Be Nice – It’s not like you have a choice anyway!

Be Nice – It’s not like you have a choice anyway!

Franchise disputes must be resolved in a particular way. Franchisors who are not prepared to be nice, should beware! There are good reasons why a franchisor should listen carefully to their franchisees and make genuine attempts to resolve any  franchise dispute.
A franchise agreement entered into on or after 1 October 1998 must provide for a complaint handling procedure that complies with Part 4 of the franchising code of conduct.
The Franchising Code also obliges both parties to act in good faith.  In order to decide if the parties have acted in good faith a court will look at whether the parties have acted honestly, and for genuine reasons and whether each party has cooperated to try to achieve the objective of the Franchise Agreement.
 A snippet of the Code relating to dispute resolution is set out below:

Part 4Resolving disputes

Division 1General

34  Internal complaint handling procedure

                   A franchise agreement must provide for a complaint handling procedure that complies with Division 2 of this Part.

35  Resolving disputes

                   A party to a franchise agreement (the complainant) who has a dispute with another party to the franchise agreement may:

                     (a)  take action under the agreement’s complaint handling procedure; or

                     (b)  take action in accordance with the procedure set out in Division 3 of this Part.

36  When a party is taken to be trying to resolve a dispute

             (1)  A party will be taken to be trying to resolve a dispute if the party approaches the resolution of the dispute in a reconciliatory manner, including doing any of the following:

                     (a)  attending and participating in meetings at reasonable times;

                     (b)  not taking action during the dispute, including by providing inferior goods, services, or support, which has the effect of damaging the reputation of the franchise system;

                     (c)  not refusing to take action during the dispute, including not providing goods, services or support, if the refusal to act would have the effect of damaging the reputation of the franchise system;

                     (d)  if a mediation process is being used to try to resolve the dispute—both:

                              (i)  making the party’s intention clear, at the beginning of the process, as to what the party is trying to achieve through the process; and

                             (ii)  observing any obligations relating to confidentiality that apply during or after the process.

             (2)  To avoid doubt, if a mediation process is being used to try to resolve the dispute, subclause (1) applies whether the mediation is conducted under this code or otherwise.

37  Right to bring proceedings unaffected

                   This Part does not affect the right of a party to a franchise agreement to bring legal proceedings, whether under the franchise agreement or otherwise.

Division 2Internal complaint handling procedure

38  Notification of dispute

             (1)  The complainant must tell the respondent in writing:

                     (a)  the nature of the dispute; and

                     (b)  what outcome the complainant wants; and

                     (c)  what action the complainant thinks will resolve the dispute.

             (2)  The parties should then try to agree about how to resolve the dispute.

             (3)  If the parties cannot agree how to resolve the dispute within 3 weeks, either party may refer the matter to a mediator for mediation under:

                     (a)  a franchise agreement; or

                     (b)  this code.

             (4)  If the parties cannot agree on who should be the mediator, either party may ask the mediation adviser to appoint a mediator.

Note:          The mediation adviser is appointed by the Minister, see clause 44.

39  Mediation

             (1)  Subject to subclause (2), a mediator appointed for a dispute may decide the time and place for mediation.

             (2)  The mediation must be conducted in Australia.

             (3)  The parties must attend the mediation.

Civil penalty:          300 penalty units.

             (4)  For subclause (3), a party is taken to attend mediation if the party is represented at the mediation by a person who has the authority to enter an agreement to settle the dispute on behalf of the party.

             (5)  The parties must try to resolve the dispute.

Note:          For when a party is taken to be trying to resolve a dispute, see clause 36.

             (6)  After the mediation has started, the mediator must advise the mediation adviser, within 28 days, of that fact.

Division 3Code complaint handling procedure

Subdivision ANotification of dispute

40  Notification of dispute

             (1)  The complainant must tell the respondent in writing:

                     (a)  the nature of the dispute; and

                     (b)  what outcome the complainant wants; and

                     (c)  what action the complainant thinks will resolve the dispute.

             (2)  The parties should then try to agree about how to resolve the dispute.

             (3)  If the parties cannot agree how to resolve the dispute within 3 weeks, either party may refer the matter to a mediator for mediation under:

                     (a)  a franchise agreement; or

                     (b)  this code.

             (4)  If the parties cannot agree on who should be the mediator, either party may ask the mediation adviser to appoint a mediator.

Note:          The mediation adviser is appointed by the Minister, see clause 44.

Subdivision BMediation

41  Mediation

             (1)  Subject to subclause (2), a mediator appointed for a dispute may decide the time and place for mediation.

             (2)  The mediation must be conducted in Australia.

             (3)  The parties must attend the mediation.

Civil penalty:          300 penalty units.

             (4)  For subclause (3), a party is taken to attend mediation if the party is represented at the mediation by a person who has the authority to enter an agreement to settle the dispute on behalf of the party.

             (5)  The parties must try to resolve the dispute.

Note:          For when a party is taken to be trying to resolve a dispute, see clause 36.

             (6)  After the mediation has started, the mediator must advise the mediation adviser, within 28 days, of that fact.

42  Termination of mediation

             (1)  This clause applies to the mediation of a dispute if:

                     (a)  at least 30 days have elapsed after the day that mediation began; and

                     (b)  the dispute has not been resolved.

             (2)  The mediator may terminate the mediation at any time unless satisfied that a resolution of the dispute is imminent.

             (3)  However, if either party asks the mediator to terminate the mediation, the mediator must do so.

             (4)  If the mediator terminates the mediation of a dispute under this clause, the mediator must issue a certificate stating:

                     (a)  the names of the parties; and

                     (b)  the nature of the dispute; and

                     (c)  that the mediation has finished; and

                     (d)  that the dispute has not been resolved.

             (5)  The mediator must give a copy of the certificate to:

                     (a)  the mediation adviser; and

                     (b)  each of the parties to the dispute.

43  Costs of mediation

             (1)  The parties are equally liable for the costs of mediation under this Subdivision unless they agree otherwise.

             (2)  The parties must pay for their own costs of attending the mediation.

             (3)  In this clause:

costs of mediation under this Subdivision include the following:

                     (a)  the cost of the mediator;

                     (b)  the cost of room hire;

                     (c)  the cost of any additional input (including expert reports) agreed by both parties to be necessary to conduct the mediation.

Franchisees should obtain legal advice immediately if they are in dispute with their franchisor. It is likely that the first step in resolving a dispute in the most cost effective way, is to ask your lawyer to commence the disptue resolution process required by the code.
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