Pty Ltd

Case [2003] FCA 1231

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Will Writers Guild

Pty Ltd [2003] FCA 1231

TRADE PRACTICES – application for compensation for loss and damage – contraventions of Pts IVB and V of Trade Practices Act 1974 – sale of franchise – false representations – failure to comply with Franchising Code of Conduct – whether party for whom compensation claimed copied respondents’ material to operate same or similar business – whether that party sustained loss or damage

Trade Practices Act 1974 (Cth) s 87(1A)
Trade Practices (Industry Codes – Franchising) Regulations 1998 (1998 No 162)

Australian Competition & Consumer Commission v Murray (2002) 121 FCR 428 referred to
Australian Competition & Consumer Commission v Murray (No 2) (2003) ATPR 41-927 referred to
Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 referred to

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v WILL WRITERS GUILD PTY LTD and SIDNEY JAMES MURRAY

T11 of 2001

WEINBERG J
3 NOVEMBER 2003
MELBOURNE (HEARD IN HOBART)

IN THE FEDERAL COURT OF AUSTRALIA

TASMANIA DISTRICT REGISTRY

T11 OF 2001

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

WILL WRITERS GUILD PTY LTD
FIRST RESPONDENT

SIDNEY JAMES MURRAY
SECOND RESPONDENT

JUDGE:

WEINBERG J

DATE OF ORDER:

3 NOVEMBER 2003

WHERE MADE:

MELBOURNE (HEARD IN HOBART)

THE COURT ORDERS THAT:

1.The respondents pay to Will Power International Pty Ltd (ACN 089 942 361) the sum of $137,697.

2.The respondents pay the applicant’s costs of and incidental to this proceeding.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

TASMANIA DISTRICT REGISTRY

T11 OF 2001

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

WILL WRITERS GUILD PTY LTD
FIRST RESPONDENT

SIDNEY JAMES MURRAY
SECOND RESPONDENT

JUDGE:

WEINBERG J

DATE:

3 NOVEMBER 2003

PLACE:

MELBOURNE (HEARD IN HOBART)

REASONS FOR JUDGMENT

  1. This is an application by the Australian Competition and Consumer Commission (“the ACCC”) pursuant to s 87(1A) of the Trade Practices Act 1974 (Cth) (“the Act”) for compensation in favour of Will Power International Pty Ltd (“Will Power”) for loss and damage said to have been caused by conduct of Will Writers Guild Pty Ltd, the first respondent, which contravened Pts IVB and V of the Act, and to which Mr Sidney Murray, the second respondent, was said to be a party.

    The factual background

  2. In 1999 the first respondent sold, throughout Australia, franchises to operate a will writing business.  In selling the franchises the respondents falsely represented to the prospective franchisees that the business could be lawfully carried on, as described.  In addition, the respondents failed to comply with the Franchising Code of Conduct in a variety of ways including failing to give relevant disclosure documents required by that Code. 

  3. As a result of the false representations, proceedings were brought against the respondents under s 79 of the Act. After a lengthy hearing, they were each convicted by Heerey J, on 11 October 2002, of offences under s 59(2) arising…

Continue reading Pty Ltd

Sign in free to access the full text

Details
AGLC
Pty Ltd [2003] FCA 1231
Case
[2003] FCA 1231
Decision Date

CaseChat Overview and Summary

The Australian Competition and Consumer Commission (ACCC) applied to the Federal Court for compensation on behalf of Will Power International Pty Ltd, which claimed it suffered losses due to the conduct of Will Writers Guild Pty Ltd and Sidney Murray, who were found to have contravened the Trade Practices Act 1974. The first respondent had sold franchises for a will-writing business, falsely representing that the business could be lawfully operated. The respondents failed to comply with the Franchising Code of Conduct, leading to convictions and penalties. The Court had to decide whether Will Power was entitled to compensation for the loss and damage caused by the respondents' conduct and whether the respondents could rely on evidence of profits from a separate business to offset the claimed losses.

The Court found the evidence provided by the respondents to challenge Will Power's claim of a net loss to be unreliable and tenuous. The respondents' witness, Sidney Murray, was deemed evasive and contradictory. The Court also noted that the respondents' claim that Will Power's self-help book was a copy of the respondents' materials was unsubstantiated. The Court concluded that the finding of a total failure of consideration in the franchise sales applied equally to Will Power, justifying compensation. The sum of $130,000 paid for the worthless franchises constituted a loss that entitled Will Power to compensation.

The Court ordered that the respondents pay Will Power International Pty Ltd $137,697 and the applicant’s costs of and incidental to the proceeding. This ruling reinforces the importance of compliance with the Trade Practices Act and the Franchising Code of Conduct, and the consequences for those who fail to adhere to these legal requirements.

Orders

Orders of the court

1. The respondents pay to Will Power International Pty Ltd (ACN 089 942 361) the sum of $137,697.

2. The respondents pay the applicant’s costs of and incidental to this proceeding.

Background

Background to the litigation

This is an application by the Australian Competition and Consumer Commission (“the ACCC”) pursuant to s 87(1A) of the Trade Practices Act 1974 (Cth) (“the Act”) for compensation in favour of Will Power International Pty Ltd (“Will Power”) for loss and damage said to have been caused by conduct of Will Writers Guild Pty Ltd, the first respondent, which contravened Pts IVB and V of the Act, and to which Mr Sidney Murray, the second respondent, was said to be a party. The factual background In 1999 the first respondent sold, throughout Australia, franchises to operate a will writing business. In selling the franchises the respondents falsely represented to the prospective franchisees that the business could be lawfully carried on, as described. In addition, the respondents failed to comply with the Franchising Code of Conduct in a variety of ways including failing to give relevant disclosure documents required by that Code. As a result of the false representations, proceedings were brought against the respondents under s 79 of the Act. After a lengthy hearing, they were each convicted by Heerey J, on 11 October 2002, of offences under s 59(2) arising out of the sale of franchises to each of six complainants: see Australian Competition & Consumer Commission v Murray (2002) 121 FCR 428. On 7 February 2003, his Honour imposed fines on each respondent, and ordered them to pay substantial amounts to five of those six complainants: Australian Competition & Consumer Commission v Murray (No 2) (2003) ATPR 41-927. In his reasons for judgment given when imposing penalties, Heerey J observed:“Since the business for which the franchise or licence was granted could not be carried on lawfully, there was a total failure of consideration.” The orders made in relation to these five complainants were made under s 87(1). The respondents did not oppose these orders. In each case the amount of the order for compensation was the franchise fee paid by complainant, together with incidental expenses such as interest, printing, stationery costs and the like. Although application was made for an order under s 87(1) on behalf of the sixth complainant, Will Power, Heerey J declined to determine that application. The amount sought was $137,696, a figure that was one dollar out because of an arithmetical error. However, his Honour noted that the respondents alleged that the two individuals behind Will Power, Mr Andrew Fisher and Mr Paul Mansfield, had copied or adapted the first respondent’s material to run a successful will writing business and had been selling booklets and will kits in the course of that business as recently as December 2002. Messrs Fisher and Mansfield disputed the allegation. His Honour concluded that the matter raised “quite complex evidentiary and legal issues”, and that it was not appropriate to resolve those issues by granting or refusing the discretionary summary remedy conferred by s 87(1). He therefore made no order, but indicated that the complainants and the respondents could pursue such other remedies as they may be advised.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

WEINBERG J
I was next invited to infer that as the WilPaC book was in its third edition, the business must be generating profits. It was then submitted that there should be an account of these profits, and that any amount so generated should be deducted from the loss claimed to have been incurred. It was further submitted that Messrs Fisher and Mansfield, and Will Power, should be refused compensation unless and until they provided to the respondents their tax returns, and other accounting records, which demonstrated that they had suffered a real loss.Conclusions The evidence upon which the respondents relied to challenge Mr Fisher’s claim that Will Power had sustained a net loss of $137,697 was, to put it mildly, extremely tenuous. Mr Murray was cross-examined briefly on his affidavit. However, even in the short time that I observed him, he showed himself to be an evasive witness. He also contradicted himself on a number of significant matters. At one point, he said that he kept a copy of the original Executor’s Memorandum, with its distinctive formatting, but that he believed that it was with his former solicitors who would not return it because there were professional fees owing. When pressed upon that point, he resiled from his initial account and conceded that those solicitors may not have any such document in their possession. He said that he had not located a copy of the document himself, and it was unclear to what extent, if at all, he had searched for it. Likewise, as noted earlier, Mr Murray at one point maintained that he alone had devised the format in which the document was prepared. Subsequently, he agreed that it had been a joint effort, with Messrs Fisher and Mansfield. I was left with the clear impression that Mr Murray was a singularly unreliable witness. I would not act upon his evidence unless there was other evidence that independently supported it. There are other difficulties with the respondents’ case. It is palpably clear that the WilPaC book is not a copy of the “blue book”. The fact that both books cover similar ground is not to the point. Any self-help book dealing with the making of a will would be expected to contain much of the same material, including for example, definitions of the central concepts relevant to will making that are contained in both books. Indeed, the evidence was that Mr Murray himself had drawn heavily upon other books of a similar type in preparing the “blue book”. As indicated earlier, Heerey J concluded that there had been “a total failure of consideration” in relation to the payments made by the franchisees. That finding is equally applicable to Will Power, as it is in relation to the other complainants. The sum of $130,000 was paid to the first respondent for two franchises that were essentially worthless because they could not be operated lawfully. The fact that Messrs Fisher and Mansfield decided to embark upon a separate and distinct self-help will making venture, which was lawful, in an effort to salvage something from the wreckage, does not mean that they suffered no loss or damage. The franchise fee paid was money thrown away. Nothing of any real value was received in return.

Ratio Decidendi

Legal Principle Established

Established by: WEINBERG J

Full text does not contain this section.