Punchbowl Casual Dining Pty Ltd v Rashays Cafes & Restaurants Pty Ltd (Trial Judgment)

This dispute came out of a franchise relationship that expanded from one restaurant to a proposed second site. The existing site was a Rashays restaurant at Punchbowl. The proposed new opportunity was a Rashays restaurant at Bankstown. The applicants said the two became linked through conversations with Rashays representatives. Their case was that if they took the Bankstown opportunity, they were promised continuing rights at Punchbowl as well.

The written starting point was important. On 16 December 2019, the parties entered into a franchise agreement for Punchbowl. The court said that agreement expired on 4 December 2023 and contained no option to renew. A licence to occupy for the Punchbowl site was also entered into on the same day. That meant any later claim that the franchise would continue beyond that date needed to overcome the plain terms of the written agreement or be supported by some other legally effective representation or arrangement.

In June 2022, Rashays advertised a proposed new Bankstown restaurant. The court accepted evidence from Rashays' general manager, Mr Krayem, that the applicants approached Rashays about that site. On the accepted evidence, he told them the site would need to be built from scratch, would cost more than usual, and was initially priced at $1.8 million plus GST. After negotiation, the proposed price was reduced to $1.6 million plus GST, with instalments to help fund the build and the balance to be financed with interest.

The applicants' version was different in a critical respect. They alleged that in conversations in June and early July 2022, Rashays promised that if they purchased the Bankstown franchise they would receive either an extension of the existing Punchbowl franchise or a new franchise agreement for Punchbowl. The court rejected that account and accepted Mr Krayem's evidence that no such promise was made.

The extract identifies claims under section 18 of the Australian Consumer Law and clause 6 of the Franchising Code, along with contractual and general law claims. In practical terms, the court had to decide whether Rashays had made the alleged promises or representations about the future of the Punchbowl site and whether those alleged statements entitled the applicants to compensation.

The judge made clear that the case turned on disputed conversations. The applicants accepted that unless the court accepted their version of those conversations and rejected Rashays' version, they could not succeed in any of their compensation claims. That is a very exposed litigation position for any business. It means the case is not mainly about interpreting a signed clause. It is about whether the court believes one side's recollection of meetings and calls over the other side's recollection, and how those recollections fit with the documents.

The extract also shows that the court was dealing with a cross-claim by Rashays for unpaid debts owed by the franchisee company and guaranteed by Mr Rahman and Mr Wajahat. So the court was not only deciding whether the applicants should receive compensation. It was also deciding whether the franchisor should recover money from them.

The extract shows why contemporaneous documents mattered so much. The judge formed an adverse view of the credibility of both Mr Rahman and Mr Wajahat and said their evidence would be rejected except where corroborated by contemporaneous documents or where it amounted to admissions against interest. By contrast, the judge described Mr Krayem as an impressive witness and accepted his evidence. Other Rashays witnesses were also generally accepted.

The reasons given for those credit findings are commercially important. The judge considered it implausible that the applicants did not really know the Punchbowl franchise expired on 4 December 2023 without any option to renew, especially because they had signed the agreement, obtained legal advice at the time, and paid $900,000 for the franchise business. The judge also found problems with their evidence about instalment plans and with denials that Bankstown franchise documents had been provided, when documents showed they had been sent in January 2023 and amended documents were sent in March 2023.

Those findings did more than damage general credibility. They directly weakened the applicants' core theory of the case. If the court concluded that the applicants were wrong or unreliable about the expiry date, the payment arrangements and whether draft Bankstown documents had been sent, it became much harder for them to persuade the court that a crucial oral promise had been made about Punchbowl renewal or replacement rights.

The extract also contains a broader evidentiary discussion about how witnesses should give evidence of conversations. The judge noted that the witnesses generally gave evidence in indirect speech unless they claimed a verbatim recollection. For business readers, the practical point is simple. Courts are alert to the limits of memory. A witness saying what was said in substance may be more realistic than a polished reconstruction of exact words years later. That makes contemporaneous emails, texts and draft documents even more valuable.

The orders are clear. The amended originating application was dismissed. That means the applicants did not obtain the substantive relief they were seeking at trial. The court also entered judgment for Rashays on its cross-claim in the amount of $144,901.20 plus interest at the rates referred to in the Interest on Judgments Practice Note. The court then set a timetable for evidence and submissions on costs.

On the available extract, the practical reason for the applicants' failure is also clear. The judge accepted Rashays' evidence and rejected the applicants' evidence on the disputed conversations that underpinned the compensation claims. In particular, the judge accepted Mr Krayem's evidence that he did not say that if the applicants purchased the Bankstown site they would receive either an extension of the Punchbowl franchise or a new franchise agreement for Punchbowl.

The extract also records findings that the Punchbowl franchise agreement had a fixed expiry date and no option to renew, and that Bankstown draft franchise documents had in fact been sent. Those findings substantially undercut the applicants' pleaded case. Even without the full later portions of the reasons, the visible part of the judgment shows that the evidentiary foundation of the applicants' case failed.

For franchisees, the first lesson is to read the signed agreement closely, especially the term, expiry date, renewal rights, guarantees and payment obligations. If the agreement says it ends on a particular date and contains no option to renew, you should assume that is the legal position unless and until a later written arrangement clearly changes it. Hoping that the relationship will continue is not the same as having a contractual right to continue.

The second lesson is to document dependencies between deals. If you are willing to buy a second site only because you believe the first site will be renewed, that dependency should be written into the transaction documents. Otherwise, the law may treat the second-site discussions and the first-site expiry as separate issues. In this case, the court accepted evidence that the Punchbowl lease discussion was separate and not part of any Bankstown deal.

The third lesson is to treat draft documents and payment correspondence seriously. The extract shows that draft Bankstown franchise documents and emails about instalments became important because they contradicted parts of the applicants' evidence. If you receive draft documents that do not reflect what you say was promised, object in writing straight away. Silence or delay can make your later position harder to prove.

The fourth lesson is about guarantees and debt exposure. A business owner can lose the main claim and still face judgment for unpaid debts. That is what happened here. If directors or shareholders have given personal guarantees, those guarantees can become very real when the business relationship breaks down.

Finally, this case is a reminder that litigation over oral promises is expensive and uncertain. Once the dispute becomes a contest about who said what in a meeting or phone call, the court will look hard at credibility, consistency and contemporaneous records. Businesses are usually better protected by careful documentation at the time of the deal than by trying to reconstruct the deal later in court.

The proceedings were commenced on 4 December 2023, which the court said was the last day of the Punchbowl franchise term. An ex parte interlocutory injunction was granted that day to restrain steps affecting the Punchbowl site and business operations. On 16 February 2024, the court dismissed an application to discharge that injunction. Later, consent orders made on 24 May 2024 provided that the injunction would be discharged if certain payments were not made. The applicants accepted that the injunction was discharged on 6 June 2024 after those conditions were not met.

The trial was heard on 2 to 4 October 2024 and 24 October 2024. Judgment was delivered on 1 November 2024. The visible orders dismiss the applicants' amended originating application, enter judgment on the cross-claim for $144,901.20 plus interest, and set a timetable for costs submissions.

Because the available judgment text is truncated, this page should be read as a careful public explainer of the parts that are visible rather than a complete annotation of every issue in the case. The key commercial points, however, are strongly supported by the published extract: the case turned on disputed conversations, the court preferred Rashays' evidence, the applicants' case failed, and the cross-claim succeeded.