A 4WD franchisor had misled franchisees and contravened the Franchising Code of Conduct, the Federal Court has found.
Justice Selway yesterday handed down his decision on an Australian Competition and Consumer Commission-initiated action against the franchisor 4WD Systems Pty Ltd and 4WD Systems Australia Pty Ltd and the companies' directors.
Justice Selway declared that 4WD Systems Pty Ltd had breached section 52 of the Trade Practices Act in that:
- it had misled a franchisee in relation to the time it would take to supply goods;
- it had misled a different franchisee as to the time it would take to supply goods, and as to the quality of those goods; and
- it had misled another franchisee as to quality of goods.
He also declared the company had breached section 53(eb) by making a false representation about the place of origin of a four wheel drive differential lock.
He found also that the company had contravened the Franchising Code of Conduct as it had not provided mandatory disclosure documents to a prospective franchisee.
Justice Selway further declared that a related company, 4WD Systems Australia Pty Ltd, had misled a franchisee in relation to the time it would take to supply goods.
Justice Selway issued injunctions against both companies restraining them for three years from entering into franchising agreements without giving to any prospective franchisee detailed information as to the quality of the goods that will be supplied and the time of delivery of such goods.
A director of the companies, Mr Raleigh Julian Hoberg, who was found to be relevantly involved in the breaches, was ordered to disclose the proceedings against the companies to any prospective franchisee during the next three years. Another director, Mr Thomas Hewitson, was also found to be relevantly involved but the court exercised its discretion not to make orders against him.
The court found that it was not satisfied that the conduct constituted unconscionable conduct under section 51AC of the Act. An ACCC application for refund of the franchise fees to franchisees was refused.
"The judgement sends another clear message to the franchise industry that franchisors have an obligation to deal fairly and honestly with their franchisees", ACCC Chairman, Mr Graeme Samuel, said today. "It also indicates that ACCC continues to make it a priority to enhance the business community's understanding of this legislation and the rights and obligations of all parties involved".