Mills Oakley Lawyers give legal advice on class actions against franchisors

Warren Scott of Mills Oakley Lawyers advises that franchisees can commence a class action against a franchisor when;

• Seven or more franchisees have claims against a franchisor,
• those claims have arisen from related circumstances and,
• the claims of the franchisees give rise to a substantial common issue of law or fact.

Franchisee groups commencing representative proceedings to resolve a common issue are provided a context for doing so in the Federal Court Act 1976 and the Supreme Court Act 1986 (VIC) (The Acts).

The Acts state franchisees claims must give rise to a substantial common issue of law or fact. The courts have suggested the term 'related circumstances' refers to a wider connection than ‘identity’ or ‘similar’. In each case there is a threshold judgement on whether the similarities warrant a class action.

The claims common to a group of franchisees will satisfy the requirements to commence a class action if the issue of law or fact is ‘large or weighty’ as distinct from simply being ‘ephemeral or nominal’.

The Weimann v Allphones case of 2009 provides a good indication of the scope of franchisee group claims.

There was a question of unconscionable conduct on the part of the franchisor, Allphones for not giving franchisees adequate time to consider an option to renew on terms different to their existing franchise agreement.
 
Two categories of franchisees brought the case. The first had exercised the option and the second were still operating under a franchise agreement and the time to consider the renewal option had not come.

It was argued that the second group did not have the requisite claims against the franchisor to join the group proceedings, however it was deemed that their interests in the matter raised real issues with real consequences depending on the resolution of the dispute.

Both franchisees and franchisors should seek legal advice on how to deal with potential claims by groups of franchisees.

If you have any further enquiries, please contact Mills Oakley Lawyers.