Backyard Concepts Corporation Pty Ltd v Jim's Group Pty Ltd

[1] DAUBNEY J: This is an application by the defendant pursuant to s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Qld) (the Act) for the transfer of this proceeding to the Supreme Court of Victoria. On 14 August 2007, the defendant entered a conditional appearance to the claim which, together with the statement of claim, had been filed on 29 June 2007.

[2] The claim is for damages for 'breach of duty, and further or alternatively breach of contract and further or alternatively for breach of the Trade Practices Act 1974 (Cth) and further or alternatively as equitable compensation, together with interest thereon pursuant to the Supreme Court Act 1995 (Qld) and costs'.

[3] The case sought to be advanced by the plaintiff against the defendant can be relevantly summarised as follows:

(a) the defendant was the head franchisor of a franchised business known as 'Jim's Irrigation';

(b) by an agreement dated 30 June 2004 the plaintiff:

(i) purchased from Pavemart Pty Ltd the Australian and New Zealand divisional franchise rights to Jim's Irrigation;

(ii) purchased from Paveman Pty Ltd the South Australian franchise business of Jim's Irrigation;

(c) prior to entering into this purchase agreement, Mr McCracken of the plaintiff attended a meeting in Melbourne with Mr Penman of the defendant, in the course of which Mr Penman made representations as to:

(i) the defendant's favourable attitude to the plaintiff's franchise concept and that 'the defendant would provide all necessary assistance and support to the plaintiff to develop and execute the concept if the plaintiff proceeded to purchase the respective businesses';

(ii) the suitability of a Mr May as the 'key man' for 'the development, and maintenance of the existing franchise network in South Australia, Victoria and Western Australia';

(d) the plaintiff alleges that the defendant breached the Franchising Code of Conduct (FCC) made under the Trade Practices Act 1974 (Cth) by:

(i) failing to ensure that Pavemart provided the plaintiff with a proper disclosure document for each of the businesses;

(ii) failing itself to provide a proper disclosure document;

(iii) wrongly representing that the provision of disclosure documents for the grant of a new franchise would be sufficient disclosure for the FCC;

(iv) providing a disclosure document for each business which failed to comply with the FCC;

(e) the plaintiff further alleges that certain disclosure documents (a 'Regional Franchiser Disclosure Document' dated 1 June 2004 and a 'Divisional Franchise Disclosure Document' dated 29 June 2004) were misleading and deceptive in numerous particulars relating to, inter alia, the number of existing franchised businesses in the relevant regions;

(f) the plaintiff says that these misrepresentations induced it to enter into certain new franchise agreements with the defendant to enable the purchases from Pavemart Pty Ltd and Paveman Pty Ltd to be completed according to their terms;

(g) the plaintiff particularises a number of instances of alleged failure on the part of the defendant to provide support and assistance, and other matters which it alleges amount to breaches of the franchise agreements between the defendant and the plaintiff, or breach of cognate pro-contractual warranties. The plaintiff also alleges that the defendant acted in breach of an implied obligation to act honestly and in good faith;

(h) the loss and damage claimed to have been suffered by the plaintiff is pleaded in the following terms:

20. In the premises and in consequence of the defendant's breaches of its contractual obligations and/or warranties and further or alternatively, the defendant's breaches of its duty and obligation to act with honesty and good faith and, further or alternatively, the defendant's breaches of the TPA, the plaintiff suffered loss and damage.

(a) the inflated price which the plaintiff paid to Pavemart for the existing franchise businesses, the returns on which wrongly included projections for the Perth, Melbourne and Sunshine Coast franchises;

(b) the inflated price which the plaintiff paid to Pavemart for the businesses which included the value of the Perth regional franchise which had not then been received by Pavemart and or the defendant, the plaintiff was forced to substantially alter its strategy for the development of the plaintiff's franchise concept (which as the defendant well knew was the sole or alternatively the predominant reason why the plaintiff agreed to purchase the businesses and the Brisbane and Sunshine Coast regional franchise);

(c) the inflated value for goodwill which the plaintiff paid for the businesses insofar as the purchase of the businesses did not (as the plaintiff reasonably believed) limit Pavemart's ability to compete in the field of domestic landscaping which was an integral part of the plaintiff's franchise concept which it intended to establish in conjunction with the defendant systems experience and expertise;

(d) and further and in the alternative to (a), (b) and (c) the businesses goodwill was not founded on past income performance but on unjustified and unwarranted optimism that the existing franchisees would continue within the system notwithstanding the new personnel that the plaintiff had to employ in the event as occurred that Mr May was represented by the defendant as an unsuitable person to trust and employ.

21. The plaintiff attempted to continue to manage the existing franchise businesses in their then state and condition and further to employ staff and resources to develop the plaintiff's franchise concept in order to and with the intention of mitigating the loss and damage caused by the defendant's breaches, but the franchise businesses failed, and/or alternatively suffered substantial operating losses which adversely affected the plaintiff's capacity to continue the respective franchise business in accordance with the defendant's warranties, the respective franchise agreements and the representations made by Mr Penman, and the plaintiff thereby suffered loss and damage.

(a) Total failure of consideration for the purchases in the sum of $332,636.71 on the basis that:-

(i) the plaintiff would not have purchased the businesses for the respective prices or at all if it knew or could reasonably have been aware of:-

A. the true facts concerning the Perth and South Melbourne Divisional franchises;

B. the true facts concerning the components of the goodwill of the respective businesses;

C. the true facts concerning the defendant's failure to perform its obligations pursuant to the amended agreement concerning the plaintiff's franchise concept;

D. the true facts concerning the defendant's failure to perform its assistance and support obligations concerning the landscaping goodwill issue and Mr May's employability issue;

(b) further and alternatively the loss and damage suffered by the plaintiff in attempting to continue the franchise businesses in the circumstances comprising the following:-

(ii) $60,000 overdraft and debt finance to fund continuing operations;

(c) loss of the value of the businesses as a going concern, with or without the plaintiff franchise concept.

(a) a proceeding (the relevant proceeding) is pending in the Supreme Court (the first court); and

(i) the relevant proceeding arises out of, or is related to, another proceeding pending in the Supreme Court of another State or of a Territory and it is more appropriate that the relevant proceeding be determined by that other Supreme Court; or

(A) whether, in the opinion of the first court, apart from this Act and any law of the Commonwealth or another State relating to cross-vesting of jurisdiction, the relevant proceeding or a substantial part of the relevant proceeding would have been incapable of being instituted in the first court and capable of being instituted in the Supreme Court of another State or Territory; and

(B) the extent to which, in the opinion of the first court, the matters for determination in the relevant proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the State or Territory referred to in sub-subparagraph (A) and not within the jurisdiction of the first court apart from this Act and any law of the Commonwealth or another State relating to cross-vesting of jurisdiction; and

It is more appropriate that the relevant proceeding be determined by that other Supreme Court; or

(iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of another State or of a Territory;

The first court shall transfer the relevant proceeding to that other Supreme Court.

[5] Neither sub-ss 5(2)(b)(i) or (ii) are relevant to the present case and, as noted above, this application is specifically brought in reliance on sub-s 5(2)(b)(iii). Thus, the only question is whether, on the material before me, it appears to me that it is in the interests of justice that this proceeding be determined by the Supreme Court of Victoria.

[6] Since Bankinvest AG v Seabrook,[1] it has been accepted that the approach called for in determining the forum which meets the 'interests of justice' is that which is seen as 'the appropriate forum' in the sense of being that with which the action has the most real and substantial connection.

In World Firefighters Games Brisbane v World Firefighters Games Western Australia Incorporated & Ors,[2] Philippides J noted, by reference to authority, that the range of factors considered relevant in assessing which is the 'more appropriate forum' are:

(a) the application of the substantive law, if it is peculiar to a particular jurisdiction;

(b) forensic advantages or disadvantages conferred by the competing procedural laws;

(c) the plaintiff's choice of forum and the reason for that choice;

(d) substantive connections with the forum (eg residence, domicile, place of occurrence and choice of law);

(e) balance of convenience to parties and witnesses;

[8] Whilst it is inapt, on an application such as this, to speak of a party bearing the onus,[3] it is nevertheless noteworthy that the principal ground urged by the defendant in support of the cross-vesting application is the fact that the franchise agreements entered into between the plaintiff and the defendant each contain a clause in the following terms:

Any legal action involving the [defendant] shall only be commenced in the State of Victoria and each party submits to the legal jurisdiction of Victoria.

[9] That the parties contracted in such terms is relevant to, but certainly not determinative of, the question of where the interests of justice lie for the purposes of s 5(2)(b)(iii) of the Act. In Worldwide Firefighters,[4] Philippides J said:[5]

The authorities favour the view that under the cross-vesting legislation, the exclusive jurisdiction clause remains a relevant consideration, on the basis that the "interests of justice" require that due acknowledgment be accorded to such a clause as representing the bargain between the parties and that proper regard be given to the need to hold parties to their bargain. Nevertheless, in my opinion, in considering the weight to be given under the legislation to such a clause, one should not start form the position that such clauses should be viewed with the "strong bias" in their favour previously accorded to them at common law. The weight to be given to such clauses will vary depending on the other surrounding and countervailing circumstances.

[10] See also Zeke Services Pty Ltd & Anor v Traffic Technologies Ltd & Anor.[6] I note in passing that, despite the fact that the clause in question in that case was an 'exclusive jurisdiction' clause strictu sensu, Chesterman J nevertheless did not consider that to be a factor of such significance as to outweigh other considerations in determining the appropriate forum in that case.

In the present case, the clauses relied on by the defendant do not, in my opinion, weigh so heavily in the balance as to cause me to conclude that it is in the interests of justice for the proceeding to be transferred to the Supreme Court of Victoria. On the material before me:

(a) the substantive law to be applied in this case is the same in Queensland and Victoria;

(b) there are no forensic advantages to either party determined by the forum;

(c) it seems clear enough that the plaintiff chose to commence this proceeding in Queensland because this is where its directors and shareholders reside and its lawyers are located;

(d) the dispute has substantive connections with both Queensland and Victoria - for example, the corporate residence of the plaintiff is in Queensland while that of the defendant is in Victoria, and representations alleged to have been made by or on behalf of the defendant are said to have occurred in Queensland (via the delivery of documentation) and in Victoria (at a meeting);

(e) given the respective domiciles of the parties, the balance of convenience as between Queensland and Victoria is evenly balanced. Moreover, it appears that some of the witnesses expected to give evidence reside in Queensland, some in Victoria, and some in neither.

(f) similarly, the competing considerations of comparative cost for the parties are balanced in the sense that wherever the trial is heard will be an 'away match' for one of the parties;

(g) no questions of convenience to either this or the Victorian court systems arise.

[12] Taking all of these factors into account, I am not persuaded that it is in the interests of justice that this proceeding be cross-vested to the Supreme Court of Victoria. Accordingly, I order that:

2. The defendant pay the plaintiff's costs of and incidental to this application on the standard basis.

[1] (1988) 14 NSWLR 711.

[2] [2001] QSC 164.

[3] Bankinvest AG v Seabrook (1988) 14 NSWLR 711, 727 (Rogers A-JA).

[4] [2001] QSC 164.

[6] [2005] QSC 135, [38].