Westjap Pty Ltd v Whitlock
[2002] WASC 94
WESTJAP PTY LTD -v- WHITLOCK [2002] WASC 94
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASC 94 | |
| Case No: | CIV:1421/2002 | 11 & 17 APRIL 2002 | |
| Coram: | PULLIN J | 26/04/02 | |
| 19 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| A | |||
| PDF Version |
| Parties: | WESTJAP PTY LTD (ACN 093 988 259) LLOYD KEITH WHITLOCK |
Catchwords: | Injunction Interlocutory injunction Turns on own facts Service of notice by post |
Legislation: | Property Law Act 1969, s 135 |
Case References: | Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Bressan v Squires [1974] 2 NSWLR 460 Henthorn v Fraser [1892] 2 Ch 27 Strang v Lewes Nominees Pty Ltd [1983] WAR 139 Wallville Pty Ltd v Liristis Holdings Pty Ltd [2001] NSWSC 894 ACCC v CG Berbatis Holdings Pty Ltd (2000) 96 FCR 491 ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 Amercian Cyanamid Co v Ethicon Ltd [1975] AC 396 Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 185 ALR 1 Burger King Corp v Hungry Jack's Ltd [2001] NSWCA 187 Cameron v Qantas Airways Ltd (1995) 55 FCR 147 Cayne v Global Natural Resources plc [1984] 1 All ER 225 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Dalecoast Pty Ltd v Guardian International Pty Ltd [1999] WASC 11 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349 Far Horizons Pty Ltd v McDonald's Australia Ltd [2000] VSC 310 Foran v Wight (1989) 168 CLR 385 Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703 Hallmark Consolidated Ltd v Centaur Mining & Exploration Ltd [2001] WASC 190 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Hurley v McDonald's Australia Ltd (2000) ATPR 41-741 Liristis Holdings Pty Ltd v Q-Corp Marine Pty Ltd [2001] NSWSC 418 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 Pilmer v The Duke Group Ltd (in liq) (2001) 180 ALR 249 Port Kennedy Resorts Pty Ltd v Huat [2000] WASCA 328 Qantas Airways Ltd v Cameron (1996) 66 FCR 246 Royal Botanic Gardens & Domain Trust v South Sydney City Council (2002) 186 ALR 289 South Sydney District Rugby League Football Club Ltd v News Ltd (1999) 169 ALR 120 Temwood Holdings Pty Ltd v Asean Australian Assets Pty Ltd [2000] WASC 84 Temwood Holdings Pty Ltd v Oliver [20001] WASC 131 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
LLOYD KEITH WHITLOCK
Defendant
Catchwords:
Injunction - Interlocutory injunction - Turns on own facts
Service of notice by post
Legislation:
Property Law Act 1969, s 135
Result:
Application dismissed
(Page 2)
Category: A
Representation:
Counsel:
Plaintiff : Mr J C Giles
Defendant : Mr M P Cornes
Solicitors:
Plaintiff : Solomon Brothers
Defendant : Babingtons
Case(s) referred to in judgment(s):
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Bressan v Squires [1974] 2 NSWLR 460
Henthorn v Fraser [1892] 2 Ch 27
Strang v Lewes Nominees Pty Ltd [1983] WAR 139
Wallville Pty Ltd v Liristis Holdings Pty Ltd [2001] NSWSC 894
Case(s) also cited:
ACCC v CG Berbatis Holdings Pty Ltd (2000) 96 FCR 491
ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253
Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349
Amercian Cyanamid Co v Ethicon Ltd [1975] AC 396
Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 185 ALR 1
Burger King Corp v Hungry Jack's Ltd [2001] NSWCA 187
Cameron v Qantas Airways Ltd (1995) 55 FCR 147
Cayne v Global Natural Resources plc [1984] 1 All ER 225
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Dalecoast Pty Ltd v Guardian International Pty Ltd [1999] WASC 11
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349
(Page 3)
Far Horizons Pty Ltd v McDonald's Australia Ltd [2000] VSC 310
Foran v Wight (1989) 168 CLR 385
Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703
Hallmark Consolidated Ltd v Centaur Mining & Exploration Ltd [2001] WASC 190
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Hurley v McDonald's Australia Ltd (2000) ATPR 41-741
Liristis Holdings Pty Ltd v Q-Corp Marine Pty Ltd [2001] NSWSC 418
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1
Pilmer v The Duke Group Ltd (in liq) (2001) 180 ALR 249
Port Kennedy Resorts Pty Ltd v Huat [2000] WASCA 328
Qantas Airways Ltd v Cameron (1996) 66 FCR 246
Royal Botanic Gardens & Domain Trust v South Sydney City Council (2002) 186 ALR 289
South Sydney District Rugby League Football Club Ltd v News Ltd (1999) 169 ALR 120
Temwood Holdings Pty Ltd v Asean Australian Assets Pty Ltd [2000] WASC 84
Temwood Holdings Pty Ltd v Oliver [20001] WASC 131
(Page 4)
1 PULLIN J: This is an application in which the plaintiff seeks an interlocutory injunction which seeks to keep on foot the relationship of franchisee and franchisor, which both parties agree existed between the parties before 28 February 2002 in relation to two franchise areas.
2 This is litigation which is partly explained by the failure of parties to ensure that all contract documents were completed and exchanged. The plaintiff complains that it was never given a copy of the agreement relating to the Eastern Hills franchise agreement. It seems to me that if the plaintiff wanted a copy of the agreement – and it should have wanted a copy – then it could have asked for it. The fact that it did not have a copy of the agreement forms one of the relevant circumstances in its claim that there were misrepresentations or unconscionable conduct on the part of the defendant. The defendant, for his part, never took the trouble to obtain from the plaintiff, a copy of the assignment document in relation to the Eastern Hills franchise agreement. If he had obtained a copy, this may have shown the address for service of documents, which has become important in relation to the service of a termination notice.
3 It is not in dispute that in August 2000, the plaintiff secured by assignment, the rights of the franchisees under two franchise agreements called the Novus Eastern Hills franchise agreement and the Novus Rockingham franchise agreement. The franchise businesses involve carrying out windscreen repairs. The defendant is alleged to have negotiated on behalf of the plaintiff to secure an assignment of these franchise agreements from previous franchisees. The defendant denies acting on behalf of the plaintiff in that way.
4 The plaintiff claims that although it obtained a copy of the Rockingham Agreement, it only received one page of the Eastern Hills Agreement from the defendant.
5 I gave earlier ex tempore reasons to maintain the status quo until I could hear submissions from both parties about this application after the defendant had filed affidavits. At that stage, undertakings were given by the defendant to cease certain conduct which the defendant says it was entitled to engage in following the termination or expiry of the franchise agreements.
6 The Eastern Hills Franchise Agreement opens with the words: "This Agreement, executed the 22nd day of January 1998, and made 1 May 1997 between …" and closes with the words "… the parties hereto have set their hands and seals the date and year first hereinbefore written".
(Page 5)
7 Clause 3 of the agreement reads:
"Except in the case of earlier termination, as provided for in this Agreement, the franchise granted herein shall be for a term of five (5) years from the date of this Agreement. Provided that the FRANCHISEE is in full compliance with all of the terms and conditions of this Agreement or the then effective franchise agreement between the AREA FRANCHISOR and the FRANCHISEE (as the case may be), the FRANCHISEE shall have two (2) successive five (5) year renewal options for a maximum of to (sic) two (2) renewals or a total of fifteen (15) years (including the initial term of this Agreement) … The FRANCHISEE shall give the AREA FRANCHISOR written notice of intent to exercise such option at least one hundred and eighty (180) days prior to the expiration of the primary term hereof, or any renewal term, (as the case may be) and shall sign current equipment leases, registered user agreements and any other agreements or documents to be required by the AREA FRANCHISOR …"
8 The Rockingham agreement opens with the words: "This agreement, executed the 1st day of March 1997, and made 1 January 1995 ...", closes with the same words as in the other agreement, and cl 3 was in the same terms as in the other agreement.
9 The plaintiff contends that the phrase "from the date of this Agreement" in cl 3, refers to the date it is said that the agreement was "made", ie 1 May 1997 in the case of the Eastern Hills agreement (which means the first term will come to an end on 30 April 2002) and 1 January 1995 in the case of the Rockingham agreement (which means the first term came to an end on 31 December 1999). The defendant contends for the date on which the agreement was executed, which in the case of Eastern Hills was 22 January 1998 (which means the first term would end if not otherwise terminated, on 21 January 2003) and 1 March 1997 in the case of the Rockingham agreement (which means the first term ended on 28 February 2002).
10 The phrase "from the date of this Agreement" is ambiguous, and at trial evidence may be led of mutually known facts at the time of execution to assist in construing the phrase. No such facts were put before me. At the moment, without the benefit of any such evidence, I must construe the document by reference to its terms alone. I must avoid any construction of the ambiguous phrase which will produce consequences which appear
(Page 6)
- to be capricious, unreasonable, inconvenient or unjust: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109.
11 In my opinion, which must be provisional, the "date of the agreement" is the date on which it was "made", rather than the date on which it was "executed". An agreement is "made" when an offer made by one party is accepted by the other and acceptance communicated. The form of these agreements suggests that the agreements were made on one date and later the agreements were reduced to written form, and those written forms then "executed". The date of "execution" is the date when the written agreement was signed recording the terms of the agreement which the parties "made" at the earlier date. Even if the parties had not, in fact, "made" an agreement at the earlier date, the execution of the agreement constituted an agreement that the parties treated themselves as having "made" the agreement on the earlier date. This makes good sense when cl 3 is read. Surely the term should not commence on the date when the agreement was "executed", which could be at any date depending upon extraneous factors such as the time taken for the draftsmen to prepare the document. If I construed the phrase "from date of this Agreement" as a reference to the date when the agreement was executed, then there would be no purpose in the parties having agreed a date when the agreement was "made".
12 As a result of my conclusion about the meaning of the phrase "from the date of this Agreement":
(a) the Eastern Hills agreement will terminate on 30 April 2002, unless it has already been terminated by action of the defendant; and
(b) the first term of the Rockingham agreement expired on 31 December 1999, which suggests that the plaintiff's predecessor had either renewed the term by the exercise of an earlier option or had continued it on some other arrangement with the defendant.
13 The "Franchise Assignment Form" dated 4 August 2000 in relation to the Rockingham agreement, gives no clue as to what the parties regarded as the term of the then franchise agreement. It simply states that:
"The franchise agreement is assigned in part area (sic) on the 4 August 2000 and is now an agreement between (the defendant) … and (the plaintiff)."
(Page 7)
14 I now need to quote some further terms in the agreement, because these relate to a claim by the defendant that the Eastern Hills agreement has been terminated.
15 Clause 16 of the agreement reads:
"TERMINATION OF AGREEMENT. In addition to the methods of termination herein above set forth, if any, this Agreement shall terminate on the occurrence of any of the following events:
…
C Upon an event of default by the FRANCHISEE, an event of default shall include the following:
…
5. Failure to pay any some of money due hereunder by him to the AREA FRANCHISOR within twenty-one 21 days from the due date of payment without reasonable cause.
…
Upon an event of default as herein above described, the AREA FRANCHISOR shall give the FRANCHISEE written notice of said event of default, which notice shall state the grounds therefor and shall be effective:-
…
- 3. Fourteen (14) days after the date of notice of such event of default, if such default is an event of default specified in Paragraphs 5, … above, and such event of default being curable is not cured within such period."
17 By letter dated 1 March 2002, the solicitors for the defendant wrote to the plaintiff at 23 Charles Street, South Perth, which letter reads:
"1 March 2002
(Page 8)
- The Directors
Westjap Pty Ltd
23 Charles St
South Perth WA 6151
Attention: Mr John Douglas-Delaurant
Dear Sir
NOVUS FRANCHISE AGREEMENT – EASTERN HILLS
We act for Lloyd Whitlock as trustee for the Whitlock Family Trust. We are instructed that payment of the following amounts by you under the Novus Windscreen Repair And Scratch Removal Franchise Agreement between Lloyd Whitlock, trading as Novus Windscreen Repair And Scratch Removal as Trustee for the Whitlock Family Trust and Richard Christopher Jankowski, made 1 May 1997, which was assigned to Westjap Pty Ltd on or about 4 August 2000 (the Franchise Agreement) are overdue.
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And Phone Charges |
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Copies of the invoices to which these amounts refer are attached.
Under clause 5 D of the Franchise Agreement you are required to pay the Service Fee on or before the 7th day of the following month in which it falls due. Under clause 5E of the Franchise Agreement you are required to pay the Advertising Fee monthly. You are in breach of these clauses of the Franchise Agreement.
(Page 9)
- Our client requires you to remedy these breaches by paying the total amount due in full within 14 days of the date of this letter. We are instructed to give notice that if you fail to pay the total amount due in full within that 14 day period our client will terminate the Franchise Agreement pursuant to clause 16 C 5 of that agreement …"
18 There is some confusion about when this was posted. Mr Babington, solicitor for the defendant, has sworn an affidavit saying that he caused the letter to be posted on 1 March 2002. A note made by his articled clerk, however, says that "Letter of breach re Eastern Hills dated 1st March 2002 sent on 5th March 2002".
19 Further confusion is caused by the fact that the defendant's solicitor's letter of 22 March 2002 suggests that the letter which had been sent recording the breach of terms of the Eastern Hills agreement was dated 25 February 2002.
20 The plaintiff denies that it received the letter of 1 March 2002.
21 The defendant relies upon cl 19 of the Eastern Hills agreement to prove service which clause reads:
"NOTICES. All notices, offers, requests and other communications from any of the parties hereto to any of the others shall be in writing and shall be considered to have been duly given or served if sent by pre-paid post to the party at his or her address set forth below, or to such other address as such party may hereafter designate by written notice to the other parties.
A. If to the AREA FRANCHISOR, to LLOYD WHITLOCK of 46 Bankhurst Way Greenwood Western Australia. Suite 4/226 Carr Pl Leederville
B. If to the FRANCHISEE, to ________________________
_____________________________________________"
22 As can be seen, no address was inserted as an address for the franchisee, and even if it had, it would not have been relevant because it would have been the address of the plaintiff's predecessor. As a result, no reliance can be placed on cl 19. The assignment document for the Eastern Hills franchise has not been produced by either party, so it is impossible
(Page 10)
- to say whether it set out an agreed address for service of notices on the plaintiff.
23 The defendant then seeks to rely on s 135(1)(a) of the Property Law Act 1969, which reads:
"… any notice served on any person under any instrument or agreement that relates to property may be served on that person-
…
(iii) by posting it to him as a letter addressed to him at his usual or last known place of abode, or if he is in business as a principal, at his usual or last known place of business …"
24 Section 135(1)(b) provides that a notice so posted shall be deemed to have been served at the time when, by the ordinary course of post, the notice would have been delivered "unless the contrary is shown". The provisions of s 135 of the Property Law Act were only referred to during the course of closing oral submissions. I called for further written submissions concerning the section. The defendant submits that s 135(1)(b) is "concerned only with questions as to the time of service, not of service itself (and that) it applies to the situation where a person claims that he did not receive a letter until after the time it should have reached him within the ordinary course of post". No authorities were cited in support of that submission. Neither counsel has identified any cases dealing with the section. In the limited time available to me, I have come across one case, namely Strang v Lewes Nominees Pty Ltd [1983] WAR 139 at 141, where Burt CJ said of the section that it provides that posting is the means by which service is effected, but it is the time of the delivery in the ordinary course of post which fixes the time at which service is effected. The purpose of the section is to displace the rule in Henthorn v Fraser [1892] 2 Ch 27.
25 The date when the notice was "deemed" to have been served, depends upon evidence about the ordinary course of post. No evidence at all has been led about that subject, and in any event Mr Delaurant, who appears to be the principal director, says that he did not receive the letter. The defendant has also submitted that "there is no evidence that it was not received at the registered office of the plaintiff". I do not see how that submission assists the defendant. Even if there had been evidence to show when, in the ordinary course of post, the notice would have been delivered, there is evidence that the service of the notice was not effected
(Page 11)
- and there is, as a result, evidence in terms of s 135(1)(b) "to the contrary". Whether he did receive it will depend upon findings to be made at trial after a full examination of the issue, but at the moment all I need say is that reliance cannot be placed on s 135 of the Property Law Act 1969 to prove service in the face of the plaintiff's denial that it received the notice.
26 The plaintiff referred me to Wallville Pty Ltd v Liristis Holdings Pty Ltd [2001] NSWSC 894 and Bressan v Squires [1974] 2 NSWLR 460. The latter dealt with s 170 of the Conveyancing Act 1919 (NSW), which was not in the same terms as s 135. The former case dealt with s 170 after it had been amended in 1991. The cases collect together a number of useful authorities, but the issue here is really a factual one – namely whether Mr Delaurant's evidence about non-receipt is evidence "to the contrary", which prevents the deeming provision in s 135(1)(b) from operating. I consider that it is such evidence.
27 None of this precludes the defendant from serving a fresh notice of termination.
28 The result is that, on the evidence before me at the moment, the Eastern Hills franchise agreement does not come to an end until 30 April 2002, and it has not been terminated. I am therefore satisfied that the plaintiff has shown that there is a prima facie claim to be tried that the Eastern Hills franchise agreement is still on foot.
29 As to the Rockingham franchise agreement, my view is that the original term expired in 1999, and at the moment the only conclusion that I can reach is that the option must have been exercised or the parties have reached some other arrangement allowing the plaintiff to continue as franchisee. There has not been any action by the defendant to terminate that agreement, and on that basis the plaintiff has shown prima facie that it is entitled to continue as franchisee in relation to the Rockingham agreement for some period presently unknown to me.
30 If I am wrong about my construction of the two agreements and the phrase "from the date of this Agreement" in cl 3 is a reference to the date of "execution", then I consider that there is a serious question to be tried about the representations which the plaintiff says were made. The plaintiff alleges that representations were made by the defendant that new agreements were being prepared in relation to both the Eastern Hills franchise and the Rockingham franchise and that there was no requirement to exercise the options. It is submitted that any attempt to rely on the failure to exercise the options would constitute unconscionable
(Page 12)
- conduct under s 51AC of the Trade Practices Act and would entitle the plaintiff to be granted relief under the Trade Practices Act or in equity. Whether the plaintiff can make out these claims in relation to the Eastern Hills franchise in circumstances when it did not trouble itself to obtain and read a copy of the Eastern Hills franchise agreement, and did not trouble itself to protect its position by exercising the option, is a matter for trial. At the moment, all I can say is that there is a serious question to be tried. The strength of the plaintiff's claim is a relevant factor when it comes to the balance of convenience and discretionary considerations. The plaintiff's case, based on alleged misrepresentations and unconscionable conduct, does not impress me as a being a very strong one. I am nevertheless satisfied that, on the evidence advanced by the plaintiff on those grounds (which evidence is disputed by the defendant), there is at least a serious question to be tried.
31 At this point I should mention a telephone number which is of some importance, namely the number 132234. This is a telephone number which, in advertisements, attracts callers to seek out Novus products. Telephone calls are received at the defendant's office, and calls from within a franchisee's area are identified by some means and then redirected to the appropriate franchisee. The defendant claims that the Rockingham franchise agreement has come to an end by effluxion of time, and he claims that he has terminated the Eastern Hills agreement. As a result, he is no longer directing calls originating from within the plaintiff's area to the plaintiff. My conclusion is that it is arguable that neither agreement has yet come to an end, and as a result the plaintiff is entitled to benefit from the callers on that telephone number until the agreements are terminated or expire. I note that the franchise agreements require the franchisor, under cl 4D.5, to "refer to the FRANCHISEE any business appropriate to the Franchised Business which arises within the territory as defined in Paragraph 1 of this Agreement".
32 The plaintiff seeks an injunction requiring the defendant to "perform its obligations pursuant to the Franchise agreements … until judgment or further order". It would, of course, be quite unjust to compel the defendant to perform his obligations if the plaintiff was not required to perform its obligations. The plaintiff's readiness, willingness or ability to perform its obligations is therefore relevant to the exercise of my discretion. If it be shown that the plaintiff is in breach of important terms of the agreement, then the court, exercising its equitable jurisdiction, is unlikely to lend its assistance to the plaintiff.
(Page 13)
33 The defendant complains that the plaintiff has failed to pay money due to the defendant under the franchise agreement. The obligation imposed on the plaintiff to pay moneys to the defendant is, of course, one of the primary obligations imposed on the plaintiff. The defendant says that the money due to it on 11 April 2002 amounts to just over $16,000. Mr Delaurant gave oral testimony during the hearing on 11 April 2002. He disputed the amount claimed but admitted that he owed $13,000. When the matter resumed on 17 April 2002, this sum had not been paid. I reserved my decision, and undertakings which had been given by the defendant on the first day of hearing were continued by the defendant, subject to certain variations and conditions. My fiat reads:
"2. Undertakings given by both parties are continued until 2pm 22 April 2002, subject to the following variations and conditions:
(a) The defendant undertakes to provide to the plaintiff's solicitors by 2 pm on 18 April 2002, a statement of moneys it has received from the plaintiff's debtors ("Statement").
(b) The plaintiff pay to the defendant's solicitors by 2 pm 22 April 2002, the sum of $13,000 less the total amount referred to in the Statement.
(c) If payment is made by the plaintiff in accordance with (b), then the undertakings of both parties continue until the delivery of reasons for decision on this application.
(d) Costs reserved."
"… his Honour grants leave to either party to file an affidavit after 2pm on Monday, 22 April 2002, stating whether or not the moneys to be paid by the plaintiff have been paid in accordance with the undertaking. In short, the plaintiff may wish to file an affidavit saying that the money has been paid, or alternatively the defendant may wish to file an affidavit saying that the money has not been paid. His Honour will take into account such affidavits when reaching a decision about the grant of the injunction."
(Page 14)
35 An affidavit has been filed on behalf of the defendant by the defendant's solicitor, Mr Babington, pursuant to that grant of leave. His affidavit is dated 24 April 2002. It reads:
" …
3. I am informed by the defendant and verily believe that at or about 12.30pm on Friday 18 April 2002 he sent to the plaintiff's solicitors by facsimile transmission a statement of moneys he has received from the plaintiff's debtors, pursuant to the terms of order 2(b) (sic) made by the Honourable Justice Pullin on Thursday 17 April 2002. A true copy of the statement is annexed hereto and marked 'EB1'.
4. The plaintiff did not pay to me by 2pm on 22 April 2002 the sum of $13,000 less the total amount referred to in the statement, being $524.53, pursuant to the terms of order 2(b) made by the Honourable Justice Pullin on Thursday 17 April 2002, or any sum.
5. At the time of swearing this affidavit at approximately 11 am on 24 April 2002, I have not received any monies from the plaintiff, nor have I received any communication from the plaintiff or its solicitors about payment of the monies referred to in the preceding paragraph."
36 No affidavit has been received from the plaintiff.
37 I now turn to the evidence of other matters complained about by the defendant.
38 Clause 6G.4 of the Eastern Hills franchise agreement reads:
"The FRANCHISEE shall maintain financial stability and reasonably satisfactory credit rating."
39 Clause 6G.7 reads:
"The FRANCHISEE shall conduct all business and operate the facility/facilities in a manner which will not impair the goodwill associated with the FRANCHISE business operated by the AREA FRANCHISOR …"
(Page 15)
40 The defendant, in his affidavit, reveals that the plaintiff has failed to pay creditors and has paid various accounts with cheques which have been dishonoured. The defendant has received a number of written complaints about the plaintiff's conduct in the latter part of 2001 before March 2002.
41 An example is a letter from Protector Glass Distribution, dated 27 November 2001, directed to the defendant and reading as follows:
"Re: PGD Trading Terms – Novus Armadale
We have written to you under separate cover concerning the PGD / Novus Group Trading Terms as negotiated and agreed earlier this year.
In that letter we explained that we have been forced to revert to the earlier (more expensive) pricing structure as a result of breaches of our strict 45-day payment agreement. Our own terms with our suppliers are even more stringent, but that has been necessary to enable PGD to continue to buy at rates, which allowed us to offer Novus the favourable pricing structure we agreed upon.
We are particularly concerned at the state of the account of Novus Armadale, which is over $65,000 in excess of 120 days and almost $15,000 in excess of 90 days.
We have been very patient with Novus Armadale but we have experienced numerous dishonoured cheques and no significant reduction of the overdue amount has occurred in spite of several meetings (which you have attended) and over a number of months.
The reason we are communicating directly with you is to advise that we have reached the point at which we have no alternative but to commence legal proceedings against Novus Armadale to recover the debt. Obviously we are very conscious of the damage a writ against any of the Novus Franchisees could have upon the whole Novus Group and as a result of our close and valued past association, we are reluctant to take that step without warning you beforehand and giving you an opportunity as Franchisor to attempt to take remedial action.
We intend to proceed with our action however, if we have not reached some form of mutually satisfactory agreement with you
(Page 16)
- directly (as opposed to with Novus Armadale) regarding the account within the next 7 days."
42 I note that there is a dispute about whether or not the plaintiff has entered into an arrangement with Protector Glass Distribution to pay off the amount owing to this supplier. The other point which is revealed in the letter, however, is that Protector Glass Distribution had received "numerous dishonoured cheques".
43 I also refer to a facsimile sent by Neil Bennett & Co Pty Ltd to the defendant, dated 7 February 2002, which reads:
"I write in concern about one of your franchisees, Novus Windscreens at Kelmscott. We have been supplying sundry items to them since September 2000. There (sic) payment record has been satisfactory until the latter half of 2001.
Despite Mr Delaurant's verbal commitments to make attempts to pay what is owed to us no money has been forthcoming. The monies owed extend as far back as August 2001. His most recent attempt to pay us some money resulted in our bank returning his cheque (for $295.25) with a referral to the drawer. This was only last week. He owes us a total of $1,904.25, which is not a large sum of money to pay.
Can you help with any information on the matter. We have dealings with several Novus franchisees and this sort of payment pattern and behaviour does not endear us to do business with any of them confidently. This, of course, is not what we want."
44 A letter of 15 February 2002 from Armadale Window Tinting also complains about moneys owing by the plaintiff, and a complaint is made in the following terms:
"I have been experiencing problems obtaining payment as John has not been present in his shop on the 4 occasions I have been there. His secretary refuses to give out his mobile phone number and messages left with her to phone me have been ignored."
45 Another sign of the plaintiff's difficulties was raised by the plaintiff itself. Mr Delaurant said in his affidavit of 3 April 2002:
(Page 17)
- "On 6 March 2002, the defendant also obtained my Northam telephone business number being telephone number 08 9622 8600 from the telephone service provider."
46 It seems that Mr Delaurant, on behalf of the plaintiff, was not there making full disclosure of the relevant facts.
47 The defendant, in his affidavit, says that he arranged to obtain this number because Telstra had disconnected it for non-payment. The defendant produced a letter dated 11 March 2002 directed to the plaintiff, which read:
"On 28 February 2002 I tried to pass a job on to you in Northam on 9622 8600. This number came up as disconnected. I called you direct on your mobile and passed the caller through.
You told me that the lines had been cut by a trench digger.
We called Telstra to find out how long they believed that they would be down for and they advised that the number was disconnected on 18 February 2002.
We obtained this number, had it reactivated and diverted to us through the exchange at Northam. This will stop:
1. Any competitor picking it up.
2. When customers call direct it will be answered.
I note that this is an advertised number and it was disconnected. Calls that we currently receive from this number will be passed through to you at cost for the line, the number, the redirection to us and then for us to pass it to you. We will bill you for these costs.
Before we can start doing that please sign and return this letter to acknowledge that you will meet these costs."
48 The combination of all this evidence leads me to the conclusion that there is a prima facie case that the plaintiff is in breach of cl 6G.4 or cl 6G.7. That is also a consideration relevant to the exercise of my discretion.
49 There is a prima facie case that the plaintiff was in financial difficulty in late 2001 and early 2002. As a result, Mr Delaurant has
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- offered his own undertaking as to damages to that of the plaintiff, but the evidence given by the plaintiff at the hearing indicates that the plaintiff and Mr Delaurant are both of very limited means. So far as the plaintiff is concerned, Mr Delaurant has testified that it has liabilities of $102,000 and that it has as its only assets the two franchises and a small additional business called "Acryl-Clear", which is a windscreen business. As to the latter, the defendant says that this business is being conducted in breach of the franchise agreement. There is an argument about whether or not this prohibition has been waived. I need not resolve that issue, but in any event Acryl-Clear's business is not of substantial value. There is an argument about whether or not the two franchise businesses are worth $120,000, as the plaintiff says, or somewhere around the $15,000 which was paid by the plaintiff to secure assignments of the businesses. The only evidence from the plaintiff about value is a passing reference in Mr Delaurant's affidavit in parentheses which says "the plaintiff had the Franchise Business valued by Roz Baker business brokers who had suggested a price of not less than $120,000". That suggests an asking price for sale and not a value, but even if it is accepted as the value of the combined franchises, it suggests the plaintiff has limited net assets. As mentioned, Mr Delaurant is also giving an undertaking, but he owns no real estate. His assets consist of his shareholding in Westjap Pty Ltd and about $50,000 worth of other assets, consisting of chattels, including a 1994 Range Rover, household goods, and some money. The plaintiff alleges that its poor financial position has been caused by the defendant's action in treating the Rockingham agreement as at an end and the Eastern Hills agreement as having been terminated. I do not accept that explanation. There were signs of financial stress in the plaintiff before 28 February 2002.
50 In addition, I should note that the defendant will face a difficult task in trying to prove what loss has been suffered by reason of the grant of the injunction, compared with the relatively easier task which faces the plaintiff in pursuing a claim for damages. If the plaintiff obtains an injunction and then fails at trial, then the defendant will be entitled to compensation for the effect of the injunction. The defendant's damages will be very difficult to assess. He will have to estimate what the damage is to the Novus name. It will be a far harder task for the defendant to prove damage to its goodwill than the task the plaintiff has in proving damages for loss of its business.
51 All of these factors, particularly the fact that the plaintiff has not paid a sum which it admits that it owes to the defendant, the prima facie case that the plaintiff is in breach of other terms of the franchise agreements,
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- and the fact that the plaintiff's task of proving a claim for damages will be an easier one than the task that the defendant would face in trying to prove what compensation it was due as a result of the grant of an injunction, lead me to the conclusion that I should refuse the plaintiff's application for an injunction. This is not a case for the grant of equitable relief. The parties should be left to their rights at law.
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