Geowash franchise appeal dismissed

By Sarah Stowe | 23 Jun 2021 View comments

The Geowash franchise appeal by former car wash director Sanam Ali and former franchising manager Charles Cameron has been dismissed.

The pair were appealing against a Federal Court decision they knowingly breached the Australian Consumer Law (ACL) and Franchising Code of Conduct (Franchising Code).

In 2019, the Federal Court found that Geowash Pty Ltd had acted unconscionably towards franchisees through its charging practices for the establishment and fit-out of its franchise sites, in breach of the ACL.

The Court also found Geowash had contravened the Franchising Code by failing to act in good faith in relation to the sale and marketing of its franchises, contravening the Franchising Code.

Geowash had used large amounts of the monies charged to franchisees for setting up and fitting out franchise sites to pay commission to Ali and Cameron, and other expenses.

Last year, the Federal Court ordered $4.2m in total penalties against Geowash, Ali and Cameron.

The pair were also banned from managing a corporation for five and four years respectively, and ordered to pay $500,000 each as partial redress to franchisees for the losses the franchisees had suffered.

As well as appealing against the findings, Ali and Cameron also appealed the payment of penalties, redress and corporation ban.

On 22 June 2021 the Full Federal Court rejected their arguments and dismissed the appeal entirely.

The Full Court unanimously found the primary judge’s ‘characterisation of the system or pattern of conduct as unconscionable was founded upon deliberate deceptiveness and dishonesty’ and that Geowash’s ‘so called “business model’ was a largely consistent approach to extract money from a group of people by falsely representing to them that moneys would be used in a particular way, when it was not intended to do so.’

This decision upholds the initial findings and the penalty and relief orders.

ACCC deputy chair Mick Keogh welcomed the decision.

“It is completely unacceptable that funds paid by franchisees, that were supposed to pay for their franchise sites to be established, were instead used for other purposes, particularly as commission payments made to Geowash’s director and franchise manager.

“Franchisors are often in a position of power compared to their franchisees and the ACCC will continue to take enforcement action against those franchisors who exploit this power by engaging in conduct that is in breach of the Franchising Code and the ACL,” Keogh said.

Lessons from the Geowash case.