Walcan Pty Ltd v Superior Coffee & Cakes Pty Ltd

REASONS FOR JUDGMENT THE COURT: 1 There is one issue raised in this appeal. It involves a challenge to the finding made by the primary judge that the appellants had not established the making of the principal representation (upon which they say they have relied) for the purposes of establishing a contravention of s 52 of the Trade Practices Act 1974 (Cth). 2 The second appellants, Ian and Robyn Canham (Mr and Mrs Canham) were the sole shareholders of the first appellant, Walcan Pty Ltd (Walcan). On 7 July 1999 that company entered into a sub-franchise agreement with the first respondent, Superior Coffee and Cakes Pty Ltd ("Superior"). Under a master franchise agreement with BB's Coffee and Bake Australia Pty Ltd, Superior was able (subject to approval) to franchise outlets for BB's Coffee and Bake. These outlets, located in shopping centres, sold coffee and food. The second respondent, Ian Shortell, was a director of Superior. 3 Both the original and the amended statement of claim in this matter alleged and particularised three separate occasions upon which Mr Shortell purportedly made representations of a financial character to one or other or both of Mr and Mrs Canham concerning a proposed new franchise to be established at the Sunnybank Hills Shopping Centre, which Walcan in the event acquired. The Canhams pleaded reliance upon these representations as a basis for predicting the future gross sales, cost of sales, gross profit and net profit that they would achieve in operating the franchised business. 4 By an amendment permitted to be made on the third day of the hearing, the appellants pleaded a further representation, said to have been made by Mr Shortell to Mr Canham, that "[t]he applicants would achieve gross weekly sales of at least $8,000" ("the $8000 representation"). It is this representation, said to have been made orally, that the trial judge found not to have been established. 5 Before reaching that conclusion, her Honour dealt first with the representations as originally pleaded. It is unnecessary for present purposes either to describe them specifically or to refer to the evidence which led to her Honour's conclusion concerning them. It was that: "[t]he evidence given by Mr and Mrs Canham, if accepted, went no way towards establishing the case as originally pleaded. It is not possible, in my view, to conclude that some errors were made in translating their versions of events to pleadings and particulars. The pleadings were specific and detailed. The particulars showed that the applicants were apparently able to recall when, and in what circumstances, the figures were provided by Mr Shortell. In any event no explanation was offered. The case set up against the respondents was that the applicants and their accountant [Mr Hartmann] had based their assessment of the prospective business on figures representing all the key aspects of a business. The case is now much different and limited only to a representation on one occasion. It would appear that what was originally undertaken was to attribute most of the figures in Mr Hartmann's projections to Mr Shortell. Clearly Mr Shortell was not the person who calculated those sums, let alone conveyed them. A conclusion that the case was concocted in these respects seems inescapable. The effect of these findings upon Mr and Mrs Canham's credit is substantial. A review of the evidence does not assist them. The evidence does not suggest that the representation now alleged to have been made by Mr Shortell was likely to have been made." Emphasis added. 6 The circumstances in which the $8,000 representation was said to be made were as follows. At a meeting in June 1999 at the shopping centre at which the business was to be located between Mr Shortell and Mr and Mrs Canham and their daughter, Mr Shortell is alleged: (i) to have told Mr Canham "this will help you make up your mind; this store will do at least $8,000 per week"; and (ii) handed Mr Canham three graphs which showed the average monthly takings of BB's stores in Queensland, New South Wales and Victoria for the period July 1997 to June 1998.