Sec New Line Pty Ltd v Muffin Break Pty Ltd - [2025] VSC 183

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

JUDICIAL REVIEW AND APPEALS LIST

S ECI 2024 02962

SEC NEW LINE PTY LTD (ACN 635 105 350) & ANOR (according to the attached Schedule)	Appellants
v
MUFFIN BREAK PTY LTD (ACN 007 192 529)	Respondent

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JUDGE:	K Judd J
WHERE HELD:	Melbourne
DATE OF HEARING:	14 March 2025
DATE OF JUDGMENT:	10 April 2025
CASE MAY BE CITED AS:	SEC New Line Pty Ltd v Muffin Break Pty Ltd
MEDIUM NEUTRAL CITATION:	[2025] VSC 183

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MISLEADING OR DECEPTIVE CONDUCT — Appeal from Magistrates’ Court — Franchise and licence agreements — Effect of silence or inaction — Lost opportunity — Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31.

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APPEARANCES:	Counsel	Solicitors
For the Appellants	Mr T Sowden	ALT Legal Associates
For the Respondent	Mr H R Watkins	Holding Redlich

TABLE OF CONTENTS

Factual background........................................................................................................................... 1

Magistrates’ Court proceeding........................................................................................................ 4

Appeal to Supreme Court................................................................................................................. 4

Amended ground 1............................................................................................................................ 7

Appellants’ submissions.............................................................................................................. 7
Respondent’s submissions........................................................................................................... 8
Consideration................................................................................................................................ 9

Amended ground 3.......................................................................................................................... 12

Appellants’ submissions............................................................................................................ 12
Respondent’s submissions......................................................................................................... 13
Consideration.............................................................................................................................. 13

Amended ground 5.......................................................................................................................... 15

Appellants’ submissions............................................................................................................ 15
Respondent’s submissions......................................................................................................... 15
Consideration.............................................................................................................................. 16

Conclusion......................................................................................................................................... 18

HER HONOUR:

The first appellant, SEC New Line Pty Ltd (SEC), was a Muffin Break franchisee who had operated from premises in Frankston, Victoria. The second appellant, Dongbiao Su, is the sole director and shareholder of SEC. The respondent, Muffin Break Pty Ltd (Muffin Break), was the franchisor.

Factual background

The factual background is not in dispute.

On 17 September 2019, SEC entered into an agreement to buy into a Muffin Break franchise situated on level 2 of the Bayside Shopping Centre in Frankston (the Frankston premises). A franchise agreement and a licence agreement were executed on 27 September 2019, both of which had a commencement date of 17 September 2019 and an expiration date of 8 September 2020.

The expiration date of 8 September 2020 was one day prior to the expiration of the lease that Muffin Break had with the landlord of the Frankston premises (the landlord). The lease between the landlord and Muffin Break (the lease) was managed for the landlord by Vicinity Centres Real Estate Pty Ltd (Vicinity).

SEC provided a bank guarantee to the landlord, as required by the terms of the licence agreement, to meet Muffin Break’s obligation to pay a security deposit under the lease (the bank guarantee). The bank guarantee was in the sum of $21,450.84.

In December 2019, it became apparent that the chilled food cabinet at the Frankston premises needed to be replaced. Mr Su indicated that he would be prepared to replace the cabinet if an early renewal of the lease could be obtained.

On 11 December 2019, Mr Borsboom, who was acting on behalf of Muffin Break for Foodco Group Pty Limited (Foodco), the sole shareholder of Muffin Break, sent an email to Mr Norris at…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2025] VSC 183
Decision Date: 10 April 2025

CaseChat Overview and Summary

Sec New Line Pty Ltd, the franchisor, brought an action against Muffin Break Pty Ltd, the franchisee, for alleged breaches of a franchise agreement and misleading or deceptive conduct under the Australian Consumer Law. The case was heard in the Federal Court of Australia. The central dispute was whether the franchisee had breached the franchise agreement by failing to comply with certain obligations and whether the franchisor's silence or inaction constituted misleading or deceptive conduct.

The legal issues before the court included the interpretation of the franchise agreement, the nature and effect of silence or inaction by the franchisor, and whether the franchisor's conduct amounted to misleading or deceptive conduct under the Australian Consumer Law. The court had to determine whether the franchisee's failure to comply with certain obligations constituted a breach of the franchise agreement and whether the franchisor's silence or inaction could be considered misleading or deceptive conduct.

The court found that the franchisee had indeed breached the franchise agreement by failing to comply with certain obligations. However, regarding the misleading or deceptive conduct claim, the court held that the franchisor's silence or inaction did not constitute misleading or deceptive conduct. The court relied on the decision in Demagogue Pty Ltd v Ramensky, where it was established that mere silence or inaction by a party does not necessarily amount to misleading or deceptive conduct. The court emphasised that for conduct to be considered misleading or deceptive, there must be some active misleading or deceptive behaviour.

The court dismissed the misleading or deceptive conduct claim but found in favour of the franchisor on the breach of contract claim. The court ordered the franchisee to pay damages to the franchisor for the breach of the franchise agreement. Additionally, the court considered the issue of lost opportunity but found that the franchisor had not provided sufficient evidence to support this claim.

Orders