Kaytonruby Pty Ltd v Glev Franchises Pty Ltd - [1998] FCA 650

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 438 of 1993

BETWEEN:

KAYTONRUBY PTY LTD
First Applicant

CHRISTOPHER WAI HEANG LEONG
Second Applicant

LILLIAN POH HAR LEONG
Third Applicant

AND:

GLEV FRANCHISES PTY LTD
First Respondent

GLEV PTY LTD
Second Respondent

EVANGELOS DEMETRIOU CHRISTOU
Third Respondent

TULLOCH AND ASSOCIATES PTY LTD
Fourth Respondent

ALAN TULLOCH
Fifth Respondent

FRANCHISE DEVELOPMENTS PTY LTD
Sixth Respondent

LEO REYES
Seventh Respondent

JUDGE:

RYAN J

DATE OF ORDER:

11 JUNE 1998

WHERE MADE:

MELBOURNE

MINUTES OF ORDER

THE COURT ORDERS:

That the application be adjourned for further directions to a date to be fixed.

Note:Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 438 of 1993

BETWEEN:

KAYTONRUBY PTY LTD
First Applicant

CHRISTOPHER WAI HEANG LEONG
Second Applicant

LILLIAN POH HAR LEONG
Third Applicant

AND:

GLEV FRANCHISES PTY LTD
First Respondent

GLEV PTY LTD
Second Respondent

EVANGELOS DEMETRIOU CHRISTOU
Third Respondent

TULLOCH AND ASSOCIATES PTY LTD
Fourth Respondent

ALAN TULLOCH
Fifth Respondent

FRANCHISE DEVELOPMENTS PTY LTD
Sixth Respondent

LEO REYES
Seventh Respondent

JUDGE:

RYAN J

DATE:

11 JUNE 1998

PLACE:

MELBOURNE

REASONS FOR JUDGMENT

This is an action by a corporate applicant and its two directors claiming damages from the respondents arising out of the entry by the applicants into a franchise agreement and the conduct of the business of a “Pizza Haven” outlet pursuant to that agreement.

In June 1990 the second applicant, Mr Leong, saw the following advertisement in the “Age” newspaper:

LOOK!
PIZZA HAVEN WANTS YOU!
. Ambition, $30,000 plus
asset backing will qualify
you

For information
  call Leo Reyes
  on (03)
  867 7666

FRANCHISE
DEVELOPMENTS
Franchise consulting and marketing
Melbourne, Sydney, Brisbane
Adelaide, Perth

As a result, Mr Leong met Mr Reyes an employee of the sixth respondent, Franchise Developments Pty Ltd (“Franchise Developments”). Mr Reyes consulted in Mr Leong's presence a “disclosure document” prepared as at October 1989 and referred to the profit projections which were in these terms:

N
O
T
E
S
LEVEL 1
$5,000 p.w.

LEVEL 2
$7,000 p.w.

LEVEL 3
$9,000 p.w.

LEVEL 4
$12,000 p.w.

$

%

$

%

$

%

$

%

ANNUAL SALES

1

260,000

100.0

364,000

100.0

468,000

100.0

624,000

100.0

LESS COST OFSALES 2 65,000 25.0    91,000 25.0 117,000 25.0 156,000 25.0

GROSS PROFIT

195,000

75.0

273,000

75.0

351,000

75.0

468,000

75.0

LESS
OPERATING EXPENSES
Accounting
Advertising
Bank & Credit
Card Charges
Cleaning & Laundry
Electricity
Insurance
Leasing
Motor Vehicle Expenses
Rent & Outgoings
Repair & Maintenance
Royalty
Rubbish Removal
Salaries & Wages - staff
Stationary & Printing
Telephone
Uniforms
Miscellaneous

3
4

5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

   1,000
13,000

   520
   600
   8,400
   2,000
15,550
   6,000
20,000
   720
14,300
   600
52,110
   780
   1,200
   160
   1,820

    0.4
    5.0

    0.2
    0.2
    3.2
    0.8
    6.0
    2.3
    7.7
    0.3
    5.5
    0.3
20.0
    0.3
    0.5
    0.1
    0.7

     1,000
   18,200

     730
     600
     8,400
     2,000
   15,550
   12,000
   20,000
     840

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: [1998] FCA 650
Decision Date: 11 JUNE 1998

CaseChat Overview and Summary

The applicants in this case, Kaytonruby Pty Ltd and its directors, sought damages from the respondents, including Glev Franchises Pty Ltd and Glev Pty Ltd, for the losses incurred from entering into a franchise agreement and operating a "Pizza Haven" outlet. The applicants alleged that the respondents made misleading and deceptive representations about the profitability, costs, and benefits of the franchise, as well as the support and supervision provided by the franchisors. The court was required to determine which, if any, of the alleged representations were made by the respondents, relied on by the applicants, and misleading or deceptive. After reviewing the evidence and submissions, the court concluded that some of the alleged representations had an element of futurity and were not misleading or deceptive, while others were not made at all or were not relied upon by the applicants. The court found that the applicants did not rely on the representations to enter into the franchise agreements, as they had their own expertise and experience to assess the soundness of the investment. The court also found that some of the representations were merely expressions of opinion or puffery, and did not warrant a finding of misleading or deceptive conduct. The court ordered the case to be adjourned for further directions and to identify the remaining issues for determination.

Orders