7-Eleven Stores v Lanhai - [2023] VSCA 45

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2022 0035

7-ELEVEN STORES PTY LTD (ACN 005 299 427)	Applicant
v
LANHAI PTY LTD (ACN 605 035 603) (AND OTHERS ACCORDING TO THE ATTACHED SCHEDULE)	Respondents

---

JUDGES:	McLEISH, HARGRAVE JJA AND M OSBORNE AJA
WHERE HELD:	Melbourne
DATE OF HEARING:	9 February 2023
DATE OF JUDGMENT:	8 March 2023
MEDIUM NEUTRAL CITATION:	[2023] VSCA 45
JUDGMENT APPEALED FROM:	[2022] VSC 132 (Riordan J)

---

CONSUMER LAW – Misleading or deceptive conduct – Franchise agreement – Whether franchisor engaged in misleading or deceptive conduct – Whether franchisor’s conduct induced erroneous assumption as to term of agreement – Document provided to franchisees misleading – Earlier oral explanation did not immunise against misleading effect of document – Leave to appeal granted – Appeal dismissed.

PRACTICE AND PROCEDURE – Review of trial judge’s finding – Whether restraint warranted – Whether finding affected by impression of witnesses – Finding unaffected by impressions of witnesses.

Lee v Lee (2019) 266 CLR 129, applied.

---

Counsel
Applicant:		Mr PH Solomon KC with Mr MD Tehan
Respondents:		No appearance
Solicitors
Applicant:	Norton Rose Fulbright
Respondents:	No appearance

MCLEISH JA
HARGRAVE JA
M OSBORNE AJA:

Introduction

On 4 June 2015, the first respondent, Lanhai Pty Ltd as franchisee, entered into a franchise agreement with the applicant, 7-Eleven Stores Pty Ltd, in respect of a 7-Eleven store in Heathmont, Victoria. The Heathmont store was the subject of a lease between the owner of the property as lessor and 7-Eleven as lessee for a term expiring on 4 July 2021, with an option for a further five-year term exercisable by the lessee.
The franchise agreement was to expire on the earlier of:[1] the date on which the primary term of the lease expired; the expiration of any further term of the lease if the option was exercised by the franchisor within the terms of the franchise agreement; or 10 years from the date the store first opened for business under the agreement.
[1]The agreement would also expire if the franchisor exercised an option to purchase the franchisee’s interests under the agreement. See also [42] below.
In April 2021, 7-Eleven informed Lanhai that it would not be exercising the option to renew the lease and, as a consequence, the franchise agreement would come to an end on 4 July 2021, a little over six years after Lanhai had commenced operating the store.
It was accepted at trial that, prior to this, Lanhai believed that the term of the franchise agreement was 10 years and as a consequence it would be able to continue to operate the store until June 2025.
Lanhai obtained interlocutory injunctive relief, in substance restraining 7-Eleven from treating the franchise agreement as at end and permitting it to continue operating the store.
At trial, Lanhai sought permanent injunctions and damages arising from alleged contraventions of the franchising code of practice,[2] unconscionable conduct and conduct which was misleading or deceptive within the meaning of s 18 of the

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Keep reading for free

Create a free CaseChat account to read 7-Eleven Stores v Lanhai and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2023] VSCA 45
Decision Date: 8 March 2023

CaseChat Overview and Summary

The case of 7-Eleven Stores v Lanhai involved the franchisor, 7-Eleven Stores, and the franchisees, Lanhai. The dispute centred around allegations that the franchisor had engaged in misleading or deceptive conduct in relation to a franchise agreement, specifically concerning the term of the agreement. The matter was heard in the Federal Court of Australia. The franchisees argued that the franchisor's conduct, particularly the provision of a misleading document, induced them to enter into the agreement under an erroneous assumption as to its term. The franchisor contended that an earlier oral explanation provided to the franchisees negated any misleading effect of the document.

The primary legal issue before the court was whether the franchisor's conduct amounted to misleading or deceptive conduct under the Australian Consumer Law. A secondary issue was whether the trial judge's findings were influenced by the impressions of the witnesses. The court was required to determine if the franchisor's actions constituted a breach of the law and if the trial judge's findings were appropriately made without being swayed by the witnesses' impressions.

The court held that the franchisor's conduct did amount to misleading or deceptive conduct as the document provided to the franchisees was indeed misleading. The earlier oral explanation did not negate the misleading effect of the document. The court also found that the trial judge's findings were unaffected by the impressions of the witnesses, as per the principles articulated in Lee v Lee. As a result, the leave to appeal was granted, but the appeal was ultimately dismissed.

The court did not make any further orders beyond dismissing the appeal. The finding that the franchisor had engaged in misleading or deceptive conduct remained, leaving the franchisees in their original position in terms of their contractual obligations and entitlements.

Orders