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Coffee chain's hefty bill for misleading conduct

Business

The District Court has handed the director of SA-based chain Funk Coffee & Food a $600,000 bill for misleading a franchisee about the turnover of a city café – but he’s vowed to appeal the judgement.

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In September, the court ruled that Funk Coffee & Food and its director, Arthur Damaskos, would have to pay at least $372,371 to Flinders Street franchisee Benjamin Sebastino and the corporate entity company Hype Investments.

The court ruled that Damaskos had led Sebastino to believe that the café, which he would later purchase, produced $15,000 each week in turnover, translating to about $2000 in weekly profits – but, in fact, the store rarely made that much money.

And although Benjamin and Mardi Sebastiano’s corporate entity Hype Investments bought Funk Flinders Street for $350,000 in June 2009, the court assessed its true value at the time of purchase as $120,000.

Now, after hearing from the parties about interest and other costs, Judge Sydney Tilmouth has ordered Funk Coffee & Food and Damaskos to pay Sebastino and Hype a total of $602,070.

The figure includes interest, transaction costs and consequential losses.

But in a statement to InDaily this morning, Damaskos welcomed the verdict – as he can now begin the process to appeal it.

“We are glad that the final orders have been made so that we can commence the appeal process,” Damaskos said.

“The former franchisee in question operated the Flinders Street store for more than six years. During that time the store was often in the top three performing stores of the group.

We look forward to serving South Australians premium coffee and local produce for another 15 years.”

In the statement, a spokesperson for Funk and Damaskos described the coffee chain as employing more than 100 South Australians and having “successfully developed and operated in SA to the highest ethical standards for more than 15 years”.

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