Dirt Devils Cleaning Solutions Pty Ltd v Jim’s Group Pty Ltd

1. [1]

   On 27 November 2021 the second plaintiff, Mr Miguel Dominguez, caused the first plaintiff, Dirt Devils Cleaning Solutions Pty Ltd, to be incorporated for the purpose of having the company enter into a franchise agreement with the defendant. The defendant is a franchisor of service businesses. It operates in several divisions under names such as Jim’s Cleaning, Jim’s Mowing, Jim’s Bookkeeping and so on. Within each division the defendant grants franchises to companies or individuals, each of whom then carries on a service business within one of the categories, centred on a nominated “territory”, utilising the “Jim’s” business name and receiving customer referrals from the defendant.

2. [2]

   On 1 February 2022 Mr Dominguez executed a franchise agreement and associated documents under which the first plaintiff became the franchisee operator of a Jim’s Cleaning business in a territory defined as Ambarvale, being a suburb in the south-west of the Sydney metropolitan area, near Campbelltown (Franchise Agreement). Mr Dominguez signed the relevant documents both as director of the first plaintiff and as guarantor of the first plaintiff’s obligations. The Franchise Agreement remained on foot until 8 February 2023 when it was terminated by the defendant on the ground of non-payment of fees.

3. [3]

   In their Second Further Amended Statement of Claim filed on 25 March 2026 (the Statement of Claim) the plaintiffs advance the following causes of action:

   1. (1)

      Misleading and deceptive conduct contrary to s 18 of the Australian Consumer Law (being Sch 2 to the Competition and Consumer Act 2010 (Cth)). The misleading conduct is alleged to have consisted in representations by which the plaintiffs were induced to enter into the Franchise Agreement. Section 29(1) of the Australian Consumer Law is relied upon as an additional basis of liability for the representations. The remedy sought is damages, to be assessed on a “no transaction” basis; that is, compensation for the plaintiffs for everything they expended upon entering into the transaction and in carrying out its terms, with allowance for any earnings or other benefits derived.

   2. (2)

      Breach of the Franchise Agreement constituted by overcharging fees and restricting referral of customer leads to the first plaintiff. The claimed remedy is refund of overcharged amounts and damages for loss of business.

   3. (3)

      Wrongful termination of the Franchise Agreement, for which the plaintiffs claim damages for the loss of their bargain, to be assessed by reference to the value of the franchise business and the price for which it could have been sold.

   4. (4)

      Unconscionable conduct of the defendant, contrary to s 21 of the Australian Consumer Law, constituted by the alleged misrepresentations, breaches of the Franchise Agreement and wrongful termination of the agreement. Damages are claimed, to be assessed as an aggregation of losses allegedly caused by the breaches of contract and the loss of opportunity to build up the franchise business and sell it. Damages for “vexation and distress” are also claimed.

   5. (5)

      Breach of the statutory obligation to act towards the plaintiffs with good faith. The plaintiffs rely upon s 51ACB of the Competition and Consumer Act (which prohibits contravention of any applicable industry code) in combination with the Franchising Code of Conduct (which is Schedule 1 to the Competition and Consumer (Industry Codes-Franchising) Regulation 2014 (Cth). The breach of the obligation of good faith is alleged to have consisted in the same conduct as specified in relation to the unconscionable conduct claim, which in turn is the same as that pleaded in claims (1) (misleading and deceptive conduct), (2) (breach of contract) and (3) (wrongful termination).

4. [4]

   The proceedings were commenced by a Statement of Claim filed on 28 November 2022, with only Mr Dominguez as plaintiff. He did not have legal advice or representation at the time. The originating process did not allege a complete cause of action. In a single paragraph the pleading raised three grievances. Mr Dominguez alleged that from 8 November 2022, first, the defendant had restricted his access to an online application that was used for the referral of potential clients to his franchise business; secondly, that the defendant had not made any referrals of work to Mr Dominguez and, thirdly, that the defendant had not made a weekly phone call to Mr Dominguez, contrary to an alleged requirement of the Franchise Agreement. The relief claimed was $20 million.

5. [5]

   On 20 March 2023 Walton J heard an application by the defendant that the proceedings be dismissed summarily on the basis that there was no tenable cause of action underlying the obviously inadequate pleading: r 13.4 of the Uniform Civil Procedure Rules 2005 (UCPR). In the alternative the defendant sought to have the pleading struck out pursuant to r 14.28. It was apparent from the evidence tendered on the application that the proper plaintiff for any of the matters that Mr Dominguez wished to agitate was his company, the franchisee of the defendant, and not himself.

6. [6]

   Walton J reserved his decision. On 19 May 2023 an application for voluntary deregistration of Dirt Devils Cleaning Solutions Pty Ltd was lodged with the Australian Securities and Investments Commission. The application must have been made by Mr Dominguez himself, as he was the sole director. The company was deregistered pursuant to that application in July 2023. On 4 August 2023 Walton J delivered his decision on the defendant’s application: Dominguez t/as Jim’s Cleaning Ambarvale v Jim’s Group Pty Ltd [2023] NSWSC 913. His Honour refused to dismiss the proceedings summarily but struck out the pleading and granted Mr Dominguez leave to file an amended statement of claim.

7. [7]

   Mr Dominguez filed an Amended Statement of Claim on 27 August 2023, still without adding his company as a plaintiff notwithstanding that Walton J had expressly held, only three weeks earlier, that any claim under the Franchise Agreement would have to be brought by Dirt Devils Cleaning Solutions Pty Ltd: at [88]. Unsurprisingly, the defendant filed a notice of motion on 4 October 2023 again seeking that the proceedings be dismissed summarily under r 13.4 or alternatively that the new pleading be struck out pursuant to r 14.28.

8. [8]

   That further application for summary dismissal came before Schmidt AJ on 8 March 2024. Her Honour made an order referring Mr Dominguez to the Registrar to obtain “legal assistance about reregistration of Dirt Devils Cleaning Solutions Pty Ltd and the pleading of his statement of claim”. To facilitate the referral, the notice of motion was adjourned. The plaintiff had secured re-registration of his company by 21 May 2024 and he filed a Further Amended Statement of Claim, joining the first plaintiff and naming himself as second plaintiff. On 4 June 2024 leave was granted retrospectively for the plaintiffs to rely upon the Further Amended Statement of Claim and the defendant’s application in relation to the pleading that had been filed on 27 August 2023 was dismissed, with costs reserved.

9. [9]

   The present solicitor for the plaintiffs filed notice of her appointment on 3 June 2024. As earlier mentioned, the pleading has been amended again on 25 March 2026 to the current Statement of Claim.

Outline of the defendant’s franchise business

1. [10]

   It is necessary to set out a preliminary outline of the defendant’s business model to provide context for consideration of the plaintiffs’ causes of action. The defendant operates a Customer Contact Centre in Melbourne that may be contacted by prospective customers on a 131 number. Callers incur only a local call charge on fixed lines from anywhere in Australia. The Centre operates every day of the week and is staffed at a level intended to enable customers’ calls to be answered with minimum delay. If the caller seeks cleaning services, his or her name and contact details are taken down and are referred to one of the defendant’s cleaning division franchisees.

2. [11]

   The defendant provides national advertising for all the services that are provided through its various divisions. It endeavours to establish wide recognition of its tradenames, including “Jim’s” and “Jim’s Cleaning”. The defendant owns trademarks that include a distinctive head and shoulders portrait sketch of a workman. Tradenames and trademarks are used consistently to maintain brand awareness. The defendant’s agreements with its franchisees include terms that are intended to maintain high standards in the provision of services.

3. [12]

   I infer that the business model is based upon an assumption that prompt delivery of good quality service by franchisees will attract and maintain custom for the Jim’s brand, with benefit for the franchisees in volume of referrals to them and benefit for the defendant in making it attractive for business operators to enter into franchise contracts. The defendant charges an initial purchase price for a franchise agreement, as well as fees for training. The defendant sells uniforms, equipment and consumables to its franchisees and charges ongoing monthly fees for advertising. It charges a small fee for each referral of a lead for a potential customer.

Events leading to execution of the Franchise Agreement

1. [13]

   On 8 November 2021 Mr Dominguez had a Zoom meeting with Ms Silvia Valeri, Business Development Manager for the defendant. They discussed Mr Dominguez’ interest in acquiring a Jim’s Cleaning franchise. On 9 November 2021 Ms Valeri sent an email to Mr Dominguez that included the following (emphasis added):

2. [14]

   Mr Dominguez gave oral evidence that English is his second language and that there are a lot of words he does not understand in written English. He arrived in Australia at the age of 13 in 1988 and completed his Higher School Certificate in 1994. He was 46 years old when he commenced dealings with the defendant. He said that he read the email of 9 November 2021 upon receipt. The only part of it that he said he did not understand was the reference to “lead fees”.

3. [15]

   The documents attached to the email included a three page breakdown of the outlays required from the plaintiffs, including $12,000 for the franchise and $8,156 for training, equipment, consumables and sundry items. Also attached was a 25 page brochure containing a detailed narrative description of how the cleaning franchise system works. In oral evidence Mr Dominguez said he does not recall reading the and thinks that he did not read it.

4. [16]

   On 2 December 2021 Ms Valeri sent a further email to the plaintiff attaching the Franchise Agreement that the first plaintiff and Mr Dominguez would be required to execute, as franchisee and guarantor respectively, if they should proceed with the transaction. Clauses 2.1, 4.1 and 7.20 of the Agreement stipulate that the parties are bound to perform it according to its terms and “the Manuals”. A Franchisee Manual was also attached to Ms Valeri’s email of 2 December 2021. Further attachments included an Australian Competition and Consumer Commission guide to compliance with the Franchising Code of Conduct, a Key Facts sheet concerning the defendant’s trading history as a franchisor and two Disclosure Documents for Prospective Franchisees prepared by the defendant.

5. [17]

   By the time that email was sent out to Mr Dominguez he had nominated to Ms Valeri that the territory for which he wished to obtain a franchise was Ambarvale. The email of 2 December 2021 referred to the attached materials as “your document suite”. The email contained the following instruction:

6. [18]

   One of the included documents was entitled “Franchisee Checklist”. It commenced with a listing of the documents provided and contained the following further instructions (emphasis as in original):

7. [19]

   In his affidavit sworn on 3 April 2025 at par 86, Mr Dominguez deposed that he “read through the suite of documents when I had received them on 2 December 2021, however, I did not read them closely”. He gave oral evidence that he did not read any of those documents, at any time, until he commenced the proceedings. I accept the oral evidence. In his answers to several questions Mr Dominguez held to the position that he had not read the documents, even when he was queried as to the imprudence of not studying them, given that they are long and detailed legal instruments that self-evidently contained the terms of the commercial arrangement he was proposing to enter into. In one answer Mr Dominguez said that he read parts of the Manual but he did not specify what parts. When asked specifically about the portions of the Manual extracted at [30] below, he could not remember whether he read them or not.

8. [20]

   In both his affidavits and oral evidence Mr Dominguez said that he did not at any time before entering into the Franchise Agreement seek advice from anyone with respect to the contents, meaning or effect of the written material sent to him on 2 December 2021.

9. [21]

   Mr Dominguez deposed that on or about 8 December 2021 he received an invoice from the defendant for $10,105.53, which he paid at about the time of receipt. The invoice was for “Schedule Items” and “Start up Pack”. Ms Valeri’s email of 9 November 2021 explained what was comprised in those descriptions: franchisee training in Melbourne, uniform, stationary, on road training, cleaning equipment and chemicals (that is, cleaning agents).

10. [22]

    In about late November 2021 Mr Dominguez purchased a hatchback sedan motor vehicle that he proposed to use in the business. In December 2021 he bought a purpose-built trailer for carrying cleaning equipment and chemicals. In mid-January 2022 he had the trailer “wrapped” with Jim’s signage.

11. [23]

    Between 9 and 12 January 2022 Mr Dominguez attended franchisee training conducted by the defendant in Melbourne. This was group training for a number of new franchisees. At par 66 of his affidavit of 3 April 2025 Mr Dominguez deposed to the following events during the training presentations (emphasis omitted):

12. [24]

    On about 14 January 2022 Mr Dominguez received a further invoice from the defendant for $12,000, for which the narration was “Balance of Jim’s Cleaning (Ambarvale)”. He paid the invoice on about 24 January 2022. In late January 2022 he undertook on-the-job training with another Jim’s Cleaning franchisee, from which he did not consider that he received any useful instruction or guidance. Also in late January 2022 he signed all the documents that he had received under cover of Ms Valeri’s email of 2 December 2021.

13. [25]

    Execution of the Franchise Agreement included signing a statement that, in circumstances where Mr Dominguez had not sought or obtained advice from an independent legal advisor, business advisor or accountant, he made the following acknowledgement on behalf of the second plaintiff as Franchisee:

Alleged misleading representation as to unrestricted advertising

1. [26]

   At par 56 of the Statement of Claim the plaintiffs have pleaded two particulars of misleading and deceptive conduct in contravention of ss 18 and 29(1) of the Australian Consumer Law. The first particular is as follows (emphasis added):

2. [27]

   The following are the relevant parts of the two sections of the Australian Consumer Law relied upon by the plaintiffs:

3. [28]

   For the purposes of s 29(1)(b), the plaintiffs characterise the Franchise Agreement as connected with the supply by the defendant of the service of operating the franchise business, including referring customer leads. I do not consider that either of the representations alleged by the plaintiffs fall within par (b) of s 29(1), so that the section is inapplicable. I will give it no further consideration. The plaintiffs’ reliance upon the section is, in any event, superfluous. If the alleged representations were misleading and deceptive then s 18 is a sufficient basis for the plaintiff’s damages claim. Straining the language of s 29(1)(b) to try to bring the claim under that section as well is a pointless exercise.

4. [29]

   There is no dispute from the defendant that, if made, the representation pleaded in par 56(a) of the Statement of Claim would have been contrary to the terms of the Franchise Agreement that the defendant invited the plaintiffs to sign. Clause 7 of the Agreement contains the following:

5. [30]

   The Manual, which as already mentioned had contractual force, contained the following provisions with respect to advertising and promotion by the franchisee:

6. [31]

   The email of 9 November 2021 that the plaintiffs plead as the source of the misrepresentation alleged in par 56(a) of the Statement of Claim does not contain the words highlighted in the above reproduction of that paragraph. Ms Valeri wrote that the defendant does not “place any restrictions on when and where you can work” but nothing in the text of her email, extracted at [13] above, conveyed any suggestion that “where you can work” included where the franchisee could advertise.

7. [32]

   To the contrary, advertising was dealt with separately in a later part of the email, under the heading “Marketing Support”. The distinct treatment of that subject made clear that the absence of restraint upon locations in which cleaning work could be undertaken did not embrace absence of restraint upon where the franchisee’s business could be advertised. Explicitly, the email’s only affirmative representation as to the franchisee’s entitlement to conduct his or its own advertising was as follows:

8. [33]

   The plaintiffs nevertheless contend that a representation to the effect pleaded at par 56(a) arose from the email of 9 November 2021 in combination with surrounding circumstances and communications. The first category of contextual events relied upon is the oral exchange between Mr Dominguez’ and Ms Valeri in their Zoom meeting on 8 November 2021.

9. [34]

   Mr Dominguez’ gave an account of the Zoom meeting in his first affidavit of 11 November 2023. He deposed at pars 4 and 5 as follows:

10. [35]

    That evidence is consistent with Ms Valeri’s email of the next day and does not advance the plaintiffs’ case as to the pleaded representation concerning unrestricted advertising. I do not accept that Mr Dominguez could independently and reliably recall the conversation of 8 November 2021, either when he made his first affidavit two years later or at any time since. On the basis of his oral testimony and his generally un-businesslike approach to dealings with the defendant, I consider that he is not sufficiently alert, attentive or precise in his thinking to have retained a genuine and dependable recollection of any of the relevant conversations.

11. [36]

    However, I accept that from the outset of the discussion with Ms Valeri it was in Mr Dominguez’ mind that he wanted to be able to perform cleaning work beyond the limits of his own suburb. On the balance of probabilities I accept that Ms Valeri either volunteered that Mr Dominguez or his company would be able to operate the business beyond Ambarvale or confirmed that position in response to a question from Mr Dominguez. After all, that was a feature of the defendant’s business model and was promoted as such in Ms Valeri’s follow-up email of the next day and in the 25-page brochure attached to the email.

12. [37]

    In his further affidavit sworn on 3 April 2025, at par 26, Mr Dominguez purported to recall that the conversation in the Zoom meeting of 8 November 2021 included words the following effect:

13. [38]

    This affidavit was made 4½ years after the relevant conversation. Putting aside Mr Dominguez’ account of his internal thought processes in the middle of sub-par e of par 26, the remainder of sub-pars d and e merely reiterates what he deposed to on 11 November 2023 and I am satisfied for reasons already given that Ms Valeri told Mr Dominguez he could perform cleaning work beyond the limits of Ambarvale.

14. [39]

    As for sub-par f, I do not accept that when Mr Dominguez made this affidavit he had any genuine recollection of a statement by Ms Valeri that franchisees were not restricted as to how they could advertise their business. In addition to my lack of confidence in Mr Dominguez’ powers of recollection, I find it highly improbable that Ms Valeri would have made such statement. It would have been in direct contradiction of the restraint upon out-of-area advertising that was an important feature of the defendant’s franchising business model. Ms Valeri’s email of the next day, 9 November 2021, shows that she was conscious that the model restricted individual franchisees’ personal advertising to their agreed territory.

15. [40]

    Mr Dominguez contradicted sub-par f of par 26 of his affidavit of 3 April 2025 in the following passage of oral evidence (emphasis added):

16. [41]

    On the basis of that evidence and taking into account the probabilities referred to at [39] above, I am affirmatively satisfied that on 8 November 2021 Ms Valeri did not say anything specific about how a franchisee of the defendant could advertise or promote his or its business.

17. [42]

    As Mr Dominguez does not recall reading the 25-page brochure that accompanied Ms Valeri’s email of 9 November 2021, he does not rely upon it in support of his allegation that the email conveyed the representation pleaded in par 56(a). The brochure is neutral on this issue. It expressly confirms that franchisees may work out of their contractual territory. It describes the defendant’s system of centralised advertising and referral of customer leads. However, the brochure is silent on the question of whether a franchisee may undertake his or its own promotional activity and, if so, where.

18. [43]

    The plaintiffs’ case is that they were induced to enter into the Franchise Agreement in reliance upon misleading conduct constituted by the alleged representation. It is relevant to consider that the contractual documentation was provided by the defendant to the plaintiffs on 2 December 2021, well before they committed themselves to the transaction by signing at the end of January 2022. The Franchise Agreement and Manual were provided before the plaintiff’s made their first payment, for training and supplies, on 8 December 2021. Even if the email of 9 November 2021, taken alone, was open to the construction that the plaintiffs allege in par 56(a) of the Statement of Claim, the Court would not accept that that constituted misleading and deceptive conduct in circumstances where the email was followed by documents making perfectly clear that the franchisee’s advertising and promotional activity would be restricted to territory.

19. [44]

    The parts of the documents that spelt out the restrictions on individual advertising have been identified earlier in these reasons. The plaintiff was expressly encouraged, in writing, to read the documents and to obtain independent advice upon them. Taking the defendant’s conduct as a whole, I am satisfied that the email of 9 November 2021 was not misleading or deceptive in itself and that any possibility of misleading effect was overcome by provision of the contractual documents well in advance of the date for signing, with encouragement to take independent advice. Objectively, the plaintiffs were fully informed about the rights, obligations and constraints that would arise under the Franchise Agreement.

20. [45]

    In Mr Dominguez’ affidavit sworn on 11 November 2023 he deposed as follows:

21. [46]

    Neither in that affidavit nor in the original Statement of Claim filed on 8 November 2022 did Mr Dominguez assert that the plaintiffs would not have entered into the Franchise Agreement if he had known of the contractual restriction upon where the franchisee could advertise and promote the Ambarvale franchise business, as opposed to where cleaning work could be performed.

22. [47]

    On 3 April 2025 Mr Dominguez’ deposed to the following:

23. [48]

    I have earlier stated my finding that on 8 November 2021 Ms Valeri did not say anything specific about promotion or advertising of the franchise cleaning business. Mr Dominguez’ argumentative support in the above paragraphs for the proposition that he critically relied upon unrestricted advertising therefore falls away.

24. [49]

    If, as he stated in oral evidence, Mr Dominguez assumed that lack of restriction upon where a franchisee could perform cleaning work also extended to where the franchisee could advertise, the assumption was not rationally justified by anything that the defendant communicated to him. If Mr Dominguez made such an assumption, or formed such an understanding, I do not accept that it was a cause of the plaintiffs entering into the Franchise Agreement, for the following reasons.

25. [50]

    In Mr Dominguez’ 3 April 2025 affidavit at par 66e he deposed to the following as one of a number of statements made by the defendant’s representatives during the January 2022 training days:

26. [51]

    At par 68 Mr Dominguez deposed to his reaction when informed by Messrs Davenport and Penman during the training presentation that out-of-area advertising was prohibited:

27. [52]

    In oral evidence Mr Dominguez contradicted his deposition about a statement that there would be “no refunds”, in the following answers:

28. [53]

    I accept Mr Dominguez’ evidence that his first appreciation of the restriction on out-of-area advertising was acquired during the January 2022 training presentation. I do not accept that the reason he pressed on with acquiring the franchise business, despite having learned that he could not advertise outside his territory, was that he thought the loss of the $10,105.53 he had already paid left him with “no real choice”. The premise of that explanation, in par 68 of the affidavit, is that he was told there would be no refunds. Having conceded in oral evidence that he was told no such thing, his explanation for having proceeded with the Franchise Agreement is effectively abandoned.

29. [54]

    I find it inconceivable that if, as Mr Dominguez asserts, out-of-area advertising was critical to him, he would not at least have protested about advertising restrictions when told of them at the training presentation. The reconciliation of the evidence is that any expectation Mr Dominguez had up until mid-January 2022 that he would be free to advertise out-of-area was not essential to the transaction, from his point of view. No misapprehension on the point was a cause of the plaintiffs committing to the transaction.

Misleading representation about fees for client leads

1. [55]

   The plaintiffs’ second particular of misleading and deceptive conduct is as follows (emphasis added):

2. [56]

   The words highlighted in bold do not appear in the email of 9 November 2021. The relevant actual wording is as follows:

3. [57]

   In cl 1 of the Franchise Agreement the following relevant definitions appear:

4. [58]

   As a matter of common usage in the commercial setting of a service business, the term “lead” would ordinarily denote the identification of, or an introduction to, a potential customer for services of the type offered by the business. It is clear from the juxtaposition of the two above definitions that the term “Client Lead” is used in that sense (Client Lead). By the use of the words “the mere opportunity”, the definition makes it clear that Client Leads are not limited to the identification or introduction of persons or entities who actually become customers of the franchisee to whom the defendant gives “the mere opportunity to provide either a service or a quotation for a service”.

5. [59]

   Any Client Lead could progress to one of a number of alternative outcomes. The franchisee might contact the lead and provide a quote, which the lead might accept, resulting in hire of the franchisee for reward. A second possibility is that the quote might be rejected and would not be followed by engagement or payment. Thirdly, upon following up the lead, the potential customer might indicate a change of mind about requirement for the service or might advise that in the meantime some other provider has been engaged. Fourthly, a phone call from the franchisee to the lead might go unanswered and a voice or text or email message left by the franchisee might elicit no further contact. Fifthly, if the lead’s phone service should have no facility for leaving a message, the franchisee might be unable to make any contact.

6. [60]

   Clause 7.6 of the Franchise Agreement obliges the franchisee to pay to the defendant “the Monthly Franchise Fees”. That obligation continues for the term of the Agreement. The Monthly Franchise Fees are defined in cl 1 to include “the Lead Fee” which in turn is defined as the amount payable as listed in item 10 of the Schedule to the Franchise Agreement. The Lead Fee is specified in the Schedule as follows:

7. [61]

   The Manual includes the following provisions with respect to lead fees:

8. [62]

   Having regard to the self-evident range of possible outcomes of a franchisee attempting to follow-up a “new client sent out to the franchisee” (the words used in the email of 9 November 2021), it cannot be said that the email conveyed that the identified charge would only be levied if the referral resulted in the franchisee’s services being engaged. The email said nothing about such a limitation. The use of the word “client” did not convey the limitation. It is clear from the whole tenor of the email that whether or not the person referred would become a client in the sense of engaging the franchisee would be entirely up to the franchisee being willing to take on the work and being able to reach agreement with the client about terms. In the setting of this business model, the word “client” in the relevant part of the email meant potential client. The only reasonable reading of the impugned words in the email is that the lead fee of $15.64 with a discount of 15% would be charged for the referral, not for a concluded hire agreement being entered into.

9. [63]

   The brochure that was attached to the email of 9 November 2021 included the following explanations of the lead fee that would be payable under the Franchise Agreement (emphasis added):

10. [64]

    It is clear from the words in bold that the charging of lead fees would not be conditional upon the lead being converted to a paying engagement. On the contrary, the 15% discount was applied in recognition that some proportion of leads for which fees would be charged would not be so converted.

11. [65]

    Although Mr Dominguez does not recall reading the brochure and thinks that he did not, it must be taken into account in determining whether the email of 9 November 2021 was misleading in the respect complained of at par 56(b) of the Statement of Claim. The business relationship that was offered by the defendant involved detailed terms with numerous rights and obligations on each side. It could not be described in all its aspects within a few sentences. The brochure explained the basis of charging lead fees consistently with the contractual terms in the Franchise Agreement and Manual.

12. [66]

    In her email Ms Valeri directed Mr Dominguez’ attention to the brochure as providing “sufficient initial information”. If the pleaded representation could reasonably have been taken from the email, which I do not accept, it did not constitute misleading or deceptive conduct because the email and the attached brochure must be taken together.

13. [67]

    Further, the conduct of the defendant in sending the email of 9 November 2021 must be assessed for its alleged misleading and deceptive character in the context that it was followed three weeks later by provision of the full text of the proposed Franchise Agreement and the Manual, with ample opportunity for Mr Dominguez to read those documents and with encouragement to him to take independent advice. The terms of the Agreement and, particularly, the Manual made it plain that the lead fee would be charged for all leads referred, not only for leads that were converted into paying engagements of the franchisee’s services.

14. [68]

    Mr Dominguez deposed to the following, concerning lead fees, in his affidavit sworn on 3 April 2025:

15. [69]

    Inconsistently with par 35, in oral evidence Mr Dominguez did not claim to have made any assumption about the basis upon which lead fees would be charged but said that he did not understand those fees and did not seek any explanation of them from the defendant. His relevant answers were as follows:

16. [70]

    The oral evidence directly negates the plaintiffs’ pleaded case that they were misled or deceived concerning lead fees by the 9 November 2021 email. I am not satisfied that Mr Dominguez took from the email any meaning inconsistent with the terms regarding lead fees that were contained in the contractual documents signed at the end of January 2022. Nothing written in the email or omitted from it on the subject of lead fees caused him any loss. He was content to enter into the Franchise Agreement without understanding the basis upon which lead fees would be charged.

Conclusion on the misleading and deceptive conduct case

1. [71]

   Mr Dominguez’ oral evidence, considered with the whole of the information conveyed to him by the defendant prior to execution of the Franchise Agreement, shows that the plaintiffs’ pleading of misrepresentations and Mr Dominguez’ depositions in his affidavit of 3 April 2025 about having been misled by reliance upon misrepresentations amounted to an artificial attempt to construct a cause of action. The plaintiffs’ case based upon ss 18 and 29(1) of the Australian Consumer Law fails and must be dismissed.

Alleged breach of the Franchise Agreement – restriction of referrals

1. [72]

   The defendant’s business records include an electronic log of communications between the defendant and each franchisee. With respect to the plaintiffs, the log comprises a mixture of emails between the defendant and Mr Dominguez and contemporaneous notes by the defendant’s staff of their phone conversations with Mr Dominguez.

2. [73]

   As part of the franchise system the defendant provided Mr Dominguez with an application for his mobile phone, by means of which he could nominate areas in which he would be willing to carry out cleaning services. The application also enabled Mr Dominguez to limit the hours of the day between which he would be willing to receive leads and the maximum number of leads per day that he wished to be offered. The defendant would limit its referral of leads in accordance with the nominated parameters.

3. [74]

   When he commenced business under the franchise in about February 2022, Mr Dominguez initially adopted settings on the application that enabled him to receive leads from the whole of the Sydney metropolitan area, including towards the central business district. However, he found that travelling time made this not worthwhile and he narrowed the settings to suburbs closer to his home in Ambarvale. Because he was being charged a fee for each lead he did not want to receive leads that would be impractical and/or uneconomic for him to follow up.

4. [75]

   As at 8 August 2022 Mr Dominguez had configured the application to receive a maximum of four leads on Mondays and Tuesdays and one lead on other days. He specified the hours of 8:00 am to 5:00 pm Monday to Friday and 10:00 am to 5:00 pm on Saturday and Sunday as the intervals within which he would willing to receive leads. In an email of 8 August 2022 one of the defendant’s staff urged him to extend his willingness to take leads in order to expand his business. It was pointed out that he did not have to work longer hours but by increasing his willingness to receive leads he would secure engagements to fill his available working hours within whatever days and time intervals he was prepared to work.

5. [76]

   During the second half of August 2022 Mr Dominguez told the defendant’s staff that he was busy. There is no evidence that he heeded the defendant’s advice to increase his availability to receive leads. Mr Dominguez described his workflow as “a little quiet” on 14 September 2022. At about that time complaints about his performance were received by the defendant as described below. He again said that he was “a little quiet” on 13 October 2022, at which time he had narrowed the windows within which he would receive referrals to 11:00 am to 5:00 pm that day, a Thursday, and 11:00 am to 3:00 pm the next day.

6. [77]

   In his affidavit sworn 3 April 2025 Mr Dominguez deposed that on average six leads per week did not respond to his attempts to make contact notwithstanding that he always tried to call back within 15 minutes. His estimate of six failed leads per week amounts to 36 per month. However, he only received 38 leads in August 2022, 27 in September and 37 in October. His estimate of uncontacted leads cannot be correct as it would have left him with no work at all. I accept that some proportion of the leads referred to the plaintiffs could not be converted to paying work. On the evidence I am not able to determine whether the proportion was more than 15% or, if so, how much more.

7. [78]

   The defendant’s centralised customer contact system was utilised not only by potential customers enquiring about the provision of services but also for customer responses to surveys regarding work performed and for customer complaints. The defendant’s communications log shows that by 26 September 2022 three complaints about the quality of the plaintiffs’ service had been received. Each of those complaints was discussed between one of the defendant’s staff and Mr Dominguez. He provided answers to the complaints. Mr Penman sent Mr Dominguez an email on 26 September 2022 stating that he regarded the complaints as serious and urging that Mr Dominguez improve his performance.

8. [79]

   On 8 November 2022 a member of the defendant’s staff proposed a 50% refund to a customer who complained about poor cleaning work. On 9 November 2022 Mr Penman issued the following instruction to the staff member handling the most recent complaint:

9. [80]

   “Limiting to territory” meant that the plaintiffs would receive referrals only for work in the territory defined in the Franchise Agreement and not for work to be performed in other areas wherein Mr Dominguez had indicated a willingness to provide cleaning services.

10. [81]

    On 10 November 2022 Mr Penman sent a further email in the following terms:

11. [82]

    Mr Dominguez responded on 16 November 2022 with a long email asserting that he had only learned of the obligation to pay lead fees when he attended the training in Melbourne between 9 and 12 January 2022. He complained that most of the leads sent to him either could not be contacted upon prompt call-back or, if contacted, did not engage his services. He also wrote that his training had been inadequate and requested a refund of “the amount that I paid for the Franchise so we can part ways”. Mr Penman replied the same day, telling Mr Dominguez that he had been told very clearly about lead fees before he signed.

12. [83]

    On 16 November 2022 Mr Dominguez sent to the defendant a document headed “Notice of dispute”. The core complaints in this document were as follows:

13. [84]

    Mr Penman responded by email on 17 November 2022, rejecting the proposed resolution and stating that the “policy on lead fees is clearly stated in your contract” and that the “need to offer good service” was urged at the precontract training. On 7 December 2022 Mr Dominguez lodged with the Small Business Commissioner for NSW an application for assistance in resolving his dispute with the defendant. The application, a copy of which was sent to the defendant, specified that the plaintiffs wanted a refund of what they had paid for the franchise and compensation of $500,000. Mr Dominguez specified in the application form that he hoped to achieve the following from mediation:

14. [85]

    Clause 4.7 of the Franchise Agreement stipulates that the defendant will provide Initial Training, as defined in cl 1, and cl 4.8 obliges the Franchisee to attend and complete that training, to the satisfaction of the defendant, prior to the signing of the Agreement. Clause 4.8A is as follows:

15. [86]

    Clause 5 contains the following subclauses regarding referral of leads and restrictions of referrals:

16. [87]

    Clause 7.22 obliges the franchisee to perform all services in the franchise business “in a professional and workmanlike manner”.

17. [88]

    The Manual makes the following provision for allocation of Leads to franchisees and for restriction of such allocation:

18. [89]

    Under that ranking, the second plaintiff could expect referral of leads from outside its territory of Ambarvale, subject to the qualification in the last sentence of the wording quoted above. There are further provisions of the Manual relating to automatic consequences in the event of high frequency of complaints from customers but the above provision is relied upon by the defendant as conferring upon it a discretion to restrict the franchisee to referrals arising within its own territory if customer service is deemed “poor”.

19. [90]

    At pars 24 and 31 of the Statement of Claim the plaintiffs allege that the defendant breached the Franchise Agreement on about 8 November 2022 by ceasing to refer Client Leads from outside Ambarvale without having given notice of any alleged breach of the Agreement by the first plaintiff and without having issued any written notice pursuant to cl 5.2. The defendant’s conduct in this respect is said to have been a breach of cl 5.2 and of an implied obligation of the defendant to act in good faith. The defendant does not dispute that it was under such an implied obligation.

20. [91]

    Clauses 5.2 and 5.3 empower the defendant to cease referring any leads to a franchisee, including from within the franchisee’s territory, either pending remedy of a notified breach of the Agreement under cl 5.2 or permanently under cl 5.3 – provided the prerequisites of the respective clauses are satisfied. Clauses 5.2 and 5.3 are sufficiently wide terms to empower the defendant, alternatively, to cease referring only a limited category of leads, such as those arising outside the territory.

21. [92]

    In my view the provision of the Manual for allocation of leads confers upon the franchisor a discretion, independent of cll 5.2 and 5.3, to restrict leads to territory. That independent discretion is not constrained by the prerequisites of cll 5.2 and 5.3. No breach of cl 5.2 arose from the defendant’s exercise of the discretion in the circumstances that I have recounted above.

22. [93]

    Nor have the plaintiffs established that the defendant breached its implied obligation of good faith by restricting the plaintiffs to territory from 8 November 2023. It is clear from the contemporaneous records in the defendant’s log of communications with Mr Dominguez that the defendant had received four complaints of poor service, which it regarded as serious and significant. The evidence includes detailed accounts of what the respective customers complained about and how Mr Dominguez responded to those complaints, directly to the customers in some cases and also by way of explanation to the defendant.

23. [94]

    There is every appearance that the defendant’s concern about the number and nature of the complaints was genuine. The burden rests upon the plaintiffs to prove an absence of bona fides, or that the defendant merely purported to act in response to the complaints while in truth it was restricting the second plaintiff to territory from some ulterior motivation. The plaintiffs have shown no evidence of that.

24. [95]

    I reject the plaintiffs’ submission that “as at 10 November 2022, Mr Dominguez had only 3 complaints, which Mr Penman did not bother to investigate or seek Mr Dominguez’ response to”. The defendant’s records show nine complaints in 2022: on 3 March, 4 April, 7 April (two complaints from separate customers), 27 May, 18 September, 27 October, 31 October and 8 November. Some of these are noted as “Deleted” or “At fault” or “Settled”, indicating that the defendant had made an examination of the circumstances, upon the basis of which a view on the merits of the respective complaints had been formed.

25. [96]

    The bona fides of Mr Penman as the decision maker with respect to restricting the second plaintiff to territory do not depend upon him having investigated the complaints personally. The defendant tendered from its business records electronic notes of Mr Dominguez’ responses to the last five complaints (27 May, 18, 27 and 31 October and 8 November). The responses were obtained and recorded by Ms Nikki Pinch and Ms Kim Field. Clearly, the complaints were investigated and I infer that Mr Penman informed himself of what his staff had ascertained before restricting the second plaintiff to territory.

26. [97]

    It is notable that the restriction was imposed pending Mr Dominguez undergoing retraining. The legitimacy of that requirement is contested by the plaintiffs but it was permitted by cl 4.8A. Even without reliance upon that clause, the discretion conferred by the Manual was broad enough to empower the defendant to withhold leads from out of the franchisee’s territory on terms that referrals would be renewed if retraining should be undertaken. The fact that the defendant required retraining as a condition of removing the restriction to territory is testament to the reasonableness and good faith of the defendant’s action.

27. [98]

    The restriction of the second plaintiff to territory has not been shown to have constituted a breach of either the express provision of the Franchise agreement in cl 5.2 or the implied obligation of the defendant to act in good faith.

Alleged breach of the Franchise Agreement – fees for unconverted leads

1. [99]

   In par 33 of the Statement of Claim it is alleged that, on the proper construction of the Franchise Agreement, the defendant was not entitled to charge lead fees in circumstances where the second plaintiff “was not even able to make contact with the potential client”. In pars 34 and 37 it is alleged that in breach of the Agreement, the defendant did charge fees in those circumstances, giving rise to a claim in damages of approximately $400 per month.

2. [100]

   I have earlier stated my conclusion that, particularly by reference to the incorporated terms of the Manual, the Franchise Agreement entitled the defendant to charge a fee of $15.98 for each lead, as specified in the Schedule to the Agreement, irrespective of whether the lead resulted in an engagement of the franchisees services, subject to a 15% discount on the monthly total to allow for leads that did not convert. In the category of leads that did not convert, there is no practical distinction between any of the second to fifth possibilities referred to at [59] above. There is no basis in the Franchise Agreement or in the Manual for construing the provisions relating to lead fees as entitling the second plaintiff to relief or refund if the potential customer should fail to answer the franchisee’s call and refrain from calling back.

3. [101]

   This alleged breach of contract is not established.

Alleged wrongful termination of the Franchise Agreement

1. [102]

   On 23 January 2023 the defendant issued to the second plaintiff a Notice of Breach stating that, in breach of cll 7.6-7.17 of the Franchise Agreement and the Schedule thereto, there had been a failure to pay an amount of $668.92. This was an unpaid balance of one or more invoices that the defendant had rendered for Monthly Fees payable under the Agreement, including lead fees. Clause 12.5 provided for the services of such a notice.

2. [103]

   Clause 12.6 stipulated that if a default in payment of monies should not be rectified within 14 days after issue of a notice of breach, then the defendant could terminate the agreement by a further notice. The plaintiff did not make good the default and on 8 February 2023 the defendant issued a Notice of Termination.

3. [104]

   Paragraphs 35 and 36 of the Statement of Claim are as follows:

4. [105]

   Pursuant to that pleading, the alleged wrongfulness of the defendant’s termination of the contract is made to depend upon an allegation of prior breach with respect to restriction of leads, which I have already decided adversely to the plaintiffs, and an allegation of bad faith in terminating for an improper purpose.

5. [106]

   As to par 35(a), there is no dispute that the amount of $668.92 was unpaid. I have rejected the plaintiff’s assertion that the amount was not due in so far as it arose from overcharging of lead fees. The evidence does not establish on the balance of probabilities that the plaintiffs were unable to pay this small amount. Nor does it establish that, if they were without funds, there impecuniosity arose from the restriction upon client leads that the defendant had imposed from 8 November 2022. Further, I have found that that restriction of leads was not in breach of the Agreement. Therefore, it cannot be said, on any view, that breach of contract by the defendant was the cause of the non-payment for which the Notice of Termination was issued. Paragraph 35(a) is not made out.

6. [107]

   Sub-paragraphs (b) and (c) of par 35 are factually correct. However, neither those facts nor any other established circumstance would justify a finding on the balance of probabilities that the defendant terminated the contract for the improper reason that the plaintiffs had commenced proceedings in this Court and refused to withdraw them, rather than for the stated reason that the first plaintiff had persistently failed to pay the overdue amount of $668.92. There is no trace of any such improper purpose in contemporaneous records and correspondence.

7. [108]

   The plaintiffs assert that the inference is supported by the failure of the defendant to call Mr Penman, whom they submit would have been the decision-maker with respect to termination of the Agreement. The plaintiffs cite Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 but in my view the principle of that case does not assist them. In Jones v Dunkel at p 308, Kitto J said this:

8. [109]

   Statements of Menzies J at p 312 and Windeyer J at pp 320-321 are to similar effect. The above quoted passage was applied in the judgment of the plurality in Australian Securities and Investments Commission v Hellicar (2013) 247 CLR 345; [2012] HCA 17 at [169]. In Bellevarde Constructions Pty Ltd v L’Officina by Vincenzo Australia Pty Limited [2022] NSWCA 246 at [37], Brereton JA expressed the point in the following terms

9. [110]

   Here, there is no foundation at all for inferring an improper purpose. On the contrary, Mr Dominguez’ notice of dispute of 16 November 2022 came close to expressing repudiation of the Agreement by his statement: “we cannot work together going forward”. By the terms of that notice and the subsequent failure to pay, the defendant was given good reason to exercise its contractual right of termination. There is nothing in the plaintiffs’ evidence that Mr Penman need have been called to answer. His absence from the witness box is of no significance.

Unconscionable conduct of the defendant – Australian Consumer Law, s 21

1. [111]

   In pars 44-51 of the Statement of Claim the plaintiffs allege that the defendant engaged in conduct that was unconscionable contrary to s 21 of the Australian Consumer Law in the following respects:

2. [112]

   Section 21 of the Australian Consumer Law is in the following terms, extracted so far as relevant:

3. [113]

   The plaintiffs’ allegation that the defendant acted unconscionably is based entirely upon allegations of other, specific wrongdoing that have failed in their entirety. The unconscionable conduct claim must therefore also be dismissed.

Orders

1. [114]

   For these reasons the following orders will be entered:

   1. (1)

      The plaintiffs’ claims in the Second Further Amended Statement of Claim filed on 25 March 2026 are dismissed.

   2. (2)

      Order that the plaintiffs pay the defendant’s costs of the proceedings, including all costs reserved pursuant to interlocutory orders.