GM Fascia and Gutter Pty Ltd v Trailer Trash Franchise Systems Pty Ltd
[2019] VCC 248
•12 March 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-16-00098
| GM FASCIA & GUTTER PTY LTD (ACN 052 427 031) | Plaintiff |
| v | |
| TRAILER TRASH FRANCHISE SYSTEMS PTY LTD (ACN 132 428 196) | First Defendant |
| and | |
| DALE COONEY | Second Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26, 27, 28 February, 2 March, 3, 4, 5, 6, 7, 11, 13 December 2018 and 29, 30, 31 January, 1, 4, 6 February 2019 | |
DATE OF JUDGMENT: | 12 March 2019 | |
CASE MAY BE CITED AS: | GM Fascia & Gutter Pty Ltd v Trailer Trash Franchise Systems Pty Ltd and Anor | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 248 | |
REASONS FOR JUDGMENT
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Subject:Breach of contract; Misleading or deceptive conduct
Catchwords: Misleading or deceptive conduct; franchise material indicating pendency of patents protecting franchised process; no entitlement to relief where franchisee disabused of belief in a share of a statutory monopoly before committing to franchise;
Franchise agreement; whether agreement may be terminated other than in accordance with mandatory industry code; whether proven that franchisee defaults remained unremedied after notice to remedy; termination notice invalid; nominal damages only recoverable with franchise business uneconomic; whether franchise agreement may be varied orally in face of no oral modification clause; unconscionable conduct by franchisee not proven.
Legislation Cited: Australian Consumer Law, as enacted by the Competition and Consumer Act 2010 (Cth); Australian Consumer Law andFair Trading Act 2012 (Vic); Part IV AA s24AH, s24AI Wrongs Act 1958 (Vic); 323(1)(a), 324(1) Crimes Act 1958 (Vic); s140 Evidence Act 2008 (Vic); Trade Practices Act 1974; Trade Practices (Industry Codes – Franchising) Regulations 1998
Cases Cited:Houghton v Arms (2006) 225 CLR 553; Briginshaw v Briginshaw (1938) 60 CLR 336; SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50; Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51; Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (Cth) (1981) 147 CLR 297; Aura Enterprises Pty Limited v Frontline Retail Pty Ltd; Suisse Atlantique Societe d’Armament Maritime SA v Rotterdamsche Kolen Centrale NV [1967] 1 AC 361, 422; Apache Oil Australia Pty Ltd v Santos Offshore Pty Ltd [2015] WASC 318 [119]; Mr Whippy Pty Ltd v Oceanwalk Pty Ltd [2008] NSW CA 8; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; Gangemi v Osborne; Bloomingdale Holdings Pty Ltd v 63 Buckley Street Pty Ltd [2009] VSCA 297; MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] 4 All ER 21; Liebe v Molloy (1906) 4 CLR 437; Commonwealth v Crothall Hospital Services (Aust) Ltd (1981) 36 ALR 567; Mendelssohn v Normand Ltd [1970] 1 QB 177; GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited (2003) 128 FCR 1; Re Gibson’s Settlement Trusts [1981] Ch 179; Hadley v Baxendale (1854) 9 Ex 341
Judgment:1. Within fourteen days, the parties must bring in short Minutes to give effect to these reasons. 2. Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr L. Magowan | PCL Lawyers |
| For the Defendants | Ms V. Plain | KHQ Lawyers |
HIS HONOUR:
Background
1 Mr Cooney is a certified practising accountant. Perhaps ironically, given that title, he does not and has not practised as such. (Transcript (“T”) 1077, Line(s) (“L”) 16-28) In the past, he has worked in senior administrative positions for a number of high profile law firms, including Arnold Bloch Leibler and Minter Ellison. At another time, he worked for a legal practice management software company. (T1078, L4-9)
2 Mr Cooney was introduced to the first defendant, Trailer Trash Franchise Systems Pty Ltd (“TTFS”) by a Mr Andrew Aston, whose brother-in-law had brought to Australia the system which that company was marketing and operating. Mr Tom Jamieson was a director of TTFS. Mr Cooney met Mr Jamieson and agreed to take up a position with TTFS. Mr Cooney officially became a director of that company on 1 July 2007. (T1078, L11 – T1079, L1) According to Mr Cooney, the first franchisee commenced on 1 August 2008. (T1079, L9-11)
3 The system was based upon a trailer-mounted skip or bin, the subject of two patents one of which was numbered 2006100625, relative to an invention described as “portable bin”, the inventors of which were identified as Cameron Morrell Griffiths, Thomas Alexander Garfield Jamieson and Glen Tremlett Crawford. (Court Book (“CB”) 248) The registered owner of that patent was Trailer Trash Pty Ltd. (Ibid)
4 The patent abstract described the bin as follows:
“A portable bin, including a hollow receptacle mounted on a trailer that includes a hitch so that it can be towed by a vehicle, wherein the receptacle is adapted to be decoupled from the trailer by a lifting device so that it can be emptied, and the receptacle includes an aperture through which its contents can be emptied when the lifting device decouples and rotates the receptacle more than ninety degrees.” (CB 250)
5 The advantage of this system which, according to Mr Cooney, has a tare of 2,000 kilograms (T1559, L3-5), for householders, handymen and tradesmen undertaking small building projects, is that the bin may be delivered to site by being towed by an ordinary passenger vehicle. As a registered vehicle the trailer may be parked on the public road or manoeuvred down a private track or driveway. Once filled, it may be removed from site by being towed by an ordinary passenger vehicle. Unlike a traditional skip, no forklift or special lifting mechanism on the back of a truck is required to deliver or remove it.
6 It is to be noted that the registered owner of that patent was Trailer Trash Pty Ltd, a company different from TTFS, the defendant in the present proceeding. Mr Cooney is not and never has been a director of Trailer Trash Pty Ltd.
7 At an early stage, there was a dispute as to the ownership of the concept. One of the inventors identified in the patent, Mr Cameron Griffiths, did not see eye to eye with Mr Jamieson and went his own way. He established a company known as Mobile Skips Pty Ltd (“Mobile Skips”). According to Mr Cooney:
“Mobile Skips commenced their business shortly after Trailer Trash, I think probably in 2006, I think Trailer Trash was around 2005. The business was set up by Tom’s former partner, business partner; they’d had a bit of a falling out, so they agreed that Tom would continue with the existing business and then Cam said that he would then set up basically another business in competition. That’s the extent that I know about the initial discussions. I know that there was an agreement that they put, where Tom got the brand, patent and all those elements, and then Cam said, ‘Look, I’m just gonna set up another business anyway’.” (T1092, L15-26)
8 These events and Mr Cooney’s knowledge of them, as we shall see, have assumed significance in the dispute between the present parties.
9 By letter dated 2 October 2008, Middletons, solicitors acting for Trailer Trash Pty Ltd (“Trailer Trash”), sent a demand to Mr Cameron Griffiths as director of Mobile Skips. They noted the existence of two patents held by their client and continued:
“Our client has recently become aware that Mobile Skips Pty Ltd … has been distributing, advertising, promoting, offering for sale and hire portable bins which are identical to or substantially similar to our client’s portable bins … This conduct by Mobile Skips … constitutes an infringement of our client’s patents.”
The letter demanded an undertaking from Mobile Skips to “cease and refrain” from its allegedly infringing activities. No such undertakings were given, and there the matter was left to rest. (Exhibit M)
10 In a licence agreement dated 31 March 2011, Trailer Trash Pty Ltd, TAGJ Consulting Pty Ltd (a trustee company associated with Mr Jamieson), and DPC Consulting Pty Ltd (a trustee company controlled by Mr Cooney), carried on business in partnership as Trailer Trash Australia and licenced to TTFS’ various Business Assets (including the patents) (Exhibit 9, pp19-31)
11 In 2009, a Mr Keith Rickards purchased a franchise known as “Thornbury Trailer Trash”. (T783, L3-10) Mr Rickards carried on this business under the style “Keith Rickards Family Trust No 2” (ABN 956 709 19191). (CB 84)
12 In late 2011 or early 2012, Mr Rickards decided to sell his franchise. He said that there were three people who expressed “mild interest” in purchasing. One other person who was seriously interested was Mr Maher, whose company GM Fascia and Gutter Pty Ltd (“GM”) is the plaintiff in this proceeding. (T785, L6-10)
13 The other person who expressed serious interest in purchasing Mr Rickards’ franchise was Mr Bruce Campbell. Mr Cooney sent an email to Mr Campbell on 20 April 2012, including:
· Franchise Agreement – blank version
· Disclosure Document
· Franchising Code of Conduct – effective from July 2010. (CB 1194)
14 The sale to Mr Campbell did not proceed. At about the same time, Mr Maher arranged to hire a trailer which entailed his attending Mr Rickards’ premises, collecting the trailer and signing an agreement. According to Mr Rickards, Mr Maher expressed interest in his business, and Mr Rickards told him that it was for sale. Mr Rickards told him how the business operated.
15 In the immediate vicinity of Mr Rickards’ premises were competitors in the form of Ronco Skips and Budget Bin Hire. Neither of these operators, however, offered skips on wheels. Budget Bin Hire provided skips that were slid off the back of a truck, and Ronco’s skips were lifted off a truck with chains. (T787, L1 – T788, L1)
16 Mr Rickards recollects informing the prospective purchasers about Mobile Skips’ involvement in the market. Mr Rickards said, “I had nothing to hide, they – you know, they were parked on the streets around the area …”. (T788, L6-8) Mr Rickards said that he told the prospective purchasers “they should do their own due diligence” (Ibid, 15-16)
17 Mr Maher, the principal of the plaintiff company, is a roof plumber by trade. In the course of his work, he fell off a roof and injured his back. (T503, L20-27) Mr Maher made his initial contact with Mr Rickards (as previously noted) when he hired a skip from Mr Rickard’s franchise on or about 26 April 2012. (T358, L26-28)
18 Mr Rickards’ yard was “a fenced off vacant lot in Ford Crescent … Thornbury” backing onto Darebin Creek. (T359, L10-15) Mr Maher was interested in going into business supplying skips because he was off work with his back and this was “something I think I’d be able to do”. (T359, L29-30)
19 Mr Rickards told him that he had had an enquiry from another prospective purchaser (presumably Mr Campbell), and his offer was subject to finance. This other purchaser had until the end of the week to make his decision. Mr Campbell did not proceed with the purchase. (T359, L31 – T360, L14)
20 Mr Maher said that Mr Rickards told him that “the idea was patented so no one else could do it”. (T360, L20-21)
21 Mr Rickards furnished a compilation of information relative to the business he was offering for sale expressed to be “accurate as at 27th April 2012” with a sale price of $140,000. The franchise area was said to be “North of Swan St Richmond. West of Burke Rd. East of the Tullamarine Freeway and as far to the North as the Franchisee wishes to travel”. (CB 198ff) This was the information which Mr Rickards provided to Mr Maher. (T363, L10-11)
22 Mr Maher signed a document dated 30 April 2012 acknowledging his receipt of the following documents:
“1. Contract for Sale of Business
2. Disclosure Document for Franchisee
3. Trailer Trash Franchise Agreement
4. Trade Practices Regulations 1998 under Trade Practices Act 1974
5. Copy of registration of Business Name (Northern Suburbs Trailer Trash)
6. Statements and Summaries from Trailer Trash Australia to Keith Rickards Family Trust No. 2, from June 2009 to current.” (CB 436)
23 The franchise agreement provided by Mr Rickards appears at CB 91-190.
24 Mr Maher also signed an acknowledgment of receipt of “the disclosure document”. (CB 190, T366, L13-16)
25 The disclosure document which Mr Maher received at this stage was a copy of the one given originally to Mr Rickards. (T367, L19-21) It was prepared as at 1 July 2011. (T368, L3-4)
26 Whilst these events were proceeding, Mr Cooney sent a broadcast email to everyone on the Trailer Trash system. Since Mr Maher’s company was not, at that stage, a franchisee, the email was not transmitted to him. Mr Maher said he saw this document for the first time as a result of the discovery process in the course of the present proceeding. (CB 145, T368, L28 – T369, L1)
27 The email sent by Mr Cooney ended “Regards, Dale”, referring to an email from one of the franchisees “with respect to a product very similar to ours that has recently moved into the Sydney market”. Mr Cooney noted that this competitor had been operating in the Melbourne market “for some time now”. Mr Cooney continued:
“We have, a number of times, discussed this matter with our lawyers, and have looked at various options available to us.
It has been, and still is, our consensus to address this matter by beating them commercially, rather than engaging in litigation.” (CB 1583)
28 The email noted the existence of patents protecting and granting a monopoly to the Trailer Trash system, but continued:
“The cost of litigating in the Federal Court is incredibly expensive, and, we have been advised, could cost in excess of $200,000, even for a relatively short trial. The matter could take more than 12 months to appear in court.” (Ibid)
29 The email said the proceeding might go against Trailer Trash and “our patents would be invalidated, we would be required to fund our legal fees as well as their legal fees. In addition we could face many more competitors.” He said the Federal Court was “extremely technical, and our case could fail”. The innovation patents lasted for eight years and Trailer Trash’s patents were almost six years old and, therefore, had “only a limited amount of time to run. A victory in court would be temporary at best.” Any such victory could be avoided by the making of “some small changes to the design”. (Ibid)
30 Mr Cooney was asked to produce the legal advice which was said to form the basis of the email. He produced, in response to the call, the letter of demand from Middletons to Mr Griffiths dated 2 October 2008, a quotation for the costs of an infringement trial provided by Middletons dated 31 October 2008, and an email advice from Mr Peter T Howard of Middletons dated 25 August 2008. Some, but not all, of the matters referred to in the email are traceable to this advice.
31 In addition, the question of Mobile Skips seems to have been the subject of a discussion at a company meeting held in the week commencing 6 February 2012. Mr Martin Keane, who was one of the directors of TTFS at the time, sought to raise the issue of “Mobile Skips”, and attached to an email a copy of a suggested communication to franchisees attributed to “Anna (our lawyer)”.
32 The email to franchisees the following May adopted some of what was to be found in Anna’s draft, including the thought that the best way to win the battle was “commercially (as opposed to “legally through a lengthy and expensive court action)”. (Exhibit 10)
33 Mr Cooney meanwhile provided a disclosure statement to Mr Maher, which he signed and dated 31 July 2012, though the disclosure statement was made up as at 1 July 2011 and spoke to the facts as at that date. (CB 685, T1526, L18-25)
34 Mr Maher said that he undertook some research viewing the Trailer Trash website. He produced what he said was a print-out of that website, which included inter alia under the heading “Franchise – The Trailer Trash System”, inviting readers to “become a Trailer Trash franchisee”, the statement “What you get: patents, ideas, patents … with two Australian innovation patents, a third patent for our new 6 metre skip bin has been applied for”. (CB 444, T370, L12-21) He said the same text appeared immediately before the commencement of this proceeding in 2016. (Ibid, L22-28)
35 Mr Cooney produced material from a website entitled “Way Back”, which he said established that this text did not appear on the website after 2013. (Exhibit 14)
36 In his discussions with Mr Rickards, Mr Maher said:
“I told him that I’d been off work for roughly two years with a back injury and that I had to find a new career, and I thought that potentially this business would be a good idea or would be less painful for my back, and then it looked like the business was earning enough money that I’d potentially, if I wasn’t able to do it physically, that I would be able to hire a driver to do the driving and still be able to earn an income for my family.” (T371, L1-9)
37 On 10 May 2012, there was a meeting with Mr Cooney, fellow director of TTFS, Mr Jamieson, Mr Maher and his wife Monique, his daughter, Tia (who was “just over one”), and Mr Rickards, held in a café in Darebin Road. (Ibid, L15-22)
38 According to Mr Maher, Mr Cooney “took control of the meeting”. (T372, L14-15)
39 Mr Jamieson remembers this meeting as “a regular meeting”, that is typical of lots of other similar meetings around the same time. (T944, L18-23) Mr Jamieson said the reason for the meeting was:
“twofold: (1) was to assess Grant Maher’s capability to run the franchise, he had a quite serious back injury before that, and the second reason was to discuss Mobile Skips.” (T944, L30 – T945, L2)
40 According to Mr Jamieson:
“We discussed Mobile Skips and they’d been in business for quite some time, we’d been competing alongside them, and they were very, very prominent, all one needed to do was a web search and we would come up alongside them. And, any time you did a web search for Trailer Trash Mobile Skips, you would find Mobile Skips alongside it, so Grant wanted to talk about that.” (T945, L4-11)
41 Mr Jamieson’s evidence continued:
“We said that we didn’t intend to do anything with respect to the patents. We cited the cost of patent litigation and the technical nature of the Federal Court and that we had made a decision that we would be much better off spending the money which we would otherwise spend on litigation to win commercially.” (Ibid, L15-21)
42 According to Mr Maher, the first he heard of Mobile Skips was when he saw a green trailer of the same design as those used by Trailer Trash in Hawthorn with the name “Mobile Skips” on 16 November 2012. (T387, L6-14)
43 Mr Rickards said that he had a “passive role” in the meeting, meaning he was saying little and did not take too much notice of what transpired. (T791, L8-15) In contrast to Mr Maher’s recollection of the meeting, he, Mr Rickards, attributed the dominant role in the meeting to Mr Jamieson. (Ibid, L22-23)
44 Mr Rickards said, under cover of the observation of his lack of memory of the meeting, “the patent was mentioned, but the patent was also only mentioned, because remember, we had market share”. (T799, L30 – T800, L1) The point of that remark, he said, was “We had the market share because we had marketing, Mobile Skips had no marketing”. (T800, L7-8) Mr Rickards said that he had no independent memory of mentioning Mobile Skips in the meeting. (T802, L18)
45 Mrs Maher said that Mobile Skips was not mentioned at the meeting of 10 May. She said:
“Well, nothing was said at the meeting on 10 May 2012 because Dale was telling us that this was a niche market, that nobody else could do it, so he definitely didn’t mention Mobile Skips.” (T839, L4-7)
46 A week later, on 17 May 2012, Mr Rickards executed the agreement to sell his franchise for $117,000. (T798, L6-7)
47 On 31 July 2012, a further meeting took place at the café in Darebin Road, Thornbury. Mr Maher met Mr Cooney, who brought two copies of the disclosure document and two copies of the franchise agreement, which Mr Maher executed. (T378)
48 Mr Maher said that he had had the opportunity to inspect Mr Rickards’ books and “he gave me all his invoices for every month that he’d worked there, I had them assessed by my accountant”. (Ibid, L29-31)
49 Mr Maher said that he did eventually receive a copy of the documents which he signed in “a black binder”. (T379, L7-19) He might have received these documents, he said, as late as the end of November 2012.
50 Signatures of Messrs Cooney and Maher appear at CB 771. The commencement date for the franchise was 1 August 2012. (CB 770) Consequently, Mr Maher, through his company, commenced trading on 1 August 2012. (T382, L23-25)
51 On 16 November 2012, as previously mentioned, according to Mr Maher he became aware of the operation of Mobile Skips for the first time. (T387) Mr Maher spoke to his father. (Ibid, L17-20) On his father’s advice, he then spoke to Mr Cooney.
52 According to Mr Maher, Mr Cooney said:
“Dale [Mr Cooney] was a really good friend of the family [operating Mobile Skips] and they were very, very wealthy; he said that it was going to cost somewhere around $400,000 to protect the patent through the courts, and they decided that it was an extremely - a lot amount - a lot of money, and they decided to put that money back into marketing and get us more hires, beat them at a commercial level. And he said that - he said, ‘Don’t worry, they’ll never be able to compete at the same price as us’.” (T387, 25 – T388, L3)
53 The plaintiff’s counsel, Mr Magowan, said “I take it that the premise of that conversation was that they [TTFS] still had the patents?” (T388, L4-5) Mr Maher responded “Correct”. (Ibid)
54 Mr Cooney said:
“I don’t recall the phone call and I think it’s highly unlikely … if there was a phone call, that we discussed Mobile Skips. … Grant often communicated by SMS, and I’ve had a look at my text messages around that time during the month of November, and there’s no reference to Mobile Skips even after the date that’s indicated that there was a telephone conversation. So, for something so significant in his eyes, I just don’t - I don’t believe there was a discussion about it at that time. I think it’s more than likely there was a discussion actually at the meeting in May, because what he’s suggesting was discussed is actually what I believe would have been discussed in May. …” (T1141, L4-18)
55 Mr Maher produced a document of six pages commencing at CB 2517. An entry under the heading “Mobile Skips ventures to the northern suburbs of Melbourne and opens up a facility in Reservoir”, stated “6 November 2012 - Mobile Skips ventures to the northern suburbs of Melbourne and opens a facility in Reservoir”. (CB 2520) The franchisee was Mr Bruce Campbell, the would-be buyer of Mr Rickards’ Trailer Trash franchise before Mr Maher and his company. (T388-390) The document described Mr Griffiths as the principal of Mobile Skips Holdings Pty Ltd. (T391)
56 On 20 December 2012, Mr Cooney sent an email to all those connected with the Trailer Trash enterprise. It began:
“After over 6 years working in the Trailer Trash business I have decided that it is time to take a break and hand the reins over. This has been a very difficult decision and one that has not come lightly.”
(CB 393A)
57 The email continued by referring to a number of staff changes and then stated “My final day in the office will be 14th Jan 2013.” He closed by wishing everybody “a Merry Christmas and safe and prosperous New Year”. (CB 393A)
58 Mr Cooney said:
“… there was certainly issues within the owners of the business, that we had differing views on the, um, the marketing side of the business especially. Um, I - my view was that we continued with the marketing program that we had. One of the newer owners felt as though we should go down a different path. Tom agreed with one of the new partners. So, it was fractured, we sort of - we had differing views. I decided then that it was in the interests of, sort of, the harmony of the group, that I step away and to have Tom and Andrew Robinson at the time run with the strategy that they thought was the best one to run with.” (T1132, L14-26)
59 Mr Cooney said that his equity interest in the enterprise remained, but his role became passive. He attended monthly meetings, but “had no operational or administrative or financial capacity in the business. From, --- around 20 January … that went until about April, so maybe two or three months”. (T133, L8-15) Mr Cooney undertook full-time work elsewhere. (T1134, L26-27)
60 On the face of it, Mr Cooney retained a measure of control over Trailer Trash. In practice, however, he said he was “basically ostracised for a period of time”. (T1308, 25-26)
61 According to Mr Maher, the effect for GM, as a franchisee, was most unfortunate. He said:
“… we didn’t get paid our January statements, we didn’t get paid our February statements, we didn’t get paid our March statements, and things were starting to get quite desperate now, I know it was for me. I actually had - Tom was out on my site and, um, I’d sort of was under the impression that there was some hostilities in the office, I don’t know what they were at the time.” (T394, L7-14)
62 He said, “Dale had left and then all of a sudden no one got paid, and we couldn’t get answers for anything, it was all up in the air”. (Ibid, 16-18)
63 Mr Chad Holland, the principal of Premier Waste, the company which disposed of the waste collected in Trailer Trash’s bins on contract with TTFS, said:
“There was a period they went through where we were very worried that we weren’t being paid. At the time there was some problems with the partnership, was my understanding …”. (T918, L21-24)
64 Mr Holland said Premier Waste contemplated withdrawing its services. (T920, L3-4)
65 Precisely what the disputes were between Mr Cooney, on the one hand, and the other owners of Trailer Trash, was not disclosed beyond the fairly anodyne description quoted above. This situation could hardly continue. Mr Cooney said that he sought to return to a more active role in Trailer Trash in April 2013, having been out of involvement since 20 January that year.
66 Nevertheless, in April, and for some months thereafter, Mr Cooney had no access to the TTFS bank account. He did have access to a partnership account in the name of Trailer Trash Australia. Realistically, however, in those circumstances he had little control of the enterprise (T1135, L24-28) until he sent an email remonstrating with the manager of the ANZ branch where the TTFS account was held, on Wednesday, 25 September 2013 (Exhibit 8). This email seems to have been successful in restoring him to control.
67 Mr Cooney denied a suggestion put to him by plaintiff’s counsel, Mr Magowan, that he had engaged in a screaming match with Mr Jamieson in December 2012. (T1307, L24-26) It had reached a point where the other partners, including Mr Jamieson, wanted to wind the business up, as did Mr Cooney’s wife, Tammy.
68 According to Mrs Cooney, Mr Cooney resisted this because the franchisees could lose everything. The result was that the Cooney family took over sole control of TTFS. This required Mr and Mrs Cooney to sell their house and outlay $250,000. (T1427-9) According to Mrs Cooney, “The plan was that we would stop taking new franchises … for the first six months, just so that we could evaluate”. (T1428, L21-24) This six-month period was “to take stock” (Ibid, L29)
69 From 1 July 2013 onwards, Mr Cooney and his family were in sole control. Mrs Cooney’s sister, Ms Melody Schubert, worked in the office. Mr Cooney continued in his full-time external employment. (T1430, L13-20) Mrs Cooney sent out an email “fairly early on just introducing myself”. (T1431, L18-19)
70 According to Mr Cooney, TTFS’ system operated in this way. The product marketed was the “combination of a product, some marketing and service”. (T1079, L14) The product was the mobile skip. (Ibid, L15) The service was the provision of customers with deliveries and pick-up. (Ibid, L17-19) The marketing comprised the means whereby the product is made known to the public. (Ibid, L16) A franchisee was provided each morning with a job sheet setting out, at the time of its production, the deliveries and pick-ups of mobile skips allocated to that franchisee. As a result of further orders, additional pick-ups and deliveries might be added through the day. (Ibid, L26-31)
71 TTFS provided a guide to franchisees as to pricing, separating the price charged to the customer into a core price, being the fee for the provision of the skip, and a delivery fee on a sliding scale, depending upon the distance of the delivery point from the franchisee depot. (T1080, L15-25) Franchisees received their customer orders from a number of sources. First, customers might make a booking online through the Trailer Trash website. Secondly, there was self-generated business as a result of local advertising undertaken by franchisees and repeat business, where approaches were made by customers directly to the franchisee as a result of local advertising or previous deals. Next, there were third party websites.
72 According to Mr Cooney, “so lots of bin companies would put their product on the one website and the person would select the bin they wanted and it would bring up the cheapest price.” (T1081, L9-12) The final source was calls to TTFS’ “1300” number. (T1080-1, 1083, L14)
73 Billing for all work other than the self-generated orders was carried out by TTFS, and the franchisees were paid the amount of receipts for their orders in one month on or about the 20th of the following month. This date was chosen because it equated with the point at which third party websites, such as “BookaBin”, made their payments. (T1084-86)
74 Payments to franchisees were subject to deduction of:
“…the royalties, the marketing fees, the hire of the trailers and any other fees that are within the agreement. So, effectively around the 20th there’s a net-off and then the difference is then paid.” (T1084, L30 – T1085, L3)
75 The disclosure statement signed by Mr Cooney on 31 July 2012, and furnished to Mr Maher, included, in the “Intellectual Property” section, reference to two patents. The first, number 2006100873, was described as registered on 8 May 2007, and number 2006100625 as being registered on 2 May 2007. The intellectual property was said to be owned by Trailer Trash Australia and Trailer Trash Pty Ltd and “licensed to Trailer Trash franchise”.
76 The parties to the licence agreement were Trailer Trash Australia, Trailer Trash Pty Ltd and “Trailer Trash Franchise Systems” (presumably a reference to Trailer Trash Franchise Systems Pty Ltd, the first defendant). (CB 696-698) In fact, as at 31 July 2012, when Mr Cooney gave Mr Maher the disclosure statement, the registration of these two patents had lapsed. The patents would have expired in 2014 in any event. (T1101, L7)
77 It will be recalled that Mr Maher denies having received the disclosure statement, as signed by Mr Cooney, until after the completion of the transaction. It is undisputed, however, that he received another version of the same document from Mr Rickards at an earlier stage.
78 A search of the Australian Patents Register as at 16 March 2016 shows both patents as having “ceased”, with effect from 10 February 2012 in the case of both patents. (CB 236-247) The registered owner of the innovation patents was Trailer Trash Pty Ltd. This was Mr Jamieson’s company and not Mr Cooney’s. That company, in any event, has been deregistered. (T941, L7-19)
79 Mr Jamieson said his company, in dealing with the instructed patent attorneys, Davies Collison Cave (Ibid, L29-31), did not become aware that the patent had lapsed until “after I’d left the business”, viz in June 2013. (T942, L14‑16) The problem seems to have been a failure to respond to correspondence from Intellectual Property Australia, the government authority operating the Patent Register. Mr Jamieson said that notices for renewal would have been received by Davies Collison Cave, the patent attorneys managing the patent, who should have referred this correspondence to the Trailer Trash organisation. Mr Jamieson said, “Yeah, I think they went to the office and were managed by Dale”. (T942, L8-9) It appears they were not managed by anybody, hence the “cease” designation for both patents in February 2012.
80 It will be seen from Mr Jamieson’s evidence already quoted, that he attributes fault for failing to attend to the renewal of the patent to Mr Cooney, who was apparently engaged full-time in the Trailer Trash business in February 2012 and the months preceding.
81 Mr Cooney said he was unaware of the lapsing of the patent until preparation of an assignment document, which was intended to transfer the patents to him, amongst other intellectual property, was being drafted by his legal advisers, Mills Oakley, to take effect on 1 July 2013. He likely became aware of the lapse in mid-June of 2013. (T1188, L6-14)
82 As from July 2013 Mrs Cooney was effectively in charge at the Trailer Trash office. The enterprise was entirely controlled by the Cooney family. Mr Cooney continued in full-time external employment; therefore, despite Mrs Cooney not being clothed with a particular title by TTFS, she was in effect in charge on a day-to-day basis, subject of course to Mr Cooney’s overall authority. (T1470, L25 – T1471, L6) At least in the first month, Mrs Cooney had a relatively positive view of Mr Maher and his company. (T1474, L24-28) That soured thereafter. Mrs Cooney said:
“After having to deal with Grant and this whole situation, we [viz the Cooney family] will never ever franchise anything ever again for as long as we live.” (T1429, L8-10)
83 She agreed that a review of the written record would demonstrate that she had used forceful language in her dealings with Mr Maher. She justified this in the following terms:
“Because Grant was completely and utterly incompetent and couldn’t do the very basic functions of his job, which was to pick up a bin and deliver it to a customer, pick it up from a customer, bring it back, update the - you know, basically update the website, the intranet, and maybe think about a bit of marketing to improve his business in his area - couldn’t do it, just couldn’t do it, so it was very, very difficult. Having that three months or four months - how long was it? It was actually from July through to November, so five months, that time was one of the most difficult times I’ve ever had to deal with somebody in business. It was insane.” (T1429, L13-25)
84 Following the first relatively positive month, according to Mrs Cooney:
“Within another month he - we were just getting so many complaints about him, he wasn’t doing really basic things that we were asking him to do. He - yeah, I suppose that, and that just became more and more and, you know, he would at the last minute tell us that he couldn’t walk and then we would be left to try and find somebody to deliver all his bins. He was incredibly unreliable. Many, many people were calling saying, “Where’s my bin? I spoke to Grant, he was supposed to be here two hours ago”, you know, that sort of thing. It was really stressful and, as the months went on, that just got more and more stressful. So, we had the people from Trailer Trash calling, but we also had the people from Trailer Stash calling, the other business, so it was - you know, there were six other franchises at the time, but the work - you know, in the office 80 per cent of the work was taken up with what we were doing for Grant, with Grant, having to deal with his issues.” (T1432, L2-21)
85 The reference to “Trailer Stash” was to another business operated by the same interests as controlled TTFS. Mr Maher described it as “their mobile storage business”. (T374, L27-28) This was the subject of discussion at the meeting on 10 May 2012. Mr Maher described the enterprise as follows:
“Trailer Stash is a mobile storage business. So, they have 10 cubic metre timber boxes that you can put your storage - they deliver the storage unit to your house, you put all your storage stuff in it, lock it up, they drive it back to their factory and store the box.” (T375, L8-13)
86 A company associated with Mr Cooney carried on the Trailer Stash business. By an undated deed styled ‘Asset Sale Agreement’ apparently entered into in June 2013, TeePee Books Pty Ltd, a company associated with Mr Maher, agreed to purchase the Trailer Stash business for a purchase price of $113,000, payable by instalments of $65,000 on the takeover date, apparently 30 June 2013, and $2,000 per month commencing the first month immediately following for 24 months. (CB 2417-2457)
87 The intention of the parties was to fund the $2,000 instalments by deduction from the monthly distributions to GM Fascia & Gutter Pty Ltd under the TTFS franchise arrangement. Mr Cooney, as a director of Trailer Trash Franchise Systems, wrote a letter to Mr Maher dated 10 June 2013 asking him on behalf of his company, GM, to agree to a variation of GM’s franchise agreement to permit this $2,000 deduction. In the event, Mr Maher did not sign that letter. (CB 2418) Nevertheless, in the ensuing months some $10,000 was deducted from GM’s distributions under the Trailer Trash franchise. (T1327, L4-18, Exhibit F)
88 Following on the souring of relations between the Cooneys and Mr Maher and his company, a series of “breach notices” were served or purportedly served in pursuance of GM’s franchise agreement. The first of those was dated 13 September 2013. The breaches alleged appeared in paragraph 2 in the following terms:
“The Franchisee has breached the above provisions of the Franchise Agreement as described in paragraph 1 of this notice.
Particulars
(a) On regular occasions the franchisee has not been able to accept new orders due to not being available during business hours or not having bins available to service the area;
(b) The Franchisee was unable to service its area on numerous occasions in the past few months including, but not limited to, 11 and 12 September 2013;
(c) The Franchisee advised he was unable to service his territory on 9 September 2013;
(d) The Franchisee has advised the Franchisor that the site address at 1 Ford Crescent Thornbury has been cleared from waste and also the [scil that] all trailers have been removed. This would then allow the Franchisor to vacate the Premises;
(e) The Franchisee has failed to and refused to operate the Franchised Business so as to service all Customers in a prompt, efficient, professional and courteous manner (in breach of clause 8(o)) as evidenced on 2 September where despite regular calls and text messages the Franchisee did not respond to an urgent request for service by customers;
(f) The Franchise [scil Franchisee] is unable to service his territory in accordance with the Franchise Agreement.” (CB 396)”
89 The notice concluded with a demand that the breaches be remedied by 5.00pm AEST, 17 September 2013, failing which the franchisor would terminate the franchise agreement. (CB 395-397)
90 Messrs Slater and Gordon, solicitors, responded to the breach notice in a detailed letter dated 17 September 2013 (CB 397A-397C).
91 Shiff and Company, acting for TTFS, responded in a letter dated 25 September 2013 providing further explanations of the background of the breaches alleged, and refusing to withdraw the notice. (CB 398-401)
92 Shiff and Company wrote a further letter to Slater and Gordon, dated 3 October 2013, making further complaints about Mr Maher and his company’s performance under the franchise agreement. (CB 401A-401C)
93 Slater and Gordon, under cover of a letter dated 9 October 2013, served a Notice of Dispute under clause 27 of the franchise agreement. (CB 401E-401F).
94 Shiff and Company sent a further breach notice dated 15 October 2013. The alleged breaches contained in paragraph 2 of the notice were as follows:
“(i) Trailers had been moved out of the depot and on to the side of the road along Charnfield Court. The Trailers are full of rubbish, are unsightly, and are inconveniencing the neighbouring businesses. The Franchisor has received two complaints from Heather of Millennium Marble and Granite at 1/6 Charnfield Court, Thomastown, about the location and condition of the Trailers. Heather advised our client that she had also made a complaint to the local Council about the Trailers.
Because the unsightly, inconveniently-parked and (as set out in paragraph 2(iii) below) unroadworthy Trailers are branded with the Trailer Trash Intellectual Property, such public location is prejudicial to the image of the Franchisor in breach of Clause 8(s) of the Franchise Agreement;
(ii) Millennium Marble and Granite’s complaints – and its anticipated complaint to Council – were communicated by the Franchisor to the Franchisee on 11 October 2013 by email and the Franchisor was directed to move the Trailers off the street. The Trailers have not been moved. As such directions by the Franchisor were reasonable in the context of Millennium Marble and Granite’s complaints to the Franchisor and Council, the Franchisee’s failure to comply with the reasonable directions are a breach of clause 9(e) of the Franchise Agreement;
(iii) several Trailers were missing jockey wheels, had flat tyres and/or had damaged jockey wheels, rendering them unable to be safely and legally towed in breach of clause 8(f) of the Franchise Agreement;
(iv) several trailers had been uncoupled from the bin in breach of clause 24.1(a) of the Franchise Agreement which permits only the use of the Trailers (defined in the Franchise Agreement as the ‘4m3 mobile skip’, being the trailer and bin together) by the Franchisee; and
(v) several trailers (uncoupled from the bins) were observed as being used to transport oversized pine boxes that were unrelated to the franchise business, in breach of:
(A)clause 24.1(a) of the Franchise Agreement, as set out in 2(ii) above; and
(B)clause 1.7 of the Franchise Manual, which constitutes a breach of clause 9(a) of the Franchise Agreement.” (CB 403-404)
95 There was once again a statement that failure to remedy the breaches “in the manner and by the time set out” would result in termination of the franchise agreement. (CB 402-404)
96 The next breach notice was dated 29 October 2013, alleging in paragraph 2 the following breaches:
“(a) On 28 October 2013 the Franchisee failed to deliver a Trailer in accordance with a job allocated to it at 42 Hunter Street, West Brunswick, in breach of Clause 8(o) of the Franchise Agreement.
(b) After being asked why the Franchisee failed to deliver the Trailer, Grant Maher of the Franchisee responded that he had received a Breach Notice in relation to the Trailers and accordingly all the Franchisee’s Trailers were in service mode.
To the extent that the Trailers are not roadworthy, as set out in the Breach Notice, that is a breach of Clause 8(f) of the Franchise Agreement.
To the extent that the Trailers are full and unable to be used, this prevents the Franchisee from complying with Clause 8(o) of the Franchise Agreement.” (CB 405-406)
97 The notice concluded with a threat that failure to remedy would result in the cancellation of the franchise agreement. (CB 405-406)
98 The next letter from Shiff and Company to Slater and Gordon stated:
“Grant Maher of your client has advised our client that he is unable to perform the obligations contained in the Franchise Agreement, including clause 8(o)’s obligation to service all Customers in a prompt manner, because all his Trailers are in service mode following receipt of the Breach Notice issued by this office on 15 October 2013.” (CB 407)
99 The letter alleged a failure to comply with the breach notice of 15 October, and concluded:
“Accordingly, our client is taking steps to grant another Franchisee the right to operate a Franchise Business in your client’s Territory in accordance with clause 25.2 of the Franchise Agreement.” (Ibid)
100 The letter enclosed a further breach notice already quoted.
101 Finally, in a four-page letter dated 4 November 2013, Shiff and Company, referring to the last two breach notices, stated:
“Your client [viz GM] has failed to remedy the breaches set out in the Breach Notices and has additionally committed an insolvency event within the meaning of the Franchise Agreement.” (CB 408)
102 The letter continued that there was an enclosed Notice of Termination given pursuant to clauses 25.3 and 25.4 of the Franchise Agreement. The letter continued:
“… we attach a photo of bins uncoupled from trailers outside your client’s premises, which was taken on 31 October 2013 (see Image 1). The bins were observed on the street outside the depot and the trailers could not be seen.” (Ibid)
103 Whilst this flurry of correspondence was taking place, Mr Maher and GM had moved premises. Mr Maher, presumably on behalf of GM, made an offer to lease premises at 1–2 Charnfield Court, Thomastown dated 7 June 2013. (CB 2184-5) The offer provided for a first instalment of rent at $8,250 and a security deposit of $16,666.66. A schedule, presumably intended to be attached to a Law Institute standard lease, was sent to GM, according to a notation appearing upon it, on 20 June 2013. This provided for the payment of $90,000 rent per annum plus GST for a term of three years, commencing on 12 July 2013. (CB 2186-2190)
104 The tenancy seems to have been short-lived. The parties entered into a deed of surrender of lease showing the lessor company as Con Lee Investments Pty Ltd, and GM as the tenant. The document was signed by Mr Trajcevski on behalf of Con Lee. The recitals were as follows:
(a)The Landlord and Tenant entered into a lease for a term of 3 years commencing 12 July 2013 (the Lease) for the premises known as 1‑2 Charnfield Court, Thomastown VIC 3074 (the Property).
(b)The Tenant has defaulted in payment of rent pursuant to the Lease.
(c)The Landlord has agreed to allow the Tenant to surrender the Lease subject to the terms contained herein.
105 The surrender was expressed to take effect on 11 October 2013. Mr Maher signed on behalf of GM. (CB 2197-98)
106 According to Exhibit C, which included an invoice from Rutherfords Property Management on behalf of Con Lee Pty Ltd (the lessor) as at 17 October 2013 – that is, shortly after the surrender, some $17,392.82 was payable by GM, identified in the invoice solely by its business name ‘Northern Trailer Trash’. The total claimed consisted of two items of rent, namely $8,250 for the period 12 September 2013 to 11 October 2013 and $543.96 rent for the period 12 October 2013 to 13 October 2013, and a range of outgoings and charges for repairs and cleaning at the property. It seems that the security deposit was taken to settle the account.
107 Mr Trajcevski, in his viva voce evidence to the court, said:
“[T]here was no rent paying any more, and I had to let him go. Instead of going to courts and asking for three years' lease time, I thought the best way is to let it go.” (T1051, L28-31)
108 Mr Trajcevski denied having financial difficulties at the time. He said Mr Maher of GM avoided demands for rent made by himself on behalf of his company and the managing agent by “keeping away”. (T1052, L12-14) Mr Trajcevski denied that sheriff’s officers attended the Charnfield Court property seeking an outstanding debt from Mr Trajcevski or his company. (T1055) Mr Trajcevski said “I never met the sheriff”. (T1056, L14) Mr Trajcevski also denied the proposition put to him by the plaintiff’s counsel that he had told Mr Maher in October or November of 2013 that he, Mr Trajcevski, was in financial difficulties. (T1056, L24-31)
109 Mr Maher gave a different account of these events. Charnfield Court had been used not only as the premises for GM but also for Mr Maher’s company TeePee Books, carrying on business as Trailer Stash. Mr Maher sent an email to “Trailer Trash” on the subject “Changing of depot”. The email stated:
“Unfortunately due to lack of Sales I’ve had to move my Depot from Charnfield Court. The Landlord was in financial difficulty so we jointly agreed to make a clean split on Wednesday so have worked around the clock to make the move happen. Currently I have the bins out to be flipped as we finally finished up last night.”
110 He gave the address of the new premises as being 20-22 Mercedes Drive, Thomastown. (CB 1686)
111 Around the same time, Slater and Gordon wrote a letter on behalf of GM to TTFS’ solicitors, Shiff and Company, dated 9 October 2013, and headed ‘Without Prejudice – Save As to Costs’. This letter has been put into evidence as Exhibit A, and presumably any privilege with respect to it has been waived. At paragraph 88 of a lengthy and detailed letter, the solicitors said:
“…to avoid further legal costs being incurred by the parties, our client [GM] proposes to resolve the existing situation by selling his (sic) franchise to your client [viz TTFS] for $117,000 being the price that he (sic) paid for the franchise.”
112 The letter responded in detail to each alleged breach. The letter complained of TTFS’ conduct with respect to its franchise disclosure, complaining of a failure, amongst other things, to provide annual financial statements “on a regular basis”. It also complained of unilateral abandonment of intellectual property “without consultation with franchisees”. The letter stated this had deleterious consequences “because it has enabled a competitor to enter the market using the intellectual property”. The reference here seems to be to the lapsed patents, with the “competitor” being Mobile Skips Pty Ltd.
113 Within days of this letter, by an email or letter dated 11 October 2013, TTFS over the signature of Mr Jamieson lodged an application for extension of time on behalf of Trailer Trash with respect to the innovation patents which had lapsed. The ground for extension of time was “renewal not forwarded by agent”. These applications (Exhibit N) were not ultimately pursued.
114 During the period July 2013 to November 2013, following the initial “honeymoon” period described by Mrs Cooney, the relationship between Mr Maher and GM on the one hand, and TTFS, Mrs Cooney, and others in the TTFS office such as Ms Schubert, was fraught. There was frequent recrimination, with those at TTFS, principally Mrs Cooney, faulting Mr Maher for alleged failures to meet the service standard required of him and GM by the franchise agreement. For his part, Mr Maher responded denying the validity of the criticisms and complaining of oppressive “nit picking” by Mrs Cooney and TTFS. The various breach notices already quoted arose out of this contentious relationship. At this stage it is unnecessary to go to the detail of each of these encounters.
115 It is necessary, however, to say something as to events which have assumed significance and occurred on 15 October 2013. It will be recalled that Mr Maher was moving out of GM’s premises at Charnfield Court to a new nearby site in Mercedes Drive, Thomastown. Mr Maher was at Charnfield Court on 15 October to complete the move. Mr Maher said that skips had been left out to be emptied by Premier Waste but they were not emptied. Premier’s driver told Mr Maher, according to Mr Maher’s account, that a lady, whom Mr Maher presumed to be Mrs Cooney, told Premier not to empty those skips. (T439, L9‑15)
116 A former employee or contractor of GM, a Mr Martin Brackley, also attended the site. (Ibid, L28-29) Mr Maher said that he dispensed with Mr Brackley’s services as a driver because of his poor accident record and on the direction of his insurance broker. (T440, L1-5) Mr Maher conceded that he or his company owed Mr Brackley “around $200”. (T440, L9-10) Mr Maher said that Mr Brackley was assisting his former landlord, Mr Trajcevski. (Ibid, L26-29) Mr Trajcevski denied even knowing Mr Brackley. (1052, L15-16) According to Mr Maher:
“[Mr Brackley] come out and started a fight with me. He wanted me to get off the forklift so he could use it inside with the landlord, and I said, “No, he’s just kicked me out, I’m not - you know, I’m not gonna be letting him use the forklift”, and he just got really aggressive and then he punched me hand, and then sort of grabbed me off the forklift and then we ended up having a punch on which just got absolutely out of hand. He went back to my car and smashed it up, and then he grabbed the tyre - not the tyre, the wiring harness off the trailers and was walking down the street swinging it above his head saying ... like, he wanted to kick - like, he wanted to rip me head off and choke me to death and all these sorts of things. So, one of the guys from the factories downstairs just said, “Let him go, he’ll burn out.” In swinging it around he hit himself in the face with the tyre thing, and he split his lip, like really bad ..., and I think that’s the only thing that stopped him.” (T440, L31 – T441, L19)
117 It seems neither Mr Maher nor GM paid Mr Brackley the $200. (T441, L26‑29) Mr Maher said that he walked to GM’s new factory in Mercedes Drive. Mr Maher said:
“I started hyperventilating really bad, and then I thought I was having a heart attack and I subsequently passed out, and I sort of come to in the ambulance and I was taken to the hospital ...” (T442, L2-6)
118 Mr Maher was taken to the Emergency Department of the Northern Hospital. (Ibid, L19-20) However, he was diagnosed on this occasion as having suffered a severe panic attack rather than a heart attack. (T843, L18-21)
119 Mrs Maher rang TTFS, speaking to Mrs Cooney. According to Mrs Maher, she informed Mrs Cooney that her husband had been taken to the Northern Hospital with a suspected heart attack, to which, according to Mrs Maher, Mrs Cooney responded that she was “nothing but a fucking liar”. Mrs Cooney said that she had video footage of Mr Maher at the warehouse “only half an hour ago”, so how could he be in hospital.
120 Mrs Cooney, according to Mrs Maher, said that TTFS would not be assisting with delivery and GM must make the deliveries within the stipulated timeframe. Mrs Maher said she responded, “I can’t believe you’re putting me in this position and that you are nothing but a heartless bitch”. It was following this conversation that Mrs Maher was told that the “attack” was a panic attack and not a heart attack. (T842-3)
121 Mrs Cooney’s account was that her husband had received a call on 14 October from Premier Waste to the effect that Mr Maher had abandoned his warehouse. Later that day, she attended Charnfield Court. She said, “bins were all over the street and overfull and were uncoupled that is the skips had been lifted from the trailer chassis”. She said she saw the owner of the warehouse, presumably Mr Trajcevski, who told her that Mr Maher had been evicted because he had not paid the rent.
122 Then Mr Brackley arrived, telling her that he was upset, was a father of seven children, and he was owed $1,000 for work done by him for GM or Mr Maher. Then she said she received a call from Ms Schubert from TTFS, referring to an email from Mr Maher giving the address of the new warehouse. She made her way to these premises, and once again found bins uncoupled, but could not gain access.
123 The following day, she received a call from a woman known as “Paddy” said to be Mr Brackley’s wife, saying she had videotape of Mr Maher ramming a forklift into the side of bins. She then alleged that Mr Maher had dismounted from a forklift and hit Mr Brackley. It was some hours after that, that Mrs Cooney received the call from Mrs Maher as to Mr Maher’s “attack” and hospitalisation. She agreed that she was annoyed but denied using the language attributed to her. (T1436-1439)
124 Mr Maher described an attendance, presumably some days later, at a police station. The police had called on him in hospital and directed him to attend when he was feeling better. He said he was “arrested on assault” but not charged. Apparently, the police were acting upon a complaint by Mr Brackley. According to Mr Maher, he had another panic attack during his attendance at the police station and was once again taken to hospital. He was discharged on the morning of the 17th, which would have had his initial attendance upon the police on 16 October. (T452-3)
125 The short video sequences of Mr Maher operating a forklift were produced to the court. Apparently, what is depicted is the use of the trailer chassis to remove the 10 cubic metre crate used as part of the Trailer Stash business.
126 Mr Cooney’s objection to this practice was that it might entail a gross overloading of the chassis. (T1559, L2-8) Mr Maher produced photographs of the injuries he says he sustained in Mr Brackley’s attack. (CB 503-505)
127 According to Mr Maher, his father and his wife had completed doing the deliveries in the evening of 15 October. They told him, “there was a white, either a Landrover (sic) or Range Rover at the end of the street watching them do the last couple of deliveries”. (T443, L28-31) Mr Maher also produced photographs of damage which he said Mr Brackley had done to his car: kicking in the front; breaking plastic items; and leaving his footprint on the light. (CB 506-10)
128 On 16 October, according to Mr Maher, he and his father were in a motor vehicle heading for the Charnfield Court premises:
“… there was a car parked directly opposite the street, it was a little grey car with two people in it, and I believe the one in the passenger seat was Tammy, it looked exactly like her. I hadn't actually seen Tammy at this time, I'd never seen her before, but when I saw her in court later on in the month I thought, well, that's the girl, that was the girl in the car with that bloke that day, so that was my interpretation of it.” (T449, L22-29)
129 Mr Maher said that when they removed the last few bins from the old factory, the vehicle followed them to the new factory and “Martin Brackley was there again”. He was following in a different car. (T450) Mr Maher described being followed by the grey car and also in a separate vehicle by Mr Brackley, who was revving his engine and screaming out “Mate, I'm gonna kill you, you f-ing this and that." (T451) These two vehicles followed Mr Maher as he was making his deliveries.
130 On 17 October, Mr Maher described receiving a phone call from his wife who was at their home – “Quite half hysterical” – saying there was a man sitting out at the front of the house watching Mrs Maher and her children. While this telephone conversation was taking place with Mr Maher at the Mercedes Drive factory, a car described by Mrs Maher drove across on the main road. (T453-4) The vehicle, on Mr Maher’s account, drove the distance from his home in South Morang to Thomastown whilst the Mahers were speaking by telephone to one another.
131 Later that day, Mr Maher left the factory by the back way and was able to approach a vehicle from behind. Those in the vehicle, according to him, “panicked”. He filmed this and parked. The other vehicle realised that Mr Maher was filming and stopped; did a U-turn and drove off. (T455)
132 As a result of these matters, Mr Maher made an ex parte application to a magistrate for an intervention order against Mrs Cooney. When the matter returned to the court in November, the intervention order was not continued but Mrs Cooney gave an undertaking not to approach Mr Maher. (T456)
133 Mrs Cooney denied that she had been involved in any following or stalking of Mr Maher. She produced to the court an e-ticket (Exhibit 12), which showed that she had been booked to travel from Melbourne to Sydney on a flight leaving Melbourne at 7.45am on 16 October. Mrs Cooney said that she gave the undertaking not to approach Mr Maher because, at that stage, she hoped and believed that she would have no further dealings with him. (T1440-41)
134 According to Mrs Cooney, the magistrate said that in the absence of further evidence from Mr Maher, she would not continue the intervention order. In particular, given that Mr Maher had not, before 16 October, seen Mrs Cooney. Therefore, his identification of her as a person in a vehicle on 16 October was dubious. (T1442-3)
135 Mr Cooney denied having anything to do with these matters. (T1382, L29 – T1383, L18) Mrs Cooney also denied any involvement in engaging private investigators to “surveil” Mr or Mrs Maher, their private home or their property. (T1507, L1-22)
136 By letter dated 4 November 2013, Shiff & Company, on behalf of TTFS, served a Notice of Termination of GM’s franchise agreement. The notice was directed to GM care of Slater and Gordon lawyers, and alleged:
“Your client has failed to remedy the breaches set out in the breach notices and has additionally committed an insolvency event within the meaning of the Franchise Agreement”. (CB 408-411)
137 Following the Notice of Termination, TTFS repossessed its trailers from GM. (T1168, L29-31)
138 On 31 October, Mr Maher said he convened a meeting with the other Victorian franchisees to make them aware of what was happening and to inform them that patents had lapsed. (T473, L10-17) An attempt to give an account of what was said by the franchisees at that meeting was blocked by an objection based on the hearsay rule. (T473, L11-19, 28-31)
139 Following the meeting, Mr Maher said that he went back to his yard where he had a delivery to do relative to the Trailer Stash business. He was towing a trailer onto the freeway “and there was just a smashing noise”. (T474, L19-23) He said that the trailer had been sabotaged with holes being cut with an oxyacetylene torch. (T475, L25-29)
140 Mr Maher produced video footage of the vehicles which he said were stalking him and referred to licence plate numbers. (T480)
141 Then, on the night of 3 or 4 November 2013, Mr Maher was awoken by the police, who told him that a vehicle at the front of his factory had been “torched”. This was the car that GM had been using to deliver the bins. (T481, L19-25) No one was charged over the “torching of the car”. (T481, L31 – T482, L1) Mr Maher complained that the water supply pipes to his Mercedes Drive factory “had been basically ripped apart”. (T482, L2-9) He believed this happened “in the week leading up to getting terminated”. (T483, L6-7)
This proceeding
142 Solicitors acting for the plaintiff commenced this proceeding in January 2016, seeking relief against TTFS, Mr Cooney and Mr Jamieson. The plaintiff settled its claim against Mr Jamieson and he ceased to be a party. Since then, the continuing defendants have placed reliance upon Part IV AA of the Wrongs Act 1958, and Mr Jamieson has returned as a party solely for apportionment purposes. In the events that have occurred, however, the plaintiff is precluded from recovering any judgment against him.
Plaintiff’s claim
143 In my experience, the most recent versions of the pleadings are customarily included in the opening section of the court books. Where those pleadings are overtaken during trial, the most recent versions are added to, or substituted for, the superseded versions. Regrettably, this practice has not been followed in the present case. Volume 1 of the seven volumes of court books includes the original pleadings, which have long-since been overtaken. Volume 7 includes a later version of the first and second defendant’s Defence but not the version of the Statement of Claim to which they are pleaded.
144 The most recent iteration of the plaintiff’s claim appears to be found in the document styled “Second Further Amended Statement of Claim” dated 6 December 2018. According to this document, the plaintiff, GM, was, prior to entry into the relevant franchise agreement, a “prospective franchisee” within the meaning of the Commonwealth regulations governing industry codes.
145 Next, it is said that the first defendant, TTFS, was a franchisor at material times within the meaning of the Franchising Code and was in the business of selling franchises in the business Trailer Trash. The second defendant, Mr Cooney, was said to be, at material times, a director of TTFS and, after 28 June 2013, its sole director.
146 It was said that the plaintiff was, in April and early May 2013, considering acquiring a Trailer Trash franchise, and TTFS represented to GM that it had valuable registered patents, or a licence with regard to such patents, over trailer bins and the patents or licence would prevent any person other than Trailer Trash franchisees from supplying trailer bins for hire in Australia.
147 The second defendant, Mr Cooney, was said to have represented to GM that “it” had valuable registered patents, etc and “its” patents or licences would prevent any person other than Trailer Trash franchisees from supplying trailer bins for hire in Australia. Presumably, the “it” and the “its” refer to TTFS. The representations were said to have been made orally and in writing and also were such as to be implied. The oral portion was said to have been made by Mr Cooney and Mr Jamieson to Mr Maher of GM on or about 10 May 2012 at a café in the presence of Mr Rickards and Mrs Maher. Insofar as the representation was in writing, reliance was placed on TTFS’ Operations Manual, its disclosure statement, its website and its franchise agreement.
148 As to the disclosure statement, it was said that Mr Cooney sent a signed version to Mr Maher on 30 July 2012 prior to execution of the franchise agreement. As to the franchise agreement, a draft was provided by email from Mr Cooney to Mr Maher on 30 July 2012, with a version of the franchise agreement having been presented for execution by Mr Cooney on 1 August 2012. The implied element of the representation was said to arise from the nature of a patent.
149 It was said that there were terms of the franchise agreement such that GM and TTFS owed each other a duty of cooperation in relation to it, and a duty of good faith. It was said there were further terms of the franchise agreement. First, that TTFS had a licence with respect to the patents. Secondly, that the licence “with respect to intercultural property” [scil intellectual property] would prevent any person other than Trailer Trash franchisees from supplying trailer bins for hire in Australia. The first term was said to be express and contained in the franchise agreement, and the second was implied as being so obvious as to go without saying.
150 The representation was said to be misleading or likely to mislead or deceive because TTFS did not hold the patents and was not licensed to use them, or the patents were not registered. By way of particulars, it was said that on 16 November 2012, Mr Maher observed a bright lime green mobile skip exactly the same as a Trailer Trash mobile skip, and had a conversation as described in his evidence and referred to above, with Mr Cooney. The representation was said not to relate to a future matter.
151 TTFS was said to have breached the Franchising Code by failing to give a signed copy at least 14 days before it entered into the franchise agreement. This was said to be a breach of clauses 6(2)(c) and 10 of the Franchising Code. The disclosure statement was not current but was dated 1 July 2011, said to be a breach of clause 6B of the Code. The disclosure document did not allow GM to make a reasonably informed decision or give current information, in that it identified patents as being the property of TTFS or subject to a licence, and those rights were not held by TTFS or of no value because the patents had ceased to be registered.
152 The disclosure statement did not provide financial reports for the last two financial years nor did it provide a copy of an independent audit. (clause 6(2), clause 20 of the Code) TTFS did not give an annual financial statement for the marketing fund to GM within four months after the end of the financial year which detailed the funds, receipts and expenses. (clause 17 of the Code) TTFS did not give an audited statement of the marketing to the plaintiff within four months after the end of the last financial year. (clause 17 of the Code)
153 By way of particulars, it was said that TTFS provided an unsigned copy of the disclosure statement to the plaintiff by email on 30 June 2012 and it first received a signed disclosure statement on or about 12 December 2012.
154 It was said that if there had been proper disclosure, GM would not have entered into the agreement with Mr Rickards or the franchise agreement. Therefore, it was said, TTFS has engaged in misleading or deceptive conduct. These matters were said to have been done in trade or commerce and were misleading or deceptive contrary to s18 of the Australian Consumer Law (“ACL”). Further, it was said they constituted a breach of contract by the first defendant.
155 The Notice of Termination dated 4 November 2013 purporting to terminate GM’s franchise was said to be ineffective. There was no entitlement for TTFS to terminate the franchise agreement. First, because any breach that may have occurred, which was denied, had been remedied prior to 4 November. Secondly, TTFS did not comply with cl27(2) of the Franchising Code in not allowing a reasonable time for GM to remedy breaches. The breaches alleged were not of provisions that would have entitled TTFS to terminate the agreement.
156 It was said that the notice was not a “bona fide notice”, “but rather represented a part (sic) of process implemented by [TTFS] where, in breach of the obligations of cooperation and good faith under the Franchisee (sic) Agreement, [TTFS] sought to undermine the financial viability of [GM] and intimidate Mr Maher and his family such that [TTFS] could take over the business of [GM].
157 Finally, it was said that the breaches complained of “were not breaches of the Franchise Agreement”. Therefore, TTFS “evinced an intention to longer [sic] be bound by the Franchise Agreement and repudiated [it]”. That repudiation was said to have been accepted on 22 November 2013 and GM is entitled to recover damages for repudiation.
158 It was said that TTFS had failed properly to account to GM for monies owed to it under the franchise agreement to the tune of $11,150.29.
159 The final cause of action alleged was for “unconscionable conduct”. First, it was said that GM was “at all material times in a position of special disadvantage vis a vis [TTFS and Mr Cooney]. Such special disadvantage was said to arise from the nature of the franchise agreement and its power disparity, the terms of the franchise agreement which was said to strongly favour TTFS and granted to it “considerable discretion”, the undermining conduct of TTFS and Mr Cooney referred to below, and Mr Cooney’s control of TTFS. Clause 7 of the franchise agreement, imposing obligations on TTFS, was “not onerous and largely discretionary”, whereas the obligations of the franchisee (clause 8) were “onerous and proscriptive (sic)”. There was also reference to the limitation of liability terms in clause 29 favouring TTFS.
160 Undermining conduct was said to have been taken by TTFS and Mr Cooney in the period December 2012 to November 2013, undermining TTFS’ financial position and intimidating and harassing Mr Maher and his family, “such that [TTFS] could take over [GM’s] business”. It was said the franchise agreement obliged TTFS to receive customer orders by a 1300 number and operate an online booking service, provide orders to GM for all jobs located in its exclusive territory and account to it and make payment for all monies received from customers to whom GM provided services “no later than the 17th day of every month”. Reference was made to clause 11 of the franchise agreement.
161 It was said that during the period December 2012 to September 2013, TTFS regularly failed to provide those services to GM by not maintaining the 1300 number and the online booking website, not making payment to GM for monies received within the timeframe stipulated, and providing orders for jobs located in GM’s territory to other franchisees without the consent of GM. It was said that particulars of these matters would be provided “prior to trial”.
162 Mr Cooney resumed involvement in TTFS’ business in April 2013 and took over exclusive management from 28 June 2013. Next, it was said, “Mr Cooney through [TTFS] and in his own right took steps to acquire, terminate or force the abandonment of all 13 existing franchisees”. Then, in the period October to November 2013, and while [TTFS] was subject to letters of demand from [GM’s] solicitors, TTFS procured persons including Mr Cooney, Mrs Cooney and Mr Brackley “to intimidate and harass Mr Maher and his family including sabotaging the business and business assets of [GM] such that [TTFS] could take over [GM’s] business”.
163 There were some 15 matters alleged and set out as (a) to (o). These matters, it was said, were in breach of contractual obligations to cooperate and amounted to unconscionable conduct “within the meaning of sections 20 and 21 of the [Australian Consumer Law] alternatively the unwritten law”.
164 Insofar as there were allegations of breaches of the Australian Consumer Law and the Franchising Code and the alleged unconscionable conduct by TTFS, Mr Cooney was said to have aided, abetted, counselled or procured the conduct and was knowingly concerned in it or conspired with others to effect the conduct “such as to be a person involved in the contraventions alleged”.
165 As a result, GM had suffered loss and damage in the form of:
(a) loss of investment;
(b) actual trading losses;
(c) loss of opportunity and potential profits from the date of termination;
(d) loss of profits during the tenure of the franchise; and
(e) legal fees incurred by Grant Maher for [GM] (and for which GM was liable) to the former solicitors in relation to the subject matter of the “dispute” prior to the instigation of the proceeding. These amounts were said to total $53,381.35.
166 Accordingly, a range of relief was sought by GM, including payment of a debt of $11,150.29; damages, including damages pursuant to the Australian Consumer Law; a declaration that TTFS had breached the Franchising Code; statutory interest; costs; and further or other relief.
167 The trial came on first in February 2018. It was adjourned over to later in the year for a variety of reasons, including a desire on the part of the plaintiff to amend the Statement of Claim so as to extend the claim against Mr Cooney under the Australian Consumer Law (s18) to one which put him in the role of principal contravener rather than someone merely liable as an accessory. As it is, the reference to accessorial liability in paragraph 32 of the latest version of the Statement of Claim remains.
168 Granted that, in accordance with the principles of Houghton v Arms (2006) 225 CLR 553, a person acting in his capacity as an officer of a corporation may be liable as a principal contravener of the prohibition against misleading or deceptive conduct, there is no principle of law, so far as I am aware, that, without more, merely by being a director and being involved in a contractual transaction entered into by a corporation, the director would be liable as principal on the contract.
Defence
169 In the Defence of the first and second defendants dated 11 December 2018 and refiled on 4 February 2019, these defendants say the Australian Consumer Law, as enacted by the Competition and Consumer Act of the Commonwealth, has no application to Mr Cooney (referring to s131(1) of that statute). If the contention is that the Australian Consumer Law was rendered applicable to him by the Australian Consumer Law andFair Trading Act 2012 of the State of Victoria, these defendants deny that Mr Cooney was engaged in trade or commerce.
170 As to the misleading or deceptive conduct, the defendants say that GM began considering purchasing a Trailer Trash franchise from some time on or later than 27 April 2012, and that on 30 April 2012, GM received a bundle of documents from Mr Rickards, including:
(a) a disclosure document;
(b) an unsigned Trailer Trash franchise agreement document;
(c) the Code;
(d) an unsigned contract of sale of business document.
171 The defendants say that GM signed the contract for the sale of business on 17 May 2012. They denied that TTFS made representations relative to patents or licences and say that, as at 3 May, Trailer Trash franchisees were made aware that Mobile Skips was competing in the market and there was “marginal (if any)” benefit in using patents to prevent any person other than Trailer Trash from supplying trailer bins. A similar communication was made, it was said, to GM by Mr Rickards and Mr Cooney in a meeting on 10 May. Mr Cooney denied making any representation himself.
172 Next, while they admitted that GM entered into an agreement with Mr Rickards (the franchise agreement), they denied that this was in reliance upon the representation alleged. First, because the making of the representation was denied. Secondly, even if it had been made, it was not relied upon. Thirdly, s3 in Certificate A of the franchise agreement required GM to record representations, including “markets for the franchise products or services relied upon”, and no reference was made to the representation.
173 They admitted the existence of a duty of cooperation and good faith as between the parties to the franchise agreement. TTFS and Mr Cooney denied further alleged terms in the franchise agreement relative to the patent or their ability to prevent other persons supplying trailer bins for hire in Australia.
174 The defendants admitted that the patent ceased on 27 July 2011. They say that if the representation were made, it would be a representation as to a future matter, and TTFS had reasonable grounds for making the representation because of its lack of knowledge and the lack of knowledge of Mr Cooney of the ceasing of the patents until June 2013, with these defendants becoming aware of the cessation only upon the attempt to transfer the patent. Therefore, by virtue of s4(1) of the Australian Consumer Law, the representation was not misleading or deceptive.
175 They denied the allegations as to the disclosure statement, saying that a copy was provided on 30 April 2012, which copy was signed. They admitted that the disclosure statement was dated 1 July 2011, but say it was current on 30 April 2012 when it was provided. They said that TTFS had a “licence agreement”, enabling it to use the intellectual property licensed under that agreement. They said GM received an annual financial statement for the marketing funds for the period ending 30 June 2013 in a letter dated 25 October 2013. These were emailed to GM in or about November 2013. They said the annual marketing statement was emailed to GM in or about November 2013.
321 According to his Honour, the inferences required to resolve these issues were inferences of fact and it was for the umpire to draw, or decline to draw them, and the proper order was to remit the matter to the umpire with that direction. His Honour continued:
“…When a man does work for another without any express contract relating to the matter, an implied contract arises to pay for it at its fair value. Such an implication of course arises from an express request to do work made under such circumstances as to exclude the idea that the work was covered by a written contract. So it would arise from the owner standing by and seeing the work done by the other party, knowing that the other party, in this case the contractor, was doing the work in the belief that he would be paid for it as extra work.” (Ibid, 354)
322 The “implied contract” referred to by his Honour is what in modern legal parlance would be regarded as a claim in the law of restitution, what might, in an earlier age, have been described as a quasi contractual claim. This case does not stand for the proposition that the original contract was varied or that it could be varied without any written instrument. Rather, what the court contemplated was that the “extras” could be paid for under the law of restitution outside the written contract. The second authority referred to by the learned commentator which he said has established the rule in Australia contrary to the UK Supreme Court’s decision in MBW, was Commonwealth v Crothall Hospital Services (Aust) Ltd, a decision of the Full Court of the Federal Court of Australia (1981) 36 ALR 567. The principal judgment was delivered by Ellicott J, with whom Blackburn and Deane JJ concurred. The contract in question was formed following acceptance of a tender. There were provisions for variations in wages and in the contract price and variations of areas to be cleaned. The contractors submitted claims to the Commonwealth which were calculated by reference to variations in the contract price which had not been approved in accordance with the formal and substantive procedures for variations provided for in the contract. The Commonwealth nevertheless paid those claims. A claim by the Commonwealth to recover the excess paid over and above what would have been the charges calculated under the contract without any unauthorised variations failed. Ellicott J said:
“…
It is open to the parties to a written contract to vary it. This may be done in writing or, except where the contract is required by law to be evidenced in writing, by oral agreement. The agreement to vary may be express or implied from the conduct: see generally Halsbury’s Laws of England 4th ed, vol 9, paras 566-70; Anson’s Laws of Contract 18th ed, pp 318 et seq, Goss v Lord Nugent (1833) 5 B & Ad 58, 110 ER 713, Bruner v Moore [1904] 1 Ch 305; Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1956) 98 CLR 93 at 144.
In practical terms the real question for decision in this appeal is whether the parties as a result of what transpired between the signing of the contract and the end of 1973 had agreed to the contract price being varied from an amount of $3047.93 per week to $10,227.41 per week.
… .” (1981) 36 ALR 567, 576-7
323 His Honour concluded, in the circumstances, that by making payments in accordance with the contractor’s claim the Commonwealth had varied the contract. This case might be regarded as somewhat equivocal as an authority, contrary to the view taken by the UK Supreme Court in MWB. There was no distinct prohibition upon oral variations to the contract, rather there was a particular procedure laid down which implicitly excluded the availability of any other mode of variation.
324 Professor Carter, in his work Carter on Contract paragraphs [09-010] “Express agreement that contract or variation be in writing” states:
“A contract may expressly require any variation to be in writing, or state that a purely verbal variation is not enforceable. In all cases the scope of such a clause depends on construction of the contract as a whole. However, even where there is such a provision, it will not necessarily be effective. And a verbal variation [scil an oral variation], or one arising by conduct, may in certain cases be binding.
First, an oral arrangement which is otherwise valid may be specifically enforceable.
Second, the provision will not apply if the parties have by agreement varied the requirement.”
325 He referred to Mendelssohn v Normand Ltd [1970] 1 QB 177, 183 at page 20,023, service 21. Professor Carter does not mention Liebe v Molloy.
326 It may be thought that following the decision of the UK Supreme Court in MWB, any contrary opinions of the English Court of Appeal should be taken as overruled.
327 Finally, in GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited (2003) 128 FCR 1, Finn J, as a trial judge in the Federal Court of Australia, said:
“…
[216] (1) While there is a voluminous case law concerned with the consequences that can flow from non-compliance with formal requirements imposed by statute, as for example the Statute of Frauds and its offsprings: see Phillips v Ellison Brothers Pty Ltd (1941) 65 CLR 221 at 243-244; Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 at 112-113, 122-124; Pavey & Matthews Pty Ltd v Paul (1986) 162 CLR 221; Trimis v Mina [1999] NSWCA 140; it has no bearing on the present question which involves the legal effect to be given to self-imposed, not externally imposed (ie imposed by law), formal requirements. Further, the consequences of non-compliance with statutory requirements fall to be determined under the shadow of the legislative purpose of the particular statutes in which they may be found: cf Chitty on Contracts (28th ed, 1999), vol 1, para 4-003.
[217] (2) The principal cases in this country dealing with non-compliance with contractually imposed written modification clauses are those dealing with claims to be paid for extra work or services rendered under contracts which require written orders or written agreements for such works or services: Liebe v Molloy (1906) 4 CLR 347; see generally, Halsbury’s Laws of Australia, vol 3(2), 65-1145. The conclusions to be drawn from the cases in this category are that (i) notwithstanding the writing requirement, it is open to the parties by express oral agreement or by contract implied from conduct to impose further or different rights and obligations on each other from those contained in the original contract: Liebe v Molloy, above at 353-355; Commonwealth of Australia v Crothall Hospital Services (Aust) Ltd (1981) 36 ALR 567 at 576ff; or (ii) that one party may so induce or encourage the other’s assumption on which it relies that the relevant formal requirements need not be complied with, as to be estopped from later setting up those requirements: Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251. The relevant principle, for present purposes, was stated concisely by Ellicott J in the Crothall Hospital case in the following terms (at 576):
‘It is open to the parties to a written contract to vary it. This may be done in writing or, except where the contract is required by law to be evidenced in writing, by oral agreement. The agreement to vary may be express or implied from conduct.’ (Emphasis added)
The common, often fatal, difficulty experienced by a party in seeking to make out a contract to vary has been the evidentiary one of proof of the contract itself: see Liebe v Malloy, above; Trimis v Mina, above at [64].
[218] (3) For an alleged subsequent variation to be contractually effective notwithstanding non-compliance with the written modification requirement, it must itself otherwise satisfy the requirements of a valid contract, ie ‘the terms of the arrangement must be certain, and … there must generally be real consideration for the agreement’: Ermogenous v Greek Orthodox Community of SA Inc (2002) 187 ALR 92 at 99; and see below, ‘Formation of a contract of variation’.
.[219] (4) Internationally, the law varies widely as to the efficacy of what are commonly described as ‘no oral modification’ clauses (a description I will use hereafter). The common law rule in the United States has traditionally denied effect to such clauses: eg Bartlett v Stanchfield 19 NE 549 (1889); Farnsworth, Contracts, §7.6 (3rd ed). As Cardozo J observed in Beatty v Guggenheim Exploration Co 122 NE 378 (1919): ‘Whenever two men contract, no limitation self-imposed can destroy their power to contract again’. Article 2-209(2) of the Uniform Commercial Code, in contrast, gives mandatory effect to a writing requirement for modification: see White and Summers, Uniform Commercial Code, vol 1, §1-6 (4th ed, 2000 reprint); see also Unidroit, Principles of International Commercial Contracts, Art 2.18. In the European Union, there are countries that give only evidential value to a no oral modification clause, while in others such clauses are enforced: see Lando and Beale, Principles of European Contract Law, Art 2:106, where the respective positions in the countries of the European Union are described.
[220] (5) The usual objection raised to depriving a no oral modification clause of legal effect is that it involves a failure to give effect to what the parties have agreed. In the present case GEC Marconi has raised just this objection. The vice in it, though, is that a later oral or implied contract is itself an agreement. As a US commentator recently observed (Snyder, ‘The Law of Contract and the Concept of Change: Public and Private Attempts to Regulate Modification, Waiver and Estoppel’ (1999) Wis L Rev 607 at 640):
‘The question for the court is not whether to honour the parties’ original agreement, but rather which of their agreements should be effective. To say that contract law should enforce the parties’ agreement, therefore, does not resolve the issue. The question is whether to enforce the first agreement or the second.
The common-law courts addressing [no oral modification] issues chose the second. This choice makes a fair amount of sense; the later agreement probably reflects what the parties want better than their earlier agreement does.’
I would add that the opinion expressed in the second quoted paragraph is particularly appropriate to relational contracts which, as in the present instance, may be evolutionary in character.
.[221] (6) Though lacking legal effect in the face of a subsequent oral or implied agreement, it seems to be accepted that a no oral modification clause can have significant evidentiary effect. As Holmes J commented in Bartlett v Stanchfield, above: ‘The [clause] is a fact to be taken into account in interpreting the subsequent conduct of the plaintiff and defendant’; see also Principles of European Contract Law, above, Art 2:106.
[222] (7) As a practical matter, the lack of legal efficacy of a no oral modification clause may be attributable as much to the law of estoppel as it is to the apparent policy of the law to favour a later agreement over an earlier one: cf Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd, above, 275ff; see also W J Alan & Co Ltd v El Nasr Export and Import Co [1972] 2 QB 189 at 213. As Farnsworth observes: ‘In most cases [in the US] holding such clauses ineffective … the party that seeks to escape the effect of the no oral modification clause has relied upon the oral modification’: Contracts, 450.”
It will be seen that his Honour agrees with the ALJ commentator that Liebe v Molloy and Commonwealth v Crothall Hospital Services stand for the proposition that the no oral variations clause is legally ineffective.
328 Where, then, does this leave the law to be applied in this Court? Despite respectfully differing from Finn J in his interpretation of the authorities mentioned, I believe I should treat his Honour’s exposition as stating the law on this subject to be applied by Australian courts in the absence of some further utterance by the High Court of Australia or an intermediate Court of Appeal. It follows that, despite the clause banning purely oral variations of contract, the variation agreed to by Mr Maher for the deduction of $2,000 per month should be regarded as effective, with the result that the claim for the refund of $10,000 must fail.
Slater and Gordon invoice
329 Amongst the loss and damage alleged by GM for which recovery was sought according to the Second Further Amended Statement of Claim, are a series of invoices for legal fees from law firm Slater and Gordon totalling, according to the pleading, $53,381.35. In his closing submissions, Mr Magowan revisited these claims. This entailed a concession that not all of the legal costs referred to in the pleading could be regarded as having been incurred as a result of breach or breaches by the defendant. The recalculated sum was some $29,471.15. Ms Plain noted that according to Mr Maher’s evidence, all of the invoices have been paid by GM. (T409-503) Following a notice requiring production of evidence of payments, she noted that the plaintiff’s counsel, Mr Magowan, conceded that one of the invoices, dated 30 April 2014, related to work done for another one of Mr Maher’s companies and that a dispute as to these fees had led to a proceeding in the Magistrates’ Court. (T1139, L11-15) She noted Mr Maher’s evidence that the invoice related to work performed for Trailer Stash, viz Teepee Books Pty Ltd, and part payment had been made by GM. (T1518) She said these matters were very damaging to Mr Maher’s credibility as a witness. Mr Magowan conceded that some of these legal costs could be recoverable if GM obtains an order in general terms for the costs of this proceeding. He referred to a lengthy passage from the judgment of Megarry VC in Re Gibson’s Settlement Trusts [1981] Ch 179, 187-8. This lengthy passage of his Lordship’s judgment seems to refer to the issue of whether costs incurred prior to the commencement of a proceeding may be the subject of an award as costs of the proceeding, not whether those costs can be recovered as general or special damages for breach of contract. According to Mr Magowan’s closing submissions, one of the invoices, No. 510867, rendered 20 December 2013, related, at least in part, to the costs in the Magistrates’ Court of the Intervention Order proceedings taken against Mrs Cooney and referred to above. Given that I have not accepted as proven the allegation that Mrs Cooney, or anyone at her request or at the request of the defendant, in fact harassed or stalked Mr Maher, it could not be right to award, in this proceeding, as damages, the amount of any legal costs pertaining to the Intervention Order. This is quite apart from the consideration that the costs of the parties in such a matter are in the discretion of the Magistrates’ Court. I was not referred to any statute rule or practice in that court as to what orders as to costs are customarily made in that court in such proceeding. Ms Plain admitted that legal costs incurred in the circumstances claimed here did not fall within either of the limbs of Hadley v Baxendale (1854) 9 Ex 341, as damages for breach of contract. The fact that upon challenge, the figure of legal costs sought has had to be cut so drastically, subverts the credibility of this part of the plaintiff’s case. This is not a case where an instrument, such as a lease or a mortgage, provides a contractual entitlement to GM to require either of the defendants to pay its legal costs. In the absence of such a contractual entitlement, the normal presumption would be that costs lie where they fall. When one combines that consideration with the issues as to whether a proper connection has been established between the incurring of these legal costs and any contractual breach by GM or Mr Cooney, I am not satisfied that it is proper to award either the larger or the smaller amount claimed as damages. Insofar as any costs pertaining to this proceeding, they are awardable, if at all, in accordance with the usual costs regime rather than as damages.
Damages for wrongful determination of franchise agreement
330 Mr Magowan submitted that a finding of wrongful termination should lead to an award of loss of bargain damages to GM in accordance with the third report by forensic accountant, Mr Wilkinson (Exhibit E, paragraphs [4.1]-[5.1.4]): “namely as if the business of [GM] performed as Mr Rickard’s business had”. He nominated the figure of $366,500.
331 Ms Plain contended that Mr Wilkinson’s assessment should be rejected because “the underpinning financial material upon which he relies, is wholly unreliable and based on Grant Maher’s self-serving assertions”. (closing submissions, paragraph [112])
332 Ms Plain noted that Mr Wilkinson, in cross-examination, conceded that if the “flipping fee” [that is, the cost to have Premier Waste or some other contractor, empty the skips] proved to be 30 per cent, as the historical information suggested, the GM franchise was totally uncommercial and had no value (T1024, LL14-16, 18-20). She noted that in answer to a question from me, Mr Wilkinson had conceded that if GM’s business had no maintainable earning, depriving GM of that business would inflict no loss upon it.
333 The defendants relied upon a report of forensic accountant, Mr Michael Smith (Exhibit 16). Commenting on Mr Wilkinson’s report (Exhibit E), Mr Smith noted that the “flipping costs” assumed by Mr Wilkinson were 12.67 per cent. This should be adjusted, he said “to the more accurate amount of 38.46 per cent”. Once one made that adjustment to Mr Wilkinson’s calculations, he said, “the maintainable EBIT [Earnings Before Interest and Tax] is decreased by $80,148 to a loss of $48,648 (Exhibit 16, paragraphs [6.9]-[6.10]). Mr Smith continued:
“As there is no maintainable EBIT there is no commercial goodwill in the business and net tangible assets is the most appropriate value of the Business. … Based on Mr Wilkinson’s Appendix 1 the net tangible assets of GM Family Trust is a deficit of $255,199. Accordingly, the value of GM Family Trust would be assessed to be nil”. (Ibid [6.11]-[612])
334 Mr Chad Holland of Premier Waste had given evidence that as of 25 September 2013, he had applied a credit of $2,002 to the account, charging GM for “flipping fees” (T906-907). He said that this credit was applied after prolonged complaints of overcharging from Mr Maher, and Premier Waste decided to “give him that credit in the hope that that would … resolve that and allow us to move forward”. (T907, L5-7, Exhibit 6)
335 In cross-examination of Mr Wilkinson, Ms Plain put it to him that if this amount were eliminated from the calculation as an extraordinary item, the “flipping cost” would be recalculated at 21 per cent and not 12.05 per cent, as Mr Wilkinson had calculated them (T1034, L27-T1035, L6). Mr Wilkinson agreed that this approach was “reasonable”. Mr Wilkinson agreed that in calculating “flipping costs” it would be reasonable to consider not only October and November 2013, but four months, rather than three months, including August and September. Again, Mr Wilkinson agreed (T1035, L7-19). This, according to Ms Plain, would yield a “flipping cost” of 31 per cent. Mr Wilkinson agreed that this was “what the historical rate was … .” (T1037, L5-12) Mr Wilkinson said that in the two months which he took as his guide, “there was a considerable amount of recycling, compression of the rubbish in the bins et cetera which would achieve a significant reduction.” (T1037, L19-22) I then asked Mr Wilkinson if, in allowing for the cost reduction in “flipping” based on recycling, his calculation took no account of the costs of recycling and, therefore, his conclusions were open to question, his reply was:
“Your Honour, without going through and looking at the numbers, we've got a circumstance where there's a $2,000 credit that went through here; we've got a circumstance where we've got one month with sales of $3,000, or $5,000 and flipping costs of 3,000; you'd need - - -”
(T1038, L6-11)
336 I then said, “So you think that looks a bit dubious?” and Mr Wilkinson’s reply was, “I think there’s some dubious numbers being thrown around, yes”. (Ibid, L12-13)
337 Ms Plain asked:
Q:“… if the actual flipping costs is 21 per cent or higher, there would be no commercial goodwill value in the business; these numbers would just simply disappear?---
A: That’s correct.”
(T1039, L16-20)
338 Mr Chad Holland of Premier Waste, said that he spoke to Mr Maher about his recycling ideas and that Mr Maher’s recycling enterprise would not work (T909). Mr Magowan objected to this as inadmissible opinion evidence. At any rate, GM’s move to the Charnfield Court premises in Thomastown was intended to provide their larger factory facility for recycling. Whether this recycling proposal was viable or not, in fact it could not be maintained because GM vacated the premises and surrendered its lease following a rental default. Mr Maher aspired to have a much lower “flipping cost” by management of bins, filling the bins more completely and recoveries by recycling. In acknowledgement of Mr Magowan’s objection to the non-expert opinion offered by Mr Holland as to the viability of this proposed recycling enterprise, it must be said that there was no expert evidence supportive of the recycling proposal’s viability. To base the future profitability of an enterprise upon recycling with no expert evidence supporting its viability, and in light of the larger premises required having been vacated following a rental dispute would seem, to use the word which Mr Wilkinson was prepared to accept, “dubious”. Further, an attempt to manage “flipping costs” by ensuring that more rubbish is packed into each bin, ran the risk of attracting a surcharge for excessively heavy bins, a matter which was apparently a bone of contention between Premier Waste and Mr Holland on the one side, and Mr Maher on the other. (T904)
339 In these circumstances, I believe Mr Smith’s analysis and conclusions are more reliable than those of Mr Wilkinson. Mr Smith’s opinion should be preferred, with the result that no actual loss is proven by reason of the wrongful termination of GM’s Trailer Trash Franchise.
340 It follows that no more than nominal damages may be granted to GM for the wrongful termination of its franchise agreement.
Costs
341 I have not heard comprehensive submissions on the question of costs. The matter has been touched upon briefly in connection with the damages claimed based on the Slater and Gordon invoices. Accordingly, I will reserve the question of costs.
Relief
342 I will direct the parties, within 14 days, to bring in short Minutes to give effect to these reasons.
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