Home/Uncategorized/RFG can’t have its cake and eat it too

RFG can’t have its cake and eat it too

Guirguis Pty Ltd & Anor v Michel’s Patisserie System Pty Ltd & Ors [2017] QCA 83

PRIOR REPRESENTATION DEEDS commonly used in franchising will now have less of an effect as a result of a Court of Appeal decision handed down yesterday.

The case concerned a Michel’s Patisserie in Townsville. The franchisee alleged misrepresentations about regular deliveries from Brisbane to Townsville, including the quality of frozen product once trucked that far and thawed, plus non-disclosure of a lack of suppliers, including that a key bakery in Brisbane had been placed in administration. The franchisee claimed that deliveries were in fact going to be from Sydney and had never been delivered as far away as Townville, or indeed, had not been delivered to Queensland over the past two years.

Source: Negative Space

At first instance, RFG had succeeded in defending the franchisee’s claims based upon answers given in a Prior Representations Deed. After a trial lasting 9 days, the primary judge placed great reliance upon the Deed in determining that the franchisee did not rely on the alleged representations.

Prior Representations Deed only part of the evidence

However, the Court of Appeal said the Prior Representations Deed was only part of a much larger body of evidence that the primary judge should have taken into account when addressing the issue of causation.

The Court of Appeal[1] said:

“[28] Contractual provisions such as clauses of the Franchise Agreement and the Deed of Prior Representations (including the second appellants’ answers in the Questionnaire) that are inconsistent with claims that the appellants sustained loss by entering into contracts because of misleading conduct may be relevant in the fact finding process but they are not legally effective to preclude such claims. In Campbell v Backoffice Investments Pty Ltd,[2] Gummow, Hayne, Heydon and Kiefel JJ observed that, “neither the inclusion of an entire agreement clause in an agreement nor the inclusion of a provision expressly denying reliance upon pre-contractual representations will necessarily prevent the provision of misleading information before a contract was made constituting a contravention of the prohibition against misleading or deceptive conduct by which loss or damage was sustained… whether conduct is misleading or deceptive is a question of fact to be decided by reference to all of the relevant circumstances, of which the terms of the contract are but one.”

The Court of Appeal criticised the primary judge for setting out the correct test but failing to follow it:

“[30]… In one of the cases cited by the primary judge, Juniper Property Holdings No 15 Pty Ltd v Caltabiano (No 2), Jackson J, after referring to authority for the proposition that courts adopt a cautious approach to assertions of reliance in this context, observed that “I must look to see what other evidence supports the defendant’s evidence that he would not have entered into the contract but for the alleged representations.[3]

[31] Unfortunately, the primary judge did not undertake that enquiry.

 

Contractual and negligent misrepresentation claims

RFG did have some success in dismissing claims by franchisee for breach of contract and negligent misrepresentation because clauses of the franchise agreement limited or excluded liability for these matters.[4]

The Court of Appeal remitted the matter to a retrial. RFG was ordered to pay the franchisees costs. That will mean that the parties face the time and costs of another lengthy trial, unless a resolution can be reached outside of Court.

To read the full judgment, follow this link – http://archive.sclqld.org.au/qjudgment/2017/QCA17-083.pdf

 

Writer’s note:

  • On 1 January 2015, the old Franchising Code was repealed and replaced with a new Franchising Code of Conduct. The new Code applies to conduct on or after 1 January 2015.
  • Prior Reps Deeds are still popular notwithstanding clause 20 of the Franchising Code (cl 16 of the old Franchising Code). Under clause 20:
    • A franchise agreement must not require a franchisee to sign:
      • a general release of the franchisor from liability towards the franchisee; or
      • a waiver of any verbale or written representation made by the franchisor.
  • Even though this is a decision of the Queensland Court of Appeal, it could affect decisions in all States, which are bound to follow decisions of intermediate appellate courts in another jurisdiction, when it comes to interpretation of Commonwealth legislation (such as the Australian Consumer Law): Farah Constructions v Say-Dee Pty Ltd (2007) 230 CLR 89 at 151-152 [135] .

 

Words and phrases

  • Prior Representations Deed
  • Michel’s Patisserie
  • RFG
  • Franchising Code
  • Exclusion clause
  • Franchisor and franchisee agreements
  • Franchise Agreement
  • Breach of contract
  • Negligent misrepresentation
  • Evidence to consider
  • Body of evidence
  • Relevant circumstances
  • Reliance

 

Catchwords

Guirguis Pty Ltd v Michel’s Patisserie System Pty Ltd

Competition and Consume (Industry Codes – Franchising) Regulation 2014

Campbell v Backoffice Investments Pty Ltd

Juniper Property Holdings No 15 Pty Ltd v Caltabiano (No 2)

Farah Constructions v Say-Dee Pty Ltd


[1] Fraser JA with whom McMurdo JJ and and Boddice A agreed.
[2] (2009) 238 CLR 304 at 348 [130].
[3] [2016] QSC 5 at [76].
[4] See paragraphs [56] and [57].