Bodycorp Repairers Pty Ltd v Maisano (No 8)

THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

S CI 2005 09071

BODYCORP REPAIRERS PTY LTD (ACN 068 589 408)	Plaintiff
v
ANUNIZIATO ENZO MAISANO (also known as MICHAEL MAISANO and MICHAEL MASON) & ORS	Defendants

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JUDGE:	ELLIOTT J
WHERE HELD:	MELBOURNE
DATES OF HEARING:	6-8 (9, before Daly AsJ), 13-17, 20-24, 27 and 30 MAY 2013
FURTHER WRITTEN SUBMISSIONS:	5, 7 JUNE 2013
DATE OF JUDGMENT:	4 SEPTEMBER 2013
CASE MAY BE CITED AS:	BODYCORP REPAIRERS PTY LTD v MAISANO (No 8)
MEDIUM NEUTRAL CITATION:	[2013] VSC 472

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Contract – breach – repudiation – franchise agreement – whether termination unlawful – whether breach by franchisor of essential term – willingness to perform only in manner substantially inconsistent with obligations

Contract – breach – unreasonable restraint of trade

Restitution – claim for work and labour done – flawed method of proving any loss suffered

Tort – inducement of breach of contract – attempt to establish case by inference

Practice and Procedure – application to amend pleadings during trial – leave granted – date from which amendment to take effect – whether new and distinct cause of action - relation back effect of order.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R van de Wiel QC, Mr M Goldblatt and Mr D Yarrow	Frank Sanna
For the 1^st Defendant	Mr T Di Lallo	Oakley Thompson & Co
For the 4^th, 5^th and 6^th Defendants	Mr P Cawthorn SC and Mr P Crennan	Moray & Agnew
For the 7^th and 8^th Defendants	Mr T Messer (until 16 May 2013)	Kempsons

TABLE OF CONTENTS

A. Introduction............................................................................................................................. 1

B. The parties............................................................................................................................... 2

C. Background............................................................................................................................. 3

D. Causes of action pleaded.................................................................................................... 10

D.1     Against Maisano....................................................................................................... 10
      D.2     Against AAMI and Martin...................................................................................... 12
      D.3     Against All States..................................................................................................... 17
      D.4     Against the Melton Defendants............................................................................. 17

E. The contract claims............................................................................................................... 18

E.1     Against Maisano........................................................................................................ 18
E.1.1   The issues....................................................................................................... 18
           E.1.2   The Territory.................................................................................................. 18
           E.1.3   The importance of the terms relating to the Territory............................. 22
           E.1.4   Bodycorp’s conduct with the Territory...................................................... 24
           E.1.5   Was Bodycorp in breach as at 8 July 1998?................................................ 28
           E.1.6   Was Maisano entitled to terminate?........................................................... 30

E.2     Against AAMI............................................................................................................ 33
E.2.1   The AAMI Agreement................................................................................... 33
           E.2.1.1   Has there been a breach?........................................................................... 33
           E.2.1.2   Were the restraints of trade unreasonable?............................................ 37
           E.2.2   The South Melbourne franchise.................................................................. 43

E.3 Against All States....................................................................................................... 46

F. Claims for inducing breach of contract............................................................................. 49

F.1     Relevant principles.................................................................................................... 49
     F.2     Against Maisano........................................................................................................ 51
     F.3     Against AAMI and Martin........................................................................................ 56
F.3.1   Bodycorp Airport West and Heidelberg..................................................... 57
          F.3.2   Bodycorp Glenroy.......................................................................................... 59
          F.3.3   Bodycorp Tottenham...................................................................................... 60
          F.3.4   Bodycorp Highpoint...................................................................................... 61
          F.3.5   Bodycorp Preston........................................................................................... 62
          F.3.6   Martin’s evidence in response...................................................................... 63
          F.3.7   Conclusion....................................................................................................... 74

G. Claims for work and labour done..................................................................................... 75

H. The absence of potential witnesses.................................................................................. 85

H.1 Bodycorp’s submissions.......................................................................................... 85
H.2 AAMI’s submissions................................................................................................ 87

Basis upon which leave was granted on 24 May 2013 to amend the statement of

claim......................................................................................................................................... 88

J. Other matters.......................................................................................................................... 91

J.1     Loss............................................................................................................................... 91
     J.2     Assignments................................................................................................................ 92
     J.3     Failure to mitigate any loss suffered by reason of any inducement................... 93
     J.4     Further submissions relating to Martin’s credit..................................................... 93

K. Conclusion............................................................................................................................. 94

HIS HONOUR:

A. Introduction

In metropolitan Melbourne there were said to be serious problems with the automotive repair industry in the 1980’s and early 1990’s. At that time, there were many independent operators performing repair works for damaged vehicles. It was suggested that there were highly unacceptable business practices. The practices engaged in by vehicle smash repairers were said to include coercive conduct and insurance fraud. It was also suggested numerous participants in the industry colluded to ensure anti-competitive and corrupt conduct was able to permeate and prevail. It was said that this caused serious problems for various insurers in the market.

The plaintiff, Bodycorp Repairers Pty Ltd (“Bodycorp”), put together a business plan (“the Business Plan”) to deal with the issues it perceived existed in the market. The Business Plan involved bringing together a number of independent repairers under a franchise regime operated by Bodycorp. The Business Plan was presented. As a result, a relationship arose between Bodycorp, Bodycorp’s franchisees and the 4th defendant (“AAMI”). In time, a relationship also developed between Bodycorp and the 5^th defendant (“All States”).

For a time, the business relationships appeared to be mutually beneficial. Then things changed. Ultimately, there was a falling out between Bodycorp and AAMI. Around the same time, All States ceased sending work to Bodycorp franchisees. This gave rise to a number of claims being made. Those claims include claims against AAMI, parties related to AAMI (including All States), and former franchisees of Bodycorp. In essence, Bodycorp claims others have wrongfully broken their business relationships with Bodycorp. Bodycorp also alleges AAMI has failed to pay moneys owing to Bodycorp. For the reasons that follow, Bodycorp has failed to prove any of its claims.

B. The parties

As referred to above, Bodycorp is the plaintiff. Bodycorp established a franchise business in the mid 1990s. This franchise had a substantial number of smash repairers as franchisees.

The 1st defendant, Anuniziato Enzo Maisano, (“Maisano”), was a franchisee of Bodycorp from on or about 2 February 1996. This franchise related to the Moorabbin area. From in or about December 1997, Maisano also conducted a Bodycorp shop at Malvern. During the relevant events, Maisano also went by the name of Michael Mason.[1]
[1]Maisano also used the name Michael Maisano, but not in the context of his dealings as a Bodycorp franchisee.

The 2nd defendant was a former partner of Maisano. She died in or about 2010.

The 3rd defendant was alleged, in the alternative, to be the company that conducted the Moorabbin franchise. Maisano was a director of the 3rd defendant. The 3rd defendant was last de-registered on 27 November 2011. It took no active part in the proceeding. It was Bodycorp’s position at trial that the contractual relationship for the Moorabbin franchise was between Bodycorp and Maisano. Accordingly, the absence of the 3rd defendant was of no consequence.

As referred to above, AAMI is the 4th defendant and All States is the 5^th defendant. AAMI is a motor vehicle insurer. AAMI entered into an agreement with Bodycorp in November 1997. This agreement was ultimately formalised and reduced to writing in a document executed on 29 June 1998 (“the AAMI Agreement”).

All States is a company established in the 1990’s to provide assessing services for AAMI’s shareholder companies. All States was established by reason that the shareholder companies, also being insurance companies, wanted to have an entity in place to implement an efficient and cost-effective quoting system for them. In addition to AAMI’s shareholder companies, AAMI itself was also one of the shareholders of All States.

The 6th defendant, Barry Martin (“Martin”), is a former employee of AAMI. He is now retired. From 14 July 1997 until September 2010 he held the position of supply and development manager with AAMI. In that role, his duties included liaising with smash repairers and managing the relationship between AAMI and the repairers. Those repairers included franchisees of Bodycorp.

At the start of the trial of this proceeding, the 7th defendant (“Melton”) and the 8th defendant (“Munro”) were being pursued by Bodycorp. On 16 May 2013, consent orders were made dismissing the case against Melton and Munro (collectively “the Melton Defendants”), with no order as to costs.

C. Background

By 1995, AAMI had introduced what it called its “2-quote system”. This system required a quote to be obtained from 2 smash repairers before AAMI would approve the repairs. The repairers were required to prepare the quotes independently, and were not informed of the amount or other contents of the competing quote. The purpose of the 2-quote system was to prevent colluding between repairers, thereby allowing the possibility of artificially inflating prices quoted for smash repairs. Once the 2 quotes were prepared and submitted, an assessor of AAMI would compare the quotes and then select the most competitive and complete quote; ie not necessarily the cheapest. The AAMI assessors were based at 5 or 6 customer service centres throughout metropolitan Melbourne. It was through these service centres that all quotes and repairs were coordinated by AAMI.

In addition to the 2-quote system, AAMI also had a process in place for approving smash repairers. For this purpose, repairers were put on trial and, if after 6 months they had satisfactorily performed work provided by AAMI, they would then be placed on a panel. The repairers placed on the panel were known as “Recommended Repairers”. It was the Recommended Repairers who would usually get the opportunity to quote for AAMI. Generally, like or similar opportunities were given to repairers who were on trial as to those who were Recommended Repairers.

It was very valuable to a repairer to be given Recommended Repairer status by AAMI. It reflected a high standard of competence and quality. Repairers who achieved this status added substantially to the goodwill of their business. Further, work from AAMI (together with work from All States) represented most of the business done by the Bodycorp franchisees from 1995 to 1998.

Bodycorp was incorporated in March 1995. Later in 1995, at the time Bodycorp approached AAMI, it had 2 directors, who were brothers; namely, Antonio Murdaca (“Murdaca”) and Ralph Murdaca (“Ralph Murdaca”). Bodycorp was the trustee of the Bodycorp Unit Trust, 50% of which was owned by interests associated with Murdaca and 50% of which was owned by interests associated with Ralph Murdaca. In 2002, Ralph Murdaca ceased his involvement with Bodycorp. Ralph Murdaca and his related parties transferred their beneficial interest in the shares in Bodycorp and the units held in the Bodycorp Unit Trust to Murdaca and Repose Nominees Pty Ltd, respectively.[2]
[2]Repose Nominees Pty Ltd at all material times was the trustee of the Murdaca Family Trust. For further detail in relation to these arrangements, see: Bodycorp Repairers Pty Ltd v Maisano (No 7) [2013] VSC 345, [46]-[55].

In or about mid 1995, Bodycorp prepared the Business Plan. This document was presented to senior management at AAMI. Murdaca said the Business Plan formed the basis of the “umbrella organisation” of Bodycorp.

The Business Plan set out perceived problems with the smash repair industry in metropolitan Melbourne. In addition to the matters referred to in paragraph 1 above, those problems were said to include the unsatisfactory state of repair shops, the unbusinesslike manner of repair shop employees, the absence of customer comfort areas and various other matters. It was said these matters gave a negative impression of the people behind the smash repair industry, and of the repair work itself.

In this context, Bodycorp identified its role, as part of the Business Plan, as follows:

In this regard the need exists for a “Bodycorp”, a tightly run franchise headed by a management team with hands on experience in the smash repair industry, as well as organisational and administrative skills necessary to successfully marry operator, insurer and the insured.
…
[Ralph Murdaca and Murdaca] have owned and operated several smash repair shops extremely successfully in the past 15 years, in the recent times controlling 5 outlets and assisting in the management of 3 others.
…
The [group’s] main achievement so far has been to assemble a group of 16 shops which were presentable, whose owners were able to produce a quality repair, properly equipped, reasonably honest and had not had a coloured history in their dealings with insurance companies or the police.

The Business Plan recorded that Bodycorp had inspected and investigated 85 shops in metropolitan Melbourne. This exercise was done in order to identify smash repair shops of appropriate standards and to incorporate them into the Bodycorp group as franchisees.

The Business Plan also discussed various other advantages to the industry said to exist by reason of the Bodycorp franchise arrangements. These advantages included economies of scale in relation to the purchase of products necessary for repairs, and putting in place administrative and service systems that ensured, amongst other things, quality, service, speed, accuracy and cost control.

The Business Plan was a lengthy document consisting of 22 pages, plus a draft franchise agreement and related documents. It is not necessary to set out any further detail. In short, the Business Plan contemplated the Bodycorp franchise expanding beyond the existing 16 franchisees then in place, and, with that expansion, building an ongoing relationship with AAMI.

The Business Plan stated that it was Bodycorp’s intention to forge a strategic alliance between itself and AAMI. The Business Plan suggested Bodycorp provided AAMI with, effectively, the perfect opportunity to establish a mutually beneficial relationship. It propounded that “all the potential is present to commence a formidable joint venture”. As part of the proposed joint venture, Bodycorp’s aim was to achieve Recommended Repairer status for all Bodycorp franchisees.

Murdaca said that, after discussing the Business Plan with AAMI, Bodycorp went about implementing the plan. This included a checklist that Bodycorp would use to ensure that things were done by the franchisees in accordance with Bodycorp’s standards. It also included offering a 5 year warranty to AAMI.

Murdaca gave evidence that he gave the Business Plan to 2 senior executives of AAMI, being Robert Belleville (“Belleville”) and Don Casboult (“Casboult”). However, a contemporaneous memorandum drafted by Ian Rogers (“Rogers”), then of AAMI,[3] suggested the Business Plan was provided to Belleville and Rogers. That memorandum, dated 5 July 1995, indicated AAMI’s acceptance of Bodycorp’s proposal. It stated:

As a result of [the meeting with Bodycorp], [Bodycorp] received from AAMI agreement with their concept and corporate ethos. [Bodycorp] were advised to finalise the list of members of their group and submit them to me as the contact point. Once we were in receipt of this list it was agreed that we would bring the relevant staff members together to meet and discuss the non AAMI recommended repairers on the list.
…
Following that [Bodycorp] were told we would advise [Bodycorp] regarding recommended repairer status for the non-recommended members of the group.
…
The attached list of repairers shows [14] in the group. The first [6] are currently recommended repairers. We need new agreements with them to include Bodycorp in the agreement. The last [8] are non recommended repairers and it is these we need to discuss.
(Emphasis added.)

[3]Rogers subsequently became an employee of Bodycorp.

On 18 July 1995, a number of employees of AAMI met to discuss the status of the Bodycorp franchisees. These discussions included whether or not each of the franchisees ought to either remain or become Recommended Repairers. As a result of this process, some of the Bodycorp franchisees, who previously were not Recommended Repairers, were placed on AAMI’s panel of Recommended Repairers.

Also around this time, AAMI was undertaking a general review of its Recommended Repairers who were not Bodycorp franchisees. AAMI’s own internal correspondence refers to a group called the “Dirty 30”,[4] and the fact that some of their then Recommended Repairers were giving active support to that group.
[4]This description was given to a group of smash repair industry participants who were opposed to AMMI’s 2-quote system for repair work. It was said that these participants actively attempted to undermine the 2-quote system.

From time to time, AAMI continued to consider the suitability of smash repairers to be on the AAMI panel of Recommended Repairers.

A memorandum to the state manager of AAMI dated 8 September 1997 recorded that there were a total of 119 Recommended Repairers in metropolitan Melbourne. Of those, 19 were Bodycorp franchisees (2 of whom were on trial). That memorandum listed the Bodycorp franchisees that had been included on the AAMI panel of Recommended Repairers since March 1995. The memorandum recorded that in September 1995, Abbotsford, Berwick, Coburg, Laverton, Melton, Mornington, Preston and Sunbury were added to the panel. The memorandum also recorded that in 1996, Heidelberg and South Melbourne were added to the panel. Finally, it was recorded that, in May 1997, Moorabbin was included.

The memorandum dated 8 September 1997 also listed Bodycorp franchisees that already had Recommended Repairer status before they joined Bodycorp. Those Bodycorp franchisees were Clayton, Keilor, Maribyrnong, Noble Park, North Melbourne, Reservoir and Spotswood.

Each Recommended Repairer was required to enter into an agreement (“the Recommended Repairer Agreement”) with AAMI. These were introduced by AAMI in the early 1990s. The Recommended Repairer Agreement was in a standard form, though, from time to time, it was varied in minor ways. Each Recommended Repairer Agreement was substantially in the same form, and included the following clauses or clauses similar to the following clauses:[5]
[5]Different versions of the Recommended Repairer Agreements were included in the court book: eg CB 1094, 1107, 1133, 4631. The differences between the different versions are not material to the issues in this proceeding.

In support of the Recommended Repairer Agreement AAMI will agree to:
1.Ensure all customers obtain at least one quotation from the Recommended Repairer …
2.Assess vehicles on a competitive basis which means a minimum of [2] competitive quotes will be obtained on all non-driveable and driveable vehicles.
3.Arrange for at least one quotation from a Recommended Repairer for non-driveable vehicles and, in the absence of a request by the customer to obtain his own quotation and in the absence of a quotation from the repairer to whom the car was originally towed, AAMI will obtain 2 quotations from Recommended Repairers.
…
5.Ensure Recommended Repairers have every opportunity to submit competitive quotations …
6.Provide equal opportunity to all Recommended Repairers by towing all non-driveable vehicles to, where available, AAMI Customer Service Centres to enable truly competitive quotes to be written.
…
8.Maintain records of all repairer transactions. In particular AAMI will provide monthly details of the number of jobs quoted and won along with the total repair cost authorised and average per job. This information will be strictly confidential between AAMI and the repairer. In addition it will assist both the repairer and AAMI to improve performance.
…
10.Pay Recommended Repairers within 30 days of receipt of invoice.
11.Provide to each repairer an AAMI Recommended Repairer sign.
…
13.Not transfer, in the event of the repair business being sold, the entitlements under this Agreement and the AAMI Recommended Repairer sign.
…

Termination of this Agreement shall be made in writing by either party providing 14 days notice of termination.
This Agreement replaces any prior agreement between AAMI and the repairer.

This represented a bilateral agreement between AAMI and the Recommended Repairer. Bodycorp franchisees that achieved the requisite status were required to enter into such an agreement in their own right; ie independent of Bodycorp. Thus, it is important to indentify the relationships that existed between each of Bodycorp, AAMI and its franchisees leading up to the events in November 1997.

Notwithstanding the overtures contained in the Business Plan, including reference to a joint venture, no contractual relationship was entered into, formal or otherwise, between Bodycorp and AAMI before November 1997.[6] It seems, from the communications within AAMI,[7] that at some point in 1995 it might have been contemplated that a tripartite arrangement was desirable. However, whatever might have been discussed (about which I have no direct evidence), it was common ground at trial that no legal relationship was ever created as a result of the 1995 discussions.
[6]Any contention previously made by Bodycorp of any agreement between the parties was not advanced at trial or in any statement of claim in this proceeding: compare recital D to the AAMI Agreement (see par 46 below) in which allegations by Bodycorp to this effect are recorded. See also the release in cl 2.6 of the AAMI Agreement.
[7]See, for example, the memorandum dated 5 July 1995 at par 24 above.

As between Bodycorp and its franchisees, franchise agreements were entered into. It is unnecessary to go into the details of the agreements beyond stating that they contained terms one would expect to see in many franchise agreements.[8] The only matter I refer to presently is the fact that, in the pro forma franchise agreement, restrictive covenants provided restraints upon franchisees conducting business as a smash repairer upon the expiration of the franchise agreement. All of the franchisees had this clause removed prior to entering into a franchise agreement with Bodycorp.[9] In other words, each franchise had only agreed to enter into a franchise agreement with Bodycorp on the basis that no restraint of trade was to be imposed.
[8]I will refer in more detail to the relevant terms of the franchise agreement between Bodycorp and Maisano below.
[9]This matter becomes relevant when considering the AAMI Agreement: see pars 135-156 below.

As may be seen from paragraphs 30 and 31 above, each Bodycorp franchisee who was a Recommended Repairer had a direct contractual relationship with AAMI. Further, in relation to Bodycorp franchisees who were not Recommended Repairers, they fell into 2 categories. Some of these franchisees were placed on trial in an attempt to become a Recommended Repairer, and others were simply given work (referred to as “overflow work”), when there was a surplus of work that could not be handled by Recommended Repairers.

In summary, before 1997, no agreement had ever been reached formally to link each of the relationships together. As a consequence, AAMI was able to deal with the Bodycorp franchisees in such manner as it saw fit, subject to the contractual terms of any Recommended Repairer Agreement. In my view, this is of some considerable significance when considering the events in and after November 1997.

D. Causes of action pleaded

The claims made by Bodycorp are set out in its further amended statement of claim (“FASOC”).

D.1 Against Maisano

Two causes of action are pleaded against Maisano; namely, breach of contract and inducing breach of contract.

Bodycorp alleges that Maisano breached a franchise agreement entered into between Bodycorp and Maisano (“the Moorabbin Franchise Agreement”). The Moorabbin Franchise Agreement was for a fixed term of 3 years, expiring 2 February 1999. Pursuant to the Moorabbin Franchise Agreement, Maisano was required to pay Bodycorp a management fee of 8% per annum of gross payments received by Bodycorp on behalf of Maisano. There was an option to extend the Moorabbin Franchise Agreement for 3 further terms of 3 years each.

It was alleged that on or about 6 July 1998, Maisano breached the Moorabbin Franchise Agreement by ceasing to operate as a franchisee of Bodycorp. The loss claimed by Bodycorp was for the 8% management fee for the remainder of the term (which Bodycorp would have received if Maisano had not ceased operating as a Bodycorp franchisee). Losses were also claimed in relation to rebates Bodycorp says it would have earned.

Further or alternatively, it was alleged that in the period between March 1998 and July 1998, Maisano stated to each specified franchisee (collectively “the Category A Franchisees”)[10] words to the effect that:

(a)It would be in the best interests of the franchisee to terminate its franchise agreement with [Bodycorp]; and
(b)If it did so, the franchisee would continue to be recognised by AAMI as a Recommended Repairer, but would no longer have to pay an 8% management fee to [Bodycorp],
(“the Statement”).

The particulars of the Statement were to the effect that the Statement was oral and made to each of the Category A Franchisees.[11]

[10]The Category A Franchisees were defined in the FASOC to be:

(1)Smash and Scratch Panels Pty Ltd, trading as “Bodycorp Geelong”.

(2)JJ Marvic Pty Ltd, trading as “Bodycorp Clayton”.

(3)Lawpress Pty Ltd, trading as “Bodycorp Caulfield”.

(4)Caledonian Accident Repair Centre Pty Ltd, trading as “Bodycorp Nunawading”.

[11]Further particulars of these allegations are set out in Bodycorp Repairers Pty Ltd v Maisano (No 6) [2013] VSC 265, [4]-[5].

It was alleged that in making the Statement to each of the Category A Franchisees, Maisano was aware of the existence of a franchise agreement between that franchisee and Bodycorp. It was further alleged Maisano intended that the franchisee should decide to terminate its franchise agreement with Bodycorp and, in so doing, breach the agreement. It was also alleged that each Category A Franchisee was, in fact, induced to breach the relevant franchise agreement and ended it before the fixed term of that agreement had expired.

The loss claimed by Bodycorp included not only the loss of the management fee of 8% for the remainder of the term of each of the franchise agreements in question, together with the rebates for that period, but also for 3 further 3 year terms in relation to each franchise. This was claimed on the basis that “each of the former franchisees would probably have exercised its option to extend the term”.

D.2 Against AAMI and Martin

Precisely the same representations the subject of the Statement were alleged to be made by AAMI and Martin between February 1998 and December 1999 to different franchisees (collectively “the Category B Franchisees”).[12] These representations were defined as “the AAMI Statement”.[13]
[12]The Category B Franchisees were defined to mean:
(1)Sunbury Panels Pty Ltd, trading as “Bodycorp Sunbury”.
(2)RP Panels Pty Ltd, trading as “Bodycorp Spotswood”.
(3)Mr Raymond Chaiban, trading as “Bodycorp Heidelberg”.
(4)Quicfix Pty Ltd, trading as “Bodycorp Mornington”.
(5)Maisano, trading as “Bodycorp Moorabbin”.
(6)Melton Bodyworks Pty Ltd, trading as “Bodycorp Melton”.
[13]See also Bodycorp Repairers Pty Ltd v Maisano (No 6) [2013] VSC 265, [9]-[14].

The allegations referred to in paragraph 41 above were made, with the necessary changes as to identity, in relation to AAMI and Martin and the Category B Franchisees. Loss was claimed in a similar vein, including on the basis that it was assumed each of the Category B Franchisees would have exercised its option to extend the term of the franchise agreement for 3 further 3 year terms.

As against AAMI, claims were made for breach of contract. As noted above, Bodycorp alleged an agreement between it and AAMI made in or about November 1997. That agreement was said to provide that, if at any time before 29 June 2000 a Bodycorp franchisee who was a Recommended Repairer ceased to be a Bodycorp franchisee, AAMI would take various steps, the effect of which would be that the former franchisee could no longer conduct its business as a Recommended Repairer of AAMI for 6 months. This agreement of November 1997 was alleged to have been “embodied in a written document dated 29 June 1998”. It was common ground between Bodycorp and AAMI that the document executed on 29 June 1998 contained the entirety of the terms of the agreement between the parties.

The AAMI Agreement included the following provisions:

RECITALS:
…
C.To facilitate the repair of motor vehicles AAMI appoints certain repairers as AAMI Recommended Repairers.
D.By a letter dated 10 November 1997 Bodycorp alleged that in about 1995 AAMI and Bodycorp entered an agreement that authorised or alternatively AAMI represented that Bodycorp was authorised, to appoint repairers as AAMI Recommended Repairers.
E.AAMI denies that it entered any agreement or alternatively made the representation to Bodycorp to the effect alleged.
F.The parties have entered this agreement to clarify their respective rights and interests.
OPERATIVE PROVISIONS
1.AAMI’s Obligations
1.1AAMI must invite the AAMI Recommended Repairers listed in Schedule 1 to execute a new recommended repairer agreement in the terms of Attachment “A”.[14]
[14]Attachment “A” contained the Recommended Repairer Agreement with additional clauses requiring the repairer to notify AAMI if there were, in substance, a material change to its business. It also provided that the repairer would cease to be a Recommended Repairer if it ceased to be a Bodycorp franchisee. There is no evidence to suggest any such agreement was ever entered into.
…
1.3AAMI agrees that if any of the AAMI Recommended Repairers listed in Schedule 1 cease to be a Bodycorp franchisee the (sic) (“former Bodycorp franchise”) at any time within the two year period following the execution of this agreement then:
(a)AAMI will promptly give written notice terminating the AAMI Recommended Repairer Agreement with the former Bodycorp franchisee;
(b)AAMI will take reasonable steps to ensure that AAMI Recommended Repairer signs are not displayed by the former Bodycorp franchisee within 21 days of the giving of notice under clause 1.3(a);
(c)AAMI will in the ordinary course not request the former Bodycorp franchisee to prepare a quote for the repair of a damaged car for a period of six months from the giving of notice pursuant to clause 1.3(a);
(d)AAMI will not re-appoint the former Bodycorp franchisee as an AAMI Recommended Repairer for a period of six months from the giving of notice pursuant to clause 1.3(a); and
(e)AAMI may in its absolute discretion re-appoint the former Bodycorp franchisee as an AAMI Recommended Repairer six months after the giving of notice pursuant to clause 1.3(a).

2.Bodycorp’s obligations
…

2.4 Bodycorp acknowledges and agrees that:
(a)AAMI retains the right to terminate its Recommended Repairer Agreements on the terms of the agreements. Without limiting the generality of this acknowledgement Bodycorp agrees that AAMI may terminate the Recommended Repairer Agreement with any Bodycorp franchisee on the giving of notice in writing by AAMI;
(b)If AAMI terminates a Recommended Repairer Agreement with a Bodycorp franchisee Bodycorp has no right, title, interest or authority to appoint any other person (including a Bodycorp franchisee) to replace the repairer whose agreement has been terminated.
(c)Bodycorp has no right, title or interest in an AAMI Recommended Repairer Agreement or Recommended Repairer sign; and
(d)AAMI has the sole discretion to appoint Recommended Repairers.

2.5In respect of AAMI’s obligations in paragraph 1.3 of this agreement Bodycorp acknowledges and agrees that:
…
(b)AAMI may and in the ordinary course does and will continue to authorise non-recommended repairers perform repair work if the non-recommended repairer’s quote is the most competitive and the AAMI non-recommended repairer has the apparent capacity and equipment needed to perform the repair;

…
(d)AAMI may in its absolute discretion re-appoint the former Bodycorp franchisee as an AAMI Recommended Repairer at any time after six months after the giving of a notice pursuant to clause 1.2(a) or 1.3(a).

2.6Bodycorp hereby releases and forever discharges AAMI from all actions, suits, causes of action or claims of any type in any way related to the subject matter of the letter from Bodycorp to AAMI dated 10 November 1997.

The AAMI Recommended Repairers listed in schedule 1 (for the purposes of cl 1.3) were the Bodycorp franchisees located at (listing them in the order in which they appear) Mornington, Berwick, Laverton, Coburg, Preston, Heidelberg,[15] South Melbourne, Moorabbin and Sunshine. To this list can also be added Melton, which was the subject of a separate clause; namely cl 1.2 (which, in broad terms, was similar in effect to cl 1.3). Curiously, and without any explanation as to why, the FASOC pleaded the obligations imposed on AAMI pursuant to cl 1.3 arose in relation to all Bodycorp franchisees who ceased to be a Bodycorp franchisee; ie the allegation went well beyond the Bodycorp franchisees listed in schedule 1.
[15]There was an issue in the proceeding as to whether Heidelberg was in fact a franchisee.

Having pleaded the obligations set out in cl 1.3 of the AAMI Agreement, Bodycorp alleged that, after consultation with AAMI, Bodycorp terminated the Berwick franchise in or about July 1998. Further, it alleged that by reason of the termination of the Moorabbin and Melton franchises, AAMI provided notices, pursuant to the AAMI Agreement, that each of those 3 former franchisees were terminated as Recommended Repairers and were required to return their Recommended Repairer signs.

The FASOC then alleged that AAMI breached the AAMI Agreement in a number of ways. Bodycorp alleged AAMI either failed to give the requisite notice to the other franchisees that had terminated[16] or, in the case of Moorabbin, Melton and Berwick, revoked the notice which it had previously given terminating the Recommended Repairer status of those franchisees. A further breach alleged was the failure of AAMI to require any of the former franchisees to remove their “Recommended Repairer” signs. Finally, it was pleaded that, by continuing to recognise each of the former franchisees as Recommended Repairers and to provide work to them, AAMI further breached the AAMI Agreement.
[16]These franchisees are confined to the Category A Franchisees, the Category B Franchisees and Berwick: FASOC par 33.

It was then alleged, by reason of those breaches, AAMI had no need to appoint a Recommended Repairer to replace the former franchisees. Bodycorp claimed that, as a result, Bodycorp was unable to enter into new franchise agreements with any new franchisees in the areas serviced by the former franchisees.

As a consequence, Bodycorp claimed it had suffered loss and damage. In substance, this loss was said to arise from the loss of opportunity to enter into new franchise agreements.

A further claim against AAMI was made by Bodycorp for “work and labour done”. Until day 13 of the trial, the claim was for the sum of $700,000. The claim was based upon an allegation that invoices had been remitted to AAMI but had not been paid by AAMI. Although the invoices were for work done by the franchisees of Bodycorp, Bodycorp claimed to be entitled to the moneys the subject of those invoices. It was alleged Bodycorp was an assignee of a right of each of its franchisees to be paid by AAMI for vehicle repair work done by the franchisees for or on behalf of AAMI. This claim for $700,000 was particularised very specifically. It was said that the “financial records of [Bodycorp] disclosed a deficiency of $700,000”. It also said copies of those records were available for inspection.

There was no other basis on the pleading by which Bodycorp sought to quantify this claim. It was not until 22 May 2013 (ie more than 2 weeks after the trial had commenced) that Bodycorp put AAMI on notice that it sought to plead a different basis upon which to establish this claim.

After leave was granted by the court on 24 May 2013, the claim made for work and labour done was increased to $1,445,335. Further, the basis upon which it was calculated was completely different. In short, the means by which this new claim was made was substantially by reference to documents produced by AAMI as part of its business. These documents were used by Bodycorp’s expert, Gregory Blashki (“Blashki”),[17] to prepare an expert report dated 3 March 2013 (“Bodycorp’s Expert Report”), which was tendered at trial.
[17]Blashki is a chartered accountant and an executive director of Pitcher Partners.

Bodycorp also alleged a further agreement made in or about September 1998 between Bodycorp and AAMI. It was pleaded to be partly oral and partly to be implied. It was alleged that Bodycorp would procure that the South Melbourne franchisee would cease quoting for AAMI at its North Melbourne customer service centre, and, in return, AAMI would recognise the Tottenham franchisee of Bodycorp as a Recommended Repairer and would provide quoting opportunities at North Melbourne to the Tottenham franchisee (“the South Melbourne Agreement”).

It was alleged that Bodycorp duly procured that South Melbourne cease quoting at North Melbourne. It was further alleged that, in breach of the South Melbourne Agreement, in December 1998 AAMI ceased to recognise the Tottenham franchisee as a Recommended Repairer and also ceased to request that franchisee to prepare quotes for AAMI. Until 24 May 2013, loss was claimed in relation to the South Melbourne Agreement in the sum of $220,000. Belatedly, the claim was increased to $330,985. Reliance was placed on Bodycorp’s Expert Report to justify the larger claim.

The FASOC also contained a claim alleging certain conduct was in breach of the Trade Practices Act1974 (Cth). Although this claim remained the subject of the pleadings, on day 1 of the trial Bodycorp informed the court that this claim was no longer being pursued.

D.3 Against All States

An agreement was alleged to have been made, in or about September 1995, between Bodycorp and All States. It was particularised as being partly in writing, partly oral and partly to be implied. According to the FASOC, it was agreed that if Bodycorp established a franchise in a particular area and Bodycorp undertook to be responsible to All States for the quality of the repair work done by that franchisee, All States would send work to that franchisee (“the All States Agreement”).

It was alleged that, pursuant to the All States Agreement, between September 1995 and September 1998, All States provided work to the Bodycorp franchisees and Bodycorp was held responsible by All States for the work so provided. It was alleged that, in September 1998, All States ceased to provide work to Bodycorp franchisees and as a result Bodycorp suffered loss and damage in excess of $750,000. This claim was made on the basis that Bodycorp had been denied the opportunity to derive management fees from work that would have been done by Bodycorp franchisees.

D.4 Against the Melton Defendants

As the case has now been dismissed against the Melton Defendants, I shall be brief. The FASOC set out claims for breach of contract against Melton. Further, a claim was made against Munro for inducing breach of contract which replicated the claim that was made against Maisano.

E. The contract claims

It is convenient to deal first with the various contract claims made by Bodycorp.

E.1 Against Maisano
E.1.1 The issues

The issues in relation to the contract dispute between Bodycorp and Maisano are easily identified. Bodycorp and Maisano accept the existence of the Moorabbin Franchise Agreement. They accept it was in writing, was entered into on 2 February 1996 and that it was for a term of 3 years. Maisano admits that on or about 8 July 1998 (ie 2 days after Bodycorp’s alleged date) he ceased operating as a franchisee. He says he did so because the Moorabbin Franchise Agreement was terminated by a letter dated 8 July 1998 sent by Maisano’s solicitors to Bodycorp (“the Termination Letter”). Accordingly, the only real issue is whether Maisano was acting lawfully when he purported to terminate, and ceased to continue to act in accordance with the terms of, the Moorabbin Franchise Agreement.

By his defence, Maisano alleged that Bodycorp breached the Moorabbin Franchise Agreement and thereby repudiated the agreement. Accordingly, the Termination Letter was sent on 8 July 1998, accepting that repudiation and thereby bringing the Moorabbin Franchise Agreement to an end.

E.1.2 The Territory

The breaches alleged by Maisano against Bodycorp are twofold. Both of them relate to appointments or purported appointments of new franchisees by Bodycorp within Maisano’s franchise territory (“the Territory”). There was a dispute as to what the Territory encompassed. There were also issues as to the nature and extent of Bodycorp’s conduct in its dealings with the new, or, at least, proposed new, franchisees.

It would be expected that the Moorabbin Franchise Agreement would make it clear as to what the Territory was. This is not the case. Because of the unsatisfactory state of the documentation concerning the Moorabbin Franchise Agreement, it is necessary to refer to some evidence about its execution, and the events leading up to its execution.

“The Territory” was a defined term in the Moorabbin Franchise Agreement. It was defined by reference to schedule 8. Schedule 8 defined the Territory “[a]s represented in the map attached”. The map attached was a photocopy from page 77 of the Melways (“the Melways Map”). The Melways Map in the court book had no markings on it at all and encompassed an area from, in the north west, Brighton East, to, in the south west, Cheltenham, to, in the south east, Heatherton and to, in the north east, Oakleigh South. More particularly for the purposes of this dispute, it included Bay Road in Cheltenham, from Nepean Highway to Bluff Road (“the Bay Road Area”).

The Moorabbin Franchise Agreement contained in the court book is unexecuted. Bodycorp was unable to produce an executed copy, and had not discovered such a document previously.[18]
[18]That is, it was not discovered as either a document in Bodycorp’s possession or as a document which had previously been in its possession.

When asked about the Territory, Murdaca was not able to give clear evidence about its precise dimensions. He was also unable to give any meaningful explanation as to why the executed document was unable to be produced, other than that Bodycorp had had a number of lawyers over the years. He also could not give an explanation as to why the original signed version of the Moorabbin Franchise Agreement had never been accounted for in any affidavit of documents filed on behalf of Bodycorp.

In light of the fact that an executed version of the Moorabbin Franchise Agreement was not produced, evidence was led by Maisano about the circumstances giving rise to its execution. Maisano never had an executed copy of the Moorabbin Franchise Agreement; upon its execution Bodycorp took the document into its custody. However, Maisano did have in his possession a document in precisely the same form as that produced by Bodycorp, save that the Melways Map had green highlighting specifically identifying the Territory for the purposes of schedule 8 of the Moorabbin Franchise Agreement. The green highlighting showed a smaller area than the entire map on the Melways Map. But most of the Melways Map was incorporated in the highlighted area. In particular, the Bay Road Area was well within the boundaries identified. Maisano gave evidence that this map, as highlighted, replicated the document he and Murdaca executed, being the Moorabbin Franchise Agreement.

Thus, on the 2 unexecuted versions of the Moorabbin Franchise Agreement put before the court, the Territory is either the whole of the Melways Map, alternatively the area within the green highlighting on the Melways Map. Either way, both incorporate the Bay Road Area. Accordingly, unless there were compelling evidence from Bodycorp as to different dimensions of the Territory, there can be no proper basis for suggesting that the Bay Road Area was not within the Territory.

Maisano gave evidence that immediately before signing the Moorabbin Franchise Agreement he and a representative of Bodycorp, Charles Pellegrino (“Pellegrino”) went through an earlier draft Maisano had been given. Maisano said together they went through the earlier draft with the document to be executed and compared them page by page. Maisano said this was done to ensure that the details were the same as the earlier draft, which had been agreed to at an earlier meeting. Maisano also said the agreed area of the Territory was the subject of discussions at the initial meeting between Maisano and Bodycorp (T1180.04). Murdaca did not give any contradictory evidence in this regard.

Pellegrino was an accountant acting for Bodycorp at the time. He was not called to give evidence on behalf of Bodycorp. Indeed, no one was called on behalf of Bodycorp to corroborate Murdaca’s evidence.

Maisano stated that, as part of the execution process, each page was signed, including the Melways Map. Maisano was also able to give evidence that an erroneous address referred to in schedule 3 had not been corrected, as previously requested by Maisano. He said this error was amended as part of the execution process. In summary, Maisano was able to give very specific evidence about this process and, in particular, that the Melways Map as produced by him from his copy was the one the subject of the executed version.[19]
[19]Bodycorp attacked Maisano’s credit. Bodycorp made the submission that at least on 2 occasions Maisano gave false evidence such that s 128 of the Evidence Act needed to be raised. This misrepresents the position; s 128 was raised because of the seriousness of what was being put to Maisano in cross-examination. Maisano was willing to respond to those allegations without seeking a certificate under s 128. There was nothing said by Maisano which established that what he had previously said on oath was false or materially inaccurate.

As I have stated above, Murdaca suggested that the Bay Road Area was not within the Territory. However, his evidence in this regard was very vague. In particular, he was unable to point to any conversation or document which identified what Bodycorp said was the Territory. Indeed, Murdaca stated that at the time it was Pellegrino and one other person that were preparing the maps for the various franchises. When challenged about the size of the Territory, Murdaca put his evidence in terms of his belief as to the Territory rather than giving direct evidence. In closing submissions, counsel for Bodycorp accepted there was no evidence from Bodycorp as to what the Territory was, but submitted, based on Murdaca’s evidence, I should find it did not include the Bay Road Area.

There are some further observations to be made on this issue. Notwithstanding the issue of the Territory was directly raised in Maisano’s defence well before the trial, no allegation was made by Bodycorp on the pleadings as to what it said the Territory was.

Further, outlines of evidence were filed on behalf of the parties. This issue was not referred to in Bodycorp’s outlines. It appears the first time Bodycorp sought to make an issue about the extent of the Territory was when Murdaca gave his evidence-in-chief on day 2 of the trial.

Finally on this issue, evidence was led to demonstrate the integrity of the Melways Map with highlighting, as produced by Maisano. His solicitor gave evidence that in 2000 a brief was sent to counsel which contained the unexecuted Moorabbin Franchise Agreement, including the Melways Map with highlighting. At that time it was a bound document. The solicitor said this bound document was the same document Maisano had discovered in this proceeding and had tendered in evidence. He said he removed the binding himself for the purposes of photocopying and did not rebind the document.

In the circumstances, the only finding properly open to the court is that the Melways Map with highlighting, being the version produced by Maisano, reflects the actual Melways Map in the Moorabbin Franchise Agreement executed by Maisano and Murdaca on behalf of Bodycorp.

E.1.3 The importance of the terms relating to the Territory

It is now necessary to refer to the clauses in the Moorabbin Franchise Agreement relevant to the Territory. Those clauses are as follows:

2.2The Franchisee acknowledges that this Franchise is not an exclusive franchise and that the Franchisor may grant other Bodycorp Franchises outside the Territory and, subject to the prior consent of the Franchisee … inside the Territory.
…
3.In consideration of the Franchisee paying the Franchise Fee and performing all other obligations under this Agreement, the Franchisor will, as and when it deems necessary or appropriate throughout the duration of this Agreement:
…
3.15Subject to … the Franchisee honouring its obligations under this Agreement, not open another Business or grant another Franchise within the Territory without the prior written consent of the Franchisee.

Of their nature, it would be expected that both a franchisor and a franchisee would consider terms concerned with the territory of a franchise to be essential to any agreement to enter into a franchise. In relation to a franchisor, the territory confines the area in which a franchisee may exploit the business sold by the franchisor. Equally, such clauses allow a franchisee to have some protection from competition and to establish some goodwill within a particular area. Although the terms of the particular contract need to be considered, speaking generally, it would be expected that terms of a contract which define or protect the territory of a franchisee would be understood as being essential promises, being of such importance that the parties would not have entered into the contract unless they were assured that both parties would respect the territory of the franchise.[20]
[20]See Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, 137 [47], quoting Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW)Ltd (1938) 38 SR (NSW) 632, 641.2-642.10.

Clause 2.1 granted Maisano the right to operate the business within the Territory. Maisano was required to pay a franchise fee for this right. Having reviewed the whole of the Moorabbin Franchise Agreement, I am of the opinion that Bodycorp’s obligation as set out in cl 3.15, and as reflected in cl 2.2, contains an essential promise, the breach of which would entitle Maisano to terminate.

The evidence shows that there was a direct relationship between the location of a Bodycorp franchisee and the ability of that franchisee to quote for work for AAMI. Also, for work other than for AAMI, the value and potential profitability of a Bodycorp franchise would be likely to be greatly diminished if Bodycorp were able to authorise other Bodycorp franchisees to establish businesses proximate to Maisano. The fact that written consent from Maisano was required before the Territory could be infringed also suggests the essentiality of the terms relating to the Territory.

The question of the essentiality is to be derived from “the intention of the parties as appearing in or from the contract”.[21] However, if it be relevant, the view I have formed is fortified by discussions that occurred prior to the Moorabbin Franchise Agreement being entered into.[22] Maisano gave evidence that Murdaca told him that there was a guarantee that Maisano would get an allocated area and that no one could quote in the area. Murdaca said it would be a restricted area. Further, in cross-examination, Murdaca accepted that the Territory was important to both Bodycorp and Maisano. Murdaca accepted all franchises were governed by a territory.
[21]Tramways Advertising Pty Ltd v Luna Park (NSW)Ltd (1938) 38 SR(NSW) 632, 641.7.
[22]Cf Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, 138 [48].

Accordingly, the terms of the Moorabbin Franchise Agreement (and the discussions between the parties) clearly demonstrate that the parties considered the Territory to be fundamental to the relationship of franchisor and franchisee. Also it is plain that it was the intention of the parties that they act in accordance with the existence and exclusivity of the Territory (subject to the exception of prior consent as expressly provided). In the circumstances, if Bodycorp were to deliberately infringe the relevant clauses by appointing a new Bodycorp franchisee within the Territory without the permission of Maisano, it would be expected that such a breach of contract would justify Maisano terminating the Moorabbin Franchise Agreement if he was so minded.

E.1.4 Bodycorp’s conduct with the Territory

There is no doubt on the evidence that Bodycorp investigated and then pursued the opportunity of appointing another franchisee within the Territory. This occurred in 1998 when the Moorabbin Franchise Agreement was still on foot. The issue is whether the conduct engaged in by Bodycorp actually gave rise to a new franchise or new franchises within the Territory, and thereby breached the Moorabbin Franchise Agreement. There is also an ancillary issue as to what effect, if any, the conduct may have had on Maisano’s business.

Maisano alleges that on 2 separate occasions Bodycorp sought to appoint a franchisee within the Territory. He alleges that in relation to 1 of these, namely Body Line Panel Works Pty Ltd (“Body Line”), he became aware of the appointment in early July 1998. The evidence Maisano gave suggested he was first aware of this issue in April 1998. In relation to the other franchisee, Cheltenham Accident Repair Centre Pty Ltd (“Cheltenham Accident Repair”), he alleges that he learned of this after he had already terminated the Moorabbin Franchise Agreement. However, he relies upon it as justifying his conduct in terminating the Moorabbin Franchise Agreement.[23]
[23]As to which, see: Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359, 370.9-371.3 (Rich J), 373.8 (Starke J), 377.7-378.4 (Dixon J); RW Jaksch & Associates Pty Ltd v Hawks [2005] VSCA 307, [61] (Hollingworth AJA, Ormiston and Eames JJA agreeing).

In relation to Body Line, Murdaca was directly involved in seeking to have Body Line become a new franchisee. Twice he attended the proposed premises at 321 Bay Road, which was within the Bay Road Area. Murdaca did so to assess the suitability of the premises and the business, with the intention of Body Line becoming a franchisee. He even took representatives of All States, including Garry Austin (the national operations manager[24]), to these premises so they could inspect them.
[24]See par 171 below.

Also Murdaca executed a franchise agreement on behalf of Bodycorp in early 1998; it is undated. The franchise agreement has a common seal of Body Line affixed to it. It also has a signature for that company. Murdaca said that after this document was executed he soon found out it was “useless”. He said this was because the person who signed on behalf of Body Line was not a director.

There is also another franchise agreement signed by Body Line. This agreement is dated 25 March 1998, and was executed by Anke Kaufer, who was a director of Body Line at the time. This agreement was also executed by Rogers on behalf of Bodycorp. Rogers was employed by Bodycorp at the time. Murdaca gave evidence that, as the document did not contain his signature, Bodycorp did not enter into any such agreement. Nevertheless, Murdaca did concede that the intention of Bodycorp was to enter into such an agreement.

There are at least 2 difficulties for Bodycorp arising out of these events concerning Body Line. First, there is no specific evidence as to when Bodycorp learned of the apparent absence of authority of the person who signed on behalf of Body Line. Given Murdaca was giving evidence in mid 2013 about events that occurred back in 1998, there is a considerable margin for error as to how soon it was that this position became apparent. Equally, in relation to the document executed by Rogers on behalf of Bodycorp, it is unclear as to when Bodycorp decided not to act in accordance with that signed document. Other evidence would suggest that whichever signed agreement was acted upon by Bodycorp, the intention of Bodycorp to treat neither of these documents as binding did not occur until after 8 July 1998.[25]
[25]See pars 101-108 below.

Secondly, at the time Murdaca, on behalf of Bodycorp, executed the franchise agreement with Body Line, he believed he was executing a legally binding agreement. He gave specific evidence that that was his view. He also met with the director of Body Line personally. Accordingly, regardless of the legal effect of the document, there can be no doubt as to what the intention of Bodycorp was, namely to appoint another franchisee within the Territory (as that term was defined in the Moorabbin Franchise Agreement). The same observation may be made in relation to the document signed by Rogers. Bodycorp’s intention, objectively viewed with the conduct it engaged in, was inconsistent with its obligations under the Moorabbin Franchise Agreement.

I now turn to the other proposed franchisee. The knowledge of Maisano in relation to Bodycorp establishing another alternate franchisee within the Territory arose from a document filed in this proceeding by Bodycorp.

In 2007, Bodycorp sought leave to amend its case by a further amended statement of claim. This proposed pleading attempted to introduce further allegations concerning the conduct of the defendants. Leave to make those amendments was refused both at first instance and on appeal.

It is not necessary to go into the detail of much of the further amended statement of claim as proposed in 2007. It is sufficient for present purposes to note that the amendments included allegations that as “at February [1998], and at all relevant times thereafter” there were franchise agreements in place between Bodycorp and various franchisees, including “Cheltenham Accident Repair Centre Pty Ltd trading as Bodycorp Cheltenham”. The allegations were that the goodwill of Bodycorp had been developed by developing franchises, including “Bodycorp Cheltenham”. Finally, it was suggested that various persons were induced to terminate their franchise agreement, including the franchise agreement in relation to Cheltenham. It was said that this occurred in April/May 1998.

A company search of Cheltenham Accident Repair shows it was registered on 16 June 1998, ie 1 or 2 months after the alleged inducement. The search also showed that from 1 July 1998 (until 8 November 2009) one of its principal places of business was 321 Bay Road, Cheltenham.

Murdaca said that he gave instructions in relation to the further amended statement of claim advanced in 2007. He gave evidence that there were other influences at the time. There was a funder involved and he was also given advice on the various issues. However, his evidence was clear that, having been given advice, he gave instructions as to the content of the proposed pleading in 2007. It follows that in 2007 Bodycorp gave clear and unequivocal instructions that a Bodycorp franchisee was established by Bodycorp in the Territory in 1998.

There is another fact relevant to determining Bodycorp’s intention in 1998. The relationship between Murdaca and Maisano became problematic in early 1998. Murdaca conceded that by February 1998 their relationship had become “strained”. The breakdown in the relationship arose largely out of events concerning another shop at Malvern. Those events give rise to a dispute over moneys paid by Maisano. It is unnecessary to go into that matter here. However, the difficulty in the relationship makes it all the more likely that Murdaca was looking for an alternative Bodycorp franchisee to conduct work in the Territory without the consent or involvement of Maisano.

Therefore, although the facts are not clear as to precisely when the events occurred, there are 2 separate bases upon which it can readily be established by Maisano that Bodycorp intended to establish a new franchise within the Bay Road Area at 321 Bay Road, Cheltenham. It also seems that work was being referred to this new franchise. I draw this conclusion not so much from the representations made by All States to Maisano, but from the fact that when confronted by Maisano with the suggestion of the existence of an alternate franchisee, Murdaca did not deny its existence.[26]
[26]See pars 101-108 below.

As to who the new franchisee was, I cannot be certain. The evidence is incomplete. Also what was pleaded in the proposed further amended statement of claim contradicts some of the objective evidence. However, it is not necessary for me to determine which of the 2 possible franchisees ultimately became the franchisee. I am satisfied on the evidence that at least 1 of them was a franchisee within the Territory.

E.1.5 Was Bodycorp in breach as at 8 July 1998?

The only remaining issue is whether the breach or breaches by Bodycorp were continuing as at 8 July 1998, when Maisano purported to terminate the Moorabbin Franchise Agreement. Given the very extensive lapse of time between these events and the trial, there is considerable uncertainty about precisely when these events occurred. However, there are some matters which, in my view, clearly indicate that it is highly likely the breach was continuing at the time the Termination Letter was sent by Maisano.

First, before 8 July 1998, Murdaca discussed this issue with Maisano and Murdaca never denied the existence of a new franchisee. Maisano learned of another franchisee in the Territory in April 1998. It was because of this, he said he was upset with Bodycorp from April until July 1998. He confronted Murdaca in April, only to be told by Murdaca that the franchisee had been signed up because All States had excessive workload for the area.[27]
[27]As noted in par 86 above, this does not coincide with the pleaded case. The case pleaded was that Maisano became aware of the offending conduct in early July 1998. Leave to amend this pleading to allege an earlier date was refused: Bodycorp Repairers Pty Ltd v Maisano (No 5) [2013] VSC 264; the then proposed amendment is set out in the judgment at [8]. However, the evidence referred to above ultimately was before the court in any event, as a result of the cross-examination of Maisano by Bodycorp’s counsel.

As a result of this information, Maisano contacted All States. A person from All States, by the name of Jillian, informed Maisano that she had been told by Bodycorp to split work between Maisano and the new franchisee in the area. Maisano said he then spoke again to Murdaca about the issue and discussed it with him at length. At no time was there any suggestion by Murdaca that there was not a new franchise on foot within the Territory.

During one of these discussions about the new franchisee, Maisano said it was the last straw and that he was going to get advice about terminating the agreement. Again, there was no suggestion that Murdaca comforted Maisano by stating that there was no alternate franchisee. The last of these conversations was in mid June 1998, when Maisano said to Murdaca that he “was going”. It was accepted in closing submissions that Bodycorp did not dispute this conversation occurred in mid June 1998. When I inquired of counsel for Bodycorp why Murdaca did not say in June 1998 that the new franchise was not going ahead if that was Bodycorp’s actual position, he said he could not answer that. The obvious answer is that as at mid June 1998 when the issue was last discussed, Bodycorp did intend to have (and probably already had) another franchisee in the Bay Road Area.

In summary, there were a number of occasions where Murdaca had the opportunity, prior to the Termination Letter being sent, to indicate to Maisano that there was no alternate franchisee. Notwithstanding that the very subject matter of the discussion was an alternate franchisee taking work away from Maisano, Murdaca said no such thing.

Secondly, after the Termination Letter was sent on 8 July 1998, there was a discussion between Maisano and Murdaca. Again, during that discussion Murdaca made no suggestion that there was no alternate franchisee. Murdaca said in this discussion that he wanted to meet with Maisano to discuss matters.

The fact that a conversation between Maisano and Murdaca took place is recorded in a letter dated 13 July 1998. The letter from Maisano’s solicitors to Bodycorp referred to alleged threats said to have been made by Murdaca in relation to Maisano’s business. The short point is that it does not record any suggestion that Murdaca had said that there was no alternate franchise in the Territory at the time.

Thirdly, and tellingly, in response to a suggestion that the Termination Letter indicated Maisano’s absence of consent to a new franchisee, Murdaca gave evidence under cross-examination that the franchise was not in the Territory and Bodycorp did not need his consent.

On 3 August 1998, solicitors for Bodycorp, somewhat belatedly, responded to the letters from Maisano of 8 and 13 July 1998. They asserted that the factual contention contained in the 8 July 1998 letter concerning the granting of an alternate franchise in the Territory was incorrect. Maisano gave evidence that this was the first time it had been asserted by Bodycorp that there was no alternate franchisee. Based on the evidence before the court, there is no reason to doubt Maisano’s evidence. Indeed, Murdaca never at any time suggested that, prior to 3 August 1998, he disabused Maisano, in their discussions leading up to, or immediately after, the Termination Letter, of Maisano’s belief of an alternate franchisee in the Territory.

It may well be that Bodycorp desisted in having an alternate franchisee after 8 July 1998. It also may be that in 1999 an alternate franchisee did operate in that area (as was suggested by Maisano). In my view, none of this evidence is helpful in determining the issues at hand. The simple question for me was whether or not, as at 8 July 1998, when Maisano purported to terminate the Moorabbin Franchise Agreement, there was a continuing breach of cll 2.2 and 3.15 of the Moorabbin Franchise Agreement. For the reasons set out above, in my view there was. Alternatively, if I am wrong about whether an agreement was actually entered into, there can be no doubt that Bodycorp unequivocally intended to enter into a further franchise agreement in the Territory, and that this intention continued until some time after 8 July 1998.[28]

E.1.6 Was Maisano entitled to terminate?

[28]As to which, see par 114 below.

The final question to determine is whether Bodycorp’s conduct entitled Maisano to terminate the Moorabbin Franchise Agreement. That question is determined by asking:

(1)Whether the conduct of Bodycorp is such as to convey to a reasonable person, in the situation of Maisano, renunciation either of the Moorabbin Franchise Agreement as a whole or of a fundamental obligation under it. Renunciation in this context means conduct which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party’s obligations.[29]
(2)Does the breach of the Moorabbin Franchise Agreement justify termination by Maisano.[30]

In relation to the latter of these 2 questions, even if the breach is not the breach of an essential term, the impugned conduct may manifest an unwillingness or inability to perform in circumstances that are such that Maisano is entitled to conclude that the Moorabbin Franchise Agreement will not be performed substantially according to its requirements.[31] In relation to the former question, the High Court has observed that actions may speak louder than words.[32] It seems this observation might be applicable to both questions. As the High Court noted, there is an overlapping in relation to the 2 questions posed.

[29]Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, 135 [44].

[30]Ibid, 135-136 [44].

[31]Ibid, 136 [44].

[32]Ibid.

The conduct of Bodycorp up until 8 July 1998 unequivocally conveyed to Maisano that it did not intend to perform the Moorabbin Franchise Agreement in accordance with its terms. In particular, from April 1998 through to 8 July 1998, Bodycorp indicated on a number of occasions that it had appointed a new franchisee. Murdaca may have believed that it was not within the Territory, but I have found that he was wrong about this. In those circumstances, Maisano was entitled to conclude that Bodycorp renunciated the Moorabbin Franchise Agreement in relation to a fundamental obligation, namely the exclusivity of the Territory for the purposes of Maisano’s business. That conduct alone entitled Maisano to terminate the Moorabbin Franchise Agreement.

If I am wrong about the classification of cll 2.2 and 3.15 as essential terms of the Moorabbin Franchise Agreement, in any event I find that the conduct of Bodycorp justified termination by Maisano by reason of the deliberate and continuing breach of the Moorabbin Franchise Agreement. The ongoing insistence by Bodycorp that it could maintain another franchisee within the Territory was sufficiently serious to entitle Maisano to terminate, even if cll 2.2 and 3.15 are properly classified as non-essential or intermediate terms.[33]
[33]See Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549, 562.2 (Mason ACJ, Wilson, Brennan and Dawson JJ); referred to with approval in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, 139 [51] (Gleeson CJ, Gummow, Heydon and Crennan JJ).

In circumstances where Bodycorp was confronted with the breach which Maisano reasonably claimed adversely affected his business, and Bodycorp decided to continue with its wrongful conduct, the breach must be viewed as serious. This is particularly so where the evidence suggests that the new franchisee had the direct effect of taking business that otherwise would have gone to Maisano. Even without that evidence, the inference open to be drawn is that a new franchisee located in the Territory would take business opportunities away from Maisano. Given there is only a finite number of quoting opportunities throughout metropolitan Melbourne that would have been available to Maisano, an additional franchisee in the same area, who was able to provide competitive quotes for AAMI’s business, must necessarily affect Maisano’s business adversely.

Further, even if, contrary to some of the evidence, it could be argued that Bodycorp failed to enter into a binding agreement with a new franchisee, the evidence shows it acted as if a new franchise agreement was in place. Bodycorp’s continuing and unequivocal intention to seek to enter into a new franchise agreement and to allow business to occur as if a new agreement were on foot amounted to breach of the Moorabbin Franchise Agreement. Such conduct, of itself, would justify Maisano terminating the Moorabbin Franchise Agreement.[34]
[34]Penola Trading Co Pty Ltd v Sunny Springs Pty Ltd (2009) 24 VR 349, 364-365 [83] (Maxwell P, Weinberg JA and Kyrou AJA).

The onus is on Maisano to establish that the conduct of Bodycorp definitely intimated that Bodycorp no longer regarded itself as bound, or was only willing to act inconsistently with its obligations.[35] Consistent with the onus being on the party acting on a repudiation, courts are slow to infer repudiation.[36] However, the onus has been discharged. The facts indicate that Bodycorp was only willing to perform the Moorabbin Franchise Agreement in a manner substantially inconsistent with its obligations and not in any other way.[37] That conduct entitled Maisano to terminate whichever way the relevant clauses of the Moorabbin Franchise Agreement are characterised.
[35]Larratt v Bankers and Traders Insurance Co Ltd (1941) 41 SR (NSW) 215, 223.10 (Jordan CJ).
[36]For example, Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, 32.9 (Mason J); Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 643.9 (Brennan J); Apriaden Pty Ltd v Seacrest Pty Ltd (2005) 12 VR 319, 334 [64] (Williams AJA, with whom Ormiston and Batt JJA agreed).
[37]Cf Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 647.9 (Brennan J).

In summary on this issue, Maisano was entitled to terminate the Moorabbin Franchise Agreement. The claim by Bodycorp for Maisano failing to perform in accordance with the Moorabbin Franchise Agreement after 6 or 8 July 1998 must fail.[38]
[38]See par 39 above in relation to the allegation referring to 6 July 1998. Bodycorp made no distinction between these 2 dates for the purposes of its submissions.

E.2 Against AAMI

As may be seen from section D.2 above,[39] there are 2 separate contractual claims against AAMI. I will deal with these in the order in which they are pleaded.

E.2.1 The AAMI Agreement

[39]See pars 43-51, 55 and 56 above.

The relevant clauses of the AAMI Agreement have been set out in paragraphs 46 to 47 above.

E.2.1.1 Has there been a breach?

As noted in paragraph 47, there was a preliminary point to address in relation to the ambit of the claims made under the AAMI Agreement by Bodycorp. On its face, the AAMI Agreement was confined to the Bodycorp franchisees expressly referred to in it. There was simply no basis to seek to expand its operation beyond those Bodycorp franchisees. This was effectively acknowledged by Murdaca. He said the “agreement took forever” to get signed up and by the time the parties signed “half the business was gone by then”. Accordingly, I proceed to address the issues raised on this confined basis.

Although AAMI appeared to dispute the issue, there is no doubt that the agreement was originally struck in November 1997. This is acknowledged in correspondence coming from AAMI.[40] However, nothing turns on the point of whether the agreement was entered into in November 1997 or on 29 June 1998. This is because it is pleaded that, whenever the agreement was struck, its terms were embodied in the written document executed on 29 June 1998, being the AAMI Agreement, and the breaches are alleged to have occurred after this date.
[40]By letter dated 3 April 1998, solicitors for AAMI stated that an agreement “was made in November 1997”.

As noted in footnote 15 above, there is some issue about whether or not Heidelberg was a franchisee of Bodycorp. There is conflicting evidence in this regard. It is clear that Bodycorp referred to Heidelberg as a franchisee in some of its correspondence. However, it is also clear that Bodycorp put in place a licence arrangement in relation to that shop.

When confronted with the conflicting evidence, Murdaca was steadfast in his evidence that the relationship between Bodycorp and whoever was running Bodycorp Heidelberg was that of franchisor and franchisee.

Murdaca said a lease, a licence and a franchise were granted to Century Capital Pty Ltd (“Century Capital”), who then effectively on-licensed the operation on 3 separate occasions; first to the Lantieris of Bodycorp Airport West; secondly to Alex and Charlie Fasoulis, and thirdly to Overall Panels, the proprietor of which was Raymond Chaiban (“Chaiban”) of Bodycorp Coburg. Murdaca also said that while Bodycorp itself had signed a Recommended Repairer Agreement with AAMI in respect of Heidelberg, Bodycorp never operated the Heidelberg business.

When challenged, Murdaca conceded the franchise agreement with Century Capital related to Malvern. Bodycorp was unable to produce a franchise agreement for Century Capital that was for the Heidelberg business. Murdaca also accepted that in correspondence with AAMI, Bodycorp asserted it owned the Heidelberg business, and that it had either leased the premises or licensed the business to Alex and Charlie Fasoulis and later to Chaiban.

When the correspondence referred to was put to Murdaca, he maintained it was Century Capital who had granted the respective leases or licenses, in line with the evidence referred to above.

Murdaca also said there was definitely a signed franchise agreement in relation to Heidelberg. None was produced. Murdaca said he would find it and make enquiries. If he did such things, they apparently came to nought. However, it seems there may have been a franchise agreement executed in February 1996. AAMI’s records in 1997 recorded that this was the position.[41]
[41]See par 261 below.

In addition to Murdaca, Mimma Lantieri (“Lantieri”) gave evidence on this topic. She said they leased the shop from Bodycorp, and made lease payments accordingly. She said the Lantieris, through their company, L&M Panels Pty Ltd (“L&M Panels”), were a franchisee at Heidelberg. However, she accepted there was no written franchise agreement between L&M Panels (or the Lantieris) and Bodycorp.

The state of the evidence makes it very difficult for the court to reach a conclusion with any degree of certainty. Given L&M Panels had a written franchise agreement in relation to Airport West, it is possible that it was agreed that that document would apply, with any necessary amendments, in relation to Heidelberg without a further document being required. However, there was no evidence to this effect.

In any event, I am willing to proceed on the basis that L&M Panels was located at Heidelberg and was either a franchisee, or in a contractual relationship with Bodycorp similar to a franchise agreement which could be the subject of a breach if the proprietors of the business were wrongfully induced to end their relationship with Bodycorp. Consistent with this finding, it seems that the contemporaneous documents demonstrate that Heidelberg was being treated as a franchisee.

There is no real dispute that each of the Bodycorp franchisees referred to in schedule 1 of the AAMI Agreement ceased to be Bodycorp franchisees within the 2 year period referred to in cl 1.3 of the AAMI Agreement. However, AAMI did not accept this was the position. AAMI submitted, with the exceptions of Moorabbin and Melton, Bodycorp had failed to prove each of the relevant franchisees left in the 2 year period because the evidence was not specific as to the dates of departure.

Although there is not direct evidence on the point, the only proper inference open is that each of the relevant franchisees listed in schedule 1 of the AAMI Agreement ceased to be franchisees during the relevant 2 year period. This must follow from the fact that each of them had been franchisees for more than a year. The franchise agreements were for a 3 year term.[42] The only basis which might make it possible for any of them not to have ceased lawfully (or otherwise) in the 2 year period would be if they renewed their franchise agreements in the 12 months leading up to 29 June 1998. There is nothing in the evidence to suggest this occurred.[43]
[42]All franchise agreements with Bodycorp were for a period of 3 years.
[43]A schedule of the franchise agreements that were before the court, together with the status of such agreements is attached as Schedule A.

As noted above,[44] the allegations do not include all franchisees listed in schedule 1; they are confined to franchisees that meet the description of Category A Franchisees, Category B Franchisees and are listed in schedule 1. It follows the allegations are limited to Berwick, Heidelberg, Moorabbin and Mornington. To this list, Melton must be added.[45]
[44]See fn 16 above.
[45]This is because Melton was covered by cl 1.2 of the AAMI Agreement.

There was no dispute that, in relation to the relevant franchisees, AAMI either failed to give written notice in accordance with cl 1.3(a) or, with respect to Moorabbin and Melton, withdrew notices previously given under that clause. The evidence in relation to Berwick is less clear. It lost its Recommended Repairer status, but this was said to be because of quality issues, rather than its relationship issues with Bodycorp. In any event, it appears its status was reinstated after it ceased to be a Bodycorp franchisee, but within the relevant 6 month period. It is also common ground that AAMI did not take steps to ensure that the AAMI Recommended Repairer signs were not displayed by those franchisees that ceased to be Bodycorp franchisees. Finally, AAMI’s key witness, Martin, expressly acknowledged that none of these repairers lost its Recommended Repairers status after the relationship with Bodycorp ceased.[46]
[46]Martin stated that 2 of the repairers lost their status “for a short while” but were then reinstated. It is likely, then, that all remained Recommended Repairers for all, or substantially all, of the 6 months after leaving Bodycorp.

Accordingly, there can be no doubt AAMI breached the AAMI Agreement. AAMI accepted this position, at least in relation to Moorabbin and Melton.

E.2.1.2 Were the restraints of trade unreasonable?

The key issue between Bodycorp and AAMI is whether or not the obligations imposed on AAMI pursuant to cll 1.2 and 1.3 of the AAMI Agreement are enforceable or whether they are unreasonable restraints of trade. Of course, the restraints of trade are imposed directly upon AAMI, rather than the Bodycorp franchisees. However, in considering whether or not the restraints are reasonable, the court should also consider the effect the restraints have upon the businesses of the franchisees. It was common ground between all the parties that to be a Recommended Repairer was extremely valuable to the Bodycorp franchisees.[47]
[47]See par 14 above.

By imposing the restraints in cll 1.2 and 1.3, not only did Bodycorp seek to restrict the conduct of AAMI; Bodycorp also sought to shut down a substantial part of the business of its former franchisees while it attempted, or created the opportunity, to establish its own new franchisee in the relevant area. Indeed, Bodycorp expressly acknowledged this was the purpose of the restraints. Bodycorp submitted the benefit to be derived by Bodycorp was the ability to protect the integrity of its franchise network and having the opportunity to procure a Recommended Repairer for a new franchisee in the region served by the former franchisee. This was submitted to be a legitimate business expectation of Bodycorp.

There were a number of contemporaneous statements made by Bodycorp as to why they sought to enforce the restraints against AAMI. For example, in a letter dated 12 June 1998, Bodycorp’s solicitors stated the restraints were “to protect our client’s franchise business from any current or future Bodycorp franchisees leaving Bodycorp”. AAMI submitted this was the very vice the court should find as being unreasonable. Also, both Murdaca and Ralph Murdaca gave evidence to the effect that Bodycorp wanted to be in a position where it could tell its franchisees that if they left Bodycorp they would lose their AAMI Recommended Repairer sign.

There is a further, and critical, fact that needs to be addressed. As set out in paragraph 33 above, the pro forma franchise agreement proffered by Bodycorp to its franchisees contained a restraint of trade in it. However, none of the executed versions of the franchise agreements between Bodycorp and its franchisees contained such a restraint. Thus, it is plain that, at the time each of the franchisees entered into the Bodycorp franchise agreements, they expressly rejected that agreeing to become a Bodycorp franchisee included the imposition of a restraint of trade if that franchise agreement ceased.

In this context, cll 1.2 and 1.3 of the AAMI Agreement must be seen as an attempt by Bodycorp, having failed to impose the restraint itself, to have a third party impose a restraint upon its own franchisees in the event that they ceased to be Bodycorp franchisees. In my view, this factual background at the time the AAMI Agreement was entered into[48] makes it a difficult task for Bodycorp to establish that the restraints the subject of the AAMI Agreement were reasonable.
[48]The relevant time for consideration of whether or not a restraint of trade is reasonable as at the time the contract was entered: Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288, 318.4 (Gibbs J) and the cases there cited.

A restraint of trade may be described as a contract in which one party agrees with any other party to restrict its liberty in the future to carry on trade with other persons not parties to the contract in such a manner as it chooses.[49] Bodycorp accepts cll 1.2 and 1.3 impose restraints of trade. Bodycorp also accepts that it has the onus of establishing that the restraint of trade sought to be imposed was reasonable.[50] To be enforceable, the restraint must afford no more than adequate protection to the interests of Bodycorp.[51]
[49]Petrofina (Gt. Britain) Ltd v Martin [1966] Ch 146, 180D (Diplock LJ).
[50]Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288, 308.3 (Walsh J), 317.8 (Gibbs J); Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269, 319D-E.
[51]See, for example, Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288, 306.2 (Walsh J), 315.10 (Gibbs J).

When a court applies the doctrine of restraint of trade, the relevant matters are not to be considered on legal niceties or theoretical possibilities. They are to be determined by reference to the practical working of the restraint.[52] This includes the effect the restraint may have upon persons who are not parties to the relevant contract.[53]
[52]Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288, 314.4 (Gibbs J) and the cases there cited.
[53]See, for example, Buckley v Tutty (1971) 125 CLR 353, 375.8, 381.3-382.2; Barnard v Australian Soccer Federation (1988) 81 ALR 51, 56.8.

A restraint of trade is contrary to public policy. The general position is that depriving a trader of the liberty to trade is contrary to the public interest.[54] It is void unless it “may be justified by the special circumstances of a particular case”.[55] In order to do this, the covenantee (ie Bodycorp) must establish the restriction is reasonable by reference to both the interests of the parties and by reference to the interest of the public.[56] Reasonableness is a question of law.[57]
[54]Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126, 142 [35] (Gleeson CJ, Gummow, Kirby and Hayne JJ).
[55]Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company [1894] AC 535, 565.4.
[56]Ibid.
[57]Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288, 317.10 (Gibbs J), and the cases there cited.

There are a number of reasons why, in my view, the restraint of trade sought to be imposed is unreasonable.

First, it seeks to severely harm[58] any Bodycorp franchisee who ceased to be a franchisee of Bodycorp, even if this were done lawfully at the end of a franchise agreement. In this regard, counsel for Bodycorp submitted that the use of the word “cease” in cl 1.3 of the AAMI Agreement should not be read down, but should be given its natural and ordinary meaning. He submitted that, even if a Bodycorp franchisee ceased to be a franchisee lawfully (eg the term of the franchise agreement came to an end), it would be the subject of the restraint. This construction of the clause was the only construction contended for by Bodycorp.
[58]One former Bodycorp franchisee described his Recommended Repairer status as his livelihood and as being very significant: T1016.12-.24. He also said it gave him a very strong reason to stay as a franchisee: T1016.27. Another former franchisee said the status could be very important and to cease to be a Recommended Repairer could seriously affect a business and a person’s livelihood: T1094.17-.21.

In circumstances where such a franchisee has received nothing in return for the restraint being imposed,[59] this would clearly be unreasonable in relation to it. This position is fortified by the fact that each Bodycorp franchisee successfully negotiated with Bodycorp not to be the subject of a restraint.
[59]In closing submissions, counsel for Bodycorp accepted the franchisees received no benefit in return for the restraints of trade being imposed.

Secondly, Bodycorp sought to create a restraint of trade at a time when its franchisees were already starting to leave Bodycorp. Complaints were made to Bodycorp by some of its franchisees from 1997 onwards. In particular, a number of franchisees were unhappy about paying a fee of 8% of their turnover to Bodycorp. Indeed, in closing submissions counsel for Bodycorp submitted that the catalyst for the AAMI Agreement, and the restraints of trade agreed upon, was the fact that the Abbotsford franchisee wanted to leave the Bodycorp group. Therefore, Bodycorp was seeking to interfere with the freedom of trade enjoyed by the Bodycorp franchisees at the very point in time when that freedom was either in the process of being exercised, or its exercise was imminent (ie at the expiry of the respective franchise agreements).

Thirdly, the restraint prevents the Bodycorp franchisee from obtaining Recommended Repairer status in circumstances where it would be capable of obtaining that status independently of Bodycorp, either before or after the franchise agreement. Although some franchisees obtained such status while being a franchisee, and most likely with the assistance of Bodycorp, it would be unreasonable then to necessarily tie the ongoing maintenance of that status to remaining a franchisee of Bodycorp.

Nothing in the individual franchise agreements gives rise to this position. And yet counsel for Bodycorp boldly submitted that the court ought to uphold that the only way a franchisee would have been able to keep its Recommended Repairer sign would be to renew the franchise agreement with Bodycorp. He submitted that was a reasonable position because the franchisees in question had obtained their Recommended Repairer status after becoming franchisees. In my view, this circumstance does not make it reasonable for Bodycorp to maintain that, unless a repairer continues to be a franchisee, Bodycorp is entitled to deprive a repairer of the substantial part of its business.[60] Such a position places Bodycorp in an extraordinarily strong bargaining position. It was not the basis upon which the Recommended Repair status was obtained.
[60]For completeness, I note that Bodycorp submitted the restraints of trade should be imposed even if the franchisee had a sign before becoming a franchisee.

Fourthly, the restraint goes well beyond what was reasonable for the protection of Bodycorp’s interests in seeking to have a franchisee with Recommended Repairer status in a particular area. There appears to be no good reason why Bodycorp could not seek to establish a competing business in the area which, if of a satisfactory standard and satisfactory to AAMI, could not obtain Recommended Repairer status in due course (whether at the expense of the former franchisee or otherwise). The evidence shows that AAMI reviewed its Recommended Repairers from time to time. The fact that the restraint made it easier for Bodycorp to achieve this desired outcome does not make it reasonable.

Fifthly, it was highly likely that Bodycorp was seeking to achieve an outcome by the restraint of trade which was futile or had minimal prospects of success. As at 29 June 1998 the relationship between Bodycorp and AAMI was less than harmonious. For Bodycorp to achieve its desired outcome, it required AAMI give Recommended Repairer status to a new franchisee in the relevant area within the 6 month period after cessation. Whether this would occur was entirely within the sole discretion of AAMI.[61] Given the state of the relationship, it was improbable that AAMI would ever agree to such an arrangement. This position is compounded by the fact that before the AAMI Agreement was entered into, AAMI stated in substance it would not be appointing any new Recommended Repairers for the foreseeable future.[62] If it be relevant, this position was maintained by AAMI throughout 1998 and 1999.
[61]AAMI Agreement, cll 2.4, 2.5(d).
[62]Letter from AAMI to Rogers at Bodycorp dated 14 November 1997.

Both individually and collectively, the above factors demonstrate the restraint of trade was unreasonable at the time it was entered into.

For completeness, AAMI submitted it received no advantage in agreeing to the restraints of trade. AAMI submitted that all it obtained were the acknowledgements in cll 2.4 and 2.5 of the AAMI Agreement and they were merely restatements of the factual position as otherwise prevailed. As the issues the subject of the trial have not included such matters, I am in no position to state whether or not those clauses accurately state the true position. In any event, an acknowledgement of the kind given is adequate consideration, even if it reflected the true position, as it precluded Bodycorp from taking proceedings it otherwise might have taken in relation to those matters.[63]
[63]See recital D to the AAMI Agreement in par 46 above.

Indeed, it is likely that the only reason AAMI was willing to give the restraints of trade that it did was because it saw that there was some risk in relation to allegations that Bodycorp might have otherwise made.[64]
[64]Cf Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288, 316.4 (Gibbs J).

In circumstances where AAMI led no evidence as to any adverse effect on its business by reason of the provisions of cl 1.3 of the AAMI Agreement, I am not in a position to find that the effect of those clauses on AAMI’s business is another reason for finding that they are unreasonable. Indeed, the evidence shows that AAMI had a large number of Recommended Repairers throughout metropolitan Melbourne.[65] It is highly likely that the loss of up to 5 Recommended Repairers for a period of 6 months[66] would have very little impact on AAMI’s ability to run its business.
[65]See par 28 above.
[66]At the time the AAMI Agreement was entered into, there was no apparent reason to suppose that each of the relevant franchisees would cease being Bodycorp franchisees at the same time.

Even though the restraints of trade would have a minimal impact on AAMI’s business, this does not overcome the fact that the restraints were for an illegitimate purpose. That purpose compels the court to find that the restraints of trade are unenforceable.

Submissions were made by Bodycorp in relation to the superior bargaining power of AAMI. Those submissions were misconceived. If any unequal bargaining power existed,[67] the circumstances in which unequal bargaining power might be considered relevant to the issue of reasonableness is when the covenantee has superior bargaining power; not the covenantor. This circumstance would weigh against the restraint being upheld as reasonable.[68] However, it does not follow that if the covenantor has the stronger bargaining power, that results in a restraint of trade that is plainly unreasonable being treated otherwise.

E.2.2 The South Melbourne franchise

[67]Both Bodycorp and AAMI had substantial law firms acting for them throughout the course of the negotiations.

In closing submissions, counsel for Bodycorp accepted that the court would need evidence beyond the quoting analyses themselves before it could be satisfied that the submissions of Bodycorp as to the meaning of the “repair cost $” amounts represented that for which Bodycorp contended. I was not taken to any document relating to the preparation of the quoting analyses which could so satisfy me.[113]
[113]I was taken to one document authored by Martin in which he referred to the figures in the “repair cost $” column as “income”. However, this was an internal document of AAMI prepared in September 1997 and was concerned with comparing different groups who did repair work for AAMI. Martin said it was an error to refer to those figures as “income”, and that they should have been referred to as “authorised amounts”. I accept this evidence. All credible evidence on this topic shows Martin did make an error on this occasion.

There are further matters that seriously undermine the probative value of the evidence led by Bodycorp in relation to this claim.

Both Blashki (Bodycorp’s accounting expert) and AAMI’s accounting expert, Geoffrey Sincock (“Sincock”),[114] gave evidence that the usual way such a claim would be made would be on the basis of comparing invoices issued with the payments made. Blashki stated you would also need the bank statements to prove the accuracy of such source documents. The fact that Bodycorp has failed to produce any reconciliation between payments and invoices issued is a glaring deficiency in Bodycorp’s case. Although loss might be proved by other means, it is telling that there has been no attempt to try and verify the claim made, or even part of the claim, by such a process.
[114]Fellow of the Australian Institute of Chartered Accountants and partner of Deloitte Touche Tomatsu.

The deficiency is all the more glaring by reason of some of the documentation that was provided to Blashki. Blashki was actually supplied with a large number of invoices, cheque remittances and payment advices under cover of Bodycorp’s letter of instructions to Pitcher Partners dated 21 November 2012. However, Blashki did not (and presumably was not expressly instructed to) look at any of these documents.

Blashki said he did not look at them for 2 reasons; first, the task would have been enormous and, secondly, even if he had done it, Blashki was not “in a position to prove whether they were complete, therefore reliable”. In short, it is clear Blashki was not confident in the reliability of the materials with which he had been supplied.[115] Murdaca was also unsure whether all the relevant invoices had been produced by Bodycorp.
[115]See further, Blashki’s comments at T1699.15-1700.17.

As noted in Bodycorp’s Expert Report by Blashki, “many key records that would normally be relied upon” were not made available to Blashki. They were also not made available to Sincock. No explanation was provided as to why such documentation, including “general ledgers, cash books, revenue reports, expense details, and debtors and creditors ledgers” had not been provided by Bodycorp.[116]
[116]The quoted items are from Bodycorp’s Expert Report, par 1.4.1.

Because of the state of the documentation provided to Blashki, he said in performing his task he had to do estimations where there were missing records. He said he had to extrapolate from the limited information that he had. The gaps in the information were not only from Bodycorp’s records, but also in relation to missing quoting analyses from AAMI. Blashki also accepted that matters of significance in Bodycorp’s Expert Report were only capable of understanding on the basis of assumptions he was given. One of the assumptions made, that permeated the whole of Bodycorp’s Expert Report, was that the figures in the AAMI quoting analyses represented the income of each repairer. As I have found, this assumption was incorrect.

Bodycorp bears the burden of proof not only in relation to establishing it suffered the loss claimed by reason of non-payment, but also in relation to the amount of loss it says it has sustained. It must do this on the balance of probabilities with as much precision as the subject matter reasonably permits.[117]
[117]Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257, 266 [37]. We are not here concerned with hypothetical facts in relation to the loss claimed, to which different considerations may apply in relation to the assessment of an amount (as opposed to causation and the existence of the loss): Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 355.5 (Mason CJ, Dawson, Toohey and Gaudron JJ), 367.5 (Brennan J). Accordingly, Bodycorp’s reliance on Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167, 182.8-183.8 and Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1979) 146 CLR 249, 284.5 is misplaced.

If Bodycorp had put the proper business records before the court, it would have been a relatively straightforward exercise to establish whether or not Bodycorp had been paid for all of the invoices rendered. It has failed to do this. Rather, Bodycorp has invited the court to speculate and draw conclusions based on documents which were not prepared for the relevant purpose. In those circumstances, it is my view that it has not satisfied the onus it bears in relation to establishing the loss claimed.

There was 1 type of Bodycorp record relating to claims actually made. This document type was entitled “claim reconciliation sheet” (or similar words, depending on the year) and provided information for a particular financial year. The status of such documents was entirely unclear. No one from Bodycorp gave any evidence in relation to them.

When Blashki was asked what the document was, he was unsure and struggled to remember what his instructions were on the topic. The documents were admitted into evidence as they were tendered by agreement as part of a bundle of documents put before the experts.

There are a further matters relevant to the probative value of the quoting analyses as a measure of the loss claimed.

Bodycorp called 6 witnesses who were former Bodycorp franchisees or officers of former Bodycorp franchisees. None of these witnesses gave evidence with respect to the relationship between the figures contained in the quoting analyses provided by AAMI and the actual amount of work performed. It would be expected that each one of them would be in an ideal position to corroborate Murdaca’s evidence if it were accurate. But none of them did so. This lack of evidence was even more telling given that some of the former Bodycorp franchisees expressly referred to the quoting analyses in their evidence.[118]
[118]See T996.16-.23, 1097.25-1098.01, 1112.19-.26.

Further, there was an unreality about the basis of the claim given its amount. The amount claimed represented 8% of the invoices alleged to be missing or unpaid. This means that, for the claim to be valid, the invoices themselves would need to total many millions of dollars.[119] It seems highly unlikely Bodycorp would have allowed such significant amounts to go unpaid without being able to substantiate its claim at a time proximate to the times in question.
[119]The figure put forward by AAMI was approximately $14 million. This amount was not challenged by Bodycorp.

Finally, on this topic, I refer to the observations in Bodycorp’s closing submissions about the absence of any cross-examination of Murdaca in relation to the accounts of Bodycorp. Ralph Murdaca was cross-examined on these accounts, but not Murdaca. Bodycorp submitted that the uncontroverted evidence of Ralph Murdaca was that Murdaca was primarily responsible for the accounts.

There are a number of responses to this. First, ultimately the accounts were not relied upon to establish the loss claimed. Secondly, the evidence that Murdaca was primarily responsible for the accounts was only given by Ralph Murdaca after Murdaca had completed his evidence. Thirdly, the outline of evidence filed on behalf of Ralph Murdaca expressly dealt with this topic.[120] In those circumstances, AAMI cannot be criticised for directing its cross-examination to Ralph Murdaca, rather than Murdaca.
[120]Outline of evidence of Ralph Murdaca dated 3 April 2013, [16].

In concluding, I observe that Blashki said the quoting analyses were not documents that would normally form part of the accounting records of a company. He did not know whether they reflected the accounting records of AAMI.

Blashki properly acknowledged that if the quoting analyses did not record the income of the Bodycorp franchisees in question, then all calculations he made on that assumption would be unreliable. Blashki also said if this assumption concerning income was incorrect then the methodology he adopted would be incorrect. Accordingly, this claim cannot be substantiated.

H. The absence of potential witnesses

H.1 Bodycorp’s submissions

Bodycorp invited the court to draw inferences based on the submission that AAMI failed to call a number of potential witnesses. In so doing, they relied upon the rule in Jones v Dunkel.[121]
[121](1959) 101 CLR 298, 308.5, 312.6, 320.8-321.2.

Recently, the Court of Appeal[122] concisely stated when the relevant inference may be drawn, namely:[123]

… where, as a consequence of the issues raised during the course of the evidence, an unexplained failure to call witnesses may lead to an inference that the uncalled evidence would not have assisted the party’s case. The rule permits the trier of fact to take that into account in deciding whether to accept a particular piece of evidence which has been put in issue.
(Citation omitted.)

[122]Androvitsaneas v Members First Broker Network Pty Ltd [2013] VSCA 212 (Redlich and Priest JJA and Macaulay AJA).

[123]At [30]. See also Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361, 384-385 [63]-[64].

The first submission on this issue was that each of Belleville, Casboult and Oswald (all AAMI executives) and Adams (AAMI’s solicitor) should have been called in relation to the AAMI Agreement and the relevant evidence from November 1997 to June 1998.

There is no substance to this submission. There was no issue between the parties that the written document comprising the AAMI Agreement reflected the agreement between the parties. Nothing further needed to be before the court (and perhaps may not have been admissible before the court in any event[124]).
[124]Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 352.2-353.3.

Secondly, without dealing with matters individually, it was submitted that these AAMI executives and others, together with Adams, ought to have given evidence in relation to a number of other events. These events were referred to by way of contemporaneous documentation, including file notes, memoranda and notices. I can see no reason to draw any inference from the absence of these witnesses in relation to such matters. The contemporaneous documents were in evidence. In large part they spoke for themselves. Further, it is not incumbent upon a defendant to call witnesses to fill gaps that may exist in a plaintiff’s case.

Thirdly, it was submitted by Bodycorp that Helen Thompson and Sam Sorrenti ought to have been called. These officers of AAMI had been involved in investigations and audit work in relation to allegations by Bodycorp that AAMI had failed to pay moneys owing. Again, I can see no need to draw any inference by reason of their absence. It is a matter for a plaintiff to prove its case on loss. If it is unable to even establish a prima facie case, there is no obligation on a defendant to call evidence to purport to meet a case that has not been made out.

Fourthly, it was further submitted that Joseph and Perryman should have been called to give evidence regarding AAMI’s dealings with Bodycorp and its franchisees from the period between 1995 and 14 July 1997. It was said these witnesses were relevant to the “change in the philosophy” that Martin brought to the relationship with Bodycorp.

The dealings relevant to the issues in this case were those from well after July 1997. In my view, the fact that there might have been a different type of relationship when Perryman and Joseph were in charge does not address the issue of what in fact the relationship was at the relevant times. In short, evidence of the matters referred to would have been marginally relevant, at best.

Fifthly, it was submitted that a previous state manager for AAMI, Anthony Durakovic (“Durakovic”) ought to have been called by AAMI to give evidence concerning his dealings with Lantieri and the direction made to Martin to reply to her letter of 28 October 1998. Both pieces of correspondence were in evidence. The documents speak for themselves. It is difficult to contemplate what the then state manager of AAMI might have said by way of oral evidence that would be relevant to the issues at trial. The submissions of Bodycorp did not descend to such detail. I can see no proper reason to draw any inference.

Sixthly, a submission was made in relation to Durakovic and Kay, another AAMI executive. It was submitted they should have given evidence concerning an instruction in June 1999 not to use any new Bodycorp franchisee and to wind back Bodycorp Malvern. This instruction was referred to in a memorandum of Martin.[125] Again, I do not follow what might have been added by these witnesses. The fact that an instruction was made was already in evidence. In any event, I was left to speculate as to what the significance of their absence was as no detail was given as to why these witnesses should have been called.
[125]See par 293 above.

In summary, I cannot see any substance in relation to any of the submissions of Bodycorp in relation to the absence of witnesses. Indeed, in a case of this size and in relation to events so long ago, it is highly likely that an approach by a party to call every possible relevant witness would be contrary to the obligations imposed by reason of the overarching purpose in civil litigation to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.[126]

H.2 AAMI’s submissions

[126]Civil Procedure Act 2010 (Vic), ss 7, 10, 11, 16, 19, 23, 24, 25.

AAMI submitted inferences ought to be drawn from the fact that none of the Category B Franchisees were called.

For reasons already explained,[127] these witnesses could not properly be considered as witnesses who would expect to be called as part of the case of Bodycorp. Put bluntly, they could not sensibly be considered to be “in Bodycorp’s camp”. Accordingly, there is no issue of an unexplained failure to call such witnesses.
[127]Bodycorp Repairers Pty Ltd v Maisano (No 6) [2013] VSC 265, [24]. See also pars 215-218 above.

Basis upon which leave was granted on 24 May 2013 to amend the statement of claim

As previously observed, leave was granted to Bodycorp to amend its statement of claim on 24 May 2013. As the application was heard and determined during the course of trial, I reserved for later argument the question of whether or not the order granting leave ought to be effective from that date rather than the date upon which the proceeding commenced. I now turn to consider that question.

AAMI relies upon the decision of the Court of Appeal in Agtrack (NT) Pty Ltd v Hatfield[128] in seeking to have the order made on 24 May 2013 only come into effect from that day. Relevantly, the order granting leave permitted the introduction of paragraphs 42A to 42C to the statement of claim, together with an increase in the amount claimed from $700,000 to $1,445,335.
[128](2003) 7 VR 63.

Paragraph 42A did no more than refer back to an existing allegation, namely paragraph 41(b), and alleged that those matters gave rise to an indebtedness.

Similarly, paragraph 42B did no more than refer back to paragraph 41(c) of the existing pleading, and alleged by reason of that allegation AAMI was indebted to Bodycorp.

In substance, the new allegation was contained in paragraph 42C which stated that AAMI wrongfully made payments to Bodycorp franchisees rather than to Bodycorp directly.

In my view, the amendments as allowed do no more than amend a cause of action that is already pleaded. The existing cause of action complained that moneys owing to Bodycorp by AAMI for work done by Bodycorp’s franchisees had not been paid to Bodycorp by AAMI. That remains the cause of action. In substance, the new paragraph 42C is an attempt to preclude AAMI from stating that the moneys had been paid, albeit to Bodycorp franchisees, and that these payments therefore discharged the debts that were said to be owing to Bodycorp. In short, in no way can the amendments be characterised as introducing “a new and distinct cause of action”.[129]
[129]See Agtrack (NT) Pty Ltd v Hatfield (2003) 7 VR 63, 88 [43] (Ormiston JA, with whom Chernov JA and O’Bryan AJA agreed). See also at 85-86 [39]-[40], 87-88 [42], 89 [44].

The substance of the submissions made by AAMI was that the allegations now seek to introduce additional facts and a different means by which to prove the claim. I agree with those observations. However, a variation in the means by which the same cause of action might be proved does not attract an exception to the “relation-back” effect of the amendments.[130]
[130]Ibid, 86 [41].

In AAMI’s defence to the new allegations, AAMI alleges that Bodycorp represented to it in September 2000 that it would not seek to recover any moneys paid by AAMI directly to Bodycorp franchisees (“the Non-Recovery Representation”). AAMI pleaded that it relied on the Non-Recovery Representation to its detriment by not keeping and retaining full and complete records concerning direct payments to Bodycorp franchisees. It is further pleaded that as a result of the Non-Recovery Representation and the resulting detriment, Bodycorp is estopped from advancing the claims in paragraphs 40 to 43 of the FASOC. Given my findings in section G above,[131] it is not necessary to consider this matter in full. I will address this defence briefly.
[131]See pars 305-347 above.

The genesis of this defence is a letter dated 12 September 2000 sent by Bodycorp to AAMI. That letter referred to some issues Bodycorp had outstanding in relation to its tax returns and accounting records. According to the letter, a sum of $170,503.27 had been identified as claims for which Bodycorp had not received any payment from AAMI.

The letter stated that Bodycorp was seeking to ascertain whether any of its repairers or other persons have received payment from AAMI for the claims. Bodycorp said that any information provided by AAMI would be then remitted to the Australian Tax Office so that Bodycorp’s accounts could accurately reflect its income and profitability.

The letter sought a response from AAMI within 2 weeks. It acknowledged that obtaining the information would cost AAMI money. It agreed to allow that cost to be passed on to Bodycorp. It then stated:

If it transpires that AAMI has paid repairers directly on some or all of the listed claims, Bodycorp is not seeking any recourse against AAMI over this.

Martin gave evidence to the effect that, given the staleness of this proceeding, AAMI no longer had records available to it in relation to questions raised by Bodycorp about AAMI’s accounting systems. Given that the relevant events are approximately 14 to 18 years ago, this is hardly surprising. He also gave uncontested evidence that the computer systems of AAMI had changed since the time when the relevant payments were made.

In the circumstances, where the allegation is being made in 2013 for the first time, AAMI has been effectively precluded from having the ability to defend allegations (such as they are) about non-payment to Bodycorp on the basis that they were paid to Bodycorp franchisees rather than Bodycorp.

It is my view that each of the elements of an estoppel[132] is made out. Accordingly, to the extent the claim for non-payment for work and labour done relies upon non-payment because of payment to Bodycorp franchisees, Bodycorp is estopped from making it.

J. Other matters

J.1 Loss

[132]Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428.8-429.4 (Brennan J).

In light of the findings I have made, it is strictly unnecessary for me to deal with a number of additional matters raised by the parties. In case the proceeding were to go further, I make the following brief observations.

Insofar as any claim made by Bodycorp for loss and damage relies upon a lost opportunity, because Bodycorp alleges it lost the opportunity to receive franchise fees for further terms of a franchise agreement, I assess that opportunity as having a value that is negligible or nil. In relation to each of the franchisees that left Bodycorp, there appears to be no basis to suggest there was any prospect of them remaining with Bodycorp at the end of the expiry of the original term.[133] It is clear that each franchisee was free to leave the Bodycorp group upon the original term lapsing.
[133]Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 355.2 (Mason CJ, Dawson, Toohey and Gaudron JJ), 364.1 (Brennan J).

The 1 qualification to what has been said in the previous paragraph is that, in relation to the Category A Franchisees and Category B Franchisees who also are referred to in schedule 1 of the AAMI Agreement (namely Berwick, Heidelberg, Moorabbin and Mornington, together with Melton),[134] there might be an argument that, if the restraints of trade were enforceable (contrary to my findings), there was more than a negligible opportunity that Bodycorp might persuade those franchisees to renew their franchise agreements. However, no factual evidence was led in this regard. In the circumstances, I would still find the lost opportunity to be negligible or nil.
[134]See paragraph 132 above.

In addition, to the extent that Bodycorp’s claim for loss is on the assumption that, if the existing franchisee did not renew, a new franchisee would take its place in the area, that assumption has no basis in fact. It was not alleged that a new franchisee of Bodycorp would be entitled to Recommended Repairer status. The absence of such an allegation is, no doubt, because appointment to Recommended Repairer status was entirely in the hands of AAMI.

Given the entirely unsatisfactory state of the relationship between Bodycorp and AAMI from approximately mid 1998 onwards, there was no prospect whatsoever of a new franchisee obtaining Recommended Repairer status. Further, there was no evidence that Bodycorp could attract a new and viable franchisee when it had no prospect of obtaining Recommended Repairer status.[135] In my view, this is an additional impediment to Bodycorp successfully claiming loss in the event that it made out the relevant causes of action.
[135]See par 150 above.

Further, to the extent that any claim made by Bodycorp seeks to rely upon the quoting analyses, for the reasons I have already stated, that part of the case is fundamentally flawed. No loss or damage could be properly established based upon the quoting analyses.

Finally, in relation to the claim against Maisano for inducing breach of contract, there was no evidence to establish any loss was caused by Maisano, even if the cause of action had been established. Blashki acknowledged in his analysis of the alleged loss he did not differentiate between Maisano and Munro in terms of what loss they may have caused separately. The case against Munro was dismissed and Munro was not called as a witness. In those circumstances, there was no proper basis to establish what loss Maisano alone might have caused if he engaged in the conduct alleged.

J.2 Assignments

Another issue I have not determined arises out of the allegation in paragraph 41(a) of the FASOC to the effect that Bodycorp was the assignee of the right of each of the franchisees to be paid by AAMI for vehicle repair work done by each franchisee for or on behalf of AAMI.

No actual assignments have been the subject of any evidence by Bodycorp. All that has been put before the court are various directions made by the respective franchisees authorising AAMI to make payments for work done by that franchisee to Bodycorp instead of the franchisee.

Given the evidence is not controversial, it is not necessary for me to make any findings of fact in this regard. Accordingly, I will refrain from making any decision in relation to the legal issues that arise as these are not necessary in light of my previous findings.

J.3 Failure to mitigate any loss suffered by reason of any inducement

It was contended that if, contrary to the primary submissions of the relevant defendants, there was an inducement of breach of various franchise agreements, then Bodycorp failed to mitigate any loss suffered. This was put on the basis that Bodycorp failed to sue any of the Category A Franchisees or the Category B Franchisees for breach of contract. In light of my earlier findings it is unnecessary to decide this point. But I do note there was no explanation at all from Bodycorp why it has not sought to recover from any of these franchisees in circumstances where it maintains that each of them breached the relevant franchise agreements.

J.4 Further submissions relating to Martin’s credit

By reason that I have not accepted the denials of Martin in relation to the conversations that a number of former Bodycorp franchisees alleged occurred,[136] I have not been required to consider further submissions made in relation to Martin’s credit. Speaking very broadly, the submissions were to the effect that in 1992 Martin was involved in a rationalisation process which reduced the number of Recommended Repairers for AAMI. As part of this process, Martin chose to remove 69 Recommended Repairers from the AAMI panel. Of these 69 repairers, 2 shops were owned by Murdaca and persons related to him; namely, Knighton Smash Repairs and Swedish Body Works.
[136]See pars 252-298 above.

In 1992, Murdaca did not accept this decision. He complained to AAMI. As a result of Murdaca’s protests, the decision of Martin was overridden and the Recommended Repairer status of both Knighton Smash Repairs and Swedish Body Works was reinstated.

It was submitted by Bodycorp that, because of this history, Martin harboured an animosity towards Bodycorp, as well as being disposed to favour another group of repairers. It was suggested by reason of this animosity and disposition, in 1997, when he returned to the relevant role, he went about trying to undermine Bodycorp’s business.

In my view, the evidence does not establish an underlying animosity or adverse disposition of Martin towards Bodycorp when he resumed his position in 1997. Martin denied that he singled out Murdaca’s shops in any way as part of the rationalisation process in 1992. I accept this evidence.

In short, I find that Martin’s attitude towards Bodycorp in 1998 and 1999 was more likely to be a reflection of the events that occurred from the second half of 1997 onwards, rather than some prior event. Accordingly, I placed no weight on the events in 1992 in making the determinations that I did.

K. Conclusion

For the reasons stated, the claims of Bodycorp against each of Maisano, AAMI, All States and Martin must be dismissed. Presently, I am not aware of any circumstance that would make the usual order as to costs inappropriate. I will give the parties 14 days from today to make an application in relation to the costs order. Liberty to apply is granted for that purpose, and in the meantime I will stay the operation of the costs order.

I intend to make the following orders:

1.The plaintiff’s claims against each of the 1^st defendant, the 4^th defendant, the 5^th defendant and the 6^th defendant are dismissed.
2.The plaintiff pay the costs of each of the 1^st defendant, the 4^th defendant, the 5^th defendant and the 6^th defendant, including any reserved costs.

3. Order 2 be stayed for 14 days.
4. Liberty to apply within 14 days in relation to order 2.

Schedule A

Bodycorp franchise agreements in evidence

Bodycorp	Name of contracting party	Date	Details	Recommended Repairer
Berwick	1st Pride Panels Pty Ltd	Undated	Signed	Y
Cheltenham	Body Line Panel Works Pty Ltd	25/03/1998	Unsigned with signed guarantee	N
Clayton	JJ Marvic Pty Ltd	24/07/1996	Signed	Y
Geelong	Smash & Scratch Panels Pty Ltd	Undated	Signed	N
Malvern	Century Capital Pty Ltd	1/12/1997	Signed	N
Maribyrnong	Carlo Corso	Undated	Unsigned	Y
Melton	Melton Body Works Pty Ltd	6/07/1995	Signed	Y
Moorabbin	Michael Maisano	Undated	Unsigned	Y
Mornington	Quicfix Pty Ltd	13/10/1995	Signed	Y
North Melbourne	Gregory’s Motor Body Works Pty Ltd	Undated	Copy of signature page and guarantee	Y
Sunbury	Sunbury Panels Pty Ltd	Undated	Signed	Y
Sunshine	McIntyre Auto Repairs P/L	1998	Signed	Y
Tottenham	Rocco’s Body Works Pty Ltd	1/07/2001	Signed	N

Bodycorp shops with no evidence of a franchise agreement before the court[137]

[137]There were further franchise agreements in the court book in relation to some of these franchises that were not tendered by any party.

Abbotsford	Keilor
Airport West	Laverton
Bayswater	Noble Park
Blackburn	Nunawading
Caulfield	Preston
Cheltenham (in relation to Cheltenham Accident Repair Centre)	Reservoir
Coburg	South Melbourne
Glenroy	Spotswood
Heidelberg

[2013] VSC 472

4 SEPTEMBER 2013