Watt v Shepherd (No 2) [2021] FCA 826

Federal Court of Australia

Watt v Shepherd (No 2) [2021] FCA 826 File number(s): NSD 922 of 2019

Judgment of: RARES J

Date of judgment: 23 July 2021

Catchwords: COMPETITION AND CONSUMER LAW – misleading and deceptive conduct – default judgment under r 5.23 of Federal Court Rules 2011 – unconscionable conduct – accessorial liability – inducement and reliance – unfair tactics – where Competition and Consumer (Industry Codes – Franchising) Regulation 2014 applied – where respondents made multiple misleading and deceptive representations to principal applicant – where respondents intended representations would induce principal applicant to invest and participate in franchising structure and influence other applicants to become franchisees – where representations were as to finance, future matters and profitability of franchise – where respondents lacked reasonable grounds for representations as to future matters – where respondents knew that principal applicant was in a position to influence other proprietors – where respondents knew fees payable by franchisees were not affordable or financially sustainable for franchisees – where respondents failed to make good earlier representations – where respondents failed to prepare or provide franchisees with disclosure documents, or receive from franchisees statement as to independent advice under cl 10 of Code – whether failure to provide documents required by the Code exposed franchisees to situation of vulnerability and disadvantage which was unconscionable conduct – representations made in trade or commerce within meaning of Competition and Consumer Act 2010 (Cth) and Australian Consumer Law – held: representations were misleading and deceptive (ss 18, 21 of the ACL); representations constituted unfair tactics and unconscionable conduct (ss 22(1)(g) and 22(2)(g) of the ACL); first, second and third respondents accessorially liable; franchise agreements voided; default judgment for damages to be assessed (ss 82, 87 of the CC Act and ss 236, 237 and 243 of the ACL)