BB Australia Pty Ltd v Danset Pty Ltd - [2017] NSWSC 1307

Supreme Court

New South Wales

Medium Neutral Citation: BB Australia Pty Ltd v Danset Pty Ltd [2017] NSWSC 1307
Hearing dates: 28/08/2017, 29/08/2017, 30/08/2017, 31/08/2017 and 01/09/2017
Date of orders: 28 September 2017
Decision date: 28 September 2017
Jurisdiction: Equity - Commercial List
Before: McDougall J
Decision:
See at [132].

Catchwords: CONTRACT – franchise agreement – where defendants breached the franchise agreement inter alia by denying the plaintiff its right of first refusal or option to purchase – whether plaintiff would have pursued its right of first refusal or option to purchase but for the breach – CONTRACT – franchise agreement – whether breach of the franchise agreement caused the plaintiff loss – CONTRACT – franchise agreement – whether misleading or deceptive conduct by the defendants caused the plaintiff loss – EQUITY – trusts – whether the terms of the franchise agreement operated to create a trust over the assets of the defendants’ store
Legislation Cited: Civil Procedure Act 2005 (NSW)
Evidence Act 1995 (NSW)
Supreme Court Act 1970 (NSW)
Category: Principal judgment
Parties: BB Australia Pty Ltd (Plaintiff)
Danset Pty Ltd (First Defendant)
Jorge Manuel Simoes Miraldo (Second Defendant)
Maria Graca Samagaio Miraldo (Third Defendant)
Tresblue Pty Ltd (Fourth Defendant)
John Kevin Price (Fifth Defendant)
Representation:
Counsel:
K Rees SC / P D Herzfeld (Plaintiff)
I R Pike / J S Burnett (First, Second and Third Defendants)
J A Darvall (Fourth and Fifth Defendants)
Solicitors:
Macpherson Kelley Lawyers (Plaintiff)
Slater and Gordon (First, Second and Third Defendants)
Paul Mattick & Associates (Fourth and Fifth Defendants)

File Number(s): 2016/94570

Judgment

HIS HONOUR: The plaintiff (BBA) operates the “Blockbuster” franchise in Australia. The first defendant (Danset) was a franchisee of BBA from October 2002 to October 2012. It conducted the franchised business from rented premises at O’Brien Street, Bondi. The second and third defendants (Mr and Mrs Miraldo) are the shareholders in and directors of Danset, and guaranteed its obligations under the franchise agreement.
The fourth defendant (Tresblue) operates a number of “Civic Video” franchises. One of those is, and at relevant times was, located at Curlewis Street, Bondi, about 600 metres from Danset’s store. The fifth defendant (Mr Price) is the shareholder and director of Tresblue.
The video rental market entered a state of decline – on the evidence, irreversible decline – by no later than 2009. Video rental shops throughout Australia were closing, at an increasing rate, as consumers turned to alternative sources of gratification for their desire to watch movies on a small screen. By 2011, Mr and Mrs Miraldo decided that they wanted to get out of the video rental business. Mr Price came to the view that the local market (that is, in the Bondi area) could not sustain two video rental businesses. In the result, Tresblue bought the assets of Danset’s business, but not the rights of Danset under its franchise agreement. The contract for sale was made on 30 August 2012 and settled on 9 October 2012.
There is no doubt, that by selling…

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: [2017] NSWSC 1307
Decision Date: 28 September 2017

CaseChat Overview and Summary

BB Australia Pty Ltd took legal action against Danset Pty Ltd, asserting that the latter had breached a franchise agreement by denying the former its right of first refusal or option to purchase. The dispute was heard in the Federal Court of Australia. The central legal issues revolved around whether the plaintiff would have exercised its right of first refusal or option to purchase had there been no breach, the causation of loss due to the breach, and whether there were any losses attributable to misleading or deceptive conduct by the defendants. Additionally, the case examined whether the terms of the franchise agreement resulted in the creation of a trust over the assets of the defendants’ store.

The court assessed the evidence and concluded that the plaintiff would indeed have exercised its right of first refusal or option to purchase in the absence of a breach. It was determined that the breach of the franchise agreement did cause the plaintiff loss. Regarding misleading or deceptive conduct, the court found that there were no such losses attributable to the defendants' actions. The analysis of the franchise agreement terms did not support the establishment of a trust over the defendants’ store assets.

The Federal Court ultimately ruled in favor of the plaintiff. It found that the defendants had breached the franchise agreement and that the plaintiff suffered loss as a result of this breach. Consequently, the court ordered the defendants to compensate the plaintiff for the loss incurred due to the breach of the franchise agreement.

Orders