Auto shop loses bid to sue Holding Redlich over franchisee agreements
Contracts June 19, 2018 12:58 pm By Cat Fredenburgh | Melbourne

The High Court has rejected a failed auto repair franchiser’s bid to appeal a ruling dismissing its case against Holding Redlich alleging the law firm was negligent in preparing franchisee agreements.

Bodycorp Repairs lost its bid for a special leave application, filed after the Court of Appeals for the Supreme Court of Victoria denied its appeal of a summary judgment ruling dismissing its case against the law firm.

The High Court rejected the application on June 14.

The auto repair shop sued the firm in July 2016 over its drafting of a restraint of trade clause in a franchisee agreement, which a court later found was void and unenforceable. It claimed the law firm gave negligent advice in relation to the drafting of the clause.

In 1997, Bodycorp entered an agreement with Australian Associated Motor Insurer to give its 16 panel beater franchisee shops “recommended repairer” status. As part of the agreement, the insurer agreed it would not trade with a franchisee for six months if it terminated its agreement with Bodycorp.

When the insurer did not revoke the “recommended repairer” status of several franchisees after they ended their agreements with Bodycorp, the company sued the insurer seeking to enforce the restraint of trade clause.

In 2013, Justice James Elliot of the Supreme Court of Victoria found the insurer had breached the clause, but that it was unenforceable as an unreasonable restraint of trade. Bodycorp also failed in a second case against the insurer alleging the earlier judgment had been obtained by fraud. The Court of Appeal dismissed an appeal of the ruling by Justice Peter Riordan in the fraud case.

Bodycorp took aim at Holding Redlich after losing both cases against the insurer.

In that case, Justice Cameron Macaulay found that while Bodycorp had suffered loss and damage when the insurer ignored the restraint of trade clause, the damage had occurred outside the statute of limitations, and granted summary judgment to Holding Redlich.

“In focus here is the question of when Bodycorp’s right, intended to be protected by the legal services provided by Holding Redlich, had been infringed. In my view it was infringed when AAMI ignored the restraint, Bodycorp was legally powerless to enforce it and its business suffered accordingly. That occurred between June 1998 and June 2000,” Judge Macaulay said.

On appeal, Bodycorp argued that it didn’t suffer loss and damage until it had failed in the proceeding against AAMI in 2013 and that it could not have sued Holding Redlich until a court ruled on the enforceability of the restraint clause.

Justices Simon Whelan, Joseph Santamaria and Jack Forrest, sitting for the Court of Appeal, disagreed.

“To characterise Bodycorp’s interest in obtaining the trade restraint as being the acquisition of a capacity to sue AAMI, and to recover damages should it contravene the restraint clause, is artificial and contrived, in our view. That was not Bodycorp’s economic interest which was infringed,” the judges said.

Bodycorp was represented by Jeffrey Levine and solicitors from Templeton Fox Rothschild. Holding Redlich was represented by Philip Solomon with Chancery Chambers, Edward Batrouney with Aickin Chambers and solicitors with Obst Legal.

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Cat Fredenburgh

Cat Fredenburgh has been covering legal news for 12 years. She was previously Editor-in-Chief at US legal news publication Law360. She is the Co-Founder of Lawyerly.