Glass, J.M. v I.T.P Pty Ltd

[1991] FCA 171

JUDGMENT NO. ........ ....... ...- /7/ 1 %

CATCHWORDS

Trade Practices - misleading or deceptive conduct - s.52 claim abandoned - whether claim, in the accrued jurisdiction for breach of contract ought to be struck out.

Contract - disposal of franchise agreement - debenture agreement arising from sale of franchise - whether discharge of debenture by debenture holder and consent to subsequent transfer of franchise amounted to breaches of disposal of franchise agreement.

Trade Practices Act 1974 s.52.

18 April 1991
JOHN MAXWELL GLASS AND MARLENE GLASS v. I.T.P.	PTP LIMITED
NO. NG388 of 1986
Sweeney	J .
Sydney

L

.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

BETWEEN:	JOHN MAXWELL GLASS	First Applicant
MARLENE GRACE GLASS	second Applicant

AND :  I.T.P. PTY LIMITED Respondents

THE COURT : Sweeney J.

PLACE	: Sydney
DATE	: 18 April 1991

REASONS FOR JUDGMENT

John Glass and his wife Marlene ("the applicants") seek to be owing to them pursuant to an agreement entered into	damages or in the alternative, payment of the amount claimed	between the applicants and I.T.P. Pty Limited ("the respondent") on 15 February 1979.
Since 1974 the applicants had been the owners and operators of a franchise granted to them by the respondent to engage in the business of preparing tax returns and performing related services within certain areas including the North Shore of Sydney. The applicants' claims arise out of the disposal of this North Shore Franchise. The proceedings were commenced by Application and Statement of Claim filed on 5 September 1986. An amended Statement of Claim was filed, by leave, in Court at 4.00 p.m. on 31 May 1990, the second day of the hearing.
In paragraphs 1 and 2 of the Amended Statement of Claim the applicants said:

"1. By an agreement for consideration dated 15th February, 1979 the Respondent agreed to dispose of its North Shore franchise for the sum of $190,000.00 and to pay to the Applicants the proceeds of such disposal.

2. The respondent agreed to use its best efforts to timely collect the proceeds of sale of the said franchise ".

The purchaser of the North Shore Franchise was Tarea Management Pty Ltd ("Tarea"), a company formed by Rory Glass (the brother of the first applicant) and his wife Clytie, and the consideration was $190,000.

The Amended Statement of Claim continued:

"3. By a debenture dated 2nd July, 1980 Tarea Management Pty. Limited agreed to pay to the Respondent the sum of $167,000.00 being the balance of the sum of $190,000.00 then owing by it to the Respondent arising from the sale by the Respondent to it of the said franchise.

4.   It was a term of the said debenture that the whole of the said sum of $167,000.00 or so much thereof as should remain unpaid from time to time should become immediately due and payable upon the sale by the said Tarea Management Pty. Limited of the franchise.

5.   It was a term of the franchise agreement between Tarea Management Pty. Limited and the Respondent dated 2nd July, 1980 that the consent of the Respondent was required to the transfer of the franchise."

The applicants claim that on 9 December 1983 Tarea sold the franchise to another party unrelated to this litigation, namely Zone Management (Western) Limited ("Zone").

The Amended Statement of Claim continued:

"7. The Respondent in breach of the said agreement discharged the said debenture (and did not thereupon obtain payment to it of the sum of $114,143.89 and interest thereon then owing by Tarea Management Pty. Limited to it for which it had agreed to account to the Applicants).

8.  The Respondent in breach of the said contract consented to the transfer of the franchise to Zone Management (Western) Pty. Ltd by Tarea Management Pty. Ltd and did not require payment to it of the said sum of $114,143.89 and interest thereon.

9.  Since 9th December, 1983 the Applicants have received payment of further sums of $22,108.05 on account of the selling price of the franchise and

interest thereon.

10. The Respondent has neglected and refused to pay the balance of the principal sum of $92,035.84 and all interest outstanding.

The Applicants claim the sum of $92,035.84 and interest thereon to the date hereof at the rate of 6.5% per annum or alternatively such other sum as may be found to be due to the Respondent under the said agreement and interest

thereon. "

By paragraph 1 of its defence, filed on 1 June 1990, the respondent admitted entering into a written agreement with the applicants on or about 15 February 1979. It denied the allegation that it agreed to dispose of the franchise and pay

the sum of $190,000 to the applicant. It also denied any agreement to "use its best efforts to timely collect the proceeds of the sale".

Paragraph 2 of the defence read as follows:

"2. In or before mid December 1983, the Applicants requested the Respondent that the Respondent should cease collecting monies from Tarea Management (North Shore) Pty. Limited and permit the Applicants to do so and the Respondent communicated to the Applicants its assent to that request".

In paragraph 3 of the Defence the respondent admitted that on or about July 2, 1980 a deed of debenture expressed to be between the respondent, Tarea, Rory Glass and Clytie Glass was executed by Tarea. However the respondent did not admit the allegations in paragraphs 3 & 4 of the Amended Statement of Claim relating to the terms of that deed of debenture.

By paragraph 4 of the defence the respondent admitted executing a franchise agreement between itself and Tarea on 2 July 1980, but did not admit that its consent was required for transfer of the franchise as alleged in paragraph 5 of the Amended Statement of Claim.

By paragraph 5 the respondent admitted that on or about 9 December 1983 an agreement said to be between the respondent, Tarea and Zone was executed by Zone and Tarea. The respondent did not admit the allegation in paragraph 6 of the amended Statement of Claim that this was a sale of the franchise by Tarea to Zone.

In paragraph 6 the respondent denied that it received the sum of $114,143 from Tarea and denied discharging the debenture in breach of the agreement as alleged in paragraph 7 of the Amended Statement of Claim. However in paragraph 12 it admitted executing a discharge through inadvertence.

In paragraph 7 the respondent did not admit that it consented to transfer of the franchise from Tarea to Zone in breach of the contract as alleged in paragraph 8 of the Amended Statement of Claim.

The defence continued as follows:

"8. The Respondent denies that the said sum of
$22,108.05 was received by the Applicant from the

Respondent. The Respondent denies that the whole of the said sum of $22,108.05 was received by the Applicants since December 9, 1983. Except as

by the Applicants in paragraph 9 of the Amended aforesaid the Respondent admits the allegations made Statement of Claim.

9.   A part of the sum of $22,108.05 referred to in paragraph 9 of the Amended Statement of Claim was received by the Applicants in or about September

1983.

10.  In or about December 1983, the Applicants entered into an agreement with Tarea Management (North Shore) Pty. Limited, which agreement was reduced to writing on or about December 12, 1983. The Respondent craves leave to refer at the hearing to the whole of the aforesaid agreement as if it was set out in full in this Defence.

11.  The Applicants consented to the sale by Tarea Management (North Shore) Pty. Limited of the North Shore Franchise held by it taking place prior to Tarea Management (North Shore) Pty. Limited paying to the Applicants or the Respondents monies owed by Tarea Management (North Shore) Pty. Limited with respect to the acquisition by it of the said North Shore Franchise".

In paragraph 13 and 14 of the defence the respondent alleged that it assented to the transfer by Tarea of the North Shore Franchise and executed the form of discharge after:

(a)	it gave its assent to the applicants' request, referred to in paragraph 2 of this Defence;
(b)	the entry by the applicants into the agreement referred to in paragraph 10 of this Defence;
(c)	the respondent became aware that the applicants had entered into an agreement with Tarea and became aware of some of the terms of the agreement referred to in paragraph 10 of this Defence;
(d)	the applicants consented to the sale by Tarea of the North Shore Franchise held by it taking place prior to Tarea paying to the applicants or the respondent monies owed by Tarea with respect to the acquisition
by it of the said North Shore Franchise; and
(e)	Tarea conveyed to Zone the said North Shore Franchise.

In paragraph 15 of the Defence the respondent denied being indebted to the applicant in the sum of $92,035.84 as alleged in paragraph 10 of the Amended Statement of Claim.

In paragraph 16 of the Defence the respondent claimed that the Federal Court did not have jurisdiction to determine the applicants claim.

The matter came on for hearing on Wednesday 30 May with an estimated duration of 2 days.

Mr Donohoe of counsel, in opening, submitted that the applicants' causes of action were twofold, the first based on contract, being the alleged breach of the 15 February 1979 agreement, the second being for alleged breaches of s.52 of the Trade Practices Act. During the course of the first morning counsel indicated that the Trade Practices cause of action would not be pressed. The Amended Statement of Claim raised only the contractual claim.

Mr Libling of counsel, appearing for the respondent, agreed that on 15 February 1979, a document was executed by the applicants which contained the agreement between the parties.

He also agreed that on 2 July 1980 the respondent granted a franchise to Tarea and that Tarea executed a debenture in favour of the respondent and that there was a sale agreement between Tarea and Zone.

Both parties agreed that it was necessary for the Court to construe the agreement of 15 February 1979 and a copy of the agreement was tendered and marked as Exhibit A.

The agreement provided as follows:

AGREEMENT

AGREEMENT entered into and made this 15th day of February, 1979, by and between I .T.P. a N.S.W. Company, hereinafter referred to as ITP, and John Maxwell and Marlene Grace Glass, hereinafter referred to as Glass.

WHEREAS Glass was the owner, operator of Tax Preparation Franchises granted by ITP in the area of North Shore Sydney, Melbourne West, and Gold Coast, which was cancelled by ITP by due Notice of 15 Day Cancellation in October, 1978, and

WHEREAS Glass would of (sic) been able to sell his Goodwill, Fixtures Equipment in those areas had he not lost his Franchises due to Financial losses in other areas beyond his control, and Agrees to sell what is his Right, Title, Interest to Buyers, and

WHEREAS Glass had agreed to enter into an agreement with Rory Glass for the purchase of the North Shore Franchise, and into an agreement with Ian Daley for the purchase of the Gold Coast Franchise, and

WHEREAS Glass was trying but had not an agreement for the sale of his interest in the Melbourne Franchise area, and

WHEREAS Glass acknowledges a Debt owing to I .T.P. in the amount of $64,712.14 plus interest which is agreed to and acknowledged by I.T.P., and

WHEREAS Glass acknowledges there are accounts payable outstanding not known and known which has to be paid out

of any proceeds available to Glass, and

WHEREAS Glass acknowledges that he transfers clear title to all equipment at North Shore to Rory Glass, and that he transfers clear title to all equipment at Goldcoast to Ian Daley, and he herein passes title to all equipment at Melbourne to I.T.P., and

WHEREAS ITP is willing to obligate any and all future Sun Franchise holders for these Franchise areas to pay the sums agreed to below as a condition of their receiving the Sun Franchise Contract for each specific area, and

WHEREAS GLASS is willing for the above consideration of ITP becoming a collection agent for said sums agrees to transfer any and all company names having to do with ITP or ITP the Income Tax Professionals, Executive Income Tax Service or any other Trade Marks acknowledge as being the property of ITP Pty. Ltd. under their Franchise (sic) license.

NOW THEREFORE IT IS AGREED that

1)  Glass agrees to pay ITP the sum of $20,000.00 receipt of which is herewith acknowledged to be applied against the sum of $64,712.14 owing to ITP for past Royalty, Supplies advertising and services rendered.

2)  Glass agrees to transfer all his right, Title and Interest in Trade names belonging to ITP in order for them to grant these rights out to new Sun Franchise holders for the areas of Melbourne West, North Shore Sydney and Goldcoast-Queensland.

3)  Glass agrees to transfer all his right title and interest in all Equipment, Fixtures Furniture, (sic) Sundry items on location at North Shore to Rory Glass as part of his purchase of the Franchise, in consideration of Rory Glass agreeing to pay a sum of $190,000.00 to ITP as part of the proposed Sun Franchise to be granted to him by ITP, plus interest at 6 1/2% simple.

4)  Glass agrees to transfer all his right title and interest in all Equipment, Fixtures, Furniture, Sundry items on location at Gold Coast, Queensland to Ian Daley as part of his purchase of the Franchise, in consideration of Ian Daley agreement to pay a sum of $35,000.00 to ITP as part of the proposed Sun Franchise to be granted to him by ITP, plus interest at 6 1/2% simple. Further Glass acknowledges that he has received a payment of $15,000.00 from Ian Daley and a payment of $20,000.00 from Rory Glass.

5)   Glass agrees to transfer all his right title and interest in all equipment, Fixtures, furniture, Sundry items on location at Melbourne to I.T.P., to be held by ITP and sold to persons or person who agrees to purchase Melbourne Sun Franchise. The said purchase price of Melbourne shall also be included as a conditional payment by the new Franchise holder for said Sun Franchise.

6)  ITP agrees to act faithfully and fully for the best interest of ITP and Glass, to use its best efforts to timely collect all sums due from the said Sun Franchises and to fully account to Glass annually, but no later than October 30 each year for all sums collected less any direct costs for this agency. ITP further agrees that sums collected shall be disbursed as follows and in that priority, to wit:

)a. The first $20,000.00 shall be applied by ITP against

its receivable from Glass.
The second $25,000.00 shall be paid jointly to Glass
and F.C.A. Corporation.
The next $5,000.00 shall be paid to Glass.
The next moneys collected shall be applied against
the balance of ITP's receivable from glass plus
interest at 6 1/2% Simple, with a minimum payment to
Glass for the 1980 year ending of $14,000.00
(October 30, 1980)
The balance of all purchase amounts after the above
disbursement shall be due and payable as collected
plus interest to Glass, within 30 days of receipt of
same.

Glass does hereby transfer to ITP and agrees to execute all necessary papers authorising the Corporate affairs commission to release the trade names and marks from glass to ITP or its assignees, for Melbourne West, North Shore-Sydney, and Goldcoast.

ITP agrees to only grant any new Sun Franchises for the areas of North Shore-Sydney, Melbourne-West, and Gold Coast-Queensland, by including as a condition the payment before any down payments herein acknowledged the sum of $190,000.00 for North Shore, and $35,000.00 for the Gold Coast, and not less than an amount agreed upon in writing by Monte C. Nelson. It is agreed that any debts owing by Glass on Melbourne will be paid for out of the proceeds of the sale of Melbourne before any distribution to any other parties under this agreement.

ITP agrees to as of this day to assume management control of the city of Melbourne, and assume all responsibility of payment of current on going expenses of said city until a purchaser is secured.

management of all three cities for any profits or	ITP agrees to require an accounting from the prior
losses still held by said operations belonging to Glass as of date of transfer which is November 1, 1978 for North Shore, December 1, 1978 for Goldcoast, and February 16, 1979 for Melbourne West.
Glass agrees that he will not directly or indirectly compete with any of ITP Franchisees for a period of this agreement and one year after.
ITP agrees that it will cause the agreements for payments from the new Sun Franchise holder to correspond with original intended agreement with Glass and the 3rd Parties namely that balance will be held to around 10 years time, North Shore. One Year Gold Coast.

13) ITP agrees that upon the condition of Glass fully cooperating in this transfer and assistance in getting the new Sun Franchisees into operation that it will cancel all litigation in connection with the Franchise matter of these three Franchised areas.

Time is of the essence and both parties agree to fully and honourably fulfil (sic) all matters agreed to. They agree that there are no other agreements pertaining to this agreement.

In Witness whereof the parties have affixed their seals in agreement the day and year before mentioned."

The applicants' claim was that the respondent was obliged under the agreement to collect the money from Tarea and pay it over to them. The respondent contended that this agreement was varied in September 1983, when it agreed to a request by the applicants that it cease collecting from Tarea and leave it to the applicants.

Mr Libling indicated that the respondent's case would be
that the applicants' request to cease collecting was made by

the applicants' accountant, Miss Meiklejohn, to the

respondents managing director M r Bailey. It was on this basis that Mr Donohoe commenced to call	evidence. Mr Donohoe read certain paragraphs of the affidavit
of John Maxwell Glass, sworn 29 September 1989 for the purpose of tendering certain documents.

When paragraph 1 was read the first document referred

to as the agreement of 15 February 1979 between the applicants
and respondents, was tendered as Exhibit A.

Mr Libling for the respondents conceded that "the agreement was executed by I.T.P. Pty Limited and validly executed on its behalf".

The next document referred to was an agreement dated 2

July 1980 between the respondent and Tarea. This was
tendered and marked Exhibit B. This was followed by the
debenture of 2 July 1980 executed by Tarea, which became
Exhibit C.

Counsel tendered the sale agreement between Tarea, Zone and the respondent dated 9 December 1983. This was marked Exhibit D. Counsel explained that although the agreement was for the sale by Tarea to Zone, the respondent was included as a party because it originally sold the franchise to Tarea. Mr Donohoe submitted:

unusually drawn in that it refers to itself as	agreement and in particular that it is rather "Your Honour will note from the terms of the
between the parties and the first schedule hereto respectively described as the franchisee and the purchaser and ITP Pty Limited which clearly enough is the respondent.
His Honour: What does this amount to - a sale by Tarea to Zone Management?
Mr Donohoe: Yes, your Honour.
His Honour: And because what Tarea is selling is something that comes to it from ITP - ITP is made a party to it.
Mr Donohoe: Indeed, your Honour. And your Honour will perhaps contrast that agreement with the form of agreement that applied when ITP itself directly sold or gave or granted the franchise to Tarea in that the applicants were not a party to that agreement."

M r Donohoe submitted that the relevance of this agreement

(Exhibit D) to the applicantst case was that the respondent's consent to the transfer was required by the terms of the 2 July agreement which they were entitled to withhold unless the money due to them was paid or an arrangement made to secure the payment.

Mr John Glass gave evidence that he first became aware of Exhibit D in early 1985.

When questioned as to the activities undertaken on his behalf by Miss Meiklejohn M r Glass said:

"Mr Libling: She wrote a number of letters on your

behalf is that correct?---Yes.
And occasionally she would speak to people on your
behalf?---Yes with my knowledge, yes.

And she would have discussions with people including the respondent concerning your financial affairs,	that is correct is not it?---She never - with the
respondent did you say? Yes?---Yes she would have. And she was not just someone who prepared figures on your behalf but she was an active part of your business life?---Yes I consulted her. But you did not just consult her, you also caused her to speak on your behalf with the respondent and others?---If I authorised her to do that I did, yes.
M r Glass you caused her to speak on your behalf with
the respondent and others, that is right is not it?-
--I am sorry would you repeat that.
Yes. You caused Miss Meiklejohn to speak on your behalf to the respondent and others, that is correct is not it?
His Honour: Say yes if you will?---Yes."

Mr Glass was then cross-examined as to what requests had been made for his brother Rory to pay the money owing directly to him:

"And then 1982 you asked Miss Meiklejohn to request of the respondent that you be permitted to collect your own money from your brother Rory, that is right is not it?---I requested her to ask that.

Yes. And again you did that again in 1983 did not you?---I do not recall that it was particularly 1983.

But you do not deny that you just do not recall it, is that right?---I do not recall making that request in that particular year.

Now in 1983 or more precisely in September 1983 ITP had been paid up had not it?---You mean our debt to them?

Yes, your debt to them of $64,000 had been
discharged had not it?---Yes that is correct.
And you were anxious were you not to get your money
from your brother in your own way, that is correct,
is not it?---I was anxious to get the money.
And you were anxious to get it directly from your
brother is not that right?---I was anxious to get it
from whatever source it came.
But, Mr Glass, were you in fact desirous that the

payments should come directly to you without further

ITP involvement?---I was desirous to get it from

whatever source it came.
I understand that. Were you also desirous to have
it come directly from your brother?---Yes I would

say I was desirous of that. ...

you not that he pay directly to you?---I am sorry	And with that in mind you requested your brother did
would you repeat that? You requested your brother that he should make payments directly to you?---I requested that."

The debt owed by the applicants to the respondent of $64,000 referred to in cross-examination had arisen from the applicants' original holding of the franchise and it was not disputed during the hearing that this sum was to be paid out of the $190,000 received from disposal of the franchise - the balance being payable to the applicants. Both of these matters were referred to in the 15 February agreement, (Exhibit A).

Mr Glass was then shown a letter dated 1 December 1983 from Mr Rory Glass addressed to the JM and MG Glass Family Trust. It was tendered and marked Exhibit 1. Mr Glass agreed that it was signed by his brother, Rory, and that he supposed that it had been received by the applicants though he did not recall the particular letter.

It read as follows:

-. . - - -

THE J.M. & M.G. GLASS FAMILY TRUST,
C/- L.N. MEIKLEJOHN,
12 EDGEHILL CRESCENT,

SPRINGWOOD,

QUEENSLAND 4 127

LETTER OF AGREEMENT

This is to state that according to an agreement reached between The J.M. & M.G. Glass Family Trust

the following is agreed. and Tarea Management (North Shore) Pty. Ltd., that	1. That the complete remaining monies owing on the
sale of the business known as I.T.P. 'The Income Tax Professionals' (North Shore - Sydney), now be $70,000.00 (Seventy Thousand Dollars).
2. That the above amount will be full and complete payment, provided that the method listed below is strictly adhered to.
3. That the method of payment be as follows:

$40,000.00 (Forty Thousand Dollars) paid on
30th August 1984.
$20,000.00 (Twenty Thousand Dollars) paid on
30th August 1985.
$10,000.00 (Ten Thousand Dollars) paid on

, 30th August 1986.

........ ........ ........ ...	........ ........ .......
Director	J.M. & M.G. Glass
Tarea Management (North	Family Trust
Shore) Pty. Ltd.

........ ........ ........ ........ ........ ........

Witness Witness"

Mr Glass was then cross-examined about prior discussions

with his brother, Rory, concerning the matters covered in this
letter, and gave evidence as follows:

"Mr Libling: Now, there had been prior discussions,

had there not, that is prior to 1 December 1983 between yourself and your brother Rory concerning what became the contents of this letter, that is right, is not it?---There was discussions, yes.

And they were prior to 1 December 19837---Yes."

Mr Glass was then shown a copy of a letter dated 8

December 1983 from Miss LN Meiklejohn to Rory Glass, (Exhibit

2). Mr Glass agreed that he had asked Miss Meiklejohn to

write to his brother and that this was a copy of the letter

written on his behalf. The letter read as follows: "8th December, 1983

Mr. R. Glass,
Tarea Management (North Shore) Pty. Ltd.,
P.O. Box 158,

St. Leonards. 2065

Dear Rory,

THE J.M. & M.G. GLASS FAMILY TRUST

John has asked me to write to you about your letter of agreement of the 1st December, 1983.

The terms contained therein do substantially reflect the situation except for a couple of items which John's solicitor would like to have in.

I have taken the liberty of redoing your letter on blank paper for your perusal. If you are in agreement with the wording and forward a signed formal copy here, John will have it signed as well.

Regarding the 2 instalments due for 1983, John has received legal advice to the effect that as all debts to I.T.P. have now been settled that he has every right to request that your payment be forwarded to him directly. He has asked me to convey to you his wish that you forward the cheque directly to him rather than through I.T.P.

This new negotiation has highlighted the need for your retirement as Trustee of The J.M. & M.G. Glass Family Trust. I have suggested to John that such retirement should be before the new letter of agreement is dated. I am enclosing a Deed of Appointment new Trustee and would appreciate if you would sign where I have marked.

Yours sincerely,

L.N. MEIKLEJOHN

Encl. "

Mr Glass then gave the following evidence:

"Mr Libling: Now Mr Glass if you have a look to the yourself?---Yes I have read that. fourth paragraph of the letter and read that to	Now I am not asking you what legal advice you have
received but I am asking you this. Did you tell Miss Meiklejohn that you had received legal advice to the effect that as all debts to ITP have now been settled you have every right to request that your payments be forwarded to you directly. Did you say that to Miss Meiklejohn?---Did I request it, is that what you are saying?
No, I am asking you Mr Glass whether you made a statement to Miss Meiklejohn in terms of what she says in that paragraph 4, namely did you say to Miss Meiklejohn that you had received legal advice to the effect that as all debts to ITP have now been settled you have every right to request that your payment be forwarded to you directly, did you say that?---Yes I would have said that.
And did you also ask her to convey to your brother your wish that your brother forward his cheques directly to you rather than through ITP? ---Yes I did."

Mr Glass was then shown a copy of a document headed "letter of agreement" and dated 12 December 1983, which was marked Exhibit 3. He gave evidence that the signatures on the document were those of his wife, himself, and of his brother Rory's wife.

The document read as follows:

"LETTER OF AGREEMENT

This letter records an agreement between the J.M. & M.G. Glass Family Trust (hereinafter called Glass) and Tarea Management (North Shore) Pty. Ltd. (hereinafter called Tarea) to this effect:-

1.   Tarea owes Glass $114,144 and that after Tarea pays two further instalments due at 30th September, 1983 totalling around $3000 the total amount then outstanding will be around $111,000.

2.    and following amounts on the dates indicated If Tarea pays Glass the above instalments in 1

Glass will accept that the debt has been completely satisfied.

$40,000 to be paid on 30th August, 1984

$20,000 to be paid on 30th August, 1985

$10,000 to be paid on 30th August, 1986

3.    Tarea will cause the new franchisee of the

I.T.P. 'The Income Tax Professionals' (North Shore) area to grant a debenture in favour of Glass to secure repayment of the amounts owing and Glass is to rank equally with Tarea in this debenture. The debenture should provide that the above mentioned 30th August payments be made directly to Glass by the new franchisee.

Dated this 12th day of December, 1983

Signed under Seal by Tarea	Signed under Seal by
Management (North Shore)	Eastshire Pty. Ltd
Pty. Ltd.
Witnessed by	Witnessed by

m . . . . . . . . . . . # ........ ....

Under further cross-examination Mr Glass agreed that he knew that his brother wished to sell the North Shore Franchise and assumed that he was in discussion with an intending purchaser.

In re-examination, Mr Glass said that he had never

received the debenture referred to in paragraph 3 of Exhibit

3, and that the payments referred to in paragraph 3 were not

made.

Mr Libling opened his case by submitting that:

1. The effect of the contract of 15 February 1979 was to appoint the respondent as the agent of the applicants for the purpose of collecting monies, which were at law or in equity their property.

2. That agency was terminated in September 1983 as the

result of certain statements made to the respondent on
behalf of the applicants.

3. Alternatively, it was terminated by the agreement

constituted by the agreement between the applicants and Rory Glass made in December 1983 and the conversations between John and Rory Glass.

4. The agreement of 15 February 1979 was repudiated by

the applicants "in 1980 through to 1982"

5. That the Court has no jurisdiction to deal with the applicants' contractual claim, the T r a d e P r a c t i c e s A c t claim having been abandoned and the application to the Court had been commenced prior to the cross-vesting legislation.

The affidavit of Mr John Bailey, a director of the respondent, set out the course of dealing between the parties. It detailed the payments made by the respondent to the applicants in respect of instalments from Rory Glass on his purchase of the North Shore Franchise between 23 July 1980 and

7 September 1983. Exhibited to the affidavit was a letter

dated 5 June 1979 from John Glass to the deponent which

included the following paragraph:

"A protective clause should be embodied in each of the

I .T.P. contracts of the purchasers of my areas. I would

like to have my solicitor check this clause. Would you please forward copies of all contracts for my areas so that this may be accomplished".

Mr Bailey referred to this subject in a letter to Miss Meiklejohn dated 26th June 1979, saying:

"It was never intended that protective clauses for John's rights would be embodied in any of the sale agreements of his areas. John's rights will be protected through the re-drafted 15th February 1979 agreement which should be in your hands within the next few days".

2 1

M r Bailey deposed that he knew Miss Meiklejohn as the

applicants' accountant with whom he had had numerous dealings

in which she acted on their behalf.

In the affidavit further correspondence was set out. In

paragraph 24 the deponent said:

"On or about 25 September 1983 I telephoned Meiklejohn.

As best as I can remember I said to her -

'John wants Rory to pay him direct because ITP has

now been paid out'.

As best as I can recall she replied -

'That is the instruction which John has given Rory.'

As best I can recall I said to her -

'Well obviously John is on his own from now on'."

By letter dated 8 December 1983 Rory Glass notified the respondent that he intended to sign contracts for the sale of the North Shore Franchise.

A letter of 29 April 1986 from the applicants to the

respondent read as follows:

"Re: Outstandina Monies

As YOU are aware. bv an aareement which we entered into - witG ITP on 15th .Feb>uary, 1979 we agreed to transfer our interests in the ITP franchise for North Shore, Gold Coast Queensland and Melbourne on terms that ITP would act faithfully and fully in our best interests and would use its best efforts to timely collect all monies due for

the franchises and fully acco;nt for us annually.

ITP has not acted in our best interests and it has never fully accounted to us for the sums ITP has received. It may be that it has also never made reasonable efforts to

collect the sums due for the franchises.

Our enquiries reveal that there is a considerable sum presently outstanding to us. If monies had been collected in accordance with the agreement, our calculation reveals that the amount presently outstanding is $92,000.00. Our calculation of this amount of principal is contained in the enclosed schedule. In addition, outstanding interest, given the time the sum of principal has been outstanding, appears to our rough calculations to be $85,800.00.

These figures may not be precise as we have never received any proper accounting. However, our enquiries suggest that they are reasonably accurate and unless you provide us with a full account which indicates otherwise, we must assume that these figures are correct.

The total amount owing in accordance with the provisions of the agreement is thus, $177,800.00. ITPrs periodic letters enclosing small sums appear to have been most misleading in this respect. The only other alternative is that ITP has been most negligent in collecting the sums due.

In these circumstances, unless we receive either ITP's full accounting in these matters or a satisfactory explanation as to the above and an offer to pay any outstanding sums within a reasonable time, we will be obliged to place this matter in the hands of our solicitors after the expiration of seven (7) days so that they may take whatever action they advise to be appropriate.

Yours faithfully,

Marlene Grace Glass ...

John Maxwell Glass . . .

PRINCIPAL RATE APPLICABLE AMOUNT

190,000 6 1/2 Simple 15/2/79 190,000.00
Less Payments 26/1/79 20,000.00

Balance unpaid $92,035.84"

The reply of the respondent dated 27 May 1986 read as

follows :

"RE: YOUR LETTER OF APRIL 29 1986

We acknowledge receipt of your letter, and noted its contents.

We deny all the allegations made against I.T.P. Pty
Limited.

I.T.P. Pty Limited strongly resents and rejects the imputation that I.T.P. Pty Limited has acted with impropriety in respect of any matters concerning either yourselves or Mr Rory Glass.

We make the following points:

1    Mr Rory Glass was not a party to the agreement dated February 15 1979 between I.T.P. Pty Limited John Maxwell Glass and Marlene Grace Glass.

2    Because of (1) above, I .T.P. Pty Limited was never in a position to force Mr Rory Glass, in a Court of Law or otherwise, to pay any monies due and owing to J M and M G Glass to I.T.P. Pty Limited.

3    On January 25 1982, MS Lyn Meikeljohn, acting on behalf of J M and M G Glass, requested I.T.P. Pty Limited to approve Mr Rory Glass making payments to J M & M G Glass directly, with the then remaining indebtedness to I.T.P. Pty Limited to be amortized from anticipated receipts from the sale of Melbourne West area.

4    On September 30 1982, MS Lyn Meikel john, acting on behalf of J M & M G Glass, confirmed the arrangement contained in (3) above with Mr John Bailey.

5    On or about September 25 1983, when no monies were received from Mr R Glass, M r John Bailey telephoned Mr R Glass; Mr R Glass informed Mr Bailey that Mr John Glass had instructed him to send monies directly.

It is noted in your letter that Mr R Glass made at least 2 payments, in September '83 and September '84.

In all the circumstances, and because of (3) above, J M & M G Glass relieved I .T.P. Pty Limited of any of its obligations it may have had under clause (6)(e) of the above mentioned agreement in respect of the sale of the North Shore Franchise to M r Rory Glass.

We make the further point that, because of I.T.P. Pty Limited making the concession as per (3) above, it had to wait longer for J M & M G Glass' indebtedness to I.T.P.

Pty Limited to be fully amortized.

Furthermore, on inspecting our records, J M & M G Glass are still indebted to I.T.P. Pty Limited for interest owing on the amount of $64,712.14 as stated in the Recitals of the February 15 1979 Agreement.

I.T.P. Pty Limited is currently preparing a full statement of receipts and disbursements together with an invoice for interest owing to it in respect of the $64,712.14.

This statement and an account will be sent to you within
21 days of the date hereof."

When cross-examined, M r Bailey agreed that on 11 November 1983 Rory Glass was not making payments of royalties to the respondent and that he believed that the applicants had little chance of getting the monies that were due to them, and that

on that day he could have said that to Miss Meiklejohn. He	said that at that time the respondent had given Rory Glass
notice of breach and could have cancelled the franchise and resold it under the debenture over the North Shore Franchise. He agreed that what he said to the applicants could be construed as meaning that the respondent could not get any money out of Rory Glass and that if the applicants could get any money from him they ought to try to do so.

Further cross-examined on the second day of the hearing,

2 5

Mr Bailey said that he had been wrong on the previous day when

he said that the debenture given by Tarea had not been
discharged.

He said that he had always believed that the debenture over the North Shore Franchise remained on foot and that the debenture he had cancelled was one in favour of Westpac in respect of an overdraft which it had provided for Tarea. It was only overnight that he realised his error and appreciated that he had by mistake discharged the North Shore Franchise debenture given by Tarea.

Mr Bailey said that he stripped the applicants of their franchises and directed them to sell them to third parties. He further agreed that Tarea was under no obligation to pay the applicants, who were not entitled to demand payment for it. Had the respondent cancelled the franchise, taken control and sold it, he conceded, the applicants would have received the balance of the monies due to them, but the sale by Tarea

went through in the meantime. Mr Bailey said that on 13

December 1983 he asked Rory Glass: "What about all of the $150,000 you are getting why not pay all of it to John (Glass)?". Rory Glass then told M r Bailey of his gambling problem and that "he was in debt of some $80,000 to SP bookmakers". The witness agreed that he did not seek a release from the applicants of the respondent's liability to it under the agreement of February 1979.

The applicants, in reply, read an affidavit by Miss Meiklejohn, in which she denied having a conversation with Mr Bailey in the terms alleged by him in paragraph 24 of his affidavit, quoted above. She did not recall Mr Bailey saying to her "Well, obviously John is on his own from now on" or that he ever said words to her of that effect. She also deposed to correspondence in November and December 1983 between Mr Bailey and herself, in which she referred to his stopping a cheque drawn in favour of the applicants in respect of the proceeds of the West Melbourne franchise. In the course of cross-examination, she said that she did not believe that Mr Bailey said to her "Well, obviously John is on his own from now on," or words to that effect, adding that she had been through all her time costing records and diary notes which contained no reference to any such conversation.

Had such a statement been made to her, it is not one
which she would have been likely to forget, because it would

have amounted to a warning that the respondent was casting

doubt on its obligation to the applicants under the debenture.

In his affidavit in reply, Mr John Glass said, amongst other things, that on or about 23 November 1983 he had a telephone conversation with ROry Glass, in which, as best he could recall, he said "As my debt to I .T.P. has now been repaid, will you make all future payments directly to mew and Rory replied "No, I will not do that as it would jeopardise my agreement with ITP".

At the close of evidence, a timetable was agreed upon for the making of written submissions and on 18 October 1990 the Court sat to enable the parties to speak to them. M r Libling indicated that the respondent adhered to its submissions that the Court had no jurisdiction to deal with the applicantsf claim in contract and that no jurisdiction could have been vested in it consistently with sections 76 and 77 of the Constitution.

In accordance with S.78B of the Judiciary Act 1903 directions were made that notices be given to Attorneys- General in accordance with its terms.

In February 1991 affidavits were filed to show that the notices had been given and that no Attorney-General wished to intervene and the parties filed a written consent, pursuant to Order 35 Rule 10, that the matter stand for judgment without further argument.

The respondent had, by a motion filed on 17 October 1989, sought to have the proceeding dismissed on the ground that no case was properly laid for a contravention of s.52 of the

Trade Practices Act as pleaded in the original Statement of

Claim and that if the s.52 claim were struck out that would take with it the claim in the accrued jurisdiction for breach of contract. This motion was heard by Gummow J on 14 December 1989, and his Honour delivered his reasons on that date stating:

"The Full Court of this Court in Burgundy Royale Investments Pty. Ltd. v. Westpac Banking Corporation (1987) 76 ALR 173, dealt with the situation where a primary claim for contravention of the Act fails leaving an accrued claim raising complaint in contract or tort under the general law.

The position is that the contract or tort claim would remain unless one could say of the Trade Practices claim brought here that it was colourable in the sense that it was made for the improper purpose of fabricating jurisdiction; see the report, 76 ALR at 181. There is no material before me which would substantiate an allegation that the Trade Practices claim was not instituted and is not being pursued bona fide.

So the result is reached that whatever the fate of the Trade Practices claim, the matter in the accrued jurisdiction would remain".

His Honour after some further consideration of the nature of s.52 misrepresentations and the principles by which the Court should be guided on a strike out application, dismissed the motion.

In the circumstances which now exist I would, with

respect, agree with his Honours interpretation of what the

Full Court said in Burgundy Royale and hold that there was	nothing in the applicants' case which suggests that the Trade
Practices claim here was colourable in the sense that it was made for the improper purpose of fabricating jurisdiction. Reference may also be made to Orison Pty Ltd v. Cross (81 ALR 183, especially at p.190).
While Mr Donohoe abandoned the Trade Practice claim he did not concede that there was no substance in it. In my
opinion the amendment of the Statement of Claim did not extinguish the accrued jurisdiction to deal with the common law claim any more than would have been the case if the Court had heard the Trade Practices claim and dismissed it on its merits. In my opinion, the respondent has not shown any basis upon which the Court should hold that no jurisdiction could have been vested in it consistently with Sections 76 or 77 of the Constitution. I therefore find that the Court has jurisdiction to deal with this matter and now proceed to consider the applicants' claim for breach of contract.
The contract, which it is alleged was breached, was an agreement entered into by the parties on 15 February 1979. All parties agree that Exhibit A was executed by them on 15 February 1979.
The applicants submitted that the recitals to the agreement set out the factual matrix of the relationship between the parties as follows:

(i) the applicants were no longer in a position

to sell the North Shore business having lost the
franchise
(ii)the applicants were indebted to I.T.P. in the
sum of $64,712.14
(iii)prior to cancellation the applicants had agreed
that they would sell the North Shore franchise to
Rory Glass.

3 0

The applicants submitted that the structure of the agreement was that the respondent, having cancelled the franchise would re-sell it and pay to the applicants the proceeds of that sale after deducting the amount of $64,712.14 due to it. To enable this sale to be effective the applicants transferred to the respondent all their "right, title and interest in trade names belonging to ITP ...l1.

In consideration of Rory Glass paying the sum of $190,000 to the respondent for the franchise the first-named applicant transferred "all his right title and interest in all Equipment, Fixtures, Furniture, Sundry items ..." on location at North Shore to Rory Glass.

The applicants submitted that the situation envisaged by the agreement was that the respondent would be paid money by the purchaser of the franchise (in this case Rory Glass) and would then apply the amount so received, as set forth in paragraphs 6 and 8 of the February agreement, firstly towards	the repayment of the sum of $64,712.14 owing by the applicants
to the respondent and thereafter to the applicants.
In my opinion, these submissions accurately set out the position between the parties following the execution of the agreement on 15 February 1979.
Clause 6 of that agreement provided that "ITP agrees to act faithfully and fully for the best interest of ITP and Glass, to use its best efforts to timely collect all sums due
. . . " and it is this obligation which the applicants claim
that the respondent has breached by failing to ensure that Rory Glass paid the balance of the $190,000 purchase price to the respondent.
The fact that the agreement, in its last recital, refers to the respondent becoming a collection agent does not qualify its obligations under Clause 6. As has been noted, the applicants had no rights of recovery from Rory Glass or Tarea.
At the time of the proposed sale by Tarea of the North Shore Franchise, the respondent by virtue of its debenture was entitled to a charge over the business which it was proposing to sell. That debenture also secured the payment of the monies owed by Tarea to the applicants. The respondent was a party to the sale agreement by Tarea to Zone which referred to the assets being sold as being free from encumbrances. The applicants had not given any instructions that the debenture
be discharged.

M r Bailey believed that the applicants had little chance

of getting from Rory Glass the monies due to them, which was not surprising having regard to his unsatisfactory conduct throughout the transactions and to his gambling debts. The present case is one in which a security over the franchise was of vital importance, not only to the respondent but also to the applicants. In my opinion, the failure of the respondent

3 2

to use that security to protect the applicants was a breach of
its contractual duty to them.

I further consider that the agreement of the respondent to discharge the deed of debenture given by Tarea over the North Shore Franchise amounted to a breach of its obligation to the applicants. This discharge occurred after all monies due to the respondents had been paid but when a large sum was still owed to the applicants. The evidence of Mr Bailey that this discharge occurred by mistake was far from convincing, but even if it were to be accepted, it still amounted to a breach. Each of these breaches entitles the applicants to recover damages from the respondent.

The respondent contended that at some time prior to December 1, 1983 the male applicant and his brother (Rory) came to an agreement that the respondent's role in collecting money from Mr Rory Glass was to terminate, the amount to be collected was to be reduced and the time at which the money

was to be paid was to accelerate and to be made certain. The	respondent was said to have become aware of this agreement in
the early part of December 1983.
Where the evidence of M r Bailey conflicts with that of Miss Meiklejohn, I prefer her evidence. In particular I reject his evidence that he told her - "Well, obviously John is on his own now". Even if he had said it, and she had remained silent, it would be wrong to conclude either that it amounted to a release by the applicants of the respondent from its obligations to them or that, in any event, she had authority so to release it or to qualify or vary the agreement between the parties. In my opinion, nothing that was done by or on behalf of the applicants amounted to a termination of the respondent's obligations under the agreement of 15 February 1979 or a repudiation of that agreement.

3 4

M r Donohue submitted the following table of principal and

interest due to 31 May 1990:

J M & M G GLAsS V ITP P m . LIMITED

INTEREST CALCULATION

Date	Re~avment	Princi~al	Days Rate Interest
Balance

$ $ $ $

5.2.79 -

3.8.80 170,000.00 536 6.5 16,226.85

This table has not been challenged by the respondent and accordingly the applicants are entitled to recover that amount, together with any further sum by way of interest to which the applicants are entitled.

The Court will sit at 2pm today to hear counsel as to the orders which should be made.

I certify that this and the
preceding thirtyfour (34)
pages are a true copy of the
Reasons for Judgment herein
of the Honourable M r Justice

Sweeney

Associate

Counsel for the Applicants:	Mr F Donohoe
Solicitors for the Applicants:	Lenehan & Co.
Counsel for the Respondent:	Mr D Libling
Solicitors for the Respondent:	Brown and Partners

Dates of Hearing:	30 April 1990, 30, 31 May 1990,
15 October 1990