Full Federal Court sets aside franchise agreement for breach of disclosure obligations under the Franchising Code

By Rebecca Bedford and Ben Dodgshun

On 1 May 2014, the Full Court of the Federal Court of Australia handed down its appeal decision in SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50. In doing so, it set aside a franchise agreement resulting from the franchisor’s breach of the Franchising Code of Conduct.

One of the key issues for determination in the appeal was the extent of a franchisor’s obligation under the code to provide a franchisee with a ‘current disclosure document’. In effect, the Full Federal Court has confirmed that a franchisor has an overriding obligation to ensure that the disclosure document given to a franchisee is current at the time the franchise agreement is entered into, as distinct from it only being current at the time it is given.

This is an important decision for franchisors. It confirms a willingness by the courts to read franchisors’ obligations under the code broadly, and emphasises the code’s purpose of ensuring that franchisees are able to make fully informed decisions prior to entering franchise agreements…

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