Pets Paradise Franchising (SA) Pty Ltd v; Fimill Holdings Pty Ltd

[2009] VCC 169

IN THE COUNTY COURT OF VICTORIA Revised

(Not) Restricted

AT MELBOURNE
CIVIL DIVISION

COMMERCIAL LIST – GENERAL DIVISION

Case No. CI-08-00026

PETS PARADISE FRANCHISING (SA) PTY LTD	Plaintiff
v
FIMILL HOLDINGS PTY LTD and ORS	Defendant

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JUDGE:	HIS HONOUR JUDGE ANDERSON
WHERE HELD:	Melbourne
DATE OF HEARING:	10 and 11 March 2009
DATE OF JUDGMENT:	18 March 2009
CASE MAY BE CITED AS:	Pets Paradise Franchising (SA) Pty Ltd v Fimill Holdings Pty Ltd
MEDIUM NEUTRAL CITATION:	[2009] VCC 0169

REASONS FOR JUDGMENT

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Catchwords:  Practice and procedure – Application for adjournment of proceeding –
Franchise agreement – Claim for unpaid royalties and advertising –
Pleaded defences not justicible in the County Court or not properly
particularised – Parts of defence struck out – Judgment entered for the
plaintiffs.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G. McDermott	Robert James Lawyers
For the First Defendant	No appearance

For the Second Defendant	Mr M. Axarlis (as her power of attorney and nominated representative)
For the Third Defendant	No appearance
HIS HONOUR:

1           When this matter was called on for hearing, Mr Michael Axarlis sought leave to appear on behalf of the second defendant. The second defendant was not present. Mr Axarlis said that Fiona Miller was his partner, and he produced a power of attorney dated December 2008 in which the second defendant nominated him as her attorney. The third defendant is Ms Miller’s brother, but Mr Axarlis did not seek leave to represent him or the first defendant. I gave leave for Mr Axarlis to appear for the second defendant at the trial.

2           A related action, No CI-08-00103, by the same plaintiff against Kreshendo Pty Ltd (in liquidation), Fiona Miller, and Susan Dee Axarlis (Mr Axarlis’ mother), was heard at the same time. In that matter, I gave Mr Axarlis leave to appear for Ms Miller and Ms Axarlis. The action against Kreshendo Pty was stayed because the company was in liquidation.

3           Mr Axarlis made application to adjourn both trials on the following bases:

a.	The defendants wished to raise further defences;
b.	More time was needed for the defendants to secure witnesses;
c.	The defendants needed to better understand the evidence the plaintiff would rely upon;
d.	There had been no mediation of the dispute.

4           I invited Mr Axarlis to outline the defences the defendants wished to rely upon, and to inform me what further witnesses the defendants wished to call. Mr Axarlis did this orally and, overnight, at my direction, he prepared documents in each proceeding setting out the basis of the defence and the names of the proposed witnesses and a summary of the evidence that each would give. These documents were marked as exhibits.

5 solicitors filed a notice of ceasing to act. The solicitors stated the address of the
defendants in the notice as 4 Hart Road, Buchfelde, South Australia, 5118.
Mr Axarlis acknowledged that this was an address at which documents intended to

The defendants were represented by solicitors until 15 October 2008 when the have occurred, including the vacation of earlier trial dates, various directions orders, and the service of a number of court documents. Although Mr Axarlis stated that he believed that many of these documents had not been received by the defendants, it was obvious that some had, and accordingly I considered it likely that all of the documents served at that address had reached the defendants.

6 defence. This document, according to Mr Axarlis, was drafted by their former
solicitors. The matters raised in that document went beyond the allegations in the
defence dated 8 February 2008. In discussion with Mr Axarlis I examined each of the

On 18 November 2008 the defendants filed further and better particulars of their original defence, in the further and better particulars delivered in November 2008, and in the oral submissions and written documents prepared by Mr Axarlis.

7           As a consequence of that discussion I made orders striking out paragraphs 4.4, 4.5, 5.2, 5.3, and the schedule to the defence. In summary, my reasons for doing so were as follows:

a.	The principal assertion by the defendants was that the plaintiff had required the first defendant to deal exclusively with Global Pet Products Pty Ltd in obtaining supplies for the business, and that this was in contravention of the exclusive dealing provisions in s.47 of the Trade Practices Act 1974.
b.	Section 47 is not within one of the parts of the Act in respect of which state courts are invested with federal jurisdiction. Accordingly, that matter was not justicible in this court.
c.	This same issue was raised in different guises in other paragraphs of the particulars in the schedule, and also in the defence itself, including the following:

(i)       In paragraph (4)(b)(i), the allegation that the agreement was unenforceable “as an unreasonable restraint of trade” depended upon an argument that clause 9 of the franchise agreement, relating to “stock”, required the first defendant to exclusively deal with the plaintiff or its nominated supplier.

(ii)      In paragraph (4)(b)(iii), the alleged contravention of the provisions of the Trade Practices Act relating to unconscionable conduct arose from the plaintiff’s failure to “disclose its intention to oversupply and overcharge for product and computing services” and raised a similar allegation.

(iii)     The allegation in paragraph 4.4 of the defence largely related to matters concerning alleged exclusive dealings.

8           Further particulars of the allegations in the further and better particulars also included an allegation of lack of support provided by the plaintiff to the franchisee. Mr Axarlis further addressed these matters, referring to the failure by the plaintiff to provide marketing services, business management advice and to participate appropriately in lease negotiations. However, the pleading in this regard was completely inadequate for the plaintiff to be expected to respond.

9           After examining the material produced by Mr Axarlis, it seemed to me that there was little chance of the defendants, without legal assistance, being able to adequately plead a coherent case against the plaintiff by way of set off or counterclaim. This appears to be something which is unlikely to happen in the near future. Very little seems to have happened since the defendants’ solicitors ceased to act for them. In fact, it is probable that the defendants have effectively ignored the court proceedings, including the recent directions hearings and the documents served upon them.

10         On the other hand, some or all of the defendants are part of a Federal Court action commenced in South Australia. Although the pleadings in that action were not produced, it seems to involve a number of franchisees as applicants alleging breaches by the plaintiff (franchisor) of various agreements.

11         I considered that it was appropriate in those circumstances to remove from the present action the inadequately pleaded and particularised allegations so that there could be no argument that those matters had been determined in the present proceeding. That has left as the sole issue to be decided in this action, the plaintiff’s claim for the outstanding royalties and advertising levy, and the specific defences relating to that claim.

12         The list of potential witnesses referred to by Mr Axarlis seemed to relate to general complaints about the alleged failure of the franchisor to meet its obligations. The list of potential witnesses includes franchisees who operated businesses in New South Wales, and other persons who appeared to be reluctant to be involved in the litigation. Upon examining these matters, there seemed to be no proper basis for adjourning the present proceeding.

13         The plaintiff led evidence in support of its claim. There was little dispute that the franchise agreement and the guarantees had been executed by the defendants. The claims arose from the obligations the first defendant assumed under a franchise agreement entered into with the plaintiff on 10 June 2005 in relation to a business conducted at the Westfield Shoppingtown in Modbury, South Australia. The first defendant’s obligations pursuant to the franchise agreement were guaranteed by the second and third defendants.

14         The plaintiff’s claim is calculated as follows:

Royalties $99,637.28

Advertising levy $9,963.89

Total $109,601.17

15         In addition, the plaintiff claimed interest which, pursuant to the franchise agreement, was to be calculated at the rate fixed from time to time pursuant to the Penalty Interest Rates Act 1983 plus 2%. The relevant calculation of interest on the total amount of the royalties and advertising levy to 11 March 2009 was $32,773.60.

16         As a result of the striking out of certain paragraphs of the defence, the plaintiff was essentially put to its proof. A further paragraph of the defence, based upon an assertion that the interest rate in the franchise agreement sought to give extraterritorial jurisdiction to a Victorian statute, had no substance.

17         I am satisfied that the plaintiff has established the liability of the first defendant for the amounts alleged by the plaintiff. The second and third defendants are liable pursuant to the guarantee for those amounts. Accordingly, there will be judgment for the

plaintiff against the first, second and third defendants for $142,374.77.

18         There will be a stay of execution upon the judgment for 30 days. Liberty to apply will also be reserved.

Certificate

I certify that the preceding 5 pages are a true copy of the reasons for decision of His

Honour Judge Anderson delivered on 18 March 2009.

Dated: 18 March 2009.

Julien Lowy

Associate to His Honour Judge Anderson