Profix Franchising P/L v Full Shiang P/L
[2005] SADC 163
•14 December 2005
District Court of South Australia
(Civil)
PROFIX FRANCHISING P/L v FULL SHIANG P/L AND ORS
Judgment of His Honour Judge Smith (ex tempore)
14 December 2005
DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT
Plaintiff claiming damages for breach of a Franchise Agreement entered into with defendant - defendant failed to meet obligations of Agreement - claim for damages includes losses incurred by plaintiff to clean, repair and replace missing equipment - discussion on whether damages were liquidated amounts as opposed to damages which require assessment - discussion as to whether general damages are available for breach of contract.
Held - judgment for the plaintiff against the defendants - plaintiff entitled to recover damages - damages assessed at $131,073.25 - damages does not include any sum for general damages.
District Court Rules r 75.14; District Court Act 1991 s 39, referred to.
Re Ahearn; exparte Palmer (1906) 6 SR (NSW) 576; Patterson v Wellington Free Kindergarten Assoc Inc [1966] NZLR 468; Robinson v Harman (1848) 1 Ex 850; Czarnikow v Kaufos [1969] 1 AC 350; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; Contract Law in Australia 4th ed JW Carter & DJ Harland at 854-857; McGregor on Damages 16th ed Ch 3; Chitty on Contracts, General Principles 24th ed para 1582; Jarvis v Swans Tours Ltd [1973] 1 QB 233; Athens-Macdonald Travel Service Pty Ltd v Kazis [1970] SASR 264; Hobbs v LSW Ry (1875) LR 10 QB 555; Bailey v Bullock [1950] 2 All ER 1167, considered.
PROFIX FRANCHISING P/L v FULL SHIANG P/L AND ORS
[2005] SADC 163Introduction
In this action the plaintiff claims against the defendants damages for breach of a Franchise Agreement dated the 5th March 2001 in respect of a Profix Service Centre at Hilton. The first defendant is the franchisee and the second and third defendants are Directors of the first defendant and are sued because they guaranteed the performance of the Agreement by the corporate defendant.
The damages claimed include advertising and royalty contributions not paid as required by the Agreement and also include a range of other losses which could be characterised as expenses incurred by the plaintiff as a result of the first defendant’s breaches. The plaintiff also initially claimed general damages in the sum of $10,000.
All told, the plaintiff claims the sum of $141,973.25 from all defendants.
Some procedural history
These proceedings were issued on the 14th December 2004.
On the 11th July 2005, by order of Rice DCJ, the defence and counterclaim of the first, second and third defendants was struck out.
Then on the 18th August 2005, Boylan DCJ entered judgment for the plaintiff against all three defendants for damages to be assessed.
On the 30th August 2005, this trial, being an assessment of damages, was listed for hearing on the 13th December 2005 and the plaintiff was directed to proceed by way of affidavit evidence.
At trial, on the 13th December 2005, not unexpectedly, the defendants, though called, did not appear. I am satisfied that they were given proper notice. Accordingly, the trial proceeded in their absence pursuant to r 75.14 of the District Court Rules.
Evidence
I received in evidence:
·the affidavit of loss of Raymond Bruce Newman and exhibits thereto sworn on the 7th December 2005 (Exhibit P1); and
·the affidavit of Anthony Guy Crossing and exhibits thereto sworn on the 13th December 2004 (Exhibit P2).
It is clear that the majority of the items of claimed loss cannot be regarded as liquidated sums, that is a specific sum of money, the amount of which is fixed or quantified by agreement or is capable of being ascertained by a mere calculation (see Re Ahearn; exparte Palmer[1]; see also Paterson v Wellington Free Kindergarten Assoc Inc[2]). So there can be no immediate entry of judgment. Rather, it behoves me to assess the damages in the usual way having regard to the evidence adduced by the plaintiff.
[1] (1906) 6 SR (NSW) 576
[2] [1966] NZLR 468 at 471 per Barrowclough CJ
As to the measure of damages for breach of contract, the plaintiff is entitled to be placed, so far as money can do it, in the same position as he would have been in, had the contract been performed (see Robinson v Harman[3]; Czarnikow v Kaufos[4]; Commonwealth v Amann Aviation Pty Ltd[5]).
[3] (1848) 1 Exch 850 at 855
[4] [1969] 1 AC 350 at 414, 420
[5] (1991) 174 CLR 64 at 80, 98, 117, 134, 148 and 161
As to the entitlement to general damages, plaintiff’s counsel, Mr McCabe, told me this morning that he was instructed to abandon this heading of claim. So I do not have to deal categorically with this claim except to set out the following brief comments about the claims.
There is considerable debate in the authorities about whether damages for non-pecuniary loss such as pain, suffering or inconvenience can be recovered for a breach of contract (see Contract Law in Australia[6]; see also McGregor on Damages[7]; see also Chitty on Contracts, General Principles[8]). In particular, the general rule is that damages for breach of contract relate to financial or pecuniary loss (see Chitty on Contracts, General Principles [1582]). It is notable reviewing the authorities that there are some rather isolated exceptions to the basic premise that damages for breach of contract relate to financial or pecuniary losses and this is in the area of contracts to provide entertainment or enjoyment where disappointment, distress and inconvenience was compensated for (see Jarvis v Swans Tours Ltd[9]; Athens-Macdonald Travel Service Pty Ltd v Kazis[10]; see also Hobbs v LSW Ry[11]; Bailey v Bullock[12]; McGregor on Damages [93-106]). The entitlement here is further complicated by the fact that the claimant is a corporation.
[6] 4th ed JW Carter & DJ Harland at 854-857
[7] 16th ed Ch 3
[8] 24th ed para 1582
[9] [1973] 1 QB 233
[10] [1970] SASR 264
[11] (1875) LR 10 QB 555
[12] [1950] 2 All ER 1167
With those principles in mind, I turn to the evidence which I now summarise from the affidavits before me.
On the 5th March 2001 the plaintiff and the first defendant entered into the written Franchise Agreement whereby it was agreed, for a consideration based upon revenue, to operate a motor vehicle servicing business known as Profix Service Centre at Hilton, for the period from the 5th March 2001 to the 6th November 2004.
The second and third defendants, as indicated, were Directors of the first defendant and in writing guaranteed the corporate defendants performance of its obligations under the Franchise Agreement.
By October 2001 the first defendant was in breach of the Agreement. The critical financial obligation of the franchisee is to pay the franchisor royalties and advertising contributions which are calculated on gross sales of the business. There is an obligation not only to pay these sums, but also to permit the plaintiff access to the records of the business in order to check that it is receiving its due entitlement. Since October of 2001 the first defendant refused to keep accurate records of the business and further, refused to allow the officers of the plaintiff company to freely inspect any of the records.
More particularly, since the 13th October 2004 the plaintiff has received no advertising or royalty contributions from the defendants.
On the 6th November 2004 the Franchise Agreement came to an end. Notwithstanding attempts by the plaintiff to encourage the defendants to comply with the Agreement and persist with the business there was no compliance. Moreover, the defendants held over and changed the name of the business in breach of the Agreement. There were then a series of further breaches which could only be described as a total disregard of even the most basic commercial obligations. These culminated in a number of orders of this Court.
First of all, on the 11th July 2005, Judge Rice ordered the defendants to deliver up possession of the premises by 5.00 pm on the 15th July 2005. Then because the defendants were removing and damaging the assets of the plaintiff, Judge Rice, again on the 14th July 2005, made what were effectively restraining orders against the defendants.
The plaintiff resumed possession of the site on the 15th July 2005 and commenced trading at the site on the 25th July 2005. Considerable work was done by the plaintiff restoring and cleaning up the premises and making good lost and damaged equipment.
As a result of the many breaches, the plaintiff has sustained a range of losses which are particularised in the affidavit of Raymond Bruce Newman sworn on the 7th December 2005. In the same affidavit there is a careful reconstruction of the defendants likely trading in order to calculate the gross sales and therefore the royalties and advertising contributions owed over the period of tenure and over the period of holding over. I accept these calculations as proving the plaintiff’s losses in those respects.
Further, the same affidavit sets out the other losses which have been incurred by the plaintiff in, for instance, cleaning up the site, repairing and replacing missing and damaged equipment. Also, the Agreement provides an obligation on the defendant to pay all legal costs incurred. I allow all those claimed items as being related to specific breaches by the defendants of a range of obligations set out in the Agreement. These losses are as follows, and I include in the following list the royalties and advertising contributions:
Lost advertising and royalty contributions between 1 July 2002 to 31 October 2004;
$27,718.50
Lost advertising and royalty contributions between 6 November 2004 to 31 July 2005;
$26,200.00
Howes Signs Pty Ltd for repainting the premises;
$11,099.00
Office of Consumer & Business Affairs for transfer of business name;
$128.00
NGC Electrical for removal of sign;
$726.00
Nelson Locksmith to open premises and Bunnings Warehouse;
$518.60
Tieman Industries Pty Ltd for repairs to car hoists;
$3,234.50
Replacement of equipment taken by the Defendants from the premises in breach of Order 2 detailed herein;
$11,964.92
Collex for supply of waste bins;
$189.89
Labour costs for cleaning premises;
$2,000.00
Removal of 35 tyres;
$140.00
Ketal Digital for repairing telephone lines;
$250.00
Telstra for outstanding telephone account;
$598.49
Randle & Taylor fees and disbursements
$45,305.35
TOTAL $131,073.25
As indicated above, the plaintiff abandoned the claim for “general damages”. I indicate that for the reasons set out above I would not have allowed it in any event.
I am satisfied as to the proof of all the other above claimed items. They are damages arising from the breaches of the Franchise Agreement.
Therefore I assess the plaintiff’s damages against the defendants at $131,073.25. Therefore, the judgment previously entered in favour of the plaintiff against the defendants will be in the sum of $131,073.25.
I will hear counsel as to interest pursuant to s 39 of the District Court Act 1991 and as to costs.
0