Gabjet P/L & Anor v Funk Franchise P/L & Ors (NO.3)

[2022] SADC 65

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

GABJET P/L & ANOR v FUNK FRANCHISE P/L & ORS (NO.3)

[2022] SADC 65

Judgment of his Honour Judge Slattery  

25 May 2022

DAMAGES

INTEREST

CONTRACTS

Orders and declarations in finalisation of the proceedings.

Gabjet P/L & Anor v Funk Franchise P/L & Ors (No.2) [2022] SADC 28; Gabjet P/L & Anor v Funk Franchise P/L & Ors [2021] SADC 88, considered.

GABJET P/L & ANOR v FUNK FRANCHISE P/L & ORS (NO.3)
[2022] SADC 65

[Civil]

1. The purpose of this judgment is to record the final orders that I am prepared to make in the finalisation of the action. These include orders in relation to damages and interest. In my second judgment[1] I dealt with the issue of costs of the whole proceedings. For the sake of completeness, I will make final orders here in relation to all of these topics. I will also make final orders in relation to the forms of declarations.

2. I have reached my decision on all of these topics following my consideration of the parties’ further submissions. I have fixed interest at the rate of 5% for the period from 22 July 2016 to 22 April 2022. I will leave to the parties the task of calculating a per diem from that day. The judgment sum upon which this calculation has been made is in the amount of $433,114 which reflects the corrected amount now included in my second judgment which has been republished as corrected.

3. I have also made a correction of a typographical error in the first judgment[2] which has also been republished.

   [1]    Gabjet P/L & Anor v Funk Franchise P/L & Ors (No.2) [2022] SADC 28.

   [2]    Gabjet P/L & Anor v Funk Franchise P/L & Ors [2021] SADC 88.

4. My final orders are as follows:

   1.Judgment is entered in favour of the first applicant against the first, fourth, fifth and sixth respondents in the sum of $557,708, inclusive of interest.

   2.Judgment is entered in favour of the second applicant against the first, third, fifth and sixth respondents in the sum of $22,510, inclusive of interest.

   3.The first, third, fourth, fifth and sixth respondents pay 80% of the applicants’ costs of action on a standard costs basis, to be agreed or taxed.

   4.There is no order as to costs as between the applicants and the second respondent.

   5.The first respondent contravened clause 8(3) and items 13.2 and 13.3 of Annexure 1 of the Franchising Code of Conduct by:

   5.1stating in the Disclosure Document provided to the first applicant that the Funk Victoria Square store had not previously been franchised, when it had been previously franchised to Kindred Group Pty Ltd as a former franchisee; and

   5.2failing to provide any details in the Disclosure Document provided to the first applicant of the circumstances in which the previous franchisee, Kindred Group Pty Ltd, ceased to operate, which involved a dispute between the first respondent (and its related entities) and Kindred Group Pty Ltd, based on allegations of misleading and deceptive conduct made by Kindred Group Pty Ltd against the first respondent (and its related entities), and the Funk group purchasing the Funk Victoria Square store back from Kindred Group Pty Ltd as a result of those allegations.

   6.The first respondent contravened clause 8(3) and items 6.4 and 6.5 of Annexure 1 of the Franchising Code of Conduct by failing to disclose in the Disclosure Document provided to the first applicant:

   6.1that the first respondent had bought back a franchise in relation to the Funk Waymouth Street store from a former franchisee Boss 260 Pty Ltd in November 2012; and

   6.2the name, location and contact details of Boss 260 Pty Ltd as the former franchisee of the Funk Waymouth Street store.

   7.The first respondent contravened clause 31(2) of the Franchising Code of Conduct, and was thereby in breach of its obligations to the first applicant, by failing to pay any marketing and advertising fees on behalf of Funk corporate stores over the period of 1 January 2015 to 30 June 2017, resulting in a shortfall of $128,000 in the Funk marketing fund administered by the first respondent on behalf of the Funk franchise network.

   8.The first respondent contravened clause 15(1)(b) of the Franchising Code of Conduct, and was thereby in breach of its obligations to the first applicant and the second applicant, by reason of the financial statements of the Funk marketing fund for the financial years ending 30 June 2017 and 30 June 2018 containing insufficient detail of the fund’s receipts and expenses so as to give meaningful information about sources of income and items of expenditure.

   9.The first respondent contravened clause 6 of the Franchising Code of Conduct by failing to act in good faith towards the first applicant by reason of the contraventions referred to orders 7 to 10 above and the misleading or deceptive conduct of the first respondent in relation to the financial information provided by the first respondent to the first applicant as found in the judgment of 2 August 2021.