Author: Mark Fletcher

The QNF has sent information to its members yesterday about the communication newsagents have received from Mobius Financial Services Pty. Limited about the Bill Express equipment. Below is the information provided by the QNF.

As convenor of the NSW newsagent’s class action, NANA has received the following advice which we have forwarded on to Qld Newsagents:

1. You are NOT required to keep making payments to anyone in relation to the equipment rental.
2. The Mobius FAQ sheet is seriously misleading, deceptive and misstates the position.
3. The claims by Mobius FAQ and the letter that the equipment rental company has assigned its rights may or may not be correct, but it is impossible to tell from the documentation. What has been said raises more questions that it provides answers. The assignment claim should at this stage be regarded as irrelevant.
4. The current advice states that participants of the class action NOT make payments; if you wish to participate please contact us on (07) 3862 7100
5. As we have said previously, if any party attempts to bring recovery action against any of our participant newsagents, the group will bring proceedings to protect their position. We think it is very unlikely that this will be necessary. However, our solicitors are in regular contact with the receivers.

This advice contradicts advice provided by the ANF to newsagents late yesterday. Actually, the ANF did not provide advice, it called for expressions of interest in funding action around the equipment leases. Newsagents are angry that the ANF is asking for newsagents to fund action by the ANF given that the ANF earned in excess of $1 million in revenue in relation to the these agreements which are not set to be challenged. Newsagents I have spoken with would like the ANF to commit some of the $1 million plus it earned toward getting advice on this matter.

Page 2.2.1 of the Newsagent Manual published by the Australian Newsagents’ Federation and provided by the Association to new newsagents attending mandatory training is all about Bill Express. Here is some of what is in a manual provided by the ANF just over a year ago:

Bill EXPRESS is owned and managed by DialTime, an experienced technology company that forms part of the OnQ group of companies. DialTime is an expert in over-the-counter transaction systems and specializes in delivery of electronic pre-paid services to retailers.

The concept comes with a commercial package for newsagents and additional benefits available to Members of the Australian Newsagents’ Federation. Benefits to ANF members include:

• A new revenue source from bill payment.
• EFTPOS through ANZ at leading industry rates and zero debit card fee for any transaction volumes.
• Electronic pre-paid mobile phone and telecommunications product through DialTime.
• The option of a national advertising screen designed to increase sales.
• A comprehensive electronic retailing platform designed to evolve into the future.
• Additional financial benefits.

This ANF documentation further demonstrates the conflict of the industry association in representing newsagents and fulfilling their contractual obligations to Bill Express / DialTime.

Due diligence in civil litigation (also known as due care) is the effort made by an ordinarily prudent or reasonable party to avoid harm to another party. Failure to make this effort may be considered negligence.

This is from the Wikipedia entry on due diligence. When newsagents saw the wholehearted endorsement of the ANF of Bill Express in the cover story of National Newsagent, the national magazine for newsagents published by the ANF, they reasonably expected that due diligence had been done on the offer being recommended to them.

Not once in the seven pages devoted to Bill Express in the May 2003 issue of National Newsagent were the commercial terms between the ANF and Bill Express disclosed. Nor in the two pages about Bill Express in National Newsagent in the June, July and August issues.

Talking to newsagents today about the ANF promotion of Bill Express, many say they understood the Bill Express offer to have been thoroughly researched by the ANF on behalf of newsagents. They thought the ANF had checked the complete offer to ensure it would not be harmful for newsagents.

I doubt that appropriate due diligence was undertaken. I have certainly not found any evidence of due diligence beyond questions about the agreement between the ANF and Bill Express.

This question of due diligence is important if newsagents are to get to resolution of the expensive mess left by the collapse of Bill Express. We know from documentation in the pblic domain that newsagent exposure is somewhere between $15 million and $20 million. For small family run businesses to be left with such debt from an offer brokered and promoted by an industry association for their own profit is unprecedented.

The problems newsagents have with the Bill Express related contracts today would have been exposed by thorough due diligence in 2003. The ANF could have easily made their agreement on commercial terms with Bill, Express contingent upon an acceptable and fair legal framework being approved for newsagents. From what I understand this requirement was not put by the Newsagents’ Association.

This is why newsagents are angry at the role of the ANF in the matter of Bill Express.

In my post yesterday I listed Embedded Technologies as a creditor of Technology Business International. Embedded Technologies is another company associated with Sandro DiDonato or was on paper at least. It is now controlled by a Robert and Sharon Gallesio. It operates from the same address as other TBI and Bill Express related businesses.

Embedded Technologies is interesting because it may have played a role in supplying technology to TBI which was then leased to newsagents as part of the Bill Express package.

Not all newsagents had their marketing and other rebates stopped by Bill Express earlier this year. I have seen evidence of the company paying a rebate to a newsagent as recently as earlier this month.

Moody’s Investor Service has downgraded Mobius ELR-01 notes.  23% of the ELR-01 pool is made up of debt associated with Bill Express equipment in newsagencies. In the announcement about the downgrade, Moody’s said

The rating action follows the appointment of liquidators of Technology Business International Pty Limited (TBI) and the appointment of administrators to a related party, Bill Express Limited. TBI is one of the originators and primary services of the receivables securitised through the transaction. Moody’s also notes the further deterioration in the performance of the underlying receivables pool as well as the residual uncertainty surrounding the servicing transfer process currently taking place.

In particular, Moody’s notes the following:

– TBI was placed into liquidation on June 30, 2008 and Bill Express into administration on July 8, 2008. Bill Express is a provider of payment and transactional services to a large number of Australian newsagents. The services are available via equipment provided and leased to the newsagent obligors by TBI, with the underlying leases representing the Mobius ELR securitised pool attributable to TBI.

– The services previously provided to the obligors by Bill Express have been discontinued, rendering the computer equipment ineffective.

– While Moody’s believes the contractual arrangements to repay the equipment leases in full continue to be legally robust, there is a significant risk of non-payment or delay in payment by the underlying obligors. Any such action may result in both temporary payment shortfalls and permanent principal loss to the Mobius ELR-01 notes.

– The AUD 15.6 million TBI-associated portfolio currently represents approximately 23% of the Mobius ELR-01 pool. The rating action incorporated Moody’s views with regard to the likelihood and extent of any potential loss suffered by the transaction as the result in turn of the situation surrounding TBI and Bill Express.

So, we now know the amount of newsagent money involved – $15.6 million.  This figure, more than anything else I have published here, ought to attract attention from newsagent associations to fix such an expensive problem for newsagents.

A meeting of creditors of Technology Business International Pty Ltd (TBI) was held on July 17, 2008 at the offices of Chartered Accountants Rogers Reidy in Queen Street Melbourne. TBI is the company with which newsagents signed for the lease of equipment needed to run Bill Express.

At the time of preparation of the notice of the creditors meeting the company had five creditors, the largest being HSBC Bank Australia Limited which was owed $3.4 million. This was secured debt. Mobius Financial was listed as a secured creditor with $1 in advised debt. Charters Paper and Dueltek were listed as being owed $72,473 and $907 respectively. The final creditor was Embedeed Technologies showing as being owed $47,755. Embedded Technologies operated from the Bill Express office in Eaglemont.

On the ASIC Summary of Affairs of a Company From 509, Sandro DiDonato, Director, declared that TBI had assets of $240,829 of which $225,629 was cash at bank and $15,200 was sundry debtors. This is extraordinary for a business which signed leases a few years earlier with 3,500 newsagents for amounts of between $26,000 and $32,000 per newsagency.

Newsagents were not notified about the meeting because they were not considered creditors by the liquidator. The liquidator’s representative with whom we spoke said that “TBI had no case to answer to newsagents”. I am sure that newsagents facing months and even years of paying the TBI lease on worthless equipment would have a different view.

One can only hope that ASIC and other authorities will invest sufficient resources to uncover what really went on with TBI, Bill Express, OnQ, ETT and all o the other businesses connected with this mess.

Go to my blog post from June 28 for more information on the TBI group. That post includes this information:

• TBI is owned by Technology Business Holdings Pty Ltd (TBH) and has two Directors, one of whom is Sandro DiDonato.
• Technology Business Systems Pty Ltd (TBS) is owned by TBH and has one Director, Sandro DiDonato.
• TBH has four shareholders, the largest (96.5% of issued capital) being Equip Rentals Pty Ltd and one Director, Sandro DiDonato.
• Equip Rentals Pty Ltd was deregistered on 9 December, 2007. It had one shareholder, Sandro DiDonato and two directors, one of whom was Sandro DiDonato.

TBH and TBS remain registered with ASIC today.

Some newsagents continue to face significant difficulties in trying to establish a new ADSL connection to their business in the wake of the collapse of the Broadband connection provided through the recently collapsed Bill Express.  There are reports of ISPs refusing to establish a new ADSL connection without the permission of the previous providor.  While some newsagents have been successful in jumping this hurdle, some have not, leaving their businesses without broadband access for the moment.

This is just another impact of the collapse of Bill Express on small businesses which can ill afford the business disruption.