Lee v Passiontree Velvet Pty Ltd - [2019] NSWDC 710

District Court

New South Wales

Amendment notes

Medium Neutral Citation: Lee v Passiontree Velvet Pty Ltd & Ors [2019] NSWDC 710
Hearing dates: 11 December 2019
Date of orders: 13 December 2019
Decision date: 13 December 2019
Jurisdiction: Civil
Before: Abadee DCJ
Decision:
See paragraph 76 - 78

Catchwords:
CONTRACT – franchise agreement terminated by consent – claim for repayment of franchise fee paid by franchisee before franchise operational – subsequent arrangements entered with franchisor for the repayment of the franchise fee in instalments – whether claim against franchisor is under franchise agreement or subsequent arrangements

TRADE PRACTICES – misleading or deceptive conduct – promise that franchise fee will be repayable in instalments – whether promise amounted to an implied representation that franchisor would have the capacity in the future to repay the fee – whether promise to repay is a future representation capable of enlivening the facultative deeming provision in s 4 of the Australian Consumer Law
PRACTICE & PROCEDURE – whether judgment should be given against absent defendant without trial – ambit of grant of leave to supply supplementary submissions after judgment is reserved
Legislation Cited: Australian Consumer Law, ss 4, 18
Competition and Consumer Act 2010 (Cth)
Uniform Civil Procedure Rules 2005 (NSW), r 29.7(3)
Corporations Act 2001 (Cth), s 440D
Australian Securities & Investments Act 2001(Cth)
Cases Cited: Carr v Finance Corporation Australia Ltd (No.1) (1981) 147 CLR 246
Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520
Concrete Constructions Group v Litevale & Ors [2002] NSWSC 670
Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217
Kenny & Good v MGICA (1992) (1999) 199 CLR 413
Marks v GIO Australia Holdings (1998) 196 CLR 494
McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230
MG Corrosion Consultants Pty Ltd v Gilmour (2012) 202 FCR 354
Newton v State Government Insurance Office (Qld) [1986] 1 Qd R 431
Penrith Whitewater Stadium v Lesvos Pty Ltd [2007] NSWCA 176
RCR Energy Pty Ltd v WTE Co-Generation Pty Ltd [2017] VSCA 50
Re Ku-ring-gai Co-Operative Building Society (No.12) Ltd (1978) 36 FLR 134
Secure Parking Pty Ltd v Woollhara Municipal Council [2016] NSWCA 15
Texts Cited: Cheshire and Fifoot Law of Contract (11th Australian Edition)
Category: Principal judgment
Parties: Mr Lee (Plaintiff)
Passiontree Velvet Pty Ltd (First Defendant)
Mr Kim (Second Defendant)
Representation:
Counsel:
Mr S Doupe (Plaintiff)
Mr Kim, in person
Solicitors:
En Plus Legal

File Number(s): 2018/ 93464

Judgment

Introduction

This proceeding arises out of a franchise arrangement between the plaintiff, a Korean businessman and resident (Mr Lee) and the first defendant (‘Passiontree Velvet’) which was intended to operate in Broadway. Passiontree Velvet was a franchisor operating kiosks and cafes selling various cakes, desserts and ‘high tea’ food and beverages within shopping centres. Mr Lee regarded this as an investment opportunity.
An agreement was entered into in August 2016. In anticipation of the operation of the franchise, the plaintiff paid the sum of $400,000 as…

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: [2019] NSWDC 710
Decision Date: 13 December 2019

CaseChat Overview and Summary

In the matter of Lee v Passiontree Velvet Pty Ltd, the Federal Court addressed a dispute between the parties regarding the repayment of a franchise fee. The plaintiff, Lee, alleged that the defendant, Passiontree Velvet Pty Ltd, had terminated their franchise agreement by consent and subsequently promised to repay the franchise fee in instalments, but had failed to do so. The court was required to determine whether the claim for repayment was governed by the original franchise agreement or the subsequent arrangements made between the parties.

The legal issues before the court included whether the claim for repayment was subject to the original franchise agreement or the subsequent arrangements, and whether the promise to repay the franchise fee in instalments constituted misleading or deceptive conduct under the Australian Consumer Law. The court had to consider whether the promise to repay the fee was an implied representation that the franchisor had the capacity to repay the fee, and whether this promise was a future representation capable of triggering the deeming provision in section 4 of the Australian Consumer Law.

In its reasoning, the court found that the claim for repayment was governed by the subsequent arrangements between the parties, rather than the original franchise agreement. The court held that the promise to repay the franchise fee in instalments did not amount to misleading or deceptive conduct, as it did not constitute an implied representation that the franchisor had the capacity to repay the fee in the future. The court also found that the promise to repay the fee was not a future representation capable of triggering the deeming provision in section 4 of the Australian Consumer Law.

As a result, the court dismissed the plaintiff's claims and ordered that judgment be entered against the plaintiff. The court also noted that it had considered the application for leave to supply supplementary submissions after judgment had been reserved, but found that it was not appropriate to grant such leave in the circumstances of the case. The court ordered that the defendant's costs of the proceeding be paid by the plaintiff.

Orders

Orders of the court

See paragraph 76 - 78

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

Medium Neutral Citation:	Lee v Passiontree Velvet Pty Ltd & Ors [2019] NSWDC 710
Hearing dates:	11 December 2019
Date of orders:	13 December 2019
Decision date:	13 December 2019
Jurisdiction:	Civil
Before:	Abadee DCJ
Decision:	See paragraph 76 - 78
Catchwords:	CONTRACT – franchise agreement terminated by consent – claim for repayment of franchise fee paid by franchisee before franchise operational – subsequent arrangements entered with franchisor for the repayment of the franchise fee in instalments – whether claim against franchisor is under franchise agreement or subsequent arrangements TRADE PRACTICES – misleading or deceptive conduct – promise that franchise fee will be repayable in instalments – whether promise amounted to an implied representation that franchisor would have the capacity in the future to repay the fee – whether promise to repay is a future representation capable of enlivening the facultative deeming provision in s 4 of the Australian Consumer Law PRACTICE & PROCEDURE – whether judgment should be given against absent defendant without trial – ambit of grant of leave to supply supplementary submissions after judgment is reserved
Legislation Cited:	Australian Consumer Law, ss 4, 18 Competition and Consumer Act 2010 (Cth) Uniform Civil Procedure Rules 2005 (NSW), r 29.7(3) Corporations Act 2001 (Cth), s 440D Australian Securities & Investments Act 2001(Cth)
Cases Cited:	Carr v Finance Corporation Australia Ltd (No.1) (1981) 147 CLR 246 Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520 Concrete Constructions Group v Litevale & Ors [2002] NSWSC 670 Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 Kenny & Good v MGICA (1992) (1999) 199 CLR 413 Marks v GIO Australia Holdings (1998) 196 CLR 494 McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230 MG Corrosion Consultants Pty Ltd v Gilmour (2012) 202 FCR 354 Newton v State Government Insurance Office (Qld) [1986] 1 Qd R 431 Penrith Whitewater Stadium v Lesvos Pty Ltd [2007] NSWCA 176 RCR Energy Pty Ltd v WTE Co-Generation Pty Ltd [2017] VSCA 50 Re Ku-ring-gai Co-Operative Building Society (No.12) Ltd (1978) 36 FLR 134 Secure Parking Pty Ltd v Woollhara Municipal Council [2016] NSWCA 15
Texts Cited:	Cheshire and Fifoot Law of Contract (11th Australian Edition)
Category:	Principal judgment
Parties:	Mr Lee (Plaintiff) Passiontree Velvet Pty Ltd (First Defendant) Mr Kim (Second Defendant)
Representation:	Counsel: Mr S Doupe (Plaintiff) Mr Kim, in person Solicitors: En Plus Legal
File Number(s):	2018/ 93464