A High Court decision last week has been hailed as a landmark for the franchising industry.
The decision on the Ketchell case means that a loophole, which possibly allowed franchisees to quit their franchising agreements on technicality if they could argue a breach of the Code, has now been closed.
The Master Education Services v. Ketchell case revolved around a franchisee arguing successfully that their agreement was unenforceable and illegal because they hadn’t received a signed certificate required under the Franchising Code clause 11.
This clause governs the requirement for a franchisee to be told or to obtain independent advice and to receive, read and understand the disclosure document and the Code.
When the NSW Court of Appeal initially upheld the decision in 2007, many lawyers viewed this judgement as controversial and high risk.
Subsequently, the industry body – the Franchise Council of Australia (FCA) – decided to fund an appeal to enable the franchisors to take the matter to the High Court, calling on a number of experts, such as Deacons franchising partner Stephen Giles to provide strategy and assist the franchisor lawyers Meehan & Co to run the case.
Stephen Giles said that it wasn’t common for the High Court to granted special leave to appeal and the nature of the matter presented challenges.
However, the high value of the industry – around $128 billion on 2005 data – showed that the implications were costly.
”This was a case that would normally never get to the High Court – because it was only worth about $26,000 – but I believed that the High Court could see the logic of how bad the decision was (in the NSW Court of Appeal) and that it needed to be resolved.
Logo from FCA.
No comments yet.