AMC Commercial Cleaning (NSW) Pty Ltd v Coade (No. 3)

In the matter of AMC Commercial Cleaning (NSW) Pty Ltd v Coade (No. 3), the Federal Court of Australia was called upon to interpret the terms of a Master Franchise Agreement (MFA) between the parties. The dispute centred on whether the master franchisee had the authority to enter into a sub-master franchise agreement in the Australian Capital Territory and whether any amendments to the franchise manual, which was incorporated into the MFA, could alter the scope of the master franchisee's rights and obligations.

The court was tasked with determining the extent of the master franchisee's authority under the MFA, specifically whether the MFA itself permitted the creation of sub-master franchises. Additionally, the court needed to assess whether any amendments to the franchise manual, which were incorporated into the MFA, had the effect of permitting sub-master franchises. The validity of such amendments under clause 17.3 of the MFA was also scrutinised.

The court held that the MFA did not explicitly grant the master franchisee the power to enter into sub-master franchise agreements in the ACT. The court further found that the amendment to the franchise manual, which was incorporated into the MFA, did not alter the master franchisee's rights and obligations in a manner that would permit sub-master franchises. The court also determined that the amendment to the manual was not valid under clause 17.3 of the MFA. Therefore, the master franchisee did not have the authority to enter into the sub-master franchise agreement in question.

The court's decision resulted in the master franchisee being held liable for breaching the terms of the MFA by entering into the sub-master franchise agreement without proper authority. The court ordered the master franchisee to compensate the franchisor for losses incurred as a result of the unauthorised sub-master franchise agreement.