Rafferty v Madgwicks [2012] FCAFC 37

FEDERAL COURT OF AUSTRALIA

Rafferty v Madgwicks [2012] FCAFC 37 Citation: Rafferty v Madgwicks [2012] FCAFC 37

Appeal from: Rafferty v Time 2000 West Pty Limited (No 4) [2010] FCA 725

Parties: PATRICK CAMPBELL RAFFERTY and KARAVILLE HOLDINGS PTY LIMITED v MADGWICKS TIME 2000 SYSTEMS (AUSTRALIA) PTY LIMITED ACN 127 853 614, TIME 2000 OPERATIONS (AUSTRALIA) PTY LIMITED ACN 128 700 541, EMBLETON LIMITED (A COMPANY INCORPORATED IN HONG KONG), STEPHEN GERARD DONOVAN v PATRICK CAMPBELL RAFFERTY, SANTORA HOLDINGS PTY LIMITED, KARAVILLE HOLDINGS PTY LIMITED, MADGWICKS File numbers: SAD 123 of 2010 SAD 124 of 2010

Judges: KENNY, STONE AND LOGAN JJ

Date of judgment: 20 March 2012

Catchwords: SAD 123/2010 TRADE PRACTICES - contravention of s 51AD - "involved in" under s 75B - Yorke v Lucas (1985) 158 CLR 661 considered - "involved in" requires knowledge of essential elements of a contravention not knowledge of contravention - essential elements of contravention of s 51AD by reason of failure to comply with Franchising Code of Conduct - knowledge must be actual not constructive. TRADE PRACTICES - application for relief under s 159 of the Fair Trading Act 1999 (Vic) for contravention of s 9 of Fair Trading Act 1999 (Vic) - misleading and deceptive conduct - silence - reasonable expectation and circumstances of the case - relationships between participants in conduct - legal and professional obligations. SAD 124/2010 TRADE PRACTICES - contravention of s 51AD of Trade Practices Act 1974 (Cth) - applicable industry code - application of the Franchising Code of Conduct to a heads of agreement and a rights agreement - franchisee not incorporated when agreement to enter into franchise agreement was executed - franchisee found to have impliedly ratified agreement by conduct after incorporation. TRADE PRACTICES - contravention of s 51AD of Trade Practices Act 1974 (Cth) - applicable industry code - application of Franchising Code of Conduct to a heads of agreement and a rights agreement - agreement to enter into an agreement was sufficiently certain to constitute agreement. TRADE PRACTICES - contravention of s 51AD of Trade Practices Act 1974 (Cth) - applicable industry code - application of Franchising Code of Conduct to a heads of agreement and a rights agreement - reasonable endeavours clause - sufficient to create legal obligations. TRADE PRACTICES - contravention of s 51AD of Trade Practices Act 1974 (Cth) - applicable industry code - application of Franchising Code of Conduct to a heads of agreement and a rights agreement - definitions - "prospective franchisee" - "franchise" - "franchisor" - "franchisee" - "agreement to enter into a franchise" - a person who otherwise participates in a franchise as a franchisee or franchisor - remedial legislation and broad construction. TRADE PRACTICES - contravention of s 51AD of Trade Practices Act 1974 (Cth) - applicable industry code - application of Franchising Code of Conduct to a heads of agreement and a rights agreement - construction and application of cl 4(1)(b) - "business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor or an associate of the franchisor" - factors indicating a franchise - Australian Competition and Consumer Commission v Kyloe [2007] FCA 1522 and Capital Networks Pty Ltd v .au Domain Administration Limited [2004] FCA 808. TRADE PRACTICES - contravention of s 51AD of Trade Practices Act 1974 (Cth) - applicable industry code - application of Franchising Code of Conduct to a heads of agreement and a rights agreement - construction and application of cl 5(3)(a)(ii) - "grants only 1 franchise or master franchise to be operated in Australia" - applies where at the time the franchise is entered into the franchisor intends to grant only one franchise to be operated in part or all of Australia. TRADE PRACTICES - contravention of s 51AD of Trade Practices Act 1974 (Cth) - applicable industry code - application of Franchising Code of Conduct to a heads of agreement and a rights agreement - failure of franchisor to provide Code and disclosure document and to receive written statements from the franchisee as required by cls 10 and 11 of the Code. TRADE PRACTICES - contravention of s 52 of Trade Practices Act 1974 (Cth) - misleading and deceptive conduct – misrepresentations as to manufacture of modular accommodation units and availability of prototypes - inducement and reliance. TRADE PRACTICES - application for relief under s 87 of the Trade Practices Act 1974 (Cth) - entry into agreements and payment thereunder - proof of loss and damage. TRADE PRACTICES - application for relief under s 87 of the Trade Practices Act 1974 (Cth) - remedial nature of Trade Practices Act 1974 (Cth) and broad construction – orders for payment of moneys by appellants jointly and severally within power. CORPORATIONS - s 131 of Corporations Act 2001 (Cth) - pre-incorporation contracts - ratification may be express or implied. PRACTICE AND PROCEDURE - nature of appeal in Federal Court - rehearing - task of appellate court is to correct error. CONTRACT - claim for breach of retainer - no failure to warn of consequences of being governed by the Franchising Code of Conduct.