Fonny Januar Pty Limited and anor v Oey and ors

THIRD RESPONDENT: OCorp Consulting Pty Limited

FOURTH RESPONDENT: OCorp Integrity Management Pty Limited

CATCHWORDS: S106 proceedings - unfair franchise agreement - ex parte hearing - contract is of the relevant kind as described in s106(1) - two aspects of franchise agreement which created relevant unfairness - misrepresentations resulting in that which applicant acquired being different and less valuable than what was contemplated - respondent's failure to implement franchise agreement made it difficult for applicant to succeed in operating the business - franchise agreement avoided from inception - franchisee entitled to refund of monies paid and compensation for trading loss

Industrial Relations Act 1996 s105, 106 LEGISLATION CITED: Legal Profession Act 2004 Uniform Civil Procedure Rules 2005 Schedule 5

Brown v Rezitis (1970) 127 CLR 157 CASES CITED: Mayne Nickless Ltd v Industrial Relations Commission of NSW & 3 ors [2004] NSWCA 359 McDonald's Australia Holdings Limited v Industrial Relations Commission of NSW [2005] NSWCA 286

FIRST AND SECOND APPLICANTS: Mr A Searle (c) Solicitor: LEGAL REPRESENTATIVES: Mr B Belling Home Wilkinson Lowry

FIRST TO FOURTH RESPONDENTS: Unrepresented

Application under s 106 of the Industrial Relations Act 1996

1 These are proceedings brought under s 106 of the Industrial Relations Act 1996 ("the Act"). The applicants are Fonny Januar Pty Ltd ("FJ Pty Ltd"), a company that entered into a franchise agreement, and Januar Saputra, a director and shareholder of the first applicant. The second respondent is the franchisor Charis International Pty Limited ("Charis"), of which the first respondent Peter Henry Oey is the sole director, secretary and shareholder. The third and fourth respondents are OCorp Consulting Pty Ltd and OCorp Integrity Management Pty Ltd. 2 The proceedings are constituted by a summons filed on 24 May 2005. The summons, in effect, seeks to have the franchise agreement found unfair for the purposes of s 106. The summons refers to the third and fourth respondents as being companies of which Mr Oey is also a director and shareholder. However, as I read the summons, it gives no other clue as to the part played by the third and fourth respondents in the circumstances that give rise to these proceedings. Certain documentation, being a franchise information package issued by Charis, describes that company as "a division of OCorp Group, a company founded by Peter Oey and Joseph Chow." The third and fourth respondents do not appear, on the evidence, to be parties to any contract that is sought to be found unfair and, accordingly, I propose not to consider this matter by reference to any involvement of the third and fourth respondents. 3 Ss 105 and 106 of the Act are in the following terms: s 105 Definitions

In this Part: "contract" means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. "unfair contract" means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument. s 106 Power of Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (2A) A contract that is a related condition or collateral arrangement may be declared void or varied even though it does not relate to the performance by a person of work in an industry, so long as: (a) the contract to which it is related or collateral is a contract whereby the person performs work in an industry, and (b) the performance of work is a significant purpose of the contractual arrangements made by the person. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. (6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. 4 The franchise, which is the subject of these proceedings, was an Il Gianfornaio ("IG") franchise, which was conducted personally for a short time by Mr Saputra on behalf of FJ Pty Ltd. 5 The respondents initially participated in the proceedings up to and including the mandatory conciliation process through the services of a solicitor. Later, that solicitor filed a notice of ceasing to act and thereafter the respondents did not participate in the proceedings in any way. They did not file any evidence nor did they appear at the hearing of the matter, which proceeded ex parte. 6 The narrative of the factual background that follows is based on evidence given in the proceedings both by way of affidavit and orally by Mr Saputra and on certain documentary evidence that was tendered on behalf of the applicants. 7 Mr Saputra came to Australia from Indonesia in 1997 as a student and gained a Bachelor's degree in Business at the University of Technology, Sydney. He began searching for a business opportunity. 8 Mr Saputra first met Mr Oey in late January 2003 when he was negotiating to purchase a Gloria Jeans franchise, which Mr Oey, or interests associated with him, owned. 9 At that initial meeting, Mr Oey told Mr Saputra that he was a practising accountant and business adviser and that he had a great deal of personal professional experience about franchising and could help him "into a good franchise if that's what you want." Mr Oey told Mr Saputra that he owned and managed ten Gloria Jeans stores. Mr Oey further informed Mr Saputra that entering into a franchise system would be a good move and said, "I am a practising Christian and I wouldn't lie to you. I think that this would be a good purchase for you." Mr Saputra said that because he was also a devout Christian, he believed that Mr Oey was being honest with him. 10 Ultimately, the Gloria Jeans organisation rejected Mr Saputra as a franchisee. 11 Later, in a meeting in April 2003, Mr Oey told Mr Saputra that he owned a franchise through one of his companies called Il Gianfornaio. After being shown three stores, which were then IG stores, the applicant indicated that he would be interested in joining the IG franchise system. Mr Oey told him that the stores were "a new concept. There's going to be a new design and we will provide you all the training that you need, the systems, a manager and staff. We will provide you with ongoing assistance and implement a proper marketing strategy. The franchise is growing, we are opening at least another six stores within the year." 12 Mr Oey told Mr Saputra that the only available shop was at the Westfield Miranda shopping centre, which he visited. Mr Saputra was also given a copy of a Franchise Information Pack. Relevantly, that pack refers to a number of matters that the applicant said were of significance for the purpose of these proceedings. I shall deal with each of them in turn: 1) The pack emphasises that IG is a brand and that it has a distinctive identity. It was said that the name Il Gianfornaio was distinctive and that the logo and "tag line" attached thereto were also distinctive. 2) The product sold by IG was described as "….bread…along with some 150 other Italian delicacies including coffees, pizza, focaccia, biscotti, dolci and a range of savoury items. We are an innovative retail food chain poised for massive growth because of precisely that, in the age of 'mass customisation' and enormous consumer choice, we have a little something for everyone." The product range was described in greater detail as including hot and cold beverages, pannini/pizzette, savouries, focaccia, sandwiches, pizza, bread, dolci, and biscotti. 3) There was a detailed description of the percentage sales attached to each of the items of merchandise described. Pizza was said to account for 38% and coffee 22%. These were described as high margin, high volume lines. 4) The margins were described as being 24% of weighted average cost of sales, "With the bulk of the volume being driven through higher penny profit lines this has delivered the 70% Gross Margin that the Il Gianfornaio business model enjoys." 5) Under the heading "Training" it was said that "It takes a few days only to train a serving employee to be competent at taking and preparing the product range and serving an order." The document described a person expected to control the cooking of pizza and a person wishing to become a store manager as needing about a week to train. The training was described as consisting of product knowledge, product handling, customer service, taking an order, making the products, cleaning, and "up selling to customers." 6) The "main focus of marketing" was said to be generally localised rather than "main media". It referred to letterbox drops, "shop-a-docket", window signs, local papers and flyers/handouts. 7) The documentation contained some general statements with respect to the ratio of occupancy costs to sales and the ratio of net profit to gross sales. 8) Most significantly, a page in the document entitled "Projected P/L's on various levels of weekly turnover" set out in a general sense some projections that, obviously, differed depending upon weekly sales achieved. Notes to those projections referred to the fact that no wage was included for one full-time franchisee, that all information was provided on a "without prejudice" basis and that the reader should "please satisfy yourself as to the accuracy of this information and place no formal reliance on it." 13 The lowest weekly sales projected figure was $6,000. As against this there was projected to be a gross profit of $3,600 per week. After operating expenses, net of finance costs, there was shown a profit before tax of $304 per week. 14 Mr Saputra had a conversation with Mr Oey at the end of April 2003 in which they discussed a proposed marketing strategy including advertising on bus stops, in cinemas, on radio and in newspapers and a "grand opening". Mr Saputra told Mr Oey that he was concerned about the marketing strategy, but Mr Oey said that he would take care of it all. At the same time Mr Saputra asked Mr Oey what would happen "if the business goes bad." Mr Oey replied, "Just sell it." 15 In May 2003, Mr Saputra started making payments through FJ Pty Ltd to the respondents, with an initial payment of about $70,000. He had borrowed $436,462.88 from his mother to acquire the franchise. On 30 June 2003, he commenced a three-week training program that had been scheduled for him at another store, which covered times ranging from 7am to 3pm, 10am to 3pm and, on two days, 11am to 5:30pm and 11am to 6:30pm. Altogether, there was scheduled 13 full days of training intended to cover a number of items set out in the written training program. However, Mr Saputra said that most of the training sessions lasted approximately 20 minutes to half and hour and that thereafter he was required to operate pizza ovens, espresso machines and to serve customers. 16 On 25 July 2003, Mr Oey gave Mr Saputra a 48-page franchise agreement, which was to be signed. Mr Saputra said that he wanted to show it to his solicitor but was told "Don't show your solicitor, that will just slow down the process." Mr Saputra said that he relied on and trusted Mr Oey and the agreement was executed bearing date 25 July 2003. 17 The Miranda store opened on 8 August 2003. There was no "Grand Opening" as promised by Mr Oey and the opening of the store was not promoted within the Miranda Westfield shopping centre nor were vouchers and taste testing provided on the first day of trading. There was no endeavour by the respondents to market the store in any way other than through advertisements placed in a local newspaper. 18 The staff were selected by the respondents but received no training in the use of the cash register. Furthermore, Mr Saputra said that the menus, which had been provided to the store, were different from those that the training program had been based around. When seeking information in September 2003 from a person in the respondents' office about the use of the cash register, Mr Saputra was advised by a person in the IT support area that "We don't know how to use the software." 19 All of the fixtures and fittings and the design of the shop had been specified by the respondents. Mr Saputra noted that after he commenced business the display cabinet was refrigerated but there was no heating facility. Accordingly, pizzas that were taken out of the oven had to be put in the only cabinet provided for display, which was refrigerated. They cooled quickly, became soggy and their presentation was not attractive. This was in distinction to stores that Mr Saputra had visited during his training period where there were proper heated display cabinets in use. 20 In terms of the menu, which was provided by the respondent for use in the Miranda shop, Mr Saputra said that there were items on it which he did not recognise and about which he had received no training. This included iced drinks. Furthermore, no ice machine had been provided with the equipment that had been specified by the respondents. In addition, although Charis, as franchisor, was required under the terms of the franchise agreement to supply items that were used in the menus, this did not occur and he was forced to purchase ingredients including ice cream and chocolate fudge himself. There had also been a failure to provide a freezer, which meant that Mr Saputra was not able to keep ice cream on the premises. 21 Mr Saputra said that up until early September 2003, a regional manager made available by the respondents, Ms Lyn Lock, had been working at the Miranda store to assist in building up business. However, she was required to assist in the opening of another store from the middle of October. In its first month of operation, the store lost about $20,000. 22 In October 2003, Mr Saputra met with Mr Oey and other representatives of the respondent at the Miranda shop. He complained about the difficulty in generating profit and the lack of advertising and promotion. Mr Oey promised to attend to this. When Mr Saputra complained about the lack of a heating cabinet for the pizzas, Mr Oey said that he would need to pay about $7,500 to obtain one. 23 When discussing the reason for the lack of profitability, Mr Oey said that the fault lay with the employed staff and that new staff should be engaged, which would take about two months. This was despite the fact that those persons who were employed at the shop had been engaged by and trained by the respondents' personnel. 24 Mr Oey further said that it would take at least six months for sales to pick up. 25 From 15 October 2003, Mr Saputra and his mother sought to negotiate the sale of the franchise. Mr Oey agreed provided that it was transferred to him at no cost, but this was not acceptable to Mr Saputra and his mother. Negotiations proceeded on the basis of a request by Mr Saputra for payment of $50,000 for the effecting of the transfer of the franchise but this was declined by Mr Oey. 26 Finally, on about 19 December 2003, Mr Saputra agreed to assign the franchise to Mr Oey without the payment of any monies. Mr Oey agreed to this but indicated that he required the consent of Westfield management to the assignment. By 15 March 2004, the respondents had been able to negotiate with the Westfield organisation for a surrender of the lease provided that the store continued to trade until 30 April 2004, that there was repayment to Westfield of a pro rata fit-out contribution and that the premises were delivered to Westfield with vacant possession "made good to bare shell." There was also a requirement to pay a Surrender Sum of $30,000 and the agreement was conditional upon Westfield having secured a replacement tenant for the premises prior to that date. Mr Oey sought payment from Mr Saputra of $100,000, which Mr Saputra refused to pay. 27 Mr Saputra closed the store on 23 May 2004 and vacated the premises. The following day he was served with a notice of termination of the franchise agreement from Charis. 28 It was the evidence of Mr Saputra, supported by documentation, that he had paid the sum of $76,409.11 to Charis. Of this amount, $37, 500 was said to be a franchise fee. Furthermore, he had paid other monies to third parties in connection with the set up and fit-out of the shop totalling $319,961.92. Accordingly, there had been a total outlay of $396,371.03. 29 Furthermore, in the period of trading, financial statements of FJ Pty Ltd, which were admitted into evidence and which, on the evidence, related solely to the operation of the Miranda shop, showed, for the year ended 30 June 2004, sales of $55,843.14 and expenses associated with those sales of $227,713.24. Of the expenses, the largest item is rent of $87,804, followed by gross wages of $50,895 and costs of goods sold of $34,984. Other expense items include packaging, operating supplies, superannuation, telephone, electricity, "internet", advertising, maintenance, insurance, cleaning and rubbish removals, printing and stationery and water. 30 Excluded from these expenses are amounts for accounting and legal fees, parking and fuel and bank fees and charges as well as an amount shown as "interest". This results in a net trading loss over the relevant period of about $172,000. 31 For completeness, I refer to some of the provisions of the franchise agreement. They confirm that the franchisor is responsible for providing training to nominees of the franchisee, that the franchisor will develop general marketing advertising and promotional activities or campaigns, that the franchisor will arrange a "grand opening" promotion (at the cost of the franchisee) and, significantly, imposes obligations on the franchisee with respect to the operation of the store. Included are the following: "12.13 c. ensure that the franchised business is at all times managed by the franchisee or a full-time store manager who is acceptable to the franchisor and has completed training to the franchisor's satisfaction." 12.14 The franchisee shall a. operate the Franchised Business so as to promptly service all customers in an efficient and courteous manner…." 32 The applicants sought a finding from the Court that the franchise agreement was unfair for the purpose of s 106.

Was there a contract "whereby a person performs work in any industry"? 33 Jurisdiction and power to make orders under s 106 is circumscribed by the requirement that any order may only be directed to a contract of the requisite kind as described in s 106(1). 34 A succinct statement of the relevant principles which apply in identifying any such contract, with an appropriate reference to decided authorities, is to be found in the judgment of Mason P in the New South Wales Court of Appeal in Mayne Nickless Ltd v Industrial Relations Commission of NSW & 3 ors [2004] NSWCA 359. Hodgson and McColl JJA agreed in his Honour's reasons. At [45] to [48] Mason P said: "45 The critical jurisdictional fact is the identification of a contract (as defined in s105) 'whereby a person performs work in any industry'. Stevenson v Barham (1977) 136 CLR 190 explains how this criterion is satisfied. The critical passage in the joint judgment of Mason and Jacobs JJ at 201 (with which Barwick CJ agreed: see at 192) refers to the relevant jurisdictional fact being whether the contract is one which leads directly to a person working in any industry (see generally Solution 6 at [26]-[34] per Spigelman CJ). Since 'contract' includes an 'arrangement', it follows that it is not necessary in an 'arrangement' case to prove that the work was performed pursuant to a legal obligation to do it ( QSR Ltd v Industrial Relations Commission of NSW & Ors [2004] NSWCA 199 at [47], [57], [58]).

46 Nor is it essential that there be throughout an identity between the person working and the contracting party ( Ex parte VG Haulage Services Pty Ltd: Re Industrial Commission of New South Wales [1972] 2 NSWLR 81 at 87-88, Stevenson at 200). It is commonplace for modern contracts of employment involving senior executives, professional persons and leading sportsmen and women to use a service company.

47 In Solution 6 (at [35]), Spigelman CJ referred to two paraphrases of the word 'directly' that have received judicial acceptance. In Production Spray Painting and Panel Beating Pty Limited v Newnham (1991) 27 NSWLR 644, Mahoney JA (at 649-50) posed the question in terms of 'whether the purpose of the transaction was that relevant work be performed'. Priestley and Handley JJA (at 657) posed the question in terms of whether the impugned contract 'must directly, that is under or pursuant to its terms, provide for the performance of work in an industry'. Another statement found in the cases is whether or not the work was 'required' by the contract ( Production Spray Painting at 657, Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Limited (1992) 28 NSWLR 443 at 465, Solution 6 at [35]).

48 In Solution 6 , Spigelman CJ (at 217[12]-[14]) cited the judgment of Jacobs JA in V G Haulage at 88 as supporting the proposition that a contract may be found to lead 'directly' to the performance of work in an industry if it:

(i) itself 'directly envisages' performance of work; and

(ii) has a 'recognisable impact on the conditions of that employment' and 'work'.

Identification of these elements was not intended to propound some kind of alternative test to that stated by the High Court in Stevenson (see Old UGC Inc & Ors v Industrial Relations Commission of NSW & Anor [2004] NSWCA 197 at [49]). 35 The determination whether the franchise agreement in these proceedings may be so characterised depends upon an analysis of its provisions. The recitals include a reference to the franchisee desiring "to operate an IG store…." The grant of the franchise is said to be one that allows the franchisee to operate the store as an IG franchisee. The grant contained within the agreement is one described as "the right to operate the Franchised Business…." 36 There is a requirement that if the franchisee is a company that the Principals, who are described, "are the sole directors and shareholders of the franchisee." The franchisee is required to "satisfactorily complete any initial training program." Furthermore, the right to carry on the Franchised Business is confined to the Premises designated or to alternative premises approved by the franchisor. The conduct of the business is in turn confined to one in accordance with the franchisor's business system. The premises are nominated by the franchisor, and the franchisee is limited in the products and services that may be provided to those specified by the franchisor. 37 The franchisee is required to "hire, train and maintain a staff of employees sufficient to operate…." the business and, significantly, "ensure that the Franchised Business is at all times managed by the Franchisee or a full-time store manager who is acceptable to the franchisor and has completed training to the franchisor's satisfaction." 38 The franchisee is required to operate the business "so as to promptly service all customers in an efficient and courteous manner…." 39 The franchisee has ancillary duties including the establishment and maintenance of an accounting system and the like. 40 The focus of the franchise agreement in the context of the factual circumstances, which I have outlined, leads to the conclusion that the indicia, which are referred to in the judgment of Mason P as being necessary to establish a contract of the requisite kind, have been satisfied. The agreement requires that the franchisee will, through its "Principal" carry on the franchised business. All of the circumstances leading up to and involving the making of the franchise agreement are indicative that Mr Saputra will be intimately and personally involved in the operation of the business and is required to do so. 41 The circumstances which apply in these proceedings are to be contrasted with those that were considered by the New South Wales Court of Appeal in McDonald's Australia Holdings Limted v Industrial Relations Commission of NSW [2005] NSWCA 286. There, the franchisee conducted four "McDonalds" franchises at separate outlets employing altogether about 350 persons. The managing director and "principal" of the franchisee was a Mr McLaughlin. 42 A majority of the Court, Mason P and Handley JA (Spigelman CJ dissenting on this point), held that the four franchise agreements did not constitute a contract within s 106. Handley JA (Mason P agreeing) said at [102]: "102 Characterisation of a contract to determine whether it is within the jurisdiction of the Commission under s 106 will raise questions of fact and degree in franchise cases near the borderline and the decision may not be an easy one. However there is no difficulty in the present case where the working proprietor's company employs some 350 staff. The distinction is one of substance, not form, and the Commission, in the words of Barwick CJ in Brown v Rezitis ((1970) 127 CLR 157) at 164, can uncover the real transaction between the parties. The real transaction here does not have to be uncovered, and it is not a contract whereby Mr McLaughlin works in an industry." (Case reference added) 43 I conclude that the franchise agreement is one that comes within s 106 of the Act.

Was the contract unfair? 44 The factual narration, which I have earlier set out, allows the Court to conclude that there were two significant aspects of the franchise agreement which created relevant unfairness for the purpose of s 106. The first is that, in the aggregate, there were a number of misrepresentations that resulted in that which the franchisee acquired as being significantly different and less valuable than what was reasonably contemplated. The second is that, in the implementation of the franchise agreement and in particular by reference to the franchisor's obligations, there was such a failure as to make it extremely difficult for the applicants to have succeeded in operating the business as part of the respondents' branded business. Each of these factual matters contains elements of misrepresentation and the respondents' failure to perform, and it is only necessary that I outline in a general way some of the matters that allow the Court to conclude that the relevant unfairness exists. These include: 1) The representation of a known and accepted brand did not translate into anything either by way of substance or by way of any conduct or activity on the part of the respondents. There was a relevant failure to advertise the brand in any meaningful way. 2) There was a failure to create awareness of the opening of the premises and the products offered from those premises as promised by the franchisor. These circumstances applied whether or not potential customers were or were not aware of the Il Gianfornaio brand. 3) The training provided to Mr Saputra was inadequate. 4) The employees, as trained by the franchisor, were recognised by the franchisor as being inappropriate. 5) The equipment and systems provided by the franchisor were not totally appropriate. Mr Oey, the principal of the franchisor, conducted himself in a manner that was designed to deflect Mr Saputra from exercising relevant prudence in investigating and considering the representations made by the franchisor. In this regard I make particular reference to representations about the number of franchises that Mr Oey held, the fact that he was a certified public accountant and business adviser and that he was a practising Christian (with the implication that he would conduct himself accordingly). 6) There was a representation that in all the circumstances there would be, at the least, a minimum level of sales, which did not eventuate. 45 In the circumstances of the unfairness as I have described it, it would seem that an appropriate characterisation is one of almost total failure on the part of the franchisor to deliver that which the franchisee thought that it was acquiring. In these circumstances, in my opinion, the most appropriate consequence is to order that the franchise agreement be avoided from its inception.

Monetary compensation 46 It is then necessary to consider what order is appropriate for the payment of monetary compensation which is "just in the circumstances of the case" as provided for in s 106(5). Given the conclusion that I have come to concerning the almost absolute failure of the franchisor to discharge its obligations under the franchise agreement, it is appropriate that, firstly, the franchisee FJ Pty Ltd should be entitled to a refund of all monies paid by it to the respondents and to third parties by way of the acquisition of fixtures and fittings and other fit-out costs. Furthermore, the franchisor having represented that the business would be profitable, it is appropriate that FJ Pty Ltd be entitled to be compensated for the trading loss that it sustained. In the absence of any representation of any particular level of profitability, the applicant's compensation should be confined to covering the trading loss. 47 It was submitted by counsel for the applicants that some order should be made that would compensate Mr Saputra for the time, trouble and effort expended by him in working in the business in an endeavour to make it profitable, calculated by reference to monies which would have been paid to him by way of wages under the relevant Restaurant etc Employees (State) Award. In my opinion, it is not appropriate to accede to this submission for three reasons. Firstly, there was no representation in the sense of a guarantee of any particular level of profit, secondly, the projected profitability explicitly did not take into account wages or salary payable to the principal of the franchisee and thirdly, any wages payable to Mr Saputra would have been payable to him by FJ Pty Ltd, FJ Pty Ltd being the only party to the franchise agreement. Although Mr Saputra was nominated as a "principal" in the franchise agreement, the parties to that agreement were FJ Pty Ltd and Charis. Any award of monetary compensation should be limited to that which is properly the subject of a claim made by FJ Pty Ltd as the franchisee, and a party to the franchise agreement, consequent upon the finding of unfairness and the resultant avoidance of the agreement.

Claims against the first, third and fourth respondents 48 The applicants sought orders for the payment of compensation against not only Charis, the franchisor, but also Mr Oey and the two OCorp companies, relying on the well-established principles referred to in the High Court of Australia in Brown v Rezitis (1970) 127 CLR 157. I previously referred to the part said to be played by the OCorp companies as set out in the summons. The lack of detail concerning the involvement of these two companies is reflected in the evidence, namely there is simply no evidence which would allow the Court to conclude that those two companies should be made liable in any way for the payment of any monetary compensation awarded by the Court in these proceedings. 49 However, the circumstances of Mr Oey are quite distinct. He was obviously the guiding and controlling mind of Charis, was culpably involved in the creation of the circumstances which gave rise to the unfairness to which I have referred and personally stood to gain from that unfairness through his shareholder involvement in Charis. In these circumstances, it is appropriate, in my opinion, that Mr Oey be made jointly and severally liable for the payment of all compensation which Charis is ordered to make to the first applicant, FJ Pty Ltd.

Interest and costs 50 The applicants claimed interest and costs and there are no reasons why, in my opinion, the applicant FJ Pty Ltd should not be entitled to orders in its favour for these matters.

Orders 51 Consequent upon the findings of unfairness, which I have made, I make the following orders: 1) The franchise agreement made 25 July 2003 between Charis International Pty Ltd and Fonny Januar Pty Ltd is declared wholly void from its commencement. 2) Charis International Pty Ltd and Peter Henry Oey are jointly and severally ordered to pay to Fonny Januar Pty Ltd the sum of $568,371.03 which comprises reimbursement of monies paid to Charis International Pty Ltd, reimbursement of monies paid to third parties for fixtures, fittings and fit-out and reimbursement of trading loss. 3) Charis International Pty Ltd and Peter Henry Oey are jointly and severally liable to pay interest to Fonny Januar Pty Ltd on the above amount calculated in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005, from 24 May 2005 to date of this judgment. 4) Charis International Pty Ltd and Peter Henry Oey are jointly and severally liable to pay the costs of Fonny Januar Pty Ltd in an amount assessed under the Legal Profession Act in default of agreement.

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