Bodycorp Repairers Pty Ltd v AAMI & Martin [2015] VSCA 73

Bodycorp Repairers Pty Ltd v AAMI & Martin [2015] VSCA 73 - VSCA 2015 case summary — Zoe

[42]

First, it seeks to severely harm[10] any Bodycorp franchisee who ceased to be a franchisee of Bodycorp, even if this were done lawfully at the end of a franchise agreement. In this regard, counsel for Bodycorp submitted that the use of the word 'cease' in cl 1.3 of the AAMI Agreement should not be read down, but should be given its natural and ordinary meaning. He submitted that, even if a Bodycorp franchisee ceased to be a franchisee lawfully (eg the term of the franchise agreement came to an end), it would be the subject of the restraint. This construction of the clause was the only construction contended for by Bodycorp.

In circumstances where such a franchisee has received nothing in return for the restraint being imposed,[11] this would clearly be unreasonable in relation to it. This position is fortified by the fact that each Bodycorp franchisee successfully negotiated with Bodycorp not to be the subject of a restraint.

Secondly, Bodycorp sought to create a restraint of trade at a time when its franchisees were already starting to leave Bodycorp. Complaints were made to Bodycorp by some of its franchisees from 1997 onwards. In particular, a number of franchisees were unhappy about paying a fee of 8% of their turnover to Bodycorp. Indeed, in closing submissions counsel for Bodycorp submitted that the catalyst for the AAMI Agreement, and the restraints of trade agreed upon, was the fact that the Abbotsford franchisee wanted to leave the Bodycorp group. Therefore, Bodycorp was seeking to interfere with the freedom of trade enjoyed by the Bodycorp franchisees at the very point in time when that freedom was either in the process of being exercised, or its exercise was imminent (ie at the expiry of the respective franchise agreements).

Thirdly, the restraint prevents the Bodycorp franchisee from obtaining Recommended Repairer status in circumstances where it would be capable of obtaining that status independently of Bodycorp, either before or after the franchise agreement. Although some franchisees obtained such status while being a franchisee, and most likely with the assistance of Bodycorp, it would be unreasonable then to necessarily tie the ongoing maintenance of that status to remaining a franchisee of Bodycorp.

Nothing in the individual franchise agreements gives rise to this position. And yet counsel for Bodycorp boldly submitted that the court ought to uphold that the only way a franchisee would have been able to keep its Recommended Repairer sign would be to renew the franchise agreement with Bodycorp. He submitted that was a reasonable position because the franchisees in question had obtained their Recommended Repairer status after becoming franchisees. In my view, this circumstance does not make it reasonable for Bodycorp to maintain that, unless a repairer continues to be a franchisee, Bodycorp is entitled to deprive a repairer of the substantial part of its business.[12] Such a position places Bodycorp in an extraordinarily strong bargaining position. It was not the basis upon which the Recommended Repair status was obtained.

Fourthly, the restraint goes well beyond what was reasonable for the protection of Bodycorp's interests in seeking to have a franchisee with Recommended Repairer status in a particular area. There appears to be no good reason why Bodycorp could not seek to establish a competing business in the area which, if of a satisfactory standard and satisfactory to AAMI, could not obtain Recommended Repairer status in due course (whether at the expense of the former franchisee or otherwise). The evidence shows that AAMI reviewed its Recommended Repairers from time to time. The fact that the restraint made it easier for Bodycorp to achieve this desired outcome does not make it reasonable.

Fifthly, it was highly likely that Bodycorp was seeking to achieve an outcome by the restraint of trade which was futile or had minimal prospects of success. As at 29 June 1998 the relationship between Bodycorp and AAMI was less than harmonious. For Bodycorp to achieve its desired outcome, it required AAMI give Recommended Repairer status to a new franchisee in the relevant area within the 6 month period after cessation. Whether this would occur was entirely within the sole discretion of AAMI.[13] Given the state of the relationship, it was improbable that AAMI would ever agree to such an arrangement. This position is compounded by the fact that before the AAMI Agreement was entered into, AAMI stated in substance it would not be appointing any new Recommended Repairers for the foreseeable future. If it be relevant, this position was maintained by AAMI throughout 1998 and 1999.[14]

[44]

32 First, the appellant contends that the judge erred in treating the effect of the clauses upon third parties (Bodycorp franchisees) as determinative of whether or not the restraint was reasonable. Secondly, it is asserted that the judge erred by construing the clauses as an attempt by Bodycorp (who itself had failed to impose a restraint upon its franchisees) to have AAMI impose the restraint upon Bodycorp franchisees in the event they ceased to be franchisees. Thirdly, it is asserted that the judge erred in failing to consider that the AAMI agreement was drafted by AAMI's lawyers on AAMI's behalf in order to resolve a dispute between AAMI and Bodycorp. Fourthly, it is contended that the judge erred in failing to consider the limited entitlement of a repairer under a AAMI recommended repairer agreement, which was terminable at two weeks' notice. Fifthly, it is asserted that the judge erred by placing undue weight on the fact that a AAMI recommended repairer sign was valuable to a repairer; alternatively, the judge erred by concluding that the restraint of trade imposed by AAMI 'sought to severely harm a repairer who ceased to be a Bodycorp franchisee'. Sixthly, it is asserted that the judge erred by concluding that it would be unreasonable to tie the ongoing maintenance of AAMI recommended repairer status of a Bodycorp franchisee to that franchisee remaining a franchisee of Bodycorp, in circumstances where the franchisee had previously been assisted by Bodycorp in obtaining AAMI recommended repairer status. Seventhly, it was contended that the judge erred by concluding that the restraint imposed by cls 1.2 and 1.3 went beyond what was reasonable for the protection of Bodycorp's interest. Eighthly, it was contended that the judge erred by concluding that the outcome sought to be achieved by Bodycorp through cls 1.2 and 1.3 was one which was futile or had minimal prospects of success.[15] Ninthly, it was contended that the judge erred in making what were said to be inconsistent findings that, on the one hand, Bodycorp could establish a competing business in a relevant area of a former franchisee and obtain AAMI recommended repairer status, and on the other hand, that AAMI would not appoint any new recommended repairers for the foreseeable future.[16] Tenthly, it was asserted that the judge erred by concluding that the restraints imposed by cls 1.2 and 1.3 were 'for an illegitimate purpose'.

[67]

On the basis that the representations were made by Martin to each of the former Bodycorp franchisees other than Crea, the next issue is whether or not those representations establish a case that AAMI or Martin have to answer. It is abundantly clear there is no case to answer.

Similar to the reasoning above in relation to Maisano, the representations the subject of the evidence do not equate, or even come close, to the substance of the AAMI Statement pleaded in the FASOC. The representations certainly question, to differing extents, whether it was in the interests of the franchisees to remain with Bodycorp. Some representations were coupled with the possibility of more work from AAMI once a franchisee left Bodycorp. However, it is a quantum leap to equate such representations with an intention on the part of AAMI or Martin to induce the franchisees to unlawfully breach a binding agreement with Bodycorp.

In closing submissions, I put to counsel for Bodycorp that there was nothing in the evidence of any of the Bodycorp franchisees to suggest that Martin said that they should terminate their franchise agreement with Bodycorp. That was accepted by counsel. However, it was submitted that it was implicit in the representations that were made that the franchisees would be better off if they were not Bodycorp franchisees. It was also said that it was implicit that Martin was suggesting they ought to terminate a lawfully binding agreement. It was said that this was because of the immense power that Martin had.

In my view, these submissions must be rejected. Consistent with my reasons in relation to Maisano, the evidence of the representations made by Martin are entirely consistent with Martin seeking to convey that the Bodycorp franchisees could continue to be Recommended Repairers once they had lawfully ceased to be franchisees of Bodycorp. This is particularly so in the context where many of the franchisees had agreements that were due to expire in the near future.

As discussed in paragraphs 185 to 192 above, a plaintiff needs to establish an informed and clear intention that a defendant intended the inducement of a breach of contract. The evidence of the former Bodycorp franchisees does not remotely reflect conduct demonstrating such an intention on the part of Martin. The evidence does suggest that Martin would have been more than happy for the Bodycorp franchisees to leave Bodycorp. The evidence also suggests Martin was more than willing to point out that the franchisees would be better off if they were not with Bodycorp. But conveying such matters to the franchisees is clearly insufficient to establish a cause of action.[27]

At a glance

Court

Decision date

Before

Source

Judgment (92 paragraphs)

Parties

Cases Cited (2)