Case Studies - Faults (network & hardware issues)

TDR Case Note T003546 (2009)


Faults - disconnected service due to a carrier fault, compensation for loss of business, Consumer Guarantees Act, Fair Trading Act.


The customer (a small business) contracted with the Scheme Member Provider (Provider) for the provision of an 0800 number. The customer discovered on 5 November 2008 that the 0800 number was not working. For a period the customer had been running an advertisement with only the 0800 number as a contact and without the customer’s name appearing in the advertisements. The customer sought compensation for its advertising cost of $650 and $1000 for loss of goodwill.

The provider responded that it could not guarantee that the service would be fully operational 100% of the time, and that the technology was susceptible to faults. The provider argued that the fault, which was fixed within 2 days of the customer’s notification, was resolved within a reasonable time and so it had met its contractual obligations. However, the provider offered the customer one month’s free service as a gesture of goodwill. The provider also referred to the limitation of liability in its terms and conditions, and the exclusion of the Consumer Guarantees Act (CGA) where the services are provided to a business.

Adjudicator's decision

The adjudicator found that the essential issue was whether the provider had breached the Customer Complaint Code (the Code) and its service standards, and any contractual or relevant legal requirements. With regard to the legal requirements, the relevant statutes were the CGA, the Sale of Goods Act (SGA) and the Fair Trading Act (FTA).

Firstly, the adjudicator found that the provider had the right to exclude the provisions of the CGA when the customer uses the service in business by virtue of s 43 of the CGA regarding “no contracting out except for business transactions”. The SGA also permits contracting out, as provided for in s 43(3) of the CGA and s 56 of the SGA.

Secondly, the adjudicator found that there was no evidence of misleading or deceptive conduct by the provider under the FTA. The provider’s terms and conditions state that it is impossible to provide a fault-free service where (as in this case) the quality and coverage of the services depended partly on the provider’s network and partly on other providers and telecommunications networks. The provider also excluded liability relating to any loss of profits or revenue, loss of data, loss of business or missed opportunities, wasted expenditure or savings, or any indirect or consequential loss arising from the failure, interruption or delay in the supply of any services.

Thirdly, the adjudicator held that the Code requires the provider will do its best to provide reliable and quality services although it “cannot guarantee they will be continuous or fault free” (clause 11.1). The adjudicator considered that 2 days to remedy the network fault, which required the involvement of two companies (the provider and another carrier) was an acceptable amount of time in the circumstances. The Code also excludes certain remedies from consideration, including loss of profits or indirect loss and loss of business reputation (s 30.9). The adjudicator was therefore unable to consider the remedies sought by the customer.

Final outcome

The adjudicator concluded that there was no breach of any statutory provision or the Code. Therefore no remedies were awarded. However, the adjudicator found the provider’s offer of one month’s free access was an appropriate gesture of goodwill.