Ben Coogan

National Franchising Convention 2016 – musings from the Capital (including Civic Video Pty Ltd –v- Paterson)

Ben Coogan

26 October 2016

Franchising Uncategorized

I had the pleasure of attending and also presenting at the Franchise Council of Australia’s National Franchise Convention 2016 in Canberra a few weeks ago.

Excellent keynote speakers

There were some excellent and inspiring keynote speakers such as Alex Malley, the CEO of CPA Australia and author of The Naked Ceo book and website www.thenakedceo.com, Catherine Monson, the CEO of Fastsigns International Inc from the US and Dr Sam Prince, Founder of Zambrero.

Case Update 2016

I presented on a couple of recent cases in the area of franchising that occurred over the last 12 months since last year’s conference.  One of these cases was the Western Australian Supreme Court of Appeal decision in Civic Video Pty Ltd –v- Paterson [2016] WASCA 69, which was handed down on 27 April 2016.

Civic

Civic Video Pty Ltd –v- Paterson[1]

While I was not delivering an inspiring speech to hundreds of people, I was presenting to numerous lawyers who attended the Legal Symposium which preceded the commencement of the conference.  It is a very interesting case the background of which included a struggling franchisee, who was operating under an aging franchise model through Civic Video.  The case also involved issues arising from an interested party who operated a competing franchised video store (Video Ezy) in Geraldton, Western Australia.

Video Ezy

Aside from considering the factual circumstances and the claim by Civic Video regarding the tort of inducing a breach of contractual relations, the Western Australian Court of Appeal also reviewed the principles that are applicable to assessing damages for repudiation of a franchising agreement.  You can see my written paper here.

One of the key points from this case is the findings and legal consequences of repudiation by a franchisee which were severe.  In this case, the franchisee repudiated the agreement by attempting to sell its business to a third party.  The franchisee in this case may have had a much better outcome if it had first obtained consent to assign under the franchise agreement including, if necessary, from the Court.  Of course, that was no guarantee that the franchisor would have provided the consent, but the franchisor would have been required to consider the issue carefully before reaching its decision.

The Court also confirmed that it is very difficult to prove the elements to make out the tort of interference of contractual relations.  My paper sets out the elements of that tort.  This case, serves as a good reminder of them.  It was certainly well worth the franchisor running the argument for this aspect as you could see that it was, in essence, a reasonably arguable case.

In respect of damages, the essence of the decision is that the Court held that it was significant that the advertising, development and marketing program for which the fees collected from the franchisee (which would have been expended by the franchisor) was for the ‘Civic Video System’ generally and not specifically in relation to a franchisee store.  Therefore, the Court of Appeal held that Civic Video was entitled to enforce the franchisee’s contractual obligation to pay to it all the advertising fees for the purposes of the advertising fund and following the termination of the franchise agreement, to seek damages for the diminution of the funds available to Civic Video to develop and implement that program.

The assessment of damages in respect of advertising fees, in my view, seems to be a harsh one for the franchisee, but it was one open for the Court to make and franchisees and franchisors should be aware of this precedent.  Franchisors might also consider the wording in their franchise agreements to cover off this issue.

Question time and franchising

Another interesting part of attending the conference is that I took the time to go to Parliament House and sit in on both the Senate and the House of Representatives question times.

The Minister for Small Business, Michael McCormack MP, was a keynote speaker at the conference so franchising was topical for Parliamentary business.  In this respect, I noted that the Member for Dunkley, Chris Crewther MP asked a question without notice directed to the Minister for Trade, Tourism and Investment – Steven Ciobo MP.  His question was ‘Will the Minister update the House on how the Government is creating business opportunities especially for Australian exports, but also for franchises and drive economic growth as part of our national economic plan which will be proposed in the July election …”

The answer to this question was that the Minister for Trade, Tourism and Investment clearly thought that the current government had a clear plan in providing additional export opportunities.

Perhaps this was a loose reference to franchising, but it was one that was on the mind of some of the politicians given that the FCA Conference was being held in Canberra at the same time.

[1] [2016] WASCA 69 – delivered on 27 April 2016