The High Court’s unanimous Ketchell Case decision was handed down on 26 August 2008. The court’s decision has removed a great deal of ambiguity and provided the sector with greater certainty.
In February 2000, a franchisee (Ms Jean Ketchell), was provided with franchise documents for execution. When returning the documents to the franchisor, the franchisee did not provide the franchisor with the written statement confirming they had received, read and understood the documents, as is required by the Franchising Code of Conduct.
The franchisee sought to rely on this omission to avoid paying ongoing to the franchisor by claiming there had been a breach of the Code. When the matter was heard before the NSW Court of Appeal it was decided that a breach of the Code rendered the franchise agreement illegal. This decision created a significant grey area in franchise law and the potential for both franchisors and franchisees to seek to terminate an agreement based on a technical breach of the Code.
The recent High Court decision examined various factors including the franchisee’s position, the fact that the franchisee received adequate legal advice prior to entering into the agreement and the overall effect of the alleged breach. The decision not only overturns the Court of Appeal’s ruling but also restores the stability of franchise agreements in so far as a breach of the Code now does not necessarily bring a franchise agreement to an end.
The Ketchell decision has finally provided franchisors with a more definitive understanding of the circumstances in which a franchise agreement will be upheld by Australian Courts.
DC Strategy is the region’s premier franchising specialist with an experienced and respected team of specialist franchise consultants and specialist franchise solicitors. As market leader our extensive practical experience ensures our clients have access to the latest franchising know how, outcomes, trends and developments to grow a better and more valuable business.18-Sep-2008