Freedom Foods Pty Ltd v Blue Diamond Growers

• Jurisdiction: Australia Federal only
• Judgment Date: 28 May 2021
• Neutral Citation: [2021] FCAFC 86
• Date: 28 May 2021
• Court: Full Federal Court (Australia)

Federal Court of Australia

Freedom Foods Pty Ltd v Blue Diamond Growers [2021] FCAFC 86

Appeal from:	Freedom Foods Pty Ltd v Blue Diamond Growers [2021] FCA 172
File number:	VID 138 of 2021
Judgment of:	ALLSOP CJ, COLVIN AND ANASTASSIOU JJ
Date of judgment:	28 May 2021
Catchwords:	CORPORATIONS - application for leave to appeal from interlocutory decision - appeal from interlocutory decision not to restrain arbitration in California - where parties entered into licence agreement to manufacture and sell almond milk products - where licence agreement provides for arbitration of any controversy between parties in California - where respondent commenced arbitration on basis of licence agreement - whether licence agreement is franchise agreement for purpose of Franchising Code of Conduct - whether arbitration clause of no effect due to contravention of Code - where Code provides that franchise agreement must not contain clause requiring arbitration in jurisdiction outside Australia - consideration of definition of franchise agreement in Code - leave to appeal granted - appeal dismissed
Legislation:	Competition and Consumer Act 2010 (Cth) s 51AE Federal Court of Australia Act 1976 (Cth) s 43 International Arbitration Act 1974 (Cth) s 7 Competition and Consumer (Industry Codes - Franchising) Regulation 2014 (Cth) Schedule 1 (Franchising Code of Conduct) cll 2, 3, 5, 8, 12
Cases cited:	Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross [2012] HCA 56; (2012) 248 CLR 378 CIC Insurance Ltd v Bankstown Football Club Ltd(1997) 187 CLR 384 Commissioner of Taxation v Consolidated Media Holdings Ltd[2012] HCA 55; (2012) 250 CLR 503 Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth)(1981) 147 CLR 297 Freedom Foods Pty Ltd v Blue Diamond Growers[2021] FCA 461 Kazar (Liquidator) v Kargarian; In the matter of Frontier Architects Pty Ltd (In Liq)[2011] FCAFC 136; (2011) 197 FCR 113 Lacey v Attorney‑General (Qld)[2011] HCA 10; (2011) 242 CLR 573 Minister for Employment and Workplace Relations v Gribbles Radiology Pty Ltd[2005] HCA 9; (2005) 222 CLR 194 Northern Territory v Collins[2008] HCA 49; (2008) 235 CLR 619 Project Blue Sky Inc v Australian Broadcasting Authority(1998) 194 CLR 355 Rafferty v Madgwicks [2012] FCAFC 37; (2012) 203 FCR 1 SZTAL v Minister for Immigration and Border Protection[2017] HCA 34; (2017) 262 CLR 362 Workplace Safety Australia Pty Ltd v Simple OHS Solutions Pty Ltd [2015] NSWCA 84; (2015) 89 NSWLR 594
Division:	General Division
Registry:	Victoria
National Practice Area:	Commercial and Corporations
Sub-area:	International Commercial Arbitration
Number of paragraphs:	99
Date of last submissions:	21 May 2021 (Applicants) 25 May 2021 (Respondent)
Date of hearing:	19 May 2021
Counsel for the Applicants:	Mr PD Crutchfield QC with Mr AM Dinelli and Ms A Staker
Solicitor for the Applicants:	Arnold Bloch Leibler
Counsel for the Respondent:	Dr J Moore QC with Ms H Tiplady and Mr T Farhall
Solicitor for the Respondent:	Norton Rose Fulbright Australia

ORDERS

		VID 138 of 2021
BETWEEN:	FREEDOM FOODS PTY LTD First Applicant ; FREEDOM FOOD GROUP INGLEBURN PTY LTD Second Applicant ; FREEDOM FOODS GROUP TRADING PTY LTD Third Applicant ; PACTUM AUSTRALIA PTY LTD Fourth Applicant
AND:	BLUE DIAMOND GROWERS Respondent

order made by:	ALLSOP CJ, COLVIN AND ANASTASSIOU JJ
DATE OF ORDER:	28 MAY 2021

THE COURT ORDERS THAT:

1. There be leave to appeal.

2. The appeal be dismissed.

3. The appellants and Freedom Foods Group Limited do jointly and severally pay the respondent's costs of the appeal to be assessed if not agreed such assessment to be undertaken on the basis that costs ordered to be paid by the appellants by order of the Chief Justice dated 3 May 2021 shall be set off against the costs as assessed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1. In 2011, Freedom Foods Pty Ltd (Freedom Foods), an Australian company, entered into an agreement with Blue Diamond Growers (Blue Diamond), a company incorporated in California. The agreement was styled as a licence agreement. It provided for terms on which Freedom Foods was licenced by Blue Diamond to manufacture and sell almond milk products under the name Almond Breeze and associated trade marks.

2. Pursuant to its terms, the licence agreement was automatically renewed in 2016. Freedom Foods claims that the licence agreement is a franchise agreement for the purpose of the Competition and Consumer (Industry Codes - Franchising) Regulation 2014 (Cth) which prescribed the Franchising Code of Conduct (Code) as a mandatory industry code. It says that the Code applies to conduct in relation to the licence agreement as renewed and that Blue Diamond has breached the Code. It has commenced proceedings in this Court seeking relief on that basis.

3. The licence agreement provides for the arbitration of any controversy between the parties as to the meaning of the agreement or its operation (except a controversy involving a claim for equitable relief). The agreed seat of the arbitration is Sacramento, California. On the basis of that arbitration agreement, Blue Diamond has commenced an arbitration.

4. A dispute has arisen as to whether Blue Diamond can commence the arbitration because the Code provides that a franchise agreement must not contain a clause that requires a party to the agreement to bring an action or proceedings in relation to a dispute under the agreement in any jurisdiction outside Australia. The Code provides that a clause of a franchise agreement in contravention of the prohibition 'is of no effect'. Relying on that provision, Freedom Foods (and certain related parties) sought interlocutory orders in this Court restraining the Californian arbitration. Its application was unsuccessful and Freedom Foods (and the related parties) now seek leave to appeal and, if leave is given, orders restraining the arbitration.

The Code

5. The Code takes effect by regulations made under s 51AE of the Competition and Consumer Act 2010 (Cth) which authorises the declaration of a mandatory industry code.

6. At the time the Code was declared, the Minister for Small Business issued an explanatory statement (being select legislative instrument no 168, 2014). In describing the purpose of the Code, the explanatory statement said that industry codes are 'designed to achieve minimum standards of conduct in an industry where there is an identifiable problem to address'. As to the Code itself the explanatory statement said:

The purpose of the Franchising Code is to 'regulate the conduct of participants in franchising towards other participants in franchising.' The key aspects of...