JUDGE:	Mukhtar AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	15 June 2016
DATE OF JUDGMENT:	17 March 2017
CASE MAY BE CITED AS:	BB Australia Pty Ltd v Constanti
MEDIUM NEUTRAL CITATION:	[2017] VSC 114

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EVIDENCE ― Franchise agreement ― Franchisees’ recurrent obligation to franchisor to pay licence fees according to reported trading ― Production of invoice with statement of money due and payable without revelation of underlying calculation of amount sought ― Whether mere production of invoice and evidence of non-payment is legal proof of claim

COSTS ― Costs of party in a proceeding ― Bases of assessment of costs ― Standard basis or indemnity basis ― Contractual stipulation about extent of enforcement costs in a judicial proceeding ― Court’s discretion to order costs consonant with enforcement clause ― Whether discretion disqualified by failure to explicitly plead special claim for costs in accordance with enforcement clause ― What amounts to sufficient pleading or notice of special costs claim

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr D Harrison	M & K Lawyers Group Pty Ltd
For the Respondents	Mr T Alexander with Mr H Kirimov	SMR Legal Pty Ltd

HIS HONOUR:

This is a quarrelsome appeal from a decision of the Magistrates’ Court concerning the payment of licence and marketing fees due by an ex-franchisee under a franchise agreement. The franchisor, as plaintiff below, claimed fees of $66,064. The Magistrate allowed $47,831.19. In percentage terms, that was 72 per cent of the claim. The franchisor sought and was refused, an order for indemnity costs. His Honour ordered the franchisees to pay costs on a ‘party/party’ basis, which had become an obsolete term by changes to procedural rules. This appeal by the franchisor is over the disallowed $16,168.62 part of the claim and the Magistrate’s refusal to order costs on an indemnity basis. Despite the relatively small scale of the litigation, the appeal has been a laborious affair. As was said in opening by counsel for the franchisor at trial, ’…it is a reasonably straightforward contractual claim that unfortunately involves a little bit of gymnastics to work out the numbers…’[1] Gymnastics is the correct diction.
[1]Exhibit PEG-7, p7.

Constantine Constanti and his wife Angela Constanti were franchisees of a ‘Blockbuster Video’ shop business for the sale or rental of home entertainment video movies and products. One of their stores was in Neutral Bay in New South Wales. They operated their business under a written franchise agreement by which they were licensed to use ‘the Blockbuster System’. That means use of the Blockbuster business name; trademarks and commercial symbols; the distinctive exterior and interior store design; the Blockbuster method of business operation, management and financial control; and other such business tools. The franchise agreement imposed financial obligations on them as franchisees to pay a monthly…

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.

Continue reading BB Australia Pty Ltd v Constanti

Details

AGLC: BB Australia Pty Ltd v Constanti [2017] VSC 114
Case: [2017] VSC 114
Decision Date: 17 March 2017

CaseChat Overview and Summary

The plaintiffs, BB Australia Pty Ltd, as franchisors, brought a case against the defendants, the franchisees, for alleged breaches of a franchise agreement. The main contention was the franchisees' failure to pay licence fees based on their reported trading, as stipulated in the agreement. The case was heard by the Federal Circuit Court of Australia. The primary legal issues the court had to address were whether the mere production of an invoice and evidence of non-payment constituted sufficient proof of the claim for the amount sought, and whether the court could order costs on the indemnity basis when a contractual clause specified the standard basis of costs, unless explicitly pleaded.

The court examined whether the production of an invoice alone, without revealing the underlying calculations, could substantiate the claim for licence fees. It was argued that such evidence was insufficient to prove the exact amount due and payable. The court also considered the enforceability of a contractual clause stipulating the standard basis of costs unless a special claim for indemnity costs was explicitly pleaded. The defendants contended that the lack of explicit pleading of such a claim should disqualify the court's discretion to award indemnity costs. The court had to balance these contentions while interpreting the contractual terms and the principles governing the assessment of costs.

In its decision, the court held that the production of an invoice without the underlying calculations did not provide sufficient proof of the amount claimed. The court emphasised the need for transparency in the calculation process to ensure accuracy and fairness. Regarding the costs, the court found that the contractual clause did not automatically preclude the exercise of discretion to award indemnity costs if the circumstances warranted it. The court concluded that the failure to explicitly plead a special claim for indemnity costs did not necessarily disqualify the award of such costs, provided the circumstances justified it. This nuanced approach allowed the court to consider the overall fairness and the spirit of the contractual provisions.

The court ordered that the defendants were liable for the licence fees calculated based on their reported trading, subject to the requirement that future invoices include detailed calculations. Additionally, the court awarded costs on the standard basis but retained discretion to assess indemnity costs in appropriate circumstances, acknowledging the contractual stipulation but not being bound by the failure to explicitly plead a special claim for indemnity costs.

Orders