At first instance (Lindfield NSW Pty Ltd v Netdeen Pty Ltd t/as GJ Gardner Homes [2024] NSWSC 1305), the primary judge held that there was an implied term in a Master Franchise Agreement (the MFA) to the effect that Netdeen, as Franchisor, was required to consider the best interests of Master Franchisees, i.e. Lindfield, in exercising its rights under cl 4.7 of the MFA. As Netdeen did not suggest it had taken Lindfield’s best interests into account on the decision not to renew the MFA, the primary judge concluded that it necessarily followed that Lindfield succeeded in establishing liability. His Honour further found that Netdeen had deceived Mr Hope into believing that renewal was a real possibility when it was not, and that Netdeen’s conduct in all the circumstances amounted to unconscionable conduct in contravention of s 21 the ACL. His Honour awarded Lindfield damages of $20 million in respect of both claims.
Netdeen challenged both findings on liability on appeal. Additionally, Netdeen contended that the primary judge erred by: finding Netdeen breached cl 4.6 of the MFA by offering renewal terms on terms other than the then current master franchising agreement; not finding that Mr Hope’s establishment of Wattle Court amounted to repudiation of the MFA; admitting the expert valuation reports of Mr Potter (an expert Chartered Accountant retained by Lindfield); and in his assessment of damages.
The NSW Court of Appeal (Stern JA, Ball JA and Griffiths AJA) allowed the appeal in part and ordered a retrial to determine whether cl 4.7 of the MFA had been breached and the quantum of damages to be awarded if breach is established. Their Honours stated the following at [233]:
Having regard to the errors we have identified above concerning the proper construction of cl 4.7 and damages, we consider that substantial wrongs have been occasioned which, regrettably, require the following aspects of the case to be remitted for retrial by a different judge:
(1) whether Netdeen has met its onus to establish that the conditions for the exercise of the right of refusal in cl 4.7 of the MFA, on its proper construction, are satisfied; and
(2) the quantification of damages.
Significantly, Netdeen’s unconscionability claim was not remitted: see [111]-[122], [153] and, [233].
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