Commercial law firm Phillips Fox has welcomed a decision by the High Court not to grant special leave to appeal an earlier decision of the Full Federal Court (FFC) to a former Lenard's franchisee.
The franchisee was seeking to overturn a July 2005 decision of the FFC in a case concerning a claim by the former franchisee against Lenard's for alleged misleading statements about financial projections and site selection.

The FFC ruled that the issue of whether the conduct of the Master Franchisee was "... misleading and deceptive... was... to be determined by reference to what a reasonable person in a position of the [franchisee] could have made of the documents".

"The decision is good news for franchisors who could now confidently rely on the principles of the Federal Court decision in formulating their policies and procedures," says Phillips Fox partner Tony Conaghan, who represented Lenard's.

However, Conaghan has also issued a caution for franchisors and their lawyers.

"It's important not to slavishly rely on the clauses which were the focus of the decision. These clauses have been significantly updated to take into account changes in the legal and commercial environment," he says.

Phillips Fox adds a franchisor must ensure its franchise documentation contains the necessary express warnings, disclaimers, "relevant representations" and "entire agreement" clauses so that the basis upon which a franchisee enters the system is clear.
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