Telephone:
02 9601 7900
Address:
Suite 1, 16 Norfolk Street, Liverpool NSW 2170
NEWS
16
December 2008
This purpose of this News page
is being replaced by the
web log, or
"BLOG" page now on this website.
Updated items, including the ability for visitors to comment will, mostly, from
now be posted on the
blog
page.
It is
unlikely this News page will be updated from now, but it will archived and
remain accessible, at least for the foreseeable future.
01
December 2008
Fee increase, other cuts deferred
The
lodgement fee at the NSW land titles office (or more correctly, the Land and
Property Information office within the NSW Department of Lands) for property
transfers increases from the current $92 to a whopping $184 (!!) from 1 January
2009. Whilst this fee was regularly increased in past years, it was
usually only by a few dollars, maybe by $2, or $4.
This
was one of the many outcomes of the recent NSW mini-budget. It seems that
the government is trying to make up, at least in part, the reduced stamp duty
revenues resulting from the slowing real estate property market... by slugging
an extra impost on the remaining fewer property transfer transactions.
But that's not all! Another
mini-budget outcome is
that
the NSW Government has deferred
previously legislated abolition of certain stamp duties. The following NSW stamp
duties will now be abolished as from 1 July 2012, with the original date shown
within parentheses:
27
October 2008
More Franchise updates
Well, the Allphones
(see more below) matters keeps on keeping on. Probably because of the outcome of
the Hoy case (also see more below), and most likely also resulting from
the current ACCC proceedings, in about late August 2008, Allphones issued to a
number of its franchisees, around 30, Notices of Dispute. Whilst it may not have
been in dispute with most of those franchisees, it would appear Allphones’ plan
may have been part of a pre-emptive attempt to resolve in some cases, and
prevent in others, disputes concerning issues arising from the Hoy litigation.
In doing so however, it also appears that Allphones was asking franchisees to
considerer compromising certain entitlements; the problem was though, how could
a franchisee consider negotiating and maybe compromise something that it didn’t
know what it was worth in the first place, or if the information it was given
was not complete? Well, it appears the ACCC got wind of this. Earlier this
month, the ACCC sought urgent interlocutory orders requiring Allphones to
correct and disclose particular information to franchisees. It also sought
orders stopping Allphones from refusing to allow its some of its franchisees to
sell their businesses to third parties in particular circumstances.
In another case, a few days’ ago the Federal Court sentenced Mr Bon Levi, who
the ACCC described as “one of Australia's most notorious conmen” to 10 months'
gaol (with 6 months suspended) after Mr Levi was prosecuted for contempt of
Court relating to businesses Mr Levi sold in 2006 and 2007 in defiance of the
Federal Court's orders.. The ACCC states that he has a long history of
defrauding Australians by setting up bogus franchises…”.
The contempt of court proceedings relate to businesses Mr Levi sold in
Melbourne,
Sydney and Perth in 2006 and 2007 in defiance of the Federal Court's orders.
ARE YOU A FRANCHISEE or a prospective franchisee? The ACCC, in advice the ACCC
provides to prospective franchisees, states whilst franchising has many
attractive features, there are unfortunate examples where franchisees are
misled, but often, failure comes as the result of some franchisees failing to
adequately do their homework.
The ACCC’s advice includes that prospective franchisees:
-
speak to other franchisees who have been in that business as this will
reveal valuable information about what to expect and especially to equire
about and test claims by franchisors. Frank Alvaro has always advised
prospective franchisees to contact existing franchisees for this reason and
not to be afraid from asking pressing questions about how much real and
valuable support a franchisor provides after the commitment is made; and
-
engaging a legal
advisor (and also a business advisor) - which advice could save much more
than it costs - to review the legal documents. This is particularly useful
for those with little previous small business experience and the advice
could save much more than it costs.
28
August 2008
Franchise Updates
“the more things change…” It seems that it will now be a little while longer
before the final outcome the Hoy v Allphones matter (see below) is
resolved. Allphones has lodged an appeal to the Full Court of the Federal Court.
The matter is listed on 8 September 2008 and listed again for callover on 29
October 2008.
On the other hand, the Hoy case was on the money concerning the anomaly
raised in the Ketchell case (see below). The position adopted by Justice
Rares in the Hoy case concerning Ketchell was resolved by the High
Court of Australia yesterday.
The appeal in Ketchell was successful, the High Court overturning the NSW
Court of Appeal’s decision.
The High Court ruled that a breach of the Franchising Code of Conduct by
a franchisor did not necessarily make a franchise agreement void and
unenforceable. This decision removes a serious uncertainty resulting from the
NSW Court of Appeal's decision last year.
The Seal-A-Fridge matter (see below) is next listed in the Federal Court
for directions 19 September 2008.
Need advice about a franchising matter? Call us.
26 July
2008
Family Provision
The NSW parliament is to consider (and most likely make into
law) an introduced bill amending the Succession Act. The proposed amendments include:
-
to repeal the Family Provision Act 1982. (visit the
page on deceased estates and claims for more information under the
heading Family Provision Act Claims);
-
to
enact within the Succession Act, provisions concerning claims previously
made under the Family Provision Act with some modifications.
-
to shorten the time for bringing such claims to 12 months from the
date of death (that time limit is presently 18 months); and to enable the making
of regulations to control costs and advertising of legal services in relation to
such applications.
More Franchising
News...
ACCC -v- Allphones (see below). The orders made
in the Federal Court on 18 July include that Allphones must file and serve their
defences to the ACCC's claim by 1 August 2008, and the case is next listed for
further directions in the Court on 20 August 2008.
A
federal parliamentary committee is to inquire into the
Franchising Code of Conduct and report by 1 December 2008. Its terms of
reference include to identify and, where justified, recommend improvements to
the Code
The ACCC has certainly been busy in overseeing
compliance with the Code and the Trade Practices Act. It has recently commenced
legal action against Seal-A-Fridge and its director, alleging the franchisor
engaged in unconscionable conduct towards its franchisees, including:
-
unreasonably withholding consent to franchise transfers;
-
unilaterally increasing fees payable by franchisees concerning the national
telephone number, contrary to franchise agreements; and
-
disconnecting franchisees from the national telephone number to force
franchisees to agree to the increased fees (shades of Allphones?); and
-
failing to provide current disclosure documents to franchisees that had
requested them receiving written requests.
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8 June
2008
A more recent
decision of the Federal Court demonstrates what can happen when the
relationship between franchisee and franchisor breaks down. It also
reminds us of the importance of all sides needing to comply with the terms of an
agreement, as well as with the law.
A few weeks ago we
summarised some issues raised by the NSW Court of Appeal’s decision in
Ketchell’s case - (see below under heading: 4 April 2008 - High Court
appeal to proceed in franchising case).
On 30 May 2008 a single judge
decision of the Federal Court handed down (Hoy Mobile Pty Ltd v Allphones
Retail Pty Ltd (No 2)) appears to contradict the position in
Ketchell. The reasons given by Justice Rares in Hoy most likely point to
what the outcome of the appeal to the High Court will be in Ketchell.
Part of the background in the
Allphones case was that Allphones wanted to terminate its franchise
agreement with the franchisee; the franchisee resisted. The franchisor asserted
that it was not bound to an agreement with the franchisee, Hoy, arguing its
franchise agreement with Hoy was void because of the franchisor’s own
contravention of the disclosure provision in clause 11 of the Code.
The court found that the franchise
agreement was not void because of the franchisor’s failure, before the agreement
was entered into, to comply with the disclosure provisions of the Code, and that
Ketchell should not be followed. The court rejected Allphones’ assertion
and stated the intention of the Code was to protect the position of franchisees,
not to remove their capacity to enforce rights against their franchisor.
Allphones also attempted to terminate
its franchise agreement with Hoy on the basis of what’s described as fraudulent
conduct by the franchisee. That conduct involved the unlocking of certain
pre-paid mobile telephones from particular mobile carriers to enable a consumer
to use the mobile telephone with a carrier of the consumer’s choice, not the
carrier to which that phone was “locked” to. This was contrary to the franchise
agreement and enabled the phones to be sold for a higher price, and there was no
proper accounting of this by Hoy to the franchisor.
The franchisee didn’t deny the
conduct, but resisted the franchisor’s attempt to terminate the franchise. The
franchisee claimed serious breaches of its franchise agreement by Allphones. For
example, Hoy claimed Allphones couldn’t terminate the agreement because
Allphones shortchanged Hoy and other franchisees on commissions payable to Hoy
and other payable under the agreement.
In addition, during the term of the
relationship the franchisor, introduced various new fees and charges payable by
the franchisee that were not referred to in the franchise agreement. For
example, monthly rental charge for the EFTPOS terminal, IT management charge for
IT support, and late banking fees. The franchisor also exercised a system of
stock and commission holds due to the franchisee when Allphones was of the view
the franchisee was in breach or wouldn’t accede to its requests – all without
the franchise agreement allowing for such behaviour.
The court was critical of Hoy, but
perhaps it was even more critical of Allphones, describing its conduct to the
franchisee as not only equally dishonest, but also as secretive, vindictive,
deceitful and unconscionable. Strong words indeed!
The court found that where each
party was in default and acted dishonestly in respect of their financial
accountability to the other, neither party was able to rely upon its contractual
or common law rights to terminate the franchise agreement.
The court also found Allphones
shortchanged its franchisees on commission fees, it was not entitled to deduct a
range of fees levied on franchisees, and criticised the conduct of named
Allphones’ office holders.
This is a very sad story on many
levels. No doubt substantial legal costs have been incurred by all involved, the
relationship between franchisor and franchisee must have soured so much that one
wonders how it proceeds from here. It’s a case where greed has perhaps blinded
those involved and where the franchisor, in its position of knowledge and power
relative to its franchisees, thought it could do as it pleased, rather than what
its agreement provided.
The case raises many other issues but
what must be of some concern to Allphones is the commencement of proceedings in
March 2008 against it and against Allphones’ director and Chief Executive
Officer by the ACCC. The allegations there include that Allphones failed to
comply with the Franchising Code of Conduct, engaged in misleading and deceptive
conduct, and engaged in unconscionable conduct towards its franchisees, all in
contravention of the Trade Practices Act.
It would seem this story isn’t over
yet.
The ACCC case is next listed for
further directions in the Federal Court on 18 July 2008.
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31 May
2008
Alvaro Edwards
Solicitors commenced its quality journey
some years ago, formally culminating in 2005 when we were one of the first legal
firms in NSW to achieve Legal Best Practice certification under the LAW9000
standard, which is based on the ISO9001 standard. See our page on
Quality Endorsed Legal Practice for more information on what this means.
We’re just as proud now to confirm
that following our triennial audit in April 2008 by
SAI Global Limited, it was recommended
that our triennial certification proceeds. This is a great incentive for
our continuing commitment to providing quality management systems for the
provision of legal services to our clients.
26 April
2008
New laws concerning Wills commenced
operating in NSW on 1 March 2008. Properly
prepared Wills made by a Will-maker before 1 March 2008 will continue to be
effective. See our Wills page for more information about
these changes.
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4 April
2008
High Court appeal to proceed in
franchising case. This is a simplified summary of issues raised
and decided by the NSW Court of Appeal in Ketchell -v- Master of Education
Services Pty Ltd. This case concerned a franchisor suing one of its
franchisees for non-payment of monthly franchise fees. Those fees were payable
under the franchise agreement – not an unusual provision!
The franchisee, in its defence, argued it wasn’t liable to the franchisor on the
ground that the contract was illegal and unenforceable because of the
franchisor’s failure to comply with clause 11 of the Franchising Code of
Conduct.
Paraphrased, clause 11 states that a franchisor must not enter into a franchise
agreement unless it receives from the franchisee a written statement
acknowledging that the franchisee received, read, and had a reasonable
opportunity to understand, the disclosure document and the Code. Guess what?
There was no such written statement here.
This franchisor, as others beforehand in other cases, relied on a 2004 NSW
Supreme Court decision that provided such conduct does not necessarily make
franchise contracts made in contravention of the Code illegal.
In a unanimous decision, the NSW Court of Appeal rejected this interpretation.
The franchisor, with funding assistance from the Franchise Council of Australia,
is now taking steps to proceed with an appeal in the High Court
Until the High Court appeal is finalised, this means that franchisors need to be
vigilant in ensuring they obtain from franchisees, or prospective franchisees, a
statement that complies with clause 11, as well as ensuring compliance with the
Code’s other provisions.
The question has been asked whether any non-compliance with the Code renders a
franchise agreement illegal and unenforceable. Well, whilst it is possible, it
really depends on the circumstances of each case and the exact wording of the
clause in the Code. In this case, clause 11 had a fairly explicit provision,
“…franchisor must not enter into a franchise agreement…”. Not every provision in
the Code is so acute.
One likely result is that franchisors will need to be vigilant, to the point
where some franchisees, or prospective franchisees, may consider the franchisor
to be pedantic or nit-picking.
Franchisees should not see this decision as one that gives them a way of
avoiding their obligations if there is any breach of the Code by a franchisor.
An important factor too is that the franchisee here raised the franchisor’s
non-compliance as a defence. If a claim is made by a franchisee on the other
hand, say, claiming damages allegedly resulting from the franchisor’s breach,
such damages could be limited or non-existent if such claimant can’t prove that
had the contravention of the Code not occurred, the franchisee would have either
not have entered the agreement, or negotiated different, more beneficial, terms.
So what’s the conclusion? It would seem that notwithstanding the outcome of the
appeal to the High Court, at the very least franchisors will need to not only
ensure they receive a signed statement from a prospective franchisee to show
compliance with clause 11 of the Code, but review or audit their procedures to
iron out potential other non-compliances that formerly may have been considered
as merely “technical” breaches of the Code.
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1 March
2008
Amendments to the Franchising Code
of Conduct become law. The Code regulates the
conduct of franchising. It sets out rights and obligations for both franchisors
and franchisees. It is especially about the giving to prospective franchisees
sufficient information before they enter a franchise agreement, or contract.
The
Australian Government made a number of amendments to the Code, particularly its
disclosure provisions. The changes that have come into effect include
numerous minor changes and some substantial ones. These include:
-
The Code will
now apply to foreign franchisors granting or renewing franchises or master
franchises in Australia. Foreign franchisors must now give a disclosure
document to their Australian franchisees and master franchisees.
-
A disclosure
document must now include the franchise agreement ‘in the form in which it is
to be executed’. It seems that the franchise agreement given to a
prospective franchisee needs to be virtually in its final form, not just a
sample document. An interesting question arises as to whether the 14 day
waiting period before a prospective franchisee can sign an agreement restarts
each time there is an agreed amendment to the proposed agreement.
-
The inclusion in
franchise agreements of a waiver by the franchisor of any verbal or written
representations made by the franchisor is now prohibited
-
Beefed up disclosure
provisions require franchisors to disclose actual copies of other related
agreements, such as supplier, licence and confidentiality agreements.
-
The long form
disclosure must be given if the franchised business that has an expected
turnover of $50,000pa or more ‘at any time during the term of the franchise
agreement’.
-
Franchisors are now
required to produce a disclosure document within 4 months from the end of each
financial year (previously, this was 3 months)
-
Franchisors must now
disclose whether they receive rebates or financial benefits from a supplier of
goods or services to franchisees, and provide details of such benefits, but not
the amount of those benefits.
-
The disclosure of
materially relevant facts has also been reduced to 14 days (down from 60) after
the franchisor becomes aware of that materially relevant fact. These would
include, for example, certain civil industrial or corporate proceedings against
the franchisor or its directors
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19 February 2008
Alvaro Edwards
Solicitors has now moved to the following new street (and postal) address:
Suite 1
16 Norfolk
Street
Liverpool NSW
2170
Visit
this MAP page to see the above location. All other contact details remain
unchanged.
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1
January 2008
Stamp duty abolished on leases in NSW first executed on or after this date,
unless a premium is payable or agreed to be paid in respect of the lease.
The premium paid or agreed to be paid will be liable to duty at the general
stamp duty rate. The abolition of duty on leases does not affect any
obligation to pay duty in respect of a lease instrument and a variation of a
lease instrument executed before 1 January 2008.
Land tax rate in NSW for 2008 is now 1.6% (plus $100) on the combined value
of all taxable land in excess of the threshold - this is down from the previous
year's rate which was 1.7%.
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1 September 2007
Stamp duty is no longer chargeable in NSW on advances made on or after
this date in connection with owner occupied housing providing all the borrowers
under the mortgage are natural
persons.
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1 August 2007
High Court of Australia hands down its decision in Black -v- Garnock.
This case has raised a number of critical issues concerning the protection of
purchasers of real estate in NSW, particularly between exchange of contracts and
registration of their transfer following completion of their purchase.
Unless and until there are changes to the law, the result of this decision is
most likely to increase costs, complexity and uncertainty in conveyancing,
particularly for purchasers in NSW.
For
example, we are recommending that purchasers seriously consider registering a
caveat on the property they’re purchasing as soon as practicable after exchange
of contracts. This alone adds a significant step and costs for purchasers and
differs from what was until recently the usual conveyancing practice in NSW.
Before this decision, prudent conveyancing practice in NSW did not call for a
caveat to be lodged against the title of a property following exchange of
contracts, pending completion
12 June
2007
First version of this site
published.
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