Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Orders) [2023] FCA 500

Federal Court of Australia

Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Orders) [2023] FCA 500 File number(s): NSD 395 of 2020

Judgment of: THAWLEY J

Date of judgment: 12 May 2023

Date of publication of reasons: 19 May 2023

Cases cited: Placer (Granny Smith) Proprietary Limited v Thiess Contractors Proprietary Limited [2003] HCA 10; 196 ALR 257

Division: General Division

Registry: New South Wales

National Practice Area: Commercial and Corporations

Sub-area: Commercial Contracts, Banking, Finance and Insurance

Number of paragraphs: 9

Date of hearing: 12 May 2023

Counsel for the Applicants: Dr A Greinke with Mr S Lamb

Solicitor for the Applicants: Lodhia Lawyers

Counsel for the Respondents: Mr N Olson

Solicitor for the Respondents: HWL Ebsworth Lawyers

ORDERS NSD 395 of 2020

BETWEEN: GIRCHOW ENTERPRISES PTY LTD First Applicant

KARIM GIRGIS Second Applicant

SHERIF GIRGIS (and others named in the Schedule) Third Applicant

AND: ULTIMATE FRANCHISING GROUP PTY LTD First Respondent

MAZEN HAGEMRAD Second Respondent

SAMER HUSSEINI (and others named in the Schedule) Third Respondent

order made by: THAWLEY J DATE OF ORDER: 12 MAY 2023

THE COURT ORDERS THAT:

1. The UFC Gym Franchise Agreement between the first applicant and the first respondent executed on 14 March 2023 be declared void with effect from 22 May 2023. 2. The personal guarantees given by the second, third and fourth applicants in respect of the franchise agreement referred to in order 1 be declared void ab initio. 3. The first, second and third respondents pay $1,789,848.99 compensation to the first applicant, inclusive of interest to 12 May 2023. 4. The UFC Gym Franchise Agreement between the fifth applicant and the first respondent executed on 14 March 2023 be declared void with effect from 22 May 2023. 5. The personal guarantee given by the sixth applicant in respect of the franchise agreement referred to in order 4 be declared void ab initio. 6. The first, second and third respondents pay $1,955,996.29 compensation to the fifth applicant, inclusive of interest to 12 May 2023. 7. The UFC Gym Franchise Agreement between the eighth applicant and the first respondent executed on 15 September 2017 be declared void with effect from 22 May 2023. 8. The personal guarantee given by the ninth applicant in respect of the franchise agreement referred to in order 7 be declared void ab initio. 9. The first, second and third respondents pay $1,485,643.10 compensation to the eighth applicant, inclusive of interest to 12 May 2023. 10. Reserve liberty to apply in respect of any matters arising in respect of the first, fifth and eighth applicants' exit from the UFC Gym franchise. 11. Pursuant to rule 28.67(1)(c) of the Federal Court Rules 2011, remit for further consideration by the Court-appointed Referee the assessment of the operating losses and borrowing costs of the franchise business operated by the eighth applicant, with the following directions: (a) the Referee shall exclude from the operating losses and borrowing costs any expenses unrelated to the Castle Hill UFC Gym franchise business including (but not limited to): (i) meeting expenses; (ii) national and international travel expenses; (iii) interest and operating expenses in respect of motor vehicles; (iv) such other personal expenses and expenses that are in the opinion of the Referee unrelated to the Castle Hill Gym franchise business; (b) the Referee shall be provided with copies of the following documents: (i) these sealed orders; (ii) the reasons for judgment dated 5 May 2023; (iii) the transcript of the cross-examination of the ninth applicant in respect of the accounts and expenses of the Castle Hill Gym franchise business; and (iv) Exhibit 12; (c) the Referee shall file his report with the Court by 31 May 2023; (d) the Referee otherwise conduct the inquiry pursuant to the directions of the Court made on 27 October 2022, with a view to accurately determining the actual operating lossess and borrowing costs of the eighth applicant. 12. The further costs of the Referee are to be borne solely by the eighth applicant. 13. The proceeding be stood over to 10:15am on 8 June 2023 to consider the adoption of the Referee's report and any further orders. 14. The claims against the fourth respondent be dismissed. 15. The third, fifth and eighth applicants pay the costs of the fourth respondent. 16. The cross-claim be dismissed. 17. The first, second and third respondents pay the applicants' costs of and incidental to these proceedings, including the costs of the cross-claim but excluding the costs of the claims against the fourth respondent, and in the absence of an agreement to be taxed on a party and party basis up to 11:00am on 9 March 2020 and thereafter, on an indemnity basis. 18. The respondents must file any notice of appeal on or before 12 June 2023 pursuant to rule 36.03(b) of the Federal Court Rules 2011. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.