termination fee because: 

• the issues were not minor as multiple phone lines were not working at all, and call diversions were not activated
• Yemat Tutors took reasonable steps to tell BranchTel about the problems but BranchTel did not try to fix them
• if Yemat Tutors was aware these issues would occur, they would not have signed up to the deal
• it was reasonable for Yemat Tutors to terminate the agreements as the equipment did not work as expected
• BranchTel did not provide services with due care and skill. Given the equipment formed part of a package with the services, offered under BranchTel’s letterhead and signed with BranchTel as the witness, it was reasonably foreseeable by BranchTel that Yemat Tutors could incur the $7,300 termination fee loss as a result.

The outcome

BranchTel rejected the TIO’s recommended outcome, so the complaint proceeded to a TIO decision-maker for a Preliminary View. BranchTel did not give us any new information. We re-examined the information available and upheld the original recommended outcome. Also, we found if Yemat Tutors paid any charges for phone and internet services, BranchTel should refund them.

BranchTel rejected the Preliminary Review and did not give us any new information. The TIO issued a Decision, upholding the Preliminary Review. Yemat Tutors accepted the Decision, which became binding on BranchTel and ended our process.

*All names have been changed