The boss of car wash franchisor Geowash has won her bid to access emails exchanged between the ACCC and lawyers for complaining franchisees, in a case accusing the company of misleading prospective franchisees with inflated profit projections.
In a judgment on Monday, Federal Court Justice Craig Colvin ruled that the emails exchanged between the regulator and MDS Legal director Tamra Seaton, which were subject to a subpoena, were not covered by legal professional privilege and should be handed over to Geowash director Sanam Ali.
Ali and Geowash national franchising manager Charles Cameron are named as co-respondents in the action brought by the Australian Competition and Consumer Commission, which accuses the franchisor of making false or misleading representations and engaging in unconscionable conduct in breach of the Australian Consumer Law.
It also alleges Geowash failed to comply with the good faith obligation in the Franchising Code of Conduct. Ali and Cameron allegedly engaged in and were knowingly concerned in the conduct.
MDS’s Seaton had previously represented a number of Geowash franchisees, and contended that the emails were privileged.
“The emails were some of a number sent to the ACCC, on behalf of my clients, to raise with the ACCC concerns which my clients had in relation to the conduct of Geowash Pty Ltd, and to provide further updates to the ACCC as to the position of my clients’ disputes with, and complaints about, Geowash Pty Ltd,” she said in an affidavit
However, Judge Colvin found that not only did the emails fail to mention confidentiality, they also did not constitute legal advice to either franchisees or the ACCC.
“The ACCC may have contemplated litigation. However, the documents were not brought into existence by MDS Legal for the dominant purpose of providing professional legal services relating to court proceedings in which its franchisee clients were, or were to be, parties,” the judge said.
This meant the documents fell outside the domain of legal professional privilege found in sections 118 and 119 of the Evidence Act, he said.
The regulator launched the case against Geowash in May last year, alleging a breach of good faith in relation to 30 franchisees across Australia between February 2013 to October 2016.
“The ACCC investigated Geowash’s conduct following complaints from franchisees alleging that they had been misled about their establishment costs, and ultimately had not been provided with an operating car wash franchise,” ACCC deputy chair Dr Michael Schaper said in a statement at the time.
“The ACCC was particularly concerned that, allegedly, franchisee funds were used for purposes other than those permitted by the franchise agreements, including as commissions paid to the director and franchise manager.”
The allegedly false and misleading statements included promises that prospective franchisees could make over $70,000 in revenue and over $30,000 in profits in an average 28-day period. Claims that Geowash had relationships with a variety of well-known brands, including Nissan, Audi, Emirates, Shell, Ikea and Thrifty, were also false, the ACCC argues.
The regulator is seeking declarations, injunctions, an order for the payment of pecuniary penalties, orders for non-party consumer redress, corrective notice orders, and costs against Geowash. It is also seeking orders disqualifying Ali and Cameron from managing corporations for a period of five years.
The ACCC is represented by Norton Rose Fulbright. Ali is representing herself.
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