Against a background of the recently concluded comprehensive Federal review of franchising, and in the context of a universally endorsed trend towards harmonisation of State laws and reduction in red tape and bureaucracy, South Australian backbencher Tony Piccolo is still championing his private member's bill, introduced in December 2009 into the South Australian parliament and entitled the Franchising (South Australia) Bill 2009 (the Bill). If enacted, the Bill is likely to have a very negative impact on franchising in South Australia, and potentially throughout the country.
The main features of the Bill are:-
- an extraordinarily broad ambit, with the Bill purporting to apply well beyond the confines of South Australia, and having the potential as currently drafted to apply to all Australian franchise agreements
- a new definition of statutory good faith requiring parties "to act fairly, honestly, reasonably and in a cooperative manner". This definition goes far beyond the accepted legal definition of "good faith", and ignores the fact that there is already likely to be an existing and indeed different duty of good faith and fair dealing implied into most franchise agreements
- a new regulator, the Commissioner of Franchises, is proposed with a new State bureaucracy to handle investigations, registration, prosecutions and enforcement, determination of franchising disputes, and the provision of advice to the relevant Minister. The Commissioner is given extraordinary powers of information gathering, operation and delegation. Fines of up to $20,000 can apply for failure to provide information, and there are none of the usual safeguards on information gathering
- power to the Commissioner to make binding determinations in relation to disputes arising out of unsuccessful mediations, but without the normal judicial processes to ensure the truth, accuracy or admissibility of evidence. The potential to undermine mediation, and for perverse decisions, is obvious. The Bill also purports to severally restrict legal representation in a clear denial of natural justice
- the creation of a public Franchising Register that enables the Commissioner to publicise current investigations in a manner that implies guilt until proof of innocence. The Commissioner also has a broad discretion to put on the Register such other information as the Commissioner chooses, and
- sweeping new powers for the District Court to order compensation and pecuniary penalties of up to $100,000 per infringing act, and $10,000 for individuals aiding, abetting or being in any way knowingly involved in a breach of the Bill.
If the Bill is enacted, South Australian franchisors and others coming within the broad scope of the Bill will be subject to a new regulatory regime on top of the current comprehensive Federal regime. Mr Piccolo has sought to engage with the franchise sector to "fine tune" his Bill, but the flaws in the Bill are so fundamental, and the implications for the South Australian franchise sector so significant, that the Bill cannot be supported in any form. The Franchise Council of Australia has conveyed their views to Mr Piccolo, and prepared a detailed written submission outlining the fundamental flaws in the Bill which it will be discussing with Mr Piccolo and other relevant decision makers in the hope that the Bill is withdrawn. For more information contact Norton Rose partner Stephen Giles, who has been representing the Franchise Council of Australia in negotiations with Mr Piccolo and others.
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