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A franchisor of swim schools called Jump Swim has been ordered to pay penalties of $23 million for making false or misleading representations, as well as wrongly accepting payments from franchisees.
In proceedings bought by the consumer watchdog, the Federal Court found Jump Swim - currently in liquidation - falsely represented to 174 franchisees that they would have an operational swim school within 12 months of signing a franchise agreement.
Most of those franchisees never received an operational swim school, and the Court found Jump Swim accepted payments from 127 franchisees when the company knew, or ought to have known, there was no reasonable basis for believing they would be able to supply the franchisees within 12 months.
In addition, founder and former managing director of Jump Swim Ian Michael Campbell was ordered to pay $500,000 in compensation to franchisees, and to pay a penalty of $400,000.
Campbell has also been restrained from being involved in carrying on a business as or of a franchisor in Australia for three years and from making representations about timeframes or wrongly accepting payment relating to a franchise for a period of five years.
These penalties were handed down by the Court after it found Campbell had been knowingly concerned in Jump Swim's contraventions and the wrongful acceptance of payments from franchisees.
"We took this action to help franchisees achieve some compensation and to seek orders preventing Mr Campbell and Jump Swim from signing up further franchisees to Jump Swim or another future franchise," Australian Competition and Consumer Commission (ACCC) Deputy Chair Mick Keogh said.
"Mr Campbell has been ordered not to be involved in a franchise for three years. Unfortunately, because the companies have been put into liquidation, many franchisees are unlikely to be ever fully compensated for their loss, and the corporate penalties are unlikely to be paid.
"However, we consider the penalties ordered by the Court send a strong deterrence message."
Additionally, the compensation order made against Mr Campbell means that 131 franchisees will be eligible for some partial compensation for the loss they suffered.
"Unfortunately despite the ACCC seeking freezing orders shortly after becoming aware of the conduct, the money paid by franchisees had already been largely dissipated," Keogh said.
In 2019 Belgravia Group acquired the franchise rights for more than 60 'JUMP! Swim Schools', preventing the network from collapsing after Campbell's assets were frozen in connection to the ACCC invesrigation.
The current CEO of JUMP! Swim Schools Mark Collins said he was happy there was finally some justice for those affected, noting the company would fight for more compensation for affected franchisees.
"We all just want to move forward from this and get on with the work of teaching thousands of kids across the country life-saving swimming skills," Collins said.
"There are a group of very hard-working and dedicated franchisees who make up the JUMP! Swim Schools network across Australia, and they are very keen to put this behind them, as are we.
"It's important though that there is justice and we maximise compensation for those who were most impacted by negligence and deception under the previous ownership."
Collins said he and his team have assisted throughout the legal process to-date and remained committed to helping where they could.
"We are still working with the affected group to help fund other avenues of legal recourse to obtain further settlements for them, if possible."
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