Judgment for the Cross-Claimant against the Cross-Respondents in the amount of $144,901.20 plus interest at the rates referred to in para 2.2 of the Interest on Judgments Practice Note (GPN-INT).
The Respondent file and serve any affidavits and written submissions on the question of costs within 14 days.
The Applicants file and serve any affidavits and written submissions on the question of costs within a further 14 days.
The Respondent file and serve any affidavits and written submissions in reply on the question of costs within a further 7 days.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
JACKMAN J:
[2]
Introduction
These proceedings involve claims by Punchbowl Casual Dining Pty Ltd (PCD) and its shareholders, Mr Rahman and Mr Wajahat, against Rashays Cafes & Restaurants Pty Ltd (Rashays) for various causes of action relating to franchises granted or proposed to be granted by Rashays to conduct a restaurant business at premises in Punchbowl and Bankstown in the Sydney metropolitan area. Mr Rahman is, and at all material times was, PCD's sole director.
The proceedings were commenced on 4 December 2023. On that day, I granted PCD an ex parte interlocutory injunction to restrain Rashays from taking any steps to evict PCD from the Punchbowl site, take possession of the Punchbowl site or otherwise interrupt the business operations of PCD at the Punchbowl site. That was the last day of the term of the Franchise Agreement in relation to the Punchbowl premises. On 16 February 2024, I dismissed Rashays' application to discharge that injunction: Punchbowl Casual Dining Pty Ltd v Rashays Cafes & Restaurants Pty Ltd (No 2) [2024] FCA 127.
On 24 May 2024, I made orders by consent, including an order that the interlocutory injunction be discharged if PCD did not pay certain amounts by various stipulated dates and times (Order 16). PCD failed to meet the conditions for the continuation of the injunction, and the injunction was thereby discharged. The applicants accept that the injunction was discharged on 6 June 2024. The only substantive remedies now sought by the applicants are various forms of statutory and general law compensation.
The causes of action relied on by the applicants are based on conversations which are disputed. The applicants accept that unless they succeed in having their version of the conversations accepted and the version of those conversations put forward by Rashays' witnesses rejected, then the applicants cannot succeed in any of their claims for compensation (24.10.24, T18.43-19.3).
Rashays has cross-claimed for unpaid debts owed by PCD, which were guaranteed by Mr Rahman and Mr Wajahat. By the amended cross-claim, which I granted Rashays leave to file on the first day of the hearing, Rashays' claim is now $144,901.20 plus interest.
As the credibility of witnesses to the disputed conversations is critical to the determination of these proceedings, I will begin by setting out my findings in relation to the credit of the lay witnesses, before setting out a chronological narrative of the salient facts.
[3]
Mr Rahman
I formed an adverse view of Mr Rahman's credibility. I reject his evidence except where it is corroborated by contemporaneous documentary evidence or consists of admissions against interest. Those conclusions are based primarily on the following matters.
First, despite reading and signing the Franchise Agreement for the Punchbowl site dated 16 December 2019 and obtaining legal advice on it at the time (T38.18-25), Mr Rahman claimed that he did "not really" know then that it expired on 4 December 2023 without any option to renew (T39.4-32). In my view, it is implausible that Mr Shahrouk, the solicitor then acting for PCD (who was not called to give evidence), would not have given that advice, or that Mr Rahman would not have realised from his own reading of the document that the agreement expired on 4 December 2023. That is particularly so in circumstances where PCD paid an amount of $900,000 for the franchise business.
Second, Mr Rahman denied that the instalment plan which was discussed at a meeting shortly after 4 July 2022 involving payments to be made by PCD on 19 August, 2 September and 16 September 2022 (T43.20-23) was later varied (T44.46-47). That is plainly inconsistent with the terms of the email of 23 August 2022 (CB3/1845) which I deal with further below, requiring payments at the end of that week, and then on 5 and 19 September 2022 and on handover, which reflected Mr Rahman's understanding of what had been agreed (T46.8-28). That last answer in cross-examination is contrary to Mr Rahman's affidavit evidence (affidavit of 27.9.24 at [11]). The applicants' later request to vary the instalments is reflected in the email from HWL Ebsworth on 22 March 2023.
Third, Mr Rahman was adamant that Rashays did not provide the applicants with a new franchise agreement for Bankstown (T48.18-21). That was obviously wrong, because such an agreement was provided by Rashays (via its solicitors) on 13 January 2023 (CB3/1855-6). Mr Rahman received that email and letter, read it at the time and discussed it with Mr Wajahat (T49.42-46). Mr Rahman could give no sensible explanation for his earlier answer (T50.19-24). Mr Rahman conceded that he and Mr Wajahat were not happy with the documentation they were given and decided not to sign those documents (T51.7-11). Similarly, amended franchise documents for Bankstown were sent by Rashays' solicitors on 6 March 2023 (CB3/1868), which Mr Rahman read (T51.28-33). Mr Rahman accepted that he wanted changes to be made to the draft agreement but was "not sure" they were the changes reflected in an email from Rashays' solicitor on 22 March 2023 (CB3/1869; T52.39).
Fourth, at the point of his cross-examination referred to at the end of the previous paragraph, Mr Rahman began using the phrase "I am not sure" when confronted with challenging questions. This became a constant refrain during the remainder of his cross-examination, even when asked about the plain meaning of documents put in front of him in the witness box (see, for example, T69.13-17; 71.37-39). This was evasive, especially given that in relation to some of those questions a clear admission was the only plausible answer.
Fifth, when asked whether the 29 September 2023 letter from Rashays' solicitors (saying that the Franchise Agreement ends on 4 December 2023 and that Rashays did not intend to offer a further Franchise Agreement) was of significant concern to him and was a significant matter to him, Mr Rahman gave the completely implausible answer "No" (T68.40, 69.11). It is that very matter which gave rise to the present litigation.
[4]
Mr Wajahat
I formed a similarly adverse view of Mr Wajahat's credibility, and I reject his evidence except where it is corroborated by contemporaneous documentary evidence or consists of admissions against interest. My principal reasons are as follows.
First, Mr Wajahat claimed not to have read the 16 December 2019 franchise documents at all when he received them (T106.30-32). He then contradicted that answer by saying that he did read Schedule 1 to the Franchise Agreement to the extent of reading Items 3, 4, 5, 6 and 7 (T109.40-110.15).
Second, in relation to the above matter, Mr Wajahat was adamant that he did not read Item 2 of Schedule 1 (T110.17), which would have told him that the term of the franchise expired on 4 December 2023, consistently with his evidence that he did not know at the time he signed the Franchise Agreement that the term of the franchise expired on 4 December 2023 (T109.35-36). That evidence is completely implausible. It makes no sense for Mr Wajahat to have begun reading Schedule 1 at Item 3 rather than at Item 1 and then proceeding to Item 2, before reading the other items. Moreover, the term of the Franchise Agreement was a matter of fundamental importance, noting that PCD paid $900,000 for the franchise business (T110.46-111.11). I reject Mr Wajahat's explanation that he did not read Item 2 because he was relying on the company's lawyer (Mr Shahrouk) to give advice on how long they had the restaurant for, and that Mr Shahrouk advised that the franchise would be extended for another 10 years (T111.20-33, 112.11-20). It is implausible that Mr Shahrouk would have given that advice when there was clearly no option to extend the term.
Third, Mr Wajahat agreed that after the meeting in June 2022 with Mr Krayem he learnt that Rashays' new restaurant in Bankstown needed to be completely built (T117.15-16). Mr Wajahat then denied ever knowing that it would involve a new build rather than the conversion of an existing building and restaurant (T117.23).
Fourth, Mr Wajahat claimed that the first time the matter of payment of $1 million by PCD by way of instalments arose was when he received the email of 23 August 2022 (CB3/1845; T119.21-37), and specifically denied that he and Mr Rahman had agreed to the payment plan set out in it or any other payment plans except for the initial deposit of $250,000 (T120.19-121.4, 122.40-44). That evidence is contrary to the contemporaneous document, being the email of 23 August 2022.
Fifth, Mr Wajahat said that he was not sure whether by October 2022 PCD was struggling to make payments to Rashays, but then expressly conceded that a few direct debits were bouncing at that time (T132.27-32). He also recalled receiving a breach notice on 15 September 2023 in relation to unpaid rent (T133.22-35; CB3/1883). Although Mr Wajahat did not use the formula "I am not sure" as frequently as Mr Rahman, the answer was evasive in circumstances where a clear admission ought to have been made initially.
Sixth, Mr Wajahat claimed implausibly that the person who drafted para 47 of the Statement of Claim (alleging that at no time did Rashays provide a new Franchise Agreement to the applicants in relation to the Bankstown site) was confused, and that Mr Wajahat had told his lawyer that franchise documents were issued in February 2023 (T141.42-142.21). Mr Wajahat knew that Rashays' solicitors sent franchise documents for Bankstown to PCD's solicitors on 13 January 2023 (T142.25-32).
Seventh, Mr Wajahat denied requesting a new payment plan for Bankstown in March 2023 (T157.46-47). That is contrary to the contemporaneous email of 22 March 2023 (CB3/1869) to which the applicants did not respond (CB3/1871, 1871, 1872, and 1875).
[5]
Mr Krayem
Mr Krayem was the General Manager of Rashays. He was an impressive witness, who gave clear and direct answers to the questions put to him. He demonstrated a good recollection of the events. I have no hesitation in accepting his evidence.
[6]
Mr Deverson
Mr Deverson was the CEO of Rashays from early March 2023 to 31 March 2024, and was an external consultant to Rashays from then until 30 June 2024. Mr Deverson had an uneven memory of the relevant events and conversations, understandably for somebody in the position of CEO with a wide range of different responsibilities. For the most part, Mr Deverson gave clear and direct answers to the questions that were put to him, and at times he had an understandable difficulty in dealing with questions which were not phrased clearly. Some of his answers were non-responsive. I accept his evidence on the matters in respect of which he said that he was able to remember particular events and conversations, and I prefer his evidence to that given by Mr Rahman and Mr Wajahat.
[7]
Mr Tabone
Mr Tabone is the Head of Leasing & Franchising at Rashays, having commenced employment at Rashays on 26 August 2022 in the leasing part of Rashays' business. Mr Tabone was an honest and credible witness, and I accept his evidence.
[8]
Mr Ykmour
Mr Ykmour is the sole director of Rashays and the founder of its business. Mr Ykmour had some difficulty in recalling the detail of particular events and conversations, which I regard as understandable given his role as the founder and head of the company with overall supervision of the conduct of others with more specific responsibilities. At times, Mr Ykmour gave unresponsive answers reflecting what I regard as a justifiable frustration with the manner in which questions were put to him. I regard Mr Ykmour as an honest and credible witness, and I accept his evidence.
[9]
Ms De Silva
Ms De Silva is a Senior Accountant at Rashays. Ms De Silva gave clear and direct answers, and I accept her evidence as credible.
[10]
Mr Araye
Mr Araye is Operations Manager at Rashays, having commenced his employment at Rashays in about 2021. I accept Mr Araye's evidence.
[11]
The form of affidavit evidence of conversations
All witnesses in the case who gave evidence of conversations did so in indirect speech, except on the rare occasions where the witness gave evidence of a verbatim recollection of the words actually used. Accordingly, direct speech was used only where it faithfully reflected a verbatim memory, rather than a gist memory of the conversation. This was a commendable and welcome departure from the old practice in New South Wales of witnesses giving evidence of conversations in direct speech despite the reality being that the witness is able only to recall the gist of the conversation.
In Kane's Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381 at [118]-[129], I deprecated the long-standing practice in New South Wales of witnesses giving evidence of conversations in direct speech (often prefaced by the obfuscatory formula "in words to the following effect") in circumstances where they could recall only the substance or gist of the conversation. I insisted that evidence in direct speech be given only where the witness claims to have a verbatim memory of the words actually spoken, and otherwise the evidence should be given in indirect speech as to the substance or gist of what was said. I was particularly critical at [127] of the practice of witnesses and lawyers working up a version of a conversation in direct speech (whether or not prefaced by the formula "in words to the following effect") from the witness's actual memory merely of the substance or gist of what was said, referring to that practice as logically, ethically and grammatically wrong. The New South Wales Court of Appeal unequivocally approved that reasoning in Gan v Xie [2023] NSWCA 163 at [119] (White JA, with whom Simpson and Basten JJA agreed). One might have thought that that was the end of the matter.
However, in September 2024, some 17 months after I decided Kane's Hire and some 14 months after the New South Wales Court of Appeal decided Gan v Xie, Hammerschlag CJ in Eq said in Chen v Chu [2024] NSWSC 1139 at [264]-[265] that the old practice in New South Wales was "salutary" and "conduces to a disciplined approach". His Honour made no reference to the Court of Appeal's decision to the contrary in Gan v Xie. That was then followed by the decision of the New South Wales Court of Appeal in Wild v Meduri [2024] NSWCA 230, in which Bell CJ and Kirk JA disagreed with Kane's Hire and Gan v Xie, with Bell CJ saying that the old practice was "a useful discipline" (at [252]) and endorsing Hammerschlag CJ in Eq's description of the practice as "salutary" (at [254]). White JA, on the other hand, re-iterated the Court of Appeal's reasons in Gan v Xie, and emphasised the fundamental importance of evidence being given in the witness's own words (at [285]-[332]).
I regard White JA's reasons in Wild v Meduri as compelling, and indeed unanswerable, and I gratefully adopt them. I wish only to add some particular remarks concerning the three propositions expressed by Bell CJ at [248] concerning my reasoning on the issue. That paragraph is as follows:
It is, in my view and with respect to his Honour, both unorthodox and undesirable for a single judge of any court unilaterally to arrogate to him or herself the "ending [of a] longstanding practice in New South Wales" (or any other jurisdiction). Matters of practice are relied upon by practitioners in the discharge of their daily work, and unilateral change sows confusion and is apt to generate inconsistency and uncertainty amongst the profession. A case for reform of a practice, if subject to persuasive and cogent criticism, is best worked out in and after consultation.
In the first sentence of that paragraph, Bell CJ seeks to impose limitations on the powers of single judges "of any court" to end a long-standing practice, including in circumstances (as in Kane's Hire) where there was no appellate authority supporting the practice. Bell CJ's statement, read in context, was directed to judges of the Federal Court, but would apply equally to judges of the High Court. I do not express any view as to whether his Honour's statement is appropriate to be applied to judges of the Supreme Court of New South Wales, that being a matter for the judges of that Court to resolve in light of the intrusion on judicial independence which Bell CJ's view represents. However, to the extent that Bell CJ's view is intended to apply to judges of other Courts, with great respect, his Honour is asserting a supervisory power that his Honour does not have. The Federal Court, in particular, has a responsibility with respect to practice in New South Wales where matters are heard in New South Wales, and as a national Court has a particular responsibility to foster consistent national practice (see Central Practice Note: National Court Framework and Case Management, CPN-1, para 2.1; The Hon James Allsop AO, 'Foreword' in Natalie Cujes, Litigation in the Federal Court (2015)). Its responsibilities thus differ from those of the Supreme Court of New South Wales. The Chief Justice of a State Supreme Court cannot insist that judges of the Federal Court exercise those responsibilities in a particular way. The point is pertinent to the very problem that arose in Kane's Hire, in which the opposing legal teams, from New South Wales and Victoria respectively, approached the manner of adducing evidence of disputed conversations in markedly different ways. It is desirable that, at least in hearings conducted by the Federal Court, New South Wales practice be brought into line with the rest of the country.
In the second sentence of [248], Bell CJ said that unilateral change sows confusion and is apt to generate inconsistency and uncertainty amongst the profession. In the present context, Bell CJ is, with great respect, starting at shadows. Within three months of Kane's Hire, the New South Wales Court of Appeal unanimously approved those reasons in Gan v Xie. By January 2024, Kane's Hire was cited with unqualified approval in Australia's leading treatise on the law of evidence: J.D. Heydon, Cross on Evidence (14th Australian edn, 2024), [17145]. It was also the subject of a favourable article by a team of barristers and psychologists published by the New South Wales Bar Association: Stowe, Vial, Paterson and Temler, "Conversational evidence: A stake in the heart of 'direct speech' & the psychology of conversational memory" (2023, Summer) Bar News. The first occasion of confusion, inconsistency and uncertainty was the decision of Hammerschlag CJ in Eq in Chen v Chu, on 6 September 2024, which ignored the Court of Appeal's decision in Gan v Xie. Then on 26 September 2024 Bell CJ and Kirk JA delivered their reasons in Wild v Meduri. To the extent that there is now uncertainty, that arose only in September 2024. With great respect, Bell CJ appears simultaneously to have created and criticised legal uncertainty. Whatever private reservations Bell CJ and Kirk JA may have had in the 11 months during which their Honours reserved judgment in Wild v Meduri, that did not affect the unanimity with which Kane's Hire had been received and acted on.
In the third sentence of [248], Bell CJ said that reform of a practice is best worked out in and after consultation. With great respect, that strikes me as contrary to the common law method and the individualised nature of judicial decision-making in common law jurisdictions. Be that as it may, for the last 35 years, I have heard practitioners and witnesses alike refer to the old New South Wales practice with unedifying epithets such as artificial, strained, misleading and fanciful. I have certainly never heard anyone express admiration for it until September 2024, in the two decisions to which I have referred.
[12]
Salient Facts
In 1998, Rashays commenced operating a chain of casual dining restaurants in Australia. As at 2024, there are 36 Rashays restaurants in Australia located in New South Wales, Queensland, Victoria and the ACT.
On 16 December 2019, Rashays and the applicants entered into a Franchise Agreement in respect to a restaurant located in the Sydney suburb of Punchbowl. PCD was the nominated franchisee under the Franchise Agreement, and Mr Rahman and Mr Wajahat were guarantors of the Franchise Agreement pursuant to a guarantee set out in Schedule 3 to the Franchise Agreement. As I have indicated above, the Franchise Agreement was expressed to expire on 4 December 2023 and contained no option to renew.
On the same day, 16 December 2019, Rashays and the applicants entered into a Licence to Occupy with respect to the Punchbowl site. The Punchbowl site was leased by Rashays from Ram Property Nominees Pty Ltd (Ram).
In June 2022, Rashays placed an advertisement on the Rashays website in relation to a proposed new Rashays restaurant to be built and located in Bankstown. Rashays signed a lease for the Bankstown site on 16 June 2022. In the first half of June 2022 (that is, before 16 June 2022 when the lease was signed), Mr Krayem of Rashays received a telephone call from Mr Wajahat and Mr Rahman in which Mr Wajahat said that he and Mr Rahman were very interested in the new Bankstown site. Mr Krayem's evidence, which I accept, is that Mr Wajahat asked him during that telephone conversation about the costs of Rashays Bankstown, to which Mr Krayem responded that Bankstown was a good location for a Rashays restaurant and because the site would need to be built from scratch, it would not be cheap and would cost more than usual. Mr Krayem said in cross-examination that he did not recall telling Mr Wajahat and Mr Rahman on 30 June 2022 that Rashays was going to build a new store at Bankstown (T184.13-16), but that was a different occasion from the conversation which Mr Krayem placed in the first half of June 2022. Mr Krayem then said that the price would be $1.8 million plus GST. Mr Wajahat asked if Mr Krayem could help them out by making the price cheaper and Mr Krayem responded by saying that he would see what he could do. Mr Krayem's evidence, which I accept, is that he did not say to Mr Wajahat or Mr Rahman that he had an opportunity for them and did not seek them out to be the potential franchisee. Rather, as Mr Krayem said, Mr Wajahat and Mr Rahman were the ones who approached Mr Krayem in relation to the proposed Bankstown site.
Mr Wajahat gave evidence that on about 30 June 2022, they had a telephone conversation with Mr Krayem in which Mr Krayem stated that if they agreed to purchase the Bankstown franchise, they would be given either an extension of their existing Punchbowl Franchise Agreement for a period of 10 years, or alternatively be given a new Franchise Agreement for 10 years for the Punchbowl site, and that Mr Krayem said that they would definitely receive a Franchise Agreement if they purchased the Bankstown site. Mr Rahman gave similar evidence but did not refer to a 10-year period. Mr Krayem gave evidence that he never said to Mr Wajahat or Mr Rahman during the conversation in the first half of June 2022, or at any other time, that if they agreed to purchase Rashays Bankstown then they would be given either an extension of their Franchise Agreement for Rashays Punchbowl or a new Franchise Agreement for Rashays Punchbowl. I accept Mr Krayem's evidence and I reject the evidence of Mr Wajahat and Mr Rahman in relation to their telephone conversation or conversations with Mr Krayem in June 2022.
In early July 2022, but after 4 July 2022, Mr Krayem gave evidence of having attended an in-person meeting with Mr Wajahat, Mr Rahman and the builder for Rashays Bankstown, Mr Mehajer, at Rashays' head office at Chester Hill, a suburb of Sydney. A text message dated 4 July 2022 indicates that the meeting was originally planned to be held on 4 July 2022, but was rescheduled.
Mr Krayem gave evidence, which I accept, that Mr Mehajer explained to Mr Wajahat and Mr Rahman the proposed plan for building the Bankstown site, and outlined the significant work that would need to be done, as the location was not a former restaurant location. Mr Krayem said to Mr Wajahat and Mr Rahman that the purchase price of Rashays Bankstown was $1.8 million plus GST due to the costs of construction and the fact that the site was to be built from scratch, and Mr Wajahat said that the price was very high but that he and Mr Rahman were prepared to negotiate. There was then a negotiation about the proposed price, and ultimately Mr Krayem said that Rashays could reduce the price to $1.6 million plus GST but would need payments to be made to fund the significant build cost.
Mr Krayem's evidence in relation to how the capital build costs were to be paid, which I accept, is that he asked Mr Wajahat and Mr Rahman what instalment amounts they would like to pay but said to both of them to make sure that it was an amount they could afford so that it did not create a "tight" financial situation for them. Mr Krayem also said to them that the instalments would need to be equal payments, following which Mr Wajahat proposed that the instalment amounts be $250,000 and that the instalments be paid on 19 August 2022, 2 September 2022, 16 September 2022 and the date that the Bankstown site was handed over to the Rashays Bankstown franchisee entity. Mr Krayem's evidence is that the remainder of the amount, being $600,000 plus GST, was agreed to be lent to Mr Wajahat and Mr Rahman with interest by the Rashays finance team. Mr Krayem gave evidence that the instalment payment dates were changed several times following requests from Mr Wajahat to allow more time, and that Mr Wajahat apologised to Mr Krayem on many occasions telling him that he was still waiting on money from his relative who lived overseas.
The applicants make much of what they submit is an internal contradiction in Mr Krayem's evidence between (a) Mr Krayem denying that the further instalments after payment of the deposit were due only after construction had commenced, saying that there were specific dates as to when the instalments were due (T193.1-4), and (b) Mr Krayem not recalling whether those instalments would begin after construction had commenced and recalling that he said that Rashays needed the payments to pay for construction (T193.26-32). I regard that discrepancy as a matter of relatively minor significance. The important aspect is that specific dates for the instalments were discussed and agreed upon, and that Rashays regarded those payments as necessary to put it in funds to undertake the construction work.
The applicants draw attention to the fact that Mr Mehajer could have given evidence concerning this meeting but failed to do so, and submit that an inference should be drawn that Mr Mehajer's evidence would not have assisted Rashays' case. Even drawing that inference, I remain comfortably satisfied that the evidence of Mr Krayem should be accepted, and that of Mr Wajahat and Mr Rahman should be rejected to the extent that it is inconsistent with Mr Krayem's evidence. The applicants (correctly) do not submit that the relevant inference is that the evidence would have been adverse to Rashays' case: see Kuhl v Zurich Financial Services Ltd [2011] HCA 11; (2011) 243 CLR 361 at [64] (Heydon, Crennan and Bell JJ).
During the meeting in early July, Mr Krayem's evidence, which I again accept, is that a conversation occurred about the lease for the Punchbowl site, although that was not discussed as part of any deal in relation to Rashays Bankstown. Mr Wajahat asked Mr Krayem what was happening with Punchbowl, to which Mr Krayem replied that Rashays was currently negotiating with the landlord. Mr Wajahat said that he really needed the new lease for his bank, and asked Mr Krayem whether Rashays was opening Rashays Bankstown so that it could close Rashays Punchbowl. Mr Krayem said that the locations were separate and that Rashays wanted both locations.
Mr Wajahat's evidence of the meeting, which Mr Wajahat initially said was held on 4 July 2022, is that Mr Krayem reiterated that the price for the Bankstown franchise was $1.8 million plus GST, which Mr Wajahat said was too high, and offered $1.6 million plus GST. Mr Wajahat said that he agreed that figure with Mr Rahman, but wanted confirmation being given that Rashays would give them a new lease and franchise agreement for the Punchbowl site. Mr Wajahat claims that Mr Krayem said: "you will get it 100%, don't worry, leave it with me." Mr Rahman gave similar evidence, but described the offer of $1.6 million as being put on the basis that "so long as we also got an extension for 10 years at the Punchbowl Rashays site". Mr Rahman alleges that Mr Krayem responded with the same words attributed to Mr Krayem by Mr Wajahat. I reject the evidence of Mr Wajahat and Mr Rahman to the extent that it differs from the evidence given by Mr Krayem.
On 23 August 2022, Mr Krayem sent an email to Mr Rahman and Mr Wajahat in the following terms:
Congratulations on purchasing RASHAYS BANKSTOWN.
I have attached the invoices for the agreed deposits to be paid from this week and then every two weeks after that. The final payment of $250K + GST will be invoiced on handover of the restaurant.
Please make first payment as soon as possible so I can have our Lawyers draw up the contracts.
The agreed sale of Bankstown is as follows;
Sale price of Restaurant $1 600 000 + GST
Plus Legal $6500 + loan agreement document
Site Procurement Fee $20K (discounted from $30K as approved by Mazin)
Franchise Fee $50K
Stock as required to open the Restaurant
[13]
Please note that GST is applicable as it is a brand new Restaurant however you will receive that back when you lodge your first BAS statement. Speak to your accountant to ensure you are correctly registered.
You have agreed to pay the following amounts;
$250K + GST by end of week (Invoice 1 attached)
$250K + GST to be paid by 5/9/22 (Invoice 2 attached)
$250K + GST to be paid by 19/9/22 (Invoice 3 attached)
$250K + GST To be paid on handover
[14]
The remainder of $600K + GST will be in-house financed over a period of 30 months which will incur interest of RBA + 3% as per the new Franchise Agreement that will be issued.
The applicants place substantial reliance on the opening line, congratulating Mr Rahman and Mr Wajahat on purchasing Rashays Bankstown. However, I regard that as a loosely phrased colloquialism, which indicates that Mr Rahman and Mr Wajahat had succeeded in being chosen at that stage as the anticipated franchisees, rather than as having entered into a binding contract of purchase. I interpret Mr Krayem's evidence in cross-examination that Mr Rahman and Mr Wajahat had agreed on the sale (T200.24-25) in the same way. It should be noted that the agreements alleged by the applicants to have been formed in June and July 2022 are said to be entirely oral, comprising the version of the conversations put forward by Mr Rahman and Mr Wajahat, and the applicants do not contend that the email of 23 August 2022 as a whole is a manifestation of those agreements. In particular, the applicants deny that the instalment plan set out in that email was agreed by them (24.10.24 at T4.7-10, 4.39-42). Thus, even if the parties had intended to enter into a binding agreement for a franchise at the Bankstown site on the basis which I have found was discussed in early July 2022 (including the instalment plan), it would have been on terms which the applicants expressly reject. Accordingly, having found in favour of Mr Krayem's evidence of the conversations in June and July 2022, there is no need for me to decide whether the parties intended to enter a binding franchise agreement for the Bankstown site on the basis of Mr Krayem's evidence.
The applicants also rely on evidence by Mr Ykmour as to his understanding that the Bankstown franchise had been promised to Mr Wajahat and Mr Rahman (T247.8-12). However, Mr Ykmour indicated that what he meant was that the intention was that Mr Wajahat and Mr Rahman were to go into the Bankstown site (T247.11-12). In any event, Mr Ykmour was not a participant in the relevant communications with Mr Wajahat and Mr Rahman.
On 31 August 2022, the applicants paid Rashays $90,000 for the Bankstown site. On 1 September 2022, Mr Rahman and Mr Wajahat made two payments to Rashays of $100,000 each for the Bankstown site.
In September 2022, further discussions took place between Mr Krayem and Mr Wajahat concerning the Bankstown site, including Mr Wajahat saying that he and Mr Rahman were proposing to bring in a third person to be involved in the business but did not want to put that person's name on the paperwork. Mr Krayem replied that he would not be able to make a decision on that and that Mr Wajahat and Mr Rahman would need to speak to their solicitor or accountant as to how best to structure their arrangement. Further communications took place concerning the development application in relation to Rashays Bankstown.
In October 2022, Mr Krayem began to become increasingly concerned that PCD was regularly failing to make payments and was continuing to accrue debts in relation to the operation of the Punchbowl business. Mr Krayem was also concerned that Mr Wajahat and Mr Rahman seemed unable to fund Bankstown and were missing instalment dates. Mr Wajahat had spoken to Mr Krayem on several occasions asking for more time. Mr Wajahat and Mr Rahman said to Mr Krayem that they were committed to Bankstown and the reason for the payments being delayed was that they were borrowing money from overseas and there were delays relating to international transactions. On 19 October 2022, Mr Krayem received a message from Mr Wajahat concerning $34,163.08 in direct debit payments relating to Rashays Punchbowl that had bounced, and asking if PCD would be able to enter into a payment plan of $3,000 per week for a month, with the balance being paid in full after that.
Mr Wajahat and Mr Rahman claim that on 23 November 2022 they met with Mr Krayem and Mr Tabone and that Mr Tabone informed them that the lease in respect of Punchbowl Rashays had been progressing and would soon be finalised, and that a new Franchise Agreement would be issued thereafter. Mr Tabone denies making any such statements, and Mr Krayem cannot recall Mr Tabone making any such statements. I accept Mr Tabone's denial, and find that no such statement as alleged by Mr Wajahat and Mr Rahman was made.
On 23 November 2022, Mr Tabone sent an email to Mr Wajahat as follows:
Please be advised that your lease for Punchbowl expires in December 2023 however negotiations are well underway and will soon be finalised.
Here is a summary of the key commercial terms thus far:
Proposed rental: $208,956.22 + outgoings + GST
Lease Term: 10 Years
Commencement Date: 5 Dec 2022
Cash incentive for refurb: $150,000 + GST
On 13 December 2022, Mr Krayem sent a message to Mr Wajahat pointing out that $160,000 was outstanding on the part of PCD and it needed to be reduced quickly. On the same day, Mr Wajahat rang Mr Krayem and they had a conversation about how PCD planned to reduce the debt. I accept Mr Krayem's version of the conversation, in which Mr Krayem raised with Mr Wajahat the possibility of using the money that had been deposited in relation to Rashays Bankstown and applying it towards the debts relating to Rashays Punchbowl, to which Mr Wajahat responded that that was a great idea and would take the pressure off him. Mr Krayem responded that he could do that for Mr Wajahat but that Mr Wajahat and Mr Rahman would have to replace the money that had been deposited for Rashays Bankstown, and they would need to keep up with direct debits for Rashays Punchbowl. Mr Wajahat agreed and thanked Mr Krayem.
On 13 January 2023, the solicitors for Rashays, HWL Ebsworth, provided the following documents to Mr Rahman and Mr Wajahat in relation to the proposed franchise at Bankstown: a Disclosure Document, a Franchise Agreement, a Licence to Occupy to PCD, and a Key Facts Sheet. The correspondence noted that the conclusion of the 14-day disclosure period was 28 January 2023. Under the terms of the proposed Franchise Agreement, fit out costs were $1.6 million to be paid on or before the commencement date, which was defined as the date by which the franchisee fulfilled certain conditions, but no later than 24 April 2023.
On 17 January 2023, Mr Krayem sent an email to Mr Wajahat informing him that the development application for the Bankstown site had been approved.
On 31 January 2023, Mr Deverson, Rashays' CEO, sent an email to Mr Wajahat requesting a bank guarantee and construction insurance for Bankstown. While the email stated that the required amount of the guarantee was $220,000, Mr Wajahat's evidence is that Mr Krayem told him that it was a mistake, and the amount was $55,000.
In late January or early February 2023, Mr Krayem had a telephone conversation with Mr Wajahat. According to Mr Krayem's version of the conversation, which I accept, Mr Krayem said that they could not keep having payments bounce for Rashays Punchbowl and not making instalment payments for Bankstown, otherwise Rashays was "going to pull the plug" on Bankstown. Further, Mr Krayem said that Rashays would not give the applicants a new deal for Punchbowl if they kept missing payments. Mr Krayem also said that all of the money that the applicants had initially paid in relation to Rashays Bankstown had been applied to pay debts accrued in relation to the operation of Rashays Punchbowl.
On 6 February 2023, HWL Ebsworth on behalf of Rashays sent a draft loan agreement and general security deed in relation to Rashays Bankstown to Mr Wajahat and Mr Rahman.
On 7 February 2023, Mr Krayem had a meeting with Mr Wajahat at Rashays' head office. According to Mr Krayem's version of that meeting, which I accept, Mr Krayem told Mr Wajahat that the direct debits in relation to Rashays Punchbowl were continuing to bounce and that all the money that had been paid in relation to Rashays Bankstown had been allocated to the Rashays Punchbowl debt. Mr Krayem also told Mr Wajahat that, to help him, Rashays would significantly reduce the build costs for Rashays Bankstown to $1 million plus GST, with no finance being provided, to which Mr Wajahat responded that that was great. A new instalment arrangement to pay the $1 million was also discussed during the meeting. Mr Krayem said, and I accept, that he had become aware that the actual build costs would not reach the initial estimates when the initial building program had been prepared. Mr Krayem instructed HWL Ebsworth to amend the relevant documents relating to Rashays Bankstown to reflect the new price of $1 million, and that the loan agreement was no longer required. Mr Krayem's email to HWL Ebsworth that day indicates that the payment plan was now $600,000 plus GST payable by 20 February 2024, and $400,000 plus GST payable by 20 March 2024. Rashays submits, and I accept, that it is clear from that payment plan that by this date, Rashays was proceeding on the basis that the previously paid $290,000 had been reallocated to PCD's debts for the Punchbowl franchise. On the same day, HWL Ebsworth sent a letter to the applicants withdrawing the franchise documents previously sent.
Between 21 February and 1 March 2023, Mr Krayem continued to chase Mr Wajahat in relation to payments for the Bankstown site, including the payment of the bank guarantee. On 1 March 2023, Mr Krayem sent a message to Mr Wajahat which stated:
Moe I'm getting smashed by everyone at the office. I look really bad now. I need to know your commitment to Bankstown asap. I need the Bank Guarantee paid as well. If you don't want it tell me Romi is ready. Aladdin wants it as well.
In about March 2023, Mr Krayem had a meeting with Mr Wajahat, Mr Rahman and Mr Araye, during which he brought up the fact that debts were accruing and asked whether they wanted the Bankstown franchise or not. Mr Wajahat said that they still wanted Bankstown and apologised for delays in making payments.
On 6 March 2023, HWL Ebsworth sent an email attaching amended franchise documents relating to the Bankstown Franchise, including a disclosure statement for the purchase of Bankstown Rashays, to the applicants' then solicitors.
Mr Krayem gave evidence, which I accept, that on about 22 March 2023, Mr Wajahat said to Mr Krayem that he wished to amend the instalment payments for Bankstown. On that day, HWL Ebsworth sent an email to the applicants' then solicitors confirming the applicants' request for variations to the proposed franchise agreement for Bankstown, including an amended payment plan as follows:
Payment of Legal fees Upon signing the franchise agreement
$150,000 prior to 14 April 2023
$200,000 prior to 1st May 2023
$100,000 prior to 22st [sic] May 2023
$150,000 prior to 5th June 2023
$100,000 prior to 19th June 2023
$300,000 + stock prior to handover
The email requested confirmation that the applicants wished to amend the Franchise Agreement in those terms. On 24 March 2023, HWL Ebsworth sent a follow-up email seeking a response.
From early April 2023 through to May 2023, Mr Deverson made a number of telephone calls to Mr Wajahat about the debts of the applicants, and direct debit payments being dishonoured. As at 3 May 2023, the debts were in excess of $70,000.
On 6 April 2023, Mr Krayem sent a message to Mr Wajahat stating:
We are pulling the plug on Bankstown
You need to call me
Your solicitor needs to email our solicitor to say that you agree to the new payment terms
Mr Wajahat and Mr Rahman gave evidence of attending a meeting on 6 April 2023 with Mr Krayem and Mr Araye. Mr Wajahat and Mr Rahman claim that Mr Krayem said that Rashays needed an additional $150,000 to commence development of the Bankstown site, and that Mr Krayem and Mr Araye both assured Mr Wajahat that construction would proceed shortly. Mr Krayem recalled a face-to-face meeting around this time with Mr Wajahat, Mr Rahman and Mr Araye at Rashays' head office, in which he said that if Rashays did not have a committed franchisee for the site then they did not want to go ahead with the expensive build. Mr Araye denied saying the words attributed to him. I accept Mr Krayem's and Mr Araye's evidence of the meeting and reject the evidence of Mr Wajahat and Mr Rahman to the extent that it is inconsistent with that of Mr Krayem and Mr Araye. Despite the alleged conversations, Mr Wajahat only transferred a further $75,000.
On 11 and 17 April 2023, Mr Krayem sent messages to Mr Wajahat concerning the need for a response from the applicants' solicitor concerning Bankstown. On 19 April 2023, HWL Ebsworth received an email from the applicants' solicitors stating that the applicants were still proceeding with the purchase of the Bankstown franchise and that "the payment plan is still being negotiated". On the same day, Mr Wajahat sent Mr Krayem a message comprising a screenshot of a payment confirmation of $75,000, although the message did not say what the payment was for. Mr Krayem understood it to be a payment towards the deposit for Rashays Bankstown, and responded to the message by asking Mr Wajahat what the payment plan was that he was talking about and said that he thought this had already been agreed. On 26 April 2023, Mr Krayem sent a message to Mr Wajahat asking him to "inform your solicitor to instruct our solicitor to upload the documents for Bankstown asap before they sell it to someone else". On 2 May 2023, Mr Krayem sent a message to Mr Wajahat telling him to send an email to Mr Araye asking for a revised payment plan so he could approve it, and Mr Wajahat could tell his solicitors so that he could sign the documents. Mr Wajahat responded: "Okay boss. Let me work it out."
On 9 May 2023, Mr Wajahat's evidence is that Mr Deverson told him that he would cease deliveries of product to the Punchbowl site unless outstanding amounts were paid with respect to stock and royalties. Mr Deverson did not give evidence about this particular conversation, and I accept Mr Wajahat's evidence in this regard, as it is consistent with an email sent on 10 May 2023 by Mr Deverson to Mr Wajahat saying that he had placed PCD's current Ruomky order on hold pending an agreement being reached on PCD's arrears. Ruomky Pty Ltd (Ruomky) was related to Rashays and was a supplier to Rashays' franchisees.
[15]
The Applicants' causes of action
The applicants allege various causes of action based the evidence of Mr Rahman and Mr Wajahat of conversations between them and representatives of Rashays. The applicants claim that in June 2022, Mr Krayem stated to Mr Wajahat that if the applicants agreed to enter into a franchise agreement for the new Rashays franchise to be constructed at Bankstown for a 10 year term and pay a fee to Rashays (the June 2022 Bankstown Offer), then Rashays would either renew the Punchbowl Franchise Agreement for a further 10 years, or offer a new franchise agreement with a duration of 10 years for the Punchbowl site (the June 2022 Extension Offer). The applicants claim that in early July 2022, Mr Wajahat and Mr Rahman accepted the June 2022 Bankstown Offer and the June Extension Offer in their meeting with Mr Krayem. The applicants claim that on 23 November 2022, Mr Krayem and Mr Tabone told Mr Wajahat and Mr Rahman that the lease for the Bankstown site had been progressing and would be finalised shortly, and that the Punchbowl Franchise Agreement would soon be extended. The applicants further claim that there was an agreement on about 13 July 2023 that if the applicants paid the sum of $36,500 to Rashays, the applicants or their nominee would be provided with a new or renewed franchise agreement for the Punchbowl site arising from a telephone discussion between Mr Wajahat and Mr Krayem. It is further claimed by the applicants that on 14 September 2023, a conversation took place between Mr Deverson and Mr Wajahat in which another offer was made and accepted that if certain funds were paid, a new or renewed franchise agreement for the Punchbowl site would be provided.
Those alleged oral statements are said to give rise to causes of action in (a) contract, (b) promissory estoppel, (c) misleading or deceptive conduct within the meaning of s 18 of the Australian Consumer Law (ACL), being Schedule 2 to the Competition and Consumer Act 2010 (Cth), (d) unconscionable conduct in contravention of the ACL (presumably a reference to s 21 of the ACL), and (e) breach of the obligation of good faith pursuant to cl 6 of the Competition and Consumer (Industry Codes - Franchising) Regulation 2014 (Cth) (Franchising Code).
As I have indicated above, the applicants accept that all of their claims giving rise to a right to compensation depend on the evidence of Mr Wajahat and Mr Rahman being accepted as to the relevant conversations, and the evidence of Mr Krayem, Mr Deverson and others on behalf of Rashays being rejected. As I have explained above, I reject the evidence of Mr Rahman and Mr Wajahat, and I accept the evidence of Mr Krayem and Mr Deverson, as well as the other witnesses called by Rashays. It follows that all of the applicants' claims for compensation must be rejected.
That leaves one further claim made by the applicants. Clause 18(2)(a) of the Franchising Code provides that, if the term of the franchise agreement is 6 months or longer, a notice under cl 18(1) in writing to the franchisee as to whether the franchisor intends to extend the agreement or enter into a new agreement, must be given at least 6 months before the end of the term of the agreement. In the present case, Rashays gave the relevant notice on 13 July 2023, whereas the term of the Franchise Agreement ended on 4 December 2023 (about 4½ months after the notice was given). Rashays accepts that the 13 July 2023 notice was in breach of cl 18(2)(a). However, in circumstances where the applicants were entitled to remain in possession of the Punchbowl premises and continue to operate the franchise business until the interlocutory injunction was discharged on 6 June 2024, the applicants accept that they have not suffered any loss as a result of that breach. The applicants seek a declaration that Rashays breached cl 18(2)(a) of the Franchising Code in that respect. However, a declaration will not be granted if it will produce no foreseeable consequences for the parties or have no utility: Gardner v Dairy Industry Authority of New South Wales (1977) 18 ALR 55 at 69 (Mason J, with whom Jacobs and Murphy JJ agreed), 71 (Aickin J); Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 99 (Sheppard J); Australian Competition and Consumer Commission v Alvaton Holdings Pty Ltd [2010] FCA 760 at [29(d)] (Gilmour J). In the present case, a declaration would not serve any real purpose, and I decline to make one.
[16]
The Amended Cross-Claim
As I have indicated above, Rashays has filed a cross-claim for outstanding debts in the amount of $144,901.20 against PCD, and also against Mr Rahman and Mr Wajahat as guarantors of PCD's debts. In final addresses, that amount was conceded to be due and owing, with the exception of a single item of $35 invoiced on 29 January 2024 relating to a "Chive TV" displayed in the restaurant. Mr Wajahat disputed that amount in his cross-examination on the basis that PCD never had a Chive TV installed in its restaurant, but accepted that Rashays had charged PCD for the Chive TV since July 2021 (T177.12-17). In circumstances where PCD had not disputed charges for the Chive TV for a period of 2½ years, I regard it as more likely than not that the amount of $35 on 29 January 2024 was properly charged. Accordingly, I award judgment in favour of Rashays against PCD, Mr Rahman and Mr Wajahat in the amount claimed of $144,901.20, together with interest.
[17]
Other issues
It is not necessary to deal with the other issues raised by Rashays by way of defence. Nor is it necessary for me to express any views relating to the quantification of damages or compensation. In the latter regard, however, I note that in final addresses counsel for the applicants accepted that the expert evidence relating to quantum was deficient, in that the expert witnesses had expressed views as to the likely net profit which would be earned at the Punchbowl and Bankstown premises each year for the following 10 years, but had not discounted those amounts to net present value. Counsel for the applicants indicated that, if I concluded that its claims were established in relation to liability, then the applicants would wish to seek leave to re-open their evidence to provide evidence of an appropriate discount rate to be applied to the forecasts for future net profits so as to reach a figure based on net present value. As I have held against the applicants on their claims for liability, no occasion arises for such an application to re-open the evidence, although on the material presently available to me, I do not see how such an application could be justified.
The parties indicated a preference to deal with the question of costs after delivery of reasons for judgment. Accordingly, in the orders which I make today I have set a timetable for affidavits and written submissions to be filed and served on the question of costs, and I anticipate dealing with that question on the papers.
I certify that the preceding one hundred and five (105) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.
Parties
Applicant/Plaintiff:
Punchbowl Casual Dining Pty Ltd
Respondent/Defendant:
Rashays Cafes & Restaurants Pty Ltd
Legislation Cited (2)
Competition and Consumer (Industry Codes - Franchising) Regulation 2014(Cth)cl 6
On 19 May 2023, Mr Deverson met with Mr Wajahat and Mr Rahman at the Punchbowl premises. According to Mr Deverson's version of the conversation, which I accept, Mr Deverson said to Mr Wajahat and Mr Rahman that urgent steps needed to be taken to pay the debts owing to Rashays and Ruomky, those debts then being in excess of $112,000. Mr Wajahat said that he would make some immediate payments towards the debts, and said that he had concerns in respect of about $50,000 of the debts and wanted to verify details in his accounts. Mr Deverson said that he was welcome to do that and also to speak with Ms De Silva of Rashays if necessary, but that non-disputed payments needed to be made urgently. Mr Deverson said that he would need to start implementing delivery suspensions if debts remained unpaid. Mr Wajahat said that he would process a payment of $23,000 immediately. Mr Wajahat also asked Mr Deverson whether he and Mr Rahman would be able to enter into a payment plan in relation to some of the arrears, and Mr Deverson said that he would be open to considering such a payment plan. During the meeting, there was a brief discussion concerning Bankstown, in which Mr Deverson said that Mr Wajahat and Mr Rahman had failed to pay various capital amounts required for the build and it was never Rashays' intention to build the new restaurant using its own funds. Mr Deverson invited Mr Wajahat and Mr Rahman to deal with and pay the builder directly. Mr Wajahat requested more time to consider whether he and Mr Rahman could afford the build. The amount of $23,000 was not received by Rashays on 19 May 2023.
A meeting was scheduled to take place on 22 May 2023 between Ms De Silva and the applicants in relation to the debt owing by PCD. The applicants did not attend and the meeting was rescheduled twice and eventually took place on 7 June 2023.
On 23 May 2023, the applicants received a breach notice from Ram in relation to a default in rental payments in the amount of $47,000. On 2 June 2023, Mr Wajahat told Mr Deverson that he had transferred $17,917 to Ram and $15,000 to Rashays. In about June 2023, Mr Deverson started to suspend food deliveries to PCD due to its failures to make payments.
On 7 June 2023, Ms De Silva met with Mr Wajahat and Mr Rahman in relation to the debt owing by PCD and the allocation of the funds which had initially been deposited for Bankstown. During that meeting, Ms De Silva gave the applicants a spreadsheet showing monies received and the allocation of monies, including the allocation of monies paid in respect of Bankstown to debts owing in relation to the Punchbowl site. Ms De Silva showed Mr Wajahat spreadsheets showing that PCD owed $88,279.89, and that an additional $190,000 had been credited to the applicants for payments that had not in fact been made. Mr Wajahat did not correct that statement at the time, and it is now accepted by the applicants that the additional $190,000 was credited to the applicants in error. Following the meeting, Ms De Silva sent an email to Mr Wajahat attaching the spreadsheets. Ms De Silva's calculation of the outstanding debt took into account the re-allocation of the $290,000 (which the applicants had paid towards the Bankstown franchise) to their debts relating to Punchbowl. Accordingly, the true amount then owing by PCD was $278,279.89 (being $88,279.89 plus $190,000), and if the re-allocation of the Bankstown payments had not been included, it would have been $643,279.89. Mr Wajahat and Mr Rahman claim that Ms De Silva stated that they owed $140,000 in unpaid stock, but Ms De Silva denies this, and I accept her denial, which is consistent with the contemporaneous document. Mr Wajahat claims that he did not consent to the allocation of the Bankstown funds to pay Punchbowl debts, but Ms De Silva denies that and says that the purpose of the meeting was to discuss the allocation of those funds. I accept Ms De Silva's evidence.
On 14 June 2023, Mr Wajahat sent an email to Mr Tabone requesting the return of the bank guarantee for the Bankstown site as he needed "some funds to pay off the rent". On the same day, Mr Wajahat sent a message to Mr Deverson stating that he was only able to pay $6,500 to "head office" as "I had to pay staff today". Mr Wajahat asked for a delivery to be released, promising to pay a further $3,000 the next day.
On 15 June 2023, Mr Deverson sent an email to Mr Wajahat in which he advised that the applicants were at significant risk of being locked out by Ram and that the debt due to Rashays also needed to be addressed. On the same day, Mr Wajahat sent an email requesting further time to make payments in relation to direct debits that week.
In mid-June 2023, Mr Deverson inspected the premises at Punchbowl, and became concerned that Mr Wajahat and Mr Rahman had lost respect for the Rashays brand and their restaurant.
On 21 June 2023, Mr Wajahat says that Mr Deverson contacted him by telephone to tell him that $140,000 was still owed in respect of unpaid stock and royalties, to which Mr Wajahat responded that he was organising payment. I reject Mr Wajahat's evidence, consistently with my rejection of his evidence that Ms De Silva gave the figure of $140,000 for unpaid debts on 7 June 2023.
On 26 June 2023, Mr Tabone returned the Bank Guarantee in the amount of $55,000 for the Bankstown site to Mr Wajahat. Between 26 June and 4 July 2023, Mr Wajahat made a number of payments to Rashays in respect of the outstanding debts: $15,000 on 26 June 2023, $5,000 on 27 June 2023, $21,073 on 30 June 2023, and $55,000 on 4 July 2023.
On 27 June 2023, a meeting took place between Mr Krayem, Mr Wajahat and Mr Rahman at the Owl Café. At that meeting, they discussed the failure of the applicants to meet payments and an upcoming meeting that Mr Wajahat and Mr Rahman were scheduled to have with Mr Deverson.
On 29 June 2023, Ram and Rashays Leasing NSW Pty Ltd entered into a new lease for the Punchbowl site, broadly reflecting the terms of the 23 November 2022 email. The monthly rental amount increased to $26,617 and the new rental amount was to be backdated to 5 December 2022.
In about July 2023, Rashays varied its usual practice of taking direct debits on a Friday to taking direct debits from PCD on Mondays, so that PCD had takings from the weekend in its bank account. Despite that change, PCD was still regularly unable to make payments on time. On 11 and 12 July 2023, WhatsApp messages were exchanged between Mr Deverson and Mr Wajahat, indicating that another direct deposit amount of $6,275.67 had failed. On 11 July 2023, Mr Wajahat claims that he was contacted by telephone by Mr Deverson, who informed him that the applicants still owed $36,500 in unpaid stock and royalties. Mr Wajahat says that he asked to go on a payment plan of $2,000 per week, and that Mr Deverson agreed to this. WhatsApp messages by Mr Deverson on 12 July 2023 indicate that PCD sought a payment plan of $2,500 per week for the following three weeks and then $5,000 per week for the balance of the arrears of about $35,000, to which Mr Deverson intended to agree while also serving a termination letter (CB6/3781). I prefer that contemporaneous record to Mr Wajahat's evidence.
On about 12 July 2023, Mr Deverson gives evidence of meeting with Mr Wajahat and Mr Rahman at Rashays Punchbowl. During that meeting, Mr Deverson said to Mr Wajahat and to Mr Rahman that he was extremely disappointed with them and very frustrated with them continually not paying their debts, and that he could not accept broken promises any longer. Mr Deverson said that Rashays had decided not to proceed with granting a new franchise for Punchbowl and that their Franchise Agreement would end on 4 December 2023. Mr Deverson advised Mr Wajahat to sell the business and offered to provide support to help with a sale.
On 13 July 2023, Rashays served a notice entitled "End of Franchise Agreement-Rashays Punchbowl" on the applicants. Shortly afterwards, Mr Wajahat rang Mr Krayem. Mr Krayem told Mr Wajahat that Rashays could not be expected to grant a new franchise agreement when they were owed lots of money and PCD kept failing to pay Rashays and the landlord. Mr Wajahat asked Mr Krayem to request Mr Deverson to reconsider the decision, and Mr Krayem said that he would try but that PCD needed to pay its debts. Mr Wajahat says that during the conversation Mr Krayem stated that if the applicants paid the outstanding sum of $36,500 for suppliers' fees to Rashays, the applicants would be provided with a new franchise agreement for the Punchbowl site for a term of 10 years, and Mr Rahman gave evidence in similar terms. Mr Krayem denies making that statement and I accept Mr Krayem's denial.
On 14 July 2023, Mr Deverson met with Mr Wajahat, Mr Rahman, Mr Krayem and Mr Tabone, during which there was a discussion concerning the notice of the previous day. Mr Wajahat and Mr Rahman asked Mr Deverson to reconsider the decision but Mr Deverson said that the decision stands and that they should focus on a sale and needed to repay all debts. Mr Wajahat and Mr Rahman say that Mr Deverson said that he would change his mind about refusing to extend the Franchise Agreement if the applicants changed their accountant to that proposed by Mr Deverson and made sure all payments were up to date by the end of September. Mr Deverson denies making those statements, and I accept his denial. In any event, the applicants did not change their accountant.
On 22 July 2023, the applicants made a payment of $36,500 to Rashays. The applicants contend that this was in reliance on the statements Mr Krayem was alleged to have made on 13 July 2023, but I have accepted Mr Krayem's denials of ever making those statements. On the same day, Mr Wajahat sent a text message to Mr Deverson apologising for the late payment.
On 26 July 2023, Mr Deverson had a telephone conversation with Mr Wajahat in relation to the continuing default by the applicants. An exchange of text messages took place between Mr Deverson and Mr Wajahat regarding direct debits having been declined. On 31 July 2023, Mr Deverson became aware of a winding up petition against PCD.
On 2 August 2023, Mr Wajahat and Mr Krayem had a conversation at a network franchise meeting. Shortly before that conversation, a payment for Punchbowl had bounced. Mr Wajahat transferred $9,600 to Rashays in respect of the bounced payment.
On 14 August 2023, a meeting previously scheduled for 8 August took place between Mr Deverson, Mr Krayem, Mr Wajahat and Mr Rahman, during which Mr Wajahat asked Mr Deverson to reconsider the decision not to renew the franchise at the Punchbowl site. Mr Deverson said that he would need a proper understanding and proof that all debts including rent had been paid and how they would be able to pay on time going forward. There was also a discussion about the bank guarantee for the Punchbowl site being replaced, and Mr Wajahat said that he hoped to provide the replacement bank guarantee in a few weeks. That was never done.
On 5 September 2023, Ram sent a breach notice to Rashays for the non-payment of $112,907.23 in rent by the applicants. On 6 September 2023, a weekly direct debit from PCD bounced. On 13 September 2023, Mr Tabone sent to Mr Wajahat the breach notice received from Ram on 5 September 2023.
On 14 September 2023, Mr Deverson telephoned Mr Wajahat concerning outstanding rental payments. Mr Deverson informed Mr Wajahat that Rashays needed proof that the rental monies were paid in advance of Ram's deadline, and said that Rashays would need to issue its own breach notice. Mr Wajahat claims that Mr Deverson said that if Mr Wajahat wanted a new franchise agreement and lease for the Punchbowl site, he would need to find a way to make the payment, but Mr Deverson denies having said that a new franchise agreement or lease would be provided if the overdue rent was paid, and I accept Mr Deverson's evidence. Mr Wajahat also claims that he had a telephone conversation on 14 September 2023 with a representative of Ram in which he requested an extension of time to pay overdue rent, and claims that Mr Deverson was part of that conversation. Mr Deverson says that he has no recollection of such a conversation, and I reject Mr Wajahat's evidence that Mr Deverson was a party to it. On the same day, Mr Wajahat sent an email to JKR Lawyers, the solicitors for Ram, seeking an extension to pay the breach amount.
On 15 September 2023, Rashays issued a breach notice to PCD with respect to the Franchise Agreement and the Licence to Occupy. The notice had a deadline of 18 September 2023 for the payment of $112,907.23 to Ram and $660 to Rashays, and that time for compliance was later extended to 21 September 2023. On 15 September 2023, Mr Wajahat was informed by Ram in a telephone conversation that the new date for payment was 26 September 2023. Between 16 and 22 September 2023, the applicants paid $112,907.23 to Ram in four separate payments.
On 29 September 2023, the solicitors for Rashays advised the applicants that the Franchise Agreement would expire on 4 December 2023, that Rashays did not intend to offer a further agreement, and that the breach notice had not been remedied. Mr Krayem attended the Rashays Punchbowl premises, where he handed a copy of the breach notice to Mr Wajahat or Mr Rahman. Mr Wajahat claims that Mr Krayem told him that they should seek legal advice as he thought that what Mr Deverson did was not lawful, but Mr Krayem denies this, and I accept Mr Krayem's denial.
On 1 October 2023, a telephone conversation took place between Mr Deverson, Mr Krayem, Mr Wajahat and Mr Rahman, during which Mr Deverson advised that he was not changing his mind in relation to a new franchise agreement, requested Mr Wajahat and Mr Rahman to write him a letter setting out exactly how they would deal with arrears and remedy the financial situation, and advised that Rashays would support a sale of the business. In October 2023, a number of emails and messages were exchanged between Mr Deverson and Mr Wajahat relating to the failure to pay monies owing, the expiry of the Franchise Agreement on 4 December 2023, the potential sale of the franchise at the Punchbowl site, and Rashays not being prepared to reconsider its decision not to renew the applicants' franchise. On 7 November 2023, Mr Deverson sent an email to Mr Wajahat advising that all outstanding arrears (suppliers, landlord and employees) must be settled before any sale of the business was completed. On 9 November 2023, Ram sent an email to Mr Tabone stating that rent for October and November 2023 was still outstanding, and that Ram would be taking further action.
On 10 November 2023, HWL Ebsworth sent a breach notice to the applicants for unpaid debts, including a failure to pay rent. On 11 November 2023, Mr Deverson sent an email to Mr Wajahat and Mr Rahman, demanding that they remedy the breaches and stating that if the breaches were not remedied, then Rashays would terminate the Franchise Agreement. On 14 November 2023, Mr Wajahat sent an email to Mr Deverson claiming that he had no knowledge of the breach which was the subject of the 10 November 2023 breach notice.
On 16 November 2023, Mr Krayem responded to a message from Mr Wajahat accusing Mr Krayem of having tortured Mr Wajahat and having been committed to taking his store back, saying "If I have done wrong by you I ask you for forgiveness but I know everything I have tried to do is help you". I regard that response by Mr Krayem as a magnanimous gesture on his part, and in no way an admission of any wrongdoing, whether legal or moral. In my view, Mr Krayem and Rashays had shown a great deal of patience towards the applicants over a long period of time, and cannot be criticised for enforcing Rashays' clear legal rights.
On 23 November 2023, PCD again defaulted on making weekly direct debit payments. Between 23 and 29 November 2023, emails were exchanged between Mr Deverson and Mr Wajahat in relation to outstanding direct debit payments, failure to pay employee entitlements, the 10 November 2023 breach notice, and requests for supply orders to be released for Rashays Punchbowl. On 1 December 2023, Mr Deverson sent an email to Mr Wajahat in relation to existing arrears and advised that the Franchise Agreement and Licence to Occupy the Punchbowl site would expire on 4 December 2023.
As I have indicated above, on 4 December 2023, the present proceedings were commenced and I granted an ex parte interlocutory injunction in favour of PCD against Rashays. On 5 June 2024, Ram terminated the lease of the Punchbowl site for non-payment of rent. As I have indicated above, the applicants accept that the injunction was discharged on 6 June 2024, by reason of PCD failing to make payments as required by Order 16 of the orders made on 24 May 2024.
Rashays ultimately decided not to proceed with a franchise at the Bankstown site. Mr Ykmour initially was unable to say when that decision was made (T247.41-248.10), but later gave evidence that Mr Deverson was a consultant but no longer CEO at that time (T259.41-44). I accept that evidence. Therefore, the decision not to proceed with the Bankstown franchise was made some time in the period April to June 2024; that is, well after these proceedings began.