Red Rooster Pty Ltd v Red Hot Pty Ltd
[2016] WADC 23
•3 MARCH 2016
RED ROOSTER PTY LTD -v- RED HOT PTY LTD [2016] WADC 23
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WADC 23 | |
| Case No: | CIV:2220/2015 | 17 FEBRUARY 2016 | |
| Coram: | DEPUTY REGISTRAR HEWITT | 3/03/16 | |
| PERTH | |||
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Defendants given unconditional leave to defend | ||
| PDF Version |
| Parties: | RED ROOSTER PTY LTD RED HOT PTY LTD ADAM TERTIUS CLASSEN |
Catchwords: | Practice and procedure Summary judgment application turns on its own facts |
Legislation: | Nil |
Case References: | Nil |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
RED HOT PTY LTD
First Defendant
ADAM TERTIUS CLASSEN
Second Defendant
Catchwords:
Practice and procedure - Summary judgment application turns on its own facts
Legislation:
Nil
Result:
Defendants given unconditional leave to defend
Representation:
Counsel:
Plaintiff : Mr Williams
First Defendant : Mr Ko
Second Defendant : Mr Ko
Solicitors:
Plaintiff : Solomon Brothers
First Defendant : Trinix Lawyers
Second Defendant : Trinix Lawyers
Case(s) referred to in judgment(s):
Nil
1 DEPUTY REGISTRAR HEWITT: In this action the plaintiff sues the first defendant under the terms of agreement which permitted the first defendant to occupy various shops which I might characterise as Red Rooster outlets. The second defendant is sued as the guarantor of the first defendant and the plaintiff's claim in effect is for the payments due under the terms of the agreements for the occupation of the premises.
2 By a chamber summons filed on 5 November 2015, the plaintiff sought an extension of time within which to bring a summary judgment application and summary judgment and it is that application with which these reasons deals.
3 It is necessary to understand a little of the arrangements which existed between the plaintiff and the first defendant in order to understand the basic matrix in which the parties conducted their business arrangements.
4 The first defendant occupied three outlets being the Midland Gate, Carousel and Rockingham food court premises, and the monies payable for the occupation of those outlets was calculated from sales details, electronically transmitted from the tills operated at each of those premises to the plaintiff at its head office. A proportion of the sales revenue, together with various adjustments according to the agreements between the parties, comprised the amount payable by the first defendant in respect of the agreements upon which the plaintiff sues.
5 I shall first deal with the application for an extension of time. Various facts have been put before me in affidavits filed in support of the application to explain the delay. Those explanations include the change of the system used by the plaintiff, its relocation to another state, and changes in personnel. It is said that it was difficult to retrieve the documents which are exhibited to the affidavit to support the application. When I consider that the plaintiff has in one affidavit alone put 841 pages of material before me, I find little difficulty in accepting that logistically it was a challenging process and made more difficult by the other matters to which I have referred.
6 The defendant has placed an almost equivalent amount of material before me and it is readily apparent to me that these parties have had an intricate, ongoing relationship and the materials took some time to prepare and present to the court. In the circumstances I am inclined to accept the explanations offered and I extend the time within which the application may be brought to the date of its filing.
7 Although the plaintiff bears the onus of persuasion on a summary judgment application, in the present circumstances there appears to be no significant challenge to the accuracy of the figures which have been advanced by the plaintiff. The thrust of the defence to the summary judgment application relates to various matters which may be pleaded as counterclaims, set-offs, and a claim under the consumer law. The standard to be adopted on a summary judgment application is high and it is necessary before such an application succeeds to be satisfied that there is no issue to be tried, or no other matter which would justify the matter going to trial and being dealt with in the usual way. A number of potential defences have been advanced in the materials filed by the defendant and a number of them relate to previous trading relationships between the plaintiff and the first defendant prior to the agreements which are the subject of the plaintiff's claim.
8 The first matter which is raised is the proposition advanced by the first defendant that there were various breaches of the earlier agreements which impacted upon the profitability of the outlets then being run by the first defendant. There is a dispute between the parties as to whether the various terms which underpin the claim made by the first defendant are actually contractual terms in the agreements upon which they rely. The terms do not appear in the agreements themselves but do appear in a document apparently annexed to the agreements described as a franchise agreement which sets out the obligations of the plaintiff to provide help and support and so forth to the first defendant. The difficulty I have with this aspect of the claim is that in a schedule to the franchise agreement, many of the terms relied upon by the first defendant have been indicated to be not applicable. That provides a considerable obstacle to the propositions advanced by the first defendant but what is worse is the bald statement, completely unparticularised, contained in par 19 as follows:
By reason of the plaintiff failing to comply with its obligations under the original management agreements, the first defendant has suffered damages and loss of profit in the sum of approximately $1,074,551.46.
9 That figure appears to be a trading loss suffered by the first defendant in the various stores to which the earlier agreements apply. I find it a very broad and unlikely proposition that the whole of the trading losses in the first defendant in the period of operation of the outlets can be attributable to the failures of the plaintiff to provide the support which the first defendant alleges it was due.
10 Furthermore, as I have earlier indicated, there is considerable doubt as to whether the terms relied upon by the first defendant were even part of contracts entered by the first defendant. Accordingly on my analysis of the claim I have just described it is at best a counterclaim arising from matters unrelated to the plaintiff's claim: that is an earlier commercial relationship between the parties. As I have indicated the evidence of the existence of a claim and its quantification is extremely weak.
11 The next issue raised is that in relation to the earlier agreements there were overcharges by the plaintiff totalling $151,484.19. In that regard, the evidence of the first defendant is particular and persuasive that such a claim might well exist. Whether such a claim could be described as a set-off or an equitable set-off is debatable but if it were to be characterised as an equitable set-off, it is certainly not entwined with and connected to the matters upon which the plaintiff relies to assert its claim or unpaid amounts arising as it does from earlier agreements. There does appear to me to be a basis upon which the first defendant could run a counterclaim and perhaps a set off in regard to that amount, notwithstanding the fact that the claim arises from agreements other than those upon which the plaintiff relies.
12 The next matter raised by the defendant concerns events which took place when the plaintiff retook possession of the outlets from the first defendant on the grounds of the first defendant's defaults. The claim is that in retaking possession of the premises, the plaintiff converted to its own use stock to the value of $37,283.82 and cash of a total of $9,000. Those alleged defaults clearly arise out of the operation of the current agreements and could be raised as an equitable set-off in so far as the stock is concerned since although the first defendant has nominated values to the stock, its entitlement would need to be assessed. As to the cash content, that could be pleaded as a set off, although once again it seems unlikely that each store had precisely $3,000.
13 In total therefore the claim for overcharging in the earlier contracts and the claim for conversion of the goods of the first defendant upon the plaintiff repossessing the various outlets was a total of $205,179.46.
14 The final defence offered by the first defendant is a claim under the consumer law. It is said that claim would entitle the first defendant to an order rescinding the agreements upon which the plaintiff's action is based. The gist of that aspect of the claim under the Australian consumer law is based upon two propositions. The first proposition is that in essence the first defendant promised to raise its game in regard to its promotion and management of the Red Rooster brand within the relevant area and further that certain opportunities might become available to the plaintiff which would allow it to trade more profitably. It is said that induced the first defendant to renew the relevant contracts. The allegation is that none of these things ever happened.
15 The next matter is rather more contentious. It is alleged that the first defendant wished to surrender outlets which were running at a loss but did not do so because he was told that he was not able to return individual stores and if he did so, it may jeopardise future opportunities to purchase the right to operate Red Rooster drive-through stores.
16 As an aside I mention that at various stages the first defendant was a proprietor of up to eight Red Rooster outlets but the three which are identified in par 21 of the defendant's affidavit are Booragoon Garden City, Carillion City, and Morley Galleria. None of those outlets are those for which the plaintiff sues for outstanding monies. The proposition which is advanced is that the first defendant was told that if it did not renew the leases for the relevant stores, it would be jeopardising his future relationship with the plaintiff and further that it was told that the only way a store could be returned is if or when the board of the plaintiff decided not to renew the leases, and that at the relevant time, the plaintiff had no intention of cancelling or not renewing any leases. The defendant contends that it was told that it was an all or nothing deal. Either all the outlets were to be returned or none of them were to be returned. Such a contention is in clear contradiction to the terms of the leases themselves which contain expiry dates and options to renew. In par 22 the first defendant makes it clear that the first defendant was aware that in order to continue with the leases of those stores it was necessary to renew the leases. It is difficult to understand how the defendant could have possibly thought that the approval of the plaintiff was required before the defendant was allowed to allow a lease to expire on its expiry date without renewing it. Even if correct, and the conversations between the first defendant and the plaintiff were as he describes, it is difficult to understand how that can be characterised as misleading and deceptive conduct. Finally the first defendant alleges that in the re-negotiated agreements which are the subject of the plaintiff's claim the payments required by the first defendant to be in advance rather than in arrears as had previously had prevailed and that operated to the detriment of the first defendant notwithstanding the plaintiff's assurances that the renegotiated position would be more favourable for the first defendant then had formerly prevailed. My analysis of the various defences defendants is as follows: as to the damages claimed for something in excess of $1,000,000 it is so poorly articulated and particularised, that it should not operate as a basis upon which the first defendant and it can be regarded as having a defence to the plaintiff's claim. The claim is attended by some doubt as to whether or not the contractual terms upon which the first defendant intends to rely actually existed and the claim does not arise out of the commercial relationship supporting the plaintiff's claim against the first defendant. Therefore, I regard the claim as a mere cross-claim which should not be elevated as to the status of a set-off, or an equitable set-off and is a matter which the first defendant can pursue if it chooses to do so in a counterclaim. In so far as the first defendant raises the issue of an over-charge under the terms of the earlier agreements, that in my view is in the same boat as the damages claim, save that it is more adequately particularised than that claim.
17 As to the claim for conversion, in my view that is capable of being an equitable set-off in so far as it relates to stores and a set off in so far as it relates to cash. As to the claim under the Australian consumer law, the propositions advanced are potentially available and could, although in my opinion are not likely to, lead to the outcome contended for by the first defendant.
18 I now turn to the claim against the second defendant who is the guarantor of the first defendant. In my opinion the second defendant as guarantor has no capacity to rely on a set-off or counterclaim as a basis of defence to the plaintiff's claim. Furthermore, the terms of the guarantee in par 20.9(3) precludes the guarantor from the right to raise a set-off or counterclaim in defence of an action against him as a guarantor. Notwithstanding that proposition it is also my understanding of the law that the first defendant and the first defendant alone is entitled to pursue set-offs and counterclaims and the like and those rights do not devolve upon a guarantor who has undertaken to ensure that the monies payable under the terms of the contract are in fact paid and the terms of the contract are observed. Effectively that removes as a defence by the guarantor to the claim virtually everything which has been raised on behalf of the first defendant save for the misleading and deceptive conduct claim under the Australian consumer law. As I have already indicated I regard that claim as arguable but weak, but nonetheless were it to succeed the basis upon which the first defendant is sued would disappear and likewise the claim against the second defendant as guarantor would be defeated.
19 Notwithstanding my reservations concerning the strength of the Australian consumer law claim I am not inclined to order summary judgment against either defendant nor order conditions on the right to defend.
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