Smart Connection Consultancy is a boutique sport and recreation consultancy who has become one of Australia’s leading advocates for the use of synthetic sports surfaces as a vehicle to grow…read more
Federal Court freezes JUMP! Swim Schools assets as ACCC seeks $4 million in refunds for franchisees
The assets of troubled learn-to-swim franchise JUMP! Swim Schools have been frozen by the Federal Court following an urgent application by the Australian Competition and Consumer Commission (ACCC).
The ACCC applied for the asset freezing order against JUMP! founder and Chief Executive Ian Campbell and Swim Loops Holdings, Jump Loops and associated entities Jump Swim Schools Construction, Jump Swim Schools Leasing, Jump Swim Schools, Blue Paddle, Reef Services and JS Reef as it prepares to bring proceedings against the group.
With Swim Loops Holdings, the company that represents the largest number of JUMP! Swim Schools, having entered into voluntary administration, the ACCC this week alleged that representations made to franchisees that they would have an operational swim school within 12 months were false, misleading or deceptive.
In a Federal Court hearing this week, Justice Michael O'Bryan found that the ACCC had met the arguable case threshold with regard to representations.
Justice O'Bryan heard evidence that Jump had said to franchisees that there would be a "12-month turnaround from sign-on to open" on the franchise.
However, 68 franchisees were not operating after 12 months as a result of which the Commission is bringing proceedings against Jump and Campbell, seeking orders directing payment of at least $60,000 to each of these franchisees.
The total size of the franchisee refunds and compensation is expected to be at least $4 million.
Justice O'Bryan ordered Jump and Campbell not to remove assets from Australia or in any way dispose of, deal with or diminish the value of the assets.
Campbell will be allowed up to $2000 a week in living expenses.
Justice O'Bryan heard evidence that Jump received "many millions of dollars" in fees from franchisees in 2017 and 2018 but the assets held by the business are "relatively modest".
The orders refer to nine different court proceedings against Jump that are underway, while Australian Securities and Investments Commission searches show Campbell and former Jump Director Stefan Szpitalak incorporated a number of new entities in the last few months including JS Reef in April, Reef Service and Blue Paddle in May.
According to court documents, the ACCC received information from a franchisee that he was advised by an employee of Jump Loops that it intended to transfer all operating franchises to Blue Paddle.
With suggestions that assets owned directly or indirectly by the prospective respondents might be dissipated, Justice O'Bryan stated “the evidence, therefore, establishes the risk that the Jump Swim group may attempt to transfer the franchise business and assets to Blue Paddle Pty Ltd, possibly in an attempt to avoid the consequences of the complaints made, and legal proceedings brought, against entities in the Jump Swim group.”
He also noted evidence indicating Campbell has established a number of new companies and businesses in the USA and New Zealand, and evidence from financial crime watchdog Austrac of substantial financial transfers between Jump and overseas entities.
This seems to include a new swim school franchise based in Piano, Texas named ‘Raised on the Reef’, which was registered on 12th April. While the ACCC has so far been unable to obtain registration details of the website, the ‘about me’ section features images of Campbell.
It was this issue of dissipating funds that led to Justice O’Bryan’s decision to freeze assets.
He advised “the foregoing evidence satisfies me that there is a reasonable apprehension that assets owned directly or indirectly by the prospective respondents will be dissipated so as to frustrate the relief that will be sought by the ACCC in the proposed proceeding.”
A spokesperson for the ACCC said if the watchdog is ultimately successful it will apply to the court for any preserved funds to be used to compensate affected Jump franchisees.
In addition, the group may face additional action.
Robert Toth, partner at Marsh & Maher Richmond Bennison said these kinds of rulings were generally the pre-empting of a larger scale legal proceeding.
Toth told Inside Franchise Business “this is all part of the process of seeking an injunction and substantive preceding.
“In a normal case, the judge will allow a couple of weeks for the applicant to bring their proceeding to court, in this case alleging misleading and deceptive conduct.”
For Jump and Campbell, the return date sees an opportunity to consent or establish a case to fight proceedings, with Toth adding “the return date is an opportunity for respondents to turn up and argue the proceedings, request a lift to the freezing order, or in some case consent to the order.
“This current order allows all the companies to trade in a normal order of business, however, should, the respondent not turn up, it will set up the case for a permanent injunction.”
The return hearing is scheduled to be held on 20th June 2019.
Image: Jump founder Ian Campbell (top) and Campbell after being named Australian Emerging Franchisor of the Year in 2016 (below). Images courtesy of JUMP! Swim Schools.
24th January 2019 - Embody gym liquidation sees creditors lose $3.8 million
9th January 2019 - Jump! Swim School responds to media reports of dissatisfied franchisees
8th January 2019 - Media slam Jump! Swim Schools over dissatisfied franchisees
29th April 2017 - Swim School operator in the running for national franchising award
27th January 2017 - JUMP! Swim Schools welcomes 15,000 young swimmers
24th October 2016 - JUMP! Swim Schools named Emerging Franchisor of the Year
12th August 2016 - JUMP! Swim Schools a double finalist in national franchising awards
21st March 2016 - Fitness magazine publisher in liquidation
31st October 2013 - ACCC to audit fitness franchises
Asking a small favour
We hope that you value the news that we publish so while you're here can we ask for your support?
The news we publish at www.ausleisure.com.au is independent, credible (we hope) and free for you to access, with no pay walls and no annoying pop-up ads.
However, as an independent publisher, can we ask for you to support us by subscribing to the printed Australasian Leisure Management magazine - if you don't already do so.
Published bi-monthly since 1997, the printed Australasian Leisure Management differs from this website in that it publishes longer, in-depth and analytical features covering aquatics, attractions, entertainment, events, fitness, parks, recreation, sport, tourism and venues management.
Subscriptions cost just $90 a year.
Click here to subscribe.
The Complete Guide to Leisure Industry Products & Services.
Centaman has been a market leader in Enterprise Software Solutions for the leisure and recreation industry and both profit and not-for-profit attractions since 1991. It offers a wide range of software…read more
ICP is an Australian-based company focused on indoor climbing. ICP will manage your project from initial design to completion and beyond, whether you're building an international-level climbing…read more
Summit Fitness Equipment is now part of NovoFit - see www.ausleisure.com.au/suppliers/novofit/read more
METRA Australia is your innovation partner for smart electronic locking, Access Control solutions and cashless payment systems to suit all types of leisure facilities. Our team’s…read more
iEDM integrate Design, Engineering and Delivery Management services to convert existing spaces into exciting new entertainment venues. Our team consists of highly qualified professionals with diverse…read more
JonasLeisure offers a complete range of leading leisure and recreation software brands – envibe, Centaman, Gladstone Health & Leisure, The Retention People, Nutrition Complete and…read more
HQH Fitness is an international company that specialises in improving the health, fitness and wellness of people everywhere. We are the South Pacific distributors for Total Gym/GRAVITY Education and…read more
get listed with our suppliers directory
Get your business noticed in our targeted directory. Viewed by 10,000 industry professionals per week!