The court found that the franchisee's testimonies lacked credibility
The Federal Court dismissed all compensation claims by a restaurant business and its shareholders against a franchisor over disputed franchise agreements and financial obligations.
Punchbowl Casual Dining Pty Ltd (PCD) and its shareholders brought compensation claims against Rashays Cafes & Restaurants Pty Ltd. PCD and its shareholders initiated the proceedings, coinciding with the expiration of the franchise agreement for the Punchbowl restaurant. The court initially granted PCD an interlocutory injunction to prevent Rashays from disrupting PCD's business at Punchbowl. However, the injunction was discharged after PCD failed to meet the payment conditions.
PCD argued that Rashays had promised an extension of the Punchbowl franchise contingent upon their agreement to invest in a new Bankstown franchise. This claim relied heavily on oral evidence provided by PCD’s shareholders, which was contested by Rashays' representatives.
The Federal Court found that the shareholders’ testimonies lacked credibility, citing inconsistencies and contradictions. The court noted their implausible claims of ignorance regarding the expiration date of the Punchbowl Franchise Agreement despite having signed and received legal advice on it. The court also noted that another testimony contained significant contradictions, including assertions about not reading key parts of the franchise documents and shifting statements about payment agreements.
Conversely, the court found Rashays' witnesses credible. Their consistent accounts undermined the applicants’ claims that verbal promises had been made to extend or renew the Punchbowl franchise.
The applicants claimed that in June and July 2022, Rashays promised a new 10-year franchise for Punchbowl if they agreed to invest in Bankstown. The court rejected this version of events, finding no reliable evidence to support the claims. Additionally, allegations that a promise was made in July 2023 regarding a payment of $36,500 for a new agreement were dismissed based on credible denials by Rashays’ witnesses.
Ultimately, the court dismissed all claims for compensation under contract, promissory estoppel, misleading conduct under the Australian Consumer Law, and unconscionable conduct. Although the applicants argued a breach of the franchising code due to insufficient notice before the termination of the Punchbowl franchise agreement, the court ruled this breach did not warrant a declaration, as it had no substantive impact on the applicants.
