A former franchisee who agreed to open two JUMP! Swim Schools will walk away with no schools and a bill totalling $160,000, a court has ruled.
At a four-day Sydney District Court battle, Shaun Trumbull revealed he signed the agreements in March 2016.
Under the terms of the franchise model, JUMP! approves and secures a site for a franchisee before build commences, however Trumbull alleged the franchisor made misleading representations regarding timeframe.
According to Trumbull, the embattled franchisor assured him that the schools would operational within six to nine months.
After some months passed however, no sites had been secured. Trumbull then exercised an agreement clause that allowed him to terminate the deed should no site be found within four months, for one of the locations.
JUMP! Swim Schools defence lawyer, Mark Gunning questioned Trumbull over why he terminated one contract, but not the second, in which the franchisor eventually secured a site at Mona Vale after five months.
In his ruling on Thursday, Judge Abadee shared a similar concern.
“It strikes me as curious that, at no stage did Mr Trumbull seek to exercise a right under clause 5.8 in relation to the Mona Vale franchise deed, as he had done for the Brookvale deed,” Judge Abadee said in his judgement.
Over the course of the dispute, Trumbull reiterated it was his belief that the deeds were incomplete as no sites had been identified.
Judge Abadee however, disagreed.
“I find that Mr Trumbull’s conduct after entering into the deed was inconsistent with any belief, or expectation that any promise that two swim schools would be operational by November was capable of being fulfilled.”
JUMP! Swim Schools handbook
One of the most contentious aspects of the trial was the validity of a franchisee build handbook supplied to Trumbull by JUMP! commercial manager, James Hurry.
The handbook outlines to prospective franchisees a proposed timeline of build, including a series of stages that must be completed before launch.
Trumbull alleged that the handbook’s suggestion, also of six to nine months as a reasonable timeframe, was further evidence of misleading representations.
Ian Campbell, JUMP! Swim Schools managing director maintained that the handbook was merely a guide.
“I don’t believe that these would be taken as specific timeframes, I believe these would be taken as a guide,” Campbell told the court.
Trumbull’s lawyer, Damien Allen was quick to question Campbell over the data supplied in the handbook, going so far as to refer to the document as an “ad” intended to “bait” prospective franchisees.
“It was Mr. Campbell that gave Mr. Hurry the loaded gun and asked him to pull the trigger,” Allen told the court.
Judge Abadee refuted the analogy and accusation however, ruling that the handbook outlined the completion of stages was subject to a variety of circumstances.
“I do not regard that the provision of the handbook can be described as “bait” intended to lure Mr Trumbull into a course of action. Nor do I characterise the handbook as being akin to an ‘advertisement’ for JUMP!”
District Court ruling
Judge Abadee went on to rule that despite his financial burden, Trumbull had not established a case for misleading conduct, a decision that offered no solace for the former franchisee.
Trumbull was also found to have not established the causal connection required by section 236 of the Australian Consumer Law (ACL) for entitlement to damages.
Judge Abadee ordered verdicts for each of the defendants, with Trumbull to pay costs.
Trumbull has the right to an appeal, but speaking with Inside Franchise Business, the father of two admitted he was still processing the result.
“This has been absolutely devastating to my family,” he said. “I don’t believe that the judgement was right and just. Outside of the legal aspect, it’s about what is wrong and right. This has been three years of my life.”
Trumbull said he was shocked to receive the judgement, given that JUMP! had not disputed any of the payments put forward.
“The simple fact is that none of the issues I raised were ever disputed. I did pay $163,000 for a school that was never built, that site was then subsequently sold to another franchisee who is also still waiting, that’s the facts, and JUMP! never refuted that,” he said.
Despite failing to recover his funds, Trumbull urged more disgruntled franchisees to come forward, in the hope further media attention would bring about change.
“That was part of the motivation for me; to try and set the record right and show that the behaviour by this organisation and these individuals is wrong, and they need to be held accountable. I wasn’t granted that vindication, but I believe that time will vindicate,” he said.
JUMP! Swim School ongoing legal disputes
While the decision does little to salvage Trumbull’s shattered finances, it will be JUMP! that finds itself under fire in the coming weeks, with a number of similar accusations still pending.
In January, Inside Franchise Business reported that JUMP! franchisee Juliet Sharpe had paid more than $165,000 for fitout costs, in addition to more than $100,000 in rental payments for a not-yet built school.
The former franchisee terminated her agreement with JUMP! Swim Schools after the franchisor allegedly stopped paying rent on her site, forcing an eviction.
Since her story first broke, several other franchisees and tradespeople have come forward with allegations of underpayment and build delays, including Rothwell franchisee Anumeha Jain Ahuja. Ahuja said her unfinished school (pictured) has cost the Queensland couple more than $230,000, and she isn’t alone.
A wealth of media coverage and independent submissions prompted regulatory body, the Australian Competition and Consumer Commission (ACCC) to launch an investigation into the franchise, backed by the Franchise Council of Australia.
The Small Business and Family Enterprise Ombudsman (SBFEO) also confirmed to Inside Franchise Business that there are more than 40 cases involving JUMP! currently under review.
“The number of cases is upwards of 40,” a spokesperson for the SBFEO said. “Our office provides access to dispute resolution services, which means we arrange independent mediation for those small businesses wanting to take this path.”
“We are working closely with these small businesses, and we are working with the ACCC and ASIC to resolve the issues.”
One submission under review is for former franchisee Kuljeet Mathur. According to Mathur, JUMP! was unable to secure a site for his swim school, and after nine months of waiting, he took matters into his own hands.
Like Trumbull, Mathur requested a refund which he says was initially denied. After a brief legal battle, Mathur alleges that JUMP! managing director Ian Campbell called with a settlement proposal, outlining if he was to exit the agreement, JUMP! would refund $60,500 within three months.
Nearly six months on, Mathur reveals no progress has been made.
“As per the deed the payment should have been made in February but despite numerous emails and phone calls, I have not got anything back. I have lodged a case with the ASBFEO and ACCC.”
Inside Franchise Business also discovered an application for bankruptcy against JUMP! managing director Ian Campbell, dated May 2, the third day of Trumbull’s hearing.
With the JUMP! Swim Schools model issuing bank guarantees on behalf of franchise partners, some concerns for the future of the network’s existing franchisees were raised.
However, Ian Campbell confirmed that the application was served on behalf of a disgruntled landlord seeking to have the managing director declared bankrupt, rather than a reflection of his personal solvency.
“We were served this application within the last few days I believe, and it is from a landlord seeking $23,000 in rent,” Campbell told Inside Franchise Business.
“This was a site that was unable to gain certification for our use and the franchisee unable/refused to pay. The debt was settled some time ago with the landlords managing agent, which we are currently clarifying with the landlord’s solicitor.”
“Without knowing when the landlord instructed his lawyer, I expect this will be removed from the courts by consent orders shortly which is what our legal team are requesting.”
Despite the recent legal victory, JUMP! Swim Schools faces an uphill battle moving forward, with the director himself acknowledging that more than 80 franchisees are still without schools.
Campbell, who is currently overseas steering the US expansion, declined an invitation to comment on the District Court ruling.