Queensland Judgments
Authorised Reports & Unreported Judgments
  • sclq logo
  1. Caselaw
  2. QDC
  3. 2013
  4. M.T. Franchising Pty Ltd v Murlay Views Pty Ltd - [2013] QDC 179

Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  • Unreported Judgment

M.T. Franchising Pty Ltd v Murlay Views Pty Ltd[2013] QDC 179

M.T. Franchising Pty Ltd v Murlay Views Pty Ltd[2013] QDC 179

DISTRICT COURT OF QUEENSLAND

CITATION:

M.T. Franchising Pty Ltd v Murlay Views Pty Ltd & Anor [2013] QDC 179

PARTIES:

M.T. Franchising Pty Ltd (ACN 009 906 245)

(Plaintiff)

v

Murlay Views Pty Ltd (ACN 142 085 130)

(First Defendant)

&

Catherine Marjorie Doherty

(Second Defendant)

FILE NO/S:

2497/12

DIVISION:

Civil

PROCEEDING:

Trial

ORIGINATING COURT:

District Court in Brisbane

DELIVERED ON:

18 October 2013

DELIVERED AT:

Brisbane

HEARING DATE:

25 & 26 June 2013

JUDGE:

Kingham DCJ

ORDER:

  1. The defendant must pay the plaintiff the fees payable under the franchise agreement for the period from 1 August to 26 August 2011.
  2. The parties have leave to provide their agreed calculation of the amount payable for that period within seven days.
  3. Otherwise the plaintiff’s claims against the defendants are dismissed.

CATCHWORDS:

CIVIL – CONTRACTS – FRANCHISE AGREEMENTS – TERMINATION – ABANDONMENT OF AGREEMENT – where the plaintiff and first defendant – where the second defendant was guarantor – where a director of the plaintiff was removed and identified a new corporate entity as franchisee – where the first defendant was advised that the franchise agreement had been fully discharged – where the first defendant was advised to cease all payments to the plaintiff – where the director was reappointed to the plaintiff – where the plaintiff claims monies are now owed under the franchise agreement and for unpaid stock – whether the franchise agreement was terminated by frustration – whether the franchise agreement was terminated by repudiation – whether the franchise agreement was abandoned – whether the plaintiff is estopped from requiring performance of the franchise agreement – whether there is any amount owing to the plaintiff for unpaid stock.

Uniform Civil Procedure Rules 1999 (Qld), rr 5(1), 165, 168, 367(1) & 367(2).

CGM Investments Pty Ltd v Chelliah (2003) 196 ALR 548, followed.

Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337

DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1977-78) 138 CLR 423, applied.

Grundt v Great Boulder Gold Mines Pty Ltd (1937) 59 CLR 641, applied.

Marminta P/L v French [2003] QCA 541, applied.

Moratic Pty Ltd v Lawrence James Gordon [2007] NSWSC 5, followed.

Rigato Farms Pty Ltd v Ridolfi [2001] 2 Qd R 455, applied.

Summers v The Commonwealth (1918) 25 CLR 144, applied.

COUNSEL:

Mr. M.F. Wilson for the Plaintiff.

Mr. P.J. McCafferty for the Defendants.

SOLICITORS:

Porta Lawyers for the Plaintiff.

PM Lee & Co. for the Defendants.

  1. 1.)
    Background
  1. [1]
    Mr Giannino (John) Colussa is a successful businessman and the founding director of the Metro Tiles group of companies. The plaintiff, M.T. Franchising Pty Ltd, is one of the companies in the group and is the corporate vehicle through which Metro Tiles retail tile stores were initially franchised. Murlay Views Pty Ltd operated a Metro Tiles retail store at Yeppoon under a franchise agreement with the plaintiff. Its director, Catherine Doherty, guaranteed the company’s performance of that agreement.
  1. [2]
    M.T. Franchising claims fees it says are owed under the franchise agreement and an amount for unpaid stock. Murlay Views and Ms Doherty say the franchise agreement was terminated and that there is nothing owing to the plaintiff for unpaid stock.
  1. [3]
    The circumstances which the defendants say led to the franchise agreement being terminated occurred in the context of a family dispute within the Metro Tiles group. John Colussa fell out with three sons-in-law, who held the balance of power on the Board of M.T. Franchising. Mr Colussa either resigned or was removed as a director and, for a period, he lost control of that company, the plaintiff and franchisor under the agreement it now seeks to enforce.
  1. [4]
    The family dispute has since resolved and Mr Colussa is, once again, in control of M.T. Franchising. However, while he was not in control of the plaintiff, certain actions were taken by M.T. Franchising and other companies in the group which the defendants say effectively brought the franchise agreement to an end and discharged them from all obligations under it.
  1. [5]
    The plaintiff led evidence from Mr Colussa and an accountant for the group, Ms Pelagatti. They both tended to refer to Mr Colussa and the various companies in the group interchangeably. Because of the alleged consequences of actions taken by different entities within the group, it is essential to have clarity about the distinct entities and their actions at different times during the relevant period.
  1. 2.)
    The Metro Tiles Group of Companies
  1. [6]
    The relevant entities in the Metro Tiles Group of Companies are Metro Tiles Pty Ltd, M.T. Franchising Pty Ltd and Metro Tiles Franchising Pty Ltd. Mr Colussa is currently a director of each of those companies. However, between July and December 2011,[1]he was not a director of M.T. Franchising because, he said, he and his son were ejected from M.T. Franchising by his three sons-in-law.[2]
  1. [7]
    Metro Tiles Pty Ltd is the primary corporate entity and is described as the head franchisor in the franchise agreements. It owned the intellectual property in the system, images and other intellectual property of the Metro Tiles business. It granted an exclusive licence to M.T. Franchising to use and exploit the intellectual property.[3]
  1. [8]
    M.T. Franchising Pty Ltd entered into franchise agreements with third parties, exercising its rights under its licence agreement with Metro Tiles. Mr Colussa was a director of that company between about November 1990 and 27 July 2011. He was reinstated as a director on 21 December 2011.[4]
  1. [9]
    M.T. Franchising entered into a franchise agreement with Amulla Consultancy Pty Ltd in 2004. Metro Tiles was named as the head franchisor and M.T. Franchising was named as the franchisor, although only M.T. Franchising executed it. Amulla operated a Metro Tiles-branded retail outlet at Yeppoon. It was required to make monthly payments to M.T. Franchising of a franchise fee and advertising costs and to report its sales figures, on which the fees were calculated.[5]
  1. [10]
    Murlay Views was assigned that franchise agreement on 16 April 2010.[6]On the same day Ms Doherty entered into a guarantee and indemnity in relation to Murlay Views’ obligations under the assigned agreement.[7]
  1. [11]
    Metro Tiles Franchising Pty Ltd is another company in the Metro Tiles group. It was registered and Mr Colussa was appointed a director on 13 May 2011. After Mr Colussa was no longer a director of M.T. Franchising, Metro Tiles introduced the company Metro Tiles Franchising to franchisees, including Murlay Views, as the new corporate entity through which the franchise would operate.
  1. [12]
    Other corporate entities were involved, such as Metro Tiles Advertising Pty Ltd. However, for the purposes of these proceedings, the important entities are M.T. Franchising and Metro Tiles Franchising. They were the two entities through which Mr Colussa, as the controlling mind of the group, acted from time to time in asserting the rights of franchisor in relation to Murlay Views.
  1. [13]
    Because M.T. Franchising also dealt with Murlay Views when Mr Colussa’s sons-in-law controlled the company, it is necessary to closely examine what each corporate entity did during the relevant periods. The defendants claim the actions taken by M.T. Franchising, particularly during the period that Mr Colussa was not in control of it, brought the franchise agreement to an end.
  1. 3.)
    Evidence of communication between the parties
  1. [14]
    Before considering the legal arguments in support of that proposition, I will precis the communications between the parties and their evidence about two periods. For the first period, from late June to early December 2011, Mr Colussa was not in effective control of M.T. Franchising. The second period commences in early December 2011, when there is the earliest evidence that Mr Colussa had reasserted a right to act or speak for M.T. Franchising. Those dates don’t precisely coincide with the dates recorded in the ASIC company entry for Mr Colussa’s removal (27 July 2011) and reinstatement (21 December 2011) as  a director of that company. That is to be expected. They are the dates the necessary notices were filed, not the dates that relevant appointments were made or terminated.
  1. 3.1.)
    Period 1 – from late June to early December 2011
  1. [15]
    It has already been noted that the franchisor named in the agreement assigned by Amulla to Murlay Views was M.T. Franchising and that it held an exclusive licence from Metro Tiles which enabled it to use and exploit the intellectual property of the Metro Tiles business. In the context of his dispute with his sons-in-law it seems that Mr Colussa took steps to terminate that licence agreement.
  1. [16]
    Although Mr Colussa was a director of M.T. Franchising until 27 July 2011, it is a reasonable inference from the correspondence that he had lost effective control of that company before then. That arises from two pieces of documentary evidence.
  1. [17]
    The first is an email exchange between Paul Slatter for Metro Tiles Yeppoon and Patrizia Pelagatti on 14 July 2011. Mr Slatter enquired who the franchise and advertising fee had to be paid to.[8]Ms Pelagatti advised it was to be paid as usual to M.T. Franchising and that he would be advised accordingly of any changes.[9]This suggests that there had already been some communication about a potential change of franchising arrangements by that date.
  1. [18]
    The second document is a letter from Shand Taylor (of 19 August 2011) which refers to a letter from Metro Tiles to M.T. Franchising on 28 June 2011. In its letter, Shand Taylor, for M.T. Franchising, stated the letter sent by Metro Tiles on 28 June 2011 terminated the licence agreement between the two companies.[10]Neither party tendered the 28 June 2011 letter. However, the subsequent conduct of both Metro Tiles and M.T. Franchising is consistent with a letter in those terms having been sent.
  1. [19]
    In a letter to franchisees dated 29 August 2011 and signed by John Colussa as Managing Director of Metro Tiles, the following statement appears:

“It was deemed necessary to terminate the licence agreement with M.T. Franchising...” [11]

  1. [20]
    Returning to Shand Taylor’s letter of 19 August 2011, on behalf of its client M.T. Franchising, Shand Taylor accepted the termination of the licence agreement effective 7 days after the notice was given. On the evidence before the court, neither Thomsons lawyers nor Metro Tiles responded to that letter.
  1. [21]
    A week later, on 26 August 2011, Shand Taylor, acting for M.T. Franchising, wrote to Ms Doherty c/- Metro Tiles Yeppoon.[12]It notified her that the Licence Agreement between Metro Tiles and M.T. Franchising had been terminated. It advised Ms Doherty that M.T. Franchising was incapable of performing its obligations under the franchise agreement. It noted the franchise agreement made no provision for that event. It asserted the franchise agreement was frustrated because M.T. Franchising was unable to perform its essential obligations, in particular to allow a franchisee to use the system, image and other intellectual property under the franchise agreement.
  1. [22]
    It also asserted:

“… The effect of this frustration is that the franchise agreement has been fully discharged thereby relieving the parties of their obligations to further perform the franchise.”[13]

  1. [23]
    Shand Taylor also stated their understanding that Ms Doherty had been in discussions with Mr Colussa or representatives of Metro Tiles about “transfer” of the franchise to Metro Tiles or another entity operated by Mr Colussa. Shand Taylor stated the position of its client, M.T. Franchising, was that she was entitled to progress those discussions as “… your franchise agreement has been fully discharged.”
  1. [24]
    They advised Ms Doherty that she would need to come to a new arrangement with Metro Tiles if she wished to continue operating as a Metro Tiles store. Mr Colussa said that no such arrangement was ever made,[14]and the contents of the letter sent by Shand Taylor on behalf of M.T. Franchising were never retracted.[15]
  1. [25]
    The letter from Metro Tiles to all franchisees dated 29 August 2011 then followed.[16]Although it confirmed the franchise agreement with M.T. Franchising had been terminated, it asserted the agreement was still valid with Metro Tiles as head franchisor. The legal basis for this assertion was not explained. It stated the franchisees were still required to pay relevant franchise and advertising fees for past and current periods.
  1. [26]
    The letter introduced the new entity, Metro Tiles Franchising. It reiterated that M.T. Franchising no longer had a role to play. Enclosed with the letter was a document (not in evidence) described as a temporary deed of agreement. The franchisees were offered relief from franchising fees and reduced advertising costs if they signed and returned the agreement.
  1. [27]
    Mr Colussa said Murlay Views has never provided an executed agreement as requested.[17]Ms Doherty said the deed provided to her incorrectly named the franchisee as Amulla. She did not receive a deed which correctly named Murlay Views as franchisee.[18]
  1. [28]
    Mr Colussa accepted the letter he sent for Metro Tiles on 29 August informed Murlay Views that the franchise agreement with M.T. Franchising was terminated. He also accepted this was consistent with the letter sent by Shand Taylor, for M.T. Franchising, on 26 August 2011.[19]
  1. [29]
    On 9 September 2011, Ms Pelagatti sent an email to Metro Tiles Yeppoon advising that Metro Tiles Franchising was the supplier of tiles as from 1 September 2011. She explained that for purchases before September 2011, they would be billed by and required to pay Metro Tiles. For purchases after that date, they would be billed and supplied by the new company, Metro Tiles Franchising. The email also included the following:

Please do not confuse M.T. Franchising with Metro Tiles Franchising!!!!!!

Unfortunately if money is, accidentally, deposited into M.T. Franchising bank account, we do not have control over this money anymore!!!!

Also PLEASE create a new creditor in your system to reflect the changes.

Thank you

Regards

Patrizia Pelagatti

Accounting Manager[20]

  1. [30]
    The subsequent accounting documentation from the Metro Tiles group is consistent with M.T. Franchising playing no further role in the arrangements to supply Murlay Views with stock.
  1. [31]
    Although Ms Pelagatti gave evidence that she was the Accounting Manager for all the companies in the group, this clearly did not include M.T. Franchising while Mr Colussa did not control it. She confirmed that Metro Tiles Franchising supplied the franchisees with stock from September of 2011.[21]
  1. [32]
    That fits with the debtor transaction ledgers for Metro Tiles Yeppoon[22]which show that the supplier was Metro Tiles from 10 February 2011 and Metro Tiles Franchising was the supplier from 2 September 2011 until 12 November 2012. That is confirmed by the bundle of invoices led in support of the debtor ledgers.[23]The only invoice for stock before the court that was issued in the name of M.T. Franchising forms part of exhibit 22. It is for stock supplied in 2010, was issued on 31 May 2011 and was paid by Metro Tiles Yeppoon on 21 December 2011.[24]
  1. [33]
    Ms Pelagatti gave evidence that Murlay Views was provided with a franchise agreement with Metro Tiles Franchising, which wrongly named the franchisee as the former owner of Metro Tiles Yeppoon. She said she rang Ms Doherty once about it and told her if she returned the deed she would send one out with the correct name. She did not recall any other conversation about the proposed franchise agreement.[25]
  1. [34]
    The correspondence between the parties establishes that by late August M.T. Franchising and Metro Tiles were both asserting to Murlay Views that its franchise agreement, at least in so far as it concerned M.T. Franchising, had been terminated. Both M.T. Franchising and Murlay Views acted consistently with that understanding throughout this first period. Murlay Views did not source any stock from M.T. Franchising and did not supply any sales figures or creditor’s reports to M.T. Franchising during this period. Nobody made any request of Murlay Views on behalf of M.T. Franchising.
  1. [35]
    Although tiles were still supplied to Murlay Views, the dealings between Metro Tiles Yeppoon and the Metro Tiles group were through Metro Tiles and Metro Tiles Franchising, not M.T. Franchising. This is consistent with Metro Tiles letter of 29 August that it wanted to “transfer” the franchise arrangements to Metro Tiles Franchising. Ms Pelagatti made strong representations to ensure that franchisees understood the distinction between the two companies and did not, accidentally, deal with M.T. Franchising. Metro Tiles provided a new franchise agreement to Murlay Views which Ms Doherty did not sign because it wrongly named Amulla as the franchisee for Metro Tiles Yeppoon.
  1. [36]
    The legal consequences of that course of dealings will be discussed later in these reasons. By their conduct, however, each of Metro Tiles and Metro Tiles Franchising; their lawyers, Thomsons; Mr Colussa; Ms Pelagatti; M.T. Franchising; its lawyers, Shand Taylor; Murlay Views and Ms Doherty acted throughout these months as if Murlay Views was no longer obliged to account to M.T. Franchising under the franchise agreement.
  1. 3.2)
    Period 2 – from early December 2011
  1. [37]
    After his letter to franchisees on 29 August 2011, the earliest evidence that Mr Colussa purported to speak or act for M.T. Franchising is an email he sent to Metro Tiles Yeppoon on 8 December 2011.[26]Although the notice of his resumption as a director was not filed until 21 December 2011, it is reasonable to assume that by the time Mr Colussa sent this email, he considered he had a right, once more, to speak for M.T. Franchising because he signed off on the email as Managing Director of both Metro Tiles and M.T. Franchising.
  1. [38]
    He demanded creditor’s reports from July. He alleged Murlay Views was in breach of the franchise agreement and threatened legal intervention. The next day he resent the email to the same address without further text.[27]
  1. [39]
    On 3 January 2012, Karen Mills, Franchise Manager (who gave her address as the Metro Tiles Corporate Office) requested sales figures and creditors reports for November.[28]On 23 January 2012, Ms Pelagatti requested sales figures for July to December 2011; she also gave her address as the Metro Tiles Corporate Office.[29]Neither of the emails referred to M.T. Franchising.
  1. [40]
    On 27 January 2012, Mr Colussa sent an email to Metro Tiles Yeppoon. He sent it under his own name and did not sign the email as representing any particular corporate entity.[30]He advised that, ‘due to franchise agreement breaches’, their trade account had been changed from ‘Code B’ to ‘Wholesale’ rates. Code B is a reference to the rate charged to franchisees, which is considerably less than the standard wholesale price. Ms Doherty estimated the difference in price to be some 100 – 110 per cent.[31]
  1. [41]
    He demanded payment of $3597.15 owing to Metro Tiles Franchising Pty Ltd for purchases to November 2011. He advised their trading account was suspended until the outstanding amount was paid in full.
  1. [42]
    On 30 January 2012, Mr Colussa again emailed Metro Tiles Yeppoon using his own name, without corporate reference. The email attached invoices for franchising and advertising fees calculated on previous figures. They are not in evidence and it is not clear whether they were identified as owing to any particular corporate entity in the group. Mr Colussa also advised that their sales figures, creditors’ reports and fees for July to December 2011 remained outstanding. Mr Colussa noted that trading would resume as normal once those matters had been attended to.[32]
  1. [43]
    Ms Doherty emailed Mr Colussa the next day. She said she rang that morning to ask him to release the tiles to Metro Yeppoon so she could fill current orders. She stated her understanding the items would be released on Code B pricing. In exchange, she undertook to provide the outstanding sales figures by the end of the day.[33]At some point, she did supply sales figures for those periods, using pro forma reports that were contained in the Metro Tiles system and which bore the name M.T. Franchising in the header.[34]
  1. [44]
    Counsel for the plaintiff submitted that Ms Doherty agreed that she supplied the figures only because she considered the agreement with the plaintiff was still on foot. She did give an answer that might be read that way,[35]however a fair reading of her evidence, overall, on this point is to the contrary. For example, when it was expressly put to her that she sent the sales figures because she had a franchise agreement with the plaintiff, Ms Doherty rejected the proposition. She said she only supplied the sales figures in order to avoid being charged the higher rate for requested stock, not because she accepted the franchise agreement with M.T. Franchising was still on foot.[36]
  1. [45]
    Further, during cross-examination she said her concern was not with the price at which tiles might be supplied in the future, but with her potential exposure on the unfilled orders which she had quoted to clients on the basis of Code B prices.[37]
  1. [46]
    Mr Colussa replied later that day, signing the email personally. He advised that he would release three stock orders at Code B prices, if Ms Doherty undertook to provide the sales figures and on the basis that she would provide the outstanding creditors reports by 10 February 2012.
  1. [47]
    The next email to Metro Tiles Yeppoon was sent by Mr Colussa on 24 February 2012, in which he noted the creditors reports had not been supplied. He advised he would instruct lawyers to act on the company’s behalf, should those reports not be provided by the end of the day.[38]He did not identify which company he was representing.
  1. [48]
    Ms Doherty replied later that day. She said she thought it unreasonable to require her to supply the figures in that time frame. In evidence, Ms Doherty explained she thought it unreasonable because the agreement with M.T. Franchising had come to an end.[39]Regardless, Ms Doherty said in the email that she would “supply the relevant figures to M.T. Franchising”. She requested all further correspondence be directed to her lawyers.[40]
  1. [49]
    I am not convinced by Ms Doherty’s explanation of what she meant when she said the request was unreasonable. However, I accept that she provided the figures for commercial reasons, not because she considered she was under a legal obligation to do so, or that she intended to affirm the earlier agreement with M.T. Franchising. She had a number of orders to fill for which she had quoted her clients prices based on the significantly lower Code B rate. Those tiles had been sourced from Metro Tiles Franchising, not M.T. Franchising and, at that stage, she had not signed a new franchise agreement with Metro Tiles Franchising.
  1. [50]
    Correspondence between lawyers then ensued. On 2 March 2012, Porta Lawyers, for Metro Tiles, M.T. Franchising and Mr Colussa, issued a Notice to Remedy Default citing clause 25.6 of the franchise agreement, constituted by failure to provide reports despite numerous requests.[41]
  1. [51]
    On 12 March 2012, P.M. Lee responded, advising that its clients, Murlay Views and Ms Doherty, understood the franchise agreement with M.T. Franchising had been terminated.[42]On 12 April 2012, Porta sent P.M. Lee a formal letter of demand. When it was not met, these proceedings commenced.
  1. [52]
    Ms Pelagatti gave evidence that all the other franchisees signed new deeds with Metro Tiles Franchising during the period that Mr Colussa did not have control of M.T. Franchising.[43]
  1. [53]
    In this second period it was clear that Mr Colussa asserted rights under a franchise agreement. However, he, Ms Pelagatti and Ms Mills were never clear, and Mr Colussa was not consistent, about which corporate entity was purporting to deal with Murlay Views.
  1. [54]
    It is evident that Mr Colussa did not draw a distinction between himself and any of the companies in the Metro Tiles group, except when he was no longer in effective control of M.T. Franchising. When he was not in control of the plaintiff, he directed Murlay Views not to deal with it and asserted that franchise agreement, in so far as it related to the plaintiff, was at an end. During that period all Metro Tiles franchisees, bar Murlay Views, signed up to a new franchise agreement with Metro Tiles Franchising.
  1. [55]
    The plaintiff acted as if the agreement with Murlay Views was at an end until Mr Colussa was once again a director when he began, once again, to assert a right to performance of franchise obligations, although the basis for doing so was not expressed until the Notice to Remedy Default in March 2012.
  1. 4.)
    Evidence about the operations of Metro Tiles Yeppoon after August 2011
  1. [56]
    Counsel for the plaintiff objected to evidence sought to be led by the defendant about whether Murlay Views continued to brand its operation and store in Yeppoon as a Metro Tiles Franchise.
  1. [57]
    In its reply, the plaintiff alleged the first defendant had continued to do so.[44]The first defendant did not make any rejoinder to that allegation. The combined effect of Rules 165 and 168 of the Uniform Civil Procedure Rules 1999is that the defendants are deemed to have not admitted those allegations and, without leave, could not lead evidence about them.
  1. [58]
    When counsel for the defendants sought to elicit evidence about the allegations from Ms Doherty, counsel for the plaintiff objected and counsel for the defendants indicated he did not seek to rely on the evidence objected to.[45]However, he did apply for leave to lead evidence on this issue from both Ms Doherty and an employee of the first defendant, Lindsay Jones, after counsel for the plaintiff appeared to elicit evidence from Ms Doherty about the matter.
  1. [59]
    There was a dispute between counsel about what was asked of Ms Doherty which they agreed was relevant to determining whether leave should be granted to lead evidence on the issue. To avoid inescapable delay in obtaining the transcript, counsel agreed I should hear the evidence and deal with the objection in my final reasons.
  1. [60]
    I have resolved to allow the evidence for the following reasons.
  1. [61]
    The purpose of the UCPR is to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense.[46]The Court has the power to make an order or direction about the conduct of a proceeding it considers appropriate, even though the order or direction may be inconsistent with another provision of the rules.[47]
  1. [62]
    It was apparent at trial that the defendants had not intended to place themselves in the position where they could not lead evidence on the topic. However, parties should not expect that inadvertent errors, inevitably, will be treated indulgently.[48]In deciding whether to make an order or direction, the interests of justice are paramount.[49]
  1. [63]
    Counsel for the plaintiff argued it would be prejudiced if the evidence were allowed, because it had relied on the lack of rejoinder and had not sought out evidence that might have been available to it about the way in which the store was represented during the relevant period. Although neither Mr Colussa nor Ms Pelagatti was in a position to say how the store was represented, there may have been other sources of information available on enquiry.
  1. [64]
    However, the defendants’ assertion was not made first at trial. On 12 March 2012, lawyers for the defendants asserted their client had discontinued the use of any business names, trade names and logos of Metro Tiles and had ceased using any correspondence and letterheads and promotional materials provided by Metro Tiles.[50]Although that letter does not fix a time at which that occurred, it is in the context of its assertion that the agreement was terminated by the letter from Shand Taylor of 26 August 2011 and the allegation that the defendants had taken steps on the basis of that letter.
  1. [65]
    It is also consistent with the defendants’ pleading that the first defendant had accepted the plaintiff’s repudiation and rescinded the franchise agreement and that the parties had abandoned the agreement as neither had performed it. They also denied selling tiles as a franchisee of the plaintiff.[51]
  1. [66]
    Finally, I have taken into account that counsel for the plaintiff re-opened the matter during his cross-examination of Ms Doherty, after having successfully objected to evidence on the topic being led in chief.[52]
  1. [67]
    Ms Doherty told the court that in September 2011 the Metro Tiles signage was removed and the shop was rebranded as Tiles Galore & More.[53]An invoice was tendered in support of that evidence.[54]She agreed she sent a purchase order to Metro Tiles Pty Ltd on 9 January 2012, the header of which showed the order came from Metro Tiles, 1/57 Tanby Rd, Yeppoon.[55]She explained that the purchase order was generated by a software program MYOB and that she needed technical help in order to change over the documents it created to the new business name.[56]
  2. [68]
    Lindsay Jones was an employee of Murlay Views from July 2010. He said Ms Doherty had told him in August 2011 that the trading relationship with M.T. Franchising had come to an end. From the end of September changes were made in the shop. The external signage was taken down from the front and side of the shop and from the car park. Initially they were not replaced because the staff members were given a say in what the new name should be. In the meantime, they stopped answering the phone with the name Metro Tiles.[57]
  1. 5.)
    Is the franchise agreement between M.T. Franchising and Murlay Views enforceable?
  1. [69]
    The defendants raised a number of legal arguments in support of its defence that the agreement could not be enforced by M.T. Franchising. They argued the agreement had been terminated either because of frustration, repudiation or abandonment. Alternatively, they argued the plaintiff was denied relief by the application of the doctrine of conventional estoppel.
  1. [70]
    I will deal briefly with the argument that M.T. Franchising’s contract with Murlay Views was at an end because it was impossible for the plaintiff to perform the agreement. This rests on the assertion that its licence to authorise use of the intellectual property of the Metro Tiles brand had been terminated.
  1. [71]
    Mr Colussa did agree that the licence agreement was the only basis upon which M.T. Franchising could authorise a franchisee to use that intellectual property. However, he denied the licence agreement was terminated. Certainly there was a period during which M.T. Franchising did not assert a right to authorise use of that intellectual property but Mr Colussa was restored to the Board by sometime in December, only a few months later. Neither counsel addressed the question whether a temporary dispute between the two companies was too short lived to effectively frustrate the franchise agreement.
  1. [72]
    Although both M.T. Franchising and Metro Tiles represented to Murlay Views that the licence agreement was terminated, direct evidence was not led about the contractual relationship between the two companies in the Metro Tiles group and their dealings in this period. On the evidence before the court I am not satisfied that I can determine that the agreement between M.T. Franchising and Murlay Views was frustrated.[58]
  1. [73]
    I am satisfied, however, that the agreement was either repudiated or abandoned by the parties.
  1. [74]
    The plaintiff, through the letter from Shand Taylor, renounced the agreement and declared that the parties were released from their obligations under it. In effect, this was notice of its refusal to perform its obligations under that agreement.
  1. [75]
    By the time any position to the contrary was put, the first defendant had engaged in an unequivocal overt act…inconsistent with the subsistence of the agreement.[59]It had complied with the directions from Mr Colussa and Ms Pelagatti to deal with Metro Tiles Franchising and Metro Tiles, not with M.T. Franchising and set about rebranding the store.
  1. [76]
    Its conduct was, otherwise, consistent with the position that it accepted the agreement with M.T. Franchising was at an end.
  1. [77]
    The only actions that might be interpreted as equivocation are the supply of sales figures in January 2012 and the use of proforma purchase orders from its MYOB program. I accept Ms Doherty’s explanations about these matters.
  1. [78]
    The first defendant’s response went beyond mere inactivity or acquiescence. It followed instructions about supply and payment for stock. It took active steps consistent with accepting the repudiation of the contract by removing the Metro Tiles signage from its Yeppoon store and by refraining from answering the phone using the name Metro Tiles.
  1. [79]
    I find the evidence also establishes the franchise agreement was abandoned. Until Mr Colussa resumed control of M.T. Franchising in December 2011, the plaintiff acted in conformity with its renunciation of the agreement by the letter from Shand Taylor in August 2011. Even after Mr Colussa resumed control of M.T. Franchising, it was not clear for whom he purported to speak in his dealings with Ms Doherty.
  1. [80]
    Regardless of Mr Colussa’s personal intentions at any given time, it is the conduct of the plaintiff, M.T. Franchising, which must be considered. Objectively viewed,[60]the conduct of the plaintiff manifested an intention that it would not proceed with the franchise agreement. Not only did it take no further part in any supply arrangements with Murlay Views, it informed it that it must enter into new arrangements if it wished to continue to operate as a Metro Tiles franchisee. It did not seek to further supply Murlay Views or to countermand the directions given by Mr Colussa and Ms Pelagatti not to deal with it.
  1. [81]
    Mr Colussa’s communications by email in December 2011 and January 2012 were equivocal as to which corporate entity he spoke for. It was not until the Notice to Remedy Default in February 2012, that the plaintiff could reasonably be thought to have taken any stance that was inconsistent with its abandonment of the franchise agreement.
  1. [82]
    By the conduct canvassed above in relation to its acceptance of the plaintiff’s repudiation of the franchise agreement, the first defendant manifested its consent to the plaintiff abandoning the franchise agreement.
  1. [83]
    I am satisfied that the franchise agreement was terminated either because it was repudiated or abandoned, on or about 26 August 2011. The plaintiff is not entitled to either specific performance of the agreement or damages for its breach after 26 August 2011.
  1. [84]
    Given those findings, it is not strictly necessary to consider whether the plaintiff would be restrained by conventional estoppel from asserting any rights it might have under the agreement. However, it is appropriate to indicate my views in brief.
  1. [85]
    The evidence canvassed in relation to the termination arguments establishes the propositions as to the parties’ conduct necessary to establish an estoppel of that nature.[61]Although I had some reservation about whether the first defendant could establish detriment, I accept that is constituted by the asserted claim, to the extent that it relies on fees payable under the franchise agreement after 26 August 2011, rather than any claim for unpaid stock.[62]
  1. 5.)
    Relief for the period from 1 to 26 august?
  1. [86]
    I have found that the franchise agreement was terminated, either by the first defendant accepting the plaintiff’s repudiation of the agreement or by the parties abandonment of it. The date relied upon by the defendants is the date of Shand Taylor’s letter - 26 August 2011. The uncontested evidence is that no franchise or advertising fees were paid after July 2011. No basis for resisting judgment for the period 1 – 26 August was asserted by the defendants. The plaintiff should have judgment on its claim for fees payable under the franchise agreement for that period only. Otherwise its claims under the franchise agreement are dismissed.
  1. 6.)
    The claim for unpaid stock
  1. [87]
    There is no evidence M.T. Franchising supplied stock to Murlay Views which it has not been paid for. Ms Pelagatti confirmed during cross-examination that the debtor ledger for M.T. Franchising[63]showed an amount of $16,756 owing for franchise fees, but did not disclose any amount owing for unpaid stock.[64]The amount that the plaintiff appears to claim for unpaid stock is an amount of $3,499.79, a figure derived from the debtor ledger of Metro Tiles Franchising.[65]Ms Pelagatti agreed that amount was owed to Metro Tiles Franchising, which is not the plaintiff in these proceedings.[66]She agreed that the only invoice produced to the court issued by M.T. Franchising for stock[67]was for $1,628 and was paid in full on 21 December 2011.[68]
  1. [88]
    Another entity in the Metro Tiles group may well have a claim against the defendants in relation to unpaid stock. Counsel for the plaintiff argued I could infer an agency relationship between M.T. Franchising and Metro Tiles Franchising and Metro Tiles in the supply of stock to the first defendant. In my view, a finding of agency is not open given the evidence canvassed above, particularly the letter from Metro Tiles of 29 August and the email from Ms Pelagatti of 9 September 2011, both of which expressly declaim any ongoing association between Metro Tiles (and its new entity, Metro Tiles Franchising) and M.T. Franchising.
  1. [89]
    The claim for unpaid stock has not been substantiated and is dismissed.
  1. 7.)
    Conclusion
  1. [90]
    The plaintiff has succeeded only in relation to the fees payable under the franchise agreement for the period from 1 August to 26 August 2011. The parties have leave to provide their agreed calculation of the amount payable for that period within seven days. Otherwise the plaintiff’s claims against the defendants are dismissed. I will hear from the parties as to costs.

Footnotes

[1] Transcript of Proceedings, District Court at Brisbane, 25/06/13, 1-42[46]-[47].

[2] Transcript of Proceedings, District Court at Brisbane, 25/06/13, 1-27[37] - 1-28[5].

[3] Exhibit 9 – Licence Agreement – Metro Tiles Pty Ltd & M.T. Franchising Pty Ltd, 22/03/1991.

[4] Transcript of Proceedings, District Court at Brisbane, 25/06/13, 1-42[46] – 1-43[1].

[5] Exhibit 4 – Franchise Agreement: Amulla Consultancy Pty Ltd & M.T. Franchising Pty Ltd, 22/10/04.

[6] Exhibit 5 – Deed of Assignment, 16/04/10.

[7] Exhibit 6 – Guarantee & Indemnity, 16/04/10.

[8] Exhibit 13 – Bundle of Correspondence: email from Paul Slatter to Patrizia Pelagatti, 14//07/11, 2:07PM.

[9] Exhibit 13 – Bundle of Correspondence: email from Patrizia Pelagatti to Paul Slatter, 14/07/11, 2:48PM.

[10] Exhibit 14 – Letter from Shand Taylor Lawyers to Thomsons Lawyers, 19/08/11.

[11] Exhibit 11 – Letter from Metro Tiles to the Franchisees, 29/08/11.

[12] Exhibit 10 – Letter from Shand Taylor Lawyers to Kate Doherty, 26/08/11.

[13] Exhibit 10 – Letter from Shand Taylor Lawyers to Kate Doherty, 26/08/11.

[14] Transcript of Proceedings, District Court at Brisbane, 25/06/13, 1-34[6]-[25].

[15] Transcript of Proceedings, District Court at Brisbane, 25/06/13, 1-46[46]-[47]; 26/06/13, 2-13[5]-[6].

[16] Exhibit 11 – Letter from Metro Tiles to the Franchisees, 29/08/11.

[17] Transcript of Proceedings, District Court at Brisbane, 25/06/13, 1-35[29]-[37].

[18] Transcript of Proceedings, District Court at Brisbane, 26/06/13, 2-36[4]-[18].

[19] Transcript of Proceedings, District Court at Brisbane, 25/06/13, 1-48[13]-[31]. See also Exhibit 10 – Letter from Shand Taylor Lawyers to Kate Doherty, 26/08/11.

[20] Exhibit 13 – Bundle of Correspondence: email from Patrizia Pelagatti to the Franchisees, 9/09/11, 3:39PM.

[21] Transcript of Proceedings, District Court at Brisbane, 25/06/13, 1-58[23]-[27].

[22] Exhibit 18 – Debtor Transaction Ledger: M.T. Franchising Pty Ltd; Exhibit 19 – Debtor Transaction Ledger: Metro Tiles Franchising Pty Ltd; and Exhibit 20 – Debtor Transaction Ledger: Metro Tiles Pty Ltd.

[23] Exhibit 15 – Bundle of Invoices & Receipts.

[24] Exhibit 22 – Suncorp Bank Business Payments Credit, 21/12/11, & M.T. Franchising Pty Ltd Statement, 31/05/11.

[25] Transcript of Proceedings, District Court at Brisbane, 25/06/13, 1-63[40] – 1-64[10].

[26] Exhibit 13 – Bundle of Correspondence: email from John Colussa to Metro Tiles Yeppoon, 8/12/11, 12:35PM.

[27] Exhibit 13 – Bundle of Correspondence: email from John Colussa to Metro Tiles Yeppoon, 9/12/11, 8:43AM.

[28] Exhibit 13 – Bundle of Correspondence: email from Karen Mills to Yeppoon, 3/01/12, 12:10PM.

[29] Exhibit 13 – Bundle of Correspondence: email from Patrizia Pelagatti to Metro Tiles Yeppoon, 23/01/12, 12:11PM.

[30] Exhibit 13 – Bundle of Correspondence: email from John Colussa to Metro Tiles Yeppoon, 27/01/12., 1:58PM.

[31] Transcript of Proceedings, District Court at Brisbane, 26/06/13, 2-29[36]-[38].

[32] Exhibit 13 – Bundle of Correspondence: email from John Colussa to Metro Tiles Yeppoon, 30/01/12, 1:16PM.

[33] Exhibit 13 – Bundle of Correspondence: email from Metro Tiles Yeppoon to John Colussa, 31/01/12, 10:57AM.

[34] Exhibit 16 – M.T. Franchising Pty Ltd Franchise Fee Calculations, July – December 2011.

[35] Transcript of Proceedings, District Court at Brisbane, 2-28[10] – [13].

[36] Transcript of Proceedings, District Court at Brisbane, 26/06/13, 2-29[1]-[5]; [28]-[34].

[37] Transcript of Proceedings, District Court at Brisbane, 26/06/13, 2-34[34] – 2-35[12].

[38] Exhibit 13 - Email from John Colussa to Metro Tiles Yeppoon, 24/02/12, 10:21AM.

[39] Transcript of Proceedings, District Court at Brisbane, 26/06/13, 2-14[28]-[31].

[40] Exhibit 13 – Bundle of Correspondence: email from Metro Tiles Yeppoon to John Colussa, 24/02/12, 4:04PM.

[41] Exhibit 12 – Letter from Porta Lawyers to PM Lee & Co, 2/03/12.

[42] Exhibit 12 – Letter from PM Lee & Co to Porta Lawyers, 12/03/12.

[43] Transcript of Proceedings, District Court at Brisbane, 26/06/13, 2-3[36] – [44].

[44] Reply (court document #8), filed 8/10/12 – [11](g) & (h).

[45] Transcript of Proceedings, District Court at Brisbane, 26/06/13, 2-15[1] – 2-20[38].

[46] Rule 5(1) Uniform Civil Procedure Rules 1999 (Qld).

[47] Rule 367(1) Uniform Civil Procedure Rules 1999 (Qld).

[48] Rigato Farms Pty Ltd v Ridolfi [2001] 2 Qd R 455 at [21] (de Jersey CJ).

[49] Rule 367(2) Uniform Civil Procedure Rules 1999 (Qld). See, e.g., Barker v Linklater [2008] 1 Qd R 405, a case in which evidence on an issue was allowed despite a deemed admission on the pleadings.

[50] Exhibit 12 – Letter from P.M. Lee & Co to Porta Lawyers, 12/03/12.

[51] Reply (court document #8), filed 8/10/12 – [2](f)(iv); (g); & (h).

[52] The relevant question was put by counsel for the plaintiff in cross-examination. He put the following proposition to Ms Doherty: I put it to you that once those orders were filled, you then thought it was a convenient time to start winding down your relationship with Metro Tiles?—No. I had started doing that some time earlier. See Transcript of Proceedings, District Court at Brisbane, 26/06/13, 2-31[6] – [8].

[53] Transcript of Proceedings, District Court at Brisbane, 26/06/13, 2-41[7] – [15].

[54] Exhibit 23 – Coastline Signs & Graphics Invoice, #3327.

[55] Exhibit 15 – Metro Tiles Purchase Order #1686, 9/01/12. See also Transcript of Proceedings, District Court at Brisbane, 26/06/13, 2-42[30] – [31].

[56] Transcript of Proceedings, District Court at Brisbane, 26/06/13, 2-42[41] – 2-43[3].

[57] Transcript of Proceedings, District Court at Brisbane, 26/06/13, 2-43[39] – 2-44[19].

[58] Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 356-7 (Mason J).

[59] State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyd’s Rep 277, 286.

[60] Marminta Pty ltd v French [2003] QCA 541 [22] (Jerrard JA).

[61] Moratic Pty Ltd v Lawrence James Gordon [2007] NSWSC 5 (Brereton J).

[62] Grundt v Great Boulder Gold Mines Pty Ltd (1937) 59 CLR 641, 674 (Dixon J).

[63] Exhibit 18 – Debtor Transaction Ledger, M.T. Franchising Pty Ltd.

[64] Transcript of Proceedings, District Court at Brisbane, 2-5[21] – [41].

[65] Exhibit 19 – Debtor Transaction Ledger, Metro Tiles Franchising Pty Ltd.

[66] Transcript of Proceedings, District Court at Brisbane, 2-5[43] – 2-6[15].

[67] Exhibit 22 – Suncorp Bank Business Payments Credit, 21/12/11, & M.T. Franchising Pty Ltd Statement, 31/05/11.

[68] Transcript of Proceedings, District Court at Brisbane, 2-8[30] – 2-9[7].

Close

Editorial Notes

  • Published Case Name:

    M.T. Franchising Pty Ltd v Murlay Views Pty Ltd & Anor

  • Shortened Case Name:

    M.T. Franchising Pty Ltd v Murlay Views Pty Ltd

  • MNC:

    [2013] QDC 179

  • Court:

    QDC

  • Judge(s):

    Kingham DCJ

  • Date:

    18 Oct 2013

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Barker v Linklater[2008] 1 Qd R 405; [2007] QCA 363
1 citation
Jump To
Cite 1 - [2008] 1 Qd R 405
CGM Investments Pty Ltd v Chelliah (2003) 196 ALR 548
1 citation
Jump To
Cite 1 - (2003) 196 ALR 548
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 C.L R. 337
2 citations
Jump To
Cite 1 - (1982) 149 C.L R. 337
Cite 2 - (1982) 149 C.L R. 337
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 C.L.R 423
1 citation
Jump To
Cite 1 - (1978) 138 C.L.R 423
Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641
2 citations
Jump To
Cite 1 - (1937) 59 CLR 641
Cite 2 - (1937) 59 CLR 641
Marminta Pty Ltd v French [2003] QCA 541
2 citations
Jump To
Cite 1 - [2003] QCA 541
Cite 2 - [2003] QCA 541
Moratic Pty Ltd v Gordon (2007) NSWSC 5
2 citations
Jump To
Cite 1 - (2007) NSWSC 5
Cite 2 - (2007) NSWSC 5
Ridolfi v Rigato Farms Pty Ltd[2001] 2 Qd R 455; [2000] QCA 292
2 citations
Jump To
Cite 1 - [2001] 2 Qd R 455
Cite 2 - [2001] 2 Qd R 455
State Trading Corporation of India Ltd v Golodetz Ltd [1989] 2 Lloyd's Rep 277
1 citation
Jump To
Cite 1 - [1989] 2 Lloyd's Rep 277
Summers v The Commonwealth (1918) 25 CLR 144
1 citation
Jump To
Cite 1 - (1918) 25 CLR 144

Cases Citing

Case NameFull CitationFrequency
M.T. Franchising Pty Ltd v Murlay Views Pty Ltd & Anor (No 2) [2013] QDC 2673 citations
1

Require Technical Assistance?

Message sent!

Thanks for reaching out! Someone from our team will get back to you soon.

Message not sent!

Something went wrong. Please try again.