Franchise Council wins extension of time to gather funds to fight Ketchell case

The franchise industry’s peak body has won a month-long extension of time to raise funds to fight the Ketchell case in the High Court.

As SmartCompany reported last month, the High Court has granted special leave to appeal against the NSW Court of Appeal’s decision in Ketchell v Master Education Services, a decision that many in the franchising industry believe sets a dangerous precedent.

The High Court’s decision to grant leave is subject to the franchisor, Master Education Services, funding the legal costs of the franchisee.

Master Education Services has until the end of March to provide an undertaking to the court that it accepts liability in relation to all costs, including the franchisee’s costs in the matter.

The franchisor has indicated it will be unlikely to do so without support from the Franchise Council of Australia.

Stephen Giles, FCA director, says the council is currently working through opportunities to reduce the costs, although they are expected to be in the vicinity of $200,000.

“At this stage there is strong support from franchisor and franchisee members to fund it,” he says.

The NSW Court of Appeal held in Ketchell’s case that where a franchisor does not have a written acknowledgement that a franchisee has received, read and had an opportunity to understand the disclosure document, the franchise agreement is unlawful and unenforceable.

The Franchise Council of Australia, the industry’s peak body, says this amounts to rendering a franchise agreement illegal for a technical breach of the code – and it is a decision that could create great uncertainty for 10% of franchise agreements or 5000 franchisees and their franchisors.