Pets Paradise Franchising (SA) Pty Ltd v; Kreshendo Pty Ltd (in liquidation)

[2009] VCC 168

IN THE COUNTY COURT OF VICTORIA Revised

(Not) Restricted

AT MELBOURNE
CIVIL DIVISION

COMMERCIAL LIST – GENERAL DIVISION

Case No. CI-08-00103

PETS PARADISE FRANCHISING (SA) PTY LTD	Plaintiff
v
KRESCENDO PTY LTD (IN LIQUIDATION) 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 Kreshendo Pty Ltd (in liquidation)
MEDIUM NEUTRAL CITATION:	[2009] VCC 0168

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	Mr M. Axarlis (as her nominated representative)
HIS HONOUR:

1           When this matter was called on for hearing, Mr Michael Axarlis sought leave to appear on behalf of the second and third defendants. 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 was in court. Mr Axarlis is her son, and she indicated that she wished him to represent her at the hearing. I gave leave for Mr Axarlis to appear for both the second and third defendants at the trial. The first defendant, Kreshendo Pty Ltd, is in liquidation, and the action against it was stayed.

2           A related action, No CI-08-00026, by the same plaintiff against Fimill Holdings Pty Ltd, Fiona Miller, and Jason Paul Kelly (Ms Miller’s brother), was heard at the same time. In that matter, I gave Mr Axarlis leave to appear for Ms Miller. There was no appearance on behalf of Fimill Holdings Pty Ltd or Mr Kelly.

3           Mr Axarlis made application in both cases to adjourn the proceeding. I refused the applications, and the reasons for that decision are set out in the reasons for judgment in case No CI-08-00026. I made orders striking out certain paragraphs of the defendants’ defence dated 8 February 2008 in both actions, and proceeded to hear the plaintiff’s claims.

4           The claim in this proceeding arose from the obligations the first defendant assumed under a franchise agreement entered into with the plaintiff on 21 June 2005 in relation to a business conducted at the Westfield Shoppingtown in Oaklands Park, South Australia. The first defendant’s obligations pursuant to the franchise agreement were guaranteed by the second and third defendants.

5           Pursuant to the franchise agreement, the first defendant was obliged to pay royalties and an advertising levy, both calculated as a percentage of the sales from the business. The plaintiff’s credit manager, Ms Rolanda Mills, gave evidence based upon entries in the books of account of the plaintiff of the reported sales of the first defendant between June 2006 and January 2008.

6

In respect of three weekly periods, the sales figures had not been provided by the respect of those weeks the plaintiff had estimated the likely sales based upon the figures for the immediately preceding period. For the week ended 13 January 2008, this included the week before Christmas, during which sales, traditionally, were unusually high. As a consequence, the plaintiff accepted that the estimated figure for the sales that week should be adjusted to reflect the likely sales.

7           During the hearing, I discussed with counsel the appropriateness of deducting the sum of approximately $35 from the amount claimed. Upon reflection, that figure was inadequate. It is also necessary to deduct further sums because of the overestimate of the royalties and advertising. I consider that the more appropriate figure to use for the week ending January 2008 is the sales figure for the week ending 30 December 2007, and to calculate the royalties and advertising levy on the basis of that figure.

8           As a consequence, the appropriate calculation of the plaintiff’s claim is as follows:

Royalties	$108,014.91
Advertising levy	$11,707.88
Total	$119,722.79

9

In addition, the plaintiff claimed interest which, under the franchise agreement, was to 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 $31,388.13.

10         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.

11         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 second and third defendants for $151,110.92.

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

Certificate

I certify that these 3 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