By Paul Martin -
Snapshot
- The recent NSW Court of Appeal decision in Workplace Safety Australia v Simple OHS Solutions Pty Ltd [2015] NSWCA 84 confirms that distribution and other agreements may be ‘franchise agreements’ even if the parties did not intend this to occur.
- The definition of ‘franchise agreement’ in the Franchising Code of Conduct (Cth) is potentially of broad scope.
- Businesses and their lawyers need to exercise caution about the purpose and effect of distribution or other agreements if they do not intend them to be deemed franchise agreements. Alternatively, if the parties intend to enter into a franchise agreement, then they should ensure full compliance with the Code.
The Franchising Code of Conduct (Cth) (‘the Code’) is a piece of legislation that has assumed great importance in many commercial relationships since its commencement in 1998. The Code is designed to provide significant safeguards to franchisees and to regulate the way in which franchises are established and operated generally. The Code is prescribed as a mandatory industry code under s 51AE of the Competition and Consumer Act 2010 (Cth) (‘the Act’). A breach of the Code constitutes a breach of the Act under s 51ACB (formerly s 51AD) of the Act. A breach of the Code may give rise to a range of remedies, including damages under s 82 of the Act.
The NSW Court of Appeal has recently confirmed, in the decision of Workplace Safety Australia v Simple OHS Solutions Pty Ltd [2015] NSWCA 84, that it is the practical substance of a commercial relationship, and not the name or style of an agreement, that will determine whether an agreement is a ‘franchise agreement’, and therefore subject to the Code. It should be noted that a new version of the Code commenced on 1 January 2015 following a detailed review of the previous version of the Code by the Australian Government.
The case described in this article dealt with the pre-2015 version of the Code, but the decision remains informative when considering the definition of ‘franchise agreement’ as well as the general operation of the Code.
