Patisserie pair take cake in court ruling

GOLD Coast franchisor Retail Food Group has lost a fiveyear legal battle against a Townsville couple who spent more than $200,000 on a failed Michel’s Patisserie store.

The decision comes just days before the release of RFG’S half-yearly results, which are expected next Thursday.

Shares in the company dipped 6.67 per cent to a new low yesterday afternoon, touching 28 cents by 2pm.

In a 71-page judgment, District Court Judge Jennifer Rosengren found the Southport company had made misleading claims to Frederick and Karen Guirguis about the quality, range and frequency of delivery of products from Brisbane to their Townsville store.

She also found that RFG engaged in misleading and deceptive conduct by not informing the couple its Brisbane-based bakery supplier was in financial difficulty.

The supplier went into liquidation just before their store opened in May 2012, meaning the frozen Michel’s cakes had to travel 2000km from Sydney, often leaving them in poor condition.

Court documents said one entire shipment of cakes had to be thrown out after inconsistent transport methods left them unsellable, with Mr Guirguis warning RFG his store would be “broke by December” if the issue wasn’t sorted.

The couple were forced to cease trading in July 2013 after copping losses of more than $37,000, and they first launched court action the same year.

The first judge dismissed their claims but the couple won an appeal in 2017 and it was retried.

Judge Rosengren upheld the couple’s claims, finding Ms Guirguis would have earned $41,000 including super if she had stayed in her role as a hairdresser.

Lost wages for Mr Guirguis, who left a $250,000 role at construction company Laing O’rourke to run the patisserie, were calculated at $64,000 including super.

Including the trading losses from the store, that would bring their total losses to about $405,000, not including interest and legal fees.

In defending the claim, RFG said its representations about the potential of the store and effectiveness of the supply chain “were mere puffery” and were not supposed to be taken literally.

But Judge Rosengren disagreed, saying she did “not accept that any of the established representations can be characterised as mere puffery in the various contexts in which they were made”.

“They were as to the kinds of products to be supplied to a potential franchisee for retail sale by it, the reliability and frequency of that supply from Brisbane and the quality of those products upon their receipt in Townsville. They were significant definitive statements,” Judge Rosengren said.

She said at the time of the negotiations there was no evidence that RFG had delivered the promised range of products to locations as remote as Townsville.

“This was essentially uncharted territory,” she said.

“It follows that RFG did not have reasonable grounds to make the oral representations.

“I am therefore satisfied that they should be characterised as ‘conduct that is misleading or deceptive or likely to mislead or deceive’.”

Before making formal orders, Judge Rosengren invited submissions from the parties “as to the form of the orders and the orders that should be made for interest and costs”.