The Australian Competition and Consumer Commission has instituted proceedings in the Federal Court, Adelaide, against the current and former directors of Synergy in Business Pty Ltd (in voluntary liquidation) alleging contraventions of the mandatory Franchising Code of Conduct and also misleading and deceptive conduct in breach of the Trade Practices Act 1974.
Having placed the company in voluntary liquidation on 6 June 2002, the director of the company, Ms Helen Ewing, and a former director, Mr Chris Hudman, are the respondents in the proceedings.
The ACCC alleges that the Newcastle-based company advertised throughout Australia to sign up consultants. It then licensed these people to promote and sell Synergy's small business development program, known as the "Best Practice Program". At least 31 people, located in various States and Territories, joined as consultants and paid between $11,000 and $24,500 each for the licences.
The ACCC alleges that Synergy specifically excluded the licence arrangement from being characterised as a franchise by including a clause in the licence contract to that effect, in addition to making oral representations to prospective licensees. However, the ACCC is of the view that Synergy is in fact a franchise and it operates as such in practice. The ACCC alleges that therefore Synergy has contravened the Franchising Code by failing to provide proper disclosure documents to prospective licensees and failing to render other investor protection afforded by the Code.
The ACCC also alleges that Synergy breached section 59(2) of the Act by making false or misleading representations with respect to the potential income that could be earned by licensees in selling the Best Practice Programs.
The ACCC is seeking remedies against both respondents that include:
a declaration that the Synergy Best Practice Program is a franchise and, therefore, subject to the Franchising Code
orders that effectively inaugurate the franchisees’ rights under the Franchise Code, including their cooling off rights or, in the alternative, that the licence contracts are void ab initio
declarations that Synergy engaged in conduct in contravention of sections 51AD, 52, 59(2) of the Trade Practices Act and that Helen Ewing and Chris Hudman were involved in that conduct
injunctions, orders for refunds in excess of $620,000, and costs.
A directions hearing is listed for 2 September 2002 in the Federal Court, Adelaide at 9.30 a.m.
