Failed franchise promoter ordered to pay $157,000 compensation
29 January 1998
Judge J Cadenhead sitting in the District Court in Auckland imposed a $157,000 compensation order on Higgs Holdings Ltd and its director David Higgs. This is the highest compensation order awarded in a Commission action.
Higgs Holdings Ltd and Mr Higgs pleaded guilty to 48 charges relating to the sale of franchises for a biscuit distribution system. The business involved placing display bins containing biscuits in various retail outlets and business premises throughout their franchise areas. Members of the public would then buy the biscuits via an honesty box at each display bin.
When Mr Higgs was selling the franchises, purchasers were told that there would be a certain level of profit and that losses due to theft would be minimal. Neither of these projections/representations turned out to be true.
The Commerce Commission did not seek any fine. The Commission instead sought the compensation order made by Judge Cadenhead compensating the purchasers of the franchise for their initial outlay. Thirteen people adversely affected by this scheme will receive on average $12,000 in compensation.
"This is an important decision", said Dr Bollard, Chairman of the Commerce Commission, "as it highlights the need for representations about the profitability and other operating features of businesses to be soundly based and accurate".
Contact: Rachel Leamy, Manager Fair Trading Act
Phone Work (04) 498 0908 Cell 021 662 773