Rickard v Testel Australia Pty Ltd

Case [2017] SASC 144

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

RICKARD & ORS v TESTEL AUSTRALIA PTY LTD

[2017] SASC 144

Judgment of The Honourable Justice Doyle

10 October 2017

APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - STAY OF PROCEEDINGS

APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - SECURITY FOR COSTS

PROCEDURE - JUDGMENTS AND ORDERS - ENFORCEMENT OF JUDGMENTS AND ORDERS

The respondent (plaintiff) brought a claim against the applicants (defendants) for, inter alia, breach of a restraint covenant in a franchise deed. The plaintiff obtained judgment against the defendants in the amount of $172,912 (including interest), and costs were awarded against the defendants on an indemnity basis.

The defendants have appealed the decision of the trial judge on the issues of quantum and costs. In relation to quantum, the defendants complain that the trial judge erred in assessing the plaintiff’s lost opportunity. In relation to costs, the defendants challenge the trial judge’s decision to extend the order for indemnity costs to include the costs of their cross-action.

The defendants are seeking a stay of enforcement of the judgment and costs orders pending hearing and determination of the appeal.  The plaintiff seeks security for its costs of the appeal.

Held per Doyle J, ordering a stay of enforcement pending the appeal:

1.      The appeal has arguable prospects of success, and there is some prospect of prejudice to the defendants (in the form of bankruptcy, liquidation and an inability to pursue the appeal) being avoided should a stay be granted.

2.      The stay is to be conditional upon the defendants providing written undertakings restricting the use of their assets and to prosecute their appeal with all reasonable diligence; and upon them providing the plaintiff with security for its costs in the amount of $22,000.00.

Supreme Court Civil Rules 2006 (SA) r 300; Enforcement of Judgments Act 1991 (SA) s 17, referred to.
Essential Beauty Franchising (WA) Pty Ltd v Pilton Holdings Pty Ltd (No 3) [2014] SASC 148, applied.
Colgate Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248; Kalifair Pty Ltd v Digi-tech (Aust) Ltd (2002) 55 NSWLR 737; Landmark Operations Ltd v J Tiver Nominees Pty Ltd [2009] SASC 14; Lesses v Maras (No 2) [2016] SASC 140; Philip Morris (Australia) Ltd v Nixon [1999] FCA 1281; Ryan v Urban Construct (SA) Pty Ltd (No 2) (2012) 114 SASR 410; Technilock (Aust) Pty Ltd v Mondami Pty Ltd [1999] SASC 94; Testel Australia Pty Ltd v Rickard & Ors [2017] SADC 31; Testel Australia Pty Ltd v Rickard & Ors (No 2) [2017] SADC 69; Wu v Li [2014] FCA 297, discussed.

RICKARD & ORS v TESTEL AUSTRALIA PTY LTD
[2017] SASC 144

Civil

DOYLE J:       

  1. The plaintiff, Testel Australia Pty Ltd (Testel), was successful in obtaining judgment for $172,912 (inclusive of interest) and costs orders against the defendants, Mr Troy Rickard, Mr Rowan Wilson…

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AGLC
Rickard v Testel Australia Pty Ltd [2017] SASC 144
Case
[2017] SASC 144
Decision Date

CaseChat Overview and Summary

The case of Rickard v Testel Australia Pty Ltd involves a dispute between Testel Australia Pty Ltd, a franchisor of electrical testing businesses, and Troy Rickard, a former franchisee, among others. Testel alleged that Rickard breached his obligations under the franchise agreement by engaging in a competing business. Rickard, in turn, brought a cross-action against Testel, alleging various breaches of contract and misconduct. The case was heard in the Supreme Court of South Australia.

The primary legal issues in this case were whether Rickard breached the franchise agreement by engaging in a competing business and whether Testel engaged in unconscionable conduct and breached other contractual obligations. Additionally, the court had to determine the appropriate security for costs to be provided by the defendants and whether to stay enforcement of the judgment pending appeal.

The court found that Rickard breached the franchise agreement by engaging in a competing business, but it did not find that the contract of employment between Rickard and the competing business was a sham. The court also found that Testel had engaged in unconscionable conduct and breached other contractual obligations. Consequently, the court ordered a stay of enforcement pending appeal and required the defendants to provide security for costs in the amount of $22,000. The court's decision was based on the significant issues raised in the appeal and the potential impact on the parties if the judgment were enforced before the appeal was determined.

In summary, the court granted a stay of enforcement pending appeal and required the defendants to provide security for costs in the amount of $22,000. The court's decision was based on the significant issues raised in the appeal and the potential impact on the parties if the judgment were enforced before the appeal was determined.

Orders

Orders of the court

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Background

Background to the litigation

These are my reasons for ordering a stay of enforcement pending appeal, and that the defendants provide security for costs in the amount of $22,000.Background Testel has an electrical testing business. It operates that business as a franchisor with a number of franchises both in South Australia and throughout Australia, and has done so for a number of years. In 2004, T&T Rickard Pty Ltd (T&T) entered into a franchise agreement with Testel, contained in a document referred to as the 2004 franchise deed. T&T’s directors were Mr Troy Rickard and Ms Tracey Rickard. Mr Rickard executed a document by which he guaranteed the performance by T&T of its obligations under the 2004 franchise deed. The franchise agreement was renewed through the execution of similar deeds in 2007 and 2010. Testel’s business model involved it charging a fee of 22 per cent of the revenue earned by the franchisees, plus marketing fees and other charges. In April 2011, Active was incorporated by its sole director, Mr Rowan Wilson. Mr Wilson had until shortly prior to this date been an employee of T&T. He was a close friend of Mr Rickard. From the time of its incorporation, Active began operating an electrical testing business which was essentially the same as T&T’s business. In particular, Active began providing services to a large former client of Testel (through the T&T franchise), the Flinders Medical Centre (FMC). Meanwhile, by early 2011, the relationship between Testel and T&T had broken down. T&T ceased performing work under the franchise from May 2011, and, by email dated 19 August 2011, Mr Rickard purported to terminate the contractual relationship between T&T and Testel. In August 2012, Mr Rickard purported to enter a contract of employment with Active. In the same year, T&T was deregistered as a company. In these proceedings, Testel sued Mr Rickard, as the guarantor of T&T, for various alleged breaches of the franchise deed. The alleged breaches included:· breach of the duty of confidence owed by T&T to Testel; and· breach of the clause which restrained Mr Rickard, as the manager of T&T, from engaging in a business which was substantially the same as, or was in competition with, Testel’s business. In relation to the latter, it was Testel’s case that the contract of employment between Mr Rickard and Active was a sham; that Mr Rickard had been involved as a principal in the business of Active from the start. Testel also sued Mr Wilson and Active for tortious interference with the contractual relationship between Testel and T&T. Mr Rickard brought a cross-action against Testel, alleging breach of a collateral agreement allegedly entered into at the time the 2004 franchise deed was signed. Mr Rickard also alleged that Testel engaged in unconscionable conduct, engaged in misleading conduct, breached a contractual obligation of good faith, and breached the Franchising Code of Conduct. He sought remedies that included declarations that the franchise deed, the restraint clause and/or the guarantee were void.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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