Hosanna Holdings Pty Limited and ors v Peter Henry Oey and ors

PARTIES: FIRST RESPONDENT: Peter Henry Oey

SECOND RESPONDENT: Charis International Pty Limited

THIRD RESPONDENT: OCorp Consulting Pty Limited

FOURTH RESPONDENT: Rowland Jones

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 TO THIRD APPLICANTS: Mr A Searle (c) Solicitor: Mr B Belling LEGAL REPRESENTATIVES: Home Wilkinson Lowry

FIRST TO FOURTH RESPONDENTS: Unrepresented

Hosanna Holdings Pty Limited and ors v Peter Henry Oey and ors

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 Hosanna Holdings Pty Limited ("Hosanna"), Jeffrey Samuel Ramdoo, a director and shareholder of Hosanna and his wife Renee Ramdoo, also a director and shareholder. Hosanna entered into a franchise agreement with the second respondent, Charis International Pty Limited ("Charis") of which the first respondent, Peter Henry Oey was the sole director, secretary and shareholder. There are two other named respondents, OCorp Consulting Pty Limited ("OCorp") and Rowland Jones. The summons is not precise as to the involvement of OCorp in the proceedings, nor was the evidence given in the proceedings such as would warrant any relief being claimed by the applicants against OCorp. Mr Jones was said to be the business development director of Charis and he participated in negotiations with Hosanna through Mr Ramdoo. 2 The franchise agreement, which was the subject of these proceedings, was for the operation of an Il Gianforniao ("IG") franchise at the Westfield shopping complex in Hornsby. The franchise agreement was alleged to be unfair for the purposes of s 106 of the Act and applicants sought a finding of unfairness and consequential relief. 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 respondents were represented by legal practitioners when the proceedings commenced but shortly after the mandatory conciliation, which was unsuccessful, the solicitors filed a notice of ceasing to act. Thereafter, the respondents did not participate in any way in the proceedings. They did not file any evidence nor did they appear at the hearing. 5 Mr Ramdoo swore two affidavits, which became evidence in the proceedings and he gave oral evidence. In addition, a number of documents were tendered into evidence. 6 Commencing in December 2002, Mr Ramdoo applied on a number of occasions to operate a Gloria Jeans store under franchise but was unsuccessful. He was referred to Mr Rowland Jones to assist in organising finance for the acquisition of a Gloria Jeans franchise. Mr Jones suggested that Mr Ramdoo meet with a friend, Mr Peter Oey the first respondent, who had an Il Gianforniao franchise. Mr Jones gave Mr Ramdoo a brochure describing the IG business and franchise operations in the form of a franchise information package. 7 On about 19 September 2003, Mr Ramdoo met Mr Oey at a Gloria Jeans outlet at Kellyville. Mr Oey said that he planned to put about 25 IG stores in New South Wales and later expand into other states. He described himself as an accountant, business adviser and a master franchisor for IG and Gloria Jeans, Asia. Mr Oey said that he was a practising Christian. 8 The franchise information package contained a number of representations. 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." 9 By letter dated 23 September 2003, Mr Oey as managing director of Charis offered Mr Ramdoo the IG franchise for a shop at Westfield, Hornsby. Mr Ramdoo was informed by a Mr Chew, Charis' leasing manager, that the Hornsby site would be "a really, really good store." 10 Mr Oey later told Mr Ramdoo that the Chatswood IG store was turning over about $24,000 per week, the Eastgardens IG store about $12,000 and growing every week by $1,000, but that the Miranda store was being operated incompetently by a franchisee who did not know what he was doing. Mr Ramdoo was also told by Mr Jones that Mr Oey "is not going to open any IG store that won't make a turnover of at least $15,000 a week." 11 Mr Ramdoo utilised Hosanna for the acquisition of the franchise. In October 2003, $41,250 was paid to Charis for franchising fees and $22,366.66 for design fees, centre design approval, BA/DA approval and for rent payable in advance. In all, Hosanna paid $65,964.46 to Charis in connection with the franchise agreement. Hosanna paid a further $321,926.05 to third parties for the setup and fit out of the Hornsby store. 12 Shortly after, Mr Ramdoo received a Disclosure Document issued by Charis. 13 That document described Mr Oey as having extensive experience with the management of food and beverage operations and as being a certified practising accountant, tax agent and Justice of the Peace. It said, in part, "He comes from a diverse background of restaurant retail, public practice accounting and senior corporate management." 14 Significantly, clause 10 of the Disclosure Document requires the franchisee to "offer the types and brands of products and services specified by the Franchisor from time to time….The Store Franchisee must supply the whole range of goods or services of the franchise stock." 15 The Disclosure Document referred to a number of obligations of the franchisor that, in turn, were described in the Franchise Agreement. These included a reference to training and store opening before the franchise business starts and training and operation assistance and an operating manual during the operation of the business. 16 Attached to the Disclosure Document was a schedule entitled "Internal Income Projections for Miranda Westfield." The assumptions contained in that document were said to be based on annual rent applying at the Miranda store and research "based on cross reference of the existing three Il Gianforniao stores and the ten franchised businesses managed by OCorp Integrity Management Pty Limited." The forecast figures were said to exclude depreciation, the franchisee salary and financing costs and were said to reflect "an operational financial statement." The internal income projections for Miranda Westfield were said to represent an earnings forecast that was applicable to the proposed Westfield Hornsby site. 17 Three levels of sales were referred to. Level 1 was described as worst-case involving weekly sales averaging $16,000, Level 2 as a target involving weekly sales of $17,000 and Level 3 as "above target" involving weekly sales of $18,500. The "worst-case" showed on an annualised basis total sales of $832,000, cost of sales of $291,200 leaving a total gross profit of $540,800. After operating expenses totalling $483,604 net annual earnings before interest, depreciation and tax was projected to be $57,196. 18 As I have said, this is the worst-case scenario. A note to the schedule indicates that the figures were not guaranteed but were indicative of a feasibility study on the Miranda Westfield site. 19 In November 2003, Mr Oey told Mr Ramdoo that "Lynn Lock will provide staff for the store and train you and the staff." He was given a training schedule for his own training at the IG store at Warringah. That schedule provided for at least nine days of training between hours varying from 7am to 3pm and 9am to 5pm. However, Mr Ramdoo was only given three days training at the Warringah store, which was conducted by Mr Andres Barragan who provided "very little training on the day-to-day management operation of the store." Furthermore, a promised manager's manual was not provided to Mr Ramdoo until about April 2004. 20 Although told by Mr Oey that the store would be ready for opening on 15 November 2003, it was in fact not ready until 11 December 2003, although Hosanna was required to pay rental from 15 November. 21 In late November, Mr Ramdoo attended on the supplier of pizza conveyor ovens to be installed in his and other IG stores. This supplier was arranged by Charis. The operational manager of Charis, who was present at the demonstration, told Mr Ramdoo that the ovens could make two Roman-style pizzas at any one time. Mr Ramdoo was assured by the operational manager, by Mr Chew the leasing manager and by Ms Lock that the ovens were acceptable. 22 However, after the store opened it became obvious that the ovens could produce only one pizza at any one time, which made it impossible to cook enough pizzas to satisfy demand at busy times. As it was impossible to display pizzas in the cabinets, many potential customers walked away empty-handed. 23 On 9 December 2003, a Franchise Agreement was entered into between Charis as franchisor and Hosanna as franchisee. Mr and Mrs Ramdoo signed as guarantors. 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…." 24 In addition to the problems concerning the pizza oven, which were never rectified, Mr Ramdoo was dissatisfied with the ultimate design of the store. The cabinet was not big enough to hold sufficient stock to enable sales of $15,000 per week, food could not be served from behind the counter and extra staff had to be employed to service store tables and a pizza bench was not supplied for four months because Mr Oey had not paid for the supply of benches for his other stores. 25 Mr Oey had promised Mr Ramdoo that marketing of the store would be conducted before it opened and that there would be a "grand opening" by a famous person. Mr Ramdoo said that the store was not marketed before its opening and that there was never any "grand opening". In conversations with Mr Oey about marketing conducted between January and June of 2004, Mr Oey continually said that he would focus on "local marketing" by which he meant advertising on radio, bus shelters and buses, but no such advertising was ever conducted. 26 A health and safety inspector of Hornsby Shire Council required that some design flaws in the store be rectified including the erection of a barrier between the pizza oven and the customers sitting behind it at a cost of $2,000. 27 Despite promises, Mr Oey never supplied signage to the effect that the store sold Italian coffee nor did the franchisor supply adequate menus to inform customers of the items being sold. 28 The lease agreement with Westfield provided for the refund of $30,000 as a contribution to shop fitting fees necessary to establish the new store. Mr Oey declined to pass any of this amount to Hosanna even though at one stage he promised to refund about $10,000 of these monies. 29 Despite the obligations of Charis to provide staff who had been properly trained, it became clear shortly after the store opened that this had not occurred. An arrangement had been made for Ms Lock to work in the store for the first two weeks to provide training for staff but this did not occur. She arranged for Mr Barragan to leave the Warringah store and work at the Hornsby store. Mr Barragan was required to leave the Hornsby store because of inappropriate behaviour, the nature of which it was said was known to Ms Lock and Mr Oey. 30 Furthermore, after opening the store Mr Ramdoo ascertained that he was required to pay delivery charges for the supply of products and that, by arrangement with Mr Oey, delivery charges were levelled against the Hornsby store for the supply of pizza bases to the Chatswood Chase store, which was operated by Mr Oey. This situation was rectified in September 2004. 31 In addition to the above complaints, Mr Ramdoo said that the Hornsby store had never been provided with an Il Gianforniao "bocca" logo and had never been provided with a large menu board for display that showed the items that were available for sale. 32 The business has never made a profit. In about April 2004, Mr Ramdoo told Mr Oey that he wished to leave the IG franchise but this did not occur. 33 Some time after May 2004, Mr Ramdoo received logistics sheets which set out the weekly turnover of other IG stores for the weeks ending 9, 16 and 23 May 2004. Although Chatswood Chase averaged in excess of $18,000 per week, the turnover for Skygarden, Warringah and Hornsby was of the order of $7,000 per week and for Eastgardens and Erina a little in excess of $4,000 per week. These indicated to Mr Ramdoo that the turnover of the stores was considerably less than he had been led to believe. 34 From about March 2005, Mr Ramdoo endeavoured to negotiate with Charis to be released from the Franchise Agreement and, in some way, to become a licensee so as to be able to continue to trade. Those negotiations failed to secure any agreement. 35 Hosanna continues to trade in the premises although it removed the IG badge in January 2007. In March 2007, the lease of the premises was assigned by Charis to Hosanna. Mr Ramdoo has endeavoured to sell the business. His initial attempts were frustrated because of the refusal of Mr Oey to assign the lease. Since then, the business has never made money. Obviously, this would make it difficult to sell. 36 A significant misrepresentation relied upon by Mr Ramdoo is one that the business would involve takings of about $15,000 per week. This was represented orally by Mr Jones and, by implication, within the Disclosure Document. 37 The evidence given in the proceedings was that Hosanna sustained a trading loss for the 2004 financial year of $77,094 and for the 2005 financial year of $78,811. The applicants did not provide any further financial documents for later taxation years but the evidence was that the business continued to trade at a loss of the same order. At the current time, the business is trading at a loss of approximately $4,000 per month.

Was there a contract "whereby a person performs work in any industry"? 38 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). 39 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]). 40 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…." 41 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 comply 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. 42 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." 43 The franchisee is required to operate the business "so as to promptly service all customers in an efficient and courteous manner…." 44 The franchisee has ancillary duties including the establishment and maintenance of an accounting system and the like. 45 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 Ramdoo will be intimately and personally involved in the operation of the business and is required to do so. 46 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. 47 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) 48 I conclude that the franchise agreement is one that comes within s 106 of the Act.

Was the contract unfair? 49 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 Ramdoo and the employees of Hosanna was inadequate. 4) 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 Ramdoo 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). 5) There was a representation that in all the circumstances there would be, at the least, a minimum level of sales, which did not eventuate. 50 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 51 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 Hosanna 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 Hosanna be entitled to be compensated for the trading loss that it sustained. Because there was a representation of a particular level of profitability, the applicant's compensation should reflect this lost net trading profitability. 52 It was submitted by counsel for the applicants that some order should be made that would compensate Mr Ramdoo 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, the projected profitability explicitly did not take into account wages or salary payable to the principal of the franchisee and secondly, any wages payable to Mr Ramdoo would have been payable to him by Hosanna, Hosanna being the only party to the franchise agreement. Although Mr Ramdoo was nominated as a "principal" in the franchise agreement, the parties to that agreement were Hosanna and Charis. Any award of monetary compensation should be limited to that which is properly the subject of a claim made by Hosanna as the franchisee, and a party to the franchise agreement, consequent upon the finding of unfairness and the resultant avoidance of the agreement. 53 There is no evidence of any involvement of the third applicant, Renee Ramdoo, in the transactions the subject of these proceedings and I do not propose to make any order in her favour. 54 In written submissions, counsel for the applicants properly and appropriately conceded that the applicants would not be entitled to any award of monetary compensation on an ongoing basis for an indefinite period. In any event, the franchise agreement was for a finite period of six years. On the one hand, Mr Ramdoo has attempted to mitigate the losses sustained by persevering with the business at least up to the date of hearing. To that extent it might be thought that Hosanna has had the benefit of the use of the fixtures, fittings and equipment on which it expended a great deal of money and that any compensation with respect to these items should be modified accordingly. On the other hand, I accept that the applicants would have had great difficulty in finding an assignee of the business operation involving the use of the same fixtures, fittings and equipment given the continued history of trading losses. There is no evidence as to whether Hosanna or Mr Ramdoo assumed any obligation to the lessor of the premises with respect to lease payments. There is evidence that the lessee of the premises was Charis until March 2007 when the lease was assigned by Charis to Hosanna. Given the fact that Mr Ramdoo endeavoured to negotiate a release from the franchise agreement from March 2005 and that he was unable to secure any negotiated position with Charis until March 2007, it seems to me that this latter date is an appropriate one by which any entitlement to monetary compensation might be said to terminate. A sensible and commercial approach to the trading difficulties encountered by Hosanna adopted by both parties jointly would have allowed both parties to minimise the losses which each of them would sustain as a result of the failure of the business operation at the Hornsby premises. I infer from the evidence that the inability of the applicants to negotiate some form of outcome, which would be to the mutual advantage of both sets of parties, was a result of the attitude taken by Charis to the trading situation that developed. Although Hosanna may have mitigated its losses by walking away from the business at an earlier stage, I conclude that it was the conduct of Charis that inhibited this step. It is for this reason that I fix upon March 2007 as being the appropriate date upon which to crystallise monetary compensation payable to Hosanna pursuant to s 106 of the Act. In the absence of any taxation returns, but relying on the evidence of Mr Ramdoo, I propose calculating the amount of trading losses for the period commencing 1 July 2005 at the rate of $75,000 per annum which, until the end of February 2007, would add another $125,000 to the established trading losses for the 2004 and 2005 financial years. I adopt the same approach in compensating Hosanna for loss of represented trading profit of $57,196 per annum. I intend calculating this element of the compensation by awarding a lump sum of $150,000 to cover the period December 2003 to February 2007.

Claims against the first, third and fourth respondents 55 The applicants sought orders for the payment of compensation against not only Charis, the franchisor, but also Mr Oey, an OCorp company and Mr Rowland Jones, relying on the well-established principles referred to in the High Court of Australia in Brown v Rezitis (1970) 127 CLR 157. There is insufficient evidence concerning the role played by the OCorp company to conclude that it should be made liable in any way for the payment of any monetary compensation awarded by the Court in these proceedings. In the same way, although Mr Rowland Jones was involved in making representations, there is no evidence of sufficient overall culpability or indeed any proprietary or other connection between Mr Rowland Jones and Charis to justify making any order for payment of monetary compensation against him. 56 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, Hosanna.

Interest and costs 57 The applicants claimed interest and costs and there are no reasons why, in my opinion, the applicant Hosanna should not be entitled to orders in its favour for these matters.

Orders 58 Consequent upon the findings of unfairness, which I have made, I make the following orders: 1) The franchise agreement made 9 December 2003 between Charis International Pty Ltd and Hosanna Holdings 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 Hosanna Holdings Pty Ltd the sum of $818,795.51 which is made up of a refund of $65,964.46 being the payments made by Hosanna Pty Ltd to Charis International Pty Ltd, reimbursement of $321,926.05 being payments made by Hosanna Holdings Pty Ltd to third parties, $280,905 being compensation for trading losses to 28 February 2007 and $150,000 compensation for loss of represented trading profit. 3) Charis International Pty Ltd and Peter Henry Oey are jointly and severally liable to pay interest to Hosanna Holdings Pty Ltd on the above amount calculated in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005, from 17 June 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 Hosanna Holdings Pty Ltd in an amount assessed under the Legal Profession Act in default of agreement.

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