Gardner Corporation Pty Ltd v Zed Bears Pty Ltd

This case arose out of a dispute between a franchisor, Gardner Corporation, and two franchisees, Zed Bears and Krishell, over the sale of a franchise and subsequent operation of the business. The franchisees claimed that the franchisor had engaged in misleading or deceptive conduct in breach of the Trade Practices Act 1974 (Cth) and that this conduct led to the failure of the franchise business. The court was required to determine whether the franchisor was liable for the losses suffered by the franchisees, and if so, the extent of that liability. The court had to consider the causal link between the misleading conduct and the loss, the role of other factors in causing the loss, and the appropriate measure of damages. The court found that the franchisor had indeed engaged in misleading conduct, which played a significant role in the franchisees' decision to enter into the franchise agreement. While other factors, such as management decisions and unforeseen events, also contributed to the failure of the business, the misleading conduct remained a material cause of the loss. Therefore, the franchisor was held liable for the losses suffered by the franchisees. The court awarded damages to the franchisees in the full amount of their loss, as the law does not permit partial compensation under section 82 of the Trade Practices Act. The court also rejected arguments that the damages award amounted to rescission of the franchise agreement or that the damages were too remote.