Secretary to the Department of Justice and Regulation v Century 21 Australia Pty Ltd [2017] VSCA 205

ESTATE AGENTS - Franchise agreement - Whether franchise agreement within statutory definition - Compensation fund for victims of estate agent's defalcations - Payments out of fund by Secretary to victims of defalcation - Joint and several liability of franchisor - Estate Agents Act 1980, ss 43, 72, 73, 75, 79 and 84.

STATUTES - Statutory interpretation - Text, context and purpose of statute - Extrinsic materials - Use of extrinsic materials - Statutory provision both punitive and beneficial - Principles to be applied - Estate Agents Act 1980, s 43 - Interpretation of Legislation Act 1984, ss 35(a) and 35(b).

WORDS AND PHRASES - 'Franchising agreement' - Meaning of 'franchising agreement' - Estate Agents Act 1980, s 43(5).

1 Victorian Realty Group Pty Ltd ('VRG') was a licensed real estate agent, carrying on business as an estate agent. On 12 June 2009, VRG and Century 21 Australia Pty Ltd (the respondent) executed an agreement headed 'FRANCHISE AGREEMENT' ('the Franchise Agreement'). In the Franchise Agreement, VRG was referred to as 'Franchisee'.

2 Between October 2011 and May 2012, VRG committed a number of defalcations resulting in 13 of its clients losing money. Subsequently, the clients were recompensed out of the Victorian Property Fund ('the Fund'), a fund established under the Estate Agents Act 1980 ('the Act') and administered by the Secretary to the Department of Justice & Regulation (the applicant).

3 The issue in this case is whether the Franchise Agreement is a 'franchising agreement' as defined in s 43(5) of the Act. Section 43(5) relevantly provides that in s 45 of the Act:

franchising agreement means an agreement whereby an estate agent is authorized to carry on business under any name in consideration of any other person entitled to carry on business under that name receiving any consideration whether by way of a share in the profits of the estate agent's business or otherwise;

4 The resolution of the question of whether the Franchise Agreement is a 'franchising agreement' as defined is important because, under the provisions of the Act, if the Franchise Agreement is such an agreement, then the respondent is jointly and severally liable for VRG's defalcations and the applicant is entitled to recover the amounts paid out of the Fund in respect of those defalcations from the respondent.[1]

5 In the proceeding below, the trial judge determined that the Franchise Agreement was not a franchising agreement as defined. As a result, the judge dismissed the applicant's claim for the recovery of the amounts paid out of the Fund in respect of VRG's defalcations.[2] It is from that decision that the applicant now seeks leave to appeal.

6 The applicant contended that the Franchise Agreement was a franchising agreement because the Franchise Agreement authorised VRG to carry on business under the name 'Century 21' in consideration of the respondent, which was entitled to carry on business under that name, receiving consideration. The respondent, however, contended that the Franchise Agreement was not a franchising agreement because the Franchise Agreement only authorised VRG to carry on business under the name 'Century 21 Complete Properties' and, notwithstanding satisfaction of the other elements of the statutory definition of franchising agreement, the respondent was not 'entitled to carry on business under that name'. Indeed, it said that the Franchising Agreement specifically prohibited VRG from carrying on business under the name 'Century 21'.

7 In order to resolve the issue between the parties, it is necessary to examine the terms of the Franchise Agreement and an earlier agreement between Century 21 Real Estate Corporation and the respondent ('the International Agreement'). In the International Agreement, Century 21 Real Estate Corporation ('Century 21 International') was referred to as 'Century 21' or 'Franchisor', and the respondent was referred to as 'Subfranchisor'. The question of what name (or names) VRG was entitled to carry on business under falls to be determined by the provisions of the Franchise Agreement. The question of whether the respondent was entitled to carry on business under that name (or names) falls to be determined by the provisions of the International Agreement.

8 In the Franchise Agreement, the respondent is referred to as 'Century 21 Regional', and VRG is referred to as 'Franchisee'. The recitals to the Franchise Agreement provided:

1. Century 21 Real Estate Corporation, a Delaware Corporation (hereinafter called 'CENTURY 21 International'), is the owner of certain trademarks and service marks, including the name 'CENTURY 21®' which have been registered on the Principal Register in the United States Patents and Trademark Office, with other appropriate state agencies in the United States, the Registrar of Trade Marks in Australia and with governmental agencies of certain foreign countries (which marks, together with certain other trademarks and service marks which are not registered or which are pending registration, are hereinafter collectively called 'CENTURY 21 Marks');
2. CENTURY 21 International has developed a system for the promotion and assistance of independently owned and operated real estate offices, including policies, procedures and techniques designed to enable such offices to compete more effectively in the real estate sales market (which system is hereinafter called the 'CENTURY 21 System'). The CENTURY 21 System includes, but is not limited to, common use and promotion of certain CENTURY 21 Marks, copyrights, trade secrets, centralized advertising programs, recruiting programs, referral programs and sales and management training programs. CENTURY 21 International has from time to time revised and updated the CENTURY 21 System and plans to continue to do so as required in its best judgment;

1. CENTURY 21 International has granted CENTURY 21 Regional the right to sub license certain CENTURY 21 Marks, and to franchise the CENTURY 21 System to licensed real estate agents whose offices are located within CENTURY 21 Regional's designated territory (hereinafter called 'Region'); and

1. Franchisee desires to obtain and CENTURY 21 Regional has agreed to grant a franchise to operate a real estate office under the terms and conditions hereinafter set forth.

9 Of note in recital A is that 'Century 21' is referred to as a 'name' that is one of 'certain trademarks and service marks' owned by Century 21 International. Recital A also defines the 'Century 21 Marks' to include, among other things, the name Century 21. Recital B defines the 'Century 21 System'. Recitals C and D then record that Century 21 International has granted the respondent the right to sub-licence certain Century 21 Marks and to franchise the Century 21 System, and that the respondent has agreed to grant a franchise to VRG on the terms of the Franchise Agreement.

10 Clause 1 of the Franchise Agreement provided for the grant of the franchise to VRG. Clause 1 also provided for the incorporation of a policy and procedure manual (the 'P&P Manual') into the terms of the Franchise Agreement. Clause 1 provided:

1. GRANT OF FRANCHISE

CENTURY 21 Regional hereby grants to Franchisee, and Franchisee hereby accepts, the non-exclusive right:

(i) to use the CENTURY 21 System and certain CENTURY 21 Marks, as they are set forth in the CENTURY 21 Policy and Procedure Manual (hereinafter called the 'P&P Manual'), as it may be revised and/or supplemented from time to time by CENTURY 21 International or CENTURY 21 Regional, and adapted for use in Australia and notified to Franchisee from time to time for the operation of a licensed real estate office upon the terms and conditions set forth in this Agreement (hereinafter called the 'Franchise ').

(ii) to engage in the business of offering, selling or distributing services at the Franchisees approved location under a marketing plan or system developed by CENTURY 21 International.

The grant of this Franchise shall not be construed as granting Franchisee any right to purchase any additional franchises from CENTURY 21 Regional, or any right or priority as to the location of any additional franchise which may be granted by CENTURY 21 Regional. If CENTURY 21 Regional subsequently grants Franchisee any franchise (including any renewal franchise to be operated at Franchisee's Approved Location as hereinafter set forth) said grant shall be on such terms as CENTURY 21 Regional shall prescribe.

11 Clause 4 of the Franchise Agreement dealt with the trade name under which VRG was required to operate. Clause 4 provided:

4. NAME OF FRANCHISE

A. Franchisee acknowledges to CENTURY 21 Regional that the business to be carried on by the Franchisee must be capable of being identified by the public as being substantially associated with the CENTURY 21® marks as they are set forth in the P&P Manual.

B. Franchisee shall operate under the trade name set out in Item D of the Schedule (hereinafter called 'Franchisee's CENTURY 21 trade name') and shall use no other name in connection with any operations conducted at or from the location specified in Paragraph 5 hereof without the prior written approval of CENTURY 21 Regional. In every visual display in which the CENTURY 21 modern building logo is used the portion of franchisee's CENTURY 21 trade name immediately following the words 'CENTURY 21', or other approved words, shall be in a five-to-one size relationship with the CENTURY 21 name and logo, as required in the P&P Manual, and the total appearance of Franchisee's CENTURY 21 trade name and other identifying words must be approved in advance in writing by CENTURY 21 Regional. CENTURY 21 Regional reserves the right to review and require corrections and modifications to any display by Franchisee of the CENTURY 21 name or marks. CENTURY 21 Regional's failure to promptly require corrections of or modifications to Franchisee's improper use of the name or marks shall not be deemed a waiver of CENTURY 21 Regional's right to do so.

C. Franchisee shall display the aforementioned trade name for all purposes, including but not limited to, office signs, yard signs, stationery, business cards and advertising materials, in strict compliance with the requirements set forth in the P&P Manual.

D. Franchisee shall file and keep current, in the State or Territory in which Franchisee's Approved Location is situated and at such other places as may be required by law, a 'Business Name Registration Certificate', or comparable instrument, with respect to Franchisee's CENTURY 21 trade name under which Franchisee has been approved to operate by CENTURY 21 Regional. If Franchisee is a corporation, Franchisee shall not, without the prior written consent of CENTURY 21 Regional, include the words 'CENTURY 21' as part of Franchisee's corporate name. Prior to opening an office under said trade name, Franchisee shall supply evidence satisfactory to CENTURY 21 Regional that Franchisee has complied with all relevant laws regarding the use of fictitious or assumed names.

E. Franchisee shall use franchisee's CENTURY 21 trade name and such other CENTURY 21 Marks as Franchisee may be authorized to use from time to time, exclusively for the purpose of promoting and operating a licensed real estate office, and for such other lawful business activities as may have been authorised previously in writing by CENTURY 21 Regional; provided, however, that CENTURY 21 Regional has no obligation to authorize any such additional business activities.

12 The trade name that clause 4 required VRG to operate under was 'Century 21 Complete Properties' (as set out in item D of the schedule to the Franchise Agreement). That said, in cl 4B, there are two references to 'the Century 21 name'.

13 Clause 8 of the Franchise Agreement provided for the payment of franchise service fees by VRG to the respondent. Franchise service fees were to be calculated by reference to particular percentages of gross revenue. Clause 8 defined gross revenue by reference to the revenue earned on particular transactions, but also provided for the possibility of a waiver by the respondent of the service fee as to specific transactions 'in which the Century 21 name is used in any manner'.

14 Clause 9 of the Franchise Agreement provided for payments to be made by VRG to the respondent into a national advertising fund ('NAF'). Clause 9C required the respondent to spend contributions to the NAF on particular forms of advertising. Spending from the NAF was authorised for advertising 'for the general recognition of the "Century 21" name'. We interpolate that it is not immediately apparent why the expression 'the Century 21 name' in cl 9 has quotation marks in it, when the same expression used in cl 4B and in cl 8 contains no quotation marks.

15 Clause 11 of the Franchise Agreement dealt with issues of signage, stationery, franchise management training programs, insurance, management, additional fees, records, financial statements and other matters. By cl 11, VRG agreed to abide by the terms of the P&P Manual.[3] Clause 11C(i) provided:

Franchisee agrees that throughout the term of this Agreement it will operate exclusively under Franchisee's CENTURY 21 trade name with respect to all advertising, promotion and communications, including, but not limited to, telephone answering, office sign(s), yard signs, business cards, bank accounts, stationery, promotional and advertising materials, real estate documents and all other materials used in any medium by Franchisee. Franchisee agrees to supervise all persons working with or under Franchisee in the franchised operation to assure compliance by such persons with all the terms of this Agreement and the P&P Manual.

16 Clause 18 of the Franchise Agreement dealt with procedures to be applied after the termination of the Franchise Agreement. Clause 18C provided that upon termination, VRG was to:

(iii) Immediately and permanently discontinue the use of all CENTURY 21 Marks, including, but not limited to, the proprietary mark 'CENTURY 21', all similar names and marks, and any name or mark containing the designation 'CENTURY 21,' 'CENTURY', '21' or any other name, designation or mark or similar colours or lettering indicating or tending to indicate that Franchisee is or ever was an authorized CENTURY 21 franchisee.[4]

17 It is of note that in cl 18C(iii), 'Century 21', 'Century' and '21' are each referred to as a name and rights are asserted in respect of each of them.

18 As we have already observed, cl 1 of the Franchise Agreement provided for the incorporation of the P&P Manual into the terms of the Franchise Agreement and, by cl 11, VRG agreed to abide by the terms of the P&P Manual. Under the heading 'Trade Name', the P&P Manual provided:

The Trade Name is the name under which the Franchisee operates and which is approved by the Region. The Trade Name is comprised of the words 'CENTURY 21' in conjunction with the individual Office Identification (Trading As) i.e. 'CENTURY 21 Smith Realty'. 'Trade Name' may also refer to the individual Office Identification applied with the Logo in a display consistent with the format on page 3.4.

A Franchisee must always refer to itself by its full Trade Name. This rule extends to all references to your Office, including the greeting a Receptionist and Sales Associate use for incoming phone calls.

19 The P&P Manual also provided that whenever the trade name was used, the disclaimer, 'Each office is independently owned and operated', was required to appear.

20 Under the heading 'Franchise Identification', the P&P Manual provided:

The Franchisee shall use its approved CENTURY 21 Trade Name in accordance with the Franchise Identity System section of this Manual for all business conducted by the Franchisee. This approved Trade Name must appear on all of Franchisee's official documents and signage, including but not limited to:

• Listing Forms
• Deposit Receipts
• Purchase Agreements and Offers to Purchase
• Contracts
• Cheques
• Newspaper and Telephone Directory Advertising
• All other Forms of Advertising or Promotion In Any Medium
• Office Signage
• Yard Signs
• Stationery and Business Cards

Except on signage (unless otherwise required by law), whenever the approved Company Name is used, the required disclaimer, 'Each Office Is Independently Owned And Operated' must also be used. All exceptions must be approved in advance, and in writing, by International or the Region.

21 Under the heading 'Telephone Policy', the P&P Manual provided:

In answering the telephone, Office Personnel must always use the Franchisee's full approved CENTURY 21 Trade Name, never just 'CENTURY 21', and never just the Office Identification.

22 Under the heading 'Official Notice of Trade Name, the P&P Manual provided:

Franchisee's Trade Name must be approved, in advance, by the Region. A business name registration i.e. (T/A 'trading as') form, as may be required by law, must be filed with the appropriate local, state or provincial authorities to indicate the trade name under which the Franchisee does business. Proof of compliance shall be sent to the Region prior to the Franchisee commencing operations under the CENTURY 21 name. Franchises may not incorporate using 'CENTURY 21' as part of their corporate name.

23 By cl 6A of the International Agreement, Century 21 International granted to the respondent:

the exclusive right to sub licence certain CENTURY 21 marks and to grant CENTURY 21 franchises to licensed real estate brokers in the Territory described below (hereinafter called the 'Territory') and to use the CENTURY 21 System on the terms and conditions set forth herein. For the purpose of this Agreement, the phrase 'CENTURY 21 Marks' means certain trademarks and service marks, including the name 'CENTURY 21' ... .

24 By cl 6C, Century 21 International reserved to itself the right to approve the form, content and general appearance of any literature, franchise agreements, signs or other materials or things on which a 'Century 21 name or service mark is used'.

25 Clause 10G of the International Agreement provided that the respondent was to operate under the name Century 21 Australasia Pty Ltd or such other trade name as may be approved in writing by Century 21 International.[5]

26 Clause 10H of the International Agreement provided that the respondent would not use or sub licence 'the Century 21 name' outside its Territory. Clause 10Q provided that the respondent would notify Century 21 International if it learnt of any entity 'using the name "Century 21" or a substantially similar name'.

27 Clause 14 of the International Agreement provided that Century 21 International could not guarantee that there was not a business operating somewhere in the respondent's Territory 'using the name Century 21 or a substantially similar name'. Clause 18 provided for an option to purchase the respondent's rights under the International Agreement, including 'all signs, supplies and printed material bearing a Century 21 name'. Clause 26 provided for certain circumstances in which franchise agreements entered into by the respondent with 'real estate brokers or others involving the use of the Century 21 name', were to be assigned to Century 21 International.

28 Prior to the commencement of the Act, the legislation governing real estate agents in Victoria was the Estate Agents Act 1958 ('the 1958 Act'). The 1958 Act did not contain any provision corresponding to s 43 of the Act. Section 43, providing that each party to a franchising agreement would be jointly and severally liable for any defalcation by the estate agent, commenced operation on 30 June 1981. In its original form, 'Franchising Agreement' was defined in s 43(7) of the Act to mean:

an agreement whereby an estate agent is authorized to carry on business under any name, title or description in consideration of any other person entitled to carry on business under that name, title or description receiving any consideration whether by way of a share in the profits of the estate agent's business or otherwise.

29 In the Second Reading Speech for the Bill that became the Act, Mr MacLellan MLA, the Minister for Transport, said:

The Bill introduces provisions to regulate franchise agreements. Franchising agreements are a comparatively recent innovation in the real estate industry and to date they have been by and large self-regulating. Such agreements have benefits not only for those involved but also for the general public dealing with the franchises. Because of the growth of the practice of franchising, it seemed appropriate that the agreements to this end should be regulated and the Bill does regulate such agreements.[6]

30 At trial, the parties referred to a speech given in the Upper House by Mr B Chamberlain MLC, during debate about the Bill. As the judge referred to this speech in his reasons for judgment,[7] we set out the relevant parts here. Mr Chamberlain said:

One of the major problems that has arisen in recent years is that of licensing where an agent who has a licence lends his name to a number of businesses which purport to act as his sub-agents. There is no real control of the agencies which are run as independent organizations with some payment being made to the agent who is qualified.

...

On franchising, which is dealt with in cl 43, the current situation is that persons use the names of other persons to foster their business in estate agency. This is legitimate and those persons involved have a good reputation. Therefore, nothing that I am going to say is a reflection upon the participants in those franchising schemes, but they do have certain disadvantages.

I cannot give the illustration without giving the name of the major franchisor, which is L J Hooker. Recently I saw an advertisement in a suburban newspaper which said: 'L J Hooker covers the eastern suburbs and the following properties have been sold by L J Hooker in the last month'. Those properties had not been sold by L J Hooker but by a series of independent businesses using the name of L J Hooker under a franchise agreement - perfectly legitimate and I make no complaint about it. The Bill will make it clear to the public that they are dealing with an independent person such as Bill Bloggs in Bentleigh who trades under the franchise name of L J Hooker.

A theme in the Bill is to ensure that the public is not under any misapprehension as to who they are dealing with and there are proposals to ensure that any business conducted under other than the name of the agent should be printed on the advertising material - that is, on the display window, letterheads and receipts of the business.

The same situation applies with a franchise. The Bill will make it clear that persons dealing with any of the franchise names such as L J Hooker will know that they are not dealing with the large L J Hooker organization but with Bill Bloggs here or Bill Smith there. The Bill gives the Real Estate Agents Board power to regulate the type of advertising which applies in a franchising situation. It also makes the franchisor - that is the person making his or its name available for use by these various small businesses - bear some of the responsibilities because he is on a retainer, represented by a certain percentage of the commission generated by that business.[8]

31 On 21 March 1984, by s 26 of the Estate Agents (Amendment) Act 1983, the definition of 'franchising agreement' in s 43(7) was amended by deleting the words 'name, title or description' (where twice occurring) and replacing those words with 'approved name'. That amendment corresponded with an amendment made to s 4 of the Act to define 'approved name' to mean a name approved by the Estate Agents Board under s 36 of the Act, and also to amendments made to s 36.

32 On 20 June 1989, by s 12 of the Estate Agents (Amendment) Act 1989, s 45 of the Act was substituted. The effect of the substitution was that the definition of 'franchising agreement' was moved from s 43(7) to s 43(5) of the Act, and the word 'authorized' in the definition was changed to 'authorised'.

33 On 6 December 1994, by s 47(y) of the Estate Agents (Amendment) Act 1994 ('the 1994 Act'), the definition of 'franchising agreement' in s 43(5) was amended by the deletion of the word 'approved' (where twice occurring). Section 47 of the 1994 Act was headed 'Minor consequential amendments', and made more than 100 amendments to the Act. The Explanatory Memorandum for cl 47 of the Bill that became the 1994 Act stated:

Clause 47 provides for minor consequential amendments which include substituting 'sub-agents' for 'agent's representatives' and substituting references to the 'Board' to either the Council, Authority or Tribunal as the case may be.

34 While there have been amendments to the Act since the 1994 Act, there has been no change to the definition of 'franchising agreement', nor any relevant change to those provisions of the Act that need to be considered to resolve the present case.

35 The judge determined that the Franchise Agreement was not a 'franchising agreement' within the meaning of s 43(5) of the Act.[9] In short, the judge found that VRG was not authorised to carry on business under the name 'Century 21' and that the respondent was not entitled to carry on business under that name.

36 In rejecting the applicant's contention that VRG was authorised to carry on business under the name 'Century 21', the judge said:

The franchise agreement did not authorise VRG to carry on business under the name 'CENTURY 21'. It forbade it doing so. In my opinion, particular attention must be focused on the authority to carry on business that the franchise agreement gave VRG.

Clause 4 of the franchise agreement is particularly significant in that respect. Clause 4A stated that the business to be carried on by VRG must be capable of being identified by the public as being substantially associated with the CENTURY 21 marks as set forth in the Manual. I accept that the public would have associated 'CENTURY 21 Complete Properties' with the 'Century 21' network, not least because of the prominent use of the name 'CENTURY 21' with capitalised letters. But in my opinion, the requirement of, or fact of being 'substantially associated with', is not the same as 'authorised to carry on business under'. The statutory definition of 'franchising agreement' is concerned with the authority and entitlement to carry on business under a particular name and not with other aspects of how businesses are carried on.

I have taken into account that the provisions of s 43, particularly subsection (3), are to be regarded as beneficial legislation, because they provide additional potential rights to clients of estate agents against franchisors. At the same time, s 43, because of subsection (4) is also a penal provision. Legislation that is both beneficial and penal should not be interpreted so as to deprive the beneficial features of the legislation of their purpose and effect. Even in the case of beneficial legislation however, if the words of the legislation are clear, or admit of only one outcome, that must be the meaning attributed to them.

Clause 4B required that VRG operate under the trade name 'CENTURY 21 Complete Properties' and shall 'use no other name in connection with any operations conducted at or from the' Craigieburn location. The verb 'operate' can apply to the activity of 'carry[ing] on business'. On the plain words of clause 4, I do not consider that VRG was authorised to carry on business under the name 'CENTURY 21' even if a wide definition of the word 'under' is adopted, such as 'carrying on business with the favour or aid of the name 'CENTURY 21'.

Names create and give identity. Many names, both of persons and of businesses, are similar, but, unless they are precisely the same, they are different, although parts of them may overlap. The name 'CENTURY 21 Complete Properties' is different from the name 'Century 21', although it encompasses that name. When the statutory definition of 'franchising agreement' refers to 'that name', it refers to the same or identical name, as the name under which an estate agent is authorised to carry on business. It does not refer to part of the name, even if that part has significant commercial value.

The legislative history of the regulation of franchising agreements emphasises the importance of the particular name that the estate agent was authorised to use.

For those reasons, I do not consider that the rights given to VRG under the franchise agreement including to use the CENTURY 21 System and certain CENTURY 21 marks or, to operate under a marketing plan or system developed by CENTURY 21 International, resulted in VRG being authorised to carry on business under the name 'Century 21'.

Similarly, I do not consider that the words 'CENTURY 21' which form part of the name 'CENTURY 21 Complete Properties', can be separated from that name and thereby treated as the 'name' for the purposes of s 43(5). The terms of the franchise agreement prohibited VRG, in the operation of its estate agency business at Craigieburn, from using any name other than 'CENTURY 21 Complete Properties'. I do not accept the Secretary's submission that it was sufficient that VRG was entitled to operate under a name which included the words 'Century 21'.[10]

37 In rejecting the applicant's contention that the respondent was entitled to carry on business under the name Century 21, the judge said:

The final matter to be considered in deciding whether the definition of 'franchising agreement' is satisfied is whether the Secretary has established that Century 21 Australia was entitled to carry on business under 'that name', that is, the name 'CENTURY 21'. In my opinion, the Secretary has not established that it had that entitlement. The head franchise agreement did not create that entitlement. Rather, clause 10G of the head franchise stated 'the subfranchisor shall operate under the trade name CENTURY 21 AUSTRALASIA PTY LTD or such other trade name as may be approved in writing by CENTURY 21.'[11]

In my opinion, to adopt a flexible interpretation of the term 'franchising agreement' may create uncertainty about whether a particular agreement falls within that definition. Such an approach to the interpretation of the definition might require the parties, the regulator or the Court to assess evidence of how a franchisee operated its business, rather than focusing on the rights granted by the agreement to which attention is directed by s 43(5).[12]

39 While the definition of 'franchising agreement' in s 43(5) of the Act contains a number of elements, in argument the parties identified what they referred to as two 'limbs' of the definition that were in dispute between them; the first limb was whether the franchising agreement was an agreement whereby VRG was authorised to carry on business under the name 'Century 21' (or more generally, the Century 21 name); and the second limb was whether the respondent was entitled to carry on business under that name.

40 In concluding that the Franchise Agreement was not a franchising agreement, the judge accepted a submission made by the respondent that the legislative history of the Act 'established the parliamentary intention that in order for an agreement to be a franchising agreement, a complete coincidence must exist between the names of the franchisor and the franchisee'.[13] In argument before us, the respondent maintained the submission that the definition of 'franchising agreement' required a complete coincidence between the names of the franchisor and franchisee. The respondent contended that this proposition 'flow[ed] from the terms of Mr Chamberlain's speech'.

41 In this Court, the respondent summarised its position by saying that s 43 of the Act, and the definition of 'franchising agreement', were 'only concerned with authority to use a name to carry on business'. While the respondent conceded that 'Century 21' was a name, in the sense that 'John' in the name 'John Smith' is also a name, the respondent summarised its position in argument as follows:

What we are doing is we are taking the ordinary meaning of 'carrying on business' and we say that is your trading name because trading and carrying on business are synonymous and you may only carry on business as a franchisee under one name and one name only. You may not carry on business under a portion of that name or a part of that name being the registered trademark.

There is an express prohibition. It is carrying on business under that portion of a trading name which is the registered trademark. Indeed [Century 21 International] prohibits [the respondent], as franchisor here and as sub-franchisor in the US, from carrying on business in Australia under the registered trademark Century 21. [The respondent] must carry on business under the name Century 21 Australia.

42 The applicant, however, contended that the Franchise Agreement authorised VRG to carry on business under the name 'Century 21' (or the Century 21 name) on the terms and conditions set out in the franchising agreement - which terms and conditions included a requirement that the Century 21 name or words only be used with the additional words 'Complete Properties'.

43 In order to determine whether the first limb of the definition of 'franchising agreement' was satisfied it is necessary to examine what the Franchise Agreement authorised VRG to do. The Franchise Agreement granted VRG a non-exclusive right to use the 'Century 21' name.[14] VRG was required to use this name exclusively for the purpose of promoting and operating a licensed real estate office.[15] That said, the Franchise Agreement authorised the use of the Century 21 name on terms that:

(1) VRG was required to 'operate' under the 'trade name',[16] i.e. 'Century 21' in conjunction with the office identifier. VRG was not permitted to 'operate' under any other name.

(2) VRG was required to use the 'Century 21' name in accordance with detailed specifications which included requirements that the 'Century 21' name be the predominant identifier of the business, and that the 'Century 21' component be five times more prominent than the office identifier.[17]

It may be observed that authorising the use of a name (in this case 'Century 21') for 'operating' a real estate office is, at least in one sense, authorising the carrying on of business under that name.

44 Turning to the second limb of the statutory definition of 'franchising agreement', in order to determine whether that limb was satisfied, one needs to determine what the International Agreement entitled the respondent to do. In short, the International Agreement entitled the respondent to license 'the name "Century 21".'[18] It also entitled the respondent to 'operate under the trade name Century 21 Australasia Pty Ltd or such other trade name as may be approved in writing'.[19]

45 Ultimately, the resolution of this case depends upon the construction of the definition of 'franchising agreement' in s 43(5) of the Act and the application of the statutory provision so construed. As has been said repeatedly, the task of statutory construction must begin and end with a consideration of the text itself, and the text must be construed in its context and bearing in mind the legislative purpose of the provisions of the Act.[20] Moreover, while s 43(4) of the Act creates a criminal offence (and is thus punitive), s 43(3) is beneficial. It follows that, notwithstanding the well-known principles that have application when one is construing a punitive statutory provision, the definition of 'franchising agreement' in s 43(5) should not be construed so strictly as to deprive victims of defalcations of the benefits and protections which Parliament intended they should have.[21]

46 There is nothing in the text of the definition of 'franchising agreement' that suggests that the operation of the definition, and the relevant related provisions of the Act, was to be limited by reference to whether there was a precise equivalence between particular trading names such that if one character in a trading name was added, changed or deleted, then the relevant provisions of the Act would have no application. Moreover, it is hard to see any reason why Parliament may have wanted to treat what would otherwise be franchisor/franchisee relationships differently based upon the question of whether there was or was not an absolute equivalence between the names of the franchisor and franchisee.

47 The Second Reading Speech for the Bill that became the Act does not suggest that franchise relationships were to be dealt with differently under the Act, dependent upon whether names were identical or not. Moreover, contrary to the respondent's submissions, we do not see the speech of Mr Chamberlain as being of any assistance to the respondent in the construction of the Act. Indeed, on one view, Mr Chamberlain's speech is contrary to the respondent's submissions. Fairly read, Mr Chamberlain appears to be saying that notwithstanding that a franchisee uses a franchisor's name, the franchisee will also be required to be identified and to display a distinct name, and that in these circumstances the franchisor will still 'bear some of the responsibilities because he is on a retainer'.

48 As part of the exercise of construing a statute, s 35(b) of the Interpretation of Legislation Act 1984 permits consideration to be given to relevant parliamentary debates.[22] As was said in Stingel, however, the subjective contemplation of those involved in the drafting of a statute, as to the kind of case in which the statute would be most likely to be applied, is not determinative.[23] While it was not inappropriate for the judge to look at Mr Chamberlain's speech,[24] ultimately there was nothing in that speech that relevantly assists in the construction of the definition of 'franchising agreement'.

49 In its original form the definition of 'franchising agreement' referred to the authorisation of a franchisee to carry on business under a 'name, title or description' and the entitlement of the franchisor to carry on business under that 'name, title or description'. Contrary to the respondent's submissions, the definition of 'franchising agreement' in its original form did not require a complete coincidence between the names of the franchisor and franchisee.[25] To hold that a complete coincidence between names was required would have given no work to the words 'title or description' in the original version of the definition. Further, there is nothing in the history of the Act that suggests that this unstated requirement was created by one of the later amendments to the Act or to the definition.

50 In its written case, the respondent seemed to accept that the Franchise Agreement was an agreement that would ordinarily be described as, and understood to be, a franchise agreement. The respondent's written case described the Franchise Agreement as 'the unambiguous franchise agreement in this case'. That description was, with respect, apposite. While that description does not relieve the Court of its obligation to properly construe and apply the definition of 'franchising agreement', it brings into focus the question of what legislative purpose might possibly exist in differentiating between franchise agreements that have different provisions as to trade names and the terms upon which their use is or is not permitted. That said, it is of course the text of the statutory definition that is paramount in the resolution of this proceeding.

51 'Century 21' is a name. Equally, one might describe the relevant circumstances in this case as involving the use of a name being 'the Century 21 name'. When one examines the Franchise Agreement (including the P&P Manual) it seems to us that that agreement authorised VRG to carry on business under the name 'Century 21' or the Century 21 name. Like any franchise agreement, it did so on particular terms. We have already set out the relevant terms in the present case. The existence of those terms does not gainsay the fact that the Franchise Agreement was one which authorised VRG to carry on business under the Century 21 name.

52 Similarly, in our view, the International Agreement entitled the respondent to carry on business under the name 'Century 21' or the Century 21 name within the meaning of the statutory definition. In our view, this conclusion accords with the text of the definition construed, as it must be, in its context and by reference to the legislative purpose of the provisions of the Act.

53 There will be a grant of leave to appeal and the appeal will be allowed. The orders made by the judge at trial will be set aside, and in lieu thereof there will be judgment for the applicant.

[1] See ss 43(3), 72(1), 73(f), 75, 79 and 84 of the Act.

[2] Secretary to the Department of Justice & Regulation v Century 21 Australia Pty Ltd [2016] VSC 590 ('Reasons').

[3] Clause 11C(vi) of the Franchise Agreement.

[4] The first comma in the fourth line of this extract is positioned as it is in the Franchise Agreement, inside the quotation marks. We assume this was a typographic error, although nothing turns on whether the comma should have been inside or outside the quotation marks.

[5] While the change in the respondent's name from Century 21 Australasia Pty Ltd to Century 21 Australia Pty Ltd was not explained in evidence, we were told that nothing turned on the point. See further, Reasons [48].

[6] Victoria, Parliamentary Debates, Legislative Assembly, 6 December 1979, 5858.

[8] Victoria, Parliamentary Debates, Legislative Council, 7 May 1980, 9286-7.

[10] Ibid [108]-[115] (citations omitted).

[18] Cf cl 6 of the International Agreement.

[20] Cf s 35(a) of the Interpretation of Legislation Act 1984; and see Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) [2009] HCA 41; (2009) 239 CLR 27; Certain Lloyd's Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503; Thiess v Collector of Customs [2014] HCA 12; (2014) 250 CLR 664; Talacko v Bennett [2017] HCA 15 [82].

[21] Cf Waugh v Kippen [1986] HCA 12; (1986) 160 CLR 156, 164-5 (Gibbs CJ, Mason, Wilson and Dawson JJ).

[22] See generally, Humphries v Poljak [1992] VicRp 58; [1992] 2 VR 129, 136 (Crockett and Southwell JJ) ('Humphries'); Stingel v Clark [2006] HCA 37; (2006) 226 CLR 442, 458 [26] (Gleeson CJ, Callinan, Heydon and Crennan JJ) ('Stingel'); Alcoa Portland Aluminium Pty Ltd v Victorian WorkCover Authority [2007] VSCA 210; (2007) 18 VR 146, 159 [39] (Chernov JA, with whom Maxwell ACJ and Neave JA agreed at 147 [1], 162 [45]) ('Alcoa').

[23] Stingel [2006] HCA 37; (2006) 226 CLR 442, 458 [26].

[24] Humphries [1992] VicRp 58; (1992) 2 VR 129, 136; Stingel [2006] HCA 37; (2006) 226 CLR 442, 458 [26]; Alcoa [2007] VSCA 210; (2007) 18 VR 146, 159 [39].

[25] Cf Reasons [87], [108]-[115].