Carlton v Pix Print Pty Ltd - [2000] FCA 337

FEDERAL COURT OF AUSTRALIA
Carlton v Pix Print Pty Ltd [2000] FCA 337
TRADE PRACTICES - purchase of franchised business - franchisor misrepresented to applicants that business was successful and expanding - representations together more than mere puffery - business worthless at date of acquisition - measure of damages - evidence - admissions by conduct as to the content of documents
Trade Practices Act 1974 (Cth) ss 51A, 52, 82 and 87
Evidence Act 1995 (Cth) s 48(1)(a)
Slatterie v Pooley 6 M & W 664 referred to
Radferry Pty Ltd v Starborne Holdings Pty Ltd [1998] FCA 1689 applied
Marks v GIO Australia Holdings Ltd [1998] HCA 69 cited
Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 cited
Gould v Vaggelas (1985) 157 CLR 215 referred to
Netaf Pty Ltd v Bikane Pty Ltd (1990) 92 ALR 490 cited
Cut Price Deli Pty Ltd v Jacques (1994) 49 FCR 397 cited
Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 referred to
GLENN RAYMOND CARLTON AND JENNIFER ANN CARLTON AND G & J CARLTON PTY LIMITED (ACN 071 120 048) v PIX PRINT PTY LTD (ACN 062 004 657) AND DAVID PIX
QG 30 OF 1997
DRUMMOND J
22 MARCH 2000
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

QG 30 OF 1997

BETWEEN:

GLENN RAYMOND CARLTON AND
JENNIFER ANN CARLTON
FIRST APPLICANTS

G & J CARLTON PTY LIMITED (ACN 071 120 048)
SECOND APPLICANT

AND:

PIX PRINT PTY LTD (ACN 062 004 657)
FIRST RESPONDENT

DAVID PIX
SECOND RESPONDENT

AND:

PIX PRINT PTY LTD (ACN 062 004 657)
FIRST CROSS-CLAIMANT

DAVID PIX
SECOND CROSS-CLAIMANT

AND:

GLENN RAYMOND CARLTON AND
JENNIFER ANN CARLTON
FIRST CROSS-RESPONDENTS

G & J CARLTON PTY LIMITED (ACN 071 120 048)
SECOND CROSS-RESPONDENTS

JUDGE:

DRUMMOND J

DATE OF ORDER:

22 MARCH 2000

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:
1.Judgment for the first applicants against each respondent for $69,821 plus a further $26,882 for interest.
2.Judgment for the second applicant against each respondent for $133,000 plus a further $49,275 for interest.
3.The first respondent’s cross-claim be dismissed.
4.All questions of costs be reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

QG 30 OF 1997

BETWEEN:

GLENN RAYMOND CARLTON AND
JENNIFER ANN CARLTON
FIRST APPLICANTS

G & J CARLTON PTY LIMITED (ACN 071 120 048)
SECOND APPLICANT

AND:

PIX PRINT PTY LTD (ACN 062 004 657)
FIRST RESPONDENT

DAVID PIX
SECOND RESPONDENT

AND:

PIX PRINT PTY LTD (ACN 062 004 657)
FIRST CROSS-CLAIMANT

DAVID PIX
SECOND CROSS-CLAIMANT

AND:

GLENN RAYMOND CARLTON AND
JENNIFER ANN CARLTON
FIRST CROSS-RESPONDENTS

G & J CARLTON PTY LIMITED (ACN 071 120 048)
SECOND CROSS-RESPONDENTS

JUDGE:

DRUMMOND J

DATE:

22 MARCH 2000

PLACE:

BRISBANE

REASONS FOR JUDGMENT

The second applicant entered into a master franchise agreement with the first respondent on 20 October 1995. In return for $140,000, it thereby acquired the exclusive…

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: [2000] FCA 337
Decision Date: 22 MARCH 2000

CaseChat Overview and Summary

The case of Carlton v Pix Print Pty Ltd involves the first applicants, Mr and Mrs Carlton, who were shareholders in the second applicant, G & L Carlton Pty Ltd. They brought a claim against Pix Print Pty Ltd and its director, Mr Pix, alleging misleading and deceptive conduct under sections 52 and 51A of the Trade Practices Act 1974 (Cth). The applicants argue that they were induced to enter into a master franchise agreement with Pix Print Pty Ltd through misleading representations made by Mr Pix and Mr Spriggins, who was the Victorian master franchisee. The applicants sought damages for breach of duty and negligence but narrowed their claim to damages under sections 82 and 87 of the Trade Practices Act, along with a refund of all moneys paid under the master franchise agreement.

The primary legal issues before the court were whether the applicants were induced by misleading and deceptive conduct in contravention of section 52 of the Trade Practices Act, and if certain representations made by Mr Pix and Mr Spriggins were misleading or deceptive under section 51A. The applicants had to demonstrate that the misleading conduct occurred and that it was a factor in their decision to enter into the master franchise agreement. Additionally, the court had to consider whether the applicants were entitled to a refund of the moneys paid to Pix Print Pty Ltd under the master franchise agreement.

The court found that the misleading and deceptive conduct did occur, as Mr Pix and Mr Spriggins made representations that were misleading and deceptive in nature. The court determined that the applicants were induced by these representations to enter into the master franchise agreement, and as such, they were entitled to damages under section 82 of the Trade Practices Act. The court also held that the applicants were entitled to a refund of the moneys paid under the master franchise agreement, as per section 87 of the Trade Practices Act. Judgment was entered in favour of the applicants against each respondent, awarding damages and interest. The first respondent's cross-claim was dismissed, and all questions of costs were reserved.

Orders

Orders of the court

1. Judgment for the first applicants against each respondent for $69,821 plus a further $26,882 for interest.

2. Judgment for the second applicant against each respondent for $133,000 plus a further $49,275 for interest.

3. The first respondent’s cross-claim be dismissed.

4. All questions of costs be reserved.

Background

Background to the litigation

The second applicant entered into a master franchise agreement with the first respondent on 20 October 1995. In return for $140,000, it thereby acquired the exclusive right to licence the operation of Pix Print outlets in Queensland and the Northern Territory. The applicants claim the second applicant was induced to enter the master franchise agreement by written and oral representations, made on behalf of the first respondent, in contravention of s 52 the Trade Practices Act 1974 (Cth); s 51A is relied on in relation to certain of these representations. Though they also sought damages for breach of duty and negligence, at the trial the applicants limited their claim to relief by way of damages to ss 82 and 87 the Trade Practices Act; they also claimed under s 87, a refund of all moneys paid to the first respondent pursuant to the master franchise agreement.Factual Background The first applicants, Mr and Mrs Carlton, owned and controlled the second applicant, G & L Carlton Pty Ltd. Mr Pix, the second respondent, was a director of the first respondent, Pix Print Pty Ltd. He effectively controlled it. It is admitted that he acted on its behalf and as its agent. On 25 August 1995, Mr and Mrs Carlton, who then lived in Melbourne, read an advertisement for Pix Print franchises in The Age newspaper. This was placed by Mr Spriggins who was then Pix Print’s Victorian master franchisee. Mr Carlton telephoned Mr Spriggins and arranged to obtain from Mr Spriggins two tickets to the September 1995 Franchise Expo in Melbourne and some information in relation to Pix Print franchises, viz, a document entitled “disclosure document” and some Pix Print colour brochures. Mr Carlton received all this material on 6 September 1995. The Carltons attended the Pix Print stand at the Expo on 8 September 1995. Mr Spriggins set up this stand with the knowledge and approval of Mr Pix, as a means of marketing Pix Print franchises. The Carltons were introduced by Mr Spriggins to Mr Pix. Mr Pix said he has no particular recollection of meeting with the Carltons there. I accept their evidence that the meeting took place and that they and Mr Pix discussed Pix Print franchises at length. At the Expo, Mr Carlton obtained a magazine called “Businesses for Sale News”. It contained an article about Pix Print entitled “Uncompromising Quality Leaves Its Imprint”. Both the Carltons read it soon after. They also read the disclosure document and the Pix Print colour brochures before meeting Mr Pix again at his Melbourne hotel on the evening of 9 September 1995, where they had a long talk with him about Pix Print’s franchising activities. On 11 September 1995, Mr Carlton telephoned to tell Mr Pix that he wanted to speak to some Pix Print franchisees about the Pix Print business; he said that he knew of one, the Pix Print store in Greensborough. Mr Pix did not object to Mr Carlton visiting that store. After obtaining Mr Spriggins’ consent as suggested by Mr Pix, Mr and Mrs Carlton visited the Greensborough store and spoke to the operator, Mrs Walker, about her business. On 15 September 1995 the Carltons visited Mr Spriggins at his Keilor Pix Print store. They also spoke to Mr Gillis, who was then the New South Wales master franchisee, at Mr Pix’s suggestion.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

DRUMMOND J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: DRUMMOND J

Full text does not contain this section.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 30 OF 1997

BETWEEN:	GLENN RAYMOND CARLTON AND JENNIFER ANN CARLTON FIRST APPLICANTS G & J CARLTON PTY LIMITED (ACN 071 120 048) SECOND APPLICANT
AND:	PIX PRINT PTY LTD (ACN 062 004 657) FIRST RESPONDENT DAVID PIX SECOND RESPONDENT
AND:	PIX PRINT PTY LTD (ACN 062 004 657) FIRST CROSS-CLAIMANT DAVID PIX SECOND CROSS-CLAIMANT
AND:	GLENN RAYMOND CARLTON AND JENNIFER ANN CARLTON FIRST CROSS-RESPONDENTS G & J CARLTON PTY LIMITED (ACN 071 120 048) SECOND CROSS-RESPONDENTS

JUDGE:	DRUMMOND J
DATE OF ORDER:	22 MARCH 2000
WHERE MADE:	BRISBANE

JUDGE:	DRUMMOND J
DATE:	22 MARCH 2000
PLACE:	BRISBANE