Posted by Elizabeth Gore-Jones
on 26 May 2017
In what is a seemingly busy time for franchising and the courts we have the new judgment of Guirguis Pty Ltd v Michel's Patisserie System Pty Ltd  QCA 83
In point form this is what you need to know:
The franchisee alleged the franchisor had made misrepresentations as to, amongst other things, the delivery and quality of stock and failed to disclose a key supplier had shut down impacting on a number of franchisees;
The franchisees did not outline the alleged representations in the Prior Representations Deed;
The Prior Representations Deed directed the franchisee and guarantors to specify all statements made to them and upon which they relied in deciding to enter into the franchise agreement;
The Prior Representations Deed contained 24 topics that the franchisee had to consider when completing it. None of those topics covered the alleged misrepresentations before the courts;
On appeal the Court of Appeal said the Prior Representations Deed was only part of the evidence that should be taken into account. Amongst other things they said the Prior Representations Deed is part of the evidentiary process but does not preclude claims for misleading and deceptive conduct;
The Court of Appeal said (amongst other things) the primary judge should have asked:
did the franchisor engage in the conduct alleged? and
was the conduct misleading?
An order was made for a retrial and the franchisor, business broker and other parties were ordered to pay the franchisee's and guarantor's costs.
Key Take Away Points:
- franchisor's should check the wording of their prior representation deeds;
- franchisor's should not solely rely upon those deeds as a cover all protection;
- franchisees may reconsider if the signing of a prior representation deed precludes them from taking action.
Note: This is a very brief overview which leaves out a lot of details to get the underlying message across in a bite size piece. If you want the whole picture you should read the relevant cases or obtain legal advice about your legal position
Author: Elizabeth Gore-Jones
About: Elizabeth specialises in franchising law. She lectures at Bond University PLA in franchising, she sits on the Queensland Law Society Franchising Committee, she is a past member of the Women in Franchising committee and a past member of the Franchise Council of Australia.