Licencing your trademark may cause an

expensive problem…

if you have REALLY created a franchise

April, 2015

Legal Disclaimer

This presentation is offered for general information

purposes only. It does not constitute specific legal

advice or opinion. You should not act or rely upon any

of the information contained within this seminar

without seeking the advice of a qualified solicitor who

specialises in the particular area of expertise and

jurisdiction that you require.

Introduction

A recent decision of the NSW Court of

Appeal highlights the risk of not understanding

when your agreement is really a franchise

agreement...

the so-called "distribution agreement"

in question cost the licensor

("franchisor") $208,178.39.

Introduction

You can call your agreements whatever you

like: licence agreement; distribution agreement;

or, supply agreement...

but if in reality it meets the criteria of a franchise

agreement, then it's a franchise agreement...

and to be enforceable you must have complied

with the Franchising Code of Conduct.

Overview of the Decision

This decision - Workplace Safety Australia v

Simple OHS Solutions Pty Ltd - was handed

down on the 8th of April (2015).

Overview of the Decision

The facts, put simply, were that Workplace Safety

Australia Ltd (WSA), provided online subscription

packages designed to assist businesses to meet

their obligations under occupational health and

safety legislation.

The agreement between it and Simple OHS

Solutions Pty Ltd (Simple) was titled as a

"Distribution Agreement".

Overview of the Decision

Pursuant to the agreement, Simple agreed to act

as the exclusive distributor of WSA's subscription

packages.

In doing so, Simple was required to:

set out a business plan indicating how it intended to

operate its business;

administer all sales in accordance with a process

prescribed by WSA;

use standard forms prescribed by WSA;

comply with a manual provided by WSA; and

comply with all reasonable directions of WSA.

Overview of the Decision

Further, under the agreement Simple was,

amongst other things, obliged to pay WSA a

Customer List Fee in quarterly instalments.

Overview of the Decision

The primary judge found, and the Court of Appeal

confirmed, that the Distribution Agreement was a

Franchise Agreement under the Franchising

Code of Conduct.

Overview of the Decision

Further it was found that WSA had failed to

comply with either the pre-contractual disclosure

requirements in clause 6 of the Franchising Code

of Conduct or the pre-termination requirements in

clause 21 of the Franchising Code of

Conduct...and thus had breached s 51AD of

the Competition and Consumer Act 2010 (Cth).

Overview of the Decision

The Court of Appeal found that Simple would not

have entered into the agreement had there been

compliance with the Franchising Code of Conduct

and that, as a result, Simple lost $208,178.39.

Simple, the "franchisee", was awarded damages

in the sum of $208,178.39.

What is a Franchise Agreement?

There are some exceptions, but generally a

franchise agreement is an agreement, whether in

writing, verbal or implied, under which:

1. one party (the franchisor) grants another party

(the franchisee) the right to carry on a

business supplying goods or services under a

specific system or marketing plan substantially

determined, controlled or suggested by the

franchisor or an associate of the franchisor

What is a Franchise Agreement?

2. the business is associated with a particular

trademark, advertising or a commercial

symbol owned, used, licensed or specified by

the franchisor or its associate

What is a Franchise Agreement?

3. the franchisee is required to pay, or agree to

pay an amount to the franchisor before

starting or continuing the business.

Can I cure the breach?

If it appears I have a Franchise Agreement but

haven't complied with my disclosure

obligations, can I cure the breach?

Not without the franchisee's support... but if

you've got that support, then yes... the necessary

documentation should be able to be executed and

filed in a safe place for future reference.

Turnbull Hill Lawyers – Contact Us

If you have any further questions about licencing

or franchise agreements, or you'd like to discuss a

related matter, please do not hesitate to contact

our Business Law team.

We will endeavour to respond to your enquiry

within 24 hours.