Automasters Australia Pty Ltd v Bruness Pty Ltd - [1999] WASC 39

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: AUTOMASTERS AUSTRALIA PTY LTD -v- BRUNESS PTY LTD & ANOR [1999] WASC 39

CORAM: McKECHNIE J

HEARD: 30 MARCH 1999, 7, 9 & 12 APRIL 1999

DELIVERED : 21 MAY 1999

FILE NO/S: CIV 1298 of 1999

BETWEEN: AUTOMASTERS AUSTRALIA PTY LTD (ACN 066 676 239)
Plaintiff
AND
BRUNESS PTY LTD (ACN 078 687 484)
First Defendant
DAVID IAN COOMBES
Second Defendant

Catchwords:

Mandatory interlocutory injunction - Breach of contract - Franchise business - Principles for a mandatory injunction - Turns on own facts

Legislation:

Trade Practices Act 1974 (Cth)

Trade Practices (Industry Codes - Franchising) Regulations 1998

Result:

Injunction granted

Representation:

Counsel:

Plaintiff:     Mr M H Zilko
First Defendant             :     Mr B E S Lauri
Second Defendant         :     Mr B E S Lauri

Solicitors:

Plaintiff:     Deacons Graham & James
First Defendant             :     David Taylor
Second Defendant         :     David Taylor

Case(s) referred to in judgment(s):

Cash Converters Pty ltd v Hila Pty Ltd (1993) 9 WAR 471
Miniskips Ltd v Shelton Pty Ltd (1987) 11 IPR 459
Shepherd Homes Ltd v Sandham [1971] 1 Ch 340

Case(s) also cited:

American Cyanamid Co v Ethicon Ltd [1975] AC 396
Ciavarella v Balmer (1983) 153 CLR 438
Carlton & United Breweries (NSW) Pty Ltd v Bond Brewing NSW Ltd (1987) 76 ALR 633
Cayne v Global Natural Resources PLC [1984] 1 All ER 225
Birch Investments Pty Ltd v Kiap Khee Lim, unreported; SCt of WA; Library No 7396; 12 July 1988
Gregory Lewkowski v Bergalin Pty Ltd, unreported SCt of WA; Library No 7675; 26 May 1989
Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 553
Louinder v Leis (1982) 149 CLR
Murphy v Lush (1986) 60 ALJR 523
Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286
NWL Ltd v Woods [1979] 1 WLR 1294

McKECHNIE J:

Introduction

This is an application by a franchisor seeking to restrain a franchisee from trading under the franchisor's name, goodwill and logo until trial. It is therefore in the nature of an interlocutory injunction of a mandatory kind, the granting of which will obviously have a significant effect upon the franchisee.
The franchisor says it is justified in so acting because the contract between the parties has been brought to an end.
The application has been strongly opposed. Each party has filed a series of affidavits which dispute facts asserted in the opposing side's affidavits. No application was made by either party for leave to cross‑examine the deponents.
I have noted some of the issues in dispute but have not attempted the difficult, well nigh impossible, task of resolving them in this judgment. Rather I have proceeded on what I find to be either common or uncontested facts or inferences to be drawn from such facts.

The parties

The plaintiff whom I shall now refer to as Automasters is the franchisor of automotive service centres throughout Western Australia. It is the largest group in WA and operates in 19 locations including Midland. Mr Douglas Canham is the General Manager. Automasters is the registered proprietor of Australian trade mark No 477432 and is the registered proprietor of the name "Automasters".
The two defendants are interlinked. Bruness Pty Ltd has been a franchisee of Automasters since 3 September 1992. It was granted an exclusive licence to use the Automasters system for a term from 1 July 1997 to 3 September 2002. On the 30 June 1997 the interest in Bruness passed to Mr Coombes who guaranteed its performance. Mr Coombes is a director of Bruness and the manager of Automasters Midland. When referring to the defendants in this judgment I shall generally refer to Mr Coombes as encompassing both defendants.

The franchise agreement

The original franchise agreement was expressed to be a standard franchise agreement between Automasters and a Mr and Mrs P Hinks. It is dated 3 September 1992.
The agreement was assigned to Mr Coombes by a deed of assignment dated 30 June 1997. I will outline the salient points of the agreement. The preamble asserts that Automasters have developed an automotive system and have established a reputation demand and goodwill for the business.
The franchisee wishes to obtain the benefit and advantages of associating with the business. The guarantors guarantee the due and punctual performance of all obligations of the franchisee.
Clause 4(1) deals with intellectual property then provides that immediately on termination the franchisee will cease to trade as Automasters and, in effect, transfer all names back to Automasters.
Clause 10 deals with payments to be made by the franchisee, including a franchise fee and an account service fee.
Clause 14 deals with standards. The franchisee must obtain accreditation in respect of the standards and use the QAM system to ensure the accreditation of the franchisor is protected.
Clause 15 deals with Automasters' obligations. This includes provision of technical, managerial and administrative advice:
Clause 15:3 provides that Automasters will provide a manual. The clause states:
"15.3 Operations & Procedures Manual
(a)The Franchisor has developed and will provide to the Franchisee during the Term with an Operations and Procedures Manual containing the confidential and mandatory specifications, standards and procedures prescribed from time to time by the Franchisor for the operation of the Franchise Business and the maintenance of the System and Image.
(b)The Franchisor may from time to time amend these mandatory specifications, standards and procedures at its absolute discretion and such amendments will form part of the Operations and Procedures Manual."
Clause 16.8 provides:
"Conduct of Business
The Franchisee and its employees will at all times give prompt, courteous, efficient services to all customers of the Franchisee's Business. The Franchisee and it employees will in all dealings with all customers, suppliers and the public adhere to the high standard of honesty and integrity, fair dealing and ethical conduct. The Franchisee agrees not to deviate from the specification standards procedures said by the Franchisor in the Operations and Procedures Manual or else where and in particular to ensure that:
(a)the Premises are open for business at all times during normal commercial trading hours as reasonably specified by the Franchisors;
(b)the Premises are adequately stocked with a well‑balanced selection of the franchise products or permitted alternative franchise products, to regularly replace old stock and to otherwise comply with directions relating to products or alternative products given to the Franchisee by the Franchisor;
(c)the Premises and the Equipment at all times clean, tidy, orderly, painted, equipped and maintained to a standard and in a manner approved by the Franchisor or specified in the Operations and Procedures Manual and, subject to lease obligations, the interior and the exterior of the Premises shall be repainted at least every five years;
(d)the Franchisee and all staff employed in the Franchisee's Business are at all times suitably presented and comply with the dress requirements, if any, specified in the Operations and Procedures Manual.
If at any time the Franchisor is reasonably of the opinion that the Franchisee is not complying with the provisions of this sub‑clause the Franchisor may, without prejudice to any of the other remedies available to the Franchisor including termination of this Agreement, give to the Franchisee a written notice of the steps required by the Franchisor to be taken to ensure compliance with these provisions and the Franchisee shall at its own expense comply with such requirements within the period specified in such notice."
Clause 29 deals with termination. Relevantly cl 29.4 provides:
"29.4 Termination after Notice to Remedy
The Franchisor may terminate this Agreement where the Franchisee or the Guarantors has failed to remedy the breach specified within a period of 14 days of receipt of the notice in writing from the Franchisor requiring the Franchisee to do so where the Franchisee:
(a)fails to pay to the Franchisor any sum due to the Franchisor under the terms of this Agreement;
(b)fails to submit the accurate monthly returns specified in clause 18;
(c)sells or offers for sale any unauthorised franchise services or products/services;
(d)has encumbered the Franchisee's Business or any part thereof other than in compliance with this Agreement;
(e)fails to operate the Franchisee's Business in accordance with the policies, procedure, standards and specifications set forth in the Operations and Procedures Manual;
(f)fails to rectify any breach of the Standards as assessed during the internal compliance audits conducted by the Quality Representative;
(g)operates the Franchisee's Business in a manner that presents a hazard to its employees or the public and fails to take reasonable steps to correct such breach;
(h)breaches any other term of this Agreement or breaches any term of its lease or sub‑lease of the Premises."

The operation and procedures manual

The manual forms an important part of Automasters' business. By cl 36.7 the agreement includes the manual.
The manual provides requirements for transmission of data to Automasters' head office. Franchisees are linked to the head office by computer.
Mr Canham in his affidavit of 25 March 1999 deposes in par 37 that performance of the obligation by a franchisee is important because
"Auto Masters insists on the performance of the above obligations as:
(1)it enables Auto Masters to determine whether or not a particular franchisee is following the procedures;
(2)it enables Auto Masters to calculate what royalties, licence fees and other fees are payable under the Agreement by the franchisee to Auto Masters;
(3)it enables Auto Masters to reconcile the computer‑entered data against the manual copy of the invoice."

Termination of the agreement

On 27 February 1999 Automasters served on Mr Coombes a "Notice of Default of Franchise Agreement". As this notice forms the basis for the subsequent action I shall set out the operative parts in full:
"B (1) By:
(a)clause 14.1 of the Franchise Agreement, Bruness agreed to obtain and maintain accreditation in respect of ISO 9002 of 1987 and AS3902 ("Quality Standards") and use the QAM System developed by the Franchisor to ensure continued compliance with the Quality Standards; and
(b)clause 14.4 Bruness agreed to pay all reasonable costs of the Franchisor incurred in remedying breaches in compliance by Bruness of the Quality Standards including costs of additional audits necessary to monitor subsequent compliance.
(2)By clause 16.8 of the Franchise Agreement, Bruness agreed to operate the Business in accordance with and not to deviate from the policies, procedures, standards and specifications set out in the Operations & Procedures Manual ("Manual").
(3)the Manual provides:
(a)in a section of the Manual titled "Branch Operations" that the original and copies of any invoices raised by Bruness are to be distributed in the following manner:
Original - Administration Centre (Franchisor)
1st Copy -    Customer
2nd Copy -   Branch File
(b)in a section of the manual titled "Document Control" that Bruness shall be responsible to maintain the branch filing system and indexes. Bruness is responsible for the receipt and despatch of documents between its branch and the Administration Centre and between its branch and other branches which shall be via the Administration Centre. Paperwork, Computer Data Entry and Banking are to be done on a daily basis;
(c)in a section of the Manual titled "Control of Quality Records" that Bruness is to ensure that all customer records and financial data are entered on the Computer Management System on a daily basis.
(4)By clause 16.11 of the Franchise Agreement Bruness agreed to observe all covenants and conditions of Bruness's sub‑lease of the Premises.
C.By clause 33.1 of the Franchise Agreement the Guarantor guaranteed to the Franchisor the due and punctual performance, compliance and discharge by Bruness of each and all of its covenants, undertakings and warranties in the Franchise Agreement.
D.(1)       In breach of Clause 14.4 of the Franchise Agreement Bruness has failed to pay to the Franchisor an audit fee of $200.00;
(2)In breach of clause 16.8 of the Franchise Agreement and the Manual Bruness has failed to:
(a)submit invoices to the Franchisor ("the Invoices");
(b)carry out Computer Data Entry on a daily basis; and
(c)ensure that all customer records and financial data are entered on the Computer Management System on a daily basis.
Particulars of the matters referred to in subparagraphs (a), (b) and (c) are contained in a schedule annexed to this notice.
(3)In breach of clause 16.11 of the Franchise Agreement, Bruness has breached its sub‑lease of the Premises by virtue of Bruness's having interfered with the use and enjoyment by occupiers of adjoining business premises of their common property."
Automasters asserts that the breaches were not remedied, that it was entitled to terminate the agreement, and on the 15 March 1999 it terminated the agreement.
Mr Coombes continues to trade as Automasters Midland.

The issues about default

Clause D of the notice specified three matters whereby Automasters alleged that Mr Coombes was in default.

(1) The $200 fee

This matter is quickly disposed of. The fee was eventually paid albeit without admission of liability. As I indicated to counsel at the hearing I would not be minded to make a mandatory injunction in respect of $200 fee that was paid even if late.

(2) Breach of the agreement and the manual

This is the matter upon which issues were joined.

(3) The breach of the sublease

The plaintiff did not advance the sublease breach as a basis for relief in this application.

The relevant portion of the manual

The revised manual provides as follows:
"Agreement with Customer and Booking in
Prior to a customer being advised of the cost and time required for completion Branch Manager shall ensure that the customers requirements have been clearly determined and assessed as being within Auto Masters capabilities.
When the cost and time required are advised to the customer it may be necessary for some further negotiation to reach agreement on the scope of work its cost and time required. During these negotiations, personnel shall at all times be aware of Auto Masters performance capabilities.
Once agreement has been reached and all of the customers requirements have been reviewed, the vehicle should be booked in on the Booking In Sheet (AMB 006-G). As per Appendix 1 & Sample Appendix 2.
When the vehicle is delivered to the Branch, an invoice shall be raised accordingly i.e. Tune, Service, Brakes or Mechanical. The following Data is to be entered in the computer and the invoice printed with the customer details, name, address, vehicle details, model and year. The method of payment must be confirmed and authorisation must obtained before any work is carried out however, if the customer is not avalible (sic) a notation on the invoice i.e. (by phone, as previous arranged, etc.) must be completed.
NB: When the computer system is down the information shall be hand written. (My emphasis)
APPENDICES
AMB 006-G Booking In Sheet.
AMB 006-G Booking In Sheet. Completed Example
Distribution of Invoices
The original and copies of the Invoice are to be distributed as follows:
Original - Administration Centre
1st Copy - Customer
2nd copy - Branch File.
…
Monitoring
All processes are to be progressively monitored and the results legibly recorded on the Invoice.
…
2. The Branch Outlets
The Branch Manager shall be responsible to maintain the branch filing system and indexes. The Branch Manager is responsible for the receipt and despatch of documents between his branch and the Administration Centre and between his branch and other branches which shall be via the Administration Centre. Paperwork, Computer Data Entry and Banking is to be done on a daily basis. No document shall be removed from branch office files without the consent of the Branch Manager.
…
APPENDICES
APPENDIX 1
SCHEDULE FOR TRANSMISSION OF QUALITY RECORDS FROM BRANCHES TO THE ADMINISTRATION CENTRE
Items marked "CORP" are not required to be submitted by Branch Managers of Franchised Stores.
Weekly
Computer Transfer Discs (or effect modem download when requested)
Inspection & Test Status Invoice (Administration Centre Copy) in numerical order and secured.
FORTNIGHTLY
Internal Mail."

Problems with the computer

It is obvious that the nature of this franchise requires that Automasters be constantly advised as to the business being generated through its franchisees. Part of its profit is derived from the turnover. The businesses need to be constantly monitored and decisions made. Mr Canham put it this way:
"This enables the plaintiff to ensure that no franchisees are attempting to evade payment of royalties and also allows the plaintiff to determine how busy the various franchisees are. Levels of work among the franchisees may effect (sic) the plaintiff's marketing and promoting strategy. Because of these matters, the plaintiff insists, through the obligations imposed on the franchisees by the Manual, that invoices be entered into the database daily and hard copies of invoices be provided to the plaintiff weekly (even handwritten when the computer is down)."
On behalf of Mr Coombes it is asserted that there were constant problems with the computer system. He complained many times about it with little success.
Mrs Coombes filed an affidavit. She is an experienced data processor and had the main responsibility of data entry of the invoices. She asserted constant problems with the computer including run time errors, synchronising errors, hanging including inability to use the mouse, and crashing and losing data.
Her assertions are challenged by Automasters and its computer consultant Mr Lapins.
She explains there are many reasons why an invoice cannot be completed the same day and that sometimes it may take weeks or even months to complete a job.
What is clear is that the parties have been in constant dispute over the entry of data into the computer. It is impossible to resolve that dispute on the affidavits. However it is possible to make some conclusions.
Firstly, the manual clearly states that in the event that the computer is down, the entries shall be made manually. The Coombes do not depose that they ever complied with this requirement when the computer was off line.
Secondly, Mr Canham deposed that between the notice of breach and the notice of termination, the breach was not remedied. No invoices were received. Thirty two invoices had still not been received by Automasters.
In her affidavit, Mrs Coombes details various invoices which she said were completed. However, significantly, she did not say when those invoices had been completed by her. In par 19 of her affidavit she asserts that all invoices have been entered and all completed invoices lodged with Automasters. She does not say when this was done.
The conclusion I reach is that during the notice period the breach was not remedied.
I add as an aside the fact that subsequent to these proceedings being instituted Mrs Coombes was able to complete much of the details is indicative that there was no insuperable hurdle to compliance.
Furthermore, I found the explanation in respect of some invoices, namely that they were still awaiting costing, implausible. It does not seem to accord with the business system generally outlined in the affidavits, that customers and the Coombes would still be wanting costings on parts months later.
Clause 8 of the agreement specifically deals with purchase of products, the primary obligation on a franchisee being to purchase from Automasters or its nominated suppliers.

The manual covers the procedure in respect to ordering supplies. If that procedure is followed, lengthy delays are unlikely. Finally, the delay in costings was never raised by Mr Coombes during the notice period. I would have expected this supposed difficulty to have been raised in a timely manner.

The defendants' contentions

Because of the urgency of the matter the defendants did not file a defence or counterclaim. However, counsel for Mr Coombes attacked the plaintiff's case in several areas.

Statement of claim - no cause of action

This submission was made during the early part of the defendants' response without leave. Because it was in time, the plaintiff filed an amended statement of claim.
I consider the amended statement of claim clearly discloses a cause of action.

The defendants' submissions: implied term of reasonableness

Counsel for Mr Coombes asserted that there must be a requirement of reasonableness. The contract might be technically breached but the consequences should not be visited upon a franchisee if the result is unreasonable.
I am not sure that is so. Where parties enter into a contract of mutual obligation and notice to remedy a breach is given, if the breach remains unremedied there may not be much scope for the operation an implied term of reasonableness.
Accepting however for present purposes that the concept of reasonableness is to be implied, having regard to all the circumstances, I do not regard the actions of Automasters in relation to the breach of the requirement to forward the information to Automasters as unreasonable. These notices were the culmination of a long history of default during which no evidence has been given that there was compliance by handwriting the information.
The actual notice of default which triggered the action to terminate the contract must be seen against a lengthy background of non‑compliance.
Mr Coombes received a new computer on 26 November 1998. However despite requests for invoices on 4, 8, 9, 18 and 21 December 1998 there was no compliance and there was no reason advanced as to why there was no compliance.
As a result a notice of default was delivered on 24 December 1998. No action was taken on that notice.
Mr and Mrs Coombes attempt to deal with this notice in their affidavit. From 26 November the problems with the computer asserted by Mr and Mrs Coombes, though denied by Automasters, were intermittent, related to the software and in particular run time errors and synchronising errors. It was not explained how these prevented compliance with the manual.
It is easy to see that the information is vital to Automasters' business even if the service fee in respect of the invoices under consideration might be small in the period under review.

Unconscionable contract

Counsel for the defendants also submitted that Automasters had engaged in unconscionable contract: Trade Practices Act1974 s 51AC.
The onus would be on the defendants at trial to establish that there was unconscionability by Automasters to such a degree as to warrant interference with the franchise agreement.
It is sufficient for present purposes to say that I do not regard the defendants' arguments of sufficient persuasion on this point to convince me that I should decline to grant an injunction.
Some of the argument will have to be supported by findings of fact which can only be made after a trial. While the need for a trial to resolve these issues is clearly not decisive of the question, in my opinion the present state of the evidence strongly suggests that Automasters were entitled to terminate the agreement and, even if there were other motives, the dominant reasons was for non compliance with the manual in respect to invoices.
There is no evidence from which I am able to draw an inference that Automasters is really proceeding against Mr Coombes to force him to sell back his franchise agreement at a figure much below its true market value.
As a related submission counsel for the defendant submitted that the notice of default was invalid because Automasters was in breach of contract. Its breach was said to be failing to deal with the franchisee in utmost good faith. I am not presently persuaded that there is undisputed evidence from which I can draw such a conclusion. There is some evidence to the contrary. Automasters did not proceed on its first notice of default. It tried to work through the problems with Mr Coombes. In the letter from Automasters' solicitors of 16 February 1999, Mr Coombes was requested to attend a meeting to discuss the breaches of the franchise agreement and the options Automasters were willing to make available to rectify the situation. The solicitors strongly recommended that Mr Coombes attend with his legal adviser "as the issues to be discussed are of great significance to your continued interests in your franchise business and immediate future in the Auto Masters systems".
Mr Coombes responded to that letter declining a meeting on the basis in part that:
"… I don't make enough money out of the business to afford me the luxury of taking my legal advisors to a meeting where it would appear that you have already decided what options Auto Masters Australia Pty Ltd are willing to make available to me to rectify the situation."
To some extent Mr Coombes had a point. The internal audit report was not made available to him. No convincing reason was advanced at the hearing as to why it was not given to him, even if in a form which blanked out reference to other franchisees.
However, notwithstanding this matter, there is in fact little, if any, evidence of lack of good faith by Automasters.

Internal audit report

As part of its system, Automasters requires that the franchisee undergo a quality assessment audit from time to time. Such an audit was conducted in October 1998.
On 22 January 1999 Mr Warr and Mr Canham conducted an internal audit. They reported their findings to Mr Coombes in a minute dated 22 January 1999. Various matters of default were there identified. Some of those matters relate to incomplete documentation which does not appear to depend upon computer entry. The affidavit filed by the defendant disputed this report. I have put aside matters where there is a material dispute in the affidavits. Consequently, I make no findings in this regard.

General conclusions

There is a level of dispute about customer complaints and the vagaries or otherwise of the computer system. I accept that the defendants experienced a level of problems with the computer system. I am unable to determine the extent of these problems.
However, in the circumstances I do not consider it was of such a level as to prevent general compliance with the manual. Further, the defendants did not, as required, hand write the entries when the computer was, for whatever reason, down.
I am satisfied that the defendants were in default when the notice to rectify the default was issued. I am also satisfied that they did not remedy the default within the time specified under the notice.
I do not regard as relevant the allegation that Mr Canham was acting out of some form of malice against Mr Coombes because of the ACCC's complaint, complaints about the computer system or the prosecution of a Mr Holland. Those matters are in dispute and cannot be resolved on affidavit evidence alone. However, even if true they do no more than provide a motive for Mr Canham to determine the franchise agreement.
The motive does not affect the result if there has been a breach of the contractual arrangements by failing to comply with the notice of demand.
For the purposes of determining this application I find that there was such a breach. The breach was not trivial and the action taken by Automasters in terminating the contract was reasonable.
It follows from this finding that not only is there a serious question to be tried, but that I consider it highly likely the plaintiff will succeed at trial.

Principles as to interlocutory mandatory injunction

A good exposition of the principles is to be found in Cash Converters Pty ltd v Hila Pty Ltd (1993) 9 WAR 471 per Kennedy J at 483.
The reason for the courts reluctance to grant a mandatory injection is often because as Kennedy J says:
"Such an injunction is usually more wasteful of time and money if it turns out in the end to have been wrongly granted."
For this reason, among others, a court granting a mandatory interlocutory injunction must feel a high degree of assurance that the plaintiff will ultimately succeed and that the injunction will, after a full trial, be shown to have been rightly granted: see Shepherd Homes Ltd v Sandham [1971] 1 Ch 340 per Megarry J at 351.
Where the practical effect of such an injunction is to bring to an end the court action the court should be especially cautious:
"Where a plaintiff brings an action for an injunction, I think that it is, in general, an injustice to grant one at an interlocutory stage if this effectively precludes a defendant from the opportunity of having his rights determined in a full trial … where a plaintiff brings an action and in it seeks an interlocutory injunction on the basis that the defendant has breached the former's rights then justice requires that the defendant should be entitled to dispute the plaintiff's claims at trial, and if the grant of the injunction would preclude this then it should not be granted on an interlocutory basis: per May LJ; Cayne v Global Natural Resources PLC [1984] 1 All ER 225 at 238.
I have borne these admonitions carefully in mind. In the end however, the grant of an interlocutory injunction - whether mandatory or prohibitory - is an exercise in discretion either to do justice or to avoid injustice to either party.
The following factors are relevant to the decision in this case.
1)There is a serious question to be tried.
2)I am satisfied to a high degree that the plaintiff will succeed at trial for the reasons already set out.
3)The balance of convenience
(i)Breakdown of relationship
The words of Woodward J in Miniskips Ltd v Shelton Pty Ltd (1987) 11 IPR 459 at 466 are apposite:
"A franchise arrangement which requires for its success, co‑operation between the parties cannot conveniently be cobbled together by the court after one party has purported to terminate it and has since acted on that basis, particularly when the other party is suing for misrepresentation."
In the present case it is obvious that goodwill between the parties has broken down.
(ii)The agreement: consequences of termination
The agreement by cl 30 provides what will happen once the agreement is terminated. The injunction sought by Automasters is in accordance with the agreement, providing as it does for the prevention of holding out the name Automasters, the return of property and the removal of signage.
(iii)Damage to Automasters
I am satisfied that Automasters' business will be seriously affected if Mr Coombes continues to trade as Automasters Midland. The continued provision of invoices and other information is important to the plaintiff's business and I have little confidence that the defendants' problems in compliance have been overcome.
(iv)Damage to Mr Coombes' business
I am also satisfied that Mr Coombes' business will be adversely affected by not trading under the Automasters' banner. After all, the advantages of so trading are no doubt why he entered into the franchise in the first place. He will not of course be put out of business entirely in the sense that he will be able to trade as an automobile servicer and utilise the personal goodwill he has built up. Yet the effect of an injunction is likely to be substantial. For this reason I have been especially careful to assure myself of the high likelihood of the plaintiff's ultimate success.
(v)Mediation
Upon receipt of the notice terminating the agreement, Mr Coombes appeared before me late on a Friday afternoon seeking some form of relief. His application was incompetent. However I did suggest mediation. Subsequently, it appears that Mr Coombes attempted to have Automasters participate in mediation but was unsuccessful.
The Trade Practices Act s 51AE gives power to make regulations. The Trade Practices (Industry Codes - Franchising) Regulations came into operation on 1 July 1998. The code is prescribed and is a mandatory industry code. The code affected the Automasters' Franchise Agreement with respect to mediation from 1 October 1998. Part 4 sets out a procedure for resolving disputes.
The Code relevantly provides:
"27. Code complaint handling procedure
A party to a franchise agreement who has a dispute with another party to the franchise agreement may start the procedure under clause 29.
28. Choice of procedure
A party to a franchise agreement who has a dispute with another party to the franchise agreement may, at any time, choose to use the procedure under clause 26 or 27.
29. Procedure
(1)the complainant must tell the respondent in writing:
(a)the nature of the dispute; and
(b)what outcome the complainant want; and
(c)what action the complainant thinks will settle the dispute.
(2)The parties should then try to agree about how to resolve the dispute.
(3)For mediation under a franchise agreement:
(a)if the parties cannot agree under subclause (2) within 3 weeks, either party may refer the matter to a mediator; and
(b)if the parties cannot agree about who should be the mediator, either party may ask the mediation adviser to appoint a mediator.
(4)For mediation under this code, either party may ask the mediation adviser to appoint a mediator.
(5)The mediator may decide the time and place for mediation.
(6)The parties must attend the mediation and try to resolve the dispute.
30. Mediation under the code
(1)The mediation adviser must, within 14 days after referral under paragraph 29(3)(b) or subclause 29(4), appoint a mediator for the dispute.
(2)After mediation under this code has started, the mediator must tell the mediation adviser, within 28 days, that mediation has started."
I do not know whether Mr Coombes entirely followed the procedure. However, I am prepared to accept in general terms that he wished to have the dispute mediated and that Automasters refused. This refusal is a significant factor against the granting of an injunction and may in some cases be decisive.
However, in this case I do not regard the initial refusal of Automasters to participate in mediation as decisive.
At the conclusion of the hearing on 12 April 1999 I addressed the parties as follows:
" … I am going to rise for a brief time because I want the parties to clearly - and this is addressed to the parties rather than their lawyers - to clearly understand that I will take this away and I will make a ruling on the mandatory injunction, not by tomorrow and as soon as I am able to do so. One or other party is going to lose on that ruling and the results to either party are going to be very serious.
Now, I can order mediation at this stage but I would not order mediation unless the parties consented to it. However, it seems to me that there are two ways that this action can proceed. Whether or not an injunction is granted it can proceed very expensively for both parties to have the ultimate issues thrashed out, or you can all honestly sit down and try and see if there is a way of resolving your difficulties. There may not be, and I'm inclined to think, looking at the papers, notwithstanding what Mr Lauri has said, that there is an element of truth in what is said, that the second defendant has certainly pushed to the very limit in relation to the plaintiff. At the same time, I think the plaintiff has acted - and maybe should have gone to mediation even if called on.
So what I'm going to do is rise shortly. I do propose to reserve my decision and I do propose to deliver a decision unless mediation were successful, but everybody should understand clearly each party is at risk and regardless of the outcome of this there are going to be very few winners out of a long, drawn‑out litigation. I will rise shortly so the parties can consider that."
As a result the parties did attend before an accredited mediator who had apparently been available earlier. The results of the mediation are, quite properly unknown by me. In the particular circumstances of this case therefore I do not consider that Automasters initial refusal to mediate is decisive because subsequently mediation was attempted.
(vi)Damages
If the plaintiff ultimately succeeds in its actions without a mandatory injunction, its damages are to some extent incalculable. The continued wrongful use of the name and property and the holding out of a franchise by Mr Coombes cannot be fully measured but will be significant. I note in this regard the advertising done by Automasters to promote the group.
If the defendant ultimately succeeds the damages will also be significant. However they are more measurable as the difference (if any) between average turnover while a franchisee and turnover while restrained from holding out as a franchisee.

Conclusion

There is a serious question still to be tried. At this early stage of proceedings a Judge must necessarily be predictive as to the success of that question. My prediction is that it is highly likely the plaintiff will succeed at trial. The plaintiff will only fail if the defendants discharge the onus of establishing an implied condition of reasonableness or unconscionable action or lack of good faith. I assess the chances as low. The balance of convenience strongly favours the plaintiff.
The conclusion is that justice is best served by granting an injunction in terms sought by Automasters.

Citations

Automasters Australia Pty Ltd v Bruness Pty Ltd [1999] WASC 39

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Remrose Pty Ltd v Allsilver Holdings Pty Ltd [2005] WASC 251

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