The Federal Court has ordered $4.2 million in penalties against former carwash and detailing franchisor Geowash Pty Ltd, its director Sanam Ali and its franchising manager Charles Cameron for breaches of the Australian Consumer Law. This included penalties of $1.045 million against Ms Ali and $656,000 against Mr Cameron.
In February 2019, following action by the ACCC, the Court found Geowash made false or misleading representations and failed to act in good faith in relation to the sale and marketing of its franchises contravening the Franchising Code of Conduct.
The Court also found that Geowash acted unconscionably towards franchisees through its charging practices for the establishment and fit-out of Geowash franchise sites.
Geowash created the false impression that amounts charged to franchisees would go directly towards the establishment of their car wash site, when in fact large amounts were used to make commission payments to Ms Ali and Mr Cameron and for other Geowash expenses.
“Franchisors are often in a position of power compared to their franchisees, and Geowash’s actions, including those of its executives, were very serious breaches of its obligations under the Code and the Australian Consumer Law,” ACCC Deputy Chair Mick Keogh said.
“These significant penalties should send a clear and strong message to franchisors and franchise executives about the importance of complying with their obligations under the Franchising Code of Conduct and Australian Consumer Law.”
The Court also ordered Ms Ali and Mr Cameron to pay $1 million as partial redress to franchisees for the losses they suffered as a result of Ms Ali and Mr Cameron’s conduct.
Both individuals were also disqualified from managing corporations in Australia, with Ms Ali disqualified for five years and Mr Cameron for four years.
Background
The ACCC began investigating Geowash in late 2015 and subsequently launched legal proceedings.
Geowash went into voluntary administration in October 2016 and subsequently went into liquidation on 11 April 2019.
This is the second penalty awarded for a matter enforcing the good faith obligation under the Franchising Code of Conduct in 2019. Ultra Tune Australia was ordered to pay over $2 million in penalties for various breaches of the Franchising Code of Conduct and the ACL in relation to its dealings with a prospective franchisee.
