Businesses need to ensure that they have reasonable grounds for making any representations about future matters, especially in the franchising environment.
In a decision handed down by the Federal Court, Taxsmart has been ordered to pay $260,400 in franchise fees to five former Taxsmart franchisees. The Court held that the franchisor, Tax Smart, had engaged in misleading and deceptive conduct. The orders were made by consent in the proceedings brought by the Australian Competition and Consumer Commission (ACCC).
The court found that Taxsmart collected sums of between $45,000 and $80,000 from a number of recently graduated accountants with a view of starting a franchise business with Taxsmart. The money was paid on the proviso that at the end of a 12-month supervision program the graduates would be qualified as registered tax agents and could consequently run their Taxsmart franchises.
The court declared that Taxsmart engaged in misleading or deceptive conduct on the grounds that:
- Taxsmart had not made proper enquiries or adequately considered whether the graduate program would enable graduates, with no prior experience in tax accounting, to satisfy the legal requirements for registration as a tax agent
- The graduate program was not capable of enabling graduates, without any previous work experience in tax accounting, to satisfy the legal requirements for tax agent registration.
The court also declared that Taxsmart’s sole director, Mr Andrews, aided and abetted Taxsmart in engaging in the misleading and deceptive conduct and is jointly liable for the repayment of the franchise fees. Both Taxsmart and Andrews have subsequently undertaken that they will not, for a period of three years, make representations to the same or similar effect or make offers of employment contingent on the payment of a fee.
Taxsmart and Andrews were also ordered to contribute $10,000 to ACCCs costs.
Authors: Trent Taylor and Felicia Quagliata
Trent Taylor, Partner
T: +61 7 3135 0668
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