So Good faith = Fiduciary Duty in Oz, does it?

I do not know how Mr. Bruce McFarlane of Hall & Wilcox, Melbourne, Australia qualifies as a franchise law expert.

His interpretations of good faith and fair dealings provisions within franchise law are suspect to say the least.

In a recent article Mr. McFarlane seems to criticize the mere call for good faith within franchising:

Another conflict point, McFarlane argues, is good faith negotiations, a policy endorsed by the joint meeting of Small Business Ministers in May this year. Here, parties to a franchise are urged to deal with each other in `good faith’ and adopt ‘fair dealing’ practices.

McFarlane makes the breathtakingly unsubstantiated claim that good faith provisions creates a fiduciary duty. This is simply, like, wrong, wrong, and then again, wrong.

This creates a fiduciary relationship,” said McFarlane, ”which goes beyond the relationship that they already have. It’s not like an employer relationship. You’re expected to do your own due diligence and run the business and be fully informed of the risks.

Next, McFarlane goes on and overlooks the central feature of all franchise relationships: that franchisees are vulnerable to franchisor overreaching (opportunism) because they have their life savings sunk into the store.

Franchisors know they can exercise their discretion under any flimsy pretense to act in a predatory way because the franchisee will not abandon their investment (easily).

”The Code clearly says you need independent legal and financial advice. So if the franchisee speaks to their lawyer and accountant then why should the franchisor have an additional duty to look out for them?

I do not know what Mr. McFarlane’s fear mongering is all about. But I do know no competent law academic or North American franchise lawyer (where good faith and fair dealings have been with us for 40 years with absolutely no fiduciary in sight) would defend his position.

Cash Flow Analysis: Future franchise bar aggregate billable hours can be permanently increase by creating bogey men issues to rattle their skittish, but nonetheless, well-paying franchisor clients. All monopoly legal service provider boats (franchisee/franchisor) will rise the more fear or useless legislation is passed.

Lobbying Play

  1. Construct a false argument (anchor and frame on a sham McLaw),
  2. trot out all manner of Kleenex pundits parroting as many straw man arguments as needed (fallacies based on misrepresentations: undue red tape, international competitiveness, UNIDROIT, “windfalls” of avoiding illegal debt, technical (v. non-technical?) breaches of the law, etc.),
  3. eventually “compromise” (lol) by giving the losers good faith + fair dealings + commercially reasonable provisions (knowing they have been useless in remedying any substantial U.S. or Canadian abuse in the last 40 years) and
  4. then, delay, delay, and then delay some more.

Good Faith = good grief.

Welcome to the continuing betrayal of Oz Mom-and-Pop franchise investors.

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