Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810

FEDERAL COURT OF AUSTRALIA

Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 TRADE AND COMMERCE – Trade Practices Act 1974 (Cth) and related legislation – Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) – Franchising Code of Conduct – consequences of franchisor's failure to comply with cll 10 and 11 of Code – whether franchisor's non-compliance made franchise agreement void – whether decision in Ketchell v Master of Education Services Pty Ltd [2007] NSWCA 161 should be followed – purpose of Code – need to seek guidance from implications in legislative framework Held: Franchising Code of Conduct does not evince legislative policy of striking down every franchise agreement entered into by franchisor who fails to comply with its provisions – intention of code is to protect franchisees and place obligations on franchisor to comply – failure of franchisor to comply entitles franchisee to seek to set aside agreement or to seek relief for unconscionable conduct CONTRACT – fraud – when each party is in breach of an essential term or has conducted itself in a manner amounting to a repudiation – whether one party may terminate based on other's breach or repudiation – whether one party may terminate under express contractual right to do so when other party has committed fraud – whether party must be ready and willing before being entitled to terminate Held: When each party is in breach of an essential term or has conducted itself in a manner amounting to a repudiation, neither is ready and willing to perform; neither may terminate at common law or pursuant to a contractual term: Foran v Wight (1989) 168 CLR 385 considered CONTRACT – general contractual principles – construction and interpretation of contracts – ambiguity in written provision regarding exclusive territory – relevance of pre-contractual discussions – conflicting evidence given by both parties – neither party's evidence believed – interpretation of common intention of parties – consideration of what each party, by words or conduct, would have led a reasonable person in position of other party to believe – consideration of surrounding circumstances known to parties and purpose and object of transaction – natural and common sense approach to construction – necessity to construe agreement so as to avoid commercial inconvenience Held: Ambiguousprovision to be interpreted by reference to objective common intention of parties based on reasonable person's understanding in circumstances of case CONTRACT – Fraud by franchisee – whether franchisor elected to affirm franchise agreement by its words or conduct – principles of election – whether franchisor confronted with two mutually exclusive courses of action necessitating a choice – whether franchisor communicated election to franchisee – whether reasonable person in franchisee's position would have understood franchisor's conduct to amount to affirmation of contract Held: Franchisor had not elected to affirm the contract – parties understood that franchisor would refrain from terminating for fraud until franchisee given opportunity to respond CONTRACT – general implication that parties contract to do all that is necessary for the other to have benefit of contract – duty to co-operate may be implied from objective consideration of whole of terms of contract – whether franchisor's right to impose certain charges on franchisee pursuant to agreement restricted Held: Franchisor's power to impose charge on franchisee to effect work required by terms of agreement limited to amount that is reasonable – necessary for franchisor to reduce amount charged to a reasonable amount COURTS AND JUDGES – precedents – statutory interpretation – State Court of Appeal in Ketchell v Master of Education Services Pty Ltd [2007] NSWCA 161 construed earlier version of legislation and decided every franchise agreement void when made in compliance with legislation – relevant provision re-enacted – whether single judge of Federal Court obliged to follow State Court of Appeal – whether State Court of Appeal decision 'plainly wrong' – whether subsequent decision of High Court in ACCC v Baxter Health Care (2007) 237 ALR 512 showed State Court of Appeal's approach to statutory construction wrong – whether intention of legislation to make void or to provide remedy Held: State Court of Appeal not followed; purpose of legislation remedial; not intended to avoid for any non compliance Trade Practices Act, ss 51AC, 51AD, 51AE, 87 Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth), cll 6A, 10, 11, 23(f)