The fairly dramatic facts surrounding the termination of a 'Couriers Please' franchise in a Victorian case last year shows the operational challenges of managing franchisees1. It also illustrated one of the lessor used grounds of immediate termination of a franchise – on the basis that the franchisee is operating the franchised business in a way that endangers public health and safety (Clause 29(1)(f) Franchising Code of Conduct).
While you might think this ground is only used in cases of food businesses with serious hygiene issues, the courier franchisee here was terminated for repeated threats he made to a customer. The customer was in arrears and the franchisee sent letters in which he threatened to drive his vehicle into the customer's business premises in an act of suicide and to somehow implicate the customer in his death.
After the franchisor's managers personally gave the franchisee a notice of immediate termination he threatened to kill himself and was later taken to hospital by ambulance for his own safety. The franchisor's staff then found a further and more extreme threatening letter to the customer in the franchisee's van.
While the franchisor here may have handled both the franchisee's apparent mental health issues and the customer's non payment in a more timely way, it at least confirms a practical point. A franchisor need not wait until a franchisee causes actual harm to terminate - it is sufficient if there is a real and significant threat. The threat to the franchisee's own safety is arguably also relevant.
An important additional point from this case is that the notice of termination given did not clearly specify the provision in the franchise agreement relied upon (being the equivalent of clause 29(1)(f) of the Code) although it did deal with the nature of the threatening conduct. It was held, however, that this would not detract from the validity of the notice if it is otherwise effective. Any ground for termination that exists at the time the innocent party elects to terminate may be relied on at a later date.2 Any doubt that existed that the ground for termination on the basis of endangering health and safety was not valid was put to rest once the final letter was found in the van.
Footnotes
1Sondoananh Trading Company Pty Ltd v Couriers Please Pty Ltd [2017] VCC 1644 (Woodward J)
2 Woodward J at [78] Also Shepherd v Felt and Textiles of Australia Ltd [1931] HCA 21
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