Federal Court orders Jump Loops to pay $23 million in compensation to swim school franchisees
In a judgment handed down on May 19, in proceedings brought by the Australian Competition and Consumer Commission (ACCC), the Federal Court ordered that Jump Loops pay $23 million in compensation to its deceived franchisees.
The Federal Court declared, by consent, that the franchisor Jump Loops Pty Ltd (in liquidation) (Jump Swim) 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.
The founder and former managing director of Jump Swim, Ian Michael Campbell, was also ordered by the Court to pay $500,000 in compensation and to pay a penalty of $400,000.
The court made orders restraining Campbell 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. The court found he had been knowingly concerned in Jump Swim’s contraventions, being the false and misleading representations made to franchisees who had signed up to operate a swim school, and wrongful acceptance of payments from franchisees.
Jump! Swim Schools welcomes ruling
Belgravia Group purchased the franchise rights for more than 60 Jump! Swim Schools in the second half of 2019, preventing the network from collapsing after then owner Ian Campbell’s assets were frozen in connection with an ACCC action alleging he misled over 90 franchisees by failing to deliver their fit-outs.
Jump! Swim Schools current CEO Mark Collins says he is happy there was finally some justice for those affected by the irresponsible actions of the former franchisor owner and says they will continue to fight for more compensation for those impacted.
“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,” says Collins.
“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 says 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.”
Since taking over the network, Belgravia Group has opened five sites and has another four in development.
“Jump! Swim Schools today is thriving with enrolments increasing 27 per cent throughout 2020, despite the impact of lockdowns. Most of our schools are at capacity, which is a fantastic position for our franchisees to be in,” says Collins.
Compensation
ACCC Deputy Chair Mick Keogh says they took this action to help franchisees achieve some compensation and to seek orders preventing Campbell and Jump Swim from signing up further franchisees to Jump Swim or another future franchise.
“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 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 says.
The ACCC will attempt to contact all qualifying franchisees at their last known mail or email address, through the Australian Government Solicitor. Franchisees are not obliged to participate in the compensation scheme.
Background
Jump Loops Pty Ltd was an Australian-based franchisor that sold franchises to those wishing to operate their own Jump Swim School to supply learn-to-swim services. On 17 June 2019, the ACCC instituted court proceedings against Jump Loops Pty Ltd and its parent company Swim Loops Holdings Pty Ltd, and its director, Mr Ian Michael Campbell.
On 7 June 2019, the ACCC obtained a Federal Court order freezing the assets of the companies associated with Jump Swim Schools and Mr Campbell to ensure some assets remained available to compensate franchisees.
In July 2019, the Court separately ordered that Jump Loops Pty Ltd and Swim Loops Holdings Pty Ltd be wound up as insolvent and liquidated.
On 21 December 2020, the ACCC discontinued proceedings against Swim Loops Holdings (in liquidation) with the leave of the court, to enable a swifter resolution of the enforcement proceedings against Jump Swim and Mr Campbell.
