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Guirguis Pty Ltd v Michel's Patisserie System Pty Ltd[2019] QDC 11

Guirguis Pty Ltd v Michel's Patisserie System Pty Ltd[2019] QDC 11

 

DISTRICT COURT OF QUEENSLAND

 

CITATION:

Guirguis Pty Ltd & Another v Michel’s Patisserie System Pty Ltd & Ors (No 2) [2019] QDC 11

PARTIES:

GUIRGUIS PTY LTD
ACN 151 423 577
(first plaintiff)

and

FREDERICK GUIRGUIS &

KAREN GRACE GUIRGUIS
(second plaintiff)

v

MICHEL’S PATISSERIE SYSTEM PTY LTD

ACN 132 424 947
(first defendant) 

and

MICHEL’S LEASING PTY LTD

ACN 130 002 023
(second defendant) 

and

RFGA MANAGEMENT PTY LTD

ACN 071 765 609
(third defendant) 

and

TRENT DELLIT
(fourth defendant) 

and

APLUS BUSINESS BROKERS PTY LTD

ACN 098 689 840
(fifth defendant) 

and

GEORGE METZAKIS
(sixth defendant) 

FILE NO/S:

2515 of 2015

DIVISION:

Civil

PROCEEDING:

Trial

DELIVERED ON:

15 February 2019

DELIVERED AT:

Brisbane

HEARING DATE:

21-24 May, 1 June 2018

JUDGE:

Rosengren DCJ

ORDER:

Judgment to be entered in favour of the plaintiffs subject to hearing further submissions as to the form of the order.

CATCHWORDS:

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT – FALSE OR MISLEADING STATEMENTS – where the plaintiffs entered into a franchise agreement for a Michel’s Patisserie to be located in Townsville – where the plaintiffs allege that oral and written representations were made on behalf of the franchisor which they relied upon – representations as to future matters – whether representations were misleading 

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT – FALSE REPRESENTATIONS – FALSE OR MISLEADING STATEMENTS – PUFFERY – where the representations were as to the kinds of products which would be available for sale by a franchisee, the reliability and frequency of the supply of those products from Brisbane to Townsville, and the quality and condition of the products upon their receipt in Townsville – whether the representations are mere puffery

TRADE AND COMMERCE – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT – NON-DISCLOSURES – where the plaintiffs allege material non-disclosures - whether the defendants were aware of facts which were not disclosed to the plaintiffs – whether there was an objectively reasonable expectation on the part of the plaintiffs that those facts would be disclosed

TRADE AND COMMERCE – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT – RELIANCE - SIGNIFICANCE OF INDEPENDENT LEGAL ADVICE – RESPONSES OF NON-RELIANCE IN QUESTIONNAIRE - where the plaintiffs sought independent legal advice in respect of the franchise agreement and in completing the Questionnaire and Deed of Prior Representations – where the plaintiffs did not identify the alleged misrepresentations in the Questionnaire and Deed of Prior Representations – where the defendants submit that the plaintiffs therefore did not rely upon the alleged misrepresentations – where the legal advice provided to the plaintiffs was not comprehensive – significance of the independent legal advice – significance of Questionnaire and Deed of Prior Representations – whether reliance on alleged misrepresentations established

TRADE AND COMMERCE – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT – LOSS AND DAMAGE – NO TRANSACTION CASE – losses of first plaintiff associated with entry into the franchise agreement – loss of income of second plaintiffs consequential on the first plaintiff entering into the franchise agreement 

TRADE AND COMMERCE – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT – COUNTERCLAIM- WARRANTIES – where warranty clauses provided that the plaintiffs did not rely upon any of the franchisor’s representations – where representations not identified in Questionnaire - where franchisor relies on the warranty and responses to Questionnaire as misleading or deceptive conduct by plaintiffs and counterclaim for loss and damage of franchisor’s liability to the plaintiffs - whether franchisor’s liability to plaintiffs constitutes recoverable loss or damage

Australian Consumer Law, ss 4, 18,  236, 237, 243

Civil Proceedings Act 2011 (Qld) s 58

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592

Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304

Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367

Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31

Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199

Ford Motor Co of Australia Ltd v Arrowcrest Group Pty Ltd [2003] FCAFC 313

GIO Australia Holding Ltd v Marks (1997) ATPR 43,541

Google Inc v ACCC (2013) 249 CLR 435

Gould v Vaggelas (1985) 157 CLR 215

Henville v Walker (2001) 206 CLR 459

I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109

James v ANZ Banking Group Ltd (1986) 64 ALR 347

Kabwand Pty Ltd v National Australia Bank Ltd (1989) 11 ATPR 40-950

Keen Mar Corp Pty Ltd v Labrador Shopping Centre Pty Ltd (1989) ATPR (Digest) 46-048

Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 147 ALR 568 

Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 46-054

March v Stramere (E & MH) Pty Ltd (1991) 171 CLR 506

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357

Palmer Street Developments Pty Limited & Anor v J & E Vanjak Pty Ltd & Anor [2018] QCA 111

Pappas v Soulac Pty Ltd [1983] FCA 3

Parkdale v Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 

SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50

Specsavers Pty Ltd v Luxottica Retail Australia Pty Ltd [2013] FCA 648

Riochet Pty ltd v Equity Trustees Executives & Agency Co Ltd (1993) 41 FCR 229

Venerdi Pty Ltd v Anthony Moreton Group Funds Management Ltd [2015] 1 Qd R 214

Watson v Foxman (2000) 49 NSWLR 315

COUNSEL:

R S Ashton QC and P O'Brien for the plaintiffs

D Chesterman for the first, second, third and fourth defendants

SOLICITORS:

Thomson Geer for the plaintiffs

Thynne & Macartney for the first, second, third and fourth defendants

Introduction

RFG and its systems

Background facts re Patisserie

Pre-contractual negotiations

Signing of Franchise Agreement and events prior to Patisserie opening

Operation of the Patisserie

Credibility

Oral and written representations

Representations by Mr Metzakis

Representations by Mr Dellit

Representations in email and price list

Information not disclosed

Whether conduct misleading

Puffery

Oral representations

Email and price list

Non-disclosures

Reliance

Other inquiries

Questionnaire

Legal advice

Change from Brisbane to Sydney

Other matters of non-reliance

Supply of RFG products to the Patisserie

Loss and damage

First plaintiff

Mrs Guirguis

Mr Guirguis

Counterclaim

Summary

Introduction

  1. [1]
    The second plaintiffs were directors of the first plaintiff company. In March 2012, there was a franchise agreement (‘the Franchise Agreement’) signed by the second plaintiffs on behalf of the first plaintiff whereby the first defendant granted the first plaintiff the right to establish and operate a Michel’s Patisserie business within the Stockland Shopping Centre in Townsville (‘the Patisserie’). The second defendant was the lessee of the premises from which the Patisserie operated. The third defendant managed the franchise system on behalf of the first defendant. The fourth defendant was employed by the third defendant as the Retail Leasing Executive for Queensland and the Northern Territory. The fifth defendant marketed the first defendant’s franchise system to potential franchisees. The sixth defendant was a director and sole shareholder of the fifth defendant.
  1. [2]
    The first plaintiff also entered into an Outlet Agreement with the second defendant and a Fitout Construction Agreement with a builder and the second and third defendants (‘Related Agreements’).
  1. [3]
    The second plaintiffs guaranteed the first plaintiff’s obligations under the Franchise Agreement and the Outlet Agreement.
  1. [4]
    Each of the first, second and third defendants are part of a broader business known at the Retail Food Group. During the trial, these defendants, or any of them, were referred to as ‘RFG’. I have adopted this approach in these reasons, except where it is necessary to identify a particular defendant.
  1. [5]
    On 28 May 2012, the first plaintiff commenced operating the Patisserie. The Franchise Agreement is also dated this date. There is no evidence as to when it was signed on behalf of the first defendant. In July 2013, the Patisserie was abandoned and notice was given in writing that the first plaintiff was terminating the Franchise and Outlet Agreements.[1]
  1. [6]
    In September 2013, the plaintiffs commenced this proceeding against the defendants for damages and other orders.
  1. [7]
    In April 2016, this matter was heard over nine days in the District Court in Brisbane. Judgment was delivered on 27 May 2016 dismissing the claims of the plaintiffs. On 9 May 2017, the Court of Appeal allowed an appeal from that judgment which was set aside, except in so far as that order dismissed the first plaintiff’s claim against the first defendant for damages for breach of contract and breach of warranty and the first plaintiff’s claim against all defendants for damages for negligent misrepresentation. The matter was otherwise remitted to the District Court for a retrial by a different judge.[2]The retrial came before me.  I have read the decision of the Court of Appeal.
  1. [8]
    I have not read the reasons of the Judge at the first trial. I have also not read the transcript of evidence of the first trial apart from those parts of the transcript which have been tendered as exhibits in this trial. This is because the effect of the decision of the Court of Appeal is that the matter was to be retried de novo. In short, I have heard and determined the case on the evidence that was heard and tendered before me, and only on that evidence. The trial was heard over five days. Five witnesses gave oral evidence and 176 exhibits were tendered. Exhibits 48 to 61 were tendered as original evidence only. The exhibits include the transcripts of the evidence of Gordon Robertson, Elizabeth Vale, Christopher McDowall, Peter Haley, and Elia Lytras. They each gave evidence at the first trial and the transcripts of their evidence were tendered by consent.[3] They did not give evidence at the trial before me.      
  1. [9]
    The plaintiffs’ claims against the fifth and sixth defendants were discontinued shortly prior to the commencement of the trial before me and they therefore were not represented at the trial.
  1. [10]
    In paragraph 36(b) of the Second Further Amended Statement of Claim (‘the statement of claim’), Mr Dellit and Mr Metzakis as the fourth and sixth defendants respectively, are alleged to be personally liable as parties involved in the alleged contraventions of the Australian Consumer Law in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (‘the ACL’).  At the commencement of oral submissions, counsel for the plaintiffs conceded that personal liability on the part of Mr Metzakis and/or Mr Dellit was not made out on the evidence.[4]
  1. [11]
    The plaintiffs’ case is that in early 2012 there were certain oral and written representations made on behalf of RFG about the quality, the range and the frequency of delivery of products from Brisbane. It is claimed that these representations were relied on in entering into the Franchise and Related Agreements. It is alleged there was no proper basis for making the representations and therefore they were misleading or deceptive in breach of s 18 of the ACL. It is further alleged there were failures by RFG to inform the plaintiffs of certain matters concerning the capacity to supply the Patisserie with products from Brisbane, which were inconsistent with the representations and were also misleading or deceptive. Based on these contraventions of the ACL, the plaintiffs claim damages or other compensation under ss 236, 237 and 243 of the ACL. They claim to have suffered loss and damage on the basis that they would not have entered into the Franchise and Related Agreements absent the contravening conduct. Further, a declaration is sought to the effect that the Franchise and Related Agreements are void, and unenforceable against the plaintiffs given that they were induced by conduct in breach of ss 4 and 18 of the ACL.
  1. [12]
    RFG’s counterclaim seeks to recover as against the first plaintiff the financial losses for unpaid franchise fees, marketing contributions and other costs incurred as a result of the first plaintiff abandoning the Patisserie. The total amount claimed is $650,552.24. In the event it is found that the representations were in fact made to the plaintiffs as is alleged, a further counterclaim, to which Mr Dellit is also a party, is premised on the misstatements by the plaintiffs in the Questionnaire and the Deed of Prior Representations, and the warranties in the Franchise Agreement. In that event, the plaintiffs are said to be liable for the loss and damage resulting from the misstatements and/or warranties. Further, there is a claim against the second plaintiffs on the basis of their obligations under their guarantees.

RFG and its systems

  1. [13]
    RFG is a multi-brand franchisor with a component of vertically integrated manufacturing businesses. Apart from Michel’s Patisserie, it is also the franchisor for other brands, namely BB’s Café, Donut King, Brumby’s Bakery, Pizza Capers, Crust Gourmet Pizza, It’s A Grind, The Coffee Guy and Café2U. It has approximately 1,700 franchises operating in Australia. RFG supplies products to the franchises through third party distributors, with the principal distributor being Australian Baking Supplies (‘ABS’).
  1. [14]
    In 2012, Gary Alford was responsible for RFG’s manufacturing and wholesaling. He explained that RFG had two distinct supply models. These were based on the location of a franchise in relation to a bakery which made and supplied RFG products. Those franchises which were within a three hour drive from a supply bakery, received fresh products on a daily basis. This was known as the daily fresh model. All other franchises operated on the regional model. This meant the products were delivered frozen. The products were manufactured daily but then frozen in one of two ways. One was by placing the product in a tunnel freezer. This had the effect of freezing the product within 20 to 25 minutes. It was generally used for the larger cakes. This method of snap freezing was thought to help retain the moisture in the cake. The other way of freezing a product was to place it in a general freezer, where the freezing process would take some two to three hours. This was generally used for savoury items.
  1. [15]
    Mr Alford explained in evidence that by April 2012 it was considered that the regional model was the more desirable model. A decision had been made that every new franchise would have freezers installed to store frozen products. The advantages to RFG of this model were that it was cheaper and it was thought to be a more reliable and consistent model. The advantages to the franchisees were that it enabled them to have better control over the costs of the products and stock rotations.
  1. [16]
    Michel’s Patisserie franchises first commenced operating in regional Queensland in 2008. The first two locations were in Yeppoon and Bundaberg. From this time, these franchises were supplied with their frozen products from bakeries in South Granville in western Sydney. In 2010, the supply of frozen products to the regional Queensland franchises moved from Sydney to Dyson Cakes in Brisbane (‘Dyson’). Deliveries were being made weekly to the Michel’s Patisserie Queensland regional franchises.
  1. [17]
    In early 2012, the products for Michel’s Patisserie franchises in Queensland were still being made and supplied by Dyson. However, the contract expired in February 2012. There were ongoing negotiations regarding new contract terms. Mr Alford explained that on 20 February 2012, RFG became aware, through the lawyers for Dyson, that it was experiencing a cash flow problem on account of a large waste water bill. Dyson requested a forward payment for products it had made after the expiry of the contract. $54,000 was forwarded from RFG to Dyson, on the condition that representatives from Dyson attended a meeting the following day. Mr Alford and the then CEO of RFG were present at the meeting with representatives from Dyson and its lawyers on 21 February 2012. RFG provided to Dyson a further $57,000, after being assured that the need for this money was on account of a temporary cash flow - and not a solvency - problem. In an email to Dyson later that day, it was stated that the payments to Dyson had been made to ensure ongoing supply of products to franchisees. This was in circumstances where Dyson had previously threatened to cease supplying the products.[5]
  1. [18]
    On 16 March 2012, the lawyers for Dyson informed RFG that it would not be continuing to make and supply products for RFG after 16 April 2012.[6]Mr Alford gave evidence that he thought this may have been a negotiation tactic being employed by Dyson in relation to the new contract.  As a matter of precaution RFG began speaking with other potential suppliers.[7]In the early evening of 2 April 2012, RFG received correspondence to the effect that Dyson had gone into liquidation.  RFG immediately reverted back to using bakeries in New South Wales to make and supply frozen products to Queensland’s regional Michel’s Patisserie franchises.  These bakeries were already supplying products to regional franchises in southern New South Wales and northern Victoria.  The products continued to be made from the same recipes.

Background facts re Patisserie

Pre-contractual negotiations

  1. [19]
    Mr Guirguis holds tertiary qualifications in occupational health and safety. His work generally required significant travel. He was looking to acquire a business locally in Townsville to enable him to spend more time with his family. His preference was the acquisition of a franchise business as they had limited small business experience. He was interested in a coffee shop although he did not want to be limited to selling cakes. He looked at a number of franchise coffee shops including The Coffee Club, Gloria Jeans and Jamaica Blue. His enquiries with respect to the Jamaica Blue franchise progressed to a fairly advanced stage. The first plaintiff was initially incorporated with the intention of it being used to operate a Jamaica Blue franchise. This did not eventuate. It was ultimately the vehicle by which the Guirguises gave effect to their plans for the Patisserie. I shall from time to time refer to the Guirguises as running the business, even though in reality it was the first plaintiff company.
  1. [20]
    In late 2011, Mr Guirguis recalled reading an advertisement in the Townsville Daily Bulletin for a Michel’s Patisserie franchise. He responded to the advertisement by telephoning the listed mobile number, which was Mr Metzakis’s. He was a business broker authorised by RFG to provide information to prospective franchisees about RFG’s franchise system. Mr Guirguis was told by Mr Metzakis that RFG were keen to open a franchise in Townsville and it was considering a number of potential shopping centres, including Stocklands Shopping Centre (‘Stocklands’). This was the most desirable location for Mr Guirguis, as he had been working there in his employment with Laing O'Rourke.
  1. [21]
    Following this discussion, Mr Guirguis said that he kept in touch with Mr Metzakis and he subsequently learnt that RFG had secured a lease at Stocklands.
  1. [22]
    Mr Metzakis first met Mr Guirguis in January 2012 at the Coffee Club in Brisbane city. There were ongoing discussions between them over the coming weeks. At no stage did Mrs Guirguis have any contact with Mr Metzakis. Her husband researched potential franchise opportunities and conducted the negotiations to enter into the Franchise and Related Agreements. He kept her appraised of developments and they discussed them.[8]
  1. [23]
    On 25 January 2012, Sue Graham, a franchise sales assistant, forwarded an email to Mr Guirguis. It stated that further to his communications with Mr Metzakis, she was attaching a Franchise Application document (31 pages) to be completed and signed, a Disclosure Document (approximately 250 pages) also to be signed, and an information letter outlining the application process once an application had been received. The Disclosure Document incorporated a copy of the proposed Franchise Agreement.
  1. [24]
    The Franchise Application was completed and signed by Mr and Mrs Guirguis. In this document they responded affirmatively to a question enquiring as to whether they had read the Disclosure Document and example Franchise Agreement. Section 3.5 of the Franchise Application is titled “Representations” and states “Please record any additional statements or representations made to you about the system or business that you have relied upon (please specify the statement or representation made and who made it – feel free to add additional pages).”  The Guirguises left this blank but confirmed at the bottom of the page that they had completed Section 3 in full. It is recorded that it took three hours and one minute to complete.[9]
  1. [25]
    On 31 January 2012, the Franchise Application was returned to RFG. Around this time, Mr Metzakis emailed to Mr Guirguis a Store Budget Estimate that had been provided to him by Mr Dellit.[10]Mr Guirguis was notified by RFG on 13 February 2012 that their Franchise Application had been approved.[11]
  1. [26]
    Mr Guirguis subsequently attended RFG’s offices at the Gold Coast. It was his understanding that he would be interviewed on this day. He met Mr Metzakis in the foyer and was introduced to Mr Dellit. After this, Mr Dellit took Mr Guirguis into a small room where there were some discussions. Mr Dellit had commenced employment with RFG in approximately early 2011. At the time of these subject events, he was RFG’s Regional Leasing Executive for Queensland and the Northern Territory. His primary responsibilities involved identifying gaps in the market for potential new franchises for the variety of brands that RFG had at the time. He also negotiated leases.
  1. [27]
    On 16 February 2012, RFG emailed to the Guirguises a letter. It relevantly enclosed the Franchise Grant Documentation, which included the Deed of Prior Representations & Questionnaire, the Franchise Agreement and the Outlet Licence Agreement. It stated that the Disclosure Document and a Supplementary Disclosure Document had been forwarded by email earlier that day. As to the Deed of Prior Representations & Questionnaire, the letter states the following:

“Your Application for Franchise was approved subject to, among other things, we being satisfied with the answers given by you to the questions contained in the Questionnaire and Deed of Prior Representations together with the outcome of an exit interview (where required by us).

Should a dispute arise as to the basis of your entry into the Franchise Grant Documentation, the Deed of Prior Representations may restrict you from relying upon any information unless it is contained in Franchise Grant Documentation, the Premises Disclosure or the Franchisor’s Disclosure Document, or otherwise recorded or disclosed by you in the Questionnaire or Interview.

You should discuss the terms and effect of the Deed of Prior Representations with your solicitor.  In the meantime, we note that the Questionnaire will allow you to place ‘on the record’ and information that you have relied upon in proceeding with the transaction.

It will also allow us to clarify any incorrect information at any early stage in our relationship with you. 

The Questionnaire is therefore of paramount importance to both parties.  Accordingly, we ask that you take the time provided to consider answers to the questions asked of you.  If the Questionnaire is not completed to our satisfaction then you may be requested to complete another one, or alternatively, our approval of your Application may be withdrawn.”[12]

  1. [28]
    It was recommended that the Disclosure Document and the Deed of Representations be discussed with their legal and financial advisers and that the Form A Acknowledgment contained in the Disclosure Document be signed and returned.
  1. [29]
    Mr Guirguis explained that he and his wife read the various documents but were concerned that they tended to favour RFG’s interests rather than a franchisee. The Questionnaires were completed on 16 March 2012. Mr Guirguis completed and dated his. He also completed his wife’s Questionnaire in her presence. The responses provided by the Guirguises to the various topics in the Questionnaire is discussed in further detail below.
  1. [30]
    Arthur Browne had been the Guirguis’s solicitor and they met with him at his offices on 19 March 2012 to discuss the paperwork. He looked through it. He agreed with their concerns that the documents favoured the rights of RFG. Mr Guirguis’s uncontested evidence was that Mr Browne said to them ‘If you sign this, there’s no way known you’ll ever get out of it; it’d just about be impossible.’[13] 
  1. [31]
    Mr Browne advised them that while they seemed to have quite a bit of information about the coffee side of the business, that further enquiries were required regarding the bakery and cake side of the business. The nature and extent of the legal advice is discussed in further detail below.
  1. [32]
    Later that day, Mr Guirguis forwarded an email to RFG. It stated that their solicitor had a few problems with the proposed Franchise Agreement and a few questions needed to be answered before it would be signed. One such question related to the list of products that the Patisserie would be selling and what the profit margins would be. The response provided was that because it was going to be a new store, RFG was unable to estimate the profit margin. The response also reiterated the importance of seeking independent legal and financial advice.[14]Mr Guirguis explained that it was important for them to be provided with a copy of the price list as they needed to know how much it was going to cost to purchase the products from RFG and what they could sell them for.[15]
  1. [33]
    By email dated 21 March 2012, Mr Metzakis informed Mr Guirguis that he had been speaking with the franchisee for the Yeppoon patisserie and she had commented that she sold a lot of frozen large cakes that were then taken to destinations like Mt Isa, Mackay and Townsville and she had said that the larger cakes travelled really well without losing their taste and freshness.
  1. [34]
    On the following day, Mr Dellit emailed to the Guirguises RFG’s price list dated 1 July 2011 in response to Mr Guirguis’s email of 19 March 2012. It is apparent from Exhibit 147 that it was Mr Szysz who provided to Mr Dellit the price list and the information regarding the freight costs for regional stores.[16]The Guirguises appreciated that the price list could change from time to time.[17] 
  1. [35]
    The Guirguises had their accountants provide advice about a number of accounting related matters. They prepared a Monthly Cash Forecast for the 12 months from May 2012.[18]Mr Guirguis explained in his evidence that he provided the requested documentation to his accountants and did not know the information relied upon by them in preparing the Monthly Cash Forecast.  His evidence was that while he placed some reliance on this, it was not significant as he appreciated that it was nothing more than a forecast.[19]Mrs Guirguis was unsure of the information provided to the accountants. She thought they may have given the accountants information regarding the amount of rent that was to be paid for the Patisserie.  She agreed that the document showed the Patisserie potentially making a profit and that she read it prior to signing the Franchise Agreement.  She thought it helped inform her decision about entering into the Franchise Agreement.[20]
  1. [36]
    On 23 March 2012, an email addressed to ‘Dear Franchisee’ was intended to be forwarded by RFG to all franchisees in Queensland. The Guirguises did not receive it. It was to the effect that there was going to be a need to change the Michel’s Patisserie Bakery model as there had been a number of instances where bakeries across Australia had not been able to meet their contractual requirements and operate and produce products for RFG stores. The main reason for their failures were difficulties with financial viability. It explained that on 16 March 2012, the solicitors for Dyson had indicated that it would no longer be supplying products to Michel’s Patisserie’s Queensland stores after 15 April 2012. The email foreshadowed as a worst case scenario, a potential short term interruption to the supply of some products, in particular special orders. It was recommended that stores did not take any special orders after 15 April 2012 for a period of two weeks.[21]RFG was looking at whether it could take possession of the Dyson premises at Capalaba and operate the bakery in its current form.
  1. [37]
    Mr and Mrs Guirguis returned to see their solicitor, Arthur Browne on 26 March 2012. He was not available and they instead spoke with Arthur’s son, Terrence, who was also a solicitor. The Guirguises enquired as to whether Arthur had left a message for them and Terrence said that he had not. They did not go through or discuss any of the paperwork with Terrence or any other lawyer on this occasion.[22]  
  1. [38]
    In the presence of Arthur’s daughter, Joanne, the Guirguises signed the paperwork. This included the Franchise Agreement, Questionnaires and Deed of Prior Representations, Financial Advice Report, the Form D Advisor’s Certificate (‘Independent Solicitor Certificate’) and the Form C: Section 11 Warranty.
  1. [39]
    It was Terrence Browne who completed the Independent Solicitor Certificate on the same day. It reads that on 19 March 2012 he had met with the Guirguises. It further provides that on that date they had provided him with the Franchise Disclosure and Grant documents, including the Deed of Prior Representations. In relation to those documents it states that Terrence had inter alia explained the legal and practical nature and effect of the documents and that the Guirguises had provided him with certain information, including that they had understood the general nature and effect of the documents and that his advice on the obligations and risks involved in signing the Franchise Grant documentation was understood by them.[23]None of this was in fact accurate. He had not even met with them on 19 March 2012.  It was his father who had met with them on this earlier occasion.  Mrs Guirguis’s evidence was that Terrence Browne did not discuss with them any of the matters referred to in the Independent Solicitor Certificate.[24]
  1. [40]
    The effect of Mr and Mrs Guirguis’s evidence was that while Arthur looked at the various documents, that they were not provided with any significant explanation regarding matters which are material to this claim. This is discussed in further detail below.

Signing of Franchise Agreement and events prior to Patisserie opening

  1. [41]
    As discussed above, the Franchise Agreement and other documents were signed by Mr and Mrs Guirguis on 26 March 2012. The Guirguises did not seek any advice subsequent to signing the Franchise Agreement and before opening the Patisserie about whether they could get out of or terminate the Franchise Agreement.[25] 
  1. [42]
    On 28 March 2012, a further email was forwarded by RFG to all franchisees in Queensland. The Guirguises did not receive it. The email indicated that it was looking unlikely that RFG would be able to take possession of the current Michel’s Patisserie bakery premises at Capalaba and it was hoped that there would be confirmation of this in coming days. It went on to state that while a range of bakery products had been sourced from an alternative supplier, it was at that time not possible to provide a definitive list of which products would and would not be available. As the supply of special order cakes was in question, it was recommended that franchisees contact customers who had already ordered wedding and christening cakes and make an offer of a full refund.[26]
  1. [43]
    RFG wrote to Mr and Mrs Guirguis on the same day acknowledging the receipt of their Franchise Grant Documentation. It noted that the documentation had not yet been submitted to the Franchisor and Licensor for execution and that a copy would be returned to Mr and Mrs Guirguis once they had been signed and dated. The letter enclosed the Form C Warranty for a date to be inserted in it and also the Outlet Agreement which had not been executed by the Guirguises. The letter further invited the Guirguises to complete a fresh Questionnaire if they felt the ones they had already completed were not accurate.[27]Mrs Guirguis’s evidence was that she could not remember reading this letter but thought she would have read it.  She did not know whether she would have appreciated the significance of the contents of it, particularly given that she would not have read it until after she had already signed the Franchise Agreement.[28]
  1. [44]
    Two days later, a further email was forwarded by RFG addressed to all franchisees in Queensland. The Guirguises did not receive it. The email indicated RFG was cautious as to whether special orders to be delivered between 6 and 15 April 2012 would be honoured. It recommended that franchisees not order wedding and christening cakes during these dates or if they had been ordered, to explain to customers that they could not be delivered. It went on to say that after this time, wedding and christening cakes would not be available until further notice. Franchisees were also informed that web orders would be disabled from 14 April 2012 until further notice. It was recommended that customers be told that the current bakery was not able to supply stock and that Michel’s Patisserie was working on resolving the supply issue. They were told that an information session for all Michel’s Patisserie Queensland franchisees would be held on 10 April 2012 to which they were all invited.[29]The Guirguises were unaware of this meeting. 
  1. [45]
    Mrs Guirguis commenced her training with RFG at their Gold Coast offices on 2 April 2012. It went for four weeks and three days. This was the first occasion she had spoken to or otherwise communicated with anyone from or on behalf of RFG. The training included instruction regarding the ordering of special cakes, making coffee, keeping accounting records and operating the register.[30]
  1. [46]
    On the same day a further email was forwarded by RFG addressed to all franchisees in Queensland. The Guirguises did not receive it. It informed the franchisees that RFG had just been notified that Dyson has been placed into liquidation, with the result that stocks would not be delivered to stores on the following day.[31]
  1. [47]
    On the same day, the franchisees were informed in a further email that special orders would be unable to be delivered at this point in time. It was suggested that any customer with a special order delivery scheduled up until 12 April 2012, be offered a sincere apology and a refund.[32]A day later there was a further email update to the franchisees.  This was to the effect that RFG had been working towards a number of options to resolve the situation by 16 April 2012.[33]The Guirguises did not receive either of these email communications.
  1. [48]
    There were a further two emails forwarded on consecutive days a week later to franchisees in Queensland. Once again the Guirguises did not receive them. The first one is dated 11 April 2012, advising that RFG had noted that a number of items such as muffins and pastries had not been delivered when ordered by stores. It was stated that it was expected that this situation should be improved.[34]The second email is dated 12 April 2012.  It explained that RFG had been persuading a number of suppliers to produce mud cakes which had been received by RFG, but were found not to be finished to a suitable standard.  It was explained that the condition of some of these cakes were such that they could not be distributed at all and others were being offered to franchisees at 50% of the standard price.  Franchisees were reassured that the supplier would be rectifying this.  RFG apologised on behalf of the supplier.[35]
  1. [49]
    In the week beginning 16 April 2012, while Mrs Guirguis was still at the training course, a male representative from RFG informed her that the bakery which had been supplying the franchises had gone into liquidation but that RFG was in the process of sourcing another bakery.[36]She said that he ‘made very light of it’.[37]This was the first time the Guirguises became aware of potential problems obtaining bakery supplies from Brisbane.  Mrs Guirguis remained at the training course until 2 May 2012 and was not provided with any further information as to these problems.  She told her husband of this development.  It was Mr Guirguis’s recollection that his wife told him that a bakery in Brisbane had gone into liquidation.  It was his understanding that there was more than one bakery in Brisbane supplying Michel’s Patisserie products to the franchises.[38]
  1. [50]
    On 17 April 2012, there was a further email communication from RFG to franchisees in Queensland. It was not forwarded to the Guirguises. It stated that RFG was aware of the adverse impact caused to Michel’s Patisserie franchises by the abrupt closure of Dyson. It further stated that RFG had initiated the necessary legal action against Dyson. It was recommended that franchisees ascertain whether they could make an insurance claim for losses sustained as a consequence of this. It told them that as a gesture of goodwill, RFG would be waiving receipt of franchise service fees and would not be deducting the marketing levies for the week ending 12 April 2012.[39]
  1. [51]
    Ten days later, on 27 April 2012, there was a further email communication to franchisees in Queensland. It was not forwarded to the Guirguises. It advised that RFG would be providing cash flow relief to Michel’s Patisserie franchises in Queensland by deferring in part the collection of franchise service fees for the week ending 19 April 2012.[40]
  1. [52]
    On the same day, RFG forwarded a memorandum to all Australian Michel’s Patisserie franchisees. This memorandum was not provided to the Guirguises. It explained that there had been a failure of several bakery operators, both prior to and following RFG’s acquisition of the Michel’s Patisserie system. In particular, they were told that bakery operators in New South Wales and South Australia who were related entities, had been placed into administration in January 2012. It was stated that it was manifestly apparent that the Michel’s Patisserie model required change for long term relevance and sustainability. It was proposed that the new model would be implemented over the coming two to five years. The new model was envisaged to include the introduction of multiple suppliers, whereby products manufactured in several locations (by separate suppliers) would be delivered to a central point for collection, finishing (where necessary) and distribution.[41] 
  1. [53]
    On 4 May 2012, there was a further email communication to franchisees in Queensland. It was not forwarded to the Guirguises. It stated that due to the continuing bakery supply interruption issues from the failure of Dyson, RFG would be providing ongoing cash flow relief to Michel’s Patisserie franchises in Queensland by again deferring in part the collection of franchise service fees, this time for the week ending 26 April 2012.[42]
  1. [54]
    Two days later, unaware that RFG had been corresponding with franchisees about bakery supply issues and concerns about the sustainability of the Michel’s Patisserie model, Mr Guirguis forwarded an email to Mr Dellit raising concerns that he was not hearing back from RFG. He requested a current price list. His email also raised that it was his understanding that one of the cake suppliers had gone into liquidation and that it may be necessary to get cakes out of Sydney. He expressed a further concern that the freight costs from Sydney were likely to be high given that the Patisserie was in Townsville. Mr Dellit responded two days later to the effect that the appropriate people from RFG should be getting back to him regarding this issue by close of business. This never occurred.
  1. [55]
    On 11 May 2012, there was a further email communication to franchisees in Queensland. It was not forwarded to the Guirguises. RFG advised that it was intended that the full franchise service fees for the weeks ending 3 May 2012 and thereafter would be directly debited. It also explained that from a supply point of view, a new site had been located and inspected at Virginia in Brisbane and it was hoped that a lease would be signed on this day. They were told that once the lease was finalised, it was expected that the site would be used as a distribution centre for all products, and as a decorating and finishing centre for products such as special orders that required dressing. They were informed that an update would be provided when the details were confirmed.[43]
  1. [56]
    The Fitout Construction Agreement between the builder, the first plaintiff, the second defendant and the third defendant for the construction of the fitout of the Patisserie is dated 12 May 2012.[44]

Operation of the Patisserie

  1. [57]
    The Patisserie commenced trading on 28 May 2012. This is also the date of the Franchise Agreement and the Outlet Agreement between the first plaintiff and the second defendant. Stocklands was not operating at full capacity at the time as it was undergoing a major renovation. A number of stores including Myer were scheduled to open in October 2012.[45]The Patisserie was located just outside the doors of Woolworths which had only recently re-opened.  There were a number of other coffee/café type stores within Stocklands.  Gloria Jeans was close by and there were others in the food court, which was about 200 metres from the Patisserie.
  1. [58]
    It was intended that Mr Guirguis would only work in the Patisserie on weekends. This is because he was still working in a senior role for Laing O'Rourke.
  1. [59]
    From the time the Patisserie commenced trading it had a cold room with a fridge and freezer not far from the store. RFG had arranged for their installation. The temperatures of the fridge and freezer were monitored by a digital display. The temperature for the freezer had been set by RFG.[46]On no occasion were the Guirguises shown how to alter the temperature and as far as they were aware, they were unable to alter it.[47]Exhibit 171 is a sketch drawing of the cold room by Mrs Guirguis.  It depicts the fridge and freezer and the digital temperature displays.
  1. [60]
    Ryan King was the Business Development Manager from RFG who was assigned to assist the Guirguises with the set up and establishment of the business. He was present for the first couple of days of trading. He set up the cold room, he placed the first order of products and unloaded the first delivery of products. This delivery was a substantial one.
  1. [61]
    After the first week of trading Mr Guirguis forwarded an email to Mr Dellit raising a number of comments, questions and suggestions as to RFG’s opening processes.[48]It included the fact that too much stock had been ordered.  He observed that the product was acceptable but nothing special, and that he would be able to source similar product from any number of other bake houses.  By an email dated 4 June 2012, Mr King set out the assistance that he had provided over the previous week.[49]Mr Guirguis did not accept in evidence that Mr King had provided this claimed level of assistance.[50] 
  1. [62]
    As to the frequency of the deliveries, in his email Mr Guirguis sought confirmation that they were going to be weekly. This is because Mr Guirguis had been told by Mr King on the last day he was at the Patisserie that the deliveries would be changing to fortnightly.[51]There is no evidence of any response to this.
  1. [63]
    Mr King did not return to the Patisserie. Eric Woodham subsequently took over his role. Mrs Guirguis was responsible for the day to day operation and Mr Woodham would visit every three or so weeks.
  1. [64]
    As to the unloading of the deliveries, Exhibit 1 shows that Stocklands had two delivery docks, one was adjacent to Woolworths and only a short distance from the cold room and the Patisserie. The other was at the opposite end of the shopping centre near Best & Less. Stocklands was air-conditioned. Deliveries for the Patisserie were routinely made via the loading dock adjacent to Woolworths. The delivery trucks would park at the top of the loading dock, close to the entrance. Once through the entrance the products would be wheeled along a short air-conditioned walkway to the cold room where they would be unloaded. After the first week of trading, Mrs Guirguis was responsible for the majority of the deliveries. Her evidence was that the products would usually be unloaded at one time.[52]She explained that most drivers would remain in the truck with the air conditioning going until she returned to collect the remainder of the products, if necessary.[53] 
  1. [65]
    Mrs Guirguis would usually but not always check the quality of the products when they were being unloaded into the freezer.[54]There were occasions when time did not permit this and she would instead check them later that day, or perhaps even the following morning.  Mrs Guirguis’s evidence was that she thought it was in the first few weeks that she initially noticed that some of the products were damaged.[55]Those products had been part of the first delivery which had been ordered and unloaded by Mr King.  Damage to the products included splits through the middle, freezer burns and/or an appearance of a cake having melted and being refrozen.  She would photograph them, usually write a credit request and throw most of them away. 
  1. [66]
    There is a document called the Storage Temperature Record which provided for the recording of temperatures twice daily, including the freezer in the cold room. Mrs Guirguis explained that limited time was devoted to the completion of this document during her training. She had not been told whether it was the temperature before or after the freezer door had been opened which needed to be recorded.[56]Her evidence was that the Storage Temperature Record document that was used for the purposes of the training was not completed every day.[57]Mr King did not keep any such record in the week he was at the Patisserie.  Mrs Guirguis’s evidence was that on no occasion did Mr King or Mr Woodham discuss this document with her.[58]
  1. [67]
    It was in mid-June 2012 that the Guirguises commenced recording the freezer temperature on the Storage Temperature Record. However, as Mrs Guirguis explained, while she would look at the reading daily, she would not always record it. The document shows that the records were commenced from 12 June 2012 with the final reading recorded on 21 July 2013. The longest period over which no record of the freezer temperature was made was 14 days.[59]  The entries on the record were made by either Mrs Guirguis or the store manager, Aiden. 
  1. [68]
    The Storage Temperature Record shows that on most days when the freezer temperature was recorded, that it would be between -16 and -18 degrees Celsius. However, it was far warmer than this between 14 and 16 November 2012. Mrs Guirguis explained that the reason for this is because Mr Woodham had been present at the store on 14 November 2012, and had accidently turned the power off to the cold room. This was not discovered until some three hours later. It could not be fixed until 16 September 2012.
  1. [69]
    As to the delivery of the products between Sydney and Townsville, there was no consistent process being followed. Sometimes they were unloaded and reloaded along the way and there was often more than one transport company involved. The transport time would vary between deliveries. The consignment notes that are in evidence show that the products were being transported by JL Stewart & Sons from western Sydney to a Blenners Transport depot in Darra. They were then being unloaded. On some occasions they would be transported on the same day by a different transport company, Kercat Freight Services from the Blenners Transport depot in Darra to Stocklands. On other occasions, the products would remain at the Darra depot for up to two days before being transported to Stocklands.[60]There were occasions between October 2012 and February 2013 where the delivery process between western Sydney and Townsville took between three and seven days.[61]
  1. [70]
    Special cakes such as wedding, christening and birthday cakes would be placed in a separate order from the other orders. Mrs Guirguis explained that a number of these orders were either delivered late or not delivered at all.[62]This is addressed in further detail below.
  1. [71]
    By email to RFG dated 2 July 2012, Mr Guirguis detailed a number of problems with the cakes that were being delivered and the range of products that were available. The email addressed the complaints to Mr Dellit. The complaints included the fact that since Dyson had gone into liquidation, they had been unable to source a lot of products which they had been informed were available at the time they signed the Franchise Agreement. It went on to say that the price list they had been given on 21 March 2012 had two pages of products, whereas the new Sydney bakery was only offering products listed on a one page document.[63] 
  1. [72]
    In an email to RFG dated 7 July 2012, Mr Guirguis included the following complaint:

“So now our large cakes take way too long to get to our store, we can’t have icing sugar, cream or photos on the cakes.  They arrive thawed out and most (I have all the photos to prove this) of the cakes small and large arrive in a poor state so bad that most can NOT be sold.  Also as I have stated before some of your products are just too dry and we get a lot left on the plate or returned.”[64]

  1. [73]
    In response to this RFG explained that in relation to cake types, they were able to order cream and photos on the cakes, but they could not order cakes with white icing as when those cakes thawed out the white icing would dissolve.[65]
  1. [74]
    There is a further email from Mr Guirguis dated 13 July 2012. It included a complaint that the order which had arrived on that date was defrosted. It went on to explain that the truck it arrived in was only a fridge and not a freezer truck. It stated that when they walked into the truck to look at the order, the inside of the truck was warm and it felt like the fridge had been off for some time. He went on to say that the whole order needed to be credited.[66]  
  1. [75]
    In an email to RFG dated 24 July 2012, Mr Guirguis stated that he had spoken with JL Stewart about the stock arriving defrosted.[67]   
  1. [76]
    On 31 July 2012, Mr Guirguis forwarded a further email to RFG. He stated that not only were they getting stock that was defrosted, but that the cakes were also being delivered in very poor condition. He raised a concern that it seemed that the stock was being loaded and unloaded between three or four times from the time it left the bakery supplier in Sydney until it was unloaded at Stocklands.[68]   
  1. [77]
    By early August 2012, sales in the Patisserie were improving. Despite this the Guirguises still wanted to sell it and advertised it for sale. Mr Guirguis denied that the reason for this was because his wife was finding the Patisserie stressful and not enjoying it.[69]He changed employment around this time.  This is addressed in further detail below.
  1. [78]
    By email dated 22 September 2012, Mr Guirguis informed Mr Szysz that the stock they were receiving was always in a poor state and was not frozen. He also stated that the last six special orders had not been delivered on time. Mr Guirguis said that they would be broke by December 2012, and that they had been forced to make sandwiches to fill their display cabinets.[70]  
  1. [79]
    Mr Szysz responded on 25 September 2012, to the effect that Mr Woodham had organised for a data logger to be placed in one of the recent deliveries to monitor the temperature over the entire trip and RFG hoped to be able to review the data that week.[71] 
  1. [80]
    In another email dated the same date, Mr Guirguis complained that the orders were now arriving on a Monday or Tuesday when they should have been arriving four days earlier. He explained that one of the special cakes for a child’s birthday did not arrive on time. He went on to say that Myer was opening on 25 October 2012, and they would try their best to make a success of their business. If they could not on account of continuing supply issues, Mr Guirguis indicated that RFG would need to buy the Patisserie back or they would have no choice but to take legal action.[72]
  1. [81]
    In evidence is an internal RFG email dated 28 September 2012. It is from Brett Cahill to Sharon Eggins, the Assistant Corporate Retail Manager. It stated that he was aware of the ongoing issues for Queensland regional stores. It went on to explain that JL Stewart were starting to use a new freight company. This was in circumstances where the previous carrier, Charters, had folded. He commented that there was no doubt that this had contributed to the poor level of service seen over the previous few weeks. Mr Cahill went on to explain that the owner of the new transport company had previously worked for Charters and was fully aware of the thawing and other issues causing damage to the products and also that the products were not being delivered on time. It stated that the new freight company had a vested interest in rectifying these issues.[73]  
  1. [82]
    On 2 October 2012, Mr Szysz forwarded an email to Mr Guirguis to the effect that JL Stewart had engaged Scotts as a new frozen courier company and that the deliveries had now been scheduled to arrive at Stocklands each Friday. He also explained that JL Stewarts were committed to using data loggers to assist with monitoring the supply chain temperature variations.[74]The following morning, Mr Guirguis responded to Mr Szysz explaining that the last two orders had arrived at least four days late. Further, there had been six special orders that had not been delivered on time.  This had necessitated giving away a total of eight fresh cakes as compensation, resulting in the loss of approximately $600 in sales and some very irate customers.[75]   
  1. [83]
    On account of the ongoing supply and quality issues, in mid-October 2012 Mr Guirguis cancelled the direct debit arrangements for RFG’s franchise service fees and marketing levies.[76]
  1. [84]
    In a further email from Mr Guirguis to RFG dated 24 October 2012, he complained that with the most recent order, it appeared that the products had defrosted again along the way. He said that it had taken an hour to get the products to the cold room. Mr Guirguis reiterated that the order needed to be monitored for temperature and that the delivery would not be accepted in the absence of temperature readings.[77]In evidence, Mrs Guirguis explained that the delivery driver had simply unloaded the products and left them on the loading dock in the ambient air.
  1. [85]
    By email dated 5 November 2012, RFG advised Mr Guirguis that a meeting had been held the previous week to address his issues. He was told that the aim was for the supply bakeries to have the products in the freezer for two days prior to being transported to ensure they remained frozen on arrival in Townsville. He was also informed that there would be a data logger with the deliveries to Stocklands to monitor the temperature from point to point.[78]   
  1. [86]
    On 6 November 2012, Mr Guirguis responded to RFG. He stated that he did not think the problem lay in the state the products were leaving the bakeries in Sydney. He explained that he considered the transport companies were at fault and that there had been occasions where delivery drivers had left orders on the loading dock for 30 to 45 minutes before notifying them. He again stated that the last four orders had not been delivered in a freezer truck.[79]In evidence, Mrs Guirguis said that she could not recall any such occasion although there had been one instance where the delivery driver had threatened to do this.[80]
  1. [87]
    In an email dated 19 November 2012, Mr Guirguis complained that there were occasions where the delivery drivers were unloading at the dock furthest from the Patisserie. This meant that it would take 30 to 45 minutes to get the products to the cold room.[81]This was confirmed by Mrs Guirguis in her evidence.  The transport company involved was Blenners.  It was her recollection that this company was delivering products to the Patisserie between approximately October 2012 and February 2013.[82]
  1. [88]
    From the Guirguis’s perspective, there continued to be problems with the quality of the products that were being delivered. Mrs Guirguis explained that prior to unloading the delivery which had been transported by Kercat on 20 November 2012, she placed a commercial temperature probe between the floor of the truck and the underside of the pallet and it recorded a temperature of -1.9 degrees. She wrote this on the Consignment Note.[83]In relation to the delivery on 4 December 2012, she recorded on the Consignment Note ‘-4 on steel pole’.  She explained that on this occasion this reading reflected the temperature on a steel pole inside the delivery truck.[84]
  1. [89]
    By December 2012, there was a potential purchaser for the Patisserie. When communicating with the real estate agent in an email dated 28 December 2012, Mr Guirguis included some recent trading details and the fact that the Patisserie had made $2,000 on two separate days over the previous week.[85]He explained in evidence that he considered this improvement to be explicable by the fact that they had expanded their products to include sandwiches, wraps and salads.[86]In the email, Mr Guirguis made some suggestions for a potential purchaser to grow the business.  He went on to say that if these were to be implemented, together with any ideas from the potential purchaser, that there was the potential for the store to ‘double even what we are making now’.[87]Mr Guirguis said in evidence that ‘I didn’t honestly believe this’.[88]
  1. [90]
    On 31 December 2012, Mr Guirguis sent an email to RFG complaining that they had received two deliveries of products that they had not ordered. The first was on 21 December 2012, and it included chocolate mud cakes which were melted. The second one was on 24 December 2012. The delivery arrived without notice only four hours before the Patisserie closed for Christmas. Mr Guirguis stated that in future if one product in a delivery was melted, they would assume that the whole order had been compromised. He once again requested proof that the temperature of the products was being maintained in the delivery process.[89]
  1. [91]
    RFG responded to this email on 2 January 2013, to the effect that temperature related issues needed to be addressed with the transport company. Later that morning, the Managing Director of RFG, Ellenor Clarke, emailed Mr Guirguis. She expressed her disappointment as to the issues which had been raised by him. She offered to speak with Mr Guirguis on the telephone at a suitable time.[90]
  1. [92]
    By email dated 6 February 2013, the Guirguises were informed by JL Stewart and Sons Pty Ltd that delivery to Townsville on 9 February 2013 had been cancelled due to the stock having thawed in Brisbane. He was told that the delivery of the replacement stock would be on 13 February 2013.[91]
  1. [93]
    On 17 February 2013, Mr Guirguis sent a further email detailing numerous complaints. One was that the last delivery had arrived 25 days after it had been ordered. He acknowledged that this had been in the context of a flood. He further stated that the cakes had arrived not frozen meaning that the cream icing could not be written on. He also complained that a special order cake had not arrived.[92]
  1. [94]
    Mrs Guirguis gave evidence that when the order that was placed on 19 February 2013 was delivered, the delivery driver brought it in to the Patisserie in a shopping trolley. She looked at the products and they did not look frozen. She had a conversation with him about the temperature in the truck.
  1. [95]
    Approximately one week later, the same delivery driver brought another delivery into the Patisserie. Mrs Guirguis measured the temperature inside one of the cheesecakes and it read 8 degrees. She recorded this on the order form.[93]
  1. [96]
    By email dated 24 March 2013, Mr Guirguis reiterated that they would not accept any order that did not come with irrefutable proof that the order had been properly frozen.[94]
  1. [97]
    Each of the deliveries in relation to the orders made on 12 March, 19 March, 26 March and 2 April 2013 were not accepted by the Guirguises and were sent back.[95]  Mrs Guirguis explained in evidence that the products in the two deliveries prior to 12 March 2013 had been soft.  She said “So we didn’t want any more orders.  We’re just sick of people complaining about everything being dry and stale, especially the cakes.”[96]
  1. [98]
    By a further email dated 2 April 2013, Mr Guirguis stated that it had now been five weeks since the most recent delivery.[97]This was largely due to the fact that he had been turning back deliveries.  He turned back a further delivery on 5 April 2013. He inspected the pallet generally but not individual products. 
  1. [99]
    By email dated 14 April 2013, Mr Guirguis advised RFG that they had placed one more order and that if no proof as to the integrity of the delivery was provided, that it would be sent back for one last time and he would see them in court.[98]
  1. [100]
    The Guirguises abandoned the Patisserie in July 2013. They left all equipment there.

Credibility

  1. [101]
    The witnesses who gave evidence were Mr and Mrs Guirguis, Mr Metzakis, Mr Dellit and Mr Alford. Each was cross-examined. The imperfect recollections of each of them was exacerbated by the fact that they were purporting to recall details of conversations of more than six years earlier and, in many instances, without any reliable documentary assistance.
  1. [102]
    I am cognisant that some of the emails compiled by Mr Guirguis were based on information provided to him by Mrs Guirguis, rather than on his own personal knowledge of relevant events. I am mindful that Mr Guirguis frankly conceded in cross-examination that he was telling something less than the truth as to the potential profitability of the Patisserie in his email to the real estate agent dated 28 December 2012. There are other parts of his evidence which I also do not accept. However, I reject the submission made on behalf of RFG that Mr Guirguis was a prolific exaggerator and that most of what he had to say was inherently improbable. Further, I do not accept the submission that his evidence should not be preferred to any contradictory evidence in the absence of persuasive corroboration.
  1. [103]
    As to Mr Metzakis, RFG say that because he is a professional and licensed business broker that as a matter of practise, it would be expected that he would be careful with the information he provided to all prospective purchasers.[99]In my view, this is an over-simplification.  It is also inconsistent with a later submission made by RFG to the effect that Mr Guirguis knew the potential biases of Mr Mr Metzakis.[100]In my view, Mr Metzakis’s evidence also needs to be considered in the context that he stood to gain a financial benefit from the payment of a commission to him if the first plaintiff entered into the Franchise Agreement.  I am also unpersuaded by the submission that Mr Metzakis’s evidence was in all respects inherently plausible.  One example where it was not, is his evidence to the effect that he told Mr Guirguis that the products would be coming from Sydney.  The reasons why I do not accept this evidence are addressed in detail below. 
  1. [104]
    I formed the impression that Mr Guirguis exhibited a sense of confidence and affirmative belief in his understanding of the events in question, as he recalled them. As to Mr Metzakis, it became clear in cross-examination that he had little precise recollection of exactly what was said to Mr Guirguis and when. Neither Mr Guirguis nor Mr Metzakis gave entirely consistent evidence. It is my view that the evidence of both these witnesses was selective to varying degrees and was coloured by a desire to support their own interests. Mr Guirguis’s interests as a party to the litigation are obvious. While Mr Metzakis has no such interest, he could not be regarded as an independent bystander to the subject events. He no doubt has a desire to vindicate his involvement in the pre-contractual stage of the execution of the Franchise Agreement.
  1. [105]
    As to Mrs Guirguis, she was perhaps a little less assertive than her husband in the way she gave her evidence, although she was still affirmatively confident in many respects. Her evidence did not contradict much of Mr Guirguis’s evidence. RFG urges upon me a reluctance to accept her evidence as completely reliable. I accept this submission but it is an apt observation in relation to all witnesses.
  1. [106]
    I am satisfied that as between the Guirguises, it was Mr Guirguis who was the principal decision maker as to whether to enter into the Franchise and Related Agreements. However, the decisions were not made without discussing them with his wife. He appraised her of his discussions with Mr Metzakis and Mr Dellit.
  1. [107]
    I formed the impression that Mr Dellit and Mr Alford were witnesses who sought to answer questions directly and forthrightly. Mr Dellit clearly stated that he could recall little detail of relevant events. Mr Alford made concessions against the interests of RFG.
  1. [108]
    Wherever possible, I have sought to resolve conflicts in witness accounts, by reference to the exhibits or to the inherent probabilities of the case. Where this has not been possible, it has been necessary to resort to concepts of onus of proof. The plaintiffs bear the onus of proof to satisfy the court on the balance of probabilities that their version of the events and discussions should be accepted.
  1. [109]
    Where appropriate, I have indicated below the extent to which I have accepted or rejected the evidence of particular witnesses.

Oral and written representations

  1. [110]
    The plaintiffs’ case in part is that there were positive oral and written representations said to have been made by or on behalf of RFG.
  1. [111]
    The oral representations are alleged to have been made by Mr Metzakis and Mr Dellit. The written representations can be found in an email from Mr Dellit dated 22 March 2012. This email attached a price list.
  1. [112]
    In paragraph 16 of the statement of claim the plaintiffs also rely on an email from Mr King dated 1 May 2012. However, the plaintiffs did not press this at the trial or in written submissions.
  1. [113]
    Paragraph 13(b) of the statement of claim pleads that Mr Metzakis impliedly represented that the regular delivery of products from Brisbane to Stocklands was assured.  The plaintiffs did not press this in their written submissions and it requires no further consideration.
  1. [114]
    The determination of whether a representation was made is a question of fact. It involves a consideration of the alleged conduct engaged in and the meaning of the conduct.
  1. [115]
    Where there is an oral representation, the court needs to be satisfied that words giving effect to the alleged representation were actually spoken.

Representations by Mr Metzakis

  1. [116]
    It is pleaded in paragraph 12 of the statement of claim that in or about late January or early February 2012, during the course of the inspections of existing Michel’s Patisseries in Brisbane and on the Gold Coast, Mr Guirguis expressed concerns to Mr Metzakis that RFG would not be able to make timely deliveries of the full range of fresh Michel’s Patisserie products to Stocklands because of the remoteness of Townsville from Brisbane where the products were prepared.
  1. [117]
    The alleged representations that were made by Mr Metzakis in response to these concerns are pleaded at paragraph 13 of the statement of claim. In written submissions, the plaintiffs conceded that not all of these have been established by the evidence. They now rely on the following:
  1. (i)
    deliveries of stock from Brisbane to Townsville would not be a problem;
  1. (ii)
    deliveries would be made at least weekly;
  1. (iii)
    the full range of special order cakes would be available;
  1. (iv)
    the only products that would not be available were glazed fruit topped cakes;
  1. (v)
    the products were snap frozen, delivered frozen solid in freezer trucks and of undiminished quality when thawed.[101]
  1. [118]
    There is no issue about the authority of Mr Metzakis to engage in the pleaded conduct on behalf of RFG.
  1. [119]
    The events at the centre of the dealings between Mr Guirguis and Mr Metzakis are at least to some extent in controversy. It was Mr Guirguis’s recollection that he initially met Mr Metzakis at the Coffee Club in Brisbane in early 2012, and they looked at an existing Michel’s Patisserie in Anzac Square. His evidence was that they met on a second occasion a few weeks later when they travelled to the Gold Coast to look at another existing Michel’s Patisserie store in a shopping centre near Griffith University.
  1. [120]
    Mr Guirguis explained in evidence that he did not raise any of the pleaded concerns with Mr Metzakis on the first occasion when looking at the franchise in Anzac Square. This is because at this time he was not particularly interested in purchasing a Michel’s Patisserie franchise. He was leaning towards a business that sold more than cakes. He said that during this initial meeting, Mr Metzakis told him that even a small Michel’s Patisserie franchise such as the one they were looking at could gross $12,000 per week.
  1. [121]
    According to Mr Guirguis, it was on the second occasion that he met Mr Metzakis that he raised his concerns. This is when they were in transit between Brisbane and the Gold Coast to look at the Michel’s Patisserie store near Griffith University’s Gold Coast campus. This franchise sold wraps and sandwiches, in addition to cakes. Mr Guirguis gave the following evidence:

“All right.  And what other matters did you discuss with Mr Metzakis?On the way to seeing this franchise, I had two really major concerns about the franchise.  So I asked George about those two concerns.

What were they?The first one was transporting the goods from Brisbane to Townsville. Now, Townsville is a long, long way away.  It’s 1400 kilometres.  I guess 18-plus hours driving.  So it’s an awful long way.  So I was – I was a little bit worried that, if we buy the franchise, the guys would not be able to supply us because it is such a distance.  But George assured me that – he said, “No, that’s not going to be a problem. We’ll do deliveries twice a week or, at the very least, on a weekly basis.”

And did he tell you about how that would be achieved?Yes, he did, after I asked my next question.  My next question – my other concern was, “How are you going to get the cakes up there?  Again, it’s a long way.  It’s going to take a couple of days by road.”  And I said to him, “George, if the cakes are going to be just cooked and then put in the plane freezer, I’m not interested at all because that’s going to have an after-freezer taste and we’re not going to be able to compete with the other people – the other people in the shopping centre, so I’m definitely not interested in that.”  And he said, “No, it’s snap frozen – frozen – snap frozen and, when we defrost it, it tastes like it was good that very morning, and they’ll be transporting the goods up in freezer trucks as well.”  We also discussed range of goods and   

All right.  What was the discussion about the range?Well, as I said, Townsville is a long way and so I asked him, “What’s going to be available to us because we’re going to be a regional store.  I know they’re got a store in Yeppoon, but it’s still 700 kilometres south of Townsville, so what would be the range?”  And George said we would get the full range.  Everything that they sell in Brisbane, we would be able to order it in Townsville except one fruit tart – glazed fruit tart.  That was it.”[102]

  1. [122]
    Mr Guirguis confirmed in cross-examination that he recalled being told by Mr Metzakis that the deliveries would be weekly.[103]It was then suggested to him that even though Mr Metzakis told him that deliveries would be at least weekly, that he doubted that this information was correct.  Mr Guirguis denied this and explained that he was wanting to double check that deliveries could be made within this time frame.  He explained that he accepted Mr Metzakis’s assurances about this particularly given that RFG was a large company.[104]Mr Guirguis confirmed in cross-examination the assurances provided by Mr Metzakis as to the range of products that would be available.[105]
  1. [123]
    Mr Metzakis gave evidence about the meeting in Brisbane on the occasion referred to by Mr Guirguis. It was his recollection that they discussed a number of matters including the product range, the quality of the products and how they were going to be delivered.[106] 
  1. [124]
    The evidence of Mr Metzakis was that he told Mr Guirguis that the products would be coming from Brisbane. He explained that the people from RFG had assured him that when the products thawed out that the freshness and quality would still be there and that he relayed this to Mr Guirguis. He said that he told Mr Guirguis that the products would be delivered on a refrigerated freezer truck and that they would be frozen immediately after they were baked. He recalled telling Mr Guirguis that the fruit glazed products would not be available for them to sell. As to the frequency of delivery, Mr Metzakis’s evidence was that he told Mr Guirguis that it would be weekly or fortnightly.[107] 
  1. [125]
    Mr Metzakis could not recall whether he provided the abovementioned information to Mr Guirguis when he first met him in Brisbane or on an unspecified later occasion.
  1. [126]
    In resolving these factual disputes there are no exhibits that provide objective anchor points against which the recollections of the witnesses might be tested, in seeking to determine which version of events are more likely to be either a correct recollection of likely events, or alternatively, simply true. In these circumstances, I have sought to resolve conflicts in these witness accounts by reference to the inherent probabilities of the case.
  1. [127]
    There is no dispute between the parties that Mr Metzakis told Mr Guirguis that the products would be supplied from Brisbane. Being a long term resident of Townsville, Mr Guirguis was well aware of its remoteness from Brisbane. I am also persuaded that Mr Metzakis told Mr Guirguis that this would not be a problem. This was entirely consistent with Mr Metzakis’s evidence. He did not even think it would be a problem if the products were being delivered from as far away as Sydney.[108]In addition, it is consistent with his evidence as to the assurances provided to him by RFG as detailed above.
  1. [128]
    As to the frequency of deliveries, I am satisfied that Mr Metzakis said to Mr Guirguis words to the effect that the deliveries would be at least weekly. This is consistent with Mr Alford’s evidence that there would be essentially a week between placing an order and receiving the products. There is no dispute that another of the topics of the discussions was how the quality of the products would be maintained. I am also satisfied that Mr Metzakis said to Mr Guirguis words to the effect that the products would be snap frozen solid after they had been baked. Mr Metzakis’s evidence was that the products would be immediately frozen after they were baked, which is consistent with the snap freezing process. It was important to Mr Guirguis that the products not be frozen in the usual way as it was his understanding that this would give them an ‘after-freezer’ taste. It is also consistent with Mr Guirguis’s evidence to the effect that he subsequently visited local supermarkets to gain a better understanding of what this process involved and to sample some products that were frozen in this way to satisfy himself that the quality of the product could be maintained.
  1. [129]
    I am satisfied on the evidence that Mr Metzakis told Mr Guirguis that the products would be delivered in freezer trucks. Mr Metzakis gave evidence repeatedly to this effect.[109]It makes little sense to think that Mr Guirguis would have been content had he been told that the frozen products may be delivered by a refrigerated truck rather than a freezer truck over a journey of some 1,400 kilometres.  There is no contest that Mr Metzakis reassured Mr Guirguis that the quality of the products in terms of freshness would be maintained for the purposes of sale.
  1. [130]
    As to the range of products, Mr Guirguis explained that he was aware that not all products would be available given that it would be a regional store. I accept his evidence that Mr Metzakis told him that the only products that would not be available were those with fruit glazing.

Representations by Mr Dellit

  1. [131]
    Turning to the meeting between Mr Guirguis and Mr Dellit, the plaintiffs allege that it occurred at the Gold Coast at about the same time as the discussions between Mr Guirguis and Mr Metzakis as referred to above. It is alleged that it occurred in the context of an interview by Mr Dellit or an employee of the third defendant and the purpose of the interview was to ascertain the suitability of the Guirguises to be franchisees. It is pleaded that during the meeting Mr Guirguis again expressed a number of concerns including the frequency of deliveries to Townsville, the range of products that would be available and the freshness of the products on arrival in Townsville.[110] 
  1. [132]
    It is further alleged by the plaintiffs in paragraphs 15(a) to (d) of the statement of claim that in response to these concerns Mr Dellit told Mr Guirguis the following:
  1. (i)
    deliveries of products would be made weekly ‘at the outside’;
  1. (ii)
    the full range of products would be available;
  1. (iii)
    freshness of the products would not be a problem as the cakes would be frozen solid; and
  1. (iv)
    large cakes and special order cakes could be ordered in the same way as for other franchises in Australia. 
  1. [133]
    RFG submits that it is very likely that Mr Guirguis is mistaken about the identity of the person whom he says made any such statements to him. I am not persuaded by this.
  1. [134]
    Mr Guirguis recalled having a discussion in a meeting room at RFG’s Gold Coast offices and it is this discussion that is the subject of the allegations above. Mr Dellit has no independent recollection of going into the meeting room, but in cross-examination he did not dispute that this occurred. This was the first occasion they had physically met and the introduction was facilitated by Mr Metzakis. Mr Guirguis was in the waiting room at RFG’s Gold Coast offices and was introduced to Mr Dellit by Mr Metzakis. It was Mr Dellit’s evidence that Mr Metzakis had requested for him to come and meet Mr Guirguis to put a face to the name.
  1. [135]
    Mr Metzakis did not seem to recollect such an occasion. He thought that the interview with Mr Guirguis to ascertain his suitability to be a franchisee was conducted by Mr Chris Szysz, Michel’s Patisserie’s general manager.[111]Mr Guirguis knew Mr Szysz and categorically denied that it was Mr Szysz who met with him on this occasion.  He also denied the suggestion that the person who had the discussion with him in the meeting room on this occasion had the title of Managing Director of RFG.[112]  
  1. [136]
    I am satisfied there was no one else present in the meeting room with Mr Guirguis and Mr Dellit. Mr Guirguis recalled saying to Mr Dellit that he seemed to be very young to have the position he held with RFG. He could not recall what that position was other than to say that it had ‘some marvellous title[113].  Mr Dellit responded that he had been exposed to franchising for a long time as his father had been involved with The Coffee Club for a number of years. 
  1. [137]
    Mr Guirguis’s evidence was that Mr Dellit then told him a little bit about RFG, Michel’s Patisserie and the products. His evidence was that he wanted to ask Mr Dellit the same questions that he had asked Mr Metzakis, to confirm that what Mr Metzakis had told him was true. Mr Guirguis gave the following evidence:

“Well, tell us – tell us what you asked him?Sure.  I asked him about transport to Townsville.  And, again, I stressed, it’s a long way; there’s always problems with transporting things to Townsville.  We’ve been there – we’ve lived there for 40 years, and there’s always a problem.  The road is blocked; the road is rough; people can’t get backloads, so they don’t want to drive all the way up there.  So I said to Trent, “It’s a long way to Townsville.  Are you sure you can deliver what we need every week?”  And he said, “It’s not going to be a problem.  Delivery – weekly delivery – is not going to be a problem.”

What else did you ask him about?Then I talked about the – how the cakes would be delivered.  And he said they’d be – he didn’t use “snap-frozen”;  he said something like “frozen solid” or “frozen quickly” or “quickly frozen solid”, but he didn’t use the term “snap-frozen”.  But he did say that when you defrost it, it’ll taste like it was cooked that day, that very day.

And   ?Then we discussed the range, and – I had looked at a couple of cakes while I was there, and they looked quite fragile, so I was a little bit concerned that some of those cakes would not travel well.  But Trent Dellit assured me that the full range would be available to us.  He didn’t mention the glazed tart, like George did.

He did?Not mention the glazed tart, like George mentioned.”[114]

  1. [138]
    Mr Dellit recalled being introduced to Mr Guirguis by Mr Metzakis in the foyer. He was asked whether they went in to a meeting room, to which Mr Dellit responded “I believe so, yes.”[115]  The following exchange occurred between Counsel for RFG and Mr Dellit:

“And what, to your recollection, was discussed?---  I cannot recall sorry.”[116]

  1. [139]
    Mr Dellit had effectively no recall of what occurred in the meeting room. He could not say whether anyone else was present. He denied the suggestion that they may have been in the room for 15 minutes and said it was more likely to have been closer to five minutes. This is necessarily largely speculative given that Mr Dellit had no recollection of even going in to the meeting room. He said he thought that if they had gone into the room that it would have been for a friendly chat as the foyer was noisy with pedestrian traffic.
  1. [140]
    In cross-examination, Mr Dellit accepted that he may have discussed with Mr Guirguis any concerns that Mr Guirguis raised with him about RFG. He could not recall whether Mr Guirguis expressed concerns regarding the frequency of deliveries or the transporting of products to Townsville. He could not recall whether he confirmed to Mr Guirguis that the products were to be delivered frozen. In re-examination, Mr Dellit said that if he had been asked such questions that he would have been unable to have answered them as these were matters within the responsibility of the procurement team, of which he was not a part of.
  1. [141]
    Like the factual disputes as between Mr Metzakis and Mr Guirguis, in resolving the factual disputes as between Mr Dellit and Mr Guirguis, there were no documents tendered to assist in determining which version of events ought to be preferred. I have again sought to resolve conflicts in these witness accounts by reference to the objective facts surrounding the discussions and the inherent probabilities.
  1. [142]
    Considering the evidence as a whole, I do not accept the rationale that because Mr Dellit was not part of the procurement team, he would have been unable to provide answers to the questions which Mr Guirguis is confident he raised. The evidence establishes that Mr Dellit’s knowledge of RFG was not limited to leasing related issues. For example, it was Mr Dellit who provided Mr Metzakis with a Store Budget Estimate in late January 2012.[117]Mr Metzakis’s evidence was that Mr Dellit was present at the Mackay meeting where there were discussions with another potential franchisee.  Further, Mr Metzakis’s evidence was that Mr Dellit had been one of his primary sources for the information that he provided to Mr Guirguis.  He said that there would be occasions where Mr Dellit would make enquiries for him with other people in RFG.[118]A number of exhibits confirm that Mr Dellit’s knowledge of franchise matters for RFG extended well beyond leasing related issues.  As to this, Mr Dellit conceded in cross-examination that there would be occasions where he would be asked to assist with non-leasing issues.  The emails also show that Mr Guirguis considered Mr Dellit to be one of the people from RFG who could address a variety of non-leasing issues that he required assistance with.[119] 
  1. [143]
    On the balance of probabilities, I am satisfied that Mr Dellit used words giving effect to the representations as alleged in paragraphs 15(a) to (c) of the statement of claim. It was the evidence of Mr Metzakis that he had assured Mr Guirguis that there would be another opportunity for him to ask any questions of an operational nature about the Patisserie.[120]It is therefore not surprising that Mr Guirguis again raised similar issues with Mr Dellit to those which he had previously raised with Mr Metzakis.  They were clearly matters which would have been relevant to the decision as to whether to enter into the Franchise Agreement.  The evidence clearly establishes that Mr Dellit’s knowledge was not limited to those matters pleaded in paragraph 5(b) of the Further Amended Defence (‘the defence’).  Further, it is my view that Mr Dellit’s evidence that Mr Guirguis had travelled from Townsville to the Gold Coast to “put a face to the name” seems improbable.
  1. [144]
    I am not satisfied that Mr Dellit used words giving effect to the representation as alleged in paragraph 15(d) of the statement of claim, namely that large cakes and special order cakes could be ordered in the same was as for any other franchise in Australia. There is no evidence in support of this.

Representations in email and price list

  1. [145]
    Turning to the alleged written representations, they arise from an email from Mr Dellit to Mr Guirguis. The body of the email relevantly states:

“Please see attached QLD regional price list which includes the RRP per item, along with the purchase price for the minimum order (ROYF$)

Please note that there is no extra shipping/freight costs for regional stores, however there are minimum order numbers per item.

I hope this will clarify a your [sic] questions, however Please feel free to give me a call if you’d like me to explain either of the attachments in further detail.”

  1. [146]
    The attached price list was titled “Regional QUEENSLAND RETAIL, FRANCHISE & ROYALTY PRICE LIST – 1 JULY 2011”.
  1. [147]
    This email communication needs to be considered in context, particularly the preceding emails. Mr Guirguis had first requested the price list in an email dated 19 March 2012, where he relevantly stated that “We have not received a list of Michel’s products that we will be selling in our store and what our profit margin might be.”[121]On the following day, legal counsel for Michel’s Patisserie, Elizabeth Schwartz responded stating that she acted for RFG and could not give Mr Guirguis any legal or financial advice and that she had responded to most of the questions by noting that he needed to seek independent advice.  Her response to his question about the products that the Patisserie would be selling and the likely profit margin was that “As this is a new store we cannot estimate the ‘profit margin’ as this is dependent on many things. We direct your attention to the Premises Disclosure Statement, Franchise Grant Documents and approval letter which have all been issued to you. It is also important that you seek independent legal and financial advice in this respect.”
  1. [148]
    Mr Guirguis responded by email on the same day. He referred to not having received a list of the products that would be sold in the Patisserie and what the profit margin might be. He observed that RFG had the prices and knew what the costs should be to give a ball park figure of the items to be purchased and RFG’s recommended retail price.[122]After referring to delivery charges to Townsville, Mr Guirguis wrote that if they did not receive a better reply to their questions that he did not think that they would proceed with the franchise.
  1. [149]
    There is an internal RFG email chain which Mr Dellit was copied into, where it is stated that the information being sought was “the bakery product range regional stores can order, the cost of these products into store and if any additional freight or distribution charges applied to regional store”.  The email in response to this stated that the information being sought “is a little ‘scattered’ at present”.[123]Mr Dellit then sent the email of 22 March 2012 relied upon as conveying the representations.
  1. [150]
    I accept RFG’s submission that the email and price list communicated the products which RFG was supplying to franchises as at the date it was forwarded to Mr Guirguis. In addition, I consider that the price list communicated the list of the products that Mr Guirguis would be able to sell in Townsville if he were to become a franchisee. This is in circumstances where this had been the very basis of the request having been made by Mr Guirguis in his email of 19 March 2012 as referred to above. This of course does not mean that RFG was guaranteeing that all products on the list would be supplied indefinitely at the stated prices. There was the obvious capacity for change as expressly stated in both the Disclosure Document and also the Franchise Agreement.[124]  Rather, the price list gave the Guirguises an indication of the range of products that would be supplied and the sorts of prices which would be charged for the various products.
  1. [151]
    RFG submits that the pleaded representations are not established because the price list did not include sugar icing cakes, as pleaded, but instead referred to sugar icing adornments for other cakes. However, this does not appear to be determinative. This is because the representation alleged was that RFG’s cakes, “including sugar icing cakes”, would be supplied.  In other words, the plaintiffs’ complaints about this representation extend beyond sugar icing cakes.
  1. [152]
    I am of the view that the subject email and price list when considered in the context of the preceding emails made the alleged representations about the range of available products. This was provided by Mr Dellit, with the knowledge of Mr Szysz and other representatives of RFG.

Information not disclosed

  1. [153]
    The plaintiffs further allege that there was a failure on the part of RFG to disclose to the Guirguises that franchises were experiencing delivery delays because of uncertain supplies from Dyson, where there was an objectively reasonable expectation that the information would have been disclosed. This undisclosed information is said to arise from the content of an internal RFG email dated 16 February 2012, and two further email dated 23 March 2012 and 2 April 2012 from RFG which were intended to be forwarded to all Michel’s Patisserie franchisees.
  1. [154]
    In paragraphs 33(a) and (e) of the statement of claim, the following particulars are provided:
  1. (i)
    as at 16 February 2012, Dyson was in financial difficulty and unable to meet orders;
  1. (ii)
    Mr Connors had deliberately refrained from enquiring as to Dyson’s solvency, ‘preferring not to ask’;
  1. (iii)
    as at 23 March 2012 there were no companies currently able to manufacture and supply products to the Michel’s Patisserie system and achieve the requirements of the system. 
  1. (iv)
    as at 23 March 2012, bakeries across Australia had not been able to meet their contractual requirements and operate and produce products for the Michel’s Patisserie system;
  1. (v)
    as at 2 April 2012, Dyson had been placed in administration and the products could not be supplied from Brisbane in accordance with the representations which had been made by Mr Metzakis. 

Whether conduct misleading

  1. [155]
    A corporation contravenes s 18 of the ACL, if, in trade or commerce, it engages in conduct that is misleading or deceptive or is likely to mislead or deceive. It is clear that all of the relevant conduct of RFG upon which the plaintiffs’ place reliance, is conduct in trade or commerce. It is therefore necessary to consider whether RFG in its dealings with the plaintiffs, engaged in misleading or deceptive conduct.
  1. [156]
    The ultimate issue is whether the conduct led or was likely to lead the plaintiffs into error.[125]It requires an examination of the conduct of RFG in the period leading up to the signing of the Franchise Agreement.[126] Conduct can be misleading even though the representor acted honestly and did not intend to mislead or deceive.  Whether conduct is misleading or deceptive depends on the context in which the conduct took place.[127]     
  1. [157]
    The assessment as to whether particular conduct has led a plaintiff into error is a question of mixed fact and law. It involves a determination of what a reasonable person in the position of the representee, taking into account what they knew, would make of the representor’s conduct.[128]The task of the court is to look at the evidence as a whole to determine whether the conduct contravened s 18 of the ACL.  The character of a representation is to be tested at the date of making the representation and not with the benefit of hindsight.  
  1. [158]
    Where the misleading conduct is alleged mostly to have arisen as a result of spoken words, special care needs to be taken in determining, on the relevant standard of proof, that the words conveyed an impression that was misleading.[129]
  1. [159]
    In this case, the oral representations made by Mr Metzakis and Mr Dellit, and the email from Mr Dellit dated 22 March 2012, are claimed to have conveyed certain misrepresentations to the plaintiffs in their capacity as intending franchisees of the Patisserie, through their company, the first plaintiff, and as intending guarantors of the performance of the first plaintiff.

Puffery

  1. [160]
    RFG submits that the representations were mere puffery. Whether a representation constitutes puffery and, consequently, is not actionable, turns on the particular facts considered in light of the ordinary incidents and character of commercial behaviour.[130]A characteristic often attributed to puffery is that it is “incapable of being proved to be correct or incorrect”.[131]A claim will not be regarded as puffery if there is a definitive statement as to a characteristic or consequence of the claim. 
  1. [161]
    I do not accept that any of the established representations can be characterised as mere puffery in the various contexts in which they were made. They were as to the kinds of products to be supplied to a potential franchisee for retail sale by it, the reliability and frequency of that supply from Brisbane and the quality of those products upon their receipt in Townsville. They were significant definitive statements.

Oral representations

  1. [162]
    The representations concerned matters relevant to operational issues of the Patisserie in the event that the plaintiffs decided to enter into the Franchise Agreement. Therefore, in my view, when considering the context in which they were used as detailed above, each of them were representations with respect to future matters.
  1. [163]
    It follows, from s 4(1) of the ACL that each representation is taken to be misleading or deceptive if the person who made the representation did not have reasonable grounds for making it. The mere fact that a representation proves to be inaccurate does not make it false.[132] 
  1. [164]
    By s 4(2), for the purposes of applying s 4(1), RFG are taken not to have had reasonable grounds for making the representations unless evidence is adduced to the contrary. The burden of proof is evidentiary only and the legal burden remains with the plaintiffs to establish that RFG did not have reasonable grounds for making representations as to future matters. RFG adduced evidence from Mr Alford which, in my view, is sufficient to avoid the application of s 4(2). I did not understand the plaintiffs to contend that s 4(2) applies in this case.
  1. [165]
    Therefore, it is necessary to decide whether RFG had reasonable grounds for making any of the representations. If the plaintiffs have demonstrated that RFG did not have reasonable grounds for making those representations, the representations will be taken to be misleading.
  1. [166]
    What is sufficient to amount to reasonable grounds will depend upon the nature of the representation. Here, the representations were as to the kinds of products to be supplied to a potential franchisee for retail sale by it, the reliability and frequency of that supply from Brisbane and the quality of those products upon their receipt in Townsville. Representations about such matters to potential franchisees ought not to be made lightly. They are significant statements. If they are inaccurate but are relied upon, there may be significant financial consequences that follow. The present case is a good example. Therefore, to say that Mr Metzakis and/or Mr Dellit had reasonable grounds for making each of the representations will likely require greater veracity of the information they held, than if the representations had related to something more inconsequential.
  1. [167]
    It is pleaded at paragraph 34 of the defence that there was a reasonable basis for making the representations in that at the time they were made the capabilities, qualities or descriptions represented in fact existed.[133]  Reliance is also placed on paragraphs 5 and 7(g) of Mr Metzakis’s defence filed on 1 November 2013.  In particular it is pleaded that all the information provided to Mr Guirguis had been provided to Mr Metzakis by the third defendant.
  1. [168]
    I am not satisfied on the evidence that a reasonable basis for the making of the various representations existed. There is no evidence that at the time the representations were made, that RFG had delivered the said range of Michel’s Patisserie products to locations as remote as Townsville. This was essentially uncharted territory. The next most remote location in Queensland to which Michel’s Patisserie products had been delivered was Yeppoon, which is more than 700 kilometres closer to Brisbane when compared to Townsville. There is no evidence that any enquiries were made by Mr Metzakis or Mr Dellit as to the impact that this additional distance would have on the kinds of Michel Patisserie products that could be supplied, nor the reliability and frequency of that supply, nor the mode of delivery and the quality of those products upon their receipt in Townsville.
  1. [169]
    In making this finding, I am cognisant of the fact that between 2008 and 2010 franchises in Bundaberg and Yeppoon had received their products from Sydney. However, this had ceased some two years prior to the subject events. RFG has led no evidence as to what products were being supplied to these other franchises at this earlier time, how they had been delivered and whether there had been problems maintaining the quality of the products for sale at these other stores. The price list at Exhibit 35 only applied to products supplied to RFG from 1 July 2011. Further, while the other brands of RFG franchises, such as Brumby’s, Donut King and BB’s Café had outlets in Townsville and were receiving frozen products, they were different products from varied suppliers/manufacturers in varied locations.[134]  
  1. [170]
    It follows that RFG did not have reasonable grounds to make the oral representations. I am therefore satisfied that they should be characterised as ‘conduct that is misleading or deceptive or likely to mislead or deceive’ within the meaning of the ACL.

Email and price list

  1. [171]
    On RFG’s own case, the email and price list were likely to lead Mr Guirguis into error.  It contends that these documents communicated the products that were being supplied by RFG to franchises as at 22 March 2012.  However, in paragraph 18(c) of the defence it is pleaded that this was not in fact the case, in that the price list included products which could not be ordered.  In this sense, it was misleading as to an existing fact.
  1. [172]
    The price list when considered in the context of the preceding emails, also represented to the Guirguises the products which could be supplied in the event that they decided to open a franchise in Townsville. This is because it had been forwarded to Mr Guirguis in response to his request for a list of Michel’s Patisserie products “that we will be selling in our store.”[135] I am satisfied that it was also misleading as to future matters.  This is because there was no reasonable basis for representing that the ranges of products for the sorts of prices charged as set out in the price list would be supplied by RFG in the event that they were to open a Michel’s Patisserie franchise in Townsville.  Once again, there is no evidence of any investigations or enquiries having been made as to the impact of the remoteness of Townsville on the range of Michel’s Patisserie products that could be supplied.  Therefore, as representations as to future matters, these too were misleading.

Non-disclosures

  1. [173]
    The plaintiffs carry the onus of establishing how or in what manner that which was not disclosed led or had the potential to lead them into error.[136]To succeed, the plaintiffs need to prove that RFG were aware of facts which were not disclosed to them and that the surrounding circumstances gave rise to an objectively reasonable expectation on their part that those facts would be disclosed.  This is on the basis that they would have been material to their decision as to whether to enter into the Franchise and Related Agreements.[137]  
  1. [174]
    The particulars relied upon in relation to 16 February 2012, arise from an internal RFG email from Mark Connors to Mr Alford and Andre Nell.[138]It is not readily apparent from this email that Dyson was in financial difficulty and unable to meet its orders. Rather, Mr Connors seems to have been speculating as to this possibility.  Mr Connors stated in this email words to the effect that he was deliberately refraining from enquiring as to Dyson’s solvency.
  1. [175]
    The particulars relied on in relation to 23 March 2012 arise from an email from Mr Szysz as the national operations manager of Michel’s Patisserie, to all franchisees.[139]The email relevantly stated that:
  1. (i)
    There was going to be a need to change the Michel’s Patisserie Bakery model and there had been a number of instances where bakeries across Australia had not been able to meet their contractual requirements and operate and produce products for RFG stores. 
  1. (ii)
    The main reason for their failures were difficulties with financial viability. 
  1. (iii)
    On 16 March 2012, the solicitors for Dyson had indicated that it would no longer be supplying products to Michel’s Patisserie’s Queensland stores after 15 April 2012. 
  1. (iv)
    As a worst case scenario, there would be a potential short term interruption to the supply of some products, in particular special orders.  It was recommended that stores did not take any special orders after 15 April 2012 for a period of two weeks.
  1. (v)
    RFG was looking at whether it could take possession of the Dyson’s premises at Capalaba and operate the bakery in its current form.[140]
  1. [176]
    It is not in dispute that the plaintiffs did not receive either of the emails dated 16 February or 23 March 2012. It was Mr Alford’s expectation that the email of 23 March 2012 would have been provided to them. These emails pre-date the Guirguises signing the Franchise and Related Agreements.
  1. [177]
    In my view, the circumstances of this case are compatible with a reasonable expectation that RFG would have disclosed to the plaintiffs the events in the email of 23 March 2012. RFG contend that the matters were not permanent issues affecting the Patisserie at the time if opened on late May 2012. This misses the point. They comprehended a real uncertainty regarding the supply of products from Brisbane. In my view, there were three factors that give rise to this reasonable expectation of disclosure. First, the Guirguises had no previous franchise experience and it was information that they were not capable of ascertaining in the absence of it being disclosed by RFG. Second, during pre-contractual negotiations, Mr Guirguis had expressly enquired about the achievability of delivering quality stock from Brisbane to Townsville. Third, he had been assured that this would not be a problem. It was therefore reasonable for the Guirguises to expect that if uncertainties had emerged in relation to the supply of products from Brisbane, that they would have been informed of this by RFG. The failure of RFG to disclose its changed position, while continuing to negotiate the terms of the Franchise and Related Agreements, was conduct in trade or commerce that led or was likely to lead the plaintiffs into error.
  1. [178]
    I reject RFG’s submission that the content of these emails were irrelevant to the plaintiffs and that they were only relevant to franchises operating on the daily fresh model rather than the frozen model.[141]This is entirely inconsistent with the uncontested evidence of Mr Alford that it was his expectation that they would have been forwarded to all franchisees in Queensland, which included franchises operating on the frozen model.  
  1. [179]
    It is submitted on behalf of RFG that it was not until 2 April 2012 that it became known that Dyson would not be able to continue supplying products to RFG. However, the email trail of communications indicates that prior to this time RFG were aware that there were significant uncertainties surrounding the supply of products to franchises. RFG knew that:
  1. (i)
    By late February 2012 Dyson had been experiencing cash flow problems which had required RFG to made advance payments in the sum of $110,000 to ensure ongoing supply of products to the franchises.[142]
  1. (ii)
    By mid-March 2012, Dyson had given notice that it would not be continuing to make and supply products for RFG after 16 April 2012.[143]
  1. (iii)
    By 23 March 2012:
  1. (a)
    there were a number of bakeries across Australia who had had not been able to supply products to RFG franchises;
  1. (b)
    financial viability was the principal reason why these bakeries had been unable to meet their contractual responsibilities;
  1. (c)
    there could be a short term interruption to the supply of products to franchises;
  1. (d)
    the concerns around the supply of special order products was sufficient that a solution to the supply issue needed to be found and one potential option that needed to be investigated was the possibility of RFG taking possession of the Dyson premises and taking over the supplying of products to the franchises.[144]
  1. (iv)
                  By 28 March 2012:
  1. (a)
    the potential option of RFG taking possession of Dyson was seen as unlikely to solve the supply issue;
  1. (b)
    while an alternative bakery was supplying some products, RFG did not know which products would and would not be available although all was being done to source as many products as possible;
  1. (c)
    there were sufficient problems with the supply of special order cakes that wedding and christening cake orders could not be fulfilled.[145]
  1. (v)
    By 30 March 2012:
  1. (a)
    a number of questions remained in relation to the supply of bakery      products in the near future;
  1. (b)
    wedding and christening cakes which had been ordered for 6-15 April could not be delivered with the consequence that customers needed to be offered refunds for any such orders.
  1. (c)
    wedding and christening cakes would not be available until further notice;
  1. (d)
    in relation to other ‘special order’ cakes, further updates regarding availability would be provided in the following week;
  1. (e)
    web orders had been disabled.[146]
  1. [180]
    The final email the plaintiffs have pleaded with respect to their non-disclosure case is the one of 2 April 2012 from Mr Alford to Mr Hancox and others in which it advised that Dysons had been placed into administration and would not be manufacturing products for orders for the following day. The email relevantly observed that this was the “‘worst case scenario’ and will result in many disgruntled franchisees”.  This development was conveyed by Mr Szysz in an email to franchisees.  The Guirguises did not receive this email and it was Mr Alford’s expectation that it should have been provided to them.  RFG do not dispute that by this date they were aware that Dyson would not be supplying any further products to it.  
  1. [181]
    The contents of the email of 2 April 2012 clearly gave rise to an objectively reasonable expectation on the part of the plaintiffs that RFG would have informed them that Dyson had been placed into administration and had immediately ceased manufacturing products. This is in circumstances where it was the only bakery RFG were using in Brisbane to supply products to Michel’s Patisserie franchises. Mr Guirguis had specifically raised his concern with Mr Metzakis regarding the timely delivery of products between Brisbane and Townsville and had been reassured by Mr Metzakis that this would not be a problem.

Reliance

  1. [182]
    The task of the court is to look at the evidence as a whole to determine whether the conduct in contravention of s 18 of the ACL induced the Guirguises to enter into the Franchise and Related Agreements. It does not need to be the only material cause.[147]A mere possibility of inducement is not sufficient.[148]Caution needs to be exercised in accepting self-serving assertions of reliance made in hindsight by a plaintiff. 
  1. [183]
    I have sought to assess the prospect of reliance by reference to objective criteria. This includes the nature of the representations I have found to have been made and what happened after they were made.
  1. [184]
    The oral representations made to Mr Guirguis were each in response to concerns raised by him and the nature of the representations made, in my view, were material. Common sense demands a finding that they were of a kind objectively likely to operate as inducements to the plaintiffs entering into the Franchise and Related Agreements.
  1. [185]
    As to the price list, Mrs Guirguis’s evidence was that while she did not think about it too much, she expected that the majority of the products would be indefinitely available, particularly the bigger cakes.  She looked at it to see what would be supplied and she ‘thought that looked good’.[149]Mrs Guirguis confirmed in her evidence on more than one occasion that they wanted to know the range of products that were available.[150]While I am mindful of the need to treat such self-serving assertions of reliance by Mrs Guirguis cautiously, I am persuaded by her evidence in this regard.
  1. [186]
    Little turns on RFG’s submission that when Mr Guirguis was asked about the importance of the price list during his evidence in chief, his immediate answer related to gross profit.[151]He also gave evidence that “It told me the range.  It told me the price.  It told me what we can buy.”[152]This evidence accords with the reason expressed in Mr Guirguis’s email of 19 March 2012 as to why he was requesting the list of products from RFG.
  1. [187]
    In accepting the evidence of the Guirguises on this point, I have taken into account the arguably inconsistent evidence given by Mr Guirguis as to whether he personally looked ‘very closely’ at the price list.[153]It is inherently improbable that having made the request for the list of products that Mr Guirguis would not have looked at the price list.  The request for the list by Mr Guirguis had been made on the same day that Arthur Browne had told him that he needed more information in relation to the bakery side of the business.  Against this background it is inconceivable to suggest that the Guirguises did not rely on the price list as an indication of the range of products that they would have available to sell at the Patisserie.  
  1. [188]
    As to the non-disclosures, the following exchange occurred with Mr Guirguis and his counsel in evidence in chief in relation to the email of 23 March 2012:  

“All right.  Now, Mr Guirguis, just going back quickly, if you had been informed of – going to exhibit 3 – if you had been informed of – if you’d received that email, or been informed of its content by anyone, what would have been your attitude to the – proceeding with the   ?As I said   

   franchise?    before, we were very much at the stage where we’re getting – where we didn’t want to sign, and so we were sitting on the fence very much, that last week or so, before we did sign.  So if we had seen any of these, or there was any indication of problems or troubles, we definitely would not have signed.  Never.

When you say “any indications of troubles or problems”, if it be the case that some of these problems would affect particular franchisees and some would not, would that have affected your attitude to the   ?It tells me that the company is in trouble, and so, again, we would not have signed, no.

And does that – so even if a particular step or a particular piece of information didn’t have a direct impact on the proposed Townsville franchise?I still wouldn’t have – we still wouldn’t have signed, because who knows what’s going to happen next?  Maybe it doesn’t affect us today, but maybe it will tomorrow.”[154]

  1. [189]
    Later, in cross-examination there was the following exchange with Mr Guirguis and RFG’s counsel:

“So is it your evidence that any problem or potential problem with the supply of product to your franchise would have been something which would have made you not proceed?Any problem or potential problem would have been magnified 10 times because of our location.  So I definitely would not have been interested.

When you say “not interested”, you wouldn’t have proceeded with the franchise?Correct.”[155]

  1. [190]
    As to the contents of the email of 23 March 2012, Mrs Guirguis gave the following evidence:

“And what do you say about your attitude to the entry and completion of the franchise, if you had received that information? ---  If I had have known that there was trouble like that, there is no chance I would have gone into this.”[156]

  1. [191]
    I also accept the evidence of the Guirguises on this point. Mr Guirguis had expressed his concerns to both Mr Metzakis and Mr Dellit regarding the reliable and frequent supply of Michel’s Patisserie products to Townsville. He had been told by Mr Metzakis that this would not be a problem and Mr Dellit had confirmed this. The contents of the email of 23 March 2012 clearly called into question the reassurances he had been given in this regard. The information was known to RFG three days prior to the plaintiffs signing the Franchise Agreement, at which time the Guirguises were still deciding whether to go ahead with the proposed transactions.
  1. [192]
    The email of 2 April 2012 falls into a different category. The reason for this is that it post-dates the signing of the Franchise Agreement by the plaintiffs. There is no evidence as to when Mr Alford signed it on behalf of the first defendant. The Agreement Date in it is stated to be 28 May 2012, which is the date of the Outlet Agreement and when the Patisserie commended trading.[157] 
  1. [193]
    It is not the law that any representation made or information not disclosed after a party signs an agreement, is necessarily not causative of steps taken to arrive at the point where the parties become legally bound by it. However I reject the evidence of the Guirguises that they would not have agreed to have been bound by the Franchise Agreement had they known of the contents of the subject email. This is because it was Mr Guirguis’ understanding that he had become bound by the Franchise Agreement as soon as he signed it.[158]  Mrs Guirguis gave similar evidence.  In cross-examination she explained that it was for this reason that they had not sought any legal advice in the two or so months between signing the Franchise Agreement and the Patisserie opening.[159]Therefore, I am satisfied that even if the Guirguises had been informed of the contents of the email of 2 April 2012 that they would not have sought legal advice or taken any other steps to prevent the first plaintiff from being bound by the Franchise Agreement.  As far as they were concerned, it was too late and they were already bound by it.
  1. [194]
    RFG have identified a number of matters which it is contended point to a lack of reliance. These are addressed below.

Other inquiries

  1. [195]
    RFG submits that the taking of the following steps militates against a finding that the Guirguises relied on the representations:
  1. (i)
    looking into acquiring other franchises such as The Coffee Club, Gloria Jeans and Jamaica Blue;
  1. (ii)
    having discussions with other Michel’s Patisserie franchisees; and
  1. (iii)
    making enquiries of Coles about their processes for freezing baked goods.
  1. [196]
    The first plaintiff was initially incorporated with the intention of it becoming a Jamaica Blue franchise. The Guirguises also looked at other franchise brands. However, there is very limited evidence as to the nature and extent of the enquiries made with respect to these other franchises. I do not consider the fact of these enquires weakens the case of the plaintiffs with respect to reliance.
  1. [197]
    It is true that the Guirguises spoke to some existing Michel’s Patisserie franchisees. There is conflicting evidence between the Guirguises as to the number of franchisees they spoke to. Mr Guirguis said that he was provided with the telephone list from RFG. The list spanned a couple of pages. It was his recollection that he and his wife rang each of them. Mrs Guirguis did not think she telephoned more than 10 other franchisees. She said that the ones she spoke to were all located in Brisbane or Melbourne.[160]To the extent to which this inconsistency in the evidence between the Guirguises needs to be resolved, I prefer the evidence of Mrs Guirguis to the effect that they spoke with a number of existing franchisees but certainly not all of them. 
  1. [198]
    Mr Guirguis recalled speaking to the franchisee from Yeppoon. He thought this occurred on more than one occasion and that they first spoke after he received Mr Metzakis’s email of 21 March 2012. His evidence was that he asked her generally about the business, the products she was selling and how it was going. The lady told him that the large cakes were quite good, that they arrived in good condition and that they sold well. Mr Guirguis could not remember whether he asked her about the frequency of delivery.
  1. [199]
    The evidence as to what was discussed between the Guirguises and the various franchisees can be described as vague at best. Having said this, it is reasonable to infer that the Guirguises did discuss with at least some of the franchisees, the topics which were the subject of the representations.
  1. [200]
    It was the uncontested evidence of Mr Guirguis that he visited a Coles supermarket in Townsville. His evidence was that it was for the purpose of researching the snap freezing process which Mr Metzakis had talked to him about. The Guirguises purchased some of the breads and cakes from Coles that had been snap frozen to ensure the quality of them were maintained. Mr Guirguis explained in evidence that this meant that they did not need to travel some 700 kilometres to the closest Michel’s Patisserie store to sample the frozen products.[161]
  1. [201]
    In my view, these various enquiries confirm the importance to the Guirguises of the representations in their decision whether to enter into the Franchise and Related Agreements. They were understandably questioning and checking the veracity of the representations which had been made.
  1. [202]
    Mrs Guirguis gave evidence that it was the enquiries that they made in the week before 26 March 2012 that really convinced them to enter into the Franchise Agreement. RFG relies on this evidence as further support for its contention of non-reliance. I am not persuaded that this evidence has this consequence. There is a paucity of evidence as to what these enquiries were. As already stated, the nature of the pleaded representations in the context of the concerns raised by Mr Guirguis makes them likely to have been material to the plaintiffs in their decision to proceed with the proposed transaction.
  1. [203]
    This is not to say that the Guirguises were not influenced by these abovementioned enquiries and discussions. I have no doubt that they considered other information as well. This includes the Monthly Cash Forecast and other financial information provided by their accountants. Of course though, the causation that seals the operation of s 18 of the ACL does not need to be the sole factor.

Questionnaire 

  1. [204]
    RFG also relies on the Guirguis’s responses in the Questionnaire as cogent and contemporaneous evidence of the absence of reliance.[162]These responses were completed three days prior to meeting with their solicitor, Arthur Browne.
  1. [205]
    The text on the first page of the Questionnaire directed each franchisee and guarantor to complete it, reinforced that it was to be completed fully and as accurately as possible, described its aim as being to ascertain “all statements made to you, and information provided to you, which influenced your decision to execute Franchise Grant Documentation”, and directed that, “Where applicable, you must specify any such statement or information, who provided it to you and whether it influenced your decision to proceed as aforesaid.”
  1. [206]
    Twenty-four topics were identified in the Questionnaire. They were preceded by this text: “Have you been provided with any information, or has anyone made a statement, representation or warranty to you (either verbally or in writing) in relation to the matters set out below? If so please specify in the space provided: A) the statement, representation or warranty (or other information); B) the person who made the statement, representation or warranty (or provided the information); and C) advise us whether it influenced your decision to execute Franchise Grant Documentation and proceed with the franchise.”
  1. [207]
    The topics in the Questionnaire covered matters such as the turnover, income, profit, viability, overheads, cost/turnover ratio, value, and possible competitors of the business. None of the 24 topics were directed to the subject matter of any the pleaded representations and non-disclosures.
  1. [208]
    Apart from topics 15, 21 and 24, Mr and Mrs Guirguis answered ‘no’ to each of the other 21 topics. Topic 15 states “The terms upon which the lesser of the Premises is willing to lease the Premises and the possibility of a further lease term?”, Mr Guirguis answered, “Yes. A. We were told we would get a refund of the Shop Fitout $82500. B. George Metzakis. C. Yes it did influence our decision to buy.” Topic 21 states “The skills you have or must learn to operate the Business?” Mr Guirguis answered, “Yes. A. We must pass the 4 weeks + 3 day training in Brisbane to be able to operate the shop. B. Not sure could have been George Metzakis. C. No did not influence our decision.”  Topic 24 states “The amount of ongoing support you will be provided with by the Franchisor and the regularity and extent of that support?”, to which Mr Guirguis answered “Yes. A person will spend 3 days with us when the shop first opens. A area manager will visit our shop and assist us if we need assistance. B. George Metzakis. C. Yes it helped us to make up our mind to buy the business”.
  1. [209]
    Topic 22 in the Questionnaire states “Any other relevant matter which may have influenced your decision to execute Franchise Grant Documentation or proceed with the Franchise?” Both Mr and Mrs Guirguis answered “No”.
  1. [210]
    Mrs Guirguis said that the reason for this is that her husband had been negotiating the purchase of the Patisserie and while he had kept her appraised of developments, she had not personally spoken to anyone from or on behalf of RFG. It was her understanding from reading the document that if she had spoken to anyone that she needed to include it in the Questionnaire.[163]She went on to explain that she was not sure whether she understood that the Questionnaire gave her the opportunity to place on the record any information that she relied on in purchasing the Patisserie.  She accepted that she understood that it gave RFG an opportunity to clarify any incorrect information that may have been provided to her.[164]She said that she may not have understood that the effect of the Deed of Representations was to potentially restrict them from relying on any information not recorded in the Questionnaire, in the event of a future dispute.[165]
  1. [211]
    As to Mr Guirguis’s evidence, he explained that he did not include any conversations he had with anyone as there had been so many of them. He denied the suggestion put to him that there were no other matters which influenced his decision to enter into the Franchise Agreement. He expanded on this in the following way:

“We only put down in here what we could actually prove, what we actually had in writing, not hearsay, not conversations.”[166]

  1. [212]
    The following exchange occurred between Mr Guirguis and counsel for RFG:

“And you understood at the time that the reference to “all statements or any such statement or information” in that passage included conversations, didn’t you?No, I did not.  If I included all that in there, I would have had probably about 100-page document because a lot of people that I spoke to influenced my decision to a certain degree, starting with George, followed by Trent, followed by a lot of – even the Coles people and the way – when we discussed blast freezing.  They all influenced my decision.  Was I to write all those down?  You would have easily an 80 to 100-page document.

You understood you could attach A4-sized schedules if there was insufficient space, didn’t you?So you want me to attach a 100-page document?  It’s just – it’s just farce.  It’s just ridiculous.  How can you write everything down that – everything that you say, everything that you hear, every conversation, every telephone conversation?  It’s just not doable.  And that’s why.  It’s just not practical.  And that’s why we only wrote doing things that we can substantiate with – that are in writing.  You can’t write all that – you can’t write every piece of information down.”[167]

  1. [213]
    Mr Guirguis’s responses to each of the topics, particularly topic 22 is certainly a material consideration to the issue of inducement. However, is not determinative of it. Rather, it is a question of fact to be resolved by considering all of the relevant circumstances, of which the responses in the Questionnaire are but one.[168]  
  1. [214]
    I consider Mr Guirguis’s response to topic 22 to be understandable in the circumstances. I reject the submission that his explanation was confected for the purposes of this litigation.[169]This does not accord with my impression of his evidence.  He completed the Questionnaire with no legal advice and where he had no commercial experience in negotiating franchise or similar agreements.  Although Arthur Browne looked at the Questionnaire after it had been completed, he did not explore with Mr Guirguis the reasons for his responses or provide any advice as to the effect of his responses.  Mr Browne simply enquired of Mr Guirguis if he was happy with the responses he had given.[170]Further, the Questionnaires were completed on 16 March 2012.  The email and price list were not forwarded to the Guirguises until six days later.  It is hardly surprising that the statements made about the range of product in the email and price list were not mentioned in the Questionnaires.  
  1. [215]
    It is reiterated that the nature of the representations are themselves capable of providing substantial support for a finding that those representations induced the plaintiffs to enter into the Franchise and Related Agreements. The representations were not only made by Mr Metzakis but they were effectively repeated by Mr Dellit, in circumstances where he was an employee of the third defendant. I consider that this combination of circumstances would have made them seem even more reliable to Mr Guirguis enhancing the likelihood that he relied on them. This is where the representations concerned the kinds of products to be supplied to a potential franchisee for retail sale by it, the reliability and frequency of that supply and the quality of those products upon their receipt in Townsville after having been transported from Brisbane. It would be inconceivable that they would not have been material in the decision to enter into the Franchise and Related Agreements. Therefore, the finding of inducement is made notwithstanding the respective responses given by the Guirguises to the various topics in the Questionnaire, including topic 22.

Legal advice

  1. [216]
    RFG has emphasised that the Guirguises obtained their own legal advice and that the Franchise Agreement and Deed of Representations were signed in the presence of their solicitor.[171]  The fact that independent advice has been obtained and relied upon does not preclude a finding that the Guirguises relied on the representations made on behalf of RFG.  The question is not one of law but of fact. 
  1. [217]
    The evidence establishes that the legal advice was far from comprehensive. It seems to have been cursory at best. The Guirguises met with their solicitor on one occasion only, being 19 March 2012. At this meeting Arthur Browne made the observation that the documentation was voluminous and that it tended to favour RFG. He did not go through each page with them.
  1. [218]
    Mr Browne recommended that they go away for another week and think about it and then to come back and see him. Mr Guirguis gave the following evidence:

“And when you say “explained it all”, what do you mean by that, Mr Guirguis?Well, he – we took all the documents to him, your Honour, and we sat down with him for quite a while, actually, and he read through some.  He breezed through some.  He explained everything to us.  He had a look at all the stuff that we had already filled out.  That’s about it, your Honour.  But he didn’t go page by page if that’s what you’re asking, your Honour.

Yes.  I’m wanting to know the extent of what was explained because you say he explained it all to you.  What do you mean by that?In very roundabout terms.  Not paragraph by paragraph; that’s for sure.  Yes.”[172]

  1. [219]
    It was Mrs Guirguis’s evidence that in relation to the Franchise Agreement that Mr Browne did not give them any advice about the availability of products. Her recollection was that he commented on how large the document was and that “they hold all the cards.… And it’s very one sided…”.[173]She otherwise had little recollection about the discussion with Arthur Browne.  She could not recall whether the legal and practical nature of the Deed of Prior Representations was discussed.[174]
  1. [220]
    The Guirguises had understood that they were to meet Arthur Browne again on 26 March 2012. When they attended at his offices they discovered that he was not available. For this reason they spoke to his son, Terrence, who is also a solicitor. They enquired of Terrence as to whether Arthur had left a message for them. They were advised that he had not. They were given no further legal advice on this day even though it had been the reason for their attendance. There was no discussion about the Questionnaire. There was no discussion about the price list or the outcome of any other enquiries the Guirguises had made since they had seen Arthur Browne the previous week. Against this background, they signed the Franchise Agreement and other paperwork.
  1. [221]
    I reject the submission of RFG to the effect that Mrs Guirguis’s evidence that Terrence Browne did not point out to her that she was certifying her answers to the Questionnaire to be true and correct as at 26 March 2012 is improbable.[175]To the contrary, I find her evidence to be entirely plausible and probable. 
  1. [222]
    The Independent Solicitor Certificate was completed by Terrence Browne on 26 March 2012. It does not record accurately what had transpired. Terrence had not provided any of the legal advice he certified as having provided. I am not satisfied that Arthur Browne adequately explained the legal and practical nature and effect of the documents. This is not intended to be a criticism of him. It may well be that he had intended to provide further legal advice when the Guirguises returned to see him. Unfortunately this did not eventuate. Further, there is no evidence that the Guirguises had told either Arthur or Terrence that they had understood the general nature and effect of the documents, including their obligations and risks.[176] 
  1. [223]
    In the context of this limited legal advice provided to the Guirguises, I do not accept that Mr Guirguis knew precisely what the Questionnaire required of him. It is true, as RFG has observed, that Mr Guirguis was not illiterate or suffering from some other ailment impairing his ability to comprehend documents. He had occupied occupational health and safety positions in his professional life but that does not mean that he was astute at identifying the pitfalls in purchasing a franchise. He had minimal small business experience and no retail food experience.[177]There is no evidence that he had previously operated a franchise.  Voluminous documents were provided to him.  He sought legal advice as had been recommended.  The Questionnaire was not completed in the presence of Arthur Browne.  Mr Guirguis was simply asked if he was happy with the answers he had given.[178]There was no adequate explanation given by either Arthur or Terrence Browne about the nature and/or extent of responses which were required.  
  1. [224]
    RFG also point to the fact that the Guirguises did not seek any legal advice as to whether they could get out of the Franchise Agreement after Mrs Guirguis had been told in the week of 16 April 2012 that Dyson had gone into liquidation. Mrs Guirguis was not aware of the name of the bakery and this development was delivered to her in such a way that she did not consider it to be a serious problem. Prior to opening the Patisserie, they received no further updates about this to indicate it was a continuing problem. This is despite Mr Guirguis having emailed Mr Dellit seeking clarification about it and receiving no meaningful response. The Guirguises did not have the benefit of receiving any of the emails/memorandums forwarded to other franchisees on 23, 26, 28 and 30 March and 2, 3, 4, 11, 12, 17, 27 April 2012[179]to alert them to the serious and protracted nature of the problems.  It is hardly surprising that it was Mr Alford’s expectation that these emails would have been forwarded to the Guirguises.  They were not told of the information session that was being held on 10 April 2012 to provide additional information to franchisees about the problems.  Further, Arthur Browne had told them on 19 March 2012 that they would be effectively bound by the Franchise Agreement once they had signed it.[180] 

Change from Brisbane to Sydney 

  1. [225]
    Another reason why RFG contend that a finding ought to be made that there was no reliance by the Guirguises on at least some of the representations, is because they were clearly aware before the Patisserie opened that the products would be coming out of Sydney and they did not seek any legal advice about the ramifications of this change and/or raise any objection about this. However, I am not satisfied that the Guirguises were clearly aware of this before the Patisserie opened.
  1. [226]
    RFG rely on Mr Metzakis’s evidence that he told Mr Guirguis that the products would no longer be coming from Brisbane and instead would be coming from Sydney.[181]However, an analysis of the evidence does not support a finding that Mr Metzakis conveyed this important development to Mr Guirguis.  The reasons for this are set out below.
  1. [227]
    There is no dispute that Mr Metzakis initially told Mr Guirguis that the products would be coming from Brisbane. Mr Metzakis’s evidence was that he subsequently learnt that this was not the case. He said that he was in a meeting with a potential franchisee who was considering opening a Michel’s Patisserie in Mackay (‘the Mackay meeting’) when he was told that the products would in fact be coming from Sydney. He could not recall when this meeting occurred. His evidence was that it took place at RFG’s Gold Coast offices. He said that Yvette Shearer from RFG was present, as was Mr Dellit and the potential franchisee. It was during this meeting that Mr Metzakis also learnt that not all products would be available for regional franchisees.
  1. [228]
    It was Mr Metzakis’s recollection that in the days following the Mackay meeting, he telephoned the franchisee who operated the Yeppoon store. He said there was no discussion about where the products for her franchise were supplied from. He recalled the lady telling him that customers would report to her that the quality of the cakes had been maintained even after they had been transported over long distances. Mr Metzakis conveyed to Mr Guirguis this conversation in an email dated 21 March 2012. Mr Metzakis also provided to Mr Guirguis the Yeppoon franchisee’s contact details so he could speak with her. In this email he made no mention of the fact that the products would be coming from Sydney.
  1. [229]
    While Mr Metzakis was confident that he spoke to the Yeppoon franchisee only a couple of days after the Mackay meeting, he was not as sure as to the timing of the Mackay meeting. Initially he said it occurred in late January or early February 2012.[182]His evidence later changed to it having occurred shortly prior to his email of 21 March 2012.  It seems that the latter is likely to be correct as Dyson did not tell RFG until 16 March 2012 that it would no longer be supplying products to RFG.[183]Further, a decision in relation to moving the supply from Brisbane to Sydney was not made before 2 April 2012.  There was no evidence from either Mr Metzakis or Mr Guirguis that they spoke subsequent to this time.
  1. [230]
    Mr Guirguis categorically denied that Mr Metzakis told him that the products would be coming from Sydney rather than Brisbane.[184]Further and importantly, Mr Metzakis did not give evidence of having any independent recollection of having done so.  Rather, it is something that he was sure that he would have done after the Mackay meeting.[185]I do not accept this.  As Mr Metzakis explained in evidence, as far as he was concerned it was ‘irrelevant’.[186]This is confirmed by the fact that he did not raise it in his discussion with the Yeppoon franchisee.
  1. [231]
    RFG is critical of the Guirguis’s conduct after Mrs Guirguis was told in mid-April that the bakery which had been supplying the franchises had gone into liquidation. RFG submits that Mrs Guirguis having been informed of this, did not raise any objection and this suggests that they were not so concerned by this development that it caused them to rethink their commitment to the Patisserie. They further contend that the conduct of the Guirguises at the time reveals their professed concerns about these matters during their evidence, to be confected for the purposes of the litigation.[187]I reject these submissions for the reasons detailed below.
  1. [232]
    Mrs Guirguis’s evidence, which I accept, was that there was no mention of the Dyson bakery. She said that she was not overly concerned as the male from RFG who told her ‘made very light of it’ and said that RFG was in the process of sourcing another bakery.[188]Further, she remained at the training course until 2 May 2012, and was told nothing further as to any ongoing problems in this or any other regard.[189]Mrs Guirguis explained that after having this conversation, Mr King proceeded to place the first order for the Patisserie causing her to believe that the potential supply issue which she had been told about had been resolved.
  1. [233]
    In evidence Mr Guirguis explained that it was his understanding from his conversation with his wife that a bakery in Brisbane had gone into liquidation. He did not know the name of the bakery nor the size of it.[190]He had assumed from talking to Mr Metzakis that there was more than one bakery in Brisbane supplying products to Michel’s Patisserie franchises.[191]
  1. [234]
    Turning to Mr Guirguis’s email on 6 May 2012, his evidence was that by this time he had some inkling that the products may have been coming out of Sydney. It was this that caused him to send the email to Mr Dellit raising this and other concerns. Mr Dellit responded that the appropriate person from RFG would be in contact with him regarding his concerns. This never occurred.[192]The following exchange occurred with Counsel for RFG and Mr Guirguis in cross-examination:

“And if we turn the page, we see the following:

I also understand that one of your cake suppliers has gone into liquidation, and now you might need to get your cakes out of Sydney.

A series of question marks.  See that?That’s because we had no idea.  It was just speculation.  That’s why there’s so many question marks.

You at least had some inkling that the cakes might be coming out of Sydney, didn’t you?I had an inkling, yes.  Yeah.  But no one would confirm it for us.

You didn’t ring up RFG demanding an answer to that question, did you?I honestly don’t remember, but I don’t think so, no.

You didn’t write any other emails demanding an answer to that question, did you?No, I don’t think so.  No.

And you didn’t seek any legal advice, you told us before, about not proceeding with the franchise?Why should we?  We didn’t know the extent of the – of the problem.  We had no idea.  No one kept us informed as to anything.  So why should we?”[193]

  1. [235]
    In these circumstances, it is difficult for RFG to maintain its submission that the Guirguises made no further enquiries of RFG about the possible ramifications for the Patisserie of the Brisbane bakery having gone into liquidation. Mr Guirguis assumed, reasonably in my view, that this was not an ongoing concern.
  1. [236]
    Mrs Guirguis categorically denied the suggestion put to her that she knew prior to the opening of the Patisserie that the products were coming out of Sydney. She had no recollection of seeing or reading Mr Guirguis’s email to Mr Dellit of 6 May 2012. She was not the main recipient of the email but was rather copied into it.[194]Mrs Guirguis’s evidence was that when the Patisserie opened she assumed that the bakery supply issue that she had been told about in mid-April 2012 had been resolved and that RFG had sourced another supply bakery in Brisbane.[195]This is in circumstances where she had heard nothing further about it and the person who had told her about it had not seemed overly concerned about it.  She recalled Mr King telling her in the first week after the Patisserie opened that it would now take two weeks for special order cakes to be delivered.  Mrs Guirguis said that Mr King may have mentioned to her on this occasion that the products would be coming from Sydney.[196]
  1. [237]
    Against this background it is perhaps unsurprising that the Guirguises did not seek legal advice as to whether they could get out of the Franchise Agreement which they had signed six weeks earlier. Further, they had been told that it would be nigh impossible to get out of it after it had been signed.[197] 

Other matters of non-reliance

  1. [238]
    It was suggested to Mr Guirguis in cross-examination that because of his experience of living in Townsville he doubted whether the products could be delivered on a weekly basis. In other words, RFG contend that Mr Guirguis was relying on his own assessment of the situation, rather than on any contravening conduct engaged in on behalf of RFG. Mr Guirguis rejected this and explained that he just wanted to double check, and because the reassurance was given to him and RFG is a large company, he accepted it.[198]I am persuaded by Mr Guirguis’s evidence about this.
  1. [239]
    There was also cross-examination of Mr Guirguis to the effect that he would have been somewhat circumspect as to the information that Mr Metzakis was giving him regarding the franchise. This is because Mr Guirguis would have known that as a business broker, Mr Metzakis would be paid his commission if the first plaintiff entered into the Franchise Agreement. Mr Guirguis said that irrespective of any potential payment of a commission to Mr Metzakis, it was his expectation that Mr Metzakis would provide him with accurate and honest information at all times.[199]This was clearly a reasonable expectation.  Further, this cross-examination is inconsistent with the submission made by RFG as to why Mr Metzakis’s evidence should be accepted; namely that as a professional and licensed business broker, it would be expected that he would have been careful with the information he provided to all prospective purchasers.
  1. [240]
    In their written submissions, RFG contend that because Mr Guirguis never intended to just sell cakes in the Patisserie, that it is unlikely he acquired it only on the basis of what he had been told about the Michel’s Patisserie products.[200]This misapprehends the law as it does not need to be the sole cause.  It needs to be a material cause and I am satisfied that it was.    
  1. [241]
    It is further contended in RFG’s written submissions, that the fact that Mr Guirguis did not try any of the products sold by Michel’s Patisserie, even when he was taken to other franchises by Mr Metzakis confirms how unimportant the products were to his vision of a successful business.[201]I do not agree.   Mr Metzakis only took Mr Guirguis to two other franchises very early in the pre-contractual negotiations.  It is not even clear that RFG had secured the lease to operate the Patisserie at the time of these visits.   Further, as explained above, the closest Michel’s Patisserie to Townsville was some 700 kilometres away.   This submission is also contrary to the concerns that I am satisfied Mr Guirguis raised with Mr Metzakis and Mr Dellit.
  1. [242]
    RFG further submits that for reasons unrelated to any contraventions of the ACL, the Guirguises had ‘buyer’s remorse’ and were seeking to find a way to get out of the Franchise Agreement.  It is said that within two weeks of opening the Patisserie the Guirguises were writing to RFG asking them to buy it back.  According to RFG, when this was refused, the Guirguises sought out other ways to escape the franchise.  In this regard, they rely on the fact that from early 2013 the Guirguises were not accepting any deliveries of products from RFG’s agents in the absence of irrefutable proof of the temperature at which the freezer compartment of the delivery truck was maintained.  Further, they were rejecting those deliveries without even inspecting the stock.[202]  
  1. [243]
    Mr Guirguis conceded in cross-examination that he was frustrated with RFG within a week of the Patisserie opening. He explained that this was because of ongoing supply problems from this time. It is true that in an email dated 10 June 2012 to Mr Dellit, Mr Guirguis stated that they were not happy and RFG needed to buy the business back.[203]Mr Guirguis explained that the reason why he wrote this email was because two matters he had been initially concerned about, namely delivery and the quality of the product, had already been problematic.  He explained that while he expected some teething issues, he did not expect to receive product that he could not sell.[204]I do not accept that the Guirguises had buyer’s remorse for the reasons contended for by RFG.
  1. [244]
    In short, I am persuaded that the plaintiffs entered into the Franchise and Related Agreements, borrowed money and commenced operating the Patisserie in reliance upon or induced by the representations and non-disclosures.
  1. [245]
    RFG has raised a pleading point in relation to any assertion by the plaintiffs that Mrs Guirguis independently relied on the positive oral representations made by Mr Metzakis and Mr Dellit. It is asserted that r 150(1)(j) of the Uniform Civil Procedure Rules 1999 (Qld) requires a claim in relation to a misrepresentation to be specifically pleaded.  Subsection (2) provides that any facts from which the misrepresentation is claimed must be specifically pleaded.  I am satisfied these rules have been complied with.  In paragraphs 13 and 15 of the statement of claim, it is clearly pleaded that the representations were made to Mr Guirguis by Mr Metzakis and Mr Dellit.  It is then pleaded in paragraph 30 of the statement of claim that the plaintiffs, including Mrs Guirguis entered into the Franchise and Related Agreements in reliance upon and induced by the representations.  The purpose of pleadings is to state with sufficient clarity the case that must be met and to ensure that a party has the opportunity of meeting the case against it.  I am satisfied these purposes have been achieved by the plaintiffs’ pleading.  Further, as I have previously explained, it was Mr Guirguis who was the principal decision maker and Mrs Guirguis was largely prepared to do what Mr Guirguis decided. 

Supply of RFG products to the Patisserie

  1. [246]
    There are some documents that provide general support for the evidence of Mrs Guirguis that the products supplied to the Patisserie did not accord with the representations that had been made. The documentary trail is far from complete though. Significantly, invoices do not exist for every order. Mrs Guirguis explained in evidence that this is because they were not routinely provided by the delivery drivers. They would be emailed at a later time and not always on the day of the delivery. This makes it impossible to reconcile the dates on which products were ordered with particular delivery documents. I accept RFG’s submission that limited use can be made of the photographs of the products that were tendered.
  1. [247]
    The fact that there is minimal objective evidence is not fatal to the claim of the plaintiffs. This is because I generally accept Mrs Guirguis’s evidence in this regard. It is not necessary to make detailed findings of everything that went wrong. A number of issues relating to the supply of products can be aptly described as unsatisfactory and caused significant difficulties in the running of the Patisserie.
  1. [248]
    Within a week of the Patisserie opening, the Guirguises were told that the products were definitely being supplied from Sydney rather than Brisbane. A depot at Darra in Brisbane was being used where products were unloaded, sometimes stored and then reloaded for the remainder of the journey to Townsville. There was no consistent process being followed with respect to the transportation of the products. One company would transport them to Darra and another company would be used to complete the journey to Townsville. There were occasions where the products would sit in the depot at Darra for a couple of days. The transportation process could take up to seven days.[205] 
  1. [249]
    The system the Guirguises had in place for the unloading of the products at Stocklands, was in my view appropriate and was rarely associated with delays. One example of a delay at the Townville end was when the transport company which had been engaged by RFG, delivered the products to the wrong dock, furthest from the cold room. Another example was when the delivery driver unloaded the products and left them on the loading dock in the ambient air. I am satisfied these were exceptions rather than the norm and the delays on these occasions were not caused by the plaintiffs.
  1. [250]
    RFG are critical that Mrs Guirguis could not recall reading the manual on stock control when receiving frozen goods. This is perhaps not surprising given that it related to events more than six years earlier. It seems unlikely that she would not have learnt about this, particularly given that she spent more than a month on the Gold Coast for training commencing on 2 April 2012.
  1. [251]
    Criticisms are levelled against Mrs Guirguis by RFG for the time taken between the products being unloaded at the Stocklands delivery dock to when they were loaded into the freezer. These criticisms are based on an assumption that this time could be 20 minutes if there were two loads taking 10 minutes per load.[206]However, this assumption does not accord with the evidence.  Deliveries for the Patisserie were routinely made via the loading dock adjacent to Woolworths.  The delivery trucks would park at the top of the loading dock, close to the entrance.  Once through the entrance the products would be wheeled along a short air-conditioned walkway to the cold room where they would be unloaded.  Mrs Guirguis’s evidence was that the products would usually be unloaded at one time.[207]She explained that most drivers would remain in the truck with the air conditioning going until she returned to collect the remainder of the products from the rear of the truck, if a second unload was required.[208]A second unload was an exception rather than the norm.  RFG have referred to an instance where a delivery took an hour to be unloaded.  Mrs Guirguis explained that the reason for this was because the delivery driver had simply unloaded the products and left them on the loading dock in the ambient air.   The transport companies delivering the products had been arranged by RFG’s principal distributor.   These sorts of delays were once again the exception rather than the norm.  
  1. [252]
    Mrs Guirguis said that she would usually check the products at the time of delivery when they were being loaded into the freezer. Understandably, the demands of running the Patisserie were such that there would be occasions when she could not check the products until later. According to RFG’s own criteria, products which were properly frozen and had remained frozen should not have exhibited signs of ice crystals, cracking or splitting. They should not have been stuck together.[209]Mrs Guirguis observed one or more of these features in relation to a number of the products which had been delivered from Sydney.  I accept her evidence that she initially noticed products exhibiting some of these features with the first delivery.  Numerous emails were forwarded to RFG complaining of the quality of the frozen products which had been supplied by RFG.[210]Mrs Guirguis gave evidence that the products delivered on 19 February 2013 did not look properly frozen.[211]In response to the complaints by the Guirguises about the quality of the frozen products, RFG told them that a data logger would be used to monitor the temperature of the products.  There is no evidence as to if and when this transpired and if so the data that was collected.
  1. [253]
    There was extensive cross-examination of Mrs Guirguis about the temperatures of the freezer in the cold room as recorded in the Storage Temperature Record. The questioning was directed at establishing that the blame for the sub-optimal quality of many of the frozen products lay with the Guirguises on account of the storage of the products after they had been delivered to the loading dock at Stocklands. I do not accept this is established by the evidence. The freezer had been installed by RFG. The freezer temperature had been set by RFG and as far as the Guirguises were aware it could not be manually adjusted. It was controlled by RFG and could only be altered by RFG. It is not known at what temperature the freezer had been set by RFG. Dr Robertson thought it was likely to have been at minus 17.5 degrees Celsius.[212]The industry standard is minus 18 degrees Celsius.  The Guirguises were told to ‘just leave it on all the time and don’t touch it.[213] 
  1. [254]
    The training Mrs Guirguis had received had not included the daily recording of the freezer temperature.[214]The Storage Temperature Record shows that on most days when the freezer temperature was recorded, that it would be between -16 and -18 degrees Celsius.  These were within the expected range.  The most concerning temperatures were recorded between 14 and 16 November 2012, after Mr Woodham from RFG had made the mistake of turning the power off to the cold room.  This was not discovered until about three hours later.[215] 
  1. [255]
    It of course would have been ideal if the temperature had been recorded at least daily. Having said this, Mr King from RFG ran the Patisserie for the first week and did not make a single entry in the Storage Temperature Record. Neither Mr King nor Mr Woodham spoke to Mrs Guirguis about issues relating to the freezer temperature on any occasion. Mrs Guirguis explained that while the daily temperature was not always recorded that she would look at the digital temperature display every day that she went into the freezer. She did not have any particular concerns with it apart from after Mr Woodham had turned the power off.[216]She knew that the temperature for freezer storage was at least minus 18 degrees Celsius. 
  1. [256]
    There were multiple occasions where special order cakes arrived late or not at all. In June 2012, a vanilla sponge cake was delivered on a Monday when it should have been delivered on the previous Friday. Mrs Guirguis provided the customer with two free cakes to apologise for the late delivery. In September 2012, a number of special order cakes were late or did not arrive. There was a white mud cake which had been ordered by a lady who worked at Stocklands for her son’s 16th birthday which never arrived.  The customer was irate and Mrs Guirguis offered her two free cakes.  A chocolate sponge cake which had been ordered for another customer never arrived.  There were two chocolate sponge cakes for a customer’s one year old daughter to be picked up on a Saturday which did not arrive until the following Monday.  Mrs Guirguis also gave this customer two free cakes.  There was a customer who came to the Patisserie on a Saturday to collect a cake that he had ordered for his wife’s surprise 40th birthday.  It had been ordered to be delivered on the previous Friday but it did not arrive until the following Monday.  The customer was unsurprisingly very unhappy and Mrs Guirguis refunded him his money. 
  1. [257]
    In an email dated 2 July 2012, Mr Guirguis complained to Mr Dellit that the products that the bakery in Sydney was offering to supply were more limited than those which had been listed in the price list which Mr Dellit had emailed to him on 22 March 2012.[217]Around this time, Mr Guirguis was told in an email from RFG that they could not order any cakes with white icing as it would dissolve when the cake was thawed.[218]  

Loss and damage

  1. [258]
    The plaintiffs’ claim damages against the first, second and third defendant, and other relief under ss 236, 237 and 243 of the ACL.
  1. [259]
    The relevant question as to damages is whether or not there is a sufficient connection between the contravening conduct and the loss or damage suffered, such that the latter can be regarded as being “because of” the former.[219]
  1. [260]
    The contravening conduct needs to make a material contribution to the loss or damage but need not be the sole cause.[220]The principles of causation and remoteness in relation to s 236 of the ACL are the same as those applied under the tort of negligence.
  1. [261]
    This is a ‘no transaction’ case.[221]The recovery of damages is for the amount of the loss or damage suffered, assessed by comparison between the positions the plaintiffs are in and the positions they would have been in had they not entered into the Franchise and Related Agreements.  The loss must flow directly from the inducement.[222]The cause of the loss is a question of fact which must be determined by applying common sense.[223]
  1. [262]
    For the reasons set out above, in my assessment, on all the evidence, it was the fact that Mr and Mrs Guirguis believed the relevant representations made by Mr Metzakis, Mr Dellit and made by the email and price list, together with the fact that they were not informed of the contents of the email of 23 March 2012, that was a cause of the plaintiffs entering into the Franchise and Related Agreements, and hence suffering loss.
  1. [263]
    I am persuaded RFG’s conduct in contravention of the ACL, apart from the failure to disclose the email of 2 April 2012, induced the plaintiffs to enter into the Franchise and Related Agreements. This clearly constitutes sufficient connection to satisfy the concept of causation.
  1. [264]
    The first plaintiff claims all losses associated with entry into the Franchise and Related Agreements. The losses claimed are for the capital outlay costs, namely the initial franchise fee that was paid, the cost of the fit out and equipment, the borrowing costs and the transaction costs.
  1. [265]
    The second plaintiffs’ claims are for income foregone as a result of the first plaintiff acquiring and operating the Patisserie. To succeed, it must be proven on the balance of probabilities the existence of a valuable loss of opportunity and that it was caused by the contraventions.[224]
  1. [266]
    The court was assisted by expert accounting evidence. Peter Haley from Vincents Chartered Accountants has provided an expert report at the request of the plaintiffs’ solicitors which is dated 9 May 2014.[225]Elia Lytras provided an expert report for RFG.  His report is dated 24 March 2015.[226]The experts have provided a joint report dated 7 May 2015.[227]Both experts gave evidence at the previous trial.  By consent they did not give evidence at this trial.  Rather, the transcripts of their respective evidence from the previous trial were tendered as exhibits.[228]

First plaintiff

  1. [267]
    There is no dispute on the expert evidence as to the quantum of the following acquisition costs:
  1. (i)
    Initial franchise fee - $72,000;
  1. (ii)
    Cost of fit out and equipment - $216,993;
  1. (iii)
    Fit out contribution received - $75,000 (deduction); and
  1. (iv)
    Transaction costs - $3,900.[229]
  1. [268]
    RFG have raised the issue that there is no expert evidence about the value of the Patisserie on the day that it opened. This is true, but no such evidence is necessary where loss and damage are claimed on a ‘no transaction’ basis.
  1. [269]
    The total of the borrowing costs is $42,237. In the joint expert report, Mr Lytras excluded the bank guarantee in the sum of $21,601 on the basis that he had been instructed that the plaintiffs had abandoned the Patisserie. However, in evidence Mr Lytras conceded that had the plaintiffs not entered into the Franchise and Outlet Agreements that this cost of the bank guarantee would not have been incurred. I am satisfied it is a loss that is properly recoverable.
  1. [270]
    The first plaintiff has claimed trading losses in the amount of $37,631. This figure is derived from Mr Haley’s report. It is well established that where the acquisition of a business has been induced by misleading or deceptive conduct a plaintiff may recover, as part the damages, losses arising over some period of unprofitable trading.[230]In his expert report, Mr Lytras calculated these losses to be $7,550.  The difference of $30,081 between the two figures arrived at by the experts reflects the losses incurred for the year ended 30 June 2014.  Mr Lytras explained that this sum had been excluded from his calculations for the following reasons:
  1. (i)
    The solicitors for RFG had instructed him to exclude from his assessment trading losses attributable to the plaintiffs’ abandonment of the Patisserie.
  1. (ii)
    The first plaintiff only traded for three weeks of the 2014 financial year (1 -21 July 2013).
  1. (iii)
    During the previous financial year the first plaintiff had generated positive EBITDA (earnings before interest, tax, depreciation and amortisation) before accounting for owner’s remuneration.  Therefore, it was inferred that the first plaintiff was able to trade positively at an EBITA level had it continued trading during 2014.  This meant that the actual losses incurred are likely to be due to the cessation of trading during that financial year. 
  1. [271]
    Mr Lytras conceded in cross-examination that the amount of $30,081 was a loss incurred by the first plaintiff if damages were to be awarded on the basis that it would not have entered into the Franchise and Related Agreements in the absence of the contravening conduct.[231]I allow the total trading losses claimed in the sum of $37,361.
  1. [272]
    RFG submits that there is no evidence that the trading losses were caused by any contravening conduct of the defendants as opposed to the manner in which the Guirguises conducted the Patisserie, or the competition which it faced as a retail food outlet. This misses the point. The measure of damages is how much worse off the plaintiffs are than if they had not entered into the Franchise and Related Agreements. Damages are not being assessed for example, for the breach of a term of a contract.

Mrs Guirguis

  1. [273]
    Mrs Guirguis worked in the Patisserie from 28 May 2012 until 21 July 2013, a period of some 56 weeks. She claims that over this time she could have worked as a hairdresser for 40 hours per week earning $23.68 per hour. This equates to a loss totalling approximately $53,000.
  1. [274]
    It is contended for on behalf of RFG that Mrs Guirguis’s claim is without substance. It is said that Mrs Guirguis ought not to be compensated merely because she gave up the option to work as a hairdresser in order to work in the Patisserie. According to counsel for RFG, it must be shown that she was induced to do so by the contravening conduct. It is further said that even if the first plaintiff company was induced into acquiring the Patisserie by some actionable misrepresentation, Mrs Guirguis could have continued to work as a hairdresser. This submission does not find support in the law. It is sufficient if there is reliance on the misleading or deceptive conduct by someone even if it is not the plaintiff, so long as there has been loss and damage and there is a causal connection between the contravening conduct and the loss and damage.[232]  
  1. [275]
    The financial documentation of Mrs Guirguis reveals that she earned a minimal income in Australia prior to working in the Patisserie. Her PAYG payment summary for the 2011 financial year shows that she worked for Phource Pty Ltd, which trades as Just Cuts between 16 May and 30 June 2011, and earned a total net income of $3,692. There is no evidence that she earned any other income in Australia in the 2011 financial year. The only financial information for the 2012 financial year is an Income Tax Return Summary.[233]It shows that Mrs Guirguis earned a gross income of $23,889.  The source of income is again stated to be Phource Pty Ltd.  She earned no income in the 2013 year as she was working in the Patisserie.  She continued to work in the Patisserie for the first seven or so weeks of the 2014 financial year and earned no income for that year.
  1. [276]
    In Mrs Guirguis’s evidence, she explained that her very modest income for the 2011 financial year is because she had been living in Qatar and did not return to Australia until January 2011. She went on to explain that prior to starting with the Patisserie she had been working 30 hours per week with Just Cuts with a week day hourly rate of approximately $23.80, and a Saturday hourly rate of $28.[234]
  1. [277]
    Mr Hanley calculated Mrs Guirguis’s claim for lost wages to be approximately $54,000, which is consistent with her pleaded claim in this regard. Mr Lytras calculated them to be $37,950.
  1. [278]
    In all the circumstances, I have assumed that had the first plaintiff not entered into the Franchise and Related Agreements that Mrs Guirguis would have remained working as a hairdresser. I am not convinced that she would have increased her work hours as a hairdresser from 30 hrs per week to 40 hrs per week. I have allowed a loss of 30 hours per week at $25 per hour. This gives a gross weekly figure of $750, which equates to a net weekly figure of $661. Allowing this sum over 56 weeks gives a total of approximately $37,000. Superannuation on the gross equivalent of this sum gives a total of approximately $41,000.

Mr Guirguis

  1. [279]
    The plan of Mr Guirguis to initially work in the Patisserie on weekends did not eventuate. I accept his evidence that he was required to invest significantly more time in the business. The stream of email communications show that he was in regular contact with RFG raising various concerns, frequently related to the quality of the frozen products supplied by RFG. He was also involved in sourcing products from other stores, including Woolworths and The Cheesecake Shop. This was to replace those RFG products that they were unable to sell, either because of their suboptimal quality or because they had not been delivered. I accept these problems generated additional paperwork and other administrative tasks which he was required to attend to.
  1. [280]
    Mr Guirguis had commenced employment in the position of HSEQ Manager – Regional with Laing O'Rourke from on or around 1 October 2011. His contract of employment details his gross salary to be $230,000 per annum plus superannuation of 9% ($20,700). His total annual salary package was $250,700.[235]
  1. [281]
    In August 2012, Mr Guirguis was notified by Laing O'Rourke that he was being effectively demoted. He explained in evidence that this was after he had told his manager of the problems he was having with the Patisserie.[236]He explained that his job had its own pressures and those pressures coupled with the pressures of the Patisserie were having a significant impact on he and his family.
  1. [282]
    The demoted position with Laing O'Rourke was as the Occupational Health and Safety Officer for a construction project in Gladstone. His annual base salary was to reduce from $230,000 to $155,000 but he was to receive a site allowance of $38,750. His total package was to be reduced from $250,700 to $210,220. Mr Guirguis was not prepared to accept this demotion.
  1. [283]
    Mr Guirguis had previously worked at Peabody Energy Australia Coal Pty Limited. When he had left this employment, he had been told that the company would be happy to take him back any time. He commenced discussions with his former employer while still working for Laing O'Rourke.
  1. [284]
    On 10 August 2012, Mr Guirguis tendered his letter of resignation giving a notice period of four weeks, with his last day of work being 7 September 2012.[237]He worked from Gladstone for the last month of his employment with Laing O'Rourke. 
  1. [285]
    Mr Guirguis’s evidence was that the reason he left his employment with Laing O'Rourke was because he was unable to perform his role due to the competing demands on his time in attempting to resolve issues related to the Patisserie. Mr Guirguis explained in evidence that while he told this to his manager, John Green,[238]he did not feel comfortable articulating it in his resignation letter.  The explanation he provided in that letter was that he had better career prospects elsewhere.  I accept Mr Guirguis’s evidence about this.  It is understandable that he would not have felt comfortable disclosing to anyone at Laing O'Rourke, apart from his manager, the real reason for leaving his employment.  Further, at the time he provided his resignation letter, he did not have another job, let alone one with better career prospects.  He did not accept the position with Peabody Energy until two weeks later.  It was a role with a significantly lower gross salary package of $150,000 and no long term permanency. 
  1. [286]
    I do not accept the submission by RFG that the demands of the Patisserie had nothing to do with Mr Guirguis leaving his employment with Laing O'Rourke. I am not persuaded that Mr Guirguis would have been demoted if the Guirguises had not acquired the Patisserie. There is no evidence that Laing O'Rourke had been dissatisfied with Mr Guirguis’s work performance prior to the opening of the Patisserie in May 2012.
  1. [287]
    RFG submits that it was not reasonable for Mr Guirguis to have resigned his employment to devote more time to the Patisserie when he had never run a retail business before. I am also not persuaded by this submission. There was no pre-requisite for a franchisee to have previous retail business experience. It would not have been appropriate to employ someone else to attend to the matters that Mr Guirguis attended to. It was his business and he had a vested interest in trying to resolve the supply issues that were adversely impacting on the operation of and thereby the profitability of the Patisserie. Further, it was another overhead which the first plaintiff could ill afford.
  1. [288]
    It is contended by RFG that Mr Guirguis’s greater involvement with the Patisserie was required because the business was more involved than they had expected or because Mrs Guirguis was not capable of properly managing and operating it. It is true that it was not easy for her and operating the Patisserie was more involved than they had initially thought. However, this was attributable in no small way to the problems experienced with the frozen products which RFG had arranged to have delivered to the Patisserie. For example, Mrs Guirguis was required to deal with irate customers when cakes that had been ordered had not arrived. She was also required to source products to purchase from other businesses that she could buy and then sell at the Patisserie. These were required to replace products which had been ordered which had not arrived, or alternatively were of such poor quality that they could not be sold in the Patisserie.
  1. [289]
    The point is made by RFG that the plaintiffs have not established that the misleading conduct was the cause of Mr Guirguis's greater involvement in the business. However, given this is a ‘no transaction’ case, the plaintiffs bear no such evidentiary burden. What is required to be established and I am satisfied on balance that it has, is that in the absence of the contravening conduct, the first plaintiff would not have acquired and operated the Patisserie. If this had not occurred, Mr Guirguis would have remained working with Laing O'Rourke as HSEQ Manager – Regional, with a total salary package of approximately $250,000. I reject RFG’s submission that any loss must be assessed by reference to the reduced salary of some $210,000. This is in circumstances where I am satisfied that Mr Guirguis would have remained in the more senior positon with Laing O'Rourke had the first plaintiff not entered into the Franchise Agreement.
  1. [290]
    RFG has made the point that Mr Guirguis is not entitled to recover damages resulting from personal injuries. No such claim has been made. It does not arise just because Mr Guirguis’s evidence was that the demands and stressors of the Patisserie were adversely impacting on his work performance at Laing O'Rourke.
  1. [291]
    For the abovementioned reasons, I am satisfied that had the first plaintiff not entered into the Franchise Agreement, that Mr Guirguis would have remained working as the Regional HSEQ Manager for Laing O'Rourke earning a gross base salary of $230,000 which equates to a net weekly figure of $2,860.
  1. [292]
    In the statement of claim, Mr Guirguis’s loss of opportunity claim commences from 1 October 2012. By this time he had moved to Peabody Engineering and was earning a gross base salary of $150,000, which equates to a net weekly figure of approximately $2,000.
  1. [293]
    I have allowed damages in relation to Mr Guirguis’s loss of opportunity claim until 21 January 2014. This is six months after the Guirguises abandoned the Patisserie. This is because the position occupied by Mr Guirguis was a relatively senior one in a regional location. Realistically he is unlikely to have immediately secured another job of similar seniority. I am not satisfied that any loss after this time can be attributed to the first plaintiff’s entry into the Franchise Agreement. Further, there is no evidence of any attempts Mr Guirguis has made to gain alternative employment.
  1. [294]
    Allowing a net weekly income of $2,860 for the 2013 financial year for 38 weeks between 1 October 2012 and 30 June 2013 and for the 2014 financial year for 29 weeks between 1 July 2013 and 21 January 2014 gives a total figure of approximately $192,000. As best as can be ascertained, Mr Guirguis was earning a net weekly income over this period of $2,000 per week or a total of $134,000. This results in a shortfall of $58,000. Superannuation on the gross amount of this loss at 9% gives a total loss of some $64,000.

Other relief

  1. [295]
    RFG does not contend that in the absence of the contravening conduct that the plaintiffs might have entered into the Franchise and Related Agreements upon terms different to those which were agreed. No question therefore arises as to whether an order should be made varying the terms of those agreements. Therefore I am satisfied that pursuant to s 243 of the ACL, it is appropriate to declare that whole of the Franchise Agreement and the Related Agreements are void ab initio.

Counterclaim

  1. [296]
    There are two parts to the counterclaim. The first part is for unpaid levies due under the Franchise Agreement and for costs incurred because of the abandonment of the Patisserie by the plaintiffs under the Outlet Agreement. This part of the counterclaim is necessarily dismissed in circumstances where I am satisfied that the Franchise and Outlet Agreements are void ab initio.
  1. [297]
    The second part of the counterclaim is based on a breach by the Guirguises of s 18 of the ACL for not disclosing in their responses to the Questionnaire the representations they relied on. This is despite being asked directly to do so. It is claimed that the same may be said for the warranties given in the Franchise Agreement which can be found in clauses 12.7, 12.28 and 23.12. On this basis, the first, second, third and fourth defendants claim damages or other compensation or relief pursuant to s 236 or s 237 of the ACL. In RFG’s written submissions, the quantum of the damages is said to be equal to the award in favour of the plaintiffs and would therefore entirely offset any judgment for the plaintiffs.
  1. [298]
    I am of the view that any attempt by RFG to rely on the said responses in the Questionnaire and the clauses in the Franchise Agreement to found such a cause of action cannot be accepted. Their relevance is limited to being a factual element in determining whether RFG engaged in misleading conduct and to matters relevant to causation.
  1. [299]
    The plaintiffs’ claims have been successful and the defendants are liable. RFG cannot recover damages or other relief for loss and damage caused by misleading and deceptive conduct of the plaintiffs, where the loss or damage is liability in damages to the plaintiffs for misleading or deceptive conduct under the ACL. To give effect to such a claim would circumvent the statutory provisions in the ACL prohibiting RFG from engaging in conduct that was misleading or deceptive or likely to mislead or deceive. It would have the effect of destroying the value of the right of the plaintiffs to damages under the ACL.[239]
  1. [300]
    Further, RFG cannot merely rely on a statement in a clause in the Franchise Agreement to the effect that it was misled. It would need to be established that they were in fact misled. I am not persuaded of this. This is because the positive representations were made by Mr Metzakis as an agent of RFG, Mr Dellit as an employee of the third defendant, and in an email and price list which had been provided to the Guirguises by Mr Dellit with the knowledge of Mr Szysz, the national operations manager of Michel’s Patisserie.

Summary

  1. [301]
    It follows from the above mentioned reasons that the plaintiffs have succeeded with their claims and that the Counterclaim is dismissed. Before making formal orders, I will hear the parties as to the form of the orders and the orders that should be made for interest and costs. The Court of Appeal ordered that the defendants were to pay the plaintiffs ‘costs of the appeal. The defendants were granted an indemnity certificate in respect of the appeal under s 15 f the Appeal Costs Fund 1973 (Qld).  This leaves the costs of the first trial.  Prima facie they should follow the event. 

Footnotes

[1] Exhibit 46.

[2] Guirguis Pty Ltd & Anor v Michel’s Patisserie System Pty Ltd & Ors [2017] QCA 83.

[3] Exhibits 164, 165, 175 and 176.

[4] T5-3, ln 12-34.

[5] Exhibit 141.

[6] Exhibit 123.

[7] T4-32, ln 15-35.

[8] T3-32 to 3-33;  T3-38 to 3-39.

[9] Exhibit 23 at p 1428, 1430, 1443; T2-18, ln 32-47.

[10] Exhibit 24.

[11] Exhibits 27-29.

[12] Exhibit 88 at p 1978.

[13] T1-46, ln 5-15.

[14] Exhibit 36. 

[15] T1-52, ln16-20.

[16] Exhibit 35.

[17] T2-8, ln 28-29.

[18] Exhibit 34.

[19] T2-10, ln 1-33.

[20] T3-57, ln 1-31.

[21] Exhibit 3.

[22] T1-48 to 1-49; 3-52.

[23] Exhibit 32. 

[24] T3-52, ln 45-47.

[25] T2-19, ln 39-42.

[26] Exhibit 4.

[27] Exhibit 89.

[28] T3-58 to T3-59.

[29] Exhibit 5.

[30] T2-71, ln 33-43.

[31] Exhibit 6.

[32] Exhibit 8.

[33] Exhibit 9.

[34] Exhibit 11.

[35] Exhibit 12.

[36] T2-72, ln 3-10.

[37] T4-42, ln 32-37.

[38] T2-20, ln 35-46.

[39] Exhibit 13.

[40] Exhibit 14. 

[41] Exhibit 17.

[42] Exhibit 15.

[43] Exhibit 16.

[44] Exhibit 41.

[45] These stores are marked in blue in Exhibit 1.

[46] T1-67, ln 41-47.

[47] T2-77, ln 14-18.

[48] Exhibit 168.

[49] Exhibit 85. 

[50] T1-76, ln 12-28.

[51] T2-12, ln 17-38.

[52] An exception was the order of 19 October 2012.  It was a large delivery in anticipation for the opening of Myer. 

[53] T3-60 to T3-63.

[54] T2-91, ln 27-30.

[55] T2-91, ln 24-25.

[56] T3-72, ln 5-13.

[57] T3-72, ln 1-3.

[58] T3-66, ln 34-42; T3-71, ln 23-24.

[59] Exhibit 104. 

[60] Exhibit 107 at p 112-114.

[61] Exhibit 107 at p 79-80, p 109-121, 126-128.

[62] Exhibit 108 at p 2, 3, 4, 5, 6, 12; T3-22 to T2-26.

[63] Exhibit 48.

[64] Exhibit 51 at p 1727. 

[65] Exhibit 51 at p 1725.

[66] Exhibit 50.

[67] Exhibit 52.

[68] Exhibit 49.

[69] T2-49, ln 23-27.

[70] Exhibit 53 at p 1749.

[71] Exhibit 53 at p 1751.

[72] Exhibit 56 at p 1767.

[73] Exhibit 133. 

[74] Exhibit 53 at p 1749.

[75] Exhibit 53 at p 1752.

[76] T2-54, ln 13-29.

[77] Exhibit 54 at p 1755-6; Exhibit 88.

[78] Exhibit 55 at p 1762.

[79] Exhibit 55 at p 1763.

[80] T3-63, ln 3-29.

[81] Exhibit 167.

[82] T3-64.

[83] T3-10 to 11; Exhibit 107 at p 98.

[84] T3-11; Exhibit 107 at p 105.

[85] Exhibit 92.

[86] T2-50, ln 40-45.

[87] Exhibit 92. 

[88] T2-50, ln 21-24.

[89] Exhibit 58 at p 1772.

[90] Exhibit 59 at p 1775.

[91] Exhibit 60 at p 1777.

[92] Exhibit 61.

[93] T3-9, ln 6-20; Exhibit 107 at p 63.

[94] Exhibit 100.

[95] Exhibit 107 at p 64-7.

[96] T3-28, ln 33-34.

[97] Exhibit 101.

[98] Exhibit 103. 

[99] RFG’s submissions, para 66.

[100] RGS’s submissions, para 153.

[101] Para 13, statement of claim.

[102] T1-41, ln 21-48 to T1-42, ln 1-2.

[103] T1-89, ln 36-37.

[104] T1-89, ln 36-45, T-1-90, ln 22-27.

[105] T2-7, ln 5-15.

[106] T1-26, ln 40-42.

[107] T 1-26 to 1-28.

[108] T1-38, ln 4-19.

[109] T1-26, ln 44-45; T1-28, ln 24-42.

[110] Para 14, statement of claim. 

[111] T1-33, ln 1-13.

[112] T2-6, ln 6-44.

[113] T1-44, ln 11-13.

[114] T1-44, ln 11-42.

[115] T4-51, ln 27.

[116] T4-50, ln 9.

[117] Exhibit 24.  

[118] T1-30, ln 24-28.

[119] Exhibits 24, 35, 147, 148.

[120] T1-28, ln 7-9 and ln 44-46.

[121] Exhibit 127.

[122] Exhibit 128 at p 3117.

[123] Exhibit 128 at p 3116.

[124] Exhibit 22 at p 1177; Exhibit 40, clause 23.1 at p 1589.

[125] Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [25], per French CJ. 

[126] Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592. 

[127] Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [625].

[128] Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [69].

[129] Watson v. Foxman (2000) 49 NSWLR 315 at 318-319.

[130] Specsavers Pty Ltd v Luxottica Retail Australia Pty Ltd [2013] FCA 648 at [49].

[131] Pappas v Soulac Pty Ltd [1983] FCA 3.

[132] James v ANZ Banking Group Ltd (1986) 64 ALR 347.

[133] SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50 at [77].

[134] For example, as Mr Alford explained the donuts for Donut King were manufactured from a factory in Yatala (T4-22, ln 44-47).  He further confirmed that a lot of the products for the different brands would be made by different manufacturers (T4-23, ln 34-36).

[135] Exhibit 127.

[136] Google Inc v ACCC (2013) 249 CLR 435 at 465-6; Parkdale v Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198.

[137] Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 46-054 at 53,195; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [20]; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 41. 

[138] Exhibit 145.

[139] Exhibit 3. 

[140] Exhibit 3.

[141] RFG’s submissions, para 192.

[142] Exhibit 141.

[143] Exhibit 123; Even though Mr Alford gave evidence he thought that this may have simply been a negotiation tactic, RFG was sufficiently concerned to have commenced discussions with other potential suppliers. (T4-32, ln 15-35).

[144] Exhibit 3.

[145] Exhibit 4.

[146] Exhibit 5.

[147] Kabwand Pty Ltd v National Australia Bank Ltd (1989) 11 ATPR 40-950 at 50,378.

[148] Riochet Pty ltd v Equity Trustees Executives & Agency Co Ltd (1993) 41 FCR 229 at 235.

[149] T3-41, ln 8-12.

[150] T2-70, ln 21-26; T3-40, ln 20-22; T3-41, ln 18-26.

[151] RFG’s submissions, para 92.

[152] T1-52, ln 13-2.

[153] T2-8, ln 1-19.

[154] T1-66, ln 22-45.

[155] T2-43, ln 29-35.

[156] T3-14 to T3-21.

[157] Exhibit 40 at p 70.

[158] T2-23, ln 1-2.

[159] T3-42.

[160] T3-39, ln 35-43.

[161] T1-87 to T1-88; T2-11, ln 24-29; T2-52, ln 17-24.

[162] RFG’s written submissions, paragraph 30(b)

[163] T3-48, ln 26-29.

[164] T3-48 to T3-49.

[165] T3-48, ln 14-18.

[166] T2-33, ln 17-18.

[167] T2-34 ln 33-47 to T2-35 ln 1-2.

[168] Campbell v Backoffice Investments Pty Ltd (2009) CLR 304 at 348; Keen Mar Corp Pty Ltd v Labrador Shopping Centre Pty Ltd (1989) ATPR (Digest) 46-048 at 53, 151.

[169] RFG submissions, para 242(e).

[170] T1-48, ln 7-10; T2-36, ln 34-46; T2-69, ln 31-33.

[171] RFG’s submissions, para 240.

[172] T2-31, ln 1-10.

[173] T3-42, ln 12-13; T3-53, ln 17-22.

[174] T3-51 to T3-52.

[175] RFG’s submissions, para 242(b)(ii).

[176] Exhibit 32. 

[177] T1-40, ln 9; T-1-78, ln 25-26.

[178] T1-48, ln 7-13; T 2-36, ln 36-39.

[179] Exhibits 4-17.

[180] T1-46, ln 5-15.

[181] RFG’s submissions, para 185(d).

[182] T1-30, 1n 1-4; T1-34, ln 9-18.

[183] Exhibit 3. 

[184] T2-21, ln 28-30.

[185] T1-30, ln 1-4; T1-37, ln 40-44.

[186] T1-38, ln 4-19.

[187] RFG’s submission, para 17.

[188] T2-72, ln 3-10.

[189] T3-42, ln 32-37.

[190] T2-21, ln 28-30.

[191] T2-20 to T2-21.

[192] T2-22, ln 26-35.

[193] T2-22, ln 26-45.

[194] T3-44, ln 41-45.

[195] T3-42, ln 43-46; T3-43, ln 1-13.

[196] T3-44, ln 25-35.

[197] T2-23, ln 10-17.

[198] T1-89, ln 38-45.

[199] T1-88 to T1-89.

[200] RFG’s submissions, para 234(a).

[201] RFG’s submissions, para 234(b).

[202] RFG’s submissions, para 19.

[203] Exhibit 166. 

[204] T1-77, ln 42-44. 

[205] Exhibit 107 at p 79-80, p 109-121, 126-128.

[206] RFG’s submissions, para 154(a)(ii).

[207] An exception was the order of 19 October 2012.  It was a large delivery in anticipation for the opening of Myer. 

[208] T3-60 to T3-63.

[209] Exhibit 2 at p 23.

[210] For example, exhibits 50, 53 and 61.

[211] T3-9, ln 6-20.

[212] Exhibit 164 at T 6-25, ln 26-31.

[213] T1-67, ln 40-43.

[214] T3-72, ln 1-3.

[215] T2-83, ln 39-47 to T2-85.

[216] T2-82, ln 11-14.

[217] Exhibit 48.

[218] Exhibit 62 at p 1725.

[219] Campbell v Backoffice Investments (2009) 238 CLR 304 at 102.

[220] Henville v Walker (2001) 206 CLR 459 at [14]; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at 3. 

[221] Therefore, expert evidence was not required to be led to by the plaintiffs addressing those matters in paragraphs 30(c) and (d) of RFG’s written submissions.

[222] Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 147 ALR 568 at 588.

[223] March v Stramere (E & MH) Pty Ltd (1991) 171 CLR 506 at 515.

[224] Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355. 

[225] Exhibit 136.

[226] Exhibit 140.

[227] Exhibit 137. 

[228] Exhibits 165 and 175.

[229] Plaintiffs’ written submissions at para 110.

[230] Gould v Vaggelas (1985) 157 CLR 215. 

[231] Exhibit 175 at p 6-80 to 81. 

[232] Ford Motor Co of Australia Ltd v Arrowcrest Group Pty Ltd [2003] FCAFC 313, Palmer Street Developments Pty Limited & Anor v J & E Vanjak Pty Ltd & Anor [2018] QCA 111 at [29], [30] and [37].

[233] Exhibit 81.

[234] T3-30.

[235] Exhibit 70.

[236] T 2-44, ln 1-2.

[237] Exhibit 83 at p 1931.

[238] T2-45, ln 13-35.

[239] Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367 at 371; GIO Australia Holding Ltd v Marks (1997) ATPR 43,541 at 43,555; Venerdi Pty Ltd v Anthony Moreton Group Funds Management Ltd [2015] 1 Qd R 214.

Close

Editorial Notes

  • Published Case Name:

    Guirguis Pty Ltd & Another v Michel's Patisserie System Pty Ltd & Ors (No 2)

  • Shortened Case Name:

    Guirguis Pty Ltd v Michel's Patisserie System Pty Ltd

  • MNC:

    [2019] QDC 11

  • Court:

    QDC

  • Judge(s):

    Rosengren DCJ

  • Date:

    15 Feb 2019

Appeal Status

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

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