Dominguez, t/as Jim's Cleaning Ambarvale v Jim's Group Pty Ltd t/as Jim's Group Pty Ltd

Franchise Agreement

1. Key terms of the FA are outlined in cl 1 of the FA which include the following:
2. Agreement means "this franchise agreement and includes any schedule, special condition, or annexure to the agreement and each document entering into for the purposes of amending, signing, no voting, restating or replacing the franchise agreement"
3. Franchisee means a "person, company or other legal entity described in item 2(c) of the Schedule, including its servants, employees, agents and its successors and permitted assigns". Clause 2(c) specifies that franchisee is DDCS.
4. Client means "any person, company or legal entity who retains the services of the Franchisee who retains the services of any franchisee in the division".
5. Client Lead means "the mere opportunity provided by the Franchisor to the Franchisee to provide either a service or a quotation for a service following any enquiry relating to the services offered by the Franchisee, excluding enquiries obtained through the Franchisee's own efforts with respect to doorknocking, canvassing or referrals directly from one franchisee in the Region or Division to another franchisee and excluding Clients whose details are contained in the client register specified in clause 4.21"
6. Region means "the area granted by the National Franchisor to the Franchisor pursuant to the Regional Franchise Agreement specified in item 4 of the schedule, or as amended by agreement between the National Franchisor and the Franchisor". Item 4 of the Schedule nominates "Jim's Cleaning (Sydney South West)".
7. Clause 2.1 deals with the terms and conditions of the FA in the following terms: In consideration of the payment of the Franchisee of the Initial Franchise Fee capitals and the Initial Warrant Fee, the National Franchisor and the Franchisor grant to the Franchisee the right, and the franchisee accepts the obligation, to operate the Franchise Business within the Territory in accordance with this Agreement and the Manuals.
8. The term of the FA is 20 years unless otherwise terminated in accordance with cl 12.
9. Clause 4 of the FA deals with the obligations of the Franchisor.
10. Clause 4.8A provides that in addition to initial training, the "National Franchisor may (at its sole discretion and absolute discretion) request that the Franchisee re-attend and re-complete any form of training required by the Agreement or the Manuals, including the initial training, at any time during the Term."
11. Clauses 4.10 to 4.13 deal with meetings and proactive contact. Clause 4.11 provides: The Franchisor must attempt to contact the Franchisee using the software prescribed by the National Franchisor at least monthly (weekly in the first two months), actively following up if the franchisee fails to respond.
12. Clause 5 deals with client leads. Clause 5.1 is in the following terms: Subject to this clause, the Franchisor will direct the Customer Contact Centre to refer Client Leads from Clients in the Territory to the Franchisee where the Franchisee has previously provided notice of its ability to service the Client Leads within the time frame specified by client.
13. Clause 5.2 provides that: Notwithstanding anything in clause 5.1, the Franchisor may cease referring Client Leads to the Franchisee where the Franchisee is in breach of this Agreement, such breach having been notified to the Franchisee in writing and are not remedied by the Franchisee within a reasonable period of time.
14. Clause 7 deals with obligations of the Franchisee.
15. Clause 7.32(c) provides that the Franchisee must not under any circumstances knowingly solicit work from Clients in the Territory which are Clients of another Franchisee of the same Division, unless the work is offered to the Franchisee by the Franchisor.
16. Clause 7.34 deals with customer complaint handling and is in the following terms: The Franchisee must immediately inform the Franchisor of any complaint made by a client with respect to the behaviour of the Franchisee, its employees and agents, and allow the Franchisor or its representative to investigate the complaint and take such remedial action as is deemed necessary by the Franchisor. The Franchisee will be responsible for and pay the reasonable costs incurred by the National Franchisor and the Franchisor in remedying the complaint.
17. Clause 12 deals with termination of the FA. Clause 12.5 to 12.7 deal with termination by the NF or the Franchisor. Clause 12.7(i) provides that: 12.7 The National Franchisor and the Franchisor may terminate the Franchise Agreement by providing seven days written notice to the Franchisee, if the Franchisee; (i) has been issued with a Notice of Breach for poor customer service or poor survey results regarding the Franchisees are customer service and received further complaints or poor survey results regarding the Franchisee's customer service during the notice period set out in the Notice of Breach.
18. Annexure A to the FA was executed on 31 January 2022 which consists of a written statement by the Franchisee, acknowledging receipt of a disclosure document and code of conduct.
19. Annexure A contains an acknowledgement by the Franchisee that the Franchisee has received a copy of the Information Statement, Agreement, the Code, and the Disclosure Document as required by the Code, has read all those documents and had a reasonable opportunity to understand them. The Annexure also states that the Franchisee confirms that, prior to entry into the FA, it had sought and obtained advice about the Agreement and the Franchise Business by any of the following: an independent legal advisor; an independent business advisor or an independent accountant. The Annexure provides that the person already completing the Annexure should delete which of the lists of sources of advice that have not been engaged with by the Franchisee. However, no deletions were made in the present case.
20. The Annexure also provides that in the event that the Franchisee has not obtained advice, the Franchisee acknowledges that the franchisor had told the Franchisee that the Franchisor would seek and obtain advice about the Agreement or the Franchise Business from an independent legal advisor (or other nominated advisor) and that despite the Franchisors recommendation, the Franchisee has independently decided not to seek or obtain the advice.

Factual Background

1. Mr Dominguez is the sole director of DDCS. He signed the FA in that capacity, as well as a guarantor.
2. The defendant owns and operates a franchise business across Australia and a range of fields, including residential and commercial cleaning work.
3. The recitals to the FA stipulate that Jim's Group Pty Ltd has developed and is the owner of a licensee of certain computer software, methods, systems, and other intellectual property for the conduct of the business of selling and servicing franchises under the "Jim's" names. The recitals further provide that Jim's as a NF established a DF which has a right to grant a franchise business to Franchisees in the territory within a region. It was stipulated that the parties agreed to enter into the FA to record all matters governing the relationship for the operation by the Franchisee of 'the Franchise Business in the Territory'.
4. A Franchise Business means the right granted by the Franchisor to the Franchisee to use the NF's methods, computer systems and intellectual property for the provision of services to clients in "the territory", in accordance with the FA.
5. The territory is defined in item 3 to the Schedule to the agreement in the subject FA. The territory is described as Ambarvale which is geographically described as being bordered by Appin road, bordering north of Cleopatra Drive, up to Englorie Park Drive, right at Therry Road and back to Appin Road as per the map attached to the FA. From the commencement of the FA, the vendor referred Client Leads to the DDCS where those leads originated from the Ambarvale Territory but also leads from outside the Territory. The referrals were based upon DDCS's preferences which were stipulated by DDCS in a website application available to Franchisees known as "Jim's online".
6. Between March and November 2022, the defendant received a number of complaints from customers with respect to the provision of poor cleaning services by the DDCS. The complaints emerged from a survey undertaken by the defendant. The complaints are set out in a schedule in the evidence before the Court together with a more detailed analysis of each compliant.
7. The last complaint of 8 November 2022 is described as "settled", with the representative of the defendant indicating that the file had been marked "at fault as even though the complaint is to do with quality of service on things that weren't on the quote the quality should still be at a very high standard". That outcome was achieved on 25 November 2022.
8. On 9 November 2021, the defendant's representatives spoke to Mr Dominguez who advised the defendant's representative on 9 November 2022 that the client was asking for things to be done "that was not on the quote and Miguel did them any way to avoid any issues however she after the fact wasn't happy with the standard". That consultation was with respect to each one of the complaints. I note that on one occasion, the client refused to enable Mr Dominguez to return to rectify the complaint by further cleaning. In addition to the five complaints in question, one complainant was treated by the defendant as potentially fraudulent.
9. By reason of the complaints received with respect to DDCS, on 9 November 2022, the defendant decided to cease referring clients from outside the Ambarvale territory to DDCS until DDCS had undertaken two days of additional training. The decision was purportedly taken pursuant to cl 4.8A of the FA. The decision did not however restrict the referral of Client Leads originating from within the Ambarvale territory.
10. On 16 November 2022, the defendant received a dispute notice from DDCS under the FA with respect to the decision to restrict DDCS's referrals to only those originally from within the territory.
11. On 8 February 2023, the FA was terminated by the defendant. The basis for the termination was a failure to pay fees that were due under the FA, it being stated that the DDCS was in breach of cll 7.6 - 7.17 and the Schedule of the FA.

Mr Dominguez's Affidavit

1. The plaintiff relied upon an affidavit dated 25 February 2023. The affidavit is of course not a pleading, but it is appropriate to examine as a potential basis for the plaintiff's claim for a breach of contract as pleaded in the Statement of Claim. When viewed in that light, the following contentions or propositions may be identified as arising in resistance to the Motion as follows: 1. Mr Dominguez was rushed into entering the FA and the making of two instalments. This appears to be an un-pleaded claim to rescind the FA. In addition to a concern about being forwarded leads with respect to an unresponsive client (with respect to which a fee was paid by the Franchisee), Mr Dominguez stated that there were a lot of hidden fees that were not identified until the franchise commenced. This complaint appears to have a connection to the first concern, namely that Mr Dominguez was rushed into making a decision. There appears to be the contention, as Mr Dominguez asserted, that Mr Penman "got to know his name" as a result of various concerns he expressed over time, and this had a connection to the defendant's decision to restrict access to leads outside DDCS's territory. These contentions were expressed in terms of Mr Dominguez's belief. For example, paragraph 20 of Mr Dominguez's affidavit of 25 February reads: I believe Jim Penman acted on assumption or got to know my name by all the times that I raise the issues regarding the Uncontacted customers in which he will receive a copy of the conversation by way of email in which took place between the Franchisor and Myself. 1. Mr Dominguez contested the survey results which resulted in complaints, and he sought to subpoena the evidence in that respect. It was contended that 4 out of 5 of the complaints were "agreed by my franchisors that they should not have been made." 2. The defendant was in breach of its own policy as stipulated in "Document A", annexed to the affidavit of 25 February 2023. Annexure A has a heading "QUOTE", relating to a particular quotation in October 2022 and describes the work to be undertaken. 3. A notation appears at the end of the Document A which reads as follows: Jim's Group guarantees all jobs against defects in materials and workmanship. If you are not satisfied with any aspect of the job, contact the Franchisee first and then our office. Conditions are as follows: 1. Our Franchisee must be given the opportunity to fix the problem. 2. If they cannot, our local Franchisor will be responsible. 3. If neither can satisfy your complaint, we will mutually agree on an industry expert to inspect the job (at our expense) and will arrange to fix the faults found. However, if no fault is found, then you will pay the inspection cost and the matter will be closed. 4. If a complaint to our office has not been resolved within 30 days, email Jim personally on (email address shown). The entire resources of Jim's Group stand behind this guarantee. 1. At [21] of his affidavit, Mr Dominguez deposed: The 4 steps in "Document A" were not followed, since the complaints were made directly to head office and therefore Jim penman [sic] is in Breach of the conditions or policies stated in "Document A".

Mr Dominguez Written Submissions

1. In summary, Mr Dominguez made the following written submissions in resistance to the Motion: 1. The creditors are in breach of the Policy. Mr Dominguez outlined the circumstances of each complaint but central to the question of the policy issue he identified that the customers complained to the defendant. In the details of those complaints, it is plain that the customers first complained to the defendant. Mr Dominguez also repeated a complaint that the defendant got to know his name because each week he would tell his Franchisor that he could not contact his customers. There is no evidence of a proper investigation into any of the complaints and Mr Dominguez felt "humiliated and worthless". 2. At [4] of his written submissions, Mr Dominguez contended that he was told by a Ms Silvia Valeri, that if he purchased the franchise for Ambarvale, that it did not mean that he was restricted to Ambarvale. He disclosed that Ms Valeri said that "I get work in all areas and Ambarvale would only be the area where I am buying from." From the outset of the FA, he did get work from all areas, but that is how those client leads were stopped. He contended that had he been told that he could be restricted to Ambarvale, he would not have bought the franchise. When he was ultimately restricted to only the Ambarvale territory, he did not receive one job the first three weeks and then one further job for the end of the lease. He thereby stopped operating DDCS. 3. His claim was not defective by bringing it in his own name because he was authorised as a director of the company to sign the FA. 4. There was not "solid evidence" to support the complaints. He was unable to access further evidence about the complaints because his access to the company's email was stopped. 5. He was informed by an officer of the defendant that it was a requirement that he would be contacted by her on a weekly basis, but after 8 November 2022 that practice stopped because he was "signalled out." 6. Various provisions submissions were made as to the quality of Mr Dominguez's work. The defendant's reliance upon "bad service" being performed by DDCS has no relevance to the "tenability or otherwise of the Defendants claims." 7. Mr Penman made an assumption of Jim's Cleaning Ambarvale being guilty of these complaints without any solid evidence and hence, the original application should be allowed to proceed, and the Motion filed 13 December 2022 should be dismissed. 8. The Court should reject the strike out application.

Legal Principles

1. The principles governing the Court's exercise of discretion to summarily dismiss proceedings under r 13.4 of the UCPR are well-settled. Before a Court would exercise such a discretion, it must be satisfied that the proceedings are so obviously untenable that they cannot possibly succeed, are "manifestly groundless" or so manifestly faulty that they do not even admit an argument. In O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71, the Court of Appeal confirmed (at [3]) that the following principles were of general application: 1. On a summary judgment application, the real issue is whether there is an underlying cause of action or defence, not simply whether one is pleaded; 2. The critical question can be expressed as whether there is more than a "fanciful" prospect of success or whether the outcome is so certain that it would be an abuse of process of the Court to allow the action to go forward. Demonstration of the outcome of the litigation is required, not an assessment of the prospects of its success; and 3. Powers to summarily terminate proceedings must be exercised with exceptional caution.
2. However, despite the caution with which the Court must consider such an application, it is important also to have regard to the importance of not subjecting defendants to hopeless claims by plaintiffs which are, from the outset, doomed to fail: PQ v Law Society of New South Wales (No 5) [2021] NSWSC 463 at [23] per Adamson J.
3. As to the particular concepts in r 13.4(1)(a), (b) and (c), each is not necessarily distinct and tends to overlap: see Di Liristi v Matautia Developments Pty Ltd (No 2) [2020] NSWSC 862 at [28] per Wright J. In this context, "frivolous" includes proceedings that a plaintiff has no reasonable prospects of successfully prosecuting or that are untenable, groundless, or faulty: see Spencer v Commonwealth (2010) 241 CLR 118 ("Spencer") at [59]. "Vexatious" refers to proceedings that are productive of serious and unjustified trouble or harassment.
4. In the Motion, the defendant relied specifically upon r 13.4(1)(b), being that the proceedings disclose no reasonable cause of action. The authorities confirm that, in assessing whether a reasonable cause of action is disclosed, regard must be had to whether there is a cause of action which has some chance of success, which could conceivably give the plaintiff a right to relief, or which, although weak, is properly debatable and has some apparent legitimate basis if the facts upon which it is alleged to be predicated are made good: see Preston v Star City Pty Ltd [1999] NSWSC 1273 at [31] per Wood CJ at CL; Willcocks v Croft [2021] NSWSC 1610 at [11] per Harrison AsJ.

Principles in relation to Strike Out Applications

1. Rule 14.28 of the UCPR empowers the Court to strike out a pleading, in part or whole, if (relevantly to the present Motion) it discloses no reasonable cause of action or has a tendency to cause prejudice, embarrassment or delay in the proceedings.
2. Under r 14.28 of the UCPR, the Court may strike out the whole or any part of a pleading, if the pleadings (inter alia): 1. discloses no reasonable cause of action; 2. has a tendency to cause prejudice, embarrassment or delay in the proceedings; or 3. is otherwise an abuse of the process of the court (see also r 13.4).
3. As to the first of those grounds, the principles governing the exercise of the discretion are broadly the same as those which apply in the context of an application for summary dismissal on the same grounds: see Westpac Banking Corporation v Gilio [2011] NSWSC 1309 at [36] per Rothman J; Woodchem Australia Pty Ltd v D&R Henderson Pty Ltd [2020] NSWSC 1250 at [47] per Harrison AsJ. That is, if there is no possibility of the facts pleaded giving rise to a good cause of action, the cause of action may be struck out. The power to strike out is to be exercised in accordance with the same standard which applies under r 13.4 - namely, where the case of the plaintiff is so untenable that it cannot possibly succeed: see Szanto v Bainton [2011] NSWSC 985 at [137] per Ward J; Simson v Wotif.com Holdings Ltd [2013] NSWSC 124 at [24] per Macready AsJ.
4. As to the second ground, Ward J (as her Honour then was) explained in Szanto v Bainton [2011] NSWSC 985 (at [107]) that what is meant by an embarrassing pleading relates, in essence, to whether the pleading can serve the function of a pleading under the UCPR - namely, in succinct fashion, to put the defendant properly on notice of the real substance of the claim made against it and to know what case it is that the defendant has to meet: see also Rafailidis v Camden Council [2021] NSWSC 1087 at [17] per Robb J. Accordingly, a pleading is embarrassing if it is unintelligible, ambiguous or so imprecise in its identification of material factual allegations as to deprive the opposing party of proper notice of the real substance of the claim or defence, (see Gunns Ltd v Marr [2005] VSC 251 at [14]-[15] per Bongiorno J) or if it contains inconsistent, confusing or irrelevant allegations: see Shelton v National Roads & Motorists Assn Ltd (2004) 51 ACSR 278 at [18] per Tamberlin J.

Should the Proceedings be Summarily Dismissed?

1. The various facets of Mr Dominguez's claim have been set out in this judgment, whether expressly identified in the pleadings accompanying the Statement of Claim, ascertained from Mr Dominguez's affidavit or in his submissions. In considering the question of whether the Statement of Claim discloses a reasonable cause of action, bearing in mind the foregoing principles, I propose to examine the various facets of Mr Dominguez's claim under a series of headings corresponding to his case, in that respect.

Breach of the Franchise Agreement

1. Mr Dominguez claimed that defendant breached the FA by restricting DDCS to the Ambarvale territory or, as expressed in Mr Dominguez's contention, restricting client leads to those emerging in the Ambarvale territory.
2. I do not consider that a reasonable cause of action has been demonstrated in this respect. On the evidence before the Court, at no time did the defendant cease referring client leads originating from the Ambarvale territory to DDCS. That was the limit of the obligations of the defendant under cll 2.1 and 5.1 of the FA.
3. The Franchisor did not purport to exercise rights under cll 5.3 and 5.4 of the FA. Whilst the Franchisor may have exercised a discretion to refer leads from outside of Ambarvale territory to DDCS for a period of time, it did not have an obligation to do so under the FA. I accept the submission of the defendant that, in the absence of any obligation to refer client leads sourced from other territories to DDCS or some basis to conclude that ceasing those referrals due to complaints against DDCS was inconsistent with the FA, that Mr Dominguez has not established that there is a reasonable cause of action for the client, based on a breach of agreement.
4. To the extent that Mr Dominguez contended that there was some non-compliance with the FA due to the failure of Mr Penman to issue a Breach of Notice pursuant to cl 12.7(i) of the FA, again, no reasonable cause of action is established. Clause 12.7 applies to circumstances where the defendant decides to terminate the FA and stipulates the circumstances in which termination is permissible under the agreement.
5. It is true that cl 12.7(i) entitles the defendant to terminate the FA if the Franchisee has been issued with a breach notice for poor customer service or poor survey results regarding the Franchisee's customer service and received further complaints or poor survey results regarding Franchisees customer service during the notice period set out in the breach notice. However, in this case, the evidence taken at its highest discloses that no decision to terminate the FA was made by reason of DDCS's poor survey results. Those poor survey results were addressed by the combination of ceasing out of territory client leads and requiring Mr Dominguez to attend two days of further training which he elected not to do.
6. The effect of Mr Shaw's evidence is that the ultimate termination of the FA was pursuant to a Termination Notice dated 8 February 2023 for failure to pay fees that were due and payable and as set out in a Notice of Breach dated 23 January 2023. Mr Shaw's evidence was that DDCS subsequently failed to remedy that breach. (See also of the letter from the defendant's compliance department to Mr Dominguez dated 23 January 2023). Accordingly, cl 12.7 has no relevance to the circumstances of this matter and certainly does not sustain a breach of the FA.
7. Rather, the Notice of Breach issued by the defendant relied upon a breach of cll 7.6 - 7.17 of the FA concerning failure to pay fees. In this respect, it would appear that the defendant relied upon cl 12.6 of the FA. (I note that the Notice of Breach refers to the "franchising code of conduct" which was not in evidence before the Court).

The Policy

1. Whilst not pleaded in terms in the Statement of Claim, it would seem that Mr Dominguez contended that, notwithstanding an absence of reference to the Policy in the FA, the statements made to prospective clients in the quote had some contractual force as between the Franchisee and the Franchisor. As Mr Dominguez put it, the quote is the "first point of contact" between Franchisee and the client and is expressed in such a way as to constitute not only the proposed terms of contract between the prospective client and the Franchisee but represent terms which may be enforced in contract by the Franchisee as against the Franchisor.
2. It is from this starting point that Mr Dominguez advanced two essential propositions: 1. There was no evidence that the complaints against him were properly investigated and, in fact, the complaints were not properly investigated. The treatment of them was affected by malice. 2. By undertaking the survey and thereby resulting in complaints being forwarded to the defendant, the defendant breached the first condition of the policy, namely that, the Franchisee must be first given the opportunity to fix the problem (Mr Dominguez relied on both the preamble words to the Policy and the enumerated first condition in this respect).
3. Mr Dominguez contended that the evidence disclosed that the surveys into customers were forwarded two to three weeks after the job had been completed by the Franchisee. He contended that in some of the examples given, that by the time the client had responded and made a complaint, a period of four weeks had passed. By this process, the Franchisee was bypassed and a large period of time had elapsed before an opportunity was given to fix the problem which would normally be dealt with immediately after the completion of the job.
4. The defendant made the following submissions with respect to this issue: 1. The Policy is nothing more than a pure policy and has no contractual force. 2. The FA does not dictate that the Policy is to be followed when dealing with complaints from the Franchisee's customers. Rather, the FA provides very little by way of prescriptive requirements when dealing with complaints from customers. Clause 7.34 of the FA only requires DDCS to inform the defendant immediately of any complaint made by a customer with respect to the behaviour of the Franchisee and to allow the defendant to investigate the complaint and take remedial action as is deemed necessary by the defendant. That cl7.34 contemplates that the defendant will undertake an investigation in the case of a complaint fortifies a conclusion that the defendant's approach to the complaints, the subject of the present dispute, was consistent with the procedures contemplated by the FA and certainly not contrary to them. 3. Nonetheless, the defendant accepted that for the purposes of determining the Motion, the Court may proceed on the basis that the Policy either formed part of the FA or a contract between the Franchisor and the Franchisee. But even though it is plain that the FA governed the relationship between the defendant and Mr Dominguez, the Policy is not consistent with the terms of the FA and if there be any contract it is a contract between DDCS and the customer and not the defendant. 4. As counterpoint to Mr Dominguez's argument about the issuing of the survey, the defendant contended that the reason the complaints were handled by the defendant was not due to some failure by the defendant to follow its own policy but because complaints were raised by way of a customer feedback through the customer survey. Thus, any departure from the Policy was attributable to a failure by the customers to follow that procedure by referring their complaints first to the defendant. Alternatively, the defendant has permissibly acted by seeking the feedback of the customers by the issuing of the survey. 5. On each occasion of a complaint, Mr Dominguez was given an opportunity to explain what had occurred and to rectify the issues. However, the customers either did not accept Mr Dominguez's steps to rectification or alternatively a particular complaint was dismissed by the defendant. Thus, the defendant has done no more than attempt to rectify complaints made by customers. The complaint on 9 November 2022 resulted in Mr Dominguez explaining to the complaints handler for the defendant that the client was asking for things to be done that were not quoted for and that he nonetheless undertook to do the work which a customer later stated was of an insufficient standard. In this case, Mr Dominguez was content to provide explanations in response to the complaint rather than taking the opportunity to fix a problem per se. 6. Hence, irrespective of whether the Policy was followed or not, complaints were made by customers as to the quality of work performed by DDCS, which DDCS was given an opportunity to address. The entirety of the circumstances resulted in the defendant invoking a right to restrict out of territory client leads until Mr Dominguez completed two days training. The existence of the defects in the first place was a material factor in the defendant's decision-making. 7. In those circumstances, the asserted non-compliance with the Policy was ultimately of no significance to Mr Dominguez's ultimate complaint being the restriction on referrals that was subsequently implemented. Further, it is difficult to identify how loss would flow from the fact that the complaint did not first go to Mr Dominguez for resolution, given that Mr Dominguez was ultimately given an opportunity to resolve the complaint before any decision was made to rectify the complaint or to restrict client leads to Mr Dominguez. This is particularly so because the settlement of some complaints resulted either out of Mr Dominguez's inaction in response to the complaint or the fact that the customer did not wish him to rectify the defect ends, even if a relevant contractual relationship causation could not be established as the "chain would be broken and any loss associated with the restriction on client leads would not be a loss that could be attributable to any breach by [the defendant]."
5. If attention is directed to the substance of Mr Dominguez's claim in this respect, it is claimed that the Policy had contractual force, notwithstanding Mr Dominguez's description of the quote as a "policy" in the pleadings.
6. The nature of those contractual relationships were not spelt out in the pleadings, although it would appear that Mr Dominguez relied either on the Policy forming part of the FA or that there was a contract in terms of the quote between Mr Dominguez (or rather DDCS) and the defendant.
7. Although the pleadings manifestly failed to identify whether the Policy is relied upon in either of those contractual senses and, if so, how the defendant would establish the existence of a contract in either respect, I do not consider that the pursuit of the claim in that manner, at this stage, could be described as without any reasonable prospects of success, untenable or fanciful, although it may be properly described as relatively weak.
8. No doubt, issues will arise as to whether any contract, if one can be proven to exist, is between DDCS (or Mr Dominguez) and the client, but the quote or, more particularly, the terms within it may be demonstrated to have been issued with the defendant's direction, acquiescence or in conformity with a general or standard form communication the defendant required to be issued by franchisees. The document does appear to be in a standard form and the franchise business does provide rights to use standard products or services for the franchisees, such as methods, computer systems and intellectual property.
9. It is true that cl 7.34 of the FA deals with consumer complaints and contemplates, in that respect, the investigation of a complaint by the defendant and remedial action taken in such manner as is deemed necessary by the franchisor. However, is not untenable that Mr Dominguez could argue that cl 7.34 of the FA does not necessarily exclude the procedure set out in the quote such that step one in the quote may nonetheless be given effect to as an additional requirement to or collateral to the FA, as part of a contractual arrangement in which Mr Dominguez will be given first opportunity to fix a problem with a client.
10. Nor do the steps identified in the quote necessarily contemplate actions inconsistent with the defendant taking remedial action under cl 7.34 because step two in the quote specifies that, if the franchisee cannot fix the problem, then the franchisor shall be "responsible".
11. Thus, on this analysis, if made out, the Policy may potentially be consistent with the FA. Similarly, the FA would not seem to preclude the defendant issuing a survey to customers and acting in the light of responses to rectify complaints. But it does not follow that the rectification process excludes the first step in the quote. Part of Mr Dominguez's complaint is, as I understand it, that the survey was productive of complaints made about his work that were not made directly to him and which occurred a considerable time after the performance of his work.
12. Similarly, the opportunity afforded to Mr Dominguez to explain the circumstances of the complaints to the defendant and take steps in rectification as part of a complaint rectification procedure adopted by the defendant does not necessarily conform with the Policy. Mr Dominguez's case is weakened by the fact that some clients in this context refused to accept his attempts at rectification, but it does not render his complaint, as manifested in the pleadings as untenable.
13. There is some force in the defendant's contention that the asserted non-compliance with the Policy was ultimately of minimal significance to Mr Dominguez's complaint, as to being restricted in the referrals he received to Ambervale. But it is clear that the decision to restrict referrals was as a direct result of the complaints received by customers after the issuing of the survey and accepted in some respects by the defendant. Mr Dominguez's case is that the process is entirely contrary to the requirements of the Policy. It would appear that Mr Dominguez contended that the defendant's right to restrict territory ultimately derives from a bad or invalid root, namely, procedure adopted contrary to the Policy.
14. I agree with the submission advanced by the defendant that it is difficult to identify how loss would flow from the fact that Mr Dominguez did not be provided with the first opportunity to consult with the customer, given that Mr Dominguez was otherwise given an opportunity to rectify complaints (and did not do so in many respects). But, in my view, Mr Dominguez should be given an opportunity to demonstrate that linkage in his case. He has not done so yet.
15. Overall, it has not been demonstrated, in that respect, that Mr Dominguez's case is untenable, groundless or without reasonable prospects of success, in this aspect of these pleadings.

Weekly Telephone Calls

1. Mr Dominguez claimed in his pleadings that the defendant had failed to make weekly phone calls since 8 November 2022, in breach of the FA.
2. However, I do not consider that this pleading results in a reasonable cause of action. The FA does not necessitate "weekly phone calls", but rather cl 4.11 of the FA provides that the Franchisor must, "attempt to contact the Franchisee using the software prescribed by the National Franchisor. At least monthly (weekly in the first two months) actively following up if the Franchisee fails to respond." Given that the FA was executed in January 2022, it follows that by November 2022, the weekly contract obligation under the FA had long since ceased to apply. No relevant breach of contract may be established on the basis of any failure to make weekly contact.
3. Furthermore, I accept the submission advanced by the defendant that the evidence before the Court could not establish that, as at the date of these proceedings, the defendant had defaulted in complying with cl 4.11 of the FA. The evidence disclosed that: 1. The last contact with Mr Dominguez by the defendant was around 9 November 2022 with respect to the complaint from Ms Salvador. 2. The decision to restrict referrals from outside the Ambarvale territory was conveyed to Mr Dominguez on or about 10 November 2022. 3. DDCS's Notice of Dispute was served on 16 November 2022 and the Statement of Claim was filed on 28 November 2022.
4. It follows that a month had not elapsed since the last contract by the defendant to Mr Dominguez before the proceedings were commenced. In order for cl 4.11 to be breached, it will be necessary for the passage of at least one month without contact which cannot, on the evidence before the Court, be established. Similarly to the issue of policy, it is difficult to see how such conduct could generate any recoverable loss in the proceedings.

Particular Matters Raised by the Affidavit of Mr Dominguez

1. There are a number of matters raised by Mr Dominguez in his affidavit of a factual nature which may be capable of supporting an alternative, but were not pleaded, claimed or contended. However, I agree with submissions of the defendant that there is insufficient factual material to support the existence of a tenable claim in this respect or these bases for claim are otherwise untenable, for the reasons discussed below. I shall deal with each under a series of broadly crafted headings.

Rushed into entering into the Franchise Agreement

1. As earlier mentioned, Mr Dominguez claimed that he was "rushed" into entering into the FA. There is a fundamental problem with this contention. As submitted by the defendant, in circumstances where Mr Dominguez's primary complaint in the proceedings is the restriction placed by the defendant on the referral of client leads, it is quite apparent that no claim for rescission of the roots of the FA (which seems to be the only available basis for relief from this contention) may be sustained. This is because the complaint is by its nature predicated upon the ongoing existence of the FA and the asserted non-compliance by the defendant with it.
2. If this contention is intended to support a proposition of unconscionable contract arising from unfair pressure, there is an absence of a firm foundation for the proposition on the material before the Court. Mr Dominguez in his affidavit gives the illustration that he was approached by a client about a potential cleaning franchise in October 2021. He had conversations with Ms Valeri about obtaining a franchise, as earlier mentioned. In Annexure A to the FA, as earlier described, Mr Dominguez acknowledged that at least 14 days prior to the execution of the FA, relevant disclosure documents were provided to him. He acknowledged that he read those documents, had an opportunity to understand them and had either sought legal advice or had elected not to seek legal advice. That Annexure was dated 31 January 2022. It follows that Mr Dominguez's assertion that he was rushed into sign the FA because he would otherwise not be able to access training, commencing 9 January 2022, is inconsistent with that historical factual record.
3. Lastly, it is difficult to see how an action for rescission of the FA based on these factors could constitute a claim for damages for more than $20 million.

A Hidden Fee

1. At [9] of Mr Dominguez's affidavit, he stated that there are "a lot of hidden fees that we only find out since we start the franchise." The defendant correctly contended that the Statement of Claim does not articulate relief referable to the fees paid by DDCS, and that the FA clearly and specifically details the fees payable by Franchisees (see cl 7.6) with the various fees comprised in the "Monthly Franchise Fees" being enumerated in the definitions section of the agreement (at cl 1). Indeed, in Mr Dominguez's evidence he seems to suggest that these are known, but the further information is obtained about them once the agreement commences. There is no evidence as to any reliance upon representations made as to fees.
2. Returning to the issue of Mr Dominguez being rushed into making a decision, it may be noted that initial inquiries about the franchise with the defendant were made in October 2021 and the FA was not executed until 31 January 2022. That, combined with the earlier analysis results in the conclusion that there is no conduct which may be found to be constituting a misrepresentation or misleading conduct in either of these first two respects.

Misrepresentation as to the Territory Available to Mr Dominguez under the Franchise Agreement

1. At [4] of the written submissions of Mr Dominguez he stated that in the initial conversation with Ms Valeri, he was told that the ambit of old territory was available, but that he would not be restricted to that territory. Mr Dominguez contended that Ms Valeri informed him that he would get work in all areas and that "Ambarvale would only be the area where I am buying from."
2. There is no evidence of what is asserted in Mr Dominguez's submission in this respect. Even if there was evidence in the proceedings, however, this contention may not constitute a cause of action based upon a misrepresentation. That is because the statement made by Ms Valeri conforms with the FA, which does not prevent Mr Dominguez from doing work outside his territory of Ambarvale. His own evidence is that he was doing work outside his own territory of Ambarvale before the decision was made to restrict client leave referral. The absence of such referrals did not prevent Mr Dominguez from going into other territories to do work. For example, he could advertise more broadly.
3. Clause 7.32 of the FA does not prevent Mr Dominguez from seeking work in a territory where no other franchise was established. Furthermore, the restriction in cl 7.32(c) only prevents the Franchisee from "knowingly solicit work from clients in the territory which are clients of another Franchisee of the same division." A Franchisee is not prohibited from undertaking work offered by clients which they have not solicited work from. So, it is necessary to consider whether a reasonable person in Mr Dominguez's position would have had a reasonable expectation that a particular fact would have been disclosed, such that the failure to disclose it renders that failure misleading or deceptive. The question which arises in that respect is whether the failure to provide information that outside client leads might be restricted, falls into that category.
4. There are a number of difficulties in Mr Dominguez making good this contention, but it could not be described, in my view, as untenable or offering no reasonable prospects for access. The restriction of such client leads does not necessarily mean that Mr Dominguez was prevented from operating outside Ambarvale. However, on the material presently before the Court, it is not clear whether the removal of client leads simply made it more difficult for Mr Dominguez to operate outside Ambarvale or whether it meant that he was effectively barred from operating outside Ambarvale.
5. A further problem with this contention is that the initial conversation relied upon by Mr Dominguez as a representation was followed by the provision of the FA which, by virtue of an Annexure to the agreement, Mr Dominguez has read and understood. The period Mr Dominguez had to review the FA was considerable and he had the opportunity of taking legal advice. That is a weakness in Mr Dominguez's case but it is not an insurmountable one.
6. Thus, there is a problem with this aspect of this case but that does not make the case untenable or groundless.

Malice

1. At [7], [9] and [20] of Mr Dominguez's affidavit, he repeatedly stated his "belief" that "Jim Penman got to know [his] name", apparently contending that the decision to restrict DDCS to its territory was motivated by some ill-will harboured towards Mr Dominguez by reason of various complaints that Mr Dominguez had made about certain fees payable under the FA. In circumstances where the defendant, at no time, departed from the terms of the FA in its dealings with DDCS, such allegations have no relevance to the tenability or otherwise of Mr Dominguez's claims.
2. Even if they did, however, they are based upon nothing more than supposition, unsupported by any evidence of conduct or words by Mr Penman by which such an attitude might have been conveyed. On the evidence available, it is plain that the decision to restrict client referrals originating from outside the Ambarvale territory to DDCS was made two days after the final complaint against DDCS had been settled against Mr Dominguez, which stands against any inference that it was inspired by some malicious intent.
3. Accordingly, any allegation that is predicated upon such a contention both lacks a legitimate factual foundation and would, in any case, ultimately be of no consequence in yielding a legal remedy.

Conclusion: Application for Dismissal under r 13.4(1)

1. I accept the submission of the defendant that Mr Dominguez is not the proper plaintiff. Mr Dominguez is only a party to the FA of his capacity as a director of DDCS and as guarantor. Any claim under the FA is probably that of DDCS. However, this may be remedied by an appropriate adjustment to the pleadings.
2. Having regard to the pleadings in the Statement of Claim, when read with Mr Dominguez's affidavit and his submissions, I do not consider that the Court should exercise its discretion to summarily dismiss the proceedings under r 13.4 of UCPR for the reasons provided in this judgment. I do not consider that the proceedings are so obviously untenable that they cannot possibly succeed, are manifestly groundless or are so manifestly flawed that they do not even admit an argument. I particularly refer in this respect to my discussion under the heading "Policy" and misrepresentation as to territory available to Mr Dominguez under the FA.
3. I do not consider that the defendant has established that the proceedings should be dismissed pursuant to r 13.4(1)(b) because the proceedings disclose no reasonable cause of action.

Alternative Application to Strike Out Statement of Claim

1. In my view, the alternative application by the defendant to the Statement of Claim is overwhelming. The issue which arises in this context is whether Mr Dominguez has failed to disclose reasonable cause of action on the facts pleaded. It is unnecessary in this respect, to have regard to various unpleaded contentions which may emerge from Mr Dominguez's affidavit, or even submissions which may separately suggest the semblance of some claim against the defendant.
2. Rule 14.28 of the UCPR is concerned with the contents and character of the pleading itself. In circumstances where there is no proper basis pleaded as to how the Policy constitutes an enforceable contractual or legal obligation and there has been any discernible breach of the FA identified, it must follow that the pleading fails to articulate a reasonable cause of action and will therefore be struck out.
3. A further consideration is that the Statement of Claim is embarrassing, as it fundamentally fails to serve as a proper the proper function of a pleading. In substance, the pleadings and particulars are confined to a single conclusion of assertion of breach a policy and the FA but are devoid of any detail in that respect. There was no particularity or identification of the material facts upon which the conclusion of breach may be predicated. The pleading does not disclose what the Policy is, how the Policy formed part of the FA or establish any legal obligation upon the defendant that is owed by DDCS, what clauses of the FA have been breached, what acts or omissions of the defendant give rise to a breach of the FA and how those alleged acts or omissions have caused the loss claim.
4. It is true that the pleading details attempt to develop a factual substratum of the claim, however the additional detail is marginal and only serves to identify the restriction on DDCS's online access to "Jim's online APP" without articulating the substance of that restriction and how it gives rise to a breach of contract.
5. The ambiguous nature of the claim is only exacerbated when consideration is given to the evidence upon which Mr Dominguez relies on the Motion. It appears that Mr Dominguez raised a range of complaints against the defendant, ranging from conduct which "rushed" him into signing the FA, non-disclosure of "hidden fees" and alleged targeting of him by Mr Penman for the numerous complaints made by Mr Dominguez about the "Lead Fees" payable under the FA (all of which have been discussed above). However, it is not at all clear how such contentions could support the allegations advanced in the Statement of Claim (or, indeed, whether they are intended to form part of the factual substratum to the breach of contract alleged). Similarly, there is as insufficient basis pleaded as to how a misrepresentation as to the Territory might found Mr Dominguez's action.
6. While those matters are unpleaded and accordingly might simply be ignored, that Mr Dominguez has considered it necessary and appropriate to raise such matters on the Motion implies that they bear some significance to his claims. Should that inference be correct, then the deficiency in the Statement of Claim only becomes more pronounced, for it only demonstrates that the pleading fails to articulate that the real substance of the claim sought to be advanced against the defendant and the factual bases upon which it relies.

Conclusion - Summary Dismissal

1. In my view, the defendant's motion to summarily dismiss the proceedings should be rejected, but the alternative relief to strike out the Statement of Claim pursuant to r 14.2(1)(a) of the UCPR should be granted.
2. A basis for the disposition of any question as to costs in this matter, would be no order as to costs. In any event, the parties shall have liberty to make any application regarding costs within 7 days of this judgment.

DIRECTIONS 1. The defendant shall bring in Short Minutes of Order reflecting this judgment by 12:00pm, Tuesday 8 August 2023.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 August 2023