A nightmare that never ends

"I have been led to understand that it is my fault that I lost my family home of 20 years, my small family business and other assets because I made a decision to apply the law in my defence rather than capitulate under the pressure," he says. Despite winning a Supreme Court case in one of the few successful private claims of unconscionable conduct in Australian legal history, Mr Coombes has been left bankrupt, working as a labourer to make ends meet while still looking for justice.

August 10, 2010

A nightmare that never ends
It has been a long and torturous battle for a Perth man seeking what he is owed, writes Chalpat Sonti.
Chalpat Sonti


The Midland Auto Masters store that the company tried to take off Mr Coombes.

By all appearances the story of Dave Coombes's fight for justice could have come straight from the pages of a Franz Kafka novel.

Instead of enjoying the considerable fruits of their labours, he and his family have been living a nightmare from which they cannot escape - or find a reason for - for the past 12 years.

A nightmare brought on by Mr Coombes's own actions, in pursuing what he knew - and was proved - to be right.
Denise and Dave Coombes have lived a nightmare in the past 12 years as they fight for justice.


Denise and Dave Coombes have lived a nightmare in the past 12 years as they fight for justice. Photo: Chalpat Sonti

"I have been led to understand that it is my fault that I lost my family home of 20 years, my small family business and other assets because I made a decision to apply the law in my defence rather than capitulate under the pressure," he says.

Despite winning a Supreme Court case in one of the few successful private claims of unconscionable conduct in Australian legal history, Mr Coombes has been left bankrupt, working as a labourer to make ends meet while still looking for justice.

The Ballajura man, 50, is refusing to give up on pursuing the federal government for an act of grace payment - to compensate him and his family for losses they believe were brought on by government incompetence.


Happier times… Dave Coombes (right) and Steve Hollands before the latter - now Auto Masters operations manager - was convicted of stealing from the business.

Act of grace payments can be made to people unfairly disadvantaged by the Commonwealth. This can include legislation producing unjust or unintended results or a government agency having a direct role in causing a loss.

Success for his claim, for at least $1.8 million and first pursued about seven years ago, has proved elusive, despite his case being referred to by legal experts nationwide, being raised among the highest levels of politics, and being defended successfully on appeal.


Dave Coombes’ Morley home was among the victims of his fight for justice.

Promise turns to dust
The nightmare began in July 1997 when Mr Coombes, purchased an Auto Masters automotive repair franchise.

He had worked in the automotive industry with such prestige brands as BMW and Honda most of his life, then ran a chain of retail stores for six years before deciding to merge his administrative, automotive and retailing skills into a franchising format.

His plan was to run three manager-operated outlets. His first store was in Midland and, due in part to it being somewhat run down, he increased sales by 40 per cent in the first year and a further 40 per cent in the next three months.

But after approaching the Australian Competition and Consumer Commission in September 1998 seeking clarification of the latest amendments to the legislation, he ended up in the WA Supreme Court defending the unlawful termination of his franchise.

The ACCC had investigated his concerns and in December 1998 advised him that they understood Auto Masters had withdrawn their breach notices and threats to terminate the franchise.

However when Auto Masters reissued the breach notices on Christmas Eve, the ACCC refused to clarify its position.

Nine years later the ACCC told the Senate there was no understanding with Auto Masters and at no time did it think it was appropriate to take enforcement action.

The point of contention that caused Auto Masters to issue a breach of contract notice against him - and later legal action – centred on invoices Auto Masters claimed his business had not processed in accordance with their procedures and was thus depriving them of royalty payments they believed they were entitled to.

As the court proceedings were later to show, the amount of royalties claimed was trifling and the problems were of Auto Masters making, not Mr Coombes.

Relationship breakdown
There were also other issues that the court heard led to a breakdown of the relationship between Mr Coombes and the company.

Shortly after Mr Coombes approached the ACCC, the Midland store manager, Steve Hollands, was caught pocketing the proceeds of some jobs. He was later convicted in the Midland Court of Petty Sessions of theft as a servant, a conviction upheld on appeal.

Auto Masters boss, Nigel Warr, later claimed in the Supreme Court case that Mr Hollands' conviction "wasn't a clear case of stealing - that's my view and I'm standing by it".

Mr Warr told the court Mr Hollands' actions were "something that happens in our industry every day of the week", was of no concern to him and that Mr Coombes was being "nasty" in pursuing a prosecution.

Mr Hollands has been sold a franchise and is today the company's WA operations manager.

By the time Auto Masters issued a termination notice in March 1999, Mr Coombes had already offered to sell up but had rejected Auto Masters offer for what they later admitted in court was about half what they thought it was worth.

When Mr Coombes then activated the mandatory mediation process incorporated in the legislation, prior to his franchise being terminated, Auto Masters refused to participate and the regulator again refused to clarify the law.

Despite the Supreme Court later ruling that Auto Masters was obligated to attend mediation, the ACCC told the Senate in 2007 that it didn’t believe Auto Masters was obligated to attend mediation.

Mr Coombes refuted the termination and filed a defence and counter-claim, asserting that it was Auto Masters which breached the agreement.

Political involvement
He then approached his Federal MP Stephen Smith, who in turn convened a meeting with the ACCC in order to clarify their position.

Mr Coombes claimed that an ACCC investigator raised the issue of bribes with him and his wife at that meeting and told them that it had helped to solve disputes in other industries.

Backed by his lawyer who was also present at the meeting, Mr Coombes reported the matter to the ACCC. An internal ACCC investigation rejected that complaint, though it conceded the issue of kickbacks "generally" was discussed.

Meanwhile, the ACCC commissioned a legal opinion from prominent barrister and Trade Practices Act specialist Neil McKerracher QC, later to become a Federal Court judge.

In October 1999 he found that while there was an arguable case, "I do not find it particularly strong".

Mr Coombes believed that Mr McKerracher had not been provided with all of the available facts so arranged for a further meeting, this one between himself and his legal advisors, the ACCC, their QC and the Australian Government Solicitor.

That meeting appeared to sway Mr McKerracher towards Mr Coombes's case.

In a memorandum to the AGS, Mr McKerracher said if that evidence was capable of being substantiated and proven, "then the case… is very much stronger".

He requested Mr Coombes's lawyer to provide him with existing court papers so he could review the strengths of the case.

This was then formulated into second legal advice to the ACCC which - citing legal professional privilege - it has never provided to Mr Coombes, through which led it to re-open their investigation.

The Commonwealth Ombudsman later told Mr Coombes that the ACCC received a further opinion from Mr McKerracher in April 2000.

Court action
In June that year, the Supreme Court found that Auto Masters breach notices were defective.

Three months later, Mr Coombes was told by the ACCC that an "exhaustive assessment" showed that the chances of a successful prosecution were slim and it would not intervene.

He believes that the ACCC’s decision not to seek court enforceable undertakings when the breach notices were re-issued, and their interpretation of the Act regarding the mediation issue led Auto Masters to try to beat him in a war of legal attrition.

Mr Coombes had almost exhausted his financial resources when up stepped family, friends, and even customers - providing over $100,000 - to help him continue his fight.

Justice Nicholas Hasluck found that Auto Masters had engaged in conduct that was serious, unfair and oppressive, showing no regard for conscience and was "looking for an opportunity to bring the franchise agreement to an end" motivated by the approaches to the ACCC and the police.

Overwhelmed by the cost of the litigation, Mr Coombes fell behind in his obligations to the Australian Taxation Office.

The ATO later dropped its own Supreme Court proceedings against Mr Coombes and advised him of the act of grace legislation. In 2007, Finance Minister Lindsay Tanner advised that the debt had been written off.

When Auto Masters appealed the original judgment, the ACCC told Mr Coombes that it would be in the public interest for them to intervene in the proceedings and make a submission to the court, but withdrew when Auto Masters changed the grounds of its appeal to only disputing the amount of damages.

The appeal before a full bench of the Supreme Court in 2004 went the same way as the original court case. The original judgment stood.

For a third time, Mr Coombes thought his troubles were over. For a third time he was wrong.

The cost of justice
His lawyers had previously estimated that a five-day Supreme Court trial would cost him about $44,000 and later stopped acting for him, only agreeing to come back on the record after they received more money and obtained a caveat over his Morley home.

By the time the appeal had been dismissed he had incurred legal costs of more than $400,000, but his lawyers could only provide a bill of costs for $213,000.

Of that, only about $150,000 would be recoverable and the lawyers had, as agreed, also retained the about $100,000 Auto Masters paid in damages.

The Legal Practitioners Complaints Committee later found the lawyers bill of costs was "reasonable" in light of the complexity of the legal principles involved.

Mr Coombes, by then almost broke, had no way of recovering the far greater sum of costs incurred.

A costs lawyer was engaged through the Law Society to advise on the bill and guaranteed his charge would not be more than any benefit he could get for his client.

But he later pursued Mr Coombes into bankruptcy over his own unpaid fees – of about $12,000 – after another Supreme Court ruling changed his view on the matter.

Mr Coombes had run out of money, and worse was to come.

His property was gone, sold to pay some of his legal bills. So were many of his other assets. His various attempts to get pro bono assistance and legal aid were unsuccessful.

Mr Coombes's company - which had continued to trade under a different name during his legal battles - was placed into liquidation, owing $735,000.

Despite an offer of $15,000 by friend Ron Maas for some of the businesses plant and equipment, everything was sold to Auto Masters for $3750.

"They told me that it was just easier to sell it all to Auto Masters," Mr Maas claims.

More political roundabouts
Throughout his ordeal, Mr Coombes had raised his plight with federal politicians from all sides, including Mr Smith seeking answers to why the ACCC would not back him or release Mr McKerracher’s second opinion.

Those questions - raised with ministers and in the Senate - yielded a variety of confusing answers, some later corrected - but not the answers he wanted.

Government ministers from firstly the Coalition, then Labor, repeatedly rejected his request for an act of grace payment.

It is a payment made when people are unfairly disadvantaged by the Commonwealth. This can include legislation producing unjust or unintended results or a government agency having a direct role in causing a loss.

Ironically, the watchdog included the case in its "guide to unconscionable conduct", one of just a handful of non-ACCC prosecuted cases to make the publication.

In 2005, then Parliamentary Secretary to the Finance Minister, Sharman Stone, told Mr Coombes that the ACCC had not acted defectively, and the Trade Practices Act legislation had not had any unintended impact.

"You appear to have incurred substantial legal costs as a result of your private decisions," she wrote.

Mr Coombes has received similar letters from government ministers since, and last year Mr Smith's electorate officer told him "there is nothing more this office can do to assist you".

A year earlier, Mr Smith and then-Senator Ruth Webber, wrote to Treasurer Wayne Swan and Mr Tanner respectively in support of the act of grace payment.

A recent effort to get the Senate's powerful privileges committee to investigate the ACCC answers was fruitless, while the most recent correspondence with a government minister proved likewise.

Seeking answers
Mr Coombes points to the fact that he has assiduously applied the Trade Practices Act in defending himself, yet despite two successful judgements he has suffered significant detriment and believes the ACCC failed as the regulator and while the legislation did work, it failed to provide a cost effective resolution to the dispute as intended.

His case for a payment rests on that, and on the fact the ACCC should have acted earlier in taking legal action against Auto Masters, instead of him having to do so.

He is seeking significant compensation for his losses, but more importantly, Mr Coombes says, he wants a plausible explanation as to why the ACCC "let Auto Masters do what they did to us".

Despite the rebuffs so far, he refuses to believe his fight is over.

"All I've ever done is stand up for myself and what I believed was right," he says.

"If I had have capitulated under the pressure my losses would have been significant, but my decision to defend myself has cost a great deal more.

"After I was proven right, they did their best to finish me off, but I'm still here and I'm not going to go away.

"I don't see how the Trade Practices Act or the regulators helped me out at all. Instead of providing a clear insight into the intent of the legislation the ACCC came in, picked a side, stirred the pot and left to watch as I attempted to deal with the mess.

"Because I’m the little bloke I get squashed while the government refuses to intervene."

A matter of opinion
The ACCC claim to have based their actions on the independent legal advice they received from Mr McKerracher, which included the 99-page opinion in November 1999, the further opinion that followed the Australian Government Solicitor conference and led the ACCC to reopen the case, and a further advice received in April 2000.

While the ACCC have never released the subsequent opinions the Commonwealth Ombudsman advised that the second opinion led the ACCC to reopen the case and conduct a further eight-month investigation.

The third opinion, never released, focused on a narrow point of law which was not relied upon when determining that the case against Auto Masters was weak and not suitable for commission intervention.

But the only way for Mr Coombes to see the advice now would be to take the watchdog to court. Bankrupted, and living day-to-day, the chances of that are remote.


Risks: Abuse of business, regulatory & political authority can destroy people, Any pretence will do, Australian Competition and Consumer Commission, ACCC, Bankrupt, Belief in a Just World (BJW): people deserve their fate, Bribery, Blame the victim, Can’t afford to sue, Convicted felon, Corruption, Court decision favorable to franchisees, Court decision never covers all franchisee's loses, Credence goods: taking advantage of the innocents, David and Goliath story, Dispute resolution means franchisee goes broke, Don’t owe your lawyer money, Emboldens industry bottom-feeders, Expropriation without compensation, Extortion, False hope, Fee surprises at settlement time, Feeble enforcement and prosecution, Forced to sell, Franchisor picks up stores for a song, Franchise investors deprived of information, Franchisees are practice clients that help keep the lights on until franchisor clients show up, Franchising practiced the same, worldwide, Franchisor takes franchisee stores, Futility of taking legal action, Independence, Industry elites like this regulator, Industry in disrepute, Justice, Lost homes, Must sell business (eventually) through franchisor, Nothing but cold calculation, Offered much less than market value of franchise, Old-fashioned idea that politicians are relevant, Ombudsman, Only offered a fraction of what business is worth, Only 3 ways out: resell to next loser, independence & be sued or abandon and go bankrupt , Opportunism Test: If asset ownership were reversed, would decision likely change?, Outstanding investigative journalism, Pawns in a game they can't win, Refuses to answer journalist's questions, Regulator already has enough power but they don't use it, Regulators only pick on those who can't defend themselves, Regulatory capture breeds its own incompetence, Resale value set by franchisor, Retaliation, Secret kickbacks and rebates, Should anyone trust anything associated with franchising anymore?, Scapegoating, State refuses to even listen, State sanction, Strategic lawsuit against public participation, SLAPP, Success or failure have largely to do with luck, Sue the lawyer, Sue the regulator, Sunshine is the best disinfectant, Termination threats, The Fixer fixes for a hefty price, The game is rigged, Trade association fronts and defends best and worst franchisors, Trading in false hope, Trap for the trusting, Tremendous desire to warn others, Trial decision always appealed, Uncharacteristically shy with media requests, Unconscionable conduct, Undue influence, Unsafe at any Brand?, Veil of secrecy, Watchdog fails to bark, War of attrition, We will bankrupt you, Weak law worse than no law, Weapons of Influence: Authority, What does the independent franchisee association say?, Wild West of the business world, Withholds evidence in court proceedings, You'll sign anything to get 15% of what you put into it back, Australia, 20100810 A nightmare

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