Western Australian liberal backbencher Peter Abetz has followed South Australian Labor MP Tony Piccolo's lead by introducing a private member's bill, the Franchising Bill 2010 (Bill).
The Bill is similar to Mr Piccolo's South Australian bill and key elements include:
- a new statutory definition of good faith which defines 'acting in good faith' as meaning 'to act fairly, honestly, reasonably and in a cooperative manner';
- severe new penalties of up to $100,000 for failing to comply with the Franchising Code of Conduct; and
- a new commissioner with dispute resolution powers to make final binding determinations in relation to disputes which arise out of unsuccessful mediations.
As is also the case with the South Australian bill, the Bill has a broad ambit and has the potential to capture franchise agreements outside of Western Australia and has the effect of operating retrospectively.
However, the Bill has some key differences with the South Australian bill. For example, where the South Australian bill created a new regulator, the Bill refers to the 'commissioner' as defined in, and appointed pursuant to the Consumer Affairs Act 1971 (WA).
Of particular concern, the Bill proposes the power to award damages for personal injury including physical or mental impairment and economic loss as a result of a breach of the Bill and that the courts may make 'redress orders' including a 'renewal order'.
Under the Bill, a party to a franchise agreement or the commissioner can seek to force franchise agreements to be renewed at the end of their term. A 'renewal order' allows the court to decide the renewal period, and such other terms as the court decides is just having regard to the terms of the old agreement. Leaving aside the obvious issues of whether it is desirable to enforce a contract renewal in the absence of a contractual agreement between the parties and whether it is appropriate for a court to hold such power, this new power may result in franchise agreements which are renewed indefinitely.
At the recent Franchise Council of Australia national conference, the new federal Small Business Minister Nick Sherry made it clear that he disagrees with the need for further regulation at state level when a national framework already exists.
If the Bill becomes law in Western Australia, there is a risk that franchisors may either cease expansion plans in Western Australia or increase costs for new franchisees due to the potential new compliance costs.