Latest news on franchising legal cases

Written on the 26 June 2008

Ketchell update – judges deliberating

The sector is waiting for judges to consider their decision from the recent High Court hearing into the Ketchell case, heard on 10 June.

The Ketchell case has received considerable media coverage recently, most noting the FCA move to get clarity for the sector.

The decision by the NSW Court of Appeal has created confusion which needs to be cleared up for the future stability of the franchise sector.

The case now rests with Acting Chief Justice Gummow and his Full Court colleagues, who will deliver their findings, we anticipate, in the coming weeks.

Kleins situation

The collapse of jeweller and accessories chain Kleins has led to the termination of all their franchise agreements, as of 26 June.

The collapse of Kleins has brought to the fore allegations of mismanagement and possible breaches of the franchise code.

Stephen Giles, partner at law firm Deacons and Director of the Franchise Council of Australia, was working with many of the Kleins’ franchisees and also tried to introduce potential buyers to the administrators to get the business sold.

Although reports have suggested the Kleins collapse will put pressure on the Federal Government to adopt the recommendations of a recent South Australian Parliamentary inquiry into the franchsie sector - particularly disclosure laws - Giles believes the current laws are adequate but says companies or individuals need to be fully prosecuted.

“The laws are there. If someone has breached the law, they need to feel the full force of the law”, Mr Giles said.

Allphones Update

Allphones franchisees are examining legal options as a result of the guilty verdict handed down to Allphones on 30 May.

In the Hoy Mobile v Allphones decision the Court considered the reasoning in the Ketchell case and decided that Ketchell should not be followed. His Honour Justice Rares commented that “the reasoning of the Court of Appeal in Ketchell was plainly wrong”. He argued that mere non-compliance with any requirement of the Code, including Clause 11, could not have been intended to have the consequence of invalidating any agreement with a franchisor entered into by a franchisee.

Around 30 franchisees have met to discuss the possibility of taking action against Allphones for withholding commission payments. Allphones is not a member of the FCA.

Source: Franchise Council of Australia