BOQ wins franchise test case
The operator of the Campbelltown franchise of Bank of Queensland yesterday failed in its bid for compensation from the bank over the failure of the business in 2006.
In the Federal Court of Australia the judge, Robert Buchanan, concluded that three of five key claims by the plaintiff did not hold true, making the win an easy one for the bank.
BOQ faces legal claims from several owner-operators that the roll-out of its branch network in New South Wales in the mid 2000s was rife with misrepresentation and a failure to follow up on promises.
The claim in this case, by Lester Ramsey and associated companies, was a test in what might yet be a series of legal battles between the bank and disappointed operators of small and often unsuccessful branches in Sydney.
Ramsey did establish that the bank, through BOQ executive Garry Allsopp, expected a franchise to write at least $4 million in loans each month within a reasonable time after establishment, and that at that level of new business the franchise would succeed.
On the key point of whether writing loans of $4 million per month was achievable, the judge noted the evidence of the operator of the Kellyville branch (and a witness for Ramsey) who made his own study of the likely demand for loans, and the prospects for the business, and persuaded himself that monthly loan volume of $4 million a month was feasible.
The judge paid particular weight to the final, core, claim that BOQ promised to undertake a major advertising campaign to support its fledgling branch network.
Ramsey introduced this claim more than two years after filing the case in December 2006. Ramsey said the addition followed questions raised by lawyers during preparation, and that it was a theme overlooked by him in drawing up the claim.
The judge concluded that on the issue of a major marketing campaign, Allsopp "made some general and unfocussed statement". Moreover, Ramsey raised questions of marketing with Allsop.
Buchanan wrote that, "I think it is unlikely that Mr Ramsey could have overlooked a matter of this kind if he had, in truth, relied upon a statement of the kind he attributed to Mr Allsopp."
A number of operators of franchises have settled their claims with BOQ, some after taking steps toward their own court cases.
It is not clear how many such settlements there are, but many involve the release by BOQ of the security over the operator's home.
How much BOQ has had to cop in losses on its Sydney push is also not clear.
In August 2008, impaired assets doubled over six months to $31.6 million, and it seemed at the time that franchise loans were the main feature of the rise.
BOQ's impairment problems have become more widespread since then, reaching $136 million at May 2010.