Franchisors Raise Money to Fight Franchisees in Australian High Court

Franchise Council of Australia Raising Money for Franchisor Members to Contest Court Ruling 

The self proclaimed peak Australian franchising body, the Franchise Council of Australia, purports to represent both sides of franchising. But its actions speak louder than words.

The Franchise Council of Australia is attempting to raise money from franchisor members to fund a High Court appeal against a significant court decision in favour of franchisees’ rights.

The Court of Appeal in Ketchell v Master Education Services held that where a franchisor does not have a written acknowledgement that a franchisee has received, read and had an opportunity to understand the disclosure document, the franchise agreement is unlawful and unenforceable.

The fact that the Franchise Council of Australia is now trying to raise money to have the decision overturned through the courts, and is lobbying government and the Australian Consumer and Competition Commission to intervene to change the law, is likely to raise eyebrows with franchisees.

The Franchise Council has long been perceived as representing only franchisors, not franchisees, and its strong action in support of the franchisors in this case will not assist in breaking down that perception.

But the FCA’s Steve Wright rejects the implication that it is acting only in the interests of franchisors.

“We are not contesting the validity of or the importance of disclosure acknowledgement. What we think the court needs to consider is the assertion that the absence of that renders the entire agreement illegal –regardless of whether or not the agreement has been operating successfully in every way and in compliance with the code.”

... Before the High Court appeal can proceed the franchisor must agree to pay the franchisee’s costs of the appeal, irrespective of the outcome. The cost could mount into hundreds of thousands of dollars.

A franchisee litigator, Bryan Belling with Home Wilkinson Lowry, has a very different perspective than the Franchise Council of Australia, saying the ruling reinforces franchisees' rights for disclosure.

“It is a court of record decision that requires franchisors to give very full disclosure. It is no more than a statement of law under the Franchising Code, but when a court of record says it, it puts gravity to it.”

He argues in favour of the decision. “If you are going to be fair dinkum about disclosure obligations then you need to make sure that non-disclosure has consequences, and rendering an agreement void or voidable is certainly ensuring non-disclosure has consequences.”

Read the full article by Jacqui Walker at smartcompany.com.au.