In the case of Dirt Devils Cleaning Solutions Pty Ltd v Jim’s Group Pty Ltd [2026] NSWSC 428, the New South Wales Supreme Court found that a franchisor was not liable for misleading and deceptive conduct in making purportedly ambiguous representations as to the contents of the Franchise Agreement where contractual documents were provided to the franchisor well in advance of execution and alongside an encouragement to obtain independent legal advice.
This case highlights to franchisees the importance of reading all documentation carefully, obtaining independent legal advice, and refraining from making inferences as to the meaning of contractual provisions based on potentially ambiguous statements.
Background
On 1 February 2022, Mr Dominguez, on behalf of his company Dirt Devils Cleaning Solutions Pty Ltd (Dirt Devils) signed a franchise agreement (the Franchise Agreement) with the franchisor Jim’s Group Pty Ltd (Jim’s Group), under which it would operate a cleaning business under the brand name Jim’s Cleaning. The Franchise Agreement also stipulated that the parties were bound to comply with a Franchisee Manual (the Manual).
The business model of Jim’s Group is centred on the operation of a centralised Customer Contact Centre in Melbourne that refers the contact information of prospective customers to one of their franchisees in the relevant area. A fee of $15.64 is charged to a franchisee for each customer referral (the Client Lead Fee).
Mr Dominguez signed the Franchise Agreement, apparently without reading its terms or the associated information brochure or Manual. Mr Dominguez also did not seek independent legal advice before signing the agreement.
Mr Dominguez purportedly relied on a series of representations made over zoom and by email from Ms Valeri, a Business Development Manager for Jim’s Group, to understand the contents of the Franchise Agreement.
In particular, it was said that Mr Dominguez relied on representations to the effect that he would have the opportunity to advertise beyond his assigned territory and that the Client Lead Fee would only be charged where a customer actually hires the franchisee for work.
After Dirt Devils began operating as franchisee, the Jim’s Group Customer Contact Centre began receiving complaints from their customers as to the standard and quality of Mr Dominguez’s work. Three complaints had been received and raised with Mr Dominguez by September 2022.
After a fourth complaint had been made on 8 November 2022, Jim’s Group made the decision to restrict referrals to Mr Dominguez to only those from within his assigned territory. On 10 November 2022, Jim’s Group sent an email to Mr Dominguez, noting the complaints and conveying that if any further complaints were made in the next six months, a Notice of Breach would be issued, and they would cease referring customers to Dirt Devils entirely.
On 16 November 2022, Mr Dominguez replied asserting that he only became aware that he needed to pay Client Lead Fees after attending franchisee training in Melbourne from 9 to 12 January 2022 and complaining that most of his referrals could not be contacted or did not engage his services. In that email he requested a refund of “the amount that I paid for my Franchise so we can part ways”.
On 28 November 2022, Mr Dominguez commenced proceedings against Jim’s Group, however he was at this point not legally represented and the pleadings were defective in many respects.
On 23 January 2023, Jim’s Group issued Mr Dominguez with a Notice of Breach over a failure to pay an amount owing of $668.92 under various fees, including the Client Lead Fee. By 8 February 2023, as Mr Dominguez had still not paid the amount owing, Jim’s Group issued him with a Notice of Termination.
It was not until 25 March 2026 that Mr Dominguez, now legally represented, amended his pleadings into the version that would actually go before the Court.
Issues
Did Jim’s Group engage in misleading and deceptive conduct, in breach of sections 18 and 29(1) of Schedule 2 of the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law) in making representations to induce Mr Dominguez to enter into the Franchise Agreement;
Did Jim’s Group breach the Franchise Agreement or an obligation to act in good faith by charging fees and/or by restricting customer referrals to Dirt Devils;
Did Jim’s Group wrongfully terminate the Franchise Agreement or terminate it for an improper purpose in breach of the obligation to act in good faith;
Misleading and Deceptive Conduct
Section 18 of the Australian Consumer Law provides that a “person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead of deceive”. Mr Dominguez alleged that there were two representations that amounted to misleading and deceptive conduct.
Section 29(1)(b) of the Australian Consumer Law prohibits the making of “a false or misleading representation that services are of a particular standard, quality, value or grade”. The Court considered that this provision unlikely to be applicable to the present case.
The Unrestricted Advertising Representation
Mr Dominguez alleged that Jim’s Group represented that there were no restrictions on where he was allowed to operate his business, including related advertising and promotional activities. The source of this representation was said to have been an email sent on 9 November 2021 in which Ms Valeri wrote that Jim’s Group does not “place any restrictions on when and where you can work”, a representation that reiterated similar statements made over Zoom the day before.
Mr Dominguez further alleged in an affidavit sworn on 3 April 2025, that Ms Valeri specifically reassured him at that Zoom meeting that Jim’s Group did not place restrictions on where franchisees could advertise or promote their business.
In fact, that Franchising Agreement and Manual (which had contractual force) clearly contained provisions restricting franchisees from advertising outside of their territory.
With regard to the email representations, the Court considered that the representation in relation to “where you can work” did not extend to a representation that no restrictions would be placed on where he could advertise. This was supported by the fact that advertising was dealt with in a separate part of the email, and that the only express representation relating to Mr Dominguez’s advertising rights was that he had “the opportunity to advertise locally in [his] area”.
With regard to the Zoom meeting on 8 November 2021, the Court expressed significant scepticism over Mr Dominguez’s capacity to accurately remember the details of a conversation that took place over four years ago. It additionally found that it was objectively unlikely that Ms Valeri would have made a representation that Mr Dominguez would be able to advertise outside of his territory given that such a statement would expressly contradict the Franchise Agreement, Manual, and her own email sent the following day.
The Client Lead Fee Representation
Mr Dominguez alleged that the 9 November 2021 email also represented that a Client Lead Fee would only be charged where the referred customer actually hired the franchisee to perform work. The exact wording of the email said to amount to this representation provided that “The lead fee is charged for each new client sent out to the franchisee for that month. 15.64 with a discount of 15%.”
The true contractual position was that the Client Lead Fee would be charged for all referrals regardless of whether they actually lead to work. The 15% discount was explicitly applied in order to compensate franchisees for the instances in which the referral did not lead to work.
The Court found that the text of the email plainly did not convey the representation alleged. However, the Court noted that even if the email was misleading, it would have been ameliorated by the brochure attached to that email which expressly stated that the Client Lead Fee “ is payable for each new customer, irrespective of how much the lead generates in income for you”. While Mr Dominguez asserted that did not read the brochure, the Court stressed that the email and brochure must be read together given that email encouraged Mr Dominguez to read the brochure.
Lastly, the Court found that even to the extent that there was any possibility of misleading effect from either of the above representations, it was ameliorated by the fact that the contractual documents clearly conveyed the true position, and were provided to him in in advance of the date for signing or the first payment to Jim’s Group was made. These documents were accompanied by an encouragement to seek independent legal advice. He was therefore determined to have objectively been fully informed about his rights and obligations under the Franchise Agreement.
Indeed, there was very little evidence that Mr Dominguez factually relied on either alleged representation in making the decision to enter the Franchise Agreement.
Breach of the Franchise Agreement
Mr Dominguez argued that restricting Jim’s Group conduct in suspending referrals to Dirt Devils from outside of their territory without notice and charging Client Lead Fees for unconverted customers amounted to breaches of the Franchising Agreement.
Fees for Unconverted Leads
The Court plainly rejected the assertion of Mr Dominguez that the proper construction of the provisions relating to Client Lead Fees confined them to scenarios where they lead to work. Such an interpretation was expressly in contradiction with the plain words of the Franchise Agreement.
Restriction of Referrals
The Court noted that clause 5.1 of the Franchise Agreement imposed an obligation onto Jim’s Group to refer client leads to Dirt Devils where those prospective clients were located within their assigned territory. Clauses 5.2 and 5.3 provided that Jim’s Group could only stop referring clients as required under clause 5.1 if certain conditions were met (such as a breach of the Franchising Agreement or repeated customer complaints), and if notice was validly issued.
While no such notice was issued by November 2022, Jim’s Group did not stop referring customers from within Dirt Devil’s territory. They only ceased referring customers located outside of their territory. The Franchising Agreement did confer any obligation onto Jim’s Group to make out of territory referrals, and indeed the Manual expressly contemplated that “In some cases [franchisees] may be restricted to Territory”. As such, the Court concluded that Jim’s Group retained discretion to restrict Dirt Devil’s referrals to within territory, and that such a discretion was not bound by the requirements to give notice under clauses 5.2 and 5.3.
Breach of the Good Faith Obligation
Section 51ACB of the Competition and Consumer Act 2010 (Cth) prohibits the breach of any applicable industry code. Schedule 1 of the Competition and Consumer (Industry Codes-Franchising) Regulation 2014 (Cth) (the Franchising Code of Conduct) imposes an obligation to act in good faith.
Mr Dominguez thus argued that, even if not bound by clauses 5.2 and 5.3, Jim’s Group breached their obligation to act in good faith by restricting out of territory referrals.
However, the Court found that Jim’s Group had appropriately investigated the relevant complaints, so nothing suggested that the restriction in referrals on the purported basis of complaints was not in good faith. This conclusion was supported by the fact that this restriction would be removed if and when Mr Dominguez underwent customer service retraining.
Wrongful Termination
Mr Dominguez first alleged that the termination of the Franchise Agreement was wrongful because the debt owing of $668.92 which formed the purported basis for the termination, was caused by Jim’s Groups breach of charging the Client Lead Fee for unconverted leads. This argument is clearly contingent on the unsuccessful allegation of breach above.
In the alternative, Mr Dominguez argued that the termination was truly motivated not by the debt, but by the fact that he had by this point commenced proceedings against Jim’s Group in court. Termination under this improper purpose was alleged to have been a breach of the good faith obligation under the Franchising Code of Conduct.
The Court found that nothing on the facts gave rise to an inference that the termination was motivated by an improper purpose. On the contrary, Mr Dominguez’s emails in December 2023 which expressed a desire to end the arrangement came close to repudiating the Franchise Agreement and combined with his failure to pay, gave Jim’s Group good reason to terminate the Franchising Agreement.
Statutory Unconscionable Conduct
Section 21 of the Australian Consumer Law prohibits conduct that is unconscionable as defined in the statute. The allegations of statutory unconscionable conduct were based on the same allegations of specific wrongdoing as described above. As none of those grounds were made out, the claim under section 21 also failed.
Takeaways
Prospective franchisees should always read all contractual documents and supporting information such as manuals and brochures. Even if they have not been read, Courts are willing to infer that parties are objectively informed of their rights and obligations if relevant documents have provided in a reasonable timeframe and manner.
Prospective franchisees should also be wary about relying on or making inferences from representations about the contents of legal documents that they have not read and if in doubt prioritise obtaining independent legal advice.
Franchisors should always ensure that relevant information and contractual documentation is provided to prospective franchisees in a reasonable timeframe ahead of signing, and with an encouragement to obtain independent legal advice as well as minimising the possibility of confusion arising from statements of representatives engaging with potential franchisees looking at buying into a franchise system.
If you have any queries please contact:
Alicia Hill
Principal
T: +61 3 9611 0180 | M: +61 484 313 865
E: ahill@sladen.com.au
Jake Cole
Senior Associate
T: +61 3 9611 0112 | M: + 61 413 557 157
E: jcole@sladen.com.au
This article was originally published on the Sladen Legal website: Dirt Devils Cleaning Solutions Pty Ltd v Jim’s Group Pty Ltd: The Importance of Reading all Contractual Documentation
