Henderson v Purairclean Pty Ltd - [2013] NTSC 29

Henderson & Ors v Purairclean Pty Ltd & Anor [2013] NTSC 29
PARTIES:HENDERSON, Kenneth Herbert

AND
HENDERSON, Gaelene
AND
HENDER KG PTY LTD
(ACN 136 537 507)
v
PURAIRCLEAN PTY LTD
(ACN 141 491 170)
AND
JAYMAK AUSTRALIA PTY LTD
(ACN 110 994 744)

TITLE OF COURT:  SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION:  SUPREME COURT OF THE NORTHERN TERRITORY EXERCISING TERRITORY JURISDICTION
FILE NO:41 of 2012 (21217736)
DELIVERED:  21 June 2013
HEARING DATES:  13 May 2013 – 17 May 2013
JUDGMENT OF:  RILEY CJ
CATCHWORDS:

COMPETITION AND CONSUMER LAW — Misleading and deceptive conduct — Franchise agreement — Representations as to potential turnover made to prospective franchisee — Representations not misleading or deceptive — No reliance — No loss or damage — Trade Practices Act 1974 (Cth) s 51A, s 52, s 87.
COMPETITION AND CONSUMER LAW — Industry Codes — Franchising Code of Conduct — Disclosure — Franchise agreement must be disclosed ‘in form in which it is to be executed’ — Franchise manuals incorporated into agreement by reference — Disclosure before variation of franchise agreement — No loss or damage — Trade Practices Act 1974 (Cth) s 51AD, s 87 — Franchising Code of Conduct cl 10.
CONTRACTS — Validity — Uncertainty and incompleteness — Incorporation by reference — Contracts executed without exchange of manuals that were incorporated by reference — No invalidity.
CONTRACTS — Restraint of trade — Franchise agreement — Validity of restraint — Validity to be assessed at time of entering contract — Reasonableness — Duration.
Trade Practices Act 1974 (Cth) s 51A, s 51AD, s 52, s 87.
Trade Practices (Industry Codes — Franchising) Regulations 1998 (Cth). Franchising Code of Conduct cl 10.
Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288
Australian Securities and Investments Commission v Fortescue Metals Group Ltd (2011) 190 FCR 364
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304
Duralla Pty Ltd v Plant (1984) 2 FCR 342
Lindner v Murdock’s Garage (1950) 83 CLR 628
Marks v GIO Australia Holdings Limited (1998) 196 CLR 494
Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101
Nordenfeldt v Maxim Nordenfeldt Guns and Ammunition Company Ltd [1894] AC 535
Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126
Rafferty v Madgwicks (2012) 203 FCR 1
Riverwood International Australia Pty Ltd v McCormick (2000) 177 ALR 193
REPRESENTATION:
Counsel:
Plaintiff:W Roper
Defendant:M R Burnett
Solicitors:
Plaintiff:De Silva Hebron
Defendant:Haarsma Lawyers
Judgment category classification:    B
Judgment ID Number:  Ril1306
Number of pages:  44

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN
Henderson & Ors v Purairclean Pty Ltd & Anor [2013] NTSC 29

No 41 of 2012 (21217736)
BETWEEN:

KENNETH HERBERT HENDERSON

First Plaintiff

AND

GAELENE HENDERSON
Second Plaintiff

AND

HENDER KG PTY LTD
(ACN 136 537 507)
Third Plaintiff

AND:

PURAIRCLEAN PTY LTD
(ACN 141 491 170)

First Defendant

AND

JAYMAK AUSTRALIA PTY…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] NTSC 29
Decision Date: 21 June 2013

CaseChat Overview and Summary

Henderson v Purairclean Pty Ltd involved a dispute between the plaintiffs, Mr and Mrs Henderson, and the defendants, Jaymak Australia and Purairclean Pty Ltd, regarding alleged misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) and breaches of the Franchising Code of Conduct. The Hendersons claimed that they were induced to enter into franchise agreements based on misleading representations regarding the potential turnover of their businesses. Additionally, they alleged that the defendants failed to provide them with the franchise agreements in the form in which they were to be executed, as required by the Code. The defendants denied these allegations and argued that the Hendersons had breached the terms of their franchise agreements by failing to provide financial reports and by ceasing to trade under the franchise names.

The legal issues the court had to decide included whether the defendants had engaged in misleading and deceptive conduct in relation to the potential turnover of the franchise businesses, whether the defendants had complied with the disclosure obligations under the Franchising Code of Conduct, whether the franchise agreements were valid despite being incomplete or uncertain, and whether the restraint of trade clauses in the agreements were reasonable. The court also had to determine if the Hendersons had breached their franchise agreements and whether they were liable for any resulting loss and damage under the guarantee and indemnity provisions.

The court found that the Hendersons' claims of misleading and deceptive conduct regarding turnover were not substantiated, as the representations in question were either not made or were not misleading or deceptive. The court also held that the defendants had not breached their disclosure obligations under the Franchising Code of Conduct because the franchise agreements were provided in the form they were executed, and the manuals incorporated by reference were supplied in a timely manner. The court further held that the franchise agreements were valid despite any incompleteness or uncertainty, as they were executed with the exchange of the necessary manuals. The court considered the restraint of trade clauses and found that a one-year restraint period was appropriate to protect the franchisors' interests. Finally, the court found that the Hendersons had breached their franchise agreements by failing to provide financial reports and by ceasing to trade, and they were held liable for the resulting loss and damage.

In conclusion, the court dismissed the Hendersons' claims against the defendants regarding misleading and deceptive conduct and disclosure breaches. The court found that the franchise agreements were valid and that the restraint of trade clauses were reasonable. The Hendersons were found to have breached their franchise agreements, and they were held liable for the loss and damage suffered by the defendants. The court ordered the Hendersons to compensate the defendants for the loss and damage resulting from their breaches of the franchise agreements.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

It was the submission of the defendants that a restraint for a period of two years dated from 29 February 2012, being the date of the termination of the franchise, would be appropriate. In my opinion the lesser period of restraint for one year from 29 February 2012 is more appropriate. That, in my view, would have been sufficient to protect the interests of the franchisor in all the circumstances.Conclusions In summary I have reached the following conclusions. The claim that the defendants engaged in misleading and deceptive conduct regarding turnover prior to entry into the Jaymak Franchise Agreement has not been made out and is dismissed. This is so because:(a)the pleaded representations were not made;(b)any representations were not in fact misleading and/or deceptive;(c)there were reasonable grounds for making the representations in fact made;(d)the plaintiffs did not rely upon the representations as pleaded or any other representations in entering into the agreement; and further(e)no loss or damage was suffered or likely to be suffered by the plaintiffs for the purposes of s 87 of the Trade Practices Act in relation to the alleged representations. Jaymak Australia did not breach the provisions of the Franchising Code of Conduct by not providing the plaintiffs with a copy of the Jaymak Franchise Agreement in the form in which it was to be executed. The Franchise Agreement was provided in the form that it was executed. The Jaymak Franchising Agreement incorporated, by reference, the manuals as amended from time to time. Further, Jaymak Australia did not breach the Code when it issued the May 2009 manual or the August 2009 manual. The submissions that the Jaymak Franchise Agreement and the Purairclean Franchise Agreement were not binding because: they were only agreements to be bound if the parties agreed the scope of the System and Authorised Products and Services; or were not complete; or were uncertain; have not been made out and those claims are dismissed. Purairclean Pty Ltd did not breach the provisions of the Franchising Code of Conduct by not providing a copy of the franchise agreement in the form in which it was to be executed. Hender breached the Jaymak Franchise Agreement by: failing to provide monthly profit and loss statements, balance sheets and sales reports from February 2012 onwards; failing to comply with the terms of the franchise agreement; failing or refusing to service clients; and failing to pay management fees due on 15 April 2012 and onwards. It repudiated and abandoned the franchise agreement by ceasing to trade under the name Jaymak NT on or about 31 May 2012. As a result, Jaymak Australia has suffered loss and damage. Mr and Mrs Henderson are liable for the loss and damage under the terms of the guarantee and indemnity contained in the Jaymak Franchise Agreement. Hender breached the Purairclean Franchise Agreement by failing to pay fees due under that agreement from January 2012 onwards and by failing to provide monthly profit and loss statements, balance sheets and sales reports from January 2012 onwards. Hender repudiated and abandoned the franchise agreement by ceasing to trade under the name Purairclean NT on or about 29 February 2012. Purairclean has suffered loss and damage as a result of the breach. Mr and Mrs Henderson are liable for the loss and damage under the terms of the guarantee and indemnity contained in the Purairclean Franchise Agreement.

Ratio Decidendi

Legal Principle Established

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