Pilton Holdings Pty LTd & Anor v Essential Beauty Franchising WA Pty Ltd ACN 108 421 192

[2015] HCASL 233

Pilton Holdings Pty LTd & Anor
v
Essential Beauty Franchising WA Pty Ltd ACN 108 421 192 & Ors

[2015] HCASL 233
A16/2015

1. Pilton Holdings Pty Ltd ("Pilton") was the master franchisee for Western Australia of the "Essential Beauty" chain of stores.  Essential Beauty Franchising WA Pty Ltd ("Essential Beauty WA") was the franchisor.  The relationship between the parties was governed by a Master Franchise Agreement ("the Agreement").

2. By late 2010, a dispute had developed between the parties over whether Pilton had exclusive authority under cl 9 of the Agreement to direct Western Australian franchisees with respect to the products they were to use and the suppliers from whom those products were to be obtained.  Pilton had purported to deny Western Australian franchisees the right to purchase products from Essential Beauty WA or its distributors.  Essential Beauty WA directed Pilton to withdraw this instruction and to take other steps with respect to training, benchmarking and advertising.  On 28 January 2011, Essential Beauty WA served a breach notice on Pilton in relation to these matters.  On 15 March 2011, Essential Beauty WA terminated the agreement. 

3. Essential Beauty WA obtained a declaration in the Supreme Court of South Australia (Blue J) that its notice of termination was lawful and effective.

4. Pilton and Angus Forrest, who acted as guarantor of Pilton's obligations as master franchisee, appealed to the Full Court of the Supreme Court of South Australia (Kourakis CJ, Vanstone and Lovell JJ).  The Full Court agreed with Blue J's conclusion that, on its proper construction, cl 9 imposed an obligation on Pilton to ensure that franchisees were entitled to purchase product from any one of Pilton, Essential Beauty WA or accredited third party suppliers and that Pilton could not dictate to the franchisees that they were entitled to purchase only from a subset of those categories.  It followed that Essential Beauty WA had been entitled to serve notices on Pilton requiring it to comply with its cl 9 obligation and, in the events that occurred, to terminate the Agreement.  The Full Court agreed with the primary judge that the directions concerning benchmarking and advertising were reasonable.  While these matters were not sufficiently serious to give rise to a right to terminate, Pilton's failure to remedy them following receipt of the breach notice did give rise to such a right under cl 22 of the Agreement. 

5. Pilton and Mr Forrest apply for special leave to appeal. They do not have legal representation and their application falls to be determined under r 41.10 of the High Court Rules 2004 (Cth).

6. The draft grounds of appeal are not properly drawn.  The applicants' summary of argument challenges the Full Court's construction of cll 9 and 22 of the Agreement.  The construction of the latter was not contested on the appeal to the Full Court.  The construction of cl 9 does not give rise to a question suitable for the grant of special leave.

7. The application is dismissed.

8. Pursuant to r 41.10.5, we direct the Registrar to draw up, sign and seal an order dismissing the application.

V.M. Bell
17 December 2015 S.J. Gageler