Far Horizons Pty Ltd v McDonald's Australia Ltd

The case of Far Horizons Pty Ltd v McDonald's Australia Ltd dealt with a dispute between a franchisor and franchisee concerning the implied term of good faith and fair dealing in a franchise agreement. The matter was heard in the Supreme Court of Victoria. The central issue in the case was whether McDonald's, the franchisor, had breached the implied term by operating a new store near an existing franchisee's store for extraneous purposes, such as pressuring the franchisee to sell their business or surrender their licence.

The court considered whether the implied term of good faith and fair dealing in the franchise agreements was breached by McDonald's when it opened a new store in close proximity to an existing franchisee's store. The plaintiffs argued that McDonald's had acted in bad faith by opening a new store to punish the franchisee or force them out of the system. The court found that the plaintiffs had not discharged the onus of proving that McDonald's acted in bad faith. The court further considered whether the terms pleaded in paragraphs 20 and 20A of the statement of claim were part of the licence agreements. The court concluded that, in order to make out a breach of these duties, the plaintiffs must establish bad faith, which they had not done.

The court found that McDonald's had not breached the implied term of good faith and fair dealing in the franchise agreements. The court held that the plaintiffs had not established that McDonald's had acted in bad faith by opening a new store near an existing franchisee's store. The court also found that the terms pleaded in paragraphs 20 and 20A of the statement of claim were not part of the licence agreements. The court did not consider it necessary to determine whether the implied obligation was excluded by the entire agreement clause, as the plaintiffs had not established a breach of the implied term.

The court dismissed the proceedings brought by the plaintiffs, Far Horizons Pty Ltd. The court found in favour of McDonald's Australia Ltd, the defendant. The plaintiffs were ordered to pay the defendant's costs of the proceedings.