FEDERAL COURT OF AUSTRALIA Burger King Corporation v Callas Holdings Pty Limited (in liq) [2005] FCA 278 TRADE PRACTICES – termination of franchise agreements – declaration that franchise agreements have been validly terminated PRACTICE AND PROCEDURE – application for leave to proceed against a company in liquidation BURGER KING CORPORATION v CALLAS HOLDINGS PTY LIMITED (IN LIQUIDATION) (ABN 009 436 113) NSD 1981 OF 2004 MOORE J 14 MARCH 2005 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1981 OF 2004 BETWEEN: BURGER KING CORPORATION APPLICANT AND: CALLAS HOLDINGS PTY LIMITED (IN LIQUIDATION) ABN 009 436 113 RESPONDENT JUDGE: MOORE J DATE OF ORDER: 14 MARCH 2005 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Leave be granted to proceed against the respondent in liquidation pursuant to section 71B of the Corporations Act 2001 (Cth). THE COURT DECLARES THAT: 2. The following franchise agreements have been validly terminated by the Applicant: a. The franchise agreement between Callas Holdings Pty Limited (in Liquidation) and Burger King Australia Pty Limited dated 8 December 1999, as subsequently assigned to Burger King Corporation, for the premises known as Lot 12 Lake Haven Shopping Centre, Lake Haven Drive, Lake Haven, NSW; b. The franchise agreement between Callas Holdings Pty Limited (in Liquidation) and Burger King Corporation dated 14 October 2002 for the premises known as 7 Holt Close East Maitland NSW; c. The franchise agreement between Mousum Pty Limited and Burger King Australia Pty Limited dated 4 December 2000, as subsequently assigned to Callas Holdings Pty Limited on 19 July 2002 for the premises known as 561 Peel Street (Corner of Scotts Road) Tamworth NSW; d. The franchise agreement between Callas Holdings Pty Limited and Burger King Australia Pty Limited dated 5 June 2001, as subsequently assigned by Deed of Variation to Burger King Corporation on 5 August 2003 for the premises known as Shop No. TE 09 Erina Fair Shopping Centre, Terrigal Drive, Erina NSW. THE COURT ORDERS THAT: 3. The Respondent pay the Applicant's costs of these proceedings as agreed or assessed as and from 7 March 2005. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1981 OF 2004 BETWEEN: BURGER KING CORPORATION APPLICANT AND: CALLAS HOLDINGS PTY LIMITED (IN LIQUIDATION) ABN 009 436 113 RESPONDENT JUDGE: MOORE J DATE: 14 MARCH 2005 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This judgment concerns an application filed in this Court on 24 December 2004 by the applicant, Burger King Corporation, a franchisor of restaurants. When the proceedings were commenced, the respondent, Callas Holdings Pty Limited, was a franchisee. The applicant then asserted that the respondent had been in default of the various franchise agreements and the applicant had lawfully terminated those agreements by notices given in December 2004. The applicant also asserted that, as a result of the termination of those agreements, it was entitled to injunctive relief to stop the continued use by the respondent of certain trade marks of which it was the owner. The proceedings came before the Court in January and February of this year, and were fixed for final hearing today. 2 In the meantime, the respondent has, by order of the Supreme Court of New South Wales, gone into liquidation and a liquidator has been appointed. The liquidator appears today and neither opposes nor consents to the grant of leave under s 471 of the Corporations Act 2001 (Cth) and neither consents nor opposes orders being made if leave is given. The liquidator's position was that if leave were given it would neither appear nor defend the matter. The applicant today seeks declarations that the franchise agreements concerning four restaurants or stores operated by the respondent at Erina Fair, Lake Haven, Tamworth and East Maitland were lawfully terminated by notices given on 10 March 2005, following the appointment of the liquidator. 3 The evidence establishes that a liquidator was appointed by the Supreme Court on 7 March 2005 and, secondly, that notices were given on 10 March 2005. I am satisfied that the applicant was entitled to terminate the franchise agreements for each of the four stores by giving notice of the type actually given on 10 March 2005. That is consistent with the provisions of the Franchising Code of Conduct (see the Schedule to the Trade Practices (Industry Codes – Franchising) Regulations 1998). The Code enables the summary termination of a franchise agreement in special circumstances which, in cl 23(b) of the Code, includes the franchisee becoming bankrupt, insolvent under administration or an externally-administered body corporate. 4 This is the type of proceeding in which it is appropriate for leave to be given under s 471. It involves matters that ordinarily would not be dealt with or could not be dealt with simply by the proving of a debt in the liquidation. I now grant leave and give judgment (that is, make the declarations sought by the applicant). I do so on the basis that the applicant does not now assert that the franchise agreements were effectively terminated in December 2004. Were the applicant to reserve its rights to assert that the franchise agreements were validly terminated in December 2004, it would be necessary for me to consider whether they were effectively terminated at that time. Only if they were not, could I make declarations that they were effectively terminated in March 2005. 5 Having regard to the material to which I have been taken, leave should be given. Declarations should be made that the franchise agreements in relation to the four stores were terminated by the giving of the notices dated 10 March 2005. I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore. Associate: Dated: 13 April 2005 Counsel for the Applicant: F G Lever SC with J J Miller Solicitor for the Applicant: Dibbs Barker Gosling Solicitor for the Respondent on the notice of motion Clayton Utz Date of Hearing: 14 March 2005 Date of Judgment: 14 March 2005