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30 October 2003
Background
X switched their business account from company
A to company B in June 2000, after speaking with a sales representative
employed by B. According to X, the sales representative said
X would be able to make "substantial savings" for their business
if they switched to company B.
After the switch, X began receiving accounts
from B. X noticed that the accounts were considerably cheaper
than those previously received from A and was "pleasantly
surprised". X considered that they were receiving the "substantial
saving" promised and did not consider the possibility that
the accounts were wrong. In fact, X was so impressed with
the accounts they received from B that they told other people
and suggested that they should also switch to company B.
X complained about an invoice for more than
$10,000 their business had received from company B. B acknowledged
that there had been an error and explained that the reason
for the large account was that it had failed to apply a multiplier
of 401
when calculating accounts for X's business between June 2000
and April 2002. B applied a credit of approximately $2,700
to X's account together with $1,400 to compensate for missed
prompt payment discounts. However, X was not satisfied with
this, and complained to the commissioner.
The graph below shows the pattern of invoices
received by X from both company A and company B:
Commissioner's
preliminary decision
Information was obtained from X and B, and
- in relation to the application of the legal principle of
estoppel - an opinion from a QC.
Estoppel occurs when one party (the representor)
makes a representation to another party (the representee)
with the intention that the representee will rely on that
representation and alter their position based on that representation.
The representation can be made in words (whether orally or
in writing) or by conduct. Where such a representation is
made the representor is estopped (stopped) from denying the
truth of the representation.
The commissioner determined that the following
questions needed to be answered in relation to X's complaint:
(a) Does the mere issue of an invoice in
relation to the metered supply of electricity give rise
to an estoppel?
(b) Did X rely on the representation or
were there facts known to X which would have led a reasonable
consumer to suspect that there was an under charging?
(c) Once an estoppel is raised, is B barred
from making any recovery for past under-charging?
(d) Did X change his position in reliance
on the invoices?
The commissioner reviewed the relevant law
and concluded that the issuing of invoice for electricity
can give rise to an estoppel.
B had issued a series of invoices which had
incorrectly stated the total number of units used. These invoices
were substantially less than the invoices received by X from
company A. X had noticed these savings, but as XC had been
told to expect "substantial savings" by B's representative,
X had no reason to doubt the accuracy of the invoices.
The commissioner accepted that B had relied
on the incorrect invoices when budgeting and dealing with
expenditure in its commercial operation, and concluded that
B was estopped from recovering the amount claimed from X.
Proposed recommendation
The commissioner's proposed recommendation
was that X should not have to pay the approximately $9,000
still owing to B after the credits had been applied. This
was accepted by both parties.
1
Some meters are wired to record only a particular percentage
of the electricity used. The electricity retailer takes the
actual reading, and then multiplies it by the factor needed
to calculate the actual number of units of electricity used.
In this case the meter was showing 1/40th of the units used.
However, X did not know about the multiplier.
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