Franchisor’s conduct breaches good faith: contracts discharged, rules High Court

Mark Stephens of Gatehouse Chambers was successful today in the High Court, instructed by Jonathan Hodge of Aquabridge Law, representing 17 claimants in the landmark case of Ellis & Ors v John Benson Ltd. The claimants were a group of driving instructor franchisees at the Benson School of Motoring.

In its judgment, the High Court has held that the clients’ contracts contained implied terms of good faith – and that the franchisor could not conduct itself in a manner which would be regarded as commercially unacceptable by reasonable and honest people, nor in a manner likely to cause serious damage to the relationship of mutual trust and confidence.

Mr Justice Freedman heard extensive evidence during a five-week trial earlier this year, and has today found that the franchisor breached those implied terms and thereby repudiated the clients’ contracts, entitling them to leave the network without any liability to the franchisor.

This decision confirms that, where there is an imbalance of power and the franchise relationship is similar to an employment relationship, there are limits to how a franchisor can treat its franchisees. Today’s judgment builds upon developing law concerning duties of good faith in commercial contracts, drawing upon case law such as Bates v Post Office.

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