More than $200,000 compensation and costs a warning to franchisers: get your facts right
11 May 1998
A Christchurch man, Brian Joseph Direen, being ordered to pay more than $200,000 in compensation and costs is a warning to anyone selling franchises: get the facts right before making any claims.
Commerce Commission Chairman Peter Allport said that Mr Direen was convicted in the Christchurch District Court of breaching the Fair Trading Act by misleading people in Auckland, Wellington and Christchurch about franchise schemes.
The schemes, known as "Hollywood Hotdogs", "Hollywood Quikserv" and "Pieworld" involved fast-food outlets at petrol stations.
The Commission alleged that Mr Direen misled people about the involvement of the major oil companies in the scheme. He claimed that oil companies had signed contracts and "were on-board and ready to go".
In reality there were no contracts and no commitment from any oil company.
Mr Direen had contacted four oil companies. However Judge Christopher Somerville found that the proposals never got beyond preliminary discussions or the testing stage and in all cases discussions ceased because of dissatisfaction with either the product or its promoters.
"The defendant made statements which he knew were untrue or misleading," the Judge's states in his reserved decision.
"It was the defendant with whom all of these complainants dealt and it was he who induced them to part with their money by making false or misleading statements. It was his actions which directly deprived them of their money and I do not consider that he should escape the full consequences of making good these losses."
Mr Direen was ordered to pay a total of $196,375 compensation to seven people who had been misled into investing in his schemes, plus $5,664 court costs and witnesses' expenses.
Mr Allport said that the Commission is particularly pleased that the Court has ordered Mr Direen to pay back all the money he had received from these seven people.
"Having to pay 100 percent compensation plus costs is a strong deterrent," Mr Allport said.
"To avoid such penalties, people selling franchises must get their facts right. Claims about what is already in place must be accurate. Claims about the future must have a firm basis that can be tested by others.
Media contact: Fair Trading Manger Rachel Leamy
Phone work (04) 498 0908
Communications Officer Vincent Cholewa
Phone work (04) 498 0920
Commission media releases can be viewed on its website www.comcom.govt.nz