Franchise Summary From New Zealand
This article appeared in Issue 3#5 (July/August 2009) of Business Franchise Australia & New Zealand
As mentioned in the last issue, the Franchise Association of New Zealand (FANZ) Annual Conference takes place in Queenstown on 10th and 11th July. With the conference theme being “Strategies for Success”, all the speakers have been selected for their ability to address subjects that can have a real impact on the profitable operation of franchises in the current economic climate.
A number of well respected, Australian based speakers are in the line-up, including opening and closing key note speaker, Jonar Nader, Chairman of Logictivity; George Yammouni, Chairman of the Franchise Council of Australia (FCA) and Greg Nathan, Managing Director of the Franchising Relationships Institute. As part of the continuing trans-Tasman knowledge exchange, a large party of FCA members will be making the trip across to participate.
New Web Site
The new FANZ web site went live at the beginning of May with the new address of www.franchiseassociation.org.nz. With thanks to the Brisbane-based web site design and marketing company Bloomtools, who generously donated their time and expertise, the new site was built in rapid time. New features include up to date franchising news from around the world, a members only area where access can be gained to a range of specially negotiated free and discounted services, and an on line registration and payment gateway for Association events or publications.
New Zealand Legislation
Whilst the Ministry of Economic Development has yet to report on the issue of franchise specific legislation following the call for submissions last year, the debate continues. A symposium organised by the New Zealand Governance Centre, part of Auckland University’s Business School, took place last month and was addressed by high-profile public law lawyer Mai Chen and Professor Andrew Terry, Director of Franchise Studies at the University of New South Wales. It is clear that in some quarters, the push for legislation continues whilst the FANZ position remains one of encouraging the continuation of self regulation through franchises signing up to membership and the FANZ Codes.
Important Court of Appeal Judgment
Of particular note in the current debate in New Zealand over the relative balance between franchisor and franchisee, is a recent decision by the Court of Appeal which dealt with the fallout following dissatisfaction by the franchisee (David & Another v TFAC Ltd April 2009). The decision demonstrates that when it comes to franchise agreements, both parties should be considered ‘consenting adults’ in the eyes of the law, if full disclosure and independent advice has been received ahead of an agreement being signed.
The franchisor had highlighted to the franchisees the importance of obtaining independent advice before entering into the franchise agreement. The franchisees had done so and signed a certificate, which provided details of the lawyer and accountant who had given them advice, and also included a common exemption saying they had entered into the agreement on the basis of their own judgement. Dissatisfaction escalated to a position where the parties were very quickly before the High Court where the franchisees alleged various breaches of the Fair Trading Act. The High Court considered that there had been misrepresentation and ruled in favour of the franchisees and, quite naturally, the franchisor appealed against the ruling.
The Court of Appeal considered the High Court was wrong to disregard the independent advice received by the franchisee and the related exemption provisions. Far from being buried in the documentation and discussions, these were at the forefront of the contractual process. The fact independent advice had been required by the franchisor and then received by the franchisees was important. It was unreasonable for the franchisees to simply rely on assurances that they thought they had been given, rather than on the independent advice actually received from persons experienced in franchising.
The decision really is a victory for common sense. In the current economic climate, it sends a reassuring message to franchisors that if they are upfront and honest in disclosure and make a point of insisting that franchisees receive independent legal advice, a franchisee should not be able to hold them accountable when times get tough. Being upfront and honest will also ensure franchisors are not guilty of misleading or deceptive conduct in breach of the Fair Trading Act.
(Extracts from a commentary reproduced by kind permission of Simpson Grierson solicitors).
For more information on becoming a FANZ member, visit www.franchiseassociation.org.nz
Membership is open to franchisors, franchisees, and master franchisees, as well as professional advisors or individuals with an interest in franchising in New Zealand.