(e) it was established that the respondents were pressured into entering the franchise agreement in circumstances where they were attracted by the proposition but were expressing concerns, especially in light of the loan arrangements which had been made available to them by lending authorities, about the cost of the franchise and the relocation costs involved. Contrary to Mr Ollis' evidence and the terms of the first appellant's documents, the interview conducted in April 1999 was not an exhaustive assessment of the respondents as superior teachers (Mr Ferfolia not being a teacher at all) but rather an exercise in persuading the respondents to take up the franchise at the now bargain price of $57,500 because the price had risen to $110,000 - it was only because they had been expressing interest for some time that the existing price was available to them but only if they committed on the day of the interview. It is true that the franchise agreement was not signed on that day but Mr Ollis took a non-refundable $1,000 cheque from the respondents. In his own evidence he was confused as to the purpose of that money. In the Ferfolias' case it appears that the $1,000 was at least designed to lock them into the arrangement and to discourage, on calmer reflection after the interview, any second thoughts the respondents may have had about their level of financial commitment. Ultimately, Mr Ollis accepted that he recalled very little of the conversations that took place on 11 April;
(f) in the Master Coaching handbook the appellants represented that, even though the cost of advertising was to be borne in the local area by the franchisees, all that they would need for their business would be provided to them and by inference, that material was responsible for the successful marketing of the first appellant and a significant means by which it had become such a success in the industry. The evidence shows that very little support, in fact, was given to the Ferfolias;
(g) apart from the 'Art of Tuition' provided by Mr Ollis, training was largely provided by other franchisees who also sold their material for coaching English and Mathematics. If the intention was that the franchisee should pay for updated material then, as a matter of fairness, it should have been spelt out in both the booklet and the franchise agreement so that prospective franchisees could make a proper assessment of what they were purchasing and what additional costs they may incur in operating the franchise;
(h) the Ferfolias did not receive marketing assistance that they did not pay for. This was contrary to the various representations made regarding advertising and promoting the business;
(i) the evidence did not establish a basis for finding that the Ferfolias, either innocently or deliberately, misled the appellants as to their financial status nor was there any evidentiary basis analysing how the so-called total picture of their assets would have led the appellants to reject the respondents as franchisees;
(j) there was no substance in the appellants' submission that the respondents failed to prove that they produced another 200 folders of tuition material as a result of the inadequacy of the material provided by the appellants. It mattered little whether the number '200' was an estimate or an approximation and there was no attempt to quantify what constituted a "folder", but the Court accepted that the respondents did produce extensive material from their own resources in order to continue the franchise business;
(k) the appellants pointed to the fact that the franchise did ultimately enrol significant numbers of students, reaching 100 students in the first 12 months and ultimately obtaining at least 153 students. However, the issue raised by the Ferfolias was not limited to reaching, at a single point in time, a magic figure of 100 or 200 students or an even higher figure but it was reaching these figures and maintaining the students so that the franchise was profitable;
(l) the Ferfolias were diligent in their business and in constant contact with the appellants about their failure to produce the number of students required to make the type of living that had been held out to them. Indeed, Mr Ollis had praised their efforts and operation of the franchise. He had also told Mrs Ferfolia that the business was 'no risk at all' when she enquired whether it was capable of sustaining the two of them in circumstances where Mr Ferfolia would leave his $72,000 per annum position in Bathurst;
(m) in relation to issues of credit the appellants relied on documents, including affidavits and statements made by Mr Ferfolia for other purposes in other jurisdictions, and also relied on some correspondence from Mrs Ferfolia. None of these matters established an overall basis to call into question the evidence of Mrs Ferfolia and the findings of unfairness already made. In part, this evidence showed that the Ferfolias were realistic about what to expect from a franchise and the hard work needed to make it a financial success: the appellants, however, argued that they rushed into the business, were not suitable and wanted the appellants to pay for their failure. These conclusions were not available on the evidence;
(n) The 'bona fides' of the appellants were said to be established by the fact that they loaned the Ferfolias money in order to secure the franchise. By lending them the money, Mr Ollis secured interest on his investment and secured a franchise purchase price as well as ongoing franchise fees while keeping alive the Bathurst prospect. Having favourably assessed the Ferfolias at an early stage, it was in his interests and the interests of the appellants generally to bring them into the business. The loans provided by Mr Ollis do not have the force argued for by the appellants in their case;
(o) the appellants relied on the fact that the Ferfolias, especially Mrs Ferfolia, carefully checked the franchise agreement, made notes about its contents and suggested changes and specifically acknowledged that she entered the agreement without relying on the representations made by the appellants. Despite their background, one of the major attractions for the Ferfolias of entering this franchise were the variety of representations made about the success of the system, the number of students it would attract and the fact that the business could be operated with the ongoing assistance of the franchisor who would supply the necessary materials and give advice as to the running of the business and the financial aspects of the business. These were very persuasive representations and the appellants are not able to escape the consequences of those representations;
(p) part of the attack on Mrs Ferfolia's credit was the submission that Mrs Ferfolia knew that her husband had been retrenched and had not resigned from his job in order to take up the appellants' franchise. This particular aspect of the appellants' case was said to be supported by statements made by Mr Ferfolia for the purposes of other matters and proceedings. There was no evidence that Mrs Ferolia knew of these other statements made by Mr Ferfolia or that she believed them to be correct - her evidence was that she maintained that he had left his employment to take up the franchise. The appellants appeared to have made the assumption that she knew and agreed with Mr Ferfolia's description of how his employment was terminated and thus brought her credit under suspicion. The Court was unable to come to that conclusion on the material available but even if established, such a conclusion would not have operated to reverse the general findings of unfairness;
(q) as to the materials that were actually supplied, there is no expert evidence as to whether it was adequate, appropriate or even superior for the coaching task. In those circumstances it is quite impossible to make the judgment that the materials were not professionally adequate. There does not seem to be any contest that there were gaps in the material, problems with the English material and that franchisees were developing their own material.
(r) there was a lack of acceptable evidence regarding the alleged failure of the materials supplied by the appellants to comply with the relevant curricula at the time. There were, however, other aspects of the evidence that supported a finding that the materials supplied by the appellants were inadequate; and
(s) the contract comprised of the franchise agreement was unfair in the misrepresentations made prior to entering the contract, the representations that continued to be made during the course of the operation of the franchise and the contract itself was unfair in the ways outlined and how it operated in practice.
GROUNDS OF APPEAL