Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd [2021] FCA 1579

Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd [2021] FCA 1579

The court found that the franchisor (UFC) established a prima facie case that the franchisees breached their contractual obligations by ceasing to use the required OFS system and using unauthorised software and a mobile app, and that uniformity was important for the operation of the franchise network. The balance of convenience favored granting interlocutory relief to restore the position that existed when proceedings began until the final hearing.

Parties
First Applicant: Girchow Enterprises Pty Ltd; Second Applicant: Karim Girgis; Third Applicant: Sherif Elhamy Wadie Girgis; Fourth Applicant: Paul Chau; Fifth Applicant: Activ Health Clubs Pty Ltd; Sixth Applicant: Richard Kim; Eighth Applicant: Advanced Club Management Pty Ltd; Ninth Applicant: Laziz Mirdjonov; First Respondent: Ultimate Franchising Group Pty Ltd; Second Respondent: Mazen Hagemrad; Third Respondent: Samer Husseini; Fourth Respondent: Membership Services Australia Pty Ltd
Jurisdiction
Australia
Judgment Date
14 December 2021
Procedural Posture
Interlocutory Application and Cross Claim / Granted Interlocutory Relief Pending Final Hearing
Outcome
Interlocutory relief granted; leave to file cross-claim granted.
Legal Topics
Interlocutory Relief, Franchise Agreement Disputes, Obligations Under Franchise Agreements, Restitution, Trade Marks, Approved Suppliers, Point of Sale Software Compliance
Practice and Procedure Commercial Law Franchising Interlocutory Relief Franchise Agreement Disputes Obligations Under Franchise Agreements Restitution Trade Marks +2 more

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Parties

Girchow Enterprises Pty Ltd

First Applicant

Karim Girgis

Second Applicant

Sherif Elhamy Wadie Girgis

Third Applicant

Paul Chau

Fourth Applicant

Activ Health Clubs Pty Ltd

Fifth Applicant

Richard Kim

Sixth Applicant

Advanced Club Management Pty Ltd

Eighth Applicant

Laziz Mirdjonov

Ninth Applicant

Ultimate Franchising Group Pty Ltd

First Respondent

Mazen Hagemrad

Second Respondent

Samer Husseini

Third Respondent

Membership Services Australia Pty Ltd

Fourth Respondent

Procedural Posture

Interlocutory Application and Cross Claim / Granted Interlocutory Relief Pending Final Hearing

Legal Issues

  1. 1 Whether franchisees were required to retain use of specified OFS system under franchise agreements
  2. 2 Whether franchisees could use alternative software and unauthorised mobile app
  3. 3 Whether franchisees breached obligations concerning use of trademarks

Ratio Decidendi

The court found that the franchisor (UFC) established a prima facie case that the franchisees breached their contractual obligations by ceasing to use the required OFS system and using unauthorised software and a mobile app, and that uniformity was important for the operation of the franchise network. The balance of convenience favored granting interlocutory relief to restore the position that existed when proceedings began until the final hearing.

Court Disposition

Interlocutory relief granted; leave to file cross-claim granted.

Orders

  • By 17 January 2022 and thereafter until further order, Cross-respondents to use OFS System as required Licensed Software and approved POS system.
  • By Transition Date, Cross-respondents to transfer existing member records from Mindbody to OFS and refrain from using other providers without written consent or further order.