In Brief
In a recent Supreme Court of Victoria case, a 7-Eleven franchisee was successful in obtaining an injunction proceeding against the franchisor.
The facts
- The Defendant leased the property for a store in Heathmont for a period of 10 years with an option of another 5 years.
- Ms Li and Mr Wang (the directors of the franchisee) purchased a franchise for the operation of the Heathmont store and signed a franchise agreement and a licence to use the Heathmont store.
- The Defendant did not exercise the option on the Heathmont store lease and therefore sought to terminate Ms Li and Mr Wang’s franchise and licence.
Arguments by Ms Li and Mr Wang
Ms Li and Mr Wang argued that:
- it was misrepresented to them that the franchise agreement had a 10 year term and they were not informed that the term would expire if the Defendant did not exercise the option to renew the lease; and
- the Defendant’s decision not to exercise the option in the lease of the Heathmont store was not in good faith and was unconscionable.
They further said that they would lose their business (and its ongoing value), they would have to terminate their employees and they would lose the opportunity to re-establish their business if the termination of the franchise agreement went ahead.
The Court
The Court granted an injunction in favour of Ms Li and Mr Wang, and held (amongst other matters):
- there was a serious issue to be tried;
- the continuation of the business until the matter is to be heard keeps the status quo;
- Ms Li and Mr Wang’s business would come to an end if the injunction wasn’t allowed and this was likely to have significant consequences beyond a financial impact; and
- Ms Li and Mr Wang had given an undertaking to pay damages suffered by the Defendant caused by the injunction if Ms Li and Mr Wang were not ultimately successful in their claims.
Lessons
An injunction may be available to prevent damage arising from misleading and deceptive conduct, even where no damage has yet been suffered.
Injunctions are highly technical and you should always seek legal advice before commencing or defending an injunction application.
For more information about injunctions see below a link to Madgwicks’ guide for injunctions.
