Marihani P/L as trustee for the Billy Baxter Franchisor Unit Trust v Wookey P/L

[2018] SADC 112

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

MARIHANI P/L AS TRUSTEE FOR THE BILLY BAXTER FRANCHISOR UNIT TRUST v WOOKEY P/L & ORS

[2018] SADC 112

Judgment of His Honour Judge O'Sullivan

9 November 2018

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - ENDING PROCEEDINGS EARLY - SUMMARY DISPOSAL - SUMMARY JUDGMENT FOR PLAINTIFF OR APPLICANT - GENERALLY

Franchise agreement - assignment of agreement from initial franchisor to subsequent franchisor - application for summary judgment against first and second defendants - counterclaim alleges unconscionable conduct under Trade Practices Act on the part of the initial franchisor, with the consequence that the contract is voidable.

HELD: Matter not suitable for summary judgment - application dismissed.

District Court Rules 2006 r 232; Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth)  ; Trade Practices Act (1974) s 87(2); Competition and Consumer Act (2010) s 87(2), referred to.
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, considered.

MARIHANI P/L AS TRUSTEE FOR THE BILLY BAXTER FRANCHISOR UNIT TRUST v WOOKEY P/L & ORS
[2018] SADC 112

Introduction

1. There are two applications before the Court:

2. The plaintiff’s first interlocutory application, filed on 26 September 2018, in which the plaintiff seeks summary judgment against the first and second defendants pursuant to r 232 of the District Court Rules 2006 (‘the Rules’) in the sum of $448,150 (including GST) plus advertising fees of $49,720.98 (including GST) plus interest at the Supreme Court rate; and

3. The plaintiff’s second interlocutory application, also filed on 26 September 2018, in which the plaintiff seeks:

   2.1Further and better non-party disclosure from Vicinity Pty Ltd as property manager of Elizabeth City Shopping Centre;

   2.2Leave to join an additional party to the proceedings; and

   2.3Leave to file an amended statement of claim in the form produced at exhibit MM5 to the second affidavit of Michael Marinos sworn and filed 26 September 2018 (‘second Marinos affidavit’).

4. At the commencement of the hearing, I was informed that in relation to the plaintiff’s second interlocutory application, the plaintiff did not pursue paragraph 2 (leave to join an additional party) nor paragraph 3 (leave to file and serve an amended statement of claim) in the form produced at exhibit MM5 to the second Marinos affidavit. However, the plaintiff indicated it would apply for leave to file an amended statement of claim in a form different to that at exhibit MM5. The plaintiff also applied to adjourn the application for the order sought in paragraph 1, being non-party disclosure.

5. Accordingly, the only matter upon which argument proceeded was on the plaintiff’s first interlocutory application for summary judgment.

   Relevant Principles

6. The application is brought pursuant to r 232 of the Rules. Rule 232(2) provides that:

   (2)     Summary judgment may only be given if the Court is satisfied that—

   (a)   if the applicant is a plaintiff—there is no reasonable basis for defending the applicant's claim; or

   (b)   if the applicant is a defendant—there is no reasonable basis for the claim against the applicant.

7. The relevant principles are not in contention. In short:

   (i)The power to order summary judgment should be exercised with great care and not unless it is clear that there is no real question to be tried Fancourt v Mercantile Credits Ltd[1].

   (ii)The test has been expressed as being ‘so obviously untenable that it cannot possibly succeed’ or ‘manifestly groundless’ (General Steel Industries Inc v Commissioner for Railways (NSW)[2]).

   [1] (1983) 154 CLR 87, 99.

   [2] (1964) 112 CLR 125 at 128-129 per Barwick CJ.

   The Plaintiff’s Claim

8. Billy Baxter’s (Franchising) Pty Ltd and the first defendant had entered into a franchise agreement for a Billy Baxter’s franchise on or about 1 March 2010. The second defendant, being the sole director and shareholder of the first defendant, guaranteed the first defendant’s obligations under the franchise agreement.

9. The plaintiff took an assignment of the franchise agreement from Billy Baxter’s (Franchising) Pty Ltd and claims against seven defendants for various matters arising out of the franchise agreement.

10. Insofar as the first defendant is concerned, the plaintiff alleges a breach of the franchising agreement for a failure to provide its gross weekly sales as from 25 March 2014, as well as a failure to pay the weekly franchise service fees and weekly franchise advertising contributions from on or about 25 Mach 2014. The claim against the second defendant is pursuant to the guarantee.

11. The claims against the remaining defendants refer, in general terms, to direct or indirect intentional interference with contractual relations.

12. The current statement of claim is the third statement of claim filed on 28 March 2018.

13. The current defence filed by the first and second defendant is the defence of the first and second defendants to the second statement of claim filed on 7 June 2016.

14. The second defendant does not speak English and has Mandarin as her native tongue. She is presently unrepresented, as is the first defendant and the fifth, sixth and seventh defendants.

15. The third and fourth defendants are represented by solicitors.

16. The defence filed by the first and second defendants’ previous solicitors pleads various breaches of the franchise agreement on the part of the plaintiff, as well as breaches of the franchise agreement and the franchising code of conduct contained within the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth)[3] as set out in paragraphs 19.1 to 19.6 inclusive of the defence.

    [3]    [19.5].

17. On 10 June 2015, the first and second defendants filed a counterclaim. In that document, the first and second defendants plead a breach of retainer agreement on the part of a solicitor, Ms Lillian Lin, but also that by reasons of paragraphs 5, 6 and 9 of the counterclaim, Billy Baxter’s (Franchising) Pty Ltd engaged in unconscionable conduct.[4] Allegations as to the alleged knowledge of Billy Baxter’s (Franchising) Pty Ltd and the actions about which complaint is made are set out at paragraphs 20 to 23 inclusive of the counterclaim.

    [4] At [19].

18. Consequently, the first and second defendants claim against the plaintiff for unconscionable conduct at paragraphs 25 to 28 of the counterclaim and in the prayer for relief, seek relief that the agreement be set aside as unconscionable. Although not specified, I assume this is pursuant to s 87(2) of the Trade Practices Act (1974), or alternatively s 87(2) of the Competition and Consumer Act (2010).

    Consideration

19. I have taken into account all the matters put to me by Mr O’Dea who appeared for the plaintiff. If the defendant is successful in arguing that the conduct of Billy Baxter’s (Franchising) Pty Ltd was unconscionable, such that it is entitled to have the franchise agreement set aside, then the plaintiff may have no claim against the first and second defendant.

20. In any event, in all the circumstances, when the counterclaim is considered along with the defence, it cannot be said that the first and second defendants defence is ‘so obviously untenable that it cannot possibly succeed’ or is ‘manifestly groundless’.[5]

    [5]    General Steel Industries Inc v Commissioner for Railways (NSW) supra.

21. Accordingly, I dismiss the plaintiff’s application for summary judgment.

22. I adjourn for further consideration the plaintiff’s application for further and better non-party disclosure from Vicinity Pty Ltd as property manager of Elizabeth City Shopping Centre. If the plaintiff wishes to amend its current statement of claim, it has liberty to apply.

23. I adjourn the matter for further directions to Thursday 22 November 2018 at 9:30 am, at which time I will hear the parties as to the costs of the summary judgment application.

24. The parties have liberty to apply if the date is not convenient.