Lessons from the Julstar decision and government position on penalties for Franchising Code breaches - .PDF file.
By Rebecca Bedford, Kate Watts and Ben Dodgshun
The decision in Julstar Pty Ltd v Hart Trading Pty Ltd highlights the importance of exercising caution in making pre-contractual representations and documenting those representations prior to entering into an agreement. The failure to do so in this case meant that the court had to decide between conflicting oral accounts and contextual circumstances years after the alleged events and also meant that the case was more expensive and time consuming to run than it otherwise would have been.
Most franchisors have streamlined their processes, so that all information relating to the franchise is contained in writing, including in disclosure documents. However, when oral discussions with franchisees take place, it is important that those discussions are documented (if possible). Similarly, discussions between incoming and outgoing franchisees (which have the potential, as in Julstar, to widen to include the franchisor) should ideally be documented. In the absence of contemporaneous written material, disputes between franchising parties, which often arise years after discussions have taken place, will depend on memories of events that have understandably faded. The outcome of disputes that turn on oral evidence can be difficult to predict, and these cases are often more difficult to settle as a result. If not avoided altogether, the time and costs associated with a dispute can be significantly reduced if contemporaneous written notes are made of any pre-contractual discussions between the parties…
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