Cafe2U Pty Limited v Bishambu Pty Ltd - [2013] FCA 191

FEDERAL COURT OF AUSTRALIA
Cafe2U Pty Limited v Bishambu Pty Ltd [2013] FCA 191

Citation: Cafe2U Pty Limited v Bishambu Pty Ltd [2013] FCA 191

Parties: CAFE2U PTY LIMITED v BISHAMBU PTY LTD, PARAS BISHAMBU and PRINCE BISHAMBU

File number: NSD 1312 of 2012

Judge: KATZMANN J

Date of judgment: 8 March 2013

Catchwords:
PRACTICE & PROCEDURE – application for default judgment – operation of Federal Court Rules 1979 (Cth) r 5.23(2) – whether evidence can be admitted – whether Court can look beyond pleadings– non-compliance with Court directions and orders – failure to file addresses for service or defences filed – failure to attend hearing – entitlement to relief – damages.

TRADE PRACTICES – franchise agreement – Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) cl 23 – breach of franchise agreement – termination – voluntary abandonment – fraud.

DAMAGES – assessment – breach of franchise agreement.

Legislation: Corporations Act 2001 (Cth) s 109X(1)
Federal Court of Australia Act 1976 (Cth) ss 23, 51A(1)(a)
Federal Court Rules 1979 (Cth) r 5.23(2)
Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) cl 23

Cases cited:
Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (2006) 236 ALR 665; [2006] FCA 1427
Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) (2007) 161 FCR 513
Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] 195 FCR 1
CNIP Pty Ltd v Chan & Naylor Norwest Pty Ltd (No 2) [2011] FCA 1170
D’Arling One Pty Ltd v Eagle Boys Dial-A-Pizza Australia Pty Ltd [2011] NSWSC 296
Engineered Thermal Systems Pty Limited v Salmon, In the Matter of Salmon & Speck Pty Ltd (In Liq) [2012] FCA 1159
Farahbakht v Midas Australia Pty Ltd (No 2) [2006] NSWSC 1323
Ho v Grigor (2006) 151 FCR 236
Macquarie Bank Ltd v Seagle (2008) 79 IPR 72; [2008] FCA 1417

Magill v Magill (2006) 226 CLR 551

Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227
Tesco Supermarkets Ltd v Nattrass [1972] AC 153
Yeo v Damos Earthmoving Pty Ltd, in the matter of Beachwood Developments Pty Ltd (in liq) [2011] FCA 1129

Date of hearing: 25 February 2013

Place: Sydney

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 114

Counsel for the Applicant: Mr S Wells

Solicitor for the Applicant: Lazarus Legal Group

Counsel for the Respondents: No appearance for the respondent.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1312 of 2012

BETWEEN:
CAFE2U PTY LIMITED
Applicant

AND:
BISHAMBU PTY LTD
First Respondent

PARAS BISHAMBU
Second Respondent

PRINCE BISHAMBU
Third Respondent

JUDGE:

KATZMANN J

DATE OF ORDER:

8 MARCH 2013

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.Judgment be entered in favour of the applicant pursuant to r 5.23(2) of the Federal Court Rules 2011 (Cth) in the sum of $43,983.94 including interest.
2.The first and third respondents, whether by themselves, their servants or agents, be restrained from taking any steps whatsoever in relation to the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] FCA 191
Decision Date: 8 March 2013

CaseChat Overview and Summary

Cafe2U Pty Limited, a franchisor of mobile coffee vans, brought an application for default judgment against Bishambu Pty Ltd and two individuals, alleging breaches of a franchise agreement. The primary issues before the court were whether evidence could be admitted in support of an application for default judgment, whether the court could look beyond the pleadings, and whether the applicant was entitled to relief given the respondents' non-compliance with court directions and failure to file addresses for service or defences. The court found that Cafe2U had not complied with the Federal Court Rules in serving the originating application and amended statement of claim on the respondents, and that there was no evidence that the respondents had been served. Nonetheless, the court considered that the respondents' failure to file addresses for service or defences, and their failure to attend the hearing, constituted an admission of the allegations in the statement of claim. The court held that it could look beyond the pleadings and admit evidence in support of the application for default judgment. The court also held that Cafe2U was entitled to relief, including damages for breach of the franchise agreement, an injunction preventing the respondents from operating a similar business, and an order for the return of property provided by Cafe2U. The court ordered judgment in favour of Cafe2U in the sum of $43,983.94, including interest, and made several other orders restraining the respondents from operating a similar business and requiring the return of property. The court also ordered the respondents to pay Cafe2U's costs. The court noted that if the depreciated value of the property returned exceeded the amount of damages awarded, Cafe2U would pay the difference to the respondents or into court.

Orders

Orders of the court

1. Judgment be entered in favour of the applicant pursuant to r 5.23(2) of the Federal Court Rules 2011 (Cth) in the sum of $43,983.94 including interest.

2. The first and third respondents, whether by themselves, their servants or agents, be restrained from taking any steps whatsoever in relation to the conduct of the business known as “Café Metro” in Glen Waverley, Victoria, up to and including 6 September 2013.

3. The first and third respondents, whether by themselves, their servants or agents, be restrained from being involved in or carrying on any mobile food or mobile beverage business or other business similar to “Cafe2U” in Glen Waverley, Victoria, up to and including 6 September 2013.

4. The first and third respondents, whether by themselves, their servants or agents, be restrained from infringing the applicant’s copyright in the web site known as www.Cafe2U.com.au, its menus and advertisements by reproducing or authorizing the reproduction of the applicant’s web site known as www.Cafe2U.com.au, its menus or advertisements or a substantial part thereof without the written licence of the applicant.

5. The first and third respondents, whether by themselves, their servants or agents, be restrained from continuing to operate the business of a Cafe2U Franchised Operation.

6. Within 7 days the first respondent deliver to the applicant the following items of property provided to it by the applicant:

(a) Generator sound and heat Insulation box

(b) 240 Volt Mains Distribution Box + Electrical Certification

(d) Vinyl Vehicle Branding

(e) Air Horn

(f) Territory Mapping Report – Glen Waverley

(g) 3m x 3m branded Marquee

(h) 5m Branded Flying Banner

(i) Cafe2U Business Development Manual

(j) Cafe2U uniforms

(k) Cafe2U training manual

(l) Cafe2U operations manual

(m) Cafe2U point of sale material

(n) Cafe2U menus

(o) Business cards

(p) Loyalty cards

(q) Email address

(r) Webpage

(s) Cafe2U branded products

(t) 2011 Mercedez Benz Vito 639 113 CDI 5dr Auto 5Sp 2.1DT

(u) Onan Cummins 5.5KVA Commercial Diesel Generator Unit

(v) Unic Twin Rumba Commercial Espresso Machine

(w) Quamar On Deand Commercial Coffee Grinder

(x) Hamilton Beach Commercial Blending Station

(y) FSM Commercial Swing Door Refrigerator

(z) 30 Litre Waste Storage Container

(aa) Norwood Trading Sliding Cash Drawer 101

(bb) San Jamar 2410C Cup Dispensing Unit (three units)

(cc) Eva Kool E47 Ice Storage Container

(dd) Blackwidow 4x4 Refrigerator Slide

(ee) Power Cords for Mains Operation (10Amp) (two units)

(ff) Selecta Spotpack 50 Litre Water Storage Tank

(gg) Kinetics Self Contained Hand Wash Facility

(hh) Hand Soap Pump Dispenser

(ii) Paper Towel Dispensing Unit

(jj) Storage Racking (four units)

(kk) Refrigerator Drink Display Unit

7. The first and third respondents pay the applicant’s costs as agreed or assessed.

THE COURT NOTES THAT:

To the extent that the depreciated value of items provided to the applicant listed in order 6 above exceeds the amount of damages awarded together with interest and legal costs, the applicant undertakes to the Court to pay such amount to the first respondent or, if that is not possible, into Court.

Note: Entry of orders is dealt with in Rules 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

As far as I am aware no further attempts were made to serve Paras. There is no evidence that he has ever been served with the originating application or the amended originating application and statement of claim. Consequently, although Paras is the guarantor under the agreement, he has not been served. No application was made for substituted service (r 10.24) or for the Court to dispense with service (r 1.34). This is the reason that Cafe2U only seeks orders against BPL and Prince.The facts Cafe2U has been in business for in excess of six years as a franchisor of mobile coffee vans throughout Australia. According to Mr Black, over that time it developed a reputation as a quality operator of mobile coffee vans. Currently it has over 130 franchisees in five States and in the Australian Capital Territory. The franchise operation involves the retail sale and delivery of hot and cold beverages and various food items to take away. It supplies individuals and businesses. Since about 2005 Cafe2U has maintained a website under the domain name >In about July or August 2011 Cafe2U received an online application for a franchise opportunity from Paras. Negotiations followed, culminating in the execution of the agreement on 14 September 2011. The document was apparently signed by Paras on behalf of BPL and by Mr Black on behalf of Cafe2U. Paras’s signature, or at least a signature purporting to be his, also appears as the guarantor of BPL’s obligations under the agreement. The agreement provided for a five-year term, starting on 19 September 2011. Paras and Prince were both appointed managers of the franchise operation. Before the agreement was signed Paras and Prince undertook initial training. Mr Black met both men on their first day training. So did Mr Angelis. In conformity with the allegations in the statement of claim, the substance of their evidence is that when they were introduced to the brothers Paras pretended to be Prince and vice versa. Prince was questioned about this before Cowdroy J but denied it. In the statement of claim Cafe2U alleged that up until 3 September 2012 the brothers continued to conduct themselves in this way, falsely using each other’s names. The evidence bears this out. The brothers Bishambu finished their initial training on 9 September 2011 and Mr Black presented them with certificates of completion. They then posed for a photograph holding up their certificates. Paras held up Prince’s certificate and Prince Paras’s. On or about 15 September 2011 – the day after the agreement was signed – Cafe2U (pursuant to the terms of the franchise agreement) supplied BPL and Paras with a new Mercedes Benz Vito for the operation of the business together with 37 items for use in the business. These items are listed in para 18 of the statement of claim and in para 24 of Mr Black’s affidavit. They included an email address, web page and other items the intellectual property in which Cafe2U pleaded, and Mr Black stated, is owned by Cafe2U. The other items included the Cafe2U Business Development Manual, training and operations manuals, point of sale material, menus, and business and loyalty cards.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

Citation:		Cafe2U Pty Limited v Bishambu Pty Ltd [2013] FCA 191
Parties:		CAFE2U PTY LIMITED v BISHAMBU PTY LTD, PARAS BISHAMBU and PRINCE BISHAMBU
File number:		NSD 1312 of 2012
Judge:		KATZMANN J
Date of judgment:		8 March 2013
Catchwords:		PRACTICE & PROCEDURE – application for default judgment – operation of Federal Court Rules 1979 (Cth) r 5.23(2) – whether evidence can be admitted – whether Court can look beyond pleadings– non-compliance with Court directions and orders – failure to file addresses for service or defences filed – failure to attend hearing – entitlement to relief – damages. TRADE PRACTICES – franchise agreement – Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) cl 23 – breach of franchise agreement – termination – voluntary abandonment – fraud. DAMAGES – assessment – breach of franchise agreement.
Legislation:		Corporations Act 2001 (Cth) s 109X(1) Federal Court of Australia Act 1976 (Cth) ss 23, 51A(1)(a) Federal Court Rules 1979 (Cth) r 5.23(2) Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) cl 23
Cases cited:		Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (2006) 236 ALR 665; [2006] FCA 1427 Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) (2007) 161 FCR 513 Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] 195 FCR 1 CNIP Pty Ltd v Chan & Naylor Norwest Pty Ltd (No 2) [2011] FCA 1170 D’Arling One Pty Ltd v Eagle Boys Dial-A-Pizza Australia Pty Ltd [2011] NSWSC 296 Engineered Thermal Systems Pty Limited v Salmon, In the Matter of Salmon & Speck Pty Ltd (In Liq) [2012] FCA 1159 Farahbakht v Midas Australia Pty Ltd (No 2) [2006] NSWSC 1323 Ho v Grigor (2006) 151 FCR 236 Macquarie Bank Ltd v Seagle (2008) 79 IPR 72; [2008] FCA 1417 Magill v Magill (2006) 226 CLR 551 Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227 Tesco Supermarkets Ltd v Nattrass [1972] AC 153 Yeo v Damos Earthmoving Pty Ltd, in the matter of Beachwood Developments Pty Ltd (in liq) [2011] FCA 1129
Date of hearing:	25 February 2013
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	114
Counsel for the Applicant:	Mr S Wells
Solicitor for the Applicant:	Lazarus Legal Group
Counsel for the Respondents:	No appearance for the respondent.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1312 of 2012

JUDGE:	KATZMANN J
DATE OF ORDER:	8 MARCH 2013
WHERE MADE:	SYDNEY