Green Acres faces $8m compensation claim

Meenakshi Chandrasekaran (left) and Chandrasekaran Pichai. Photo / Steven McNicholl

A group claiming to be victims of an alleged Green Acres franchise scam are suing the firm for millions of dollars in compensation.

More than 60 people have filed a legal claim in the High Court totalling $8.1 million after they were allegedly sold non-existent franchise businesses.

But the company says it will vigorously defend any claim and the $8 million is "grossly inflated".

Keith Lapham, a former Green Acres franchise master and the alleged brains behind the scam, was last week committed to trial accused of taking nearly $4 million.

The Herald understands about 90 former franchisees were part of the class action, but only 61 have been named as plaintiffs.

One claimant, Chandrasekaran Pichai, said even though two years had passed since the alleged fraud was uncovered, life was "a continuing nightmare".

"We are unable to repay the money we borrowed to buy the bogus business and because of that we have been put on [the debt collection agency] Baycorp, so it is difficult for us to raise money for any other business," he said.

"We are also falling so far back in our rent that I had to quit my job to use the lump sum I got from my holiday pay to keep a roof over our heads."

He said the claimants each contributed $1000 in legal fees to take on Green Acres.

The claims of between $88,000 and $398,000 are for training, guaranteed income for the term of the franchises, their non-existent franchise businesses and equipment purchased from Lapham.

They are also claiming interest, legal costs and $10,000 each for pain and suffering.

Nearly 200 people, mainly Indian and Chinese immigrants, are alleged to have paid Lapham for non-existent ironing businesses in 2007.

Green Acres first became aware of problems when some unauthorised franchisees contacted them with their concerns.

Lapham, originally from Fiji, pleaded not guilty last week to three counts of obtaining funds by deception.

The statement of claim said Green Acres had breached its duty by failing to monitor and control Lapham, failed to take steps to ensure adequate reporting by its former contractor, and failed to terminate the franchise agreement with him.

"The plaintiffs have lost their investments in the franchise agreements.

"They have also, in some instances, lost their entire savings. As a result they have suffered stress, humiliation, pain and suffering," said the statement, filed by lawyer Stephen Chan.

A Green Acres spokesman said the claim figure was grossly inflated, and the bulk of the sum was made up of expectation damages, or claims for guaranteed future income.

"Expectation damages are recoverable only from a breach of contract, and there is no contract."

He said one of the three fraud charges that Lapham faces related to him allegedly misrepresenting to Green Acres the number of sub-franchises he had granted.

Responding to the claims, Green Acres' lawyer David Chisholm said in the defendant's memorandum:

"They appear to be seeking expectation damages from the defendant (putting the plaintiffs in the position as if Mr Lapham had performed his contractual obligations), even though the defendant was not in a contractual relationship with any of the plaintiffs."

The company spokesman said Green Acres would not make a settlement and the claim would be "vigorously defended if it ever proceeds beyond this stage".

"Green Acres is a victim of Keith Lapham too," he said.