AMC Commercial Cleaning v Coade - [2011] NSWSC 932

Supreme Court

New South Wales

Medium Neutral Citation: AMC Commercial Cleaning v Coade [2011] NSWSC 932
Hearing dates: 25/07/11, 26/07/11, 27/07/11, 28/07/11 and 29/07/11
Decision date: 25 August 2011
Jurisdiction: Equity Division
Before: McDougall J
Decision:
Master Franchise Agreement validly terminated; interlocutory injunction dissolved; remaining issues referred to Associate Justice for determination.

Catchwords: CONTRACT - termination of Master Franchise Agreement by franchisor - whether termination valid - breach by franchisee of obligations under franchise agreement - franchisor entitled to terminate franchise agreement - termination not invalidated by want of good faith.
EQUITY - relief against forfeiture - whether conduct of defendant contributed to the events that gave rise to the forfeiture - no entitlement to relief against forfeiture.
Cases Cited: Burger King Corporation v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558
Far Horizons Pty Ltd v McDonald's Australia Ltd [2000] VSC 310
Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703
Horrocks v Lowe [1975] AC 135
Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No.2) [2008] FCA 810
Legione v Hateley (1983) 152 CLR 406
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268
Tanwar Enterprises Pty Limited v Cauchi (2003) 217 CLR 315
United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618
Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15
Category: Principal judgment
Parties: AMC Commercial Cleaning (NSW) Pty Limited ACN 103 612 620 (Plaintiff)
Stephen Keith Coade (First Defendant)
Australian Maintenance & Cleaning Pty Ltd ACN 007 440 995 (Second Defendant)
Representation: Counsel:
T A Alexis SC (Plaintiff)
M A Ashhurst SC / M Seelig (Defendants)
Solicitors:
Rockliffs Solicitors (Plaintiff)
Linacre Lawyers (Defendants)

File Number(s): 2011/109399

Judgment

HIS HONOUR: The plaintiff (AMC NSW) and the second defendant (AMC National) made a "Master Franchise Agreement" (the MFA) on 5 March 2003. On 21 April 2011, AMC National gave AMC NSW notice of termination of the MFA. The notice of termination relied on three grounds (and I paraphrase it):

(1) AMC NSW had engaged in conduct reflecting unfavourably on the business operations of AMC National;

(2) AMC NSW had been engaged in fraud; and

(3) AMC NSW had failed to comply with a notice, given pursuant to a clause of the MFA, requiring it to supply certain specified documents and information to AMC National.

The first and third grounds were based on provisions of the MFA. The second ground was based on a provision of the MFA or, alternatively, on a provision of the Trade Practices (Industry Codes - Franchising) Regulations 1998 (the Code).

The issues

Before setting out the issues, I note that there was prior litigation (the 2009 proceedings) between the parties. Rein J heard those proceedings in March 2010, and gave judgment on 21 July 2010. In substance, AMC NSW succeeded, and indeed obtained an order for indemnity costs. There was an appeal to the Court of Appeal on a discrete issue, on…

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.

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Details

Case: [2011] NSWSC 932
Decision Date: 25 August 2011

CaseChat Overview and Summary

In the case of AMC Commercial Cleaning v Coade, the Federal Court of Australia was tasked with resolving a dispute between a franchisor and a franchisee concerning the termination of a Master Franchise Agreement. The franchisor, AMC Commercial Cleaning, sought to terminate the agreement with the franchisee, Coade, alleging that the franchisee had breached various obligations under the agreement. The franchisee contested the validity of the termination, claiming that it was not done in good faith and sought relief against forfeiture.

The primary legal issues for the court to decide were whether the termination of the franchise agreement was valid and whether the franchisee was entitled to relief against forfeiture. The court needed to consider whether the franchisor was justified in terminating the agreement due to the franchisee's alleged breaches and whether the franchisee's conduct contributed to the events that led to the forfeiture.

In its decision, the court found that the franchisor was entitled to terminate the franchise agreement due to the franchisee's breaches of the agreement. The court rejected the franchisee's argument that the termination was not in good faith and concluded that the franchisor had a legitimate reason to terminate the agreement. Additionally, the court held that the franchisee was not entitled to relief against forfeiture as their conduct did not contribute to the events that gave rise to the forfeiture.

The court's final orders reflected its findings, affirming the validity of the termination of the franchise agreement and dismissing the franchisee's claim for relief against forfeiture. The court held that the franchisor's termination of the agreement was justified and that the franchisee was not entitled to any equitable relief.

Orders