FEDERAL COURT OF AUSTRALIA

Digital Central (Assets) Pty Ltd v Stefanovski [2017] FCA 738

ORDERS

THE COURT ORDERS THAT:

1.    On or before 14 July 2017, the applicant file and serve:

(a)    short minutes of the orders which it claims should be made in light of the reasons for judgement published today; and

(b)    a related submission of not more than 10 pages.

2.    In the default of their signifying agreement by the signing of a consent to the applicant’s proposed minutes of orders:

(a)    on or before 28 July 2017 the respondents file and serve:

(i)    short minutes of the orders which they claim should be made in light of the reasons for judgement published today; and

(ii)    a related submission of not more than 10 pages.

(b)    the proceedings be listed for further hearing on 1 August 2017, not before 11:00 am (with leave reserved to the respondents to appear by video link if the requisite facility is available).

3.    Costs be reserved.

4.    There be liberty to apply (including liberty to apply to the General Duty Judge in respect of the making of an order in accordance with the terms of a consent signed by the parties).

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

LOGAN J:

1    As the evidence in this case confirms, the digital age has transformed signage in respect of the marketing of real estate. Gone are the days of the uninformative “For Sale” sign. Now it is commonplace for the streetscape frontage of a listed property to be adorned with a large, high graphic quality sign incorporating carefully selected photos of its more desirable amenities and details of its key features, as well as real estate agency logos and contact details.

2    Digital Central (Assets) Pty Ltd (DCA) as franchisor has a network of franchisees throughout Australia who, within their assigned franchise territories, offer to local real estate agents this type of high graphic quality signage. One of those franchise territories is “Sydney South West”.

3    At the heart of this case is whether DCA’s former franchisee for Sydney South West, Mr Tome Stefanovski (the first respondent) or perhaps a company on whose behalf he contracted (for that is one issue in this case) have contravened the terms of a franchise agreement with DCA relating to post agreement termination competition and use of contractually supplied information said to be confidential. Contract aside, claims in equity based on a misuse of that allegedly confidential information are also made by DCA against Mr Stefanovski and his wife, Ms Kylie Clark (the second respondent) and related companies. DCA’s primary claim against them is for injunctive relief. Statute based causes of action are also pleaded. There is also a modest damages claim.

4    The resolution of the issues in the case is assisted by an understanding of how DCA has developed and conducted its franchising business and of the system for the production and installation of the signage. For this purpose, I have principally drawn upon the evidence of DCA’s director and head of production and general operations, Mr Neil Strickland. I consider that Mr Strickland gave certainly honest but also candid, generally reliable evidence on these subjects. He also struck me as a man who had translated his very particular practical skills into a niche corporate business serving, via its franchise network, the Australian real estate industry. Mr Strickland established DCA in about 2002. He had a prior background in commercial signage. It was this that gave him the idea that a business opportunity existed for the provision of high graphic quality signs to the real estate industry.

5    DCA now has eighteen (18) franchise territories throughout Australia:

    4 in Queensland;

    7 in New South Wales;

    1 in Australian Capital Territory;

    4 in Victoria;

    1 in South Australia;

    1 in Western Australia.

6    By a contract with DCA, each franchisee has exclusive rights to operate a digital signage business within a contractually delineated franchise territory. The target market for the franchisees is local real estate agents. The number and boundary delineation of the franchise territories is the result of a value judgement made by DCA as to what is likely to provide a customer base of real estate agents sufficient for a viable franchise business, having regard to apprehended competition for that customer base.

7    DCA started operating in Sydney in 2012. Sydney South West is one of the New South Wales territories.

8    DCA’s Head Office is at Yeerongpilly in Brisbane. In his role as director and head of production and operations, Mr Strickland is based there. DCA also maintains a website, realestate.digitalcentral.com.au (the website). The way in which DCA and its franchisees interface and operate their respective businesses is as follows:

(a)    each DCA franchisee is responsible for marketing and selling DCA produced signs to real estate agents within their assigned territory;

(b)    each franchisee has their own unique website password and logon for their territory;

(c)    customer orders for a sign are placed via the website;

(d)    DCA is responsible for the graphic design work in respect of an order;

(e)    DCA or, as the case may be, particular franchisees maintain a geographically distributed network of state of the art graphic printers to which completed designs are transmitted for printing and then collection by or dispatch to franchisees;

(f)    by logging in, a franchisee able to see, through their designated page on the website:

(i)    any given order relating to their territory;

(ii)    monitor that order’s progress;

(iii)    view requests for sign maintenance (termed, “sign doctors”) or for or a sign to be removed;

(g)    each franchisee is responsible for the installation, maintenance and removal of a sign within their assigned territory.

9    DCA employs a skilled team of graphic designers at its head office. They are equipped with the latest computer graphic design hardware and software. In busy times up to 12 graphic designers are employed by DCA.

10    When placing an order via the website, a real estate agent uploads desired photographs and text for a sign. These are then accessed at DCA’s head office by a graphic designer, whose task it is to provide an electronic mock-up of the requested sign. The mock-up includes the uploaded photographs and text, together with the real estate agency’s unique logos designs and colours (the “proof”). Some real estate agencies, such as Ray White and Harcourt’s, have strict guidelines around how signs produced using their colours and logos are to appear. Because of the large volumes of designs for such agencies that DCA’s graphic designers produce, they have acquired, over time, a familiarity with the requirements of these agencies. This allows them to complete the proof more accurately and more promptly than a competitor. DCA’s graphic designers are sufficiently capable to ensure that, within three (3) hours of an order being placed, the first proof is uploaded and available for viewing. It is then uploaded into the website and the ordering agent is informed by email that it is available for viewing.

11    After the ordering real estate agent receives and accesses the first proof advice email, that agent can either approve or decline the proof. If the agent declines the proof, the designer addresses the notified design deficiency with the process being repeated until a proof is approved. If it is approved, DCA causes the proof to be printed.

12    For this purpose, DCA has large format, digital printers located in Brisbane, Sydney and Melbourne (“print houses”). These printers are networked in to DCA’s computer network, including the website. By this means, printing is able to be undertaken near instantly after approval. DCA employs specially trained staff at its print houses to operate these printers. The Brisbane print house services the four franchisees in Queensland. The Sydney print house services the seven franchisees in New South Wales. The Melbourne printer services the four franchisees located in Victoria, the franchisee located in Adelaide, South Australia and the franchisee in Canberra, ACT. The franchisee in Perth, Western Australia has its own printer, which is also networked to the DCA network.

13    At the print house, the proof is printed onto a sheet or skin (the vinyl print), ready for affixing to a sign. If able, a franchisee collects the vinyl print from the relevant print house. If they are unable to pick it up the vinyl print is couriered from the print house to that franchisee.

14    DCA’s system for the ordering, design and printing of the vinyl prints is designed to ensure that the resultant sign can be installed within 24 hours of approval of the proof. Coupled with the speedy production of the first proof, this gives its franchisees a commercial advantage over their competitors. In short, they enjoy economy of scale benefits.

15    Another commercial advantage enjoyed by DCA franchisees, though not now in Queensland, is an ability to offer real estate agent customers a “curved sign” option. This affords greater onsite visibility than a flat sign. Mr Strickland designed the original “curved sign” and its associated bracketing system (another indicator of his practical nous). Originally, the “curved sign” product was unique to DCA. It provided DCA with a commercially competitive advantage on DCA’s initial entry into the market place. The “curved sign” no longer has the novelty in Queensland that it once did. It does retain significant novelty value in New South Wales. For example, over half of the sales for Sydney South West franchise territory have been for curved signs.

16    A vinyl print is essentially a very large sticker. Having collected or, as the case may be, received it by courier, the franchisee concerned places the vinyl print onto a signboard and then installs the completed signboard at the designated address.

17    As emerged in evidence, one way of thinking of a vinyl print, at least for those of us old enough to remember them, is as similar to, but very much larger than, the registration sticker that one used annually to have to affix to the front passenger side windscreen of a vehicle. Those stickers presented challenge enough to ensure wrinkle free adhesion. Vinyl prints present correspondingly greater challenges. Over time and in another indication of his practical nous, Mr Strickland has developed a successful technique for doing this. This is not without value as, if the vinyl print is wrinkled or worse in its application, the sign is thereby rendered unfit for installation. The production and collection process then has to be repeated, with corresponding loss of time, money and reputation to the franchisee concerned. The technique is described in DCA’s franchise manual.

18    A franchisee is responsible for the installation, maintenance and removal of signboards. Signboards are able to be recycled. For this purpose, the existing vinyl print is removed and replaced with a new one. Vinyl prints are not designed for an extended display life. Within 12 months the inks fade and the vinyl deteriorates on exposure to sunlight and the elements. Inferentially, this temporary quality is of no commercial concern, because of the particular use to which the signage is put.

19    The ordering, design and production of signboards for the real estate industry is a niche market within the overall printing industry market, integrated via DCA’s franchise system with installation, maintenance and removal of those signs.

20    DCA franchisees are permitted to offer to customers what are termed “custom signs”. Such signs might, for example, be for shop front use. The offering of custom signs is not encouraged by DCA. That is because of the limited life of the vinyl prints. It is also because their ordering is not integrated into the franchise system. Orders cannot be placed via the website. Instead, they must be sent by email or facsimile transmission. Further, such orders are not prioritised over real estate agent orders with the result that no guarantee can be given as to when the resultant vinyl print will be available. A franchisee bears all of the risks associated with the production and installation of a custom sign.

21    Mr Strickland first met Mr Stefanovski and Ms Clark in June 2013. They met at the Franchising Expo at Darling Harbour in Sydney. DCA had taken a stand there over the expo period (14 to 16 June 2013) for the purpose of promoting and selling its franchises in New South Wales. One of these was Digital Central Sydney South West. Mr Strickland manned the stand with his then DCA co-director, Mr. Luke Hade. At the expo, Mr Stefanovski and Ms Clark visited DCA’s stand two or three times. Mr Stefanovski told Mr Strickland that he wished to acquire a business and operate it with his partner (that is life partner), Ms Clark.

22    It is DCA’s practice itself to operate in a proposed franchise area prior to offering that franchise area for sale. This is what occurred in relation to Sydney South West as part of DCA starting to operate in Sydney in 2012. As an extract from its business records (produced via the evidence of its director and IT Head, Mr Joshua Anderson), DCA had, by June 2013, developed an extensive clientele of real estate agents in that area.

23    As a result of a post-expo follow up interview visit made to them by Mr Hade, Ms Clark completed (as she confirmed in evidence) and Mr Stefanovski signed on 24 June 2013 and submitted to DCA a “General Enquiry By Digital Central.” Form. That form is in fact an expression of interest document in which a potential franchisee provides personal information to DCA about why they are interested in taking up a franchise and answers certain questions about their business background and experience, understanding of the nature of a franchise business and its associated risks, proposed business structure and how they intend to operate the business. Completion of the form and the interview is part of the process by which DCA decides whether to sell a particular franchise to an interested person.

24    Disclosed on the form are certain traits which, on the evidence as a whole, I am well satisfied Mr Stefanovski and Ms Clark each possess – “very business minded and don’t give up easily”, “hard working, easy going, good communication skills”. In response to the question, “Why do you believe you are suited to operating a Digital Central franchise?”, the following answer was made, “Because we are focused, passionate, committed people.” On the evidence, this use of the plural in a form nominally expressing an interest by Mr Stefanovski personally was not a coincidence. The answer given also truly reveals yet another trait possessed by Mr Stefanovski and Ms Clark. There are others.

25    Other noteworthy features of the “General Enquiry By Digital Central.” Form are that, even though Mr Stefanovski is specified as the applicant, the box, “company” is marked in response to the question concerning the “proposed structure” with the company name “Stefanovski Services” being specified. It is also stated that Ms Clark as “spouse” will be active in the business and have a 50% interest in it. Once again, the reference to a corporate applicant in respect of a business in which a spouse would be active and have a 50% interest were not, on the whole of the evidence, co-incidental.

26    Ms Clark’s principal area of employment before the expo was in outdoor media advertising (street signage and signage on bus shelters, street furniture and at railway stations). Much of such employment was either for or related to Adshel Pty Ltd (Adshel). Though his own evidence on this subject is not precise, having regard to the information on the “General Enquiry By Digital Central.” Form, I find that, prior to attending the expo in 2013, Mr Stefanovski had worked in outdoor advertising, “posting of bus shelters” as the operator of an “Adshel” franchise business. He appears to have done this and also undertaken other work under a business name, “Stefanovski Services”. Mr Stefanovski and Ms Clark met in 2009, inferentially via their association with Adshel. They commenced living together in September 2009. They had twin daughters in December 2010. Ms Clark had an older child by a previous relationship.

27    Mr Stefanovski described his relationship with Ms Clark as a “tumultuous” one in which they separated a number of times. Whatever may be the truth of this, June 2013 was not one of those periods, certainly in terms of shared business aspirations. I find that the dealing with DCA which occurred at that time was very much the result of a shared purpose of Mr Stefanovski and Ms Clark. Their visiting the expo together, the manner in which the “General Enquiry By Digital Central.” Form was completed and signed and the “50% interest” each indicate that. Each also had a prior work background which was consistent with each being attracted to the type of franchise on offer by DCA.

28    Mr Stefanovski and Ms Clark married on 14 December 2015. Long before then, they had acquired together a home at Middleton Grange (the Middleton Grange property) in Sydney’s Western suburbs. It is not clear whether this is the real estate given a value on the “General Enquiry By Digital Central.”, because the reference does not specify an address. On that Form, Mr Stefanovski’s specified address is not that of the Middleton Grange property but rather one at West Hoxton (the West Hoxton property). They each claimed in evidence to have separated in or about January 2016, with Ms Clark remaining at the Middleton Grange property with the children and Mr Stefanovski moving to the West Hoxton property. Whether there was indeed a separation, or at least a complete separation, is an issue in the proceeding, because DCA alleges that they were each involved in a competitor business the operation of which entailed conduct giving rise to the causes of action it asserts and the relief it claims. DCA also alleges that Ms Clark’s role in the acquisition and operation of the Sydney South West franchise business was rather greater than either she or Mr Stefanovski cared now to admit.

29    The Franchise Agreement bears on its face a pre-typed “July 2013” as its date of making, with space for the insertion of the particular day that month on which it was made. As it happens, that day was left blank.

30    The agreement specifies Mr Stefanovski (Schedule, item 1) as the franchisee. Its commencement date is specified as 9 September 2013 (Schedule, item 5). Mr Stefanovski signed the agreement with his signature being witnessed by Ms Clark. Ms Clark gave evidence that the Franchise Agreement was signed on 9 September 2013. In this I consider that she is mistaken, probably because she has looked to the specified commencement date. Mr Stefanovski, on the other hand, gave evidence that the agreement was signed on 15 July 2013. This is the more likely date when the parties signed the agreement and I so conclude, for this reason. In August 2013, Mr Stefanovski spent a number of days at DCA’s print house at Marrickville in Sydney, receiving training by reference to subjects covered in DCA’s manual (the Manual), including the best way to roll a vinyl print on to a curved sign. DCA also provided Mr Stefanovski with a copy of the Manual that month. I consider that it is inherently unlikely that his attendance at the print house then, consequential receipt of training and receipt of a copy of the Manual would have occurred without the Franchise Agreement already having been signed.

31    What did occur in September 2013 was that DCA provided Ms Clark training in the XERO accounting package which it used. It also provided her and Mr Stefanovski with a single password login to that part of its website accessible by franchisees. On 13 September 2013, Mr Stefanovski telephoned Mr Strickland and informed him that he was still unsure on how to “layup” (roll a vinyl print on to a curved sign). On 13 November 2013, in response to this request, Mr Strickland sent to Mr Stefanovski a “sign layup tutorial” video, accessible by pressing a link in a confidential email (but not publicly available).

32    Not by coincidence, I find, other relevant events also occurred in September 2013.

33    On 17 September 2013, TK Sign Installations Pty Ltd (TK Sign Installations) was incorporated. Its place of business was the Middleton Grange property. The “TK” and “Sign Installations” in the corporate name are also not coincidental. The “T” is a reference to Mr Stefanovski’s given name, “Tome” and the “K” is a reference to Ms Clark’s given name, “Kylie”. “TK” combined with “Sign Installations” truly is descriptive of a company which carried on a business in which both Mr Stefanovski and Ms Clark were active, a business engaged in “sign installations”. Later, by a deed dated 12 November 2013, the Stefanovski Family Trust was constituted. Mr Stefanovski and Ms Clark are the primary objects of this trust. Another corporate respondent, ANT Printing Pty Ltd (ANT Printing), of which more below, is entitled to be a discretionary object of that trust, because it is “a corporation of which at least one share is beneficially owned by” Ms Clark or Mr Stefanovski.

34    TK Sign Installations was not an original respondent and its late joinder was resisted. Its existence and, even more so, its role really only became apparent after DCA had the benefit of discovery. In the interests of justice, the case was brought on for trial at the earliest available opportunity with the times for interlocutory steps being compressed accordingly. In the circumstances, DCA applied for joinder as soon as reasonably possible. Further, joinder occasioned no injustice to the existing respondents or to TK Sign Installations as, one way or the other, Mr Stefanovski or Ms Clark were already involved personally and controlled other respondents and the issues in the case already focussed on the acquisition, operation and disposal of the Sydney South West franchise. Further, the accounts of the Stefanovski Family Trust, discussed below, make it patent that it would be unjust were joinder of TK Sign Installations not to have been permitted.

35    On 23 September 2013, Stefanovski Services Pty Ltd (Stefanovski Services) was incorporated.

36    In relation to the acquisition and operation of the Sydney South West franchise, it is convenient now to turn to the accounts of the Stefanovski Family Trust. The detailed profit and loss statements and balance sheets for the trust for the years ending 30 June 2014 and 30 June 2015 were in evidence. The position presented in these, including to the Commissioner of Taxation, is that TK Sign Installations, as trustee of the Stefanovski Family Trust operated the Sydney South West franchise from its inception. Mr Stefanovski, I thought, dissembled when these accounts and this position were put to him in the course of cross-examination. I do not accept that the franchise was not operated by TK Sign Installations, as trustee. It was that company which by a contract dated 5 August 2016 and a related deed of assignment of goodwill dated 18 August 2016 disposed of the Sydney South West franchise, including assigning its goodwill to HNH Corp Pty Ltd (HNH). But long before then, the position, and the only position, for that matter, recorded in accounts relating to that franchise business was that it was operated by TK Sign Installations. Further, it is plain enough from the “General Enquiry By Digital Central.” Form that both Mr Stefanovski and Ms Clark (who completed the Form and, inferentially given both her relationship with Mr Stefanovski and her own background did not do so as an uninformed scribe) contemplated that the franchise would be operated by a company.

37    DCA posited alternative scenarios as to the position in law in the prevailing circumstances as to the entity operating the franchise. It submitted that it was “possible to fashion a case in which Ms Clark was personally a party to the franchise agreement”. This was put on the basis that, if there was a finding that Mr Stefanovski executed the agreement for the benefit of a partnership between himself and Ms Clark and given “the opaque nature of the business arrangements between them: such a finding was open to the Court with KA & C Smith Pty Ltd v Ward (1998) 45 NSWLR 702 at 706-708 (Ward) being cited as a similar case. The alterative put was that I should infer that Mr Stefanovski’s signature, witnessed by Ms Clark, was affixed to the franchise agreement as agent for a company to be formed, as undisclosed principal, and as a pre-incorporation contract. Given the matters to which I have referred in the preceding paragraph, I consider that the latter is the true position in law. Ward is distinguishable on the facts. The raison d’être for TK Sign Installations was to be the contemplated corporate operator of this franchise. Inferentially, TK Sign Installations ratified the franchise agreement from the very moment of its existence and certainly by the time when the 2014 accounts were prepared for the Stefanovski Family Trust (seemingly in or about November 2014). Further, it seems to me inferentially likely that Mr Stefanovski and Ms Clark, given their prior business backgrounds, also always contemplated that it would do so as trustee with the trust deed being but confirmation of this contemplated position.

38    The trust’s 2014 and 2015 year accounts show a marked increase in the turnover of the Sydney South West franchise from the first, part-year of its operation by that company to its second year. That is completely consistent with the drive and prior relevant experience of both Mr Stefanovski and Ms Clark. It is also completely inconsistent with the asserted minimal involvement of Ms Clark in the business, which was a feature of her and Mr Stefanovski’s evidence.

39    As early as December 2013 (inferentially from Mr Strickland’s email to her of 11 December 2013 and her reply email of 14 January 2014), Ms Clark displayed an intimate knowledge of the terms of the franchise agreement as they related to an important asset namely, the truck used for signage and related material transportation. In an email of 14 January 2014 from her even by then specially allocated DCA email address she queried DCA about “racking for our vehicle” (the “our” is not coincidental). She stated that that she believed “we are still owed a racking at no cost, as the cost for 1 x vehicle racking was included in the initial costs paid for setup of the franchise” (again, the “we” is not coincidental). This contemporaneous intimacy of knowledge is itself inconsistent with Ms Clark’s evidence that she had not seen the franchise agreement prior to the present litigation. So, too, of course, is her witnessing Mr Stefanovski’s signature to that agreement. The December 2013 inquiry and 14 January 2014 email are important, because it shows that she was not just a mere witness to another’s signature, herself unfamiliar with the terms of that agreement. It demonstrates that, as with her presence with Mr Stefanovski at the expo, her involvement and related knowledge was, even then, for business purposes.

40    Both Mr Stefanovski and Ms Clark had password access to the non-public areas of the DCA website. I do not consider that possession of this access makes Ms Clark a “key person” in terms of the franchise agreement. She is not specified as one in that agreement, only Mr Stefanovski is. Further, as I have found, the contract was not made on behalf of a partnership but in contemplation of a company to be formed. Nothing untoward attended the seeking and obtaining of the allocation of a password to her; it just seems to have escaped the attention of DCA that this made it desirable to include her as one bound by key person contractual obligations. That does not mean that other obligations did not, in the circumstances, fall on her.

41    Password access to the non-public area of the website afforded Mr Stefanovski and Ms Clark access to the following information: client list, containing agency names and addresses, email and mobile numbers of the representative agents who were customers of DCA; approved products information, containing product name, product dimensions and product price; client purchase preference information, in relation to approved products; approved product type preference (by agency and agent); name of contact responsible for hire signs; which hire sign company ought to be used; number of orders placed (in total and on an “agent by agent” basis). That this information was within the password protected part of the website is plain enough from Exhibits 4 and 5.

42    Ms Clark’s evidence was that she ceased full-time work and began a real estate agents course in early 2015. This much I accept. Her further evidence was that she then became a “stay-at- home mum”. I do accept that she was thereafter able to spend more time at the Middleton Grange property but this was far from just for the purpose of maternal duties and occasional involvement with the franchise business. I thought that she dissembled when confronted in the course of her evidence with emails about the affairs of that business authored by her. Notwithstanding an able submission made on behalf of the respondents, including her, that I should, on analysis of the email traffic and other evidence about the operation of the franchise from September 2013 to August 2016 conclude that her involvement was not extensive, I do not accept this.

43    Firstly, her liberation from her other full time work gave her more time to devote to the franchise business. The evidence discloses that she had been involved from the outset. The place of business of TK Sign Installations was the Middleton Grange property. The nature of order placement and servicing via the website lent itself to home based involvement, as did related telephone liaison with DCA. The marked increase in turnover for the Stefanovski Family Trust as between the 2014 and 2015 financial years is consistent with Ms Clark being liberated to devote more time to the business and she had the talent and experience to make the most of this. Ceasing other full time work doubtless did facilitate maternal tasks but it hardly precluded her deploying this talent and experience for the benefit of the franchise business.

44    This is confirmed by the following evidence.

45    On 4 February 2015, Ms Clark sent an email to Mr Hade in which she stated, “I am currently working a region by region list for our area, on who I will visit in the next couple of weeks, and would like to have the brochure, and flyer done up, to go out and promote the business” (emphasis added – her reference to “our” is not happenstance). There are other emails which indicate that she undertook promotional activities for the franchise business. She had the time to do this and her experience suited her to just such a task.

46    Mr Paul Kranz was a graphic designer and later design team manager employed by DCA between September 2009 and October 2015. In these roles, he took telephone calls from franchisees, and answered their questions to resolve their concerns about signage design issues. He also dealt with them by email on these subjects. His cessation of employment with DCA was itself a cause for an absence of any partisan concern as to his reliability as a witness but he had, to my observation, a good recollection of his experience working with DCA, which recollection was congruent with contemporaneous telephone records and emails which were also in evidence. I have no hesitation in accepting his evidence in full. Mr Kranz recalled and I find that he spoke with Ms Clark at least once every second day. He also had numerous email exchanges with her in relation to franchise related issues. It is not necessary to detail each of these. [That the contact with Ms Clark was both by telephone as well as email also provides a basis for rejecting her evidence and a related submission based on the email traffic in evidence that her involvement with the franchise operation was not extensive.] Of the emails and notably, in an email dated 3 July 2015, Ms Clark, using her allocated DCA email address, wrote to Mr Kranz stating, “Hi Paul: sorry to do this again, can you please reset my email password to the below [specified] Thanks Kylie” (emphasis added – the “again” inferentially indicates an ongoing personal need by her for access).

47    Mr Kranz’s evidence was also consistent with that of Ms Samantha Beasley (and vice versa). She has been employed by DCA since 25 March 2014. Though now its Design Manager, she initially undertook telephone reception duties, answering calls from both customers and franchisees. It was in that capacity and by that means that she first came to encounter both Mr Stefanovski and Ms Clark. To my observation, Ms Beasley was an honest witness who gave reliable evidence, completely congruent with contemporaneous records. Her evidence was that that Ms Clark would call her at DCA’s office at least a few times a week and that her first call of the day was usually to discuss an email, which she had sent the previous day, from Mr Clark’s allocated DCA email address. She also stated that Ms Clark would frequently call on behalf of particular DCA customers. To her recollection, Ms Beasley only spoke with Mr Stefanovski on one occasion.

48    Mr Kranz’s and Ms Beasley’s evidence was also consistent with that of Mr Strickland in relation to the nature and extent of Ms Clark’s involvement with the franchise. His evidence was that, more often than not, it was Ms Clark who called him or sent him texts about franchise business related matters. Over the period from September 2013 to August 2016, Ms Clark also sent directly to Mr Strickland a number of emails concerning such matters. Mr Kranz worked with her to produce marketing material concerning franchise products and services. This marketing material notably prominently displays Ms Clark’s allocated DCA email address. Further, some of the material identifies 2 mobile phone numbers, of Mr Stefanovski and Ms Clark.

49    I have already mentioned Mr Joshua Anderson and his role. He commenced with DCA in March 2014. He gave, to my observation, honest, reliable evidence, congruent with contemporaneous records. Mr Anderson undertook an analysis of telephone calls from DCA’s head office to Mr Stefanovski’s and to Ms Clark’s respective mobile telephone number mobile telephone numbers (the records are Exhibit 3). In 2013, 54% of the calls were made to Ms Clark’s number. In 2014, 89% of the calls were made to Ms Clark’s number. In 2015, 99% of the calls were made to Ms Clark’s number. DCA submitted that the telephone records demonstrate a preponderance of communications coming from Ms Clark, not from Mr Stefanovski. I agree and so find.

50    The true position on the evidence, contrary to that of Mr Stefanovski and Ms Clark, is that Ms Clark had an extensive and ever increasing role in the Sydney South West DCA franchise, particularly in relation to the all-important liaison with DCA head office and with real estate agency customers. Mr Stefanovski’s involvement, in keeping with his prior experience, looks to have been more focussed on the sign set up and outdoor installation and replacement tasks associated with the franchise. Some of these tasks were also undertaken at times by contractors.

51    The evidence from Mr Strickland, Mr Anderson, Mr Kranz and Ms Beasley, as well as the emails in evidence, all served to underscore that the following description in DCA’s Manual of the website was no exaggeration – “the focal point of your commercial operation and life for the duration of your franchise”. Both Mr Stefanovski and Ms Clark had password access to the non-public areas of this “focal point”. Much more than for him, it was a “focal point” for her during the period in which TK Sign Installations operated the Sydney South West franchise.

52    Her greater and ever increasing involvement is also explained by other events, to the relating of which I now turn.

53    In May 2015, T&K Group Properties Pty Ltd (T&K Group Properties), another respondent, was incorporated. Its specified place of business was the Middleton Grange property. It has two directors and shareholders, Mr Stefanovski and Ms Clark. T&K Group Properties, as the trustee of the T & K Superannuation Fund, later became the owner of the premises at Orange Grove Road, Liverpool, Sydney (the Orange Grove Road property). Both the corporate name of T&K Group Properties and the name of the superannuation fund are not coincidental. They are derived from the respective given names of Mr Stefanovski and Ms Clark. Funds to acquire the Orange Grove Road property were borrowed from the Commonwealth Bank, secured by a mortgage signed by both Ms Clark and Mr Stefanovski. The acquisition of the Orange Grove Road property was completed on 22 August 2015.

54    By August 2015, TK Sign Installations and thus Mr Stefanovski and, given her intimate involvement with him and the franchise, also Ms Clark, had decided that it wanted to sell the DCA Sydney South West franchise. Significantly, it was Ms Clark who corresponded by email during August 2015 about selling and authorised the showing to a prospective purchaser of TK Sign Installations’ (the Stefanovski Family Trust’s) profit and loss statement for this purpose. As initially marketed, TK Sign Installations sought $160,000 for the franchise business (with approximately 550 “for-sale” signs included as a part of the assets of the business). The inquiry from that prospective purchaser did not mature into a sale. TK Sign Installations continued to advertise the franchise for sale, dropping the price for that purpose. It would drop yet further before a sale was made.

55    In September 2015, Mr Stefanovski obtained a contract with Esprit Digital, for the repair and maintenance of 600 digital screens, throughout 18 Westfield shopping centres in New South Wales. The obtaining of this contract is consistent with his professed decline of active interest in the affairs of the DCA Sydney South West franchise and a desire to sell the same but that does not mean that he thereby became disinterested either in Ms Clark or the offering of digital signage to real estate agents.

56    Also in September 2015, on 30 September, ANT Printing registered and, according to the position put to the Australian Securities and Investments Commission on registration, commenced using for business the business name “Australian Real Estate Signs” (“ARES”). On 28 September 2015, ANT Printing had opened a Commonwealth Bank account for the ARES business. ANT Printing had been incorporated on 17 August 2015. Ms Clark was the director, secretary and sole shareholder of ANT Printing. It is from the Orange Grove Road property that ANT Printing currently conducts its ARES business.

57    ANT Printing has a registered domain name and related website (the ARES website). Its nominated contact in respect of that registration is Ms Clark. Development of the ARES website commenced in January 2016 with the consulting firm “Bloom 360” being retained for that purpose.

58    At the start of the 2016 financial year, TK Sign Installations’ gross monthly sales income in respect of its operation of the DCA Sydney South West franchise exhibited a growth trend even beyond the already significant increase in gross income as between the (part) 2014 financial year and the 2015 financial year. Gross receipts in the 2014 financial year had been $161,707.34 for a net profit before tax of $10,630.80. In the 2015 year, they were $329,988.71 for a net profit before tax of $58,526.62. The latter was exclusive of an expense of $25,000 being a payment to a related superannuation fund. In July 2015 the franchise gross sales income was $46,254; in August, $40,864; in September, $56,126; in October, $60,173; in November, $43,445.

59    On and from December 2015, this growth trend for the franchise fell away. In December 2015, gross sales were only $9725; in February 2016, $35,059; in March 2016, $33,250; in April 2016, $19, 015 (for that same month in the previous financial year they were $40,575); in May 2016, $17,185 (for that same month in the previous financial year they were $37,631); in June 2016, $15,674 (for that same month in the previous financial year they were $38,667); in July 2016, $10, 557 (for that same month in the previous financial year they were $46,254). This decline was not a coincidence. It was referable to the commencement of ANT Printing’s ARES business and a related and ever increasing involvement of Ms Clark in the operation of that business. Further, as will be seen, Mr Stefanovski was hardly uninvolved in the ARES business.

60    December 2015 was a significant month in the lives of both Mr Stefanovski and Ms Clark. On 13 December 2015, they married at their Middleton Grange property. Via her Twitter feed, Ms Clark published this observation in respect of that event, “today is my big day!! Finally tying the knot with my man, Tome”.

61    In addition to Twitter, Ms Clark also operated a Facebook account. By April 2016, the name which she adopted for that account was Kylie Stefanovski. Given that they had married in December the previous year, her use of this surname might perhaps be thought to be neutral as to whether she and Mr Stefanovski had, as each asserted in evidence, separated as early as January 2016 (despite pleading in paragraph 15 of her defence that she had only used the name Ms Clark since separating and despite her using the Stefanovski surname in May 2016 when dealing with Ausregistry.com.au for the purposes of the ARES business). What is not neutral is that, in April 2016, she adopted as her Facebook profile picture a photo (Exhibit 10) taken at the Middleton Grange property of her and Mr Stefanovski. The body language in that photo is of affectionate closeness. Its then adoption as a profile picture is inconsistent with the asserted separation. I thought Ms Clark dissembled in evidence when this proposition was put to her. The photo remained as Ms Clark’s Facebook profile photo until October 2016. It was only taken down after a letter of demand was sent that month by DCA’s solicitors to Mr Stefanovski and Ms Clark. That letter of demand and an appreciation of the ramifications of an ongoing relationship, not, I find, any separation, provided the occasion for the taking down of the photo.

62    In the course of Ms Clark’s evidence, it was also put to her that she had misstated her personal status on her taxation returns and in a Commonwealth social security benefit application by not declaring that she was in a marriage like relationship with Mr Stefanovski. Though she was unaccepting of this, I rather thought that she dissembled in her answers on this issue, too. Certainly, the position which she and Mr Stefanovski represented in person in 2013 at the expo was that they were, if not lawfully married, a couple de facto. And that same position was conveyed in the “General Enquiry By Digital Central.” Form. Even though, at the very least, an interrogative note is sounded in my mind about whether, as between 2013 and 2015, they ever separated, I do not find it necessary to reach a concluded view on that subject.

63    There is reason enough apart from this to reject the evidence they give about the extent of Ms Clark’s involvement with TK Sign Installations’ operation of the franchise, the absence of use of DCA derived information in the ARES business, the extent of Mr Stefanovski’s involvement with that business and their dealings both with DCA and Mr Le in relation to the sale of the Sydney South West franchise. I have already referred to some inconsistencies which form a basis for that rejection. They are others to which I refer below. What I do find, having regard to the Twitter post and Facebook pages and what is depicted in the profile photo itself, as well as the taking down of the profile photo after the letter of demand, is that they did not, as they asserted, separate after marriage. In reaching these conclusions about their evidence, I have, if only out of an abundance of caution, expressly adverted to s 140(2)(c) of the Evidence Act 1995 (Cth),

64    DCA alleged that Mr Stefanovski and Ms Clark, used their knowledge of DCA’s know-how, trade secrets, approved products, and customer information including the products and their respective prices to cause ARES to offer products identical to or similar to the approved products; to create a website having identical features and functionality to DCA’s website; to cause the price of ARES products to be less than the price of the approved products, and to solicit business from customers within the territory and within other franchised territories.

65    Mr Stefanovski stated that Ms Clark established the ARES business “without using any intellectual property or customer lists or details of the franchised business” (ie the DCA Sydney South West franchise). Ms Clark’s evidence was that, in March 2016, she had constructed a real estate agents “prospects list” for solicitation by cutting and pasting this from information on real estate.com.au. She stated that she had also in that month begun to door-knock real estate agents in the Liverpool area, going to TK Sign Installations’ customers and others. Mr Stefanovski stated that he did not “see it (ARES) as competition”, because he was in debt, and had lost complete interest, from 2015 onwards, with the DCA Sydney South West franchise business. Yet this was the very same business whose sales had shown such marked growth not just throughout 2015 but even further in the opening months of the 2016 financial year. It was also the same business that his company, TK Sign Installations had placed on the market for sale in August 2015.

66    By March 2016, the ARES website had been established but parts of it were still under construction. It had though got to a stage whereby real estate agents could be offered a website-password to non-public pages. On 23 March 2016, deposits of business receipts to the ARES Commonwealth Bank account commenced.

67    The following month, April 2016, the very same month in which Ms Clark updated her Facebook profile photo, Mr Stefanovski informed Mr Anderson that he and Ms Clark were separating and that he would be relocating to the Gold Coast. He asked Mr Anderson to de- activate Ms Clark’s email address. Ms Clark’s evidence was that “Once I stopped helping Tome, there was no reason for me to be on the website”. While the evidence discloses that she did gradually “stop helping” his company, TK Sign Installations in the operation of the franchise, that was because she was, ever increasingly, helping the ARES business.

68    The assertion of a move to the Gold Coast was, I find, a falsehood. Tellingly, I thought, Mr Anderson was neither cross-examined on the veracity of his account of this conversation nor did Mr Stefanovski or Ms Clark offer any explanation as to why his move to the Gold Coast did not occur. Such a move would have prevented Mr Stefanvoski’s active involvement in the ARES business. And he was active in that business. Inferentially, the more likely reason for the falsehood was as part of a subterfuge about that involvement and that business.

69    In May 2016, Mr Stefanovski, on behalf of TK Sign Installations, requested Mr Anderson to change the DCA website portal pricing, so that all DCA Sydney South West franchise “sign-only” prices were increased by 5%. Mr Stefanovski gave as the reasons for this that he was losing a lot of stock from boards thrown-away by owners; and “wanted to make the business more profitable”. Having regard to his observed later conduct and to observations given in evidence about the provenance of particular signage, the more likely explanation (which I find to be the case) is that some signage from TK Sign Installations’ DCA Sydney South West franchise was being utilised as part of the stock for actively starting up the ARES business. Further, it is inherently more likely, and I so find, that the 5% increase request was motivated by a desire on Mr Stefanovski’s part to confer a competitive advantage on the ARES business at its formative stage.

70    On 25 May 2016, Mr Stefanovski commenced dealings with Mr Henry Le in relation to the possible sale of TK Sign Installations’ Sydney South West franchise. In the context of these negotiations, he assured Mr Le, by an email of 27 June 2016, that he was “a legitimate business owner and seller”. Mr Le was, to my observation, a transparently honest witness. Some of his affidavit evidence was the subject of objections which I upheld but what remained of that, and also his oral evidence, I have no hesitation in accepting in full. In relation to the franchise, Mr Stefanovski told Mr Le in June 2016 that the “owners” were contractors, and that there were 550 signboards in the field. He also told Mr Le during that month that the franchise had two main competitors, Print Force and ABC. In relation to competitors, he made no reference, deliberately I find, to the ARES business. He was well aware by then that this business had well and truly commenced operations. His wife, from whom he had not separated, controlled the company which operated that business from their home. Nor did Mr Stefanovski make any reference to the 5% price increase request put to DCA.

71    By the end of July 2016, probably by email and in response to email requests made of him by Mr Le, Mr Stefanovski also furnished to Mr Le copies of TK Sign Installations DCA Sydney South West franchise’s monthly sales by item accounts for the months from August 2015 to June 2016 (each inclusive). Though Mr Le asked him for the July such accounts, Mr Stefanovski did not provide these to Mr Le. Inferentially from an email inquiry which Mr Le directed to Mr Stefanovski on 14 June 2016, Mr Stefanovski also supplied Mr Le with a copy of the balance sheet for the Stefanovski Family Trust (and thus for the franchise business), as Mr Le queried a difference between two vehicles shown on the balance sheet and a statement apparently earlier made to him by Mr Stefanovski that only one vehicle was included in the sale.

72    On 1 August 2016, Mr Stefanovski sent an email to: deslgn@go-ares.com.au (an email address associated with the ARES business), as well as to admin@digitalcentral.com.au (an email address of DCA), which included the words “we can install”. He was unable to explain in evidence why he sent this email to an ARES email address, as well as a DCA email address. Inferentially, given what I have already found was his then knowledge of the ARES business, it was an inadvertent error but, in the context of the present litigation, a revealing one. The inadvertent error is consistent with his then state of knowledge about the ARES business.

73    HNH is a company controlled by Mr Le. He caused it to enter into the contract of 5 August 2016 with TK Sign Installations for the sale of the franchise. Materially, amongst the chattels sold under this agreement was, “Complete stock of field signs installed – various sizes (x450), a list of locations will be provide on settlement”, in other words, 450 reusable signs on to which a vinyl print was affixed. Subject to a proviso which is not material, this contract provided for completion to occur on, 22 August 2016. It must have occurred as contemplated, because HNH commenced operating the DCA Sydney South West franchise on 23 August 2016.

74    The difference in the number of signs sold under the contract of 5 August 2016, 450, compared with the number for the franchise as originally marketed, 550 will be noted. Mr Stefanovski denied that he had taken about 100 signs from TK Sign Installations’ stock prior to the contract of 5 August 2016 and made them available to ANT Printing’s ARES business. I do not accept this. Taking the evidence as a whole, what is more consistent with the readiness with which ANT Printing commenced its ARES business and the presence of ARES stickers on what were signs once used in the DCA Sydney South West franchise prior to its sale to HNH (of which more below) is that he did indeed take about 100 signs and place them at the disposal of ANT Printing’s ARES business.

75    Mr Le also caused HNH to enter into the deed of assignment and restraint of trade of 18 August 2016 with TK Sign Installations and Mr Stefanovski.

76    I find that (subject to his accepting 450, not 550 signs), in entering into each of these agreements, HNH, via Mr Le, relied upon the statements Mr Stefanovski made to Mr Le in June 2016 concerning the franchise and also upon the monthly sales by item accounts furnished by Mr Stefanovski to Mr Le.

77    By the close of the 2016 financial year, ANT Printing’s gross income from its ARES business totalled $63,313. On the evidence, its largest source of this revenue was from sign hiring, exactly the same sort of business undertaken by TK Sign Installations in its DCA Sydney South West franchise. Also by 30 June 2016, the accounts for the ARES business had been set up (in “Xero”) so as to identify “owner A” drawings. These accounts were set up by a person other than Ms Clark.

78    The experience of HNH, via Mr Le, in the operation of the DCA Sydney South West franchise was that there was a marked difference in the franchise’s monthly sales when compared with the period during which TK Sign Installations had latterly operated that franchise. For August 2016, during most of which month TK Sign Installations operated the franchise, sales were $11,597 (for that same month in the previous financial year they were $40,864), in September they were $13,429, (for that same month in the previous financial year they were $56,126). These differences were dramatic. As to August, 2016 it is inherently likely that the lower than equivalent sales for the same month in the previous year or even when compared with a monthly average for previous year average was referable to the increasing attention which Ms Clark was giving to the ARES business. As to September, it was put that this and Mr Le’s later experience of lower than expected monthly sales being generated by the franchise were just the result of his different approach to the operation of the franchise. Of course, different entrepreneurial or managerial and inter-personal skills might explain a decline, and perhaps to a limited extent they do, but there are more likely major causes, even if they were not immediately apparent to Mr Le at the time. They are the 5% price increase, coupled with the undisclosed presence of ANT Printing, operated by Ms Clark, assisted by Mr Stefanovski with all of their experience of and in the very same market

79    On or about 3 October 2016, Mr Le received, via his subpage on the DCA website, a request to remove a sign in the franchise territory. The sign was one which had been placed on site at a time when TK Sign Installations operated the franchise. He photographed the front and rear of the sign. These photos are in evidence. Stuck to the rear of the sign was a sticker which stated that it was the property of ARES. Ms Clark gave evidence that, in June 2016, she had commenced getting smaller ARES stickers for the backs of signs printed, “to save on product, on stickers”. I thought that this was another of her dissembling answers. I accept that she caused ARES stickers to be printed at or about this time. But one purpose was so that they might be affixed to signs hitherto used in TK Sign Installations’ DCA Sydney South West franchise for use instead by ANT Printing in competition. Inferentially, those TK Sign Installations signs were the 100 or so that Mr Stefanovski had sometimes removed from its stock. Mr Le noticed like signs with like stickers on the reverse at other locations within the franchise territory (photographs of these are also in evidence). He forthwith drew the existence of signs with such stickers and the apparent anomaly in what was supposed to be a DCA related sign site to Mr Anderson’s attention.

80    Prompted by Mr Le’s advice, Mr Anderson undertook some investigations in Sydney. He related that, 6 October 2016, he had inspected a curved signboard with an ARES sticker on the reverse side. His evidence was that this was one of the 550 signboards used in in the DCA Sydney South West franchise. His further evidence was that the area on the reverse to which ARES sticker was affixed showed an area of like dimension to the standard DCA sticker affixed on the reverse of DCA sign boards. Mr Anderson was taxed about this identification in cross-examination. Even so, in this respect also I found him to be an honest, reliable and credible witness. He was familiar with both the type of signboards used in DCA franchises and with the placement and size of its proprietary stickers. His evidence jelled with other observations which he made when in Sydney in October 2016. On this topic, too, I accept his evidence and find accordingly.

81    On 11 October 2016, Mr Anderson drove to the Orange Grove Road property. As he related in evidence (and a photo which he took that day confirms) he there observed commercial premises (Unit 5) in which was displayed a sign in a window which read “Australian Real Estate Signage”. The logo on that sign is identical to the logo on the ARES website. He also observed (and I find) that Mr Stefanovski and Ms Clark were each present at the Orange Grove Road property and that each was working at those premises. He kept the premises under observation that day. Later in the day, he observed Mr Stefanovski depart the Orange Grove Road property by vehicle with children whom he knew to be those of Mr Stefanovski and Ms Clark. He followed the vehicle. He observed that Mr Stefanovski drove to the Middleton Grange property with the children.

82    I have no hesitation in accepting Mr Anderson’s evidence about his observations that day. Viewed in context, they are truly telling. At this stage also Ms Clark’s Facebook profile page continued to display the photo of her and Mr Stefanovski to which I have referred above. Ms Clark had not just “tied the knot with her man”; she had kept him knotted. In substance, though not of course in form, for ARES was operated by ANT Printing, they were, and inferentially had been from the inception of ARES, engaged in a joint enterprise, deploying their respective talents and experience (his sign set up, placement and replacement; hers administration, sales and marketing, though Mr Stefanovski was not without ability in these areas), as well as knowledge gained during the operation of the DCA Sydney South West franchise by TK Sign Installations, to commercial advantage. Each was and is knowingly concerned in the operation by ANT Printing of the ARES business.

83    The evidence led in the case brought to light other revealing events which occurred in October 2016. The Bank accounts of ARES show a number of payments to Mr Stefanovski that month that, on their face, appear to be payments for purposes of the ARES business but which, as also emerged in evidence are, in fact, private expenses. In the following month Ms Clark caused these payments to be made from the ARES bank account to Mr Stefanovski’s bank account:

(a)    on 11 November - $410, noted in ARES accounts as (“flags RW Penrith”);

(b)    on 15 November - $670.

84    In December 2016, Ms Clark caused further payments to be made from the ARES bank account to Mr Stefanovski’s bank account:

(a)    on 14 December - $1230 (Mr Stefanovski identified this as a “loan”; in the accounts of ARES it is identified as “flags RWGV”;

(b)    on 23 December - $120.

85    In the new year,2017, Ms Clark continued to cause payments to be made from the ARES bank account to Mr Stefanovski’s bank account:

(a)    on 12 January - $375 (In Mr Stefanovski’s bank account statement this is marked “for kids holiday”, in the ARES account, it is marked “marketing phone”);

(b)    on 10 February - $210, described as a “loan”.

86    It is difficult, given the discrepancies in description, to afford reliability to such descriptions as are given for these payments. That marked “for kids holiday” jells with both with the time of year, the existence of children of their relationship and, it must be said, what seems to me on the whole of the evidence, to be a propensity on the part of both Mr Stefanovski and Ms Clark to camouflage a true position if it suits their commercial interest. Inferentially from their descriptions and the nature and extent of the ARES business, those marked “flags RW Penrith” and “flags RWGV” are more probably than not accurately recorded in the ARES accounts and relate to a reimbursement of Mr Stefanovski for sourcing materials for the ARES business. All in all, the other payments just look like Mr Stefanovski’s drawings. The position is clearer in relation to Ms Clark. It emerged in evidence that the references in the ARES accounts to “owner A drawings” are payments to Ms Clark.

87    Mr Stefanovski asserted in his evidence that he was deriving income from a business of his own. That may well be the case, for he is an entrepreneurial man but that does not mean that he was not also involved in the business of ANT Printing.

88    Ant Printing’s ARES business offers identical products and services to those of a DCA franchise. Mr Anderson who is well familiar with what DCA franchises offer and has made a detailed study of those offered via the ARES website said as much in evidence. DCA submitted that he was not seriously challenged on this point. I agree. In her evidence, Ms Clark did not really challenge this, instead, I thought, avoiding an inconvenient truth by adding only that the ARES business offered more services than did a DCA franchise business.

89    The ARES website has identical features and functionality to the DCA website. Mr Strickland, who is well familiar with the DCA website, has studied the ARES website, stated that what was there offered were products and services identical to DCA with the online ordering system being identical to that of the DCA website. His evidence, which I accept, is that the identity extends to the use on the ARES website in some cases of the exact same product name as that which appears in the DCA website. This is borne out by a comparison of snapshots of the website which are in evidence: the first four products are for large and small photo (curved) and large and small standard (curved). As to such signs, the ARES marketing material in evidence states that these signs “are made and printed in our own facility, allowing us to produce signs quickly… The only company that offers 24-hour turnaround for installation and removal”. Included in this marketing material are large and small photo (curved) and large and small standard (curved) signs, as well as illuminated lightbox signs.

90    There is just no doubt that ANT Printing, via Ms Clark, has been doing its level and successful best to entice customers away from the DCA Sydney South West franchise which TK Sign Installations sold to HNH in August 2016 (if not also other DCA Sydney franchises) and to divert them to its ARES business. Indeed, ANT Printing, via Ms Clark, had embarked on this campaign well before the close of the 2016 financial year. Ms Clark admitted as much in her evidence. Mr Stefanovski has not been a stranger to these endeavours but rather, as I have found, deployed his talents out in the field and (at the Orange Grove property) in the workshop. The very considerable overlap between the ARES customer base (evident from its customer list in evidence) and that of the DCA Sydney South West franchise (evident from website data in evidence) is obvious.

91    What does this mean in terms of the causes of action pleaded?

92    The Franchise Agreement defines “Restraint Period” to mean:

[the] period specified in Item 18(a) of the Schedule (or if such period be held to be excessive, then during the period specified in Item 18(b) of the Schedule) after the termination of this Agreement.

93    Item 18 in the Schedule to the Franchise Agreement states:

(a)    Twelve (12) months

(b)    Twenty four (24) months

94    The drafting error is obvious. In item 18, the periods specified should have been reversed such that (a) was 24 months and (b) was 12 months. For the respondents, it was submitted that the Franchise Agreement should not be so construed but that would be contrary to business common sense and to deny the agreement commercial efficacy. The preferential restraint period under the Franchise Agreement is 24 months with 12 months being the fall-back period. The geographic area to which the restraint is applicable is cast in alternatives but, at a minimum embraced “the Territory” as defined it item 13 in the Franchise Agreement by reference to post code areas. DCA did not seek any wider restraint than “the Territory”.

95    As to the restraint period, New South Wales law is applicable to the Franchise Agreement. That means that the Restraints of Trade Act 1976 (NSW) is relevant. Under that Act: ‘A s 4 restraint of trade is valid to the extent to which it is not against public policy, whether it is in severable terms or not.’ As to this, assistance is to be gained from Ward. In that case and by reference to pertinent authority, Austin J, at 721-722 summarised the statutory validity of restraint issue for resolution in this way:

As explained by Rath J in IRAF Pty Ltd v Graham [1982] 1 NSWLR 419 at 425, the effect of this provision is to validate a restraint of trade to the extent that it imposes a reasonable restraint, in the sense stated in the classic statement of the law by Lord Macnaghten in Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co [1894] AC 535 at 565. The question whether the restriction is reasonable is to be considered with reference to the interests of the parties concerned and with reference to the interests of the public, “so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public”. In applying this test, the judge is required to “make a broad judgment on a common sense basis and on impression for the simple reason that the issue is not capable of determination by precise calculation”: Fleming Bros (Monaro Agencies) Pty Ltd v Smith [1983] ATPR 43-389 at 44,571, per Holland J.

Given that this is a pronouncement by the New South Wales Supreme Court as to the meaning and effect of a statute of that State, I consider that I should follow it unless persuaded that it is clearly wrong. I am not so persuaded. To the contrary, I respectfully agree with the summary offered by Austin J in Ward.

96    In Ward, Austin J also, with respect nicely, identified just the question to be answered in the present case in relation to the restraint. That is because, as in Ward, the benefit of the restraint is sought to be enforced by a franchisor, in the case, DCA and the question is whether, in the circumstances, the restraint is reasonable? His Honour stated, at 722:

To assess the reasonableness of the restraint clause, it is necessary to identify the legitimate interests which the clause seeks to protect. This is not a case where the purchaser of a business seeks to protect the goodwill which it has acquired by restraining the vendor from competing; nor is it a case where an employer seeks to protect its confidential information by restraining a former employee from working for a competitor. A franchise agreement has some of the elements of both of these cases, although it is a commercial arrangement closer to the former than the latter: Prontaprint Plc v Landon Litho Ltd [1987] FSR 315 at 324; Stokely-Van Camp Inc v New Generation Beverages Pty Ltd (1998) 44 NSWLR 607 at 613. In my opinion, the franchisor has an interest at stake which is analogous to the purchaser’s goodwill. It has an interest in protecting the patronage built up through the operation of the franchise, which may be lost if the franchisee is permitted to compete without restriction. The franchisor also has an interest in preserving the confidentiality of confidential information provided to the franchisee, which could be used by the franchisee to compete with the franchisor if there were no restraint. However, the franchisee has an interest in protecting the goodwill of its business. The customers are customers of the franchisee’s business, though the franchisor also has an “interest” in the customers since they are attracted to the business as a franchise business. The question is whether the restraint clause in the second franchise agreement is too wide, given the nature of the franchisor's interest and the need to balance the interests of franchisor and franchisee.

97    The evidence in this case confirms what intuition, inference, experience and common sense might in any event suggest, which is that it is important for the viability of DCA’s established, tried and market tested system of operation, and its network of franchisees who have paid good money to the advantage of this, that incoming franchisees enjoy a measure of protection from ex-franchisees. On the evidence but for like reasons in any event, if ex-franchisees were able to use their knowledge of the franchise system; and the relationships with existing customers, that would give an unfair advantage over the new franchisee. On the same bases, it would be impossible to sell a franchise if the ex-franchisee were involved in a rival business, operating in the franchise territory.

98    One of the assets which TK Sign Installations passed to HNH when it sold it the DCA Sydney South West franchise was goodwill. Goodwill, it has been said, is “notoriously difficult to define” (Hepples v Commissioner of Taxation (1992) 173 CLR 492 at 519 per Dawson J – Hepples) but these two parties and those who controlled them, inferentially including, de facto, Ms Clark in the case of TK Sign Installations, recognised that part of the value of the franchise business comprised goodwill. Having cited with approval that observation made by Dawson J in Hepples, Gaudron, McHugh, Gummow and Hayne JJ added the following observation in respect of goodwill in Commissioner of Taxation v Murry (1998) 193 CLR 605, at 611, [12], “Its existence depends upon proof that the business generates and is likely to continue to generate earnings from the use of the identifiable assets, locations, people, efficiencies, systems, processes and techniques of the business.” Each of these may be a source of goodwill. On the evidence in this case, one of the sources of TK Sign Installations’ goodwill at the time when it sold the DCA Sydney South West franchise to HNH was Ms Clark. She was good at what she did both in liaising with DCA’s Head Office and in garnering and servicing the customers of the franchise. But she was far from the only source on the evidence. DCA had established a viable presence in Sydney before TK Sign Installations came on the scene. On the evidence, it had also developed “efficiencies, systems, processes and techniques” (set out above in the description of its method of operation and more extensively detailed in the Manual). Access to these had been afforded to TK Sign Installations by DCA under the Franchise Agreement. That access was also a source of the goodwill which passed to HNH. It would be antithetical to the encouragement of the development of “efficiencies, systems, processes and techniques” in business, and their legitimate commercial exploitation by their developer via franchising, if, having enjoyed the benefit of access to them and of then selling for reward a franchise business the goodwill asset of which included as a source access to these, a former franchisee were free to exploit in competition the very same, or very substantially the same, “efficiencies, systems, processes and techniques”.

99    On the evidence, the business of ARES is, in terms of clause 24.2 of the Franchise Agreement, a business “involving the retail sale of items similar to the approved products”.

100    For these reasons, I am satisfied that it would not be contrary to public policy to restrain either or each of TK Sign Installations, and Mr Stefanovski for he was a party to the Franchise Agreement, during a 2 year period, from either directly or, indirectly, by being involved in the operations of a company, which conducts business in “the Territory” as defined in the Franchise Agreement in circumstances where that business is of the same kind, and in direct competition with, the franchised business.

101    DCA submitted that, “there is an existential risk to the applicant’s Sydney operations from the continuation of the status quo”. Mr Anderson’s view was that no-one would want to buy a franchised business in an area where a previous franchisee had used knowledge of the business to set up and run a rival business in the same territory. As I have already observed, intuition, inference experience and common sense might in any event suggest this would be the case. Holding that view, Mr Anderson’s evidence was that, if the status quo remained, it was likely that DCA would have to close down its operation in Sydney within the next 12 months. The erosion, described above, in the monthly sales income of the DCA Sydney South West franchise in 2016, before and after the sale of the franchise, bears out Mr Anderson’s concern. It is not alarmist.

102    Mr Anderson’s evidence, which I accept, was that it was impossible to calculate the amount which DCA had spent establishing and maintaining its Sydney operation. That had not been the subject of a separate accounting in DCA’s books of account. His estimate was that over $500,000 has been spent since 2012. This investment included DCA’s investment in fitting out its print house at Marrickville, purchasing and maintaining the large format digital printer located there and vehicles. He further stated, and I accept, that a cessation of DCA’s Sydney operation, would result in losses to DCA in excess of $950,000 with shutdown costs of $150,000. Damages alone are not going to be an adequate remedy in the circumstances of this case. An injunctive restraint is necessary.

103    DCA does advance a modest damages case in addition to its claim for injunctive relief. That case is grounded in both breach of contract and breach of confidence. Its quantification is found in the evidence of an accountant, Mr Andre Christian. As I understood it, Mr Christian’s quantification evidence was not, in the end, controversial. In any event, he has the requisite expertise and his approach seems to me to be a reasonable one well supported by the other accepted evidence in the case.

104    Mr Christian opined that, if ARES were found to have taken clients away from the Sydney South West franchise, then the total quantum of sales for ARES would represent the maximum of such clients lost to that franchise. As to that quantum, Mr Christian looked to ARES sales for a 17 month period (5 months before the sale of the franchise, and 12 months after termination). He found, and the fact is, that, in that period, 100% of those sales would amount to $490,000; which would produce a loss of 8% royalty of $39,196. His focus on royalty income was appropriate because, under the Franchise Agreement is that percentage income stream which flows to DCA as franchisor.

105    Mr Christian then assumed that there would have been a 15.4% market decline, between 2015 and 2016, in the franchised area, even if there had not been the competition from ARES. There is evidence that, apart from ARES and in any event, there were competitors for the signage business of real estate agents in the franchise area. Further, the evidence is that the high quality digital signs are no longer unique to DCA. There are wider factors which might inferentially be thought to intrude from the very nature of the business of the franchise’s clientele. If the placement of properties for sale declines or if properties take longer to sell, the demand for signs is inherently likely to fall. And the resultant signage rental income lost might not be replaced by longer signage hiring periods. Precision of impact in such matters is likely to be elusive. It is though reasonable to make some allowance for the contingency of a decline both in the market generally and in DCA’s market share. It is hardly unfair to any respondent to make such provision. Mr Christian has made a considered value judgement about this. It does not strike me as an obviously improbable one. I adopt it. It is therefore necessary to reduce the lost royalty stream to $37,900.

106    On investigation, Mr Christian determined (and the fact is) that 38% of ARES customers (in this 17 month period) had never been customers of the franchised business, either because they were not customers inside the franchised area, or they had never in fact dealt with the franchised business. As a result, he opined that it was necessary to reduce the lost royalty stream by 38%. That strikes me as both reasonable and necessary. That reduces the lost royalty stream to $24,302.

107    Mr Christian then opines that “my conclusion if the restraint period is 12 months and ARES is held attributable by the conduct, the royalty loss is $24,302”. He further opines that, if a 2 year restraint applied, it is necessary to add $28,920, for the 2nd year, but, applying a 33% “attrition factor” to that 2nd year, the total loss becomes $58,476. Once again, that “attrition factor” is a considered value judgement in respect of matters where precision is likely to be elusive but those I have mentioned above when considering his allowance for market decline would, on the evidence, be inferentially and inherently likely to intrude. His “attrition factor” allowance seems to me reasonably and necessarily to recognise this.

108    So the total royalty income stream loss is $58,476. This then becomes the quantum of contractual loss for which Mr Stefanovski would be liable (if he were found to be in breach of the Franchise Agreement), and for which Ms Clark and ANT Printing would be held liable (by way of equitable compensation), if she were found to have used (and used for the purposes of ANT Printing) information in breach of confidence.

109    Such breaches revealed by the evidence, for the reasons set out below.

110    As to Mr Stefanovski, it is established that he received training from DCA after entering into the Franchise Agreement. In the course of that training, the information contained in the manual was communicated to him. It was contractually communicated, with all that entails in terms of contractual obligation. There is just no doubt that it would have been impossible for him to undertake the signage related tasks that he undertook thereafter both for TK Sign Installations and, more likely than not, for ANT Printing without training and that information.

111    As to contractual obligation:

(a)    By clause 13.2 [misdescribed as c 13.1 in DCA’s submissions], Mr Stefanovski agreed that “upon the expiration or early termination of this Agreement, the Franchisee’s right to use the Intellectual Property shall cease”. “Intellectual Property”, as defined, included the Confidential Information. “Confidential information” included, definitionally, “… any information in relation to the Franchisor received by the Franchisee in the course of conducting the Business which is not publicly available, and relates to the Business, Franchise System or Franchisor and includes, but without limitation…”:

(i)    “… the contents of the Manual; all marketing strategies, plans and promotional documentation; all research, development, know-how and trade secrets…”;

(ii)    “all customer lists and any software developed on behalf of the Franchisor for use on the Franchise System and any information that is stored or recorded by any means in such software…”;

(b)    By clause 13.6, Mr Stefanovski agreed to keep the Confidential Information “absolutely confidential” at all times. Necessarily, that applied to the period while the franchise was being operated, as well as the period after it ended.

112    Precision is also apt to be elusive in relation to what does or does not fall within the term “trade secret”: Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 per Campbell JA at [123]-[125] (McColl JA agreeing at [73]) (Artedomus). As Artedomus illustrates, a useful measure of what is a “trade secret” is to identify information which, if disclosed to a competitor, would be liable to cause real (or significant) harm to the owner of the asserted “trade secret”. An additional consideration is that the owner must limit dissemination, and not encourage or permit widespread publication of this information. DCA submitted that all of the information in the Manual satisfied that description. I agree. What is found there is the detailed description of the “systems, processes and techniques of the business”. And these, on the evidence, are “systems, processes and techniques” of proven commercial worth. As to the DCA website, there is a password protected area. There is no doubt, because I find it has happened via it use in the ARES business, that the disclosure of the password protected information would cause real harm if disclosed to a competitor.

113    Mr Stefanovski (like TK Sign Installations) is also bound by cl 24.2 of the Franchise Agreement. Materially, that precluded him, during the term of the Franchise Agreement, or thereafter during the “restraint period”, from having any “financial or legal interest in” a competing business. DCA submitted that, as a matter of construction, because of the juxtaposition of “financial interest” and “legal interest”, cl 24.2 was “not necessarily concerned with proprietary interests enforceable in the courts”. For this proposition and acknowledging that it was decided in a different context, DCA cited the recent judgement of the High Court in Re Day [No 2] (2017) 91 ALJR 518. The particular constitutional context in which that case was decided is indeed very different but one of the cases cited to the court in a submission as to the meaning of “pecuniary interest” is of present assistance. That is Amadio Pty Ltd v Henderson (1998) 81 FCR 149. In that case (at 276), the Full Court held that a “financial interest” is such “that it can give rise to an expectation, which is not too remote, of a ‘gain or loss of money’”. So viewed, Mr Stefanovski had a financial interest in ANT Printing as the operator of its ARES business. For example, it was a means by which he received money to pay for the holidays of his and Ms Clark’s children. Both as a matter of construction and in practice he could and does have a “financial interest” in ANT Printing without having any legal interest in that company.

114    DCA also submitted that “as a rule, a covenant in restraint of trade will be read as applying as much to acts committed by the covenantor by means of a corporate alter ego or other agent, as to acts committed by the covenantor himself”. The authority cited supports this proposition: Gilford Motor Co Ltd v Horne [1933] Ch 935 at 956. As I have concluded above, ANT Printing is, in substance, but not in legal form, a joint enterprise of Mr Stefanovski and Ms Clark. I have mentioned his involvement observed and probable. In that he is enjoying the benefit of the “Confidential Information”.

115    Mr Stefanovski is in breach of cl 13.2, cl 13.6 and cl 24.2 of the Franchise Agreement.

116    As to Ms Clark, to subject her to an obligation in equity the information concerned must be “of a confidential nature”. The information will be of that nature if it is not “public property and public knowledge”, or if it is “constructed solely from materials in the public domain” to which “the skill and ingenuity of the human brain” has been applied: Coco v AN Clark (Engineers) Ltd (1968) 1A IPR 587 at 590 per Megarry J. A concerted submission was made on behalf of the respondents, and Ms Clark in particular, that nothing in the Manual attracted any duty of confidence. But what is trite to some may be the laughter of genius to others. Further, that it seems trite may only be so in hindsight after the benefit of revelation. Perhaps, viewed in isolation, some of the observations and statements in the Manual are trite. But, viewed as a collective whole, what the Manual contains, on the evidence and as I have already concluded, are “systems, processes and techniques” of proven commercial worth. Even if, in isolation, there are parts of the Manual which are in the public domain, the following observation of in Seager v Copydex Ltd [1967] 1 WLR 923, 931-2 is applicable:

The law on this subject ... depends on the broad principle of equity that he who has received information in confidence shall not take unfair advantage of it. He must not make use of it to the prejudice of him who gave it without obtaining his consent. ... When the information is mixed, being partly public and partly private, then the recipient must take special care to use only the material which is in the public domain. He should go to the public source and get it: or, at any rate, not be in a better position than if he had gone to the public source. He should not get a start over others by using the information which he received in confidence. At any rate, he should not get a start without paying for it.

117    One technique described in the Manual is how successfully to apply (or remove) a vinyl print to a signboard. Initially, this was a task which, even with the benefit of the detailed instruction in the Manual, defeated Mr Stefanovski. It is a “trick of the trade” arrived at by Mr Strickland by experience. Of course there are some such trade skills that just merge into general knowledge if they are not already part of it. On balance, I do not consider that this technique falls into that category. The following observations made by Salmon LJ in Seager v Copydex Pty Ltd (No 2) [1969] 1 WLR 809 are apt in this case, too:

That may be true. There are, however, many very valuable inventions on the market which are extremely simple: people have been seeking for years to find a solution and then someone hits upon the idea and it is a very simple idea. It is easy enough afterwards to say: Well, anyone could have thought of that.”

118    Given their relationship, what came to Mr Stefanovski contractually in the form of the Manual was also given to Ms Clark. Necessarily, she must have known that it was attended with confidentiality obligations and an obligation not in any way take its contents with her in the event that the franchise ceased.

119    As to password protected information, this was protected for good reason. It was obviously commercially sensitive and useful. On the evidence, Ms Clark not only had password access but she was at pains to retain that during the currency of the franchise. Again necessarily, she must have known that what lay behind the password was attended with confidentiality obligations. She might well, in theory, have derived a list of local real estate agents by some innovative internet searching. But that information was already sitting there for her in the website’s password protected area, along with much more than a bare list of names – for example, the client list negated a need for cold canvassing to ascertain interest in sophisticated signage, those listed had a known interest; their obviously useful pricing preferences were also noted there. On the evidence as a whole, and taking into account the extent to which I have not accepted her veracity and described her behaviours, it is much more inferentially probable than not that she made free use for the purposes of ANT Printing’s ARES business of the password protected information on the DCA website. I just do not accept her account as to how she went about developing a list of prospective customers for ANT Printing’s ARES business.

120    All in all, Ms Clark has had access, via the Manual, to a complete and proven (and she knew by personal experience it was proven) plan for a successful business and, as well, access to all of the password protected information in respect of that business. It is difficult to think of a better head start for the ARES business than this. Moreover, the results of ARES from its inception demonstrate that the head start existed in practice as well as theory. Mr Christian’s evidence is the information to which I find Ms Clark has had access, “has a useful life of up to 3 years” and that it “is not unreasonable or uncommercial to attribute a useful life to the confidential information overall, to a period exceeding a period of 2 or 3 years”. Looking at the nature and extent of the password protected information, this strikes me as a fair assessment of its useful life. The exploitation of that information by ANT Printing and its director, Ms Clark commenced in March 2016 at the latest. As to any “springboard” injunctive relief, DCA seeks no more than a period of 2 years from then. It is entitled at least to that period. There has been no endeavour by Ms Clark to “unbundle” from the non-confidential information from that which she has caused ANT Printing to exploit.

121    As against Ms Clark and ANT Printing, a breach of a duty of confidence arising in equity is made out.

122    DCA also pleaded causes of action against Mr Stefanovski, Ms Clark, ANT Printing, T & K Group Properties in respect of conduct in breach of the Australian Consumer Law (ACL).

123    DCA cited the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth) (Franchise Code) (Sch 1, cl 6) by virtue of which Mr Stefanovski and TK Sign Installations, each as a party to a franchise agreement, owed a duty of good faith to DCA, which is expressed as follows:

Each party to a franchise agreement must act towards another party with good faith, within the meaning of the unwritten law from time to time, in respect of any matter arising under or in relation to:

(a)    the agreement; and

(b)    this Code.

DCA submitted that guidance as to the content of that duty was to be found in the advice of the Judicial Committee in Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2002] 2 All ER (Comm) 849 (Dymocks Franchise Systems), particularly at [63] where in delivering the advice Lord Browne Wilkinson observed of the not dissimilar franchise agreements in question in that case that they “were not ordinary commercial contracts, but contracts giving rise to long-term mutual obligations in pursuance of what amounted in substance to a joint venture and therefore dependent upon coordinated action and cooperation.” Some care needs to be taken with this case. Though it was an appeal from New Zealand, the proper law of the franchise agreements was that of New South Wales. The content of that law had been the subject of expert evidence at trial. There had been a conflict of evidence but that did not extend to whether there was to be implied in such a contract under the law of New South Wales (the common law of Australia) a duty of good faith. On that subject, the trial judge had looked to an Australian legal text. The Judicial Committee (at [56]) agreed “with the Court of Appeal that the judge erred in the exercise of his discretion in seeking to determine this difficult question of New South Wales law without proper expert evidence”. The observation, at [63], relied upon by DCA was made in the context of their Lordship’s separate consideration of the question of repudiation. Immediately after that observation, the following appears:

Whether or not the agreement is such as in law to give rise to an obligation of good faith, the expressed terms of the contracts (incorporating the Operations Manual) which their Lordships have quoted imposed contractual obligations of co-operation, and contain (clause 5B) a covenant by the Todds to maintain its business in compliance with the “DYMOCKS’ Image prescribed … in the Confidential Operations Manual”. The manual refers to the franchisee being “obliged to support group buys”. It also stresses “We must be a united team, we must be seen as a team. We must act as a team and we must be the best team”. In their Lordships’ view a statement by a franchisee that for the future he will not participate in group activities is a fundamental breach of the basic principles underlying the contract which, however vaguely they may be expressed, the franchisee has undertaken to comply with. On any basis the stance taken by the Todds in 1997 and 1998 was in direct conflict with the express contractual obligations by which they had undertaken to act in co-operation and as a team.

[Emphasis added]

124    So far as the common law of Australia is concerned and since Dymocks Franchise Systems was decided, the proposition that, under the common law of Australia, there could be implied into a contract a duty of trust and confidence has been rejected: Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 (Commonwealth Bank v Barker); materially, at common law, an implied duty would rise no higher than one of co-operation.

125    For all this, the description of a general feature of franchise contracts offered in Dymocks Franchise Systems is applicable to the Franchise Agreement. And DCA calls in aid not the common law but a statutory duty of good faith. The Franchise Agreement did provide for “what amounted in substance, to a joint venture” as between DCA and, materially, Mr Stefanovski and, by post-incorporation ratification, TK Sign Installations. On the findings of fact which I have made, Mr Stefanovski embarked on a course of conduct between January 2016 and August 2016 which had as its aim the facilitation of the progressive subversion of that joint venture by a new business, ARES, operated by a company controlled by his wife, ANT Printing, in which he had a financial interest. So to do is not to act in good faith. Neither he nor the company he controlled, TK Sign Installations informed DCA of this subversion of which each was necessarily aware. This also was not to act in good faith.

126    Though DCA cited Schedule 1, clause 6 of the Franchise Code to the end of submitting that it had been contravened, it did not expressly plead that this constituted a contravention of s 51ACB within Div 2 of Pt IVB of the Competition and Consumer Act 2010 (Cth) (CCA). Nor in its statement of claim did it expressly rely upon s 80(1)(a)(ii) of the CCA in support of its claim for injunctive relief or s 82 in respect of its damages claim. Yet a contravention of the code provision it cited would enliven power to grant such relief. DCA did expressly refer to s 51ACB and to the code in its initial outline of submissions filed and served in support of its application for interlocutory injunctive relief. The later omission of reference to s 51ACB (but not to the code) looks to have been a combination of inadvertence and because the role of TK Sign Installations came to its attention after the statement of claim was drawn. Whatever might otherwise have been the position in relation to the application of this code provision to Mr Stefanvoski, TK Sign Installations was, on any view, a corporation engaged in trade or commerce and he was a person knowingly concerned in the alleged corporate contravention. And so, too, for that matter, was Ms Clark on the findings which I have made.

127    That there was an alleged contravention of this provision in the code was expressly raised in DCA’s written submissions. While a case ought to be tried on the pleadings, I can see here a disjunct between the later addition of TK Sign Installations as a respondent and the initial written outline on the one hand and the statement of claim on the other. What I cannot see, contrary to the respondents’ submissions, is any procedural unfairness to any respondent, especially Mr Stefanovski, Ms Clark and TK Sign Installations, flowing from the code contravention allegation and the later failure expressly to refer to s 51ACB or to the powers to grant relief enlivened by any such contravention.

128    As pleaded, DCA cast its ACL contravention case by reference to s 18(1) [“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”] and s 21 of the ACL in Sch 2 to that Act. Materially, s 21 of the ACL provides:

21    Unconscionable conduct in connection with goods or services

(1)    A person must not, in trade or commerce, in connection with:

(a)    the supply or possible supply of goods or services to a person (other than a listed public company); or

(b)    the acquisition or possible acquisition of goods or services from a person (other than a listed public company);

engage in conduct that is, in all the circumstances, unconscionable.

129    DCA submitted that between January 2016, and at least August 2016 each of the corporate respondents was engaged in trade and commerce as a franchisee, that Mr Stefanovski was knowingly concerned in the conduct of TK Sign Installations and that Ms Clark was knowingly concerned in the conduct of ANT Printing as well as, in relation to the sale of the franchise, TK Sign Installations. It may be accepted that each of these respondents was engaged in trade or commerce and that Mr Stefanovski and Ms Clark were knowingly concerned as alleged.

130    It was then put that Mr Stefanovski and Ms Clark had surreptitiously established the ARES business during the period 2015-2016, a business similar to the franchised business, without DCA’s knowledge. This is not strictly correct. It was ANT Printing which established and then operated the ARES business but it is a fact that Mr Stefanovski and Ms Clark were each knowingly concerned in this. Further, it is a fact that the establishment and initial months of operation of that business were deliberately concealed from DCA.

131    It was then put that there can be misleading conduct by silence, by representations, or by a mixture of both: Fraser v NRMA Holdings Limited (1995) 55 FCR 452. So much may be accepted. It was next submitted that, “[having] regard to the parties prior dealings, the nature of their relationship, the purpose of the impugned conduct and the impugned actors’ knowledge, this a paradigm situation where DCA could reasonably have expected to be told about a competing business if one existed, or was to be commenced”. Reference was then made to Schedule 1, clause 6 of the Franchise Code. But that provision imposes a duty of good faith on a party to a franchise agreement; it is not a source of a reasonable expectation that any such duty will be observed. Further, the effect of Commonwealth Bank of Australia v Barker is that there could be no implication of any duty of good faith at common law, much less any reasonable expectation that any such duty would be observed.

132    Also pleaded in the statement of claim as misleading or deceptive conduct are particular alleged affirmative misrepresentations by Mr Stefanovski to Mr Anderson in April 2016. It is said that these were “made for the purpose of eliminating suspicion, concerning the establishment of ARES”. The statement by Mr Stefanovski that he and Ms Clark were separating, and that he was moving to the Gold Coast is identified as one of these. He did make such a statement. Further, I accept that it was part of a subterfuge. In each respect, the statement was false (and therefore deemed to be misleading: s 4 ACL). The statement as to a move to the Gold Coast contained an element of futurity but that does not mean that it is outside the purview of s 18(1) of the ACL.

133    DCA submits that, “by reason of the misleading conduct, DCA has suffered, and continues to suffer, loss and damage”. As to this, it is put that “DCA was induced to consent to the termination of the franchise agreement with Mr Stefanovski, as a result of the misleading conduct, when in the counter-factual, DCA would have sought to enforce clause 24.2 of the agreement (the post termination restraint) well before 11 November 2016”. Thus, so the submission goes, “ARES would not have “got off the ground”, because some sort of proceeding, akin to the present, would have been commenced immediately it became apparent that Ms Clark (with the imprimatur of Mr Stefanovski) was taking steps preparatory to that result”. [sic]

134    It is a fact that DCA consented to the termination of the operation of the Sydney South West franchise by Mr Stefanovski (the evidence does not include any written consent and whether that mentions TK Sign Installations). That it consented when it did in August 2016 was caused by a combination of both the circumstance of silence by Mr Stefanovski individually and on behalf of TK Sign Installations and by his affirmative misrepresentations. They were each part of an overall deception plan. It is inferentially more likely than not given her relationship with Mr Stefanovski, his financial interest in and her legal interest in ANT Printing’s ARES business that Ms Clark was well aware of and either counselled or procured this overall deception.

135    Though it continued to refer to s 21 of the ACL in submissions, these did not develop the unconscionable conduct aspect of DCA’s case. Recently, in Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd [2017] FCAFC 75, at [56], after a detailed consideration of authority (which I do not repeat), the Full Court observed in respect of statutory unconscionability (which includes but is by no means limited to conduct which equity would regard as unconscionable):

56    The primary judge’s task was to evaluate the facts by reference to a normative standard of conscience, a standard permeated with accepted and acceptable community values as to proper business practices, the content of which values were illuminated by the requirements of the TPA: Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90 at [23] (Allsop CJ, Jacobson and Gordon JJ).

136    Approaching the subject in this way, I find it difficult to see what any of the subterfuge conduct or the seeking of a 5% price increase to reduce the competitive threat posed by a person to whom one was selling one’s franchise business would add to conduct which is, in any event, contrary to the code obligation for a party to a franchise agreement to act in good faith. Even so, such conduct does, in my view, offend “accepted and acceptable community values as to proper business practices”. TK Sign Installations engaged in that conduct and Mr Stefanovski and Ms Clark were each knowingly concerned in it.

137    As to consequential relief, DCA pointed to s 232 of the ACL, particularly s 232(5) and s 232(6). It did not separately refer to s 80 and s 87 of the CCA in submissions but I do not consider that anything turns on that. It submitted that, “the following parties are persons who are within the class of persons who are captured by this injunctive power: Mr Stefanovski, Ms Clark, ANT Printing, T & K Group Properties Pty Ltd and TK Sign Installations Pty Ltd”. It submitted that the following injunctive relief ought to be granted:

(a)    against Mr Stefanovski, that he be restrained from:

(i)    being involved in the “ARES” business of ANT Printing or any other similar business;

(ii)    using information contained in the Manual;

(iii)    using client information derived from the website realestate@digitalcentral.com.au.

(b)    against Ms Clark and ANT Printing the applicant seeks that each of them be restrained from:

(i)    being involved in the “ARES” business, to the extent that the “ARES” business offers products similar to that of the former franchised business;

(ii)    using any confidential information contained in the Manual;

(iii)    using any data (including that stored on the computers used in the conduct of the “ARES” business) containing client information derived from the website realestate@digitalcentral.com.au.

138    I accept that a contravention of s 51ACB constituted by an “absence of good faith” contravention of Schedule 1, clause 6 of the Franchise Code does ground an entitlement to injunctive relief of this general kind against Mr Stefanovski, TK Sign Installations, Ms Clark and ANT Printing. So, too, does the contravention of s 21 of the ACL. There were contraventions of s 18 but all that this misleading or deceptive conduct did, in relation to DCA, was, more likely than not, to delay the institution of a proceeding against, at least Mr Stefanovski and more likely than not also ANT Printing and Ms Clark (to which, as it was in the present, TK Sign Installations would have been added if not an original respondent). In my view, there is a disjunct between the contraventions of s 18 and the injunctive relief claimed. That particular disjunct is of no consequence as an entitlement to injunctive relief is otherwise found in other statutory contraventions, breach of contract and equity.

139    DCA submitted that it was entitled to like injunctive relief in respect of the other causes of action upon which it relied (discussed above). I have reached particular conclusions above as to the non-statute based entitlements of DCA to injunctive relief.

140    DCA has not specified in the injunctive relief it promotes either a competition restraint period or a geographic area. Insofar as these are contractually based, there are necessary qualifications in respect of any such restraint. It is entitled to no more than 2 years, starting from the Franchise Agreement termination date and to an area no larger than the former franchise area (the Territory, as contractually defined). An absence of temporal precision also attends the “springboard” specification of injunctive relief in respect of confidential information, be that in the Manual or password protected on the website. A period of 2 years from March 2016 is all that is warranted (or elsewhere in submissions sought). Also to a restraint on the use of confidential information, “information contained in the Manual” looks clear enough (particularly as there has been no endeavour to “unbundle”) but “client information derived from the website realestate@digitalcentral.com.au” does not strike me as an apt description of the classes of information which, on the evidence, lie behind the password protected area on that website.

141    Insofar as its damages claim was based on the ACL, DCA relied on s 237 of the ACL. Once again, it did not separately refer to s 82 of the ACL in submissions but nothing turns on that. Also once again and for like reasons in respect of the claimed consequential injunctive relief, there is a disjunct between the s 18 CCA contraventions and any damages claim. Subject to the amount to which I have found, DCA is entitled by way of damages for breach of contract and equitable compensation in respect of lost royalty income is separately supported by an entitlement to damages in that same amount in respect of the contraventions of s 51ACB of the CCA and s 21 of the ACL. It is entitled to interest on its damages and equitable compensation claims. The quantified amount includes in part a prospective period, which must be taken into account in any award of interest to date.

142    Quite how DCA is entitled to any injunctive relief or damages against T&K Group Properties either under the CCA directly, the ACL or otherwise howsoever is enduringly elusive, a point well made in the respondents’ submissions. And probably conceded, sub silentio, by DCA by an absence of any developed submission as to how it had any cause of action on the evidence against that company. On the facts which I have found, T&K Group Properties is the landlord for ANT Printing at the Orange Grove Road property, nothing more. It is ANT Printing which conducts the ARES business and it was TK Sign Installations which once conducted the DCA Sydney South West franchise. T&K Group Properties never ratified the Franchise Agreement and, on the evidence, was not the recipient of any confidential information, be that in the Manual or from the password protected area of the website. As against T&K Group Properties, the application should be dismissed. Prima facie, that dismissal should be with costs, but, given the joint representation, these must necessarily be minimal.

143    It will be obvious from the above that there is a need for DCA to bring in short minutes of the orders to which it claims it is entitled having regard to the extent which it has succeeded. In the absence of agreement between the parties on that subject, it will be necessary for the proceeding to re-listed for consideration of submissions and determination of consequential orders. For the present, I shall only make orders directed to these ends.

Associate:    

Dated:    30 June 2017

SCHEDULE OF PARTIES