Judi Moylan (Pearce, Liberal Party) Share this | Hansard source

Thank you, but I will try to keep my speech to the minimum. If you go through some of the evidence that has been given over the years, there has been plenty of evidence to suggest that a good faith provision is a logical step forward. Professor Warren Pengilley stated in his submission:

There are good grounds for inserting in the Franchising Code an obligation for parties to act in good faith. This obligation should be imposed on both parties and not on one party only …

He also stated that he recommended in 1981 to the Minister for Business and Consumer Affairs that an obligation to act in good faith could be enacted, and that his belief has strengthened since then because, he said:

… a franchise (properly defined) is an ongoing relationship involving the trust of one party in dealings with another.

He gave evidence to similar effect again when he said:

I have no objections at all to an obligation to act in good faith. I know lawyers say that the cases differ, the law is developing and so on.

I have to say that it is taking an awfully long time to develop. But he goes on:

It almost seems to me to be a case for saying, ‘Let’s put it in so that we know clearly where we are.’ It is not true that the concepts are unknown. There are obligations in insurance law and partnership law, for example, to act in good faith, and no doubt there are many more.

I say, ‘Hear, hear!’ to that.

The Law Institute of Victoria, representing 15,000 legal professionals in Victoria, recognised the need for franchisors to have certain scope to their allowable discretionary powers when dealing with franchisees, but they concluded:

The LIV recognises the uniqueness of franchising in commercial relationships. They are based on a high degree of trust and universally accepted notions of goodwill. Therefore, it is important to balance this against the arguments not to regulate, which by their nature present an unworkable economic model which assumes all franchise relationships have equal power balance and remedies to resolve disputes cost effectively. This is simply not the reality in our emerging commercial markets.

They go on to say:

The addition of a statutory obligation on franchisors to act in “good faith” is not out of step with the approach by some courts.

They give an example of a case in the New South Wales court and then go on to say:

Although there is currently some uncertainty about the exact extent of the content of an obligation of “good faith”, the insertion of a statutory obligation will allow the courts to flexibly apply the concept to individual factual circumstances.

My colleague the member for Dunkley mentioned Professor Zumbo, who has long argued the case for a good faith provision in this legislation and has considered this quite closely—he is probably one of the foremost experts on this matter. And he argues that enacting a statutory duty of good faith:

… offers considerable potential as a mechanism for promoting ethical business conduct—

and submits:

Such a statutory duty of good faith should operate generally—

within the franchising relationship—

… including requiring the parties to resolve disputes in good faith.

I do not understand why successive administrations have been so implacably opposed to doing what is really a good-sense measure in the interests of maintaining, as Professor Zumbo said, ethical business conduct and the integrity of the great franchising industry that we have in this country—there seems to be no reason in the wide world. But the South Australian government submission to the 2008 federal franchising inquiry stated:

The Committee recommends that the exclusion or inadequate determination of goodwill or other such exit payments by a franchisor during negotiations with a franchisee regarding a franchise agreement constitutes “unconscionable conduct” …

I agree with that. I think it is like robbing somebody. If you are working together in a partnership to build the goodwill of the business in the interests of both parties, there is absolutely no reason in the wide world why there should not be an equitable split, all things being equal, at the end of the contractual period of that agreement. To do otherwise is to continue to perpetrate what is a very, very unfair practice that prejudices the rights of the little people, the franchisees in most cases. The submission goes on:

The Committee recognises that goodwill presents a challenge to the franchise industry because of the unique structure of franchise businesses, the location of brand ownership and the distribution rights and responsibilities between the parties. Yet inherent in recognising that the success of a franchise depends on both parties is the need to recognise and, where necessary, quantify the value of the franchisee efforts over the term of the contract.

This cannot be too difficult. I spent many, many years in business before I came into this place and I do not understand why this cannot be done in a fair way. While an individual franchise may not succeed without the brand power and resources provided by the overarching system, the efforts—(Time expired)

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