Kerisway Pty Ltd v Granny May's Management Pty Ltd & Ors [1995] FCA 249

IN THE FEDERAL COURT OF AUSTRALIA VICTORIAN DISTRICT REGISTRY EQUITY DIVISION No VG 13 of 1995

BETWEEN: KERISWEY PTY LIMITED Applicant

AND: GRANNY MAY'S MANAGEMENT PTY LIMITED First Respondent ROBERT MICHAEL SMITH Second Respondent MICHAEL TENNER Third Respondent PAPER PLUS PTY LIMITED Fourth Respondent Coram: Olney J Place: Melbourne Date: 24 April 1995 MINUTE OF ORDER THE COURT ORDERS THAT:

1. The respondents' application to transfer the proceeding to the New South Wales Registry of the Court be dismissed. 2. The applicant provide security in the sum of $20,000 in a form approved by the Registrar as security for the respondents' costs to the end of the interlocutory stage of the proceeding with liberty to apply to increase the amount of security when the matter is ready for trial.

3. The application be stayed until such time as the security ordered in order 2 has been provided by or on behalf of the applicant. 4. Any party have leave to relist the proceeding for directions upon security being provided. 5. There be no order for costs on the respondents' motion filed 10 February 1995 and the amended motion filed 1 March 1995. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIAN DISTRICT REGISTRY EQUITY DIVISION No VG 13 of 1995

BETWEEN: KERISWEY PTY LIMITED Applicant

AND: GRANNY MAY'S MANAGEMENT PTY LIMITED First Respondent ROBERT MICHAEL SMITH Second Respondent MICHAEL TENNER Third Respondent PAPER PLUS PTY LIMITED Fourth Respondent

Coram: Olney J Place: Melbourne Date: 24 April 1995 REASONS FOR JUDGMENT This proceeding was commenced in the Victorian District Registry of the Court on 20 January 1995. The Court presently has before it a motion of which notice was filed on 10 February 1995 and which was amended by notice filed on 1 March 1995 whereby the respondents seek orders transferring the proceeding to the Sydney (sic, New South Wales) Registry and for the applicant to provide security for the respondents' costs in the sum of $36,360. The statement of claim contains 33 paragraphs and runs to 15 pages of typescript. It pleads a variety of causes of action including contravention of the Trade Practices Act, negligence, breach of warranty and breach of contract. I will endeavour to provide a brief outline of the facts pleaded, hopefully without doing any injustice to the pleader. The first respondent is a New South Wales company which carries on business as a franchisor for retailing gifts, stationery and the like through franchised retail outlets known as Granny May's Card & Gift Boutique. The second and third respondents are the joint managing directors of the first respondent and have effective control of it. Since 2 November 1988 the applicant, a Victorian company, has carried on business as a franchisee of the first respondent (the business) at premises in a suburb of Melbourne. The fourth respondent is a Victorian company which was the previous owner of the business. The second respondent was at all material times a director of the fourth respondent. By an agreement in writing dated 7 November 1988 the fourth respondent sold the business to the applicant for $152,524.78 plus stock, of which sum $150,000 represented goodwill. The applicant says that in order to induce it to purchase the business the second respondent, on behalf of the fourth respondent, represented that within 5 years the business would be worth $500,000 and could be readily sold. The applicant says it relied upon the representation and acquired the business. The applicant has since discovered that the representation was untrue and the applicant has thereby suffered loss and damage. Since 21 February 1992 the applicant has conducted the business and occupied the premises pursuant to a franchise agreement and a licence agreement with the first respondent. The applicant says that the first respondent has breached the terms of the franchise agreement whereby the applicant has suffered loss and damage. The applicant seeks: a) a declaration that the fourth respondent engaged in conduct in contravention of s 52 of the Trade Practices Act 1974. b) a declaration that the second respondent was involved in the fourth respondent's contravention of s 52. c) a declaration that the first respondent engaged in conduct in contravention of s 51AA of the Trade Practices Act. d) a declaration that the second and third respondents were involved in the first respondent's contravention of s 51AA. e) an order pursuant to s 82 of the Trade Practices Act that the respondents pay the applicant compensation. f) damages, alternatively equitable damages. g) an injunction to restrain the first respondent from terminating the franchise agreement and the licence or from taking possession of the business and the premises. h) interest i) costs j) further or other relief. Despite the length of the statement of claim and the variety of causes of action pleaded, this appears to be a fairly common type of proceeding in which a disenchanted franchisee seeks to recover its losses from a franchisor. On 10 March 1995 the respondents filed a defence which consists almost entirely of a denial of the facts alleged against them. On 6 April 1995 the first respondent filed a cross-claim against the applicant and two third parties, the directors of the applicant. In general terms the cross-claim relates to the franchise and licence agreements pleaded by the applicant and contains claims for possession of the premises from which the business is conducted and damages. It appears that the cross-claim was not filed within the time ordered by the Court and that the first respondent (cross-claimant) will require leave to proceed with it. THE TRANSFER APPLICATION Despite the fact that the first respondent is a New South Wales company having its principal place of business in that State, and the fact that the second and third respondents are based in New South Wales, the applicant's choice of venue cannot be regarded as capricious and indeed, but for one matter to which reference will be made, could not reasonably be challenged. The applicant is a Victorian company, its directors live and work in Victoria, the business and premises are in Victoria, and the representation alleged against the respondents was made in Victoria. It appears however that the franchise agreement contains the following provision: 38 Governing Laws This Franchise Agreement shall be construed and given effect in accordance with the law in force in the State of New South Wales which law shall be deemed to be the proper law of this Franchise Agreement and any dispute or difference shall be determined by the Courts having jurisdiction in the State of New South Wales and further, any proceedings arising from this Franchise Agreement or its interpretation shall be commenced in the Sydney Registry of such Court.