Rafferty v Madgwicks [2012] FCAFC 37: Franchising Code of Conduct

In Rafferty v Madgwicks [2012] FCAFC 37 (20 March 2012) the full court of the Federal Court has considered important issues arising under competition and consumer laws, state Fair Trading legislation and the Franchising Code of Conduct.

Background

The litigation giving rise to the appeals arose out of events between May 2007 and May 2008, during which Rafferty et al entered into a business venture with the Donovan et al, for the purposes of which T2W was incorporated.  The business venture involved the sale of Modular Accommodation Units (MAUs) manufactured in China and sold in Australia. 

Embleton (one of the companies associated with Donovan) claimed to hold the relevant patent applications, innovation patents and provisional patent applications in Australia and elsewhere.

A business venture was established as follows:

• By Heads of Agreement executed on or about 5 October 2007;

• A Joint Venture and Shareholders’ Agreement executed on or about 23 November 2007; and

• A Rights Agreement executed on or about 19 December 2007. 

Madgwicks solicitors prepared all three agreements. 

The business venture had failed by May 2008. T2W did not arrange the manufacture of, or indeed sell, any MAUs. Rafferty and two of his companies involved in the venture issued proceedings against Donovan and T2W to have the agreements set aside and be repaid approximately $1.7 million. Rafferty also brought proceedings against Madgwicks, the solicitors for the T2W, in relation to their advice on the agreements. These matters were heard in August 2010 and were the subject of these appeals to the Full Court.

Issues

The principal issues were whether the:

• Franchising Code of Conduct applied to two agreements to which the appellants and the respondents were parties;

• trial judge erred

• in finding that the two of the respondents had made out a case of misleading and deceptive conduct pursuant to Trade Practices Act 1974 (Cth) (TPA) s 52 against three of the appellants;

• in holding that TPA s 87 would support an order for repayment of moneys by the appellants jointly and severally; and

• in finding that the appellants had not made out their claim of breach of retainer against the fourth respondent.

• in finding that the respondent was not liable pursuant to TPA s 75B as a person involved in the contravention of  TPA s 51AD.

• in not finding that the respondent engaged in misleading or deceptive conduct in breach of the Fair Trading Act 1999 (Vic) s 9.

Result: Appeals dismissed.

“Accordingly, there is no error shown in his Honour’s finding that the Rafferty parties had not made out their claim that Madgwicks had engaged in misleading or deceptive conduct within s 9 of the FTA.”

The Trade Practices and Competition and Consumer Acts are a part of one narrative with our Competition and Consumer Point-in-Time Service.  Contact TimeBase for a free trial.