Trimuryani v Retail Food Group Limited

Trimuryani v Retail Food Group Limited [2024] FCA 1282 is a Federal Court decision approving the settlement of a representative proceeding about the Michel's Patisserie franchise system. The Court was not deciding whether the pleaded allegations were true. Its task was to decide whether the proposed settlement was fair and reasonable in the interests of group members as a whole.

The Court approved the settlement. It did so because the case was legally and factually complex, strongly contested, likely to be lengthy and expensive, and unlikely to continue if the litigation funder withdrew support. The settlement involved mutual releases. All approximately 311 group members received a broad release from the respondents in connection with the claims in the proceeding, and 166 group members also received significant releases from alleged debt claims. For the remaining group members, the result was effectively a walk-away outcome with no monetary payment.

The proceeding was brought by Devi Trimuryani on behalf of herself and other group members connected with the Michel's Patisserie franchise during the relevant period from 15 October 2015 to 30 August 2019. The Court recorded that Michel's Patisserie System Pty Ltd was the franchisor of the Michel's Patisserie business, Michel's Leasing Pty Ltd leased and licensed premises to the applicant and group members for that business, and Retail Food Group Limited was the ultimate holding company of those entities.

The pleaded case was broad. In summary, the applicant alleged systemic unconscionable conduct under the Australian Consumer Law, especially around the implementation of "Franchise System Changes" involving a move from a fresh to a frozen business model. She also alleged breaches of clause 6 of the Franchising Code of Conduct, including the implied duty to act in good faith and cooperate, alleged that certain franchise agreement terms were unfair under the Australian Consumer Law, particularly around nominated suppliers and transfer and termination provisions, and alleged misuse of marketing funds contrary to clause 31 of the Franchising Code.

The respondents denied liability and raised several substantial issues. They said much of the alleged conduct should be attributed to RFGA Management Pty Ltd acting as franchise system manager on behalf of the second respondent. They also argued there was a lack of common issues across group members because disclosure documents, franchise agreements and individual circumstances differed in material ways. They contended that the franchise system changes were made in already weakened retail trading conditions and were a necessary business decision intended to benefit both the respondents and franchisees.

A major commercial feature of the dispute was debt exposure. The respondents made set-off claims against group members, including debt claims for more than $17,860,921. That matters because the settlement was not simply about franchisees releasing claims against the franchisor side of the business. It also involved releases of alleged debts for some group members, which changed the practical value of the compromise across the class.

The proceeding started on 18 October 2021 under Part IVA of the Federal Court of Australia Act 1976 (Cth). The applicant later filed an amended statement of claim on 13 December 2022. The respondents filed their defence on 28 July 2023, and the applicant filed a reply on 15 September 2023. On 4 December 2023, the applicant filed two points of claim, one for N.E. Coffee Pty Ltd and one for Vakil and Company Pty Ltd.

On 2 May 2024, the parties reached agreement on proposed settlement terms recorded in a deed of settlement and release. On 3 July 2024, the applicant filed an interlocutory application seeking Court approval of that settlement. The Court then made directions on 1 August 2024 for the notice process to group members ahead of the approval hearing.

Two opt-out notices were filed. Two notices of objection were filed on behalf of two group members, and a further objection was later filed on behalf of another group member. The three objecting group members did not appear at the settlement hearing. The approval hearing took place on 31 October 2024 before Anderson J, who made orders approving the settlement on that date and later published reasons on 7 November 2024.

This procedural history matters because settlement approval in a representative proceeding is not automatic. The Court takes a protective role because group members may be bound by the result even if they are not personally before the Court. That is why the notice process, opt-out opportunity and objections were all relevant parts of the approval exercise.

The legal issue was whether the proposed settlement should be approved under section 33V of the Federal Court of Australia Act 1976 (Cth). In a class action setting, the Court does not simply ask whether the parties want to settle. It must decide whether the proposed compromise is fair and reasonable in the interests of group members considered as a whole, and also as between different members of the group.

The Court referred to established settlement approval principles. It noted that the Court assumes a protective role, must recognise that the interests of the parties before it may not fully align with the interests of all group members, and must decide whether the settlement falls within the range of reasonable outcomes rather than whether it is the best possible bargain that might have been achieved.

The Court also referred to the kinds of factors commonly considered in settlement approval applications, including the complexity and likely duration of the litigation, the reaction of the class, the stage of the proceeding, the risks of establishing liability, the risks of proving loss or damage, the risks of maintaining the class action, the range of reasonableness of the settlement in light of possible recovery and litigation risk, and any advice from counsel or experts. Importantly, the Court said there is no rigid checklist.

Another key point from the reasons is that the reasonableness of a settlement cannot be separated from practical questions about funding and legal costs. The Court expressly considered the alternative if approval were refused, including the evidence that the funder would not continue and that other funding was unlikely to be obtained.

The Court approved the settlement and authorised the applicant, on behalf of group members, to enter into and give effect to the settlement deed. It ordered that the settlement would bind the applicant, the respondents and the group members. It also dismissed the proceeding on the agreed release basis, made no order as to costs between the applicant and the respondents, vacated previous costs orders between them, and made a confidentiality order over certain confidential affidavit material and the confidential exhibit containing the settlement deed.

The dismissal orders reflected mutual releases. The applicant, on her own behalf and on behalf of group members, released the respondents and related persons from claims connected with or arising out of the dispute as defined in the settlement deed. In return, each respondent released the applicant and group members and related persons from claims connected with or arising out of the dispute and the alleged debts, again as defined in the settlement deed.

Anderson J accepted that the proceeding involved considerable legal and factual complexity. The claims were described as factually dense and the legal issues as not straightforward. The Court accepted that taking the matter to judgment would present significant challenges, that the outcome would be uncertain, and that the cost of continuing would be significant. The proceeding had already been on foot for a substantial period, had been vigorously defended, and would likely take a long time to complete. Even if it reached trial, there would still be remaining issues for other group members and the prospect of appeals.

A particularly important factor was funding. The Court said the evidence showed it was unlikely that the applicant's and group members' claims could proceed against the respondents if the settlement did not go ahead, because the funder had decided not to continue funding and other funding was unlikely to be obtained. The Court therefore assessed the settlement in the context that the claims had little prospect of being prosecuted to completion.

The Court also focused on the structure of the settlement. For all approximately 311 group members, the respondents were providing a broad release in connection with the claims in the proceeding, and that release extended to any entitlement to costs the respondents might otherwise have had against the applicant and group members. For 166 group members, the settlement also included significant releases in respect of alleged debt claims. For the remaining group members, the settlement was effectively a walk-away offer because it did not provide any monetary payment.

The Court considered the three objections that had been filed. It accepted that the objections understandably raised concerns about personal losses and about the fact that the settlement produced a better outcome for those group members who received releases from alleged debts. Even so, the Court concluded that those concerns had to be weighed against the funding problems and the risks of the proceeding continuing. Taking all circumstances into account, including counsel's confidential opinion that the settlement was fair and reasonable, the Court approved it.

If you are a franchisee, this case shows that serious allegations about a franchise system do not automatically lead to a trial or damages judgment. Group litigation can become difficult when franchisees signed different agreements, received different disclosure documents, traded in different conditions and may have contributed to their own losses in different ways. Those differences can make common issues harder to establish and can increase the cost and complexity of proving causation and loss.

If you are a franchisor or operate a network model, the case is a reminder that major system changes can attract scrutiny under several legal frameworks at once. A single commercial decision may later be challenged as unconscionable conduct, a failure to act in good faith, an unfair contract term issue, or a marketing fund problem. Even where liability is denied, defending a broad franchise dispute can be expensive and time-consuming.

The judgment also shows that the real value of a settlement may differ across a group. Here, some group members received significant releases from alleged debt claims, while others received no monetary payment. That does not necessarily make a settlement unfair. The Court accepted that a compromise can still be reasonable where some members receive more practical benefit than others, especially if the alternative is that the claims are unlikely to continue at all.

Another practical lesson is that funding can shape the end result. A claim may appear substantial on paper but still fail to reach trial if the funder withdraws and replacement funding is unlikely. For businesses, that means early strategy matters. Records about system changes, supplier arrangements, marketing fund use, debt balances, defaults, set-offs and loss calculations can all affect bargaining power long before any final hearing.

Although this judgment does not decide liability, it points to the kinds of records that become important in franchise disputes. For franchisors, that includes board or management records about major system changes, communications explaining the commercial reasons for those changes, records of consultation or support offered to franchisees, supplier nomination arrangements, marketing fund records, and the exact versions of franchise agreements and disclosure documents used across the network.

For franchisees, the practical records include signed franchise agreements, disclosure documents, correspondence about system changes, store performance data, invoices and supply records, marketing fund communications, notices of breach or default, and any documents showing alleged debts, offsets or reconciliations. If a dispute later becomes group litigation, these records can affect whether issues are truly common across the group and whether loss can be proved in a consistent way.

This case also shows why debt records matter. The respondents' alleged debt claims exceeded $17.8 million across the group. In that setting, a settlement that releases debt claims may be commercially significant even if it does not involve a damages payment. Businesses should therefore assess both sides of the ledger. A claim against another party may be weakened in practice if there is also a substantial exposure to cross-claims, set-offs or debt recovery.

Where a network is considering major operational changes, consistency of communication and documentation can be critical. If different operators receive different documents or are affected in different ways, that may later become central to both liability arguments and class action structure arguments.

This page is based on the Federal Court of Australia judgment in Trimuryani v Retail Food Group Limited [2024] FCA 1282. The judgment records that orders approving settlement were made on 31 October 2024 and reasons were published on 7 November 2024.

The public reasons summarise the pleaded claims, the main defence issues, the notice and objection process, the broad structure of the settlement and the Court's reasons for approval. Some settlement material remained confidential, so the public reasons do not set out every detail of the settlement deed or every individual group member outcome.