All Jump! Swim School franchisee need to be aware of the recent Federal Court decision involving the Jump! Swim School (Australian Competition and Consumer Commission v Campbell  FCA 886 (7 June 2019) at http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA//2019/886.html).
Justice O’Bryan has made orders freezing the assets of various entities involved in Jump! Swim School (called the “Jump Group”) and Ian Campbell. Those entities include the Franchisor and new entities (Blue Paddle Pty Ltd, Reef Services Pty Ltd and JS Reef Pty Ltd). The orders have been made on an interim basis and have been made without the evidence from the Jump (known as an ex-parte interlocutory order).
A freezing order is where the Court restrains a party from access to or dealing with assets under their control. Given the restrictive nature of such an order, the ACCC needed to satisfy the Court that:
- That there was a reasonably arguable case;
- That there is a risk of dissipation of the assets;
- That the balance of convenience favours the grant of the freezing order.
As to the first point, the ACCC provided evidence to the Court where they allege the Jump Group had engaged in breaches of the Competition and Consumer Act. The ACCC will lead evidence that the Jump Group may have engaged in misleading and deceptive conduct. That conduct appears to relate the “turn key” promise of establishing an operating site within 12 months. According to the evidence lead, there are up to 90 franchisees within the system who have or did not have their franchise business built and operational within that 12 month time frame. This issue has been litigated most recently in H20 Learning Pty Ltd v Swim Loops Pty Ltd t/as Jump Swim Schools & Ors (No. 2)  NSWDC 207 (28 May 2019) (see www.austlii.edu.au/cgi-bin/viewdoc/au/cases/nsw/NSWDC/2019/207.html)
As to the second point, evidence lead by the ACCC referred to issues as to the financial standing of the Jump Group and the recent establishment of new entities as part of the Jump Group. IN this regard, evidence lead by the ACC included:
- There are a multitude of court actions involving the Jump Group including debt recovery proceedings (in NSW & Victoria), insolvency/wind up actions involving various entities within the Jump Group and bankruptcy proceedings commenced against Ian Campbell.
- That there relatively modest sums held in the bank accounts of Jump Group, notwithstanding that millions in dollars in fees had been paid to the Jump Group;
- That new entities have been established to operate the franchise business in America and New Zealand. That these new entities had received transfers from the Jump Group to these new entities;
- That the ACCC will shortly commence proceedings against the Jump Group seeking compensation and pecuniary penalties against the Jump Group. The orders will seek compensation of at least $4 million. To compensate (at this stage) 68 of approximately 90 franchisees that may have suffered loss from the actions of Jump.
These freezing orders are temporary and may be opposed by the Jump Group when next before the Court. Irrespective of what happens with the freezing orders, it is clear that the complaints and issues with the Jump franchise will be part of the future ACCC action. Essentially, watch this space.
Take Out Points
For existing Jump! Swim school franchisees, careful consideration is now required as to their legal position. This may be even more urgent should the current legal actions before the Courts (not including the ACCC action) result in orders against relevant Jump entities and/or insolvency orders being declared.
For those Jump Swim School franchisees who do not yet have an operating business, they no doubt will need to sit behind and wait for the outcome of the ACCC action.
For any person thinking of becoming a Jump Swim School Franchisee, before taking that action or paying money, do your due diligence, follow the ACCC action and keep informed before making a decision.
Our firm acts for and has acted for other Jump Swim School franchisees and can provide advice and assistance.
For more information contact:
Heath Adams Director-Lawyer
(t) 9 635 3404 (e) firstname.lastname@example.org