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Swevenings Pty Ltd v Ferguson Consolidated Holdings Pty Ltd & Anor (No.5) [2010] FMCA 63 (5 February 2010)

Last Updated: 9 February 2010

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SWEVENINGS PTY LTD v FERGUSON CONSOLIDATED HOLDINGS PTY LTD & ANOR (No.5)

TRADE PRACTICES – Alleged misleading and deceptive conduct – whether representations as to profit and loss and stock made – whether representations misleading and deceptive or likely to mislead.

TRADE PRACTICES – Whether agreements franchise agreements – whether contravention of Franchising Code of Conduct – whether disclosure document.

TRADE PRACTICES – Whether loss or damage suffered – whether loss or damage induced by alleged representation or alleged contraventions.

CONTRACT – Cross-claim – collateral agreement – alleged debt – non-payment for stock supplied – alleged loss of profit from commission on sales by franchisor.

Evidence Act 1995 (Cth), ss.79, 135
Fair Trading Act 1987 (WA), ss.10, 77, 79
Trade Practices Act 1974 (Cth), ss.51A, 51AD, 51AE, 52, 75B, 82, 82(1B), 87, 87CB
Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth), reg.3 Franchising Code of Conduct cls.4, 5, 6(2)(a), 10, 11(1) and (2), 16(1), 20(2), 20(4)

ACCC v Giraffe World Australia Pty Ltd (No 2) (1999) 95 FCR 302; [1999] FCA 1161
Anema E Core Pty Ltd v Aromas Pty Ltd [1999] FCA 904
Australian Breeders Co-operative Society Ltd v Jones [1997] FCA 1405; (1997) 26 ACSR 26
Crawford Fitting v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 Eden Construction Pty Ltd v New South Wales (No 2) [2007] FCA 689
Finucane v NSW Egg Corp (1988) 80 ALR 486
Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121
Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351
Kenny and Good Pty Ltd v Mgica (1992) Ltd (1997) 77 FCR 307
King v GIO Australia Holdings Ltd (2001) 184 ALR 98; [2001] FCA 308
Klages v Walker [2007] FMCA 2056
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Marks v GIO Holdings [1998] HCA 69; (1998) 196 CLR 494
Master Education Services v Ketchell (2008) 236 CLR 101; [2008] HCA 38
Nella v Kingia Pty Ltd (1989) ATPR 46-046
Netaf Pty Ltd v Bikane Pty Ltd [1990] FCA 35; (1990) 26 FCR 305
Ocean Marine Mutual Insurance Association (Europe) OV v Jetopay Pty Ltd (2000) 120 FCR 146; [2000] FCA 1463
Quick v Stoland Pty Ltd [1998] FCA 1200; (1998) 87 FCR 371
Quinlivan v ACCC [2004] ATPR 42-010; [2004] FCAFC 175
Roach v Page (No. 11) [2003] NSWSC 907
Western Power Corporation v Normandy Power Pty Ltd [2001] WASC 202
Wheeler Grace & Pierucci Pty Ltd v Wright [1989] ATPR 40-940
Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661

JD Heydon, Trade Practices Law, Volume 2A (Thomson Reuters: Sydney)

Applicant:
SWEVENINGS PTY LTD

First Respondent:
FERGUSON CONSOLIDATED HOLDINGS PTY LTD

Second Respondent:
ERIC JOHN FERGUSON

First Cross-Claimant:
FERGUSON CONSOLIDATED HOLDINGS PTY LTD

Second Cross-Claimant:
ERIC JOHN FERGUSON

Cross-Respondent:
SWEVENINGS PTY LTD

File Number:
PEG 45 of 2008

Judgment of:
Lucev FM

Hearing date:
24 April 2009

Date of Last Submission:
24 April 2009

Delivered at:
Perth

Delivered on:
5 February 2010

REPRESENTATION

Counsel for the Applicant and Cross-Respondent:
Mr W C Chesnutt

Solicitors for the Applicant and Cross-Respondent:
Mackinlays

Counsel for the First and Second Respondents and First and Second Cross-Claimants:
Ms GBA Visscher

Solicitors for the First and Second Respondents and First and Second Cross-Claimants:
Patrick Whight

ORDERS

(1) That the parties confer with a view to reaching agreement on:
(2) The matter otherwise be adjourned to a further directions hearing at 11.30am on 22 February 2009.
(3) Costs be reserved, but that the parties confer with respect to appropriate costs orders, either as part of final orders, or in relation to the proceedings to date.
FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 45 of 2008

SWEVENINGS PTY LTD

Applicant


And


FERGUSON CONSOLIDATED HOLDINGS PTY LTD

First Respondent

ERIC JOHN FERGUSON

Second Respondent


FERGUSON CONSOLIDATED HOLDINGS PTY LTD

First Cross-Claimant


ERIC JOHN FERGUSON

Second Cross-Claimant


SWEVENINGS PTY LTD

Cross-Respondent


REASONS FOR JUDGMENT

Introduction

  1. This case concerns the sale, purchase, ownership and operation of small furniture businesses by family owned companies, and the difficulties that can arise in such events.
  2. In February 2005 the applicant, Swevenings Pty Ltd as trustee for the Roguszka Family Trust,[1] purchased a business known as Woodstock Furniture Midland[2] from the first respondent, Ferguson Consolidated Holdings Pty Ltd,[3] and entered into a collateral licence agreement.[4] At the same time Swevenings purchased from Ferguson Holdings a licence to operate a Woodstock Furniture store in the Cockburn Shopping Centre, which was then under construction.[5] In October 2005 Swevenings and Ferguson Holdings agreed to supersede the Cockburn Licence with a licence to operate a further Woodstock Furniture business in Rockingham.[6]
  3. Dr Peter and Mrs Dianne Roguszka are the directors of Swevenings which is a small family company. They are both teachers by profession.
  4. Ferguson Holdings is likewise a small family company, of which Mr Eric Ferguson is one of two directors. Mr Ferguson is a businessman.[7] Ferguson Holdings was involved in the importation to, and sale of furniture in, both Western Australia and Sydney. It operated under the name “Woodstock Furniture” at a number of stores.
  5. By an application and statement of claim originally filed in the Federal Court on 3 August 2006, and subsequently transferred to this Court on 10 March 2008,[8] Swevenings made claims against the respondents. The respondents subsequently cross-claimed against Swevenings. Details of the claims and cross-claims are set out below.

Claims and cross-claims

  1. Swevenings’ claim for relief against the respondents is made with respect to alleged misleading and deceptive conduct and contraventions of the Trade Practices Act 1974 (Cth)[9] and the Fair Trading Act 1987 (WA).[10]
  2. Swevenings claims:
    1. damages under s.82 of the TP Act, and such other orders under s.87 of the TP Act as the Court thinks appropriate;
    2. damages under s.79(1) of the FT Act and such other order or orders under s.77 of the FT Act as the Court thinks appropriate; and
    1. interest and costs.
  3. Ferguson Holdings’ cross-claims against Swevenings for loss and damage, being:
    1. indebtedness to Ferguson Holdings for alleged non-payment for stock supplied under the Collateral Agreement, in the sum of $57,718.72; and
    2. loss of income it alleges it would otherwise have received from the sale of stock in respect of the Midland Business under the Midland Licence which Ferguson Holdings claims has been breached by Swevenings, resulting in loss and damage of not less then $16,933 each financial year.

Issues

  1. In relation to Swevenings’ case various issues arise, including the following:
    1. whether the following representations, alleged to have been misleading and deceptive under s.52 of the TP Act, were made:
      1. a written profit and loss representation[11] for the Midland Business;[12]
      2. an oral future trading representation said to have been made at a meeting on 28 February 2005 by Mr Ferguson to the effect that Swevenings “could easily double those figures”;[13]
      3. a trading stock representation that adequate trading stock would be supplied to Swevenings by Ferguson Holdings if Swevenings purchased the Midland Business;[14]
      4. a representation that three containers of trading stock had been ordered and were arriving in May and June 2005;[15] and
      5. a representation that Ferguson Holdings was negotiating a lease for a further Woodstock Furniture Business at the then under construction Cockburn Shopping Centre, and that that business would be available from September 2005;[16]
    2. whether Swevenings relied upon any of the alleged representations in purchasing the Midland Business and the Cockburn Licence from Ferguson Holdings;
    1. whether Ferguson Holdings breached the Franchising Code of Conduct;[17]
    1. whether any loss or damage was suffered by Swevenings if the alleged representations were misleading and deceptive and relied upon, and if there was a breach of the Franchising Code of Conduct, which includes the following issues:
      1. the valuation of the Midland Business and the goodwill in that business;
      2. whether any trading losses were actually incurred;
      3. whether Swevenings was contributorily negligent to any loss or damage; and
      4. whether Swevenings failed to mitigate any loss or damage.
    2. if Ferguson Holdings are liable for any loss or damage suffered by Swevenings as a result of the alleged misleading and deceptive representations or any breach of the Code, whether Mr Ferguson is accessorially liable under s.75B of the TP Act, and if he is, whether there ought to be an apportionment of liability between Ferguson Holdings and Mr Ferguson.
  2. The following issues arise in relation to Ferguson Holdings’ cross-claim against Swevenings, namely:
    1. whether Swevenings is indebted to Ferguson Holdings in the sum of $57,718.72 for stock supplied under the Midland Licence; and
    2. whether Ferguson Holdings has lost commission on profits on sales which would have been made on furniture supplied to Swevenings if Swevenings had not allegedly breached the Midland Licence, and whether the value of the alleged loss of profits is at least $16,933 each financial year.

Evidence of witnesses

  1. The primary non-expert witnesses in these proceedings were Dr and Mrs Roguszka and Mr Ferguson.
  2. Dr Roguszka presented as a cautious and conservative man who answered questions in that manner, resulting in some of his answers being somewhat understated and almost diplomatic. The Court has no doubt that he was however a truthful witness, and one whose credit was not impugned.
  3. Mrs Roguszka was a robust and straightforward witness, who gave the impression of being quite naïve in relation to commercial and business matters. She was however a truthful witness, and again, one whose credit was not impugned.
  4. Mr Ferguson was a witness who was, in the Court’s view, evasive and prepared to endeavour to tailor his answers to suit his case. He consistently resorted to saying that he had made inadvertent errors or that he had overlooked matters when cornered in cross-examination. He gave every impression, and indeed admitted, that he would omit to tell the truth in order to achieve the commercial ends that he desired.[18] Some of his evidence was inherently incredible.[19] Overall, Mr Ferguson came across as a witness whose credibility was to be doubted, and whose credibility was significantly impugned in cross-examination generally.
  5. In the event of any factual evidentiary disputes between the three primary non-expert witnesses the Court has preferred the evidence of Dr and Mrs Roguszka to that of Mr Ferguson.
  6. With respect to the evidence of the expert witnesses, issues related to their expertise and evidence are dealt with in the reasons for judgment below.

In trade or commerce

  1. There is no dispute that the conduct in issue was “in trade or commerce” for the purposes of s.52 of the TP Act.

Profit and Loss Representation

  1. The genesis of this dispute lies in the preparation of the Midland Figures. The Midland Figures are a rudimentary profit and loss statement for the Midland Business for the months from July 2004 to January 2005. It is a four page document, with the first page featuring the Woodstock Furniture logo and, at the foot of the page, a post office box address, fax and phone numbers, and an email address. The Midland Figures document contained the following profit and loss information:
  2. Ferguson Holdings listed the Midland Business for sale with Kent Business Brokers[21] in or around January 2005. The Midland Figures were provided to Kent at about the same time that the Midland Business was listed with Kent. Manifestly, that was done on behalf of the owner of the Midland Business, Ferguson Holdings, of which Mr Ferguson was a director. The respondents deny that the Midland Figures were provided to Kent in order to facilitate the sale of the Midland Business.
  3. In or about early February 2005 Mrs Roguszka went to the offices of Kent to further pursue information on a number of businesses which she and Dr Roguszka were looking at with a view to possible purchase.[22] She was shown, and subsequently given, a copy of the Midland Figures. The Midland Figures were given to Mrs Roguszka by Barry Pike, an employee or agent of Kent. Mrs Roguszka subsequently provided the Midland Figures to Dr Roguszka.
  4. The respondents deny that the Midland Figures constituted a representation, and deny not having a reasonable basis for making them at the time they were made.
  5. The respondents sought to argue that the Midland Figures:
    1. were unaudited and prepared by Ferguson Holdings’ bookkeeper working from home using Ferguson Holdings’ MYOB statements and record of income and expenses;
    2. did not include figures for security, rubbish bin hires and eftpos fees, an error made by the bookkeeper which was not detected by Mr Ferguson prior to the sale to Swevenings;
    1. contained amounts for wages, insurance and workers compensation insurance which were apportioned by Mr Ferguson;
    1. contained no representation as to whether GST was included, or not included;
    2. stated GST inclusive amounts for sales and purchases;
    3. covered only the six and a half months that the Midland Business had been trading;
    4. showed a rent free period of three months;
    5. were on a cash basis not accrual basis;
    6. were obviously incomplete, thus, for example, telephone and electricity expenses were not included in the figures for July 2004 and August 2004, and therefore the Midland Figures needed to be adjusted;
    7. showed past performance, and did not represent or purport to represent levels of trading or profitability for the future; and
    8. the levels of trading and profitability in the future depended among other factors, on the skill of the operator.
  6. Mr Ferguson advised, orally, Dr and Mrs Roguszka at the meeting on 28 February 2005 that the cost of renting a warehouse was not included in the Midland Figures and that they would need a warehouse to operate the business and should factor that into their pricing.
  7. The respondents alleged that at some time on or before 28 February 2005 Dr Roguszka prepared a cash flow statement and performed calculations to satisfy Swevenings’ purchase criteria that the Midland Business would need to generate a profit of at least $7,500 per month.[23] The respondents allege that in preparing the cash flow statement:
    1. that of the Midland Figures Dr Roguszka ignored the figures for July 2004 and utilised the figures for the months of August 2004 to January 2005 in determining the net profit per month;
    2. completed figures for February to June 2005 despite there being no Midland Figures for these months, and made adjustments to the figures;
    1. added back the rent during the three month rent free period;
    1. assessed that the Midland Business would generate Swevenings’ threshold amount of at least $7,500 per month;

and that in arriving at the threshold figure of $7,500 per month the Roguszka Criteria did not rely on the specific amounts allocated for sales or expenses in the Midland Figures.

  1. The respondents argue that:
    1. no Profit and Loss Representation was made as alleged by Swevenings;
    2. the alleged Profit and Loss Representation was not a representation;
    1. if the Profit and Loss Representation was a representation, it was not false or misleading, or likely to mislead; and
    1. alternatively, if the Profit and Loss Representation was a representation about future matters then it was reasonably made and not continuing.
  2. The respondents argue that the Midland Figures are historical trading figures and not a representation about the future levels of revenue and/or profitability of the Midland Business.
  3. The respondents say that there was no representation made by them that Swevenings would achieve the same results as Ferguson Holdings had achieved in the Midland Business. The respondents also say that they would not have made the Profit and Loss Representation because they had no control or influence over the Midland Business once it had been purchased by Swevenings, and, further, they would not have made the representation because they wanted to enter into a long term business relationship with Swevenings.
  4. At hearing, the respondents (through Mr Ferguson) conceded that the Midland Figures were inaccurate, and that figures prepared by Mr Douglas-Brown,[24] an “expert” witness called by Swevenings,[25] ought to be accepted, except as to wages, superannuation and workers’ compensation insurance;[26]
  5. What the Douglas-Brown Midland Figures make plain is that the Midland Figures are wrong, and particularly so as to the alleged profit made during the period of July 2004 to January 2005 referred to in the Midland Figures.
  6. In the Court’s view the Midland Figures were a representation. They were provided to Kent by Mr Ferguson, and either prepared by him or under his direction checked by him, in connection with the sale of the Midland Business. They were produced and given to Mrs Roguszka as a person interested in buying the Midland Business. They were discussed with her at a meeting in early February 2005 and again with her and Dr Roguszka at the 28 February 2005 meeting, at which the sale of the Midland Business was specifically discussed, and the Midland Figures were specifically referred to. Mr Ferguson has admitted that it was his purpose at the 28 February 2005 meeting to “close the deal”, that is to finalise the sale of the Midland Business to Dr and Mrs Roguszka.[27]
  7. The Court also finds that the representation was misleading, or likely to mislead. This is because the figures were:
    1. wrong; and
    2. incomplete, and no caveats were expressed by the respondents, or their representatives at Kent, with respect to all of the incomplete matters in the Midland Figures.
  8. The fact that the Midland Figures were wrong meant that they were misleading, or likely to mislead, particularly as to the profit made by the Midland Business, a fact borne out by the Douglas-Brown Midland Figures. In short, the Midland Figures overstated the profit of the Midland Business resulting in a greatly inflated goodwill component being included in the Midland Business Purchase Agreement.

Future Trading Representation

  1. Swevenings says that at the 28 February 2005 meeting Mr Ferguson, acting on behalf of Ferguson Holdings, “referred to the Midland Figures and said we could easily double them” – the Future Trading Representation.[28]
  2. Swevenings says that this Future Trading Representation was a representation as to a future matter, and that neither of the respondents had any reasonable basis for the making of the Future Trading Representation.
  3. There is no dispute that there was a meeting on 28 February 2005. The respondents say that at the meeting Mr Ferguson described:
    1. generally, the operation of the buying group;
    2. how the order of furniture was placed through him to the Indonesian manufacturer;
    1. that it was necessary to rent a warehouse to support the Midland Business;
    1. the Woodstock trademark;
    2. importing;
    3. the number of stores;
    4. how the stores operated;
    5. the concept of the group;
    6. the intention to open future shops;
    7. the group advertisement;
    8. the commission of 10% on cost of the goods and the container quantities paid in advance; and
    1. that whilst containers were awaited, members of the group could buy furniture from Ferguson Holdings’ warehouse at the same price as the container cost plus 10%.
  4. Mr Ferguson conceded that the purpose of the 28 February 2005 meeting was to sell the Midland Business.[29]
  5. Mr Ferguson says he said words to the effect that Swevenings could potentially double the figures with an additional store and some sharing of expenses between the two stores, and that Dr and Mrs Roguszka knew that that was what was meant when those words were said. In particular, the respondents say that the Roguszkas knew that:
    1. the two stores would share warehouse costs and delivery costs;
    2. Dr Roguszka understood what Mr Ferguson had said concerning shared expenses;[30]
    1. Dr Roguszka considered the warehouse to be an extra cost and had read the Midland Figures at the 28 February 2005 meeting;[31] and
    1. Mrs Roguszka was aware at the 28 February 2005 meeting that the warehouse rent was not included in the Midland Figures.[32]
  6. The respondents say that the fact that the Future Trading Representation was not made as alleged is supported by the fact that Dr Roguszka does not refer to it in his affidavit.
  7. The respondents further say that Dr Roguszka’s evidence does not corroborate that of Mrs Roguszka. It is said that Dr Roguszka indicated that Mr Ferguson had said that there would be a “significant increase” in sales, not that the Midland Figures “could be doubled”. Mr Ferguson gave evidence that he did not say that the Midland Figures could be doubled, and that he would not have said that because if it had been possible to double the trading figures of the Midland Business then Ferguson Holdings would have doubled the figures itself and achieved a higher sale price for the business. Additionally, the respondents say that the Future Trading Representation would not have been made by them because they intended to enter into a long term commercial relationship with Swevenings.
  8. The respondents also say that if the Future Trading Representation was made as alleged by Swevenings then it was used by Mr Ferguson as a mere puff, alternatively, it was not capable of conveying a specific meaning and was therefore ambiguous and unable to be relied upon.
  9. With respect to the Future Trading Representation the respondents say that:
    1. it was not made as alleged by Swevenings;
    2. it was not a representation;
    1. if it was a representation it was not false or misleading or likely to mislead.
  10. Further, the respondents say that if it was a representation about future matters then it was a representation that was reasonably made but was not a continuing representation.
  11. The Court considers that Mr Ferguson would have said that the figures could be doubled. The Court believes Mrs Roguszka in that regard, and having observed Mr Ferguson the Court considers that the alleged representation sounds like the type of statement that he would be likely to make in the circumstances. The fact that Dr Roguszka says that the words “significant[ly] increase” were used is not necessarily inconsistent with Mrs Roguszka’s recollection of Mr Ferguson saying that the figures could be doubled, and, in the Court’s view, reflects the manner in which Dr Roguszka expresses himself more conservatively and diplomatically than both his wife and Mr Ferguson. The Court finds that the words alleged to constitute the Future Trading Representation were said by Mr Ferguson.
  12. Were the words of the alleged Future Trading Representation a representation for the purposes of s.52 of the TP Act? In the Court’s view the words were said for effect, and given the circumstances of Mr Ferguson trying to close a commercial sale of the business, and given the nature of Mr Ferguson himself, the Court considers that it is the type of remark that he would have made in the course of a negotiation in an effort to close the deal. It was therefore a representation that the profit figures (already wrongly and substantially inflated) could be doubled.
  13. The remark also that confirms that Mr Ferguson did rely upon the Profit and Loss Representation because it was a statement made in direct relation to the Profit and Loss Representation. It is therefore a statement that reinforces the conclusion that the Profit and Loss Representation was made by Mr Ferguson.
  14. The Future Trading Representation was a representation as to a future matter, and it was misleading and made without any reasonable basis. It was misleading for the same reasons as the Profit and Loss Representation was misleading, and in light of the Douglas-Brown Midland Figures there could not be said to be any reasonable basis for the making of such a representation.

Trading Stock Representation

  1. Swevenings asserts that at the meeting on 28 February 2005 Mr Ferguson, or alternatively Mr Ferguson on behalf of Ferguson Holdings, represented that adequate stock for trading requirements of Midland Business would be supplied as needed by Ferguson Holdings, or alternatively by Mr Ferguson, to Swevenings, if Swevenings purchased the Midland Business.
  2. Swevenings says that the Trading Stock Representation is a representation as to a future matter and one which neither of the respondents had any reasonable basis for making.
  3. The respondents say that the Trading Stock Representation:
    1. was not made at all as alleged by Swevenings; or
    2. that it was not a representation, or that if it was a representation it was not false or misleading or likely to mislead.
  4. The respondents also say that if the Trading Stock Representation was a representation as to a future matter then it was reasonably made and that there was no continuing representation.
  5. Swevenings says that Mr Ferguson effectively conceded in cross-examination that the Trading Stock Representation was made. Indeed, in cross-examination, Mr Ferguson conceded that he had omitted to tell Dr and Mrs Roguszka that there would be occasions when the warehouse would run out of either particular lines or most of its stock.[33] Mr Ferguson omitted to tell Dr and Mrs Roguszka of this because it was something that would not have helped to sell the Midland Business.[34] Thus, the Trading Stock Representation is made out. Further, it is clearly misleading.
  6. The Trading Stock Representation was a representation as to a future matter for the purposes of s.51A of the TP Act. Did Ferguson Holdings therefore have reasonable grounds for making the Trading Stock Representation?[35] In making the Trading Stock Representation Mr Ferguson was acting for Ferguson Holdings of which he was a director. In the circumstances, and given Mr Ferguson’s evidence concerning the deliberate omission to tell Dr and Mrs Roguszka of the true position with respect to the trading stock because it would not help to sell the Midland Business, there can be no basis for concluding that Ferguson Holdings had reasonable grounds for making the Trading Stock Representation.
  7. The Court therefore considers that the Trading Stock Representation was misleading and deceptive and that there were not reasonable grounds for it being made.

Containers Representation

  1. At the meeting on 28 February 2005 Swevenings says that Mr Ferguson, or alternatively Mr Ferguson on behalf of Ferguson Holdings, represented that if Swevenings purchased the Midland Business either Ferguson Holdings or Mr Ferguson would immediately order three containers of trading stock for the Midland Business from the Indonesian suppliers.
  2. Swevenings says that at a later meeting in or about late March 2005 a representation was made by Mr Ferguson, or alternatively Mr Ferguson on behalf of Ferguson Holdings, that the three containers of trading stock had already been ordered from the suppliers in Indonesia and that they would arrive at Fremantle in Western Australia in a staggered timetable, so that:
    1. the first container would arrive at the start of May 2005; and
    2. the second container would arrive at the end of May 2005; and
    1. the third container would arrive in early June 2005.
  3. Swevenings asserts that the Containers Representations were untrue because, unbeknown to Swevenings, there was, at that time, no order in terms of the Containers Representation, alternatively, that not all three containers had been ordered.
  4. The respondents say:
    1. that the Containers Representation was not made as alleged by Swevenings; or
    2. that the Containers Representation was not a representation; or
    1. that if the Containers Representation was made then it was not false or misleading or likely to mislead; and
    1. that if the alleged Containers Representation was a representation about future matters then it was reasonably made and there was no continuing representation.
  5. The respondents say that prior to the sale to Swevenings the respondents were operating the Midland Business, and that they had already ordered a container of furniture for the Midland Business prior to the sale of the business to Swevenings, and that Mr Ferguson had said to Dr and Mrs Roguszka words to the effect that he had the Midland store adequately stocked, and had a warehouse from which Swevenings could order pending the receipt of their first shipment order.
  6. The respondents deny that they were responsible for any shortfall in stock and say that Swevenings failed to place orders, or to source alternative stock, and that therefore Swevenings was responsible for any shortfall in stock.
  7. Mr Ferguson denied in cross-examination that he told Dr and Mrs Roguszka that he would immediately order the three containers for the Midland Business from the Indonesian suppliers. Mr Ferguson said that he followed his usual stock ordering cycle of placing orders every month. Stock then arrived eight to ten weeks from the date of ordering, that is, six to eight weeks to be manufactured and two weeks to be delivered. Mr Ferguson says that he had already ordered stock for his warehouse for diversion to Midland in February and the next order was due in March and then April. The respondents say that Mr Ferguson’s evidence is consistent with the documentation concerning ordering which shows that orders were placed as follows:
Container No
Order date
Destination
Expected date of departure
Expected time of arrival
5
26 Feb 05
Warehouse
-
14 April 2005
6
28 March 2005
Fremantle / Midland
7 May 2005
?
11
20 April 2005
Midland
25 June 05
14 July 05
13
29 April 2005
Midland
-
2 August 05
14
20 April 05
Warehouse
-
16 July 05
15
29 April 05
Warehouse
-
22 July 05
17
2 June 05
Midland / Fremantle
-
5 Aug 05
  1. The respondents say that there are a number of factors that support their submission that it is more likely than not that the alleged representation was not made and that Mr Ferguson’s version is to be preferred. They are:
    1. because the Midland Business had been operated by Mr Ferguson and there was no certainty as to when the business would be sold, and he had already ordered a container of furniture for the warehouse prior to the sale;
    2. the alleged representation would not be in keeping with Mr Ferguson’s normal business practice or his knowledge of the furniture industry and normal schedules for manufacture and delivery of furniture;
    1. it was in Ferguson Holdings’ best interests to order the containers of furniture because it would obtain 10% commission on the stock ordered;
    1. prior to Mr Ferguson’s departure on a fund raising trip three containers were ordered;
    2. no documentary evidence was supplied by Swevenings of the allegation that there was insufficient stock, and even though Mr Ferguson conceded that there was a shortage of stock of particular items that did not mean that the warehouse was low on all stock;
    3. Mr Ferguson said that Swevenings was free to seek stock from Ferguson Holdings’ warehouse pending receipt of the initial shipment so there should have been no shortfall;
    4. Swevenings failed to provide any evidence of orders placed that were not met or fluctuation in their stock levels;
    5. there was no evidence linking delay in delivery or shipment to Mr Ferguson;
    6. Mrs Roguszka did not place an order until 2 June 2005 notwithstanding that she had been taught how to order furniture in May 2005, with the consequence that the stock ordered did not arrive until August 2005;
    7. that while Mr Ferguson was away on a fund raising trip Ferguson Holdings’ warehouse was well stocked; and
    8. that while Mr Ferguson was away Mrs Roguszka called several times in a panic because she could not obtain specific items of stock.
  2. The respondents say that the allegations by Swevenings are generic and that no documentary evidence has been produced to prove that it was more likely than not that:
    1. Ferguson Holdings’ warehouse was not adequately stocked;
    2. the ordering of stock, even if immediate, would have resulted in arrival sooner; and
    1. any orders placed with the warehouse were not filled,

and that there is no contemporaneous evidence as to complaints about the delays.

  1. The Court accepts the evidence of Mrs Roguszka on this issue that the Containers Representation was made by Mr Ferguson,[36] In this regard, the Court prefers the evidence of Mrs Roguszka over that of Mr Ferguson who simply denied that the representation was made. Once again, the representation sounds like a representation that Mr Ferguson would have made in the course of such a meeting in order to ensure that the deal which he had closed on 28 February 2005 proceeded to settlement. Most of the matters put by Mr Ferguson as to why the representation was not made related to inferences to be drawn from the conduct of the parties at a later time. The Court is not satisfied that those matters, even if they were true, would outweigh the direct positive evidence of Mrs Roguszka that the representation was made. It is also significant in any event that ultimately three containers were raised before Mr Ferguson left for a fund raising trip in April 2005, after settlement.
  2. The representation was not a future representation but rather one relating to something that Mr Ferguson alleged had already been done. The representation was made on behalf of Ferguson Holdings by Mr Ferguson in his capacity as a director. Because the representation was false it was one which was misleading and deceptive.

Cockburn Shopping Centre Representation

  1. Swevenings says that at the meeting on 28 February 2005 Mr Ferguson represented that he was negotiating a lease for a further Woodstock Furniture business at a then uncompleted shopping centre in Cockburn and that the lease would become available in September 2005. Mr Ferguson, or alternatively Mr Ferguson on behalf of Ferguson Holdings, offered to sell Dr and Mrs Roguszka an exclusive licence to operate a Woodstock Furniture business in the Cockburn area for the sum of $20,000.
  2. Swevenings says that this was a representation as to a future matter and that neither Ferguson Holdings nor Mr Ferguson had any reasonable basis for making the Cockburn Shopping Centre Representation.
  3. The respondents say:
    1. that the Cockburn Shopping Centre Representation was not made as alleged by Swevenings; or
    2. that the Cockburn Shopping Centre Representation was not a representation; or
    1. that if the Cockburn Shopping Centre Representation was a representation it was not false or misleading or likely to mislead.
  4. Further, the respondents say that if the Cockburn Shopping Centre Representation was a representation about future matters then it was reasonably made and there was no continuing representation. In that regard, Mr Ferguson says that he had discussed an opportunity with various agents or developers for opening a Woodstock Furniture store at a warehouse redevelopment in Thomsons Lake/Success and had decided that an opportunity existed for a Woodstock Furniture store to open in that location. The right to open a Woodstock Furniture store in this area was given to Swevenings, but Swevenings was to be responsible for the costs of securing that opportunity and the location itself according to Mr Ferguson. The respondents say that the owners of the warehouse redevelopment ultimately decided not to proceed with that redevelopment. Subsequently, Swevenings surrendered the right to open a store in the Cockburn area in exchange for a licence to operate a store in Rockingham.
  5. The Court prefers the specific evidence of Mrs Roguszka in relation to this issue to that of Mr Ferguson. Her evidence was that Mr Ferguson indicated that a lease would become available, and that that lease would become available once construction works at the shopping centre had been completed in August 2005. It was on this basis that Swevenings entered into, and paid for, the Cockburn Licence.
  6. The representation was as to a future matter, and was made by Mr Ferguson on behalf of Ferguson Holdings. In the circumstances, the onus was on Ferguson Holdings to establish reasonable grounds for the making of the representation. That onus was not fulfilled. There was no evidence as to the availability of a lease or the timing of construction works at the shopping centre which would have provided the basis for finding that the making of the representation was reasonable. In the circumstances, therefore, the representation was misleading and deceptive.

Reliance

Profit and Loss Representation

  1. Swevenings alleges that Dr and Mrs Roguszka acting in reliance upon the Profit and Loss Representation entered into a contract on behalf of Swevenings (at that time unincorporated) to purchase the Midland Business for the sum of $175,000 of which $120,000 was allocated to goodwill,[37] and continued to rely upon the Profit and Loss Representation in proceeding to settlement of the contract to purchase the Midland Business on 15 April 2005.[38]
  2. The respondents deny that the applicant relied upon the Midland Figures, and therefore say they have not suffered any loss or damage, because:
    1. the Midland Figures covered a period of 6.5 months, were obviously incomplete and in need of adjustment and were not, or could not reasonably be relied upon and used to project a trading period for a full 12 months, without further enquiry;
    2. because a warning was given that independent advice and enquiries ought to be made with respect to the purchase of the Midland Business and that that was sufficient to negate any reliance by Swevenings on the Midland Figures, either in whole or in part;
    1. Swevenings instead relied upon one or more of the following:
      1. the Cash Flow Forecast Statement prepared by Dr Roguszka;
      2. the Roguszka Criteria;
      3. the Roguszka’s own favourable impression of the Midland Business gained on an inspection; and
      4. the figures relating to the trading of Woodstock Furniture stores at Kardinya and Canningvale which were owned independently of the respondents, and which figures impressed Dr and Mrs Roguszka.
  3. As indicated above, the respondents argued that Swevenings (or Dr and Mrs Roguszka prior to incorporation) ought to have obtained independent advice and made enquiries concerning the purchase of the Midland Business with persons other than the respondents.
  4. The respondents say that prior to attending the 28 February 2005 meeting Swevenings had been provided with the Midland Figures only after signing a document entitled “Conditions of Supply” on Kent letterhead, and that the Conditions of Supply contained a warning to the following effect:
  5. Mrs Roguszka signed the Conditions of Supply for the applicant.
  6. The respondents further say that at the 28 February 2005 meeting Mr Ferguson left the meeting after answering all questions raised by Dr and Mrs Roguszka. It was only after the 28 February 2005 meeting that Dr and Mrs Roguszka made an offer to purchase the Midland Business.

Future Trading Representation

  1. For reasons set out above the alleged Future Trading Representation was a representation, and it is evident from Mrs Roguszka’s evidence that it was relied upon by Swevenings, albeit in conjunction with other factors.

Trading Stock Representation

  1. For reasons set out above, the Trading Stock Representation was a representation, and it is evident that it was relied upon by Swevenings.

Containers Representation

  1. Swevenings says that it relied upon the Containers Representation by:
    1. proceeding to settlement of the purchase of the Midland Business under the Midland Business Purchase Agreement on 15 April 2005; and
    2. forsaking to take any steps to obtain alternative supplies of trading stock for the Midland Business, thereby suffering loss by reason of that business having insufficient stock for its trading requirements for the period from the beginning of May 2005 until October 2005.
  2. In the Court’s view it is reasonably clear that Mrs Roguszka, in particular, relied upon the Containers Representation and the Future Trading Representation and the Trading Stock Representation in making a decision to proceed to purchase the Midland Business. She was, probably because of her complete lack of relevant business and retail experience, particularly comforted by the representations that the business would have sufficient stock on hand to see it through Swevenings’ first few months trading.

Cockburn Shopping Centre Representation

  1. Swevenings says that acting in reliance upon the Cockburn Shopping Centre Representation Swevenings entered into a contract to purchase an exclusive licence to operate a Woodstock Furniture business in the Cockburn area, for which it paid the sum of $20,000, and thereby suffered loss and damage in that a lease did not become available within the shopping centre at Cockburn by September 2005 or by any reasonable time thereafter.
  2. Swevenings clearly acted in reliance on the Cockburn Shopping Centre Representation in entering into the Cockburn Licence. Indeed, it is fair to observe that but for the representation there would have been no Cockburn Licence.

Rockingham Licence

  1. Swevenings says that in or about October 2005, and acting in reliance upon the Profit and Loss Representation, the Future Trading Representation and the Trading Stock Representation, and in an attempt to mitigate losses arising from the Midland Business Purchase Agreement and from the purchase of the Cockburn Licence, Swevenings agreed with Ferguson Holdings, or alternatively Mr Ferguson, to surrender the Cockburn Licence for the Rockingham Licence, being an exclusive licence to operate a Woodstock Furniture business in the Rockingham area. Swevenings thereafter commenced to operate the Woodstock Furniture business from leased premises in Rockingham as a Woodstock Furniture franchise and thereby incurred trading losses. Those trading losses are set out below.

Sole inducement not necessary

  1. In Australian Breeders Co-operative Society Ltd v Jones[39] the majority of the Full Court of the Federal Court observed that:

and

“The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract.”[41]
  1. Each of the representations referred to above was relied upon, either in whole or part, in inducing Swevenings to enter into the various agreements and licences referred to above. There may have been other inducement, but for present purposes it is sufficient if the representations were only a partial inducement.

Breach of the Code

  1. Sections 51AD and 51AE of the TP Act provide as follows:
  2. The TP Franchising) Regulations provide[42] that the Code is a prescribed mandatory industry code.[43]
  3. It is not in dispute that:
    1. the Code is an applicable industry code under s.51AE of the TP Act and the Franchising Regulations, and that it is declared to be a mandatory industry code;
    2. the respondents are prohibited from contravening an applicable industry code under s.51AD of the TP Act;
    1. Swevenings and Ferguson Holdings entered into an oral agreement by which $20,000 of the $120,000 allocated to goodwill would pay for what the parties described as a “licence” (the Midland Licence) to conduct the Midland Business;
    1. on 28 February 2005 Swevenings and Ferguson Holdings entered into an agreement whereby Swevenings agreed to pay Ferguson Holdings $20,000 for the Cockburn Licence;
    2. on or around 27 October 2005 Swevenings and Ferguson Holdings entered into separate collateral contracts as follows:
      1. a collateral contract to the Midland Business Purchase Agreement that set out the terms and conditions for the conduct of the Midland Business;[44] and
      2. a collateral contract to the Cockburn Licence, that set out the terms and conditions for the conduct of the Rockingham Business;[45]
    3. each collateral contract included the following terms:
      • “2.2 The parties acknowledge that Licensor is the proprietor of all the marks and the brand names used in the Group ....
      • 5.1 The Licensor will, pursuant to this agreement permit the Licensee to use the image and be part of the Buying Group.
      • 5.2 The Licensor will train the Licensee within the territory.
      • 5.3 The Licensor will supply the approved products, or co-ordinate the supply from approved suppliers. The Licensee shall acquire from the Licensor or from approved suppliers all quantities of the approved products required by the Licensee.
      • 5.4 All products offered for sale by the Licensee shall be
        • 5.4.1. approved products supplied by the Licensor; or
        • 5.4.2 up to 10% from an alternative supplier with the prior written consent of the Licensee.
      • 9.2 The Licensee must pay for all stock of the approved products orders ordered prior to delivery or in accordance with any credit terms pursuant to this agreement or agreed upon between the parties from time to time in writing. This payment will include the cost of the goods plus a 10% payment of the cost to the licensor.”
    4. the Midland Business Purchase Agreement and the Cockburn Licence and the Rockingham Licence are franchise agreements under cl.4 of the Code;
    5. Swevenings is a franchisee under cl.3 of the Code by reason of the fact that it is a person to whom a franchise is granted;
    6. Dr Roguszka and Mrs Roguszka are franchisees under to cl.3 of the Code by reason of the fact that they are people who otherwise participate in a franchise as franchisees;
    7. Ferguson Holdings is a franchisor under cl.3 of the Code by reason of the fact that it is a person who grants a franchise;
    8. Mr Ferguson is a franchisor under cl.3 of the Code by reason of the fact that he is a person who otherwise participates in a franchise as a franchisor;
    1. Swevenings and Ferguson Holdings entered into the franchise Agreement after 1 October 1998 under cl.5 of the Code;
    1. under cl.6.2(a) of the Code, the franchisor must create a disclosure document in accordance with Annexure 1 of the Code prior to entering into a franchise agreement;
    2. under cl.10 of the Code, the franchisor must give a copy of the Code and a disclosure document to a prospective franchisee at least 14 days before the prospective franchisee enters into a franchise agreement or an agreement to enter into a franchise agreement;
    3. neither of the respondents gave Swevenings, Dr Roguszka or Mrs Roguszka a disclosure document for either the Midland Business or the Cockburn Licence or the Rockingham Licence at least 14 days prior to entering into either the Midland Business Purchase Agreement or the Cockburn Licence or the Rockingham Licence, or at all;
    4. by reason of the facts set out in sub-paragraphs (a) to (o) the respondents breached cls.6 and 10 of the Code;[46]
    5. under cl.11(1) of the Code the franchisor must not enter into a franchise agreement unless the franchisor has received from the franchisee or prospective franchisee a written statement that the franchisee or prospective franchisee has received, read and had a reasonable opportunity to understand the disclosure document and the Code;
    6. prior to entering into the Midland Business Purchase Agreement and the Cockburn Licence and the Rockingham Licence, neither Swevenings, Dr Roguszka or Mrs Roguszka had been provided the written statement under cl.11(1) of the Code because they had not received a disclosure document or the Code;
    7. prior to entering into the Midland Business Purchase Agreement or the Cockburn Licence or the Rockingham Licence, neither Swevenings, Dr Roguszka or Mrs Roguszka had provided a written statement under cl.11(1) of the Code;
    8. prior to entering into the Midland Business Purchase Agreement or the Cockburn Licence or the Rockingham Licence neither Swevenings, Dr Roguszka or Mrs Roguszka had provided a signed statement under cl.11(2) of the Code;
    9. by reason of the matters referred to in sub-paragraphs (q) to (t) above, the respondents have breached cls.11(1) and (2) of the Code.[47]
  4. The respondents do not admit the alleged contravention of s.51AD of the TP Act but in light of the admission of breaches of the Code there can be no doubt, and the Court finds, that there has been a contravention of s.51AD of the TP Act. The respondents also deny that but for the alleged contravention, Swevenings would not have entered into the Midland Business Purchase Agreement or the Cockburn Licence or the Rockingham Licence.
  5. The clear evidence of Mrs Roguszka is that Swevenings would not have entered into a franchise agreement. In the circumstances, the contravention of s.51AD of the TP Act must be found to have been a cause of the entry into the abovementioned agreements and licences.
  6. The respondents also deny that Swevenings has suffered or is likely to suffer loss or damage by reason of the alleged contravention of the TP Act and that it is entitled to recover loss or damage or both from Ferguson Holdings under ss.82 and 87 of the TP Act. Loss and damage is dealt with below.

Whether loss and damage suffered

  1. Swevenings alleges that it suffered the following loss and damage:
    1. the sum paid as goodwill for the Midland Business - $120,000;
    2. trading losses for the Midland Business for the period 15 April 2005 until 1 November 2006 - $70,284;
    1. trading losses for the Rockingham Business for the period November 2005 until 1 November - 2006 $37,594;
    1. the sum paid for the Cockburn Licence - $20,000.
  2. The total claim is $247,878 plus interest.
  3. The respondents deny that Swevenings suffered the alleged loss and damage. Further, the respondents allege that:
    1. Swevenings failed to mitigate its damage;
    2. there were breaks in the chain of causation which meant that the respondents were not responsible for the alleged loss and damage;
    1. the respondents were not responsible for the Midland Business and Rockingham Business losses;
    1. there was no due diligence by Swevenings as purchaser of the Midland Business or the Cockburn Licence; and
    2. Swevenings was contributorily negligent and that under s.82(1B) of the TP Act damages should be reduced to the extent that the Court thinks just and equitable.

Contributory negligence, due diligence and mitigation of damage

  1. To a significant extent the respondents rely upon Swevenings alleged contributory negligence and failure to mitigate damage, as well as their alleged failure to conduct due diligence. In part, and in large part it must be said, the respondents point to various disclaimers and exclusion clauses in the various agreements and licences (all of which are for relevant purposes franchise agreements) to argue that a liability for loss or damage which otherwise might exist can be avoided.
  2. In the Court’s view the various disclaimers and exclusion clauses cannot be given effect in this regard because of the provisions of the Code. There are several reasons for this view:
    1. first, whilst breach of the Code does not preclude Ferguson Holdings from enforcing the terms of a franchise agreement,[48] the Court does not consider it to be “just and equitable” under s.82(1B) of the TP Act for the respondents to be able to rely upon provisions of disclaimers and exclusion clauses in circumstances where that reliance seeks, effectively, to use those disclaimers and exclusion clauses to effect a waiver of liability for the various representations the Court has found the respondents to have made. Such reliance and effect flies in the face of clause 16(1) of the Code, which prohibits a franchise agreement from containing “a waiver of any verbal or written representation made by the franchisor.”
    2. second, the Code has been contravened by Ferguson Holdings and Mr Ferguson in so far as they failed to provide, for example, disclosure documents and a copy of the Code,[49] and ensure that the requisite independent advice has been received by Swevenings, before entering into any of the franchise agreements.[50] It ill behoves the respondents, and the Court does not consider it to be “just and equitable” under s.82(1B) of the TP Act, to allege that Swevenings has been contributorily negligent, and so on, by reason of Swevenings failure to get the very independent advice that Ferguson Holdings was required to have ensured that there was evidence of Swevenings having received before entering onto any of the franchise agreements.
    1. third, even “remarkable imprudence”[51] will not break the chain of causation, and as one very learned author has observed:
      • Thus the chain of causation is not broken by a failure by the victim to take reasonable care of his own interests in failing to make proper inquiry (for example in failing to examine carefully the accounting records of a motel sold), any more than it is broken where the plaintiff in deceit could have discovered the falsity by the exercise of care.[52]
    1. fourth, having regard to all the facts of this case, and to the width of the scope of s.52 of the TP Act and the purpose of the Code, the Court considers that this is a case of a type intended to afford protection to the unsuspecting victim.
  3. To reduce the amount of damages for the purposes of s.82(1B) of the TP Act the respondents must show that they did not intend to cause the loss and damage and that they did not fraudulently cause the loss or damage. Swevenings says that the respondents recklessly or deliberately put forward incorrect data in the Midland Figures, and that the purpose of doing so was to induce Swevenings to pay an excessive amount for the goodwill of the Midland Business. It was thus intended by the respondents that the damage for which recovery is now sought, be suffered by Swevenings.
  4. For the above reasons much of the argument raised by the respondents about loss and damage falls away. The Court deal s hereunder with the remainder.

The goodwill claim

  1. The applicant relies on Mr Douglas-Brown’s valuation of the Midland Business for its goodwill claim. That valuation was $30,000. Swevenings paid $120,000 for the goodwill of the Midland Business. The respondents argue that a valuation of the Midland Business by Mr Robinson ought to be accepted, that valuation being $155,000, and that therefore Swevenings’ primary entitlement is to $20,000 being the difference between the price paid for the Midland Business and its valuation as at February 2005, namely $175,000 less $155,000, equalling $20,000.
  2. The respondents submitted that the valuation evidence of Mr Douglas-Brown ought not be accepted because of an alleged lack of expertise in valuing businesses that are not in financial difficulty, and that in particular as an insolvency practitioner he has dealings with companies in financial distress, and would therefore have little experience in dealing with any companies with a goodwill component. The respondents specifically attacked Mr Douglas-Brown’s expertise in the preparation of valuation reports, which he did not normally prepare, and the fact that he was not a member of any business valuation groups or did not undertake training regularly specifically in relation to valuations. The respondents also said that his lack of expertise was demonstrated by his failure set out the valuation method utilised, in his original affidavit.
  3. In the Court’s view Mr Douglas-Brown’s evidence can be accepted as expert evidence. Mr Douglas-Brown:
    1. holds relevant tertiary qualifications (a Bachelor of Business Degree from Curtin University);
    2. is an official liquidator of the Supreme Court of Western Australia;
    1. is a registered company auditor; and
    1. has been involved in the external administration of over 300 companies over the last 25 years.
  4. In addition Mr Douglas-Brown has acted as an expert witness in proceedings in both civil and criminal matters in court and prepared expert witness reports for litigation matters in the last five years. Both in his employment and his capacity as an expert witness he has been required to analyse past trading history of companies and businesses.
  5. The respondents’ objection that Mr Douglas-Brown would not have experience dealing with any companies with a goodwill component does not necessarily follow: a company in financial distress may have a large goodwill component because of, for example its name and masthead or reputation or level of specialisation. In any event, this was a business whose financial health was not good, and one of a type Mr Douglas-Brown was therefore used to dealing with. The fact that Mr Douglas-Brown does not normally prepare valuation reports does not mean that he is not qualified to do so. Indeed, from both his qualifications and experience, valuation of companies and businesses is an essential part of his work. In the circumstances, the Court is prepared to accept the evidence of Mr Douglas-Brown as an expert.
  6. The expert evidence for the respondents was given by Mr Robinson. Mr Robinson:
    1. has no tertiary qualifications;
    2. is a real estate agent who, within his own business, acts as a business broker and has done so for about four years;
    1. has no special expertise in the valuation of companies or businesses - in distress or otherwise;
    1. has no specialist qualifications in valuations, but who has done a very short REIWA course in valuation; and
    2. was not able to name a single valuation text.
  7. In the circumstances, the Court has come to the view that Mr Robinson’s evidence ought not be accepted as the evidence of an expert. In any event, the Court would prefer the evidence of Mr Douglas-Brown. His evidence was given in a proper and professional manner, and he had command of the materials upon which his analysis was based.[53] By contrast, Mr Robinson was full of bluster, and gave every appearance of, both in his written evidence and oral evidence, not understanding the valuation methodology that he purported to employ. Furthermore, he was a person who had had business dealings with Mr Ferguson, and the Court was not entirely satisfied that his evidence could be said to be independent.
  8. Therefore, the Court would be prepared to accept Mr Douglas-Brown’s evidence as that of an expert, but not accept Mr Robinson’s evidence as that of an expert. In any event, the Court would prefer Mr Douglas-Brown’s evidence over that of Mr Robinson for the reasons otherwise outlined above.
  9. The Court finds that Swevenings’ reliance upon each of the Profit and Loss Representation, the Future Trading Representation, the Trading Stock Representation and the Containers Representation, each of which was misleading, resulted in Swevenings being induced to pay $90,000 more for the goodwill of the Midland Business than it was worth, and thereby suffering loss and damage in that amount.

Trading Losses

  1. The respondents claim that the evidence of Mr Douglas-Brown in support of the alleged trading losses is not admissible, alternatively, that it should be given little or no weight.
  2. Essentially, the respondents allege that Mr Douglas-Brown’s evidence concerning trading losses is not based on his training, study or experience or specialised knowledge as a qualified accountant and insolvency practitioner.[54] The respondents say that all that Mr Douglas-Brown has done is transfer, or have one of his employees transfer, information on MYOB accounts to an Excel spreadsheet and reflect those as trading losses. There was no assessment of the accounts and no detailed reconstruction or review of the accounts. The respondents allege that Mr Douglas-Brown’s reasoning process to support any view as to the trading losses is thus not based on his particular specialised knowledge[55] and therefore the opinion evidence is not wholly or substantially based on specialised knowledge within s.79 of the Evidence Act, and is therefore merely inadmissible argument.
  3. In the alternative, the respondents say that the Court ought to exercise its general discretion to refuse to admit the evidence concerning trading losses because it relies upon hearsay and was not capable of being tested before the Court.[56] The respondents also point to an error in the accounts whereby in the month of September 2006 the gross profit for the month was greater than the total income for the month. The explanation for that error was that the figures were simply transferred from MYOB accounts without reviewing or adjusting the accounts. In the circumstances, the respondents say that as the facts are disputed, and the evidence is unfairly prejudicial to the respondents it ought to be excluded under s.135 of the Evidence Act.
  4. For reasons set out above the Court accepts Mr Douglas-Brown is an expert, and can give evidence concerning the trading figures of the Midland Business. In any event, any attempt to attack Mr Douglas-Brown’s expertise is destroyed by the respondents’ acceptance of the adjusted trading figures for the Midland Business contained in the Douglas-Brown’s Midland Figures[57] as the net profit figures for the Midland Business from 17 July 2004 to 31 January 2005, subject to adjustments for wages and superannuation.
  5. The respondents argue that the wages and superannuation adjustment is necessary because Mr Douglas-Brown made an assumption with respect to the Midland Business having ongoing wages for 2.8 employees. The respondents say that there is no evidence upon which to conclude that the Midland Business engaged 2.8 employees and that the weight of evidence is in favour of the Midland Business having had at most two employees. The respondents point to evidence that it says indicate that the Midland Business operated with two employees, namely that :
    1. Swevenings operated the Midland Business and the Rockingham Business with four employees, having two in each store; and
    2. Mr Ferguson’s evidence that Woodstock Furniture stores ran regularly with 1.5 employees.
  6. The respondents also say that Swevenings over-inflated the figures for employees for the Midland Business by utilising employees to undertake delivery work which was previously undertaken by the respondents’ freight service.
  7. The evidence established that:
    1. Jenny Loncaric and Lesley Downing both worked fulltime at the Midland shop;
    2. Mrs Genovese also worked at the Midland shop, and Mr Ferguson;
      1. allocated one third of her time to the wages bill for the Midland Business;[58] and
      2. gave evidence that she worked for up to three days a week in the Midland Business.[59]
  8. At an absolute minimum therefore the Court finds that there is evidence to support there being a minimum of 2.33 employees, and up to 2.6 employees, employed in the Midland Business by Ferguson Holdings prior to the sale of the Midland Business. In the circumstances of a new proprietor learning the business and having to undertake a certain level of training the Court finds that the higher figure of 2.6 employees is appropriate. It is this figure of 2.6 employees that should be used to calculate the wages and superannuation.
  9. The respondents also claim that the respondents did not cause the applicant to incur any trading losses and that trading losses are not in the circumstances recoverable.
  10. The respondents also assert that they are not responsible for loss or damage in relation to the trading losses of Swevenings by reason or breaks in the chain of causation, and submit that Swevenings must show that the losses flow directly from any inducement arising from a misleading or deceptive representation.[60]
  11. The respondents also argue that after discovery of the misrepresentation Swevenings continued to trade with knowledge of the misrepresentation and that those trading losses were a consequence of a failure to deal with the misrepresentation until it was too late.[61]
  12. The respondents also argue that Swevenings’ conduct caused a break in the chain of causation because the trading losses suffered by it were due to a lack of management, operational and selling experience. In this regard the respondents point to:
    1. the fact that Mrs Roguszka and her son operated the Midland Business and that neither of them had any relevant management, operational or selling experience in a furniture store, and indeed the only experience either of them had was her son’s experience working as the deli section manager at an IGA store;
    2. the fact that because they adopted a different marketing and merchandising strategy to that of the respondents including the stocking of sofas in the Midland Business and the Rockingham Business;
    1. the fact that Mrs Roguszka’s inexperience and inability to determine how to order stock contributed to the losses, and in particular Mrs Roguszka’s evidence that she did not understand how to order stock notwithstanding that she had a meeting specifically with Mr Ferguson, and with Dr Roguszka in attendance, to discuss and have explained by Mr Ferguson the stock ordering system;
    1. the decision to advertise on radio station 6IX which was expensive all-of-Perth advertising yielding minimal results, as opposed to advertising in a medium concentrated in the Midland area;
    2. Swevenings’ failure to seek proper training for its management/employees from the respondents as it was entitled to do under the licence agreements; and
    3. the selection and siting of the Rockingham store a long way back from the road and difficult to enter because of a busy intersection and in a shopping centre where other stores had relocated.
  13. The respondents also argue that Swevenings entered into the Rockingham Licence and the Second Midland Licence at a time when it was experiencing a poor trading performance, and at a time when it knew that the Midland Figures were incomplete or inaccurate.
  14. The respondents also argue that Swevenings was suffering from cash flow problems prior to it entering into the Rockingham Business, and that it was unreasonable for it to do so at such a time, rather than consolidating the position of the Midland Business, or at the very least, seeking professional advice before commencing the second business.
  15. The respondents say that as Dr Roguszka completed the accounts of the business run by Swevenings on a monthly basis he knew or ought to have known at an early stage that the Midland Figures were inaccurate or incomplete, but did not challenge those figures until March 2006.
  16. The respondents claim that Swevenings failed to mitigate its loss in that it ought to have ceased trading as soon as it became aware of the true trading performance of the business. It argues that reasonable steps must be taken to mitigate loss consequent upon misleading and deceptive conduct and that there cannot be recovery for damages for losses which could reasonably have been avoided.[62] The respondents submit that there was a failure to mitigate loss by reason of opening a second store in Rockingham and that in the circumstances, that was clearly unreasonable. It is submitted that Swevenings had had six months actual trading experience and knowledge of the expenses and outgoings and the profit and loss of the Midland Business between April and October 2005, when it decided to enter into the second Midland Licence and the Rockingham Licence, and that it did so because the Midland Business had operated for a single month of October 2005 with gross sales of $40,834.80 and net profit of $5,332.82.[63] That contention is further supported, the respondents argue, by the fact that Dr Roguszka was responsible for the preparation of the accounts for Swevenings’ operation of the Midland Business, and that he realised at an early stage that the Midland Figures were not correct.
  17. Swevenings was entitled to enter into the Midland Business, to familiarise itself with that business, and to endeavour to operate it profitably. It was entitled to a reasonable period in which to do this. In all the circumstances, the Court considers that a period of approximately six months would be reasonable. That period roughly coincides with the time – 27 October 2005 – when Swevenings entered into the Second Midland Licence and agreed to give up the Cockburn Licence for the Rockingham Licence and to commence the Rockingham Business. By that time, Swevenings had had sufficient experience of the Midland Business to be in a position to make its own judgment as to whether to enter into those licences and to commence the Rockingham Business. Given the extent of the trading losses claimed, it ought to have been cautious in doing so. In those circumstances, there is sufficient to conclude that there was a break in the chain of causation at the time that Swevenings entered into the Second Midland Licence and commenced the Rockingham Business such as to render Ferguson Holdings no longer liable for any ongoing trading losses in the Midland Business. Furthermore, the evidence indicates that Swevenings made a considered business judgment as to whether to enter into the Second Midland Licence and to commence the Rockingham Business, and did so on the basis of the trading figures for the Midland Business for a single month, the month of October 2005, and because it considered that the stock and ordering problems had been overcome.[64] This is the type of business judgment that was open to Swevenings having regard to the fact that it had been operating the Midland Business for a period of six months. Once again, it is sufficient to break the chain of causation with respect to the cause of losses in the Midland Business. It is also sufficient to render Ferguson Holdings not liable for any losses incurred in the Rockingham Business.
  18. In the circumstances, the Court finds that:
    1. by reason of Ferguson Holdings’ misleading and deceptive conduct in relation to the Profit and Loss Representation, the Future Trading Representation, the Trading Stock Representation and the Containers Representation, Swevenings was induced to purchase the Midland Business and to incur trading losses during the period from 15 April 2005 to 27 October 2005; and
    2. Ferguson Holdings is not liable for any losses incurred by Swevenings in relation to the Rockingham Business.
  19. The trading losses for the Midland Business ought to be calculated on the basis of wages and superannuation for 2.6 employees, for reasons set out above.

Cockburn Licence

  1. For essentially the same reason as finding Swevenings was induced to enter into the Midland Business Purchase Agreement by reason of Ferguson Holdings’ misleading and deceptive conduct, Swevenings was also induced to enter into the Cockburn Licence by reason of the same misleading and deceptive conduct. In so doing, it has suffered loss and damage by reason of the payment of $20,000 as the Cockburn Licence fee, and the Court so finds.

Mr Ferguson’s liability

  1. Under s.75B of the TP Act a person involved in a contravention includes a person who has:
    1. “aided, abetted, counselled or procured the contravention”;[65] or
    2. “been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention”.[66]
  2. Aiding or abetting or being knowingly concerned in or a party to a contravention:
    1. requires actual knowledge of the facts which constitute the elements of the contravention;[67]
    2. may include a failure to make reasonable inquiry about the facts where there is a suspicion that the facts are not what they seem, from which actual knowledge may be inferred;[68]
    1. does not require an intention to contravene the TP Act, but does require intentional participation in the events constituting the contravention.[69]
  3. Ordinarily, a principal will not be liable for the conduct of a corporation, except where the principal’s actions are such that they may be taken to be those of the corporation.[70]
  4. Swevenings asserts that at all material times Mr Ferguson acted in his capacity as a director. Swevenings alleges that Mr Ferguson had actual knowledge of each of the representations because he personally made each of the representations. It is therefore said that he is involved in any contravention of s.52 of the TP Act in that he was directly, knowingly concerned in, or a party to the contravention and that Swevenings is therefore entitled, under ss.82 and 87 of the TP Act, to recover loss or damage from Mr Ferguson. In the alternative, it is said that there is conduct in breach of s.10 of the FT Act and that loss or damage is recoverable pursuant to ss.77 and 79(1) of the FT Act.
  5. Mr Ferguson oversaw the preparation of, or prepared himself, the Midland Figures. Mr Ferguson concedes that the figures in the Midland Figures were wrong, but claims that this was an “oversight” because certain costs were omitted, GST inclusive figures were used and wages were understated. Such a concession, and the basis for it, demonstrates personal knowledge of the Midland Figures, and hence the Profit and Loss Representation.
  6. Although Mr Ferguson had no idea what hours were worked by Mrs Genovese in the Midland store[71] he allocated one third of her time to the wages account for the Midland store. Mr Ferguson admitted that he knew that Ms Loncaric and Ms Downing worked fulltime at the Midland store. He did not however allocate their wages on that basis, that is, as fulltime workers, in the Midland Figures. This conduct shows a deliberate indifference to the true state of affairs and to the accuracy of the Midland Figures being forwarded to the business broker for the purposes of assisting with the selling of the Midland Business.
  7. Mr Ferguson admitted that there was a significant financial problem developing with a Woodstock Furniture store that had been opened in the Sydney area at about the time that he was preparing the Midland Figures. The Court is prepared to infer that the financial difficulties that were being experienced with the Sydney Woodstock Furniture store were sufficient to motivate Mr Ferguson to endeavour to make the Midland Figures appear better than the actual business figures for the Midland Business.
  8. Under cross-examination Mr Ferguson admitted that he was not at the 28 February 2005 meeting merely to answer questions from potential purchasers. Rather, his purpose was to sell the Midland Business. He was there to “close the deal”. Again, the Court is prepared to infer that that would motivate him to endeavour to make the Midland Figures look better than they were, or, at least, to be indifferent to their accuracy in all the circumstances. Furthermore, Mr Ferguson was prepared to make the Trading Stock Representation knowing it to be misleading.[72]
  9. The Court is of the view that Mr Ferguson is liable in his personal capacity under s.75B of the TP Act as a person knowingly concerned in the contravention by Ferguson Holdings of s.52 of the TP Act. Liability would similarly attach under the equivalent provisions of the FT Act.

Damages under the TP Act?

  1. The evidence establishes that the misleading and deceptive conduct induced Swevenings to purchase:
    1. the Midland Business; and
    2. the Cockburn Licence,

and that Swevenings’ was thereby caused loss and damage by reason of the respondents’ contravention of s. 52 of the TP Act.[73]

  1. In the circumstances, Swevenings is entitled to compensation for the conduct of Ferguson Holdings and Mr Ferguson.[74] The assessment of compensation must be that which most fairly compensates for the wrong suffered[75] measured by the amount of loss or damage sustained.[76] The loss or damage suffered by Swevenings is as follows:
    1. the overpayment of goodwill in the sum of $90,000;
    2. the trading losses in the Midland Business in the period 15 April 2005 to 27 October 2005; and
    1. the payment of $20,000 for the Cockburn licence.

Apportionment of liability

  1. The respondents say that the applicant makes in its statement of claim a claim for pure economic loss. And, that each of the respondents are liable for the pleaded loss under s.52 of the TP Act. The respondents say that if they are liable (which is denied) then the claim is one which is an apportionable claim within the meaning of s.87CB(1) of the TP Act, and that pursuant to s.84 of the TP Act Ferguson Holdings acted through the person of Mr Ferguson, and each of Ferguson Holdings and Mr Ferguson would be concurrent wrongdoers whose acts or omissions caused the applicant’s loss. Each of the respondents therefore seeks an apportionment of liability to an amount reflecting the proportion of the damage and loss that the Court considers just having regard to the extent of their responsibility for the damage or loss.
  2. A concurrent wrongdoer does not have the benefit of apportionment if the wrongdoer intended to cause the economic loss.[77] In this case it is clear on the facts that the respondents intended to cause Swevenings economic loss, including the payment of the inflated goodwill for the Midland Business, and the Cockburn Licence fee. There will therefore be no apportionment of liability, and the respondents are jointly liable for Swevenings’ loss and damage.

Cross-claim

  1. The Midland Licence contained the following terms and conditions:
  2. Breach of the Code does not preclude Ferguson Holdings from enforcing the terms of the Midland Licence.[79]

Alleged debt for stock supplied

  1. Ferguson Holdings claims that Swevenings failed to pay for stock supplied as and when payment fell due under the Midland Licence and as invoiced to it by Ferguson Holdings. There is proof of the supply of the stock, less consignment stock returned, valued at $57,718.72.[80] Mr Ferguson asserts the amount is unpaid and still due. Mr Ferguson was not cross-examined on this issue. The Court therefore accepts his evidence.
  2. The Court finds that Swevenings is indebted to Ferguson Holdings in the sum of $57,718.72 for failure to pay for stock supplied.

Alleged loss of profits

  1. Ferguson Holdings argues that Swevenings was not able to terminate the Midland Licence without its consent, and that the term is to be implied by reason of:
    1. paragraph 10.1, 10.2 and 15.2 of the Midland Licence;
    2. the fact that no express right is granted to Swevenings in the Midland Licence to terminate same; and
    1. to give the Midland Licence business efficacy.
  2. Ferguson Holdings says that it supplied Swevenings with stock to operate the Midland Business. During the financial year ending 30 June 2006 Ferguson Holdings says that Swevenings paid an amount of $16,933.43 to it under paragraph 9.2 of the Midland Licence. There is evidence to support this amount which the Court accepts.
  3. Ferguson Holdings says that on or about 8 November 2006 Swevenings gave up possession of the business premises from which the Midland Business was operated, and did so without the consent or authority of Ferguson Holdings, and further without the consent of Ferguson Holdings changed the signage of the business premises by removing the name of Woodstock Furniture Midland and replacing it with a different name and continued trading under that different name at those premises until a later date unknown to Ferguson Holdings at which time trading from those premises ceased. Ferguson Holdings also says that on or about 8 November 2006 Swevenings ceased to purchase stock from Ferguson Holdings. Those facts are not really in dispute.
  4. Ferguson Holdings says that the conduct of Swevenings contrary to the Midland Licence has resulted in Ferguson Holdings suffering loss and damage being the loss of income which it would otherwise have received from the sale of stock in each year of trading from 8 November 2006 and that that claim is ongoing as Swevenings has not terminated the Midland Licence.
  5. Clauses 10.1, 10.2 and 15.1 of the Midland Licence do not assist with the issue of whether Swevenings has a right to terminate the contract. They deal with circumstances which pertain whilst the contract is on foot, and in any event, do not preclude termination of the contract but rather purport to prescribe what Swevenings cannot do in relation to matters such as shareholdings, the transfer and assignment of rights and the vacation of the premises from which the Midland Business was conducted. Critically, however, clause 20(2) of the Code provides that a request to transfer a franchise must not be unreasonably withheld. Given that the provisions of the Code are mandatory[81] there is at least a right in Swevenings to terminate the Midland Licence by transferring the franchise.
  6. Clause 16 of the Midland Licence gives Ferguson Holdings an express right to terminate. There is no express right in Swevenings to terminate (the Midland Licence is silent on this issue), which means that (absent the applicable mandatory transfer provisions of the Code) its contractual obligation is impliedly of indefinite duration. A contract of indefinite duration implies a right of termination at will by reasonable notice: indeed such a provision is necessary because otherwise a party would never be able to end the contract, and its obligations would extend in perpetuity, whereas ordinarily the nature of a commercial contract leads to a conclusion that it is terminable on reasonable notice.[82] In this case a right to terminate the Midland Licence can be implied because it is not contrary to any express provision, is necessary for business efficacy, and is reasonable, equitable and obvious. Furthermore, it is at least, as to a transfer of the franchise, consistent with the Code.
  7. The question then becomes what constitutes reasonable notice? Reasonable notice is that period which is long enough to enable Ferguson Holdings to redeploy labour and equipment, to carry out commitments, to bring any current negotiations to an end and to terminate the relationship in a businesslike manner.[83] How long is that period in the case of a franchise agreement of this type? Some clues might be gleaned from the Midland Licence itself:
    1. written notice from Ferguson Holdings to Swevenings to rectify a breach provides for termination within a “reasonable period” of “not more than 30 days” in the event the breach is not rectified;[84] and
    2. where breach of the Midland licence is deliberate and calculated to cause damage to Ferguson Holdings, the “reasonable period of notice” to terminate is ‘seven days or such shorter period as the Licensor [Ferguson Holdings] determines.’[85]
  8. A further indicator of the possible length of reasonable notice is given in the Code which provides that a franchisor is taken to consent to a transfer of the franchise if written notice of objection is not given within 42 days.[86] Yet another indicator is that the time from entry into the Midland Business Purchase Agreement to settlement (28 February 2005 to 15 April 2005) was 45 days.
  9. Having regard to all the circumstances, the Court considers that 42 days constitutes reasonable notice of termination of the Midland Licence. The Court finds that there was a failure in this case by Swevenings to give notice of termination of the Midland Licence. It follows that any damage by way of loss of profit (being commission on sales) suffered by Ferguson Holdings as a consequence of that failure is limited to that suffered in the 42 days from 8 November 2006.

Conclusion and orders

  1. The Court has found that:
    1. Swevenings’ reliance upon each of the Profit and Loss Representation, the Future Trading Representation, the Trading Stock Representation and the Containers Representation, each of which was misleading and/or deceptive contrary to s.52 of the TP Act, resulted in Swevenings being induced to enter into the Midland Business Purchase Agreement and paying $90,000 more for the goodwill of the Midland Business than it was worth, and thereby suffering loss and damage in that amount;
    2. for essentially the same reason as finding Swevenings was induced to enter into the Midland Business Purchase Agreement by reason of Ferguson Holdings’ misleading and deceptive conduct, Swevenings was also induced to enter into the Cockburn Licence by reason of the same misleading and deceptive conduct. In so doing, it has suffered loss and damage by reason of the payment of $20,000 as the Cockburn Licence fee, and the Court so finds;
    1. the respondents breached s.51AD of the TP Act;
    1. by reason of the respondents’ misleading and deceptive conduct in relation to the Profit and Loss Representation, the Future Trading Representation, the Trading Stock Representation and the Containers Representation, and the breach of s.51AD of the TP Act, Swevenings was induced to purchase the Midland Business and to incur trading losses during the period from 15 April 2005 to 27 October 2005;
    2. the trading losses for the Midland Business ought to be calculated on the basis of wages and superannuation for 2.6 employees;
    3. the respondents are not liable for any losses incurred by Swevenings in relation to the Rockingham Business;
    4. the loss and damage suffered by Swevenings is as follows:
      1. the overpayment of goodwill in the sum of $90,000;
      2. the trading losses in the Midland Business in the period 15 April 2005 to 27 October 2005; and
      3. the payment of $20,000 for the Cockburn licence;
    5. the respondents are jointly and severally liable for Swevenings’ loss and damage;
    6. Swevenings is indebted to Ferguson Holdings in the sum of $57,718.72 for failure to pay for stock supplied;
    7. there was a failure in this case by Swevenings to give notice of termination of the Midland Licence. It follows that any damage by way of loss of profit (being commission on sales) suffered by Ferguson Holdings as a consequence of that failure is limited to that suffered in the 42 days from 8 November 2006.
  2. The Court would ordinarily make declarations and order to reflect the conclusions set out above. Before doing so, and bearing in mind that quantum is yet to be finally determined because of the necessity to, in particular, recalculate trading losses for the Midland Business, the Court will order that:
    1. the parties confer with a view to reaching agreement on:
      1. final declarations and orders; or
      2. declarations and orders reflecting the conclusions reached in these Reasons for Judgment;
    2. otherwise adjourning the matter to a further directions hearing at 11.30am on 22 February 2009; and
    1. costs be reserved, but that the parties confer with respect to appropriate costs orders, either as part of final orders, or in relation to the proceedings to date.
  3. To the extent that the parties are not able to agree with respect to the various matters referred to above, the Court will either deal with those matters at the directions hearing on 22 February 2010, or, more likely, make further directions to have those matters dealt with by way of further hearing and/or submissions.

I certify that the preceding 156156one hundred156156fifty-sixeighty-fiveone hundred and fifty-six (156) paragraphs are a true copy of the reasons for judgment of Lucev FM


Associate: S Gough


Date: 5 February 2010

[1] “Swevenings”.
[2] “Midland Business”.
[3] “Ferguson Holdings”.
[4] “Midland Licence”.
[5] “Cockburn Licence”.
[6] “Rockingham Licence”.
[7] Ferguson Holdings and Mr Ferguson will collectively be referred to as “the respondents”.
[8] From April 2008 to early April 2009 the matter was punctuated by a number of interlocutory applications and hearings in this Court, resulting in 16 orders and four separate written judgments in that period.
[9] “TP Act”.
[10] “FT Act”.
[11] “the Midland Figures”.
[12] “Profit and Loss Representation”.
[13] “Future Trading Representation”.
[14] “Trading Stock Representation”.
[15] “Containers Representation”.
[16] “Cockburn Shopping Centre Representation”.
[17] “Code”. The Franchising Code of Conduct is the Schedule to the Trade Practices (Industry Codes – Franchising) Regulations 1988 (“TP Franchising Regulations”): TP Franchising Regulations, reg.3.
[18] See the particularly telling cross-examination at Transcript 271-272 concerning the admission with respect to the Trading Stock Representation.
[19] See for example his evidence concerning the alleged loss of MYOB records at Transcript 238.
[20] Affidavit of Diane Jane Roguszka, sworn 16 October 2008, Annexure DJR 02 (“Mrs Roguszka’s Affidavit”).
[21] “Kent”.
[22] Mrs Roguszka’s Affidavit, paras.6-17.
[23] “Roguszka Criteria”.
[24] “Douglas-Brown Midland Figures”.
[25] Mr Douglas-Brown’s “expertise” was challenged by the respondents. That issue is dealt with below.
[26] Transcript at 216.
[27] Transcript at 264.
[28] Mrs Roguszka’s Affidavit, para.28.
[29] Defence, para.26.
[30] Affidavit of Dr Peter Marian Roguszka, para.16 (“Dr Roguszka’s Affidavit”).
[31] Dr Roguszka’s Affidavit, paras.14 and 18.
[32] Mrs Roguszka’s Affidavit, para.32.
[33] Transcript at 271-272.
[34] Transcript at 272.
[35] The shift in onus provisions under s.51A of the TP Act do not apply to an accessory under s.75B of the TP Act. Klages v Walker [2007] FMCA 2056 at para.39 per Lucev FM, citing Quinlivan v ACCC (2004) ATPR 42-010; [2004] FCAFC 175.
[36] Mrs Roguszka’s Affidavit, para.40.
[37] “Midland Business Purchase Agreement”.
[38] Dr Roguszka’s Affidavit, paras.9, 12, 13 and 14; and Mrs Roguszka’s Affidavit, paras.16, 20, 23, 24 and 28.
[39] [1997] FCA 1405; (1997) 26 ACSR 26 (“Australian Breeders”).
[40] Australian Breeders at 66 per Wilcox and Lindgren JJ.
[41] Australian Breeders at 66 per Wilcox and Lindgren JJ.
[42] TP Franchising Regulations, reg.3.
[43] “The Code”.
[44] “Second Midland Licence”.
[45] “Rockingham Licence”.
[46] The breach is admitted: Defence, para.57.
[47] The breach is admitted: Defence, para.57.
[48] Master Education Services v Ketchell (2008) 236 CLR 101; [2008] HCA 38 (“Master Education Services”).
[49] Code, cl.10.
[50] Code, cl.11.
[51] Nella v Kingia Pty Ltd (1989) ATPR 46-046 at 53,140 per French J.
[52] JD Heydon, Trade Practices Law, Volume 2A (Thomson Reuters: Sydney), para.18.1738.6.
[53] The materials were necessarily limited because the respondents were unable to produce all of their records.
[54] Evidence Act 1995 (Cth), s.79; Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705; Quick v Stoland Pty Ltd (1998) 87 FCR 371.
[55] Ocean Marine Mutual Insurance Association (Europe) OV v Jetopay Pty Ltd (2000) 120 FCR 146; [2000] FCA 1463 at para.23 per Black CJ, Cooper and Emmett JJ.
[56] Roach v Page (No. 11) [2003] NSWSC 907 at paras.34 and 74 per Sperling J.
[57] Exhibit A5, column 4.
[58] Transcript at 256.
[59] Transcript at 252.
[60] Netaf Pty Ltd v Bikane Pty Ltd [1990] FCA 35; (1990) 26 FCR 305 at 308 per Sheppard and Pincus JJ; Kenny and Good Pty Ltd v Mgica (1992) Ltd (1997) 77 FCR 307 at 328 per Wilcox, Branson and Sackville JJ.
[61] Anema E Core Pty Ltd v Aromas Pty Ltd [1999] FCA 904 (“Anema”).
[62] Finucane v NSW Egg Corp (1988) 80 ALR 486 per Lockhart J.
[63] Dr Roguszka’s Affidavit, para.41.
[64] Dr Roguszka’s Affidavit, paras.41-42.
[65] TP Act, s.75B(1)(a).
[66] TP Act, s.75B(1)(c).
[67] Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 666-669 (“Yorke”); Quinlivan v ACCC [2004] ATPR 42-010; [2004] FCAFC 175 (“Quinlivan”).
[68] King v GIO Australia Holdings Ltd (2001) 184 ALR 98; [2001] FCA 308.
[69] Yorke at 666-669; ACCC v Giraffe World Australia Pty Ltd (No 2) [1999] FCA 1161; (1999) 95 FCR 302 at 346; [1999] FCA 1161.
[70] Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121; Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR 40-940.
[71] Transcript at 257.
[72] Transcript at 271-272.
[73] Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494.
[74] TP Act, s.82(1).
[75] Johnson v Perez (1988) 166 CLR 351.
[76] I&L Securities.
[77] TP Act, s.87CC(1)(a).
[78] The Licensor is Ferguson Holdings and the Licensee is Swevenings.
[79] Master Education Services.
[80] Mr Ferguson’s Affidavit, para.50 and Annexure EJF 14.
[81] TP Franchising Regulations, reg.3(b).
[82] Crawford Fitting v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 at 444 per McHugh J (“Crawford Fitting”); Western Power Corporation v Normandy Power Pty Ltd [2001] WASC 202 at para.175 per McKechnie J (“Western Power”); Eden Construction Pty Ltd v New South Wales (No 2) [2007] FCA 689 at paras.26-28 per Graham J.
[83] Crawford Fittings at 444 and 448 per Mchugh J; Western Power at para.188 per McKechnie J.
[84] Midland Licence, cl.16.1.
[85] Midland Licence, cl.16.4.
[86] Code, cl.20(4).

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