Many franchisors specify their home state as the governing law of the franchise agreement, often ignoring the case law on the issue.

In December 2010, the Federal Magistrates Court considered the choice of law issue in Broad Spectrum Training Pty Ltd and Ors v Bidding Buzz Limited.

The franchisor sought to have the proceedings commenced by the franchisee transferred from the Perth to the Brisbane registry of the Federal Magistrates Court.

The parties entered into a franchise agreement which specified Queensland as the governing law of the agreement.

The directors of the franchisor argued that the proceedings should be transferred to Brisbane on the following basis:

• the directors of the franchisor reside in Queensland;
• the Franchise Agreement was entered into in Queensland;
• the Franchise Agreement has a specific law provision, providing for governance by Queensland laws;
• the franchisee’s substantive claim raises an issue with respect to Queensland legislation (Queensland fair trading laws);
• any witnesses to be called will be located in Queensland; and
• they would be put to significant cost if they have to travel with witnesses to Perth.

The directors of the franchisee argued that:

• they executed the Franchise Agreement in Perth;
• if the matter proceeds to hearing a range of witnesses will be called, those witnesses residing throughout Australia (however, the applicants gave no further detail of who those witnesses are and where they reside);
• they are independent business persons whose income depends upon their own efforts and that time off to travel interstate results in income reduction or cessation;
• if the proceedings are transferred to the Brisbane Registry it will be necessary for them to instruct new solicitors; and
• additional costs would be incurred in travelling and accommodation for the applicants and their witnesses, and that this would prevent the applicants from pursuing their claims against the respondents, although no detail of the costs and the necessity to discontinue on a financial basis are given.

The court noted that the franchisee’s directors were essentially self-employed and their absence from Perth would affect their income and livelihood. However, the court distinguished absence for a period of two to three days (which would not affect their income) from a week away (which had potential to affect their livelihood).

The court went on to say that regardless of whether the proceedings are heard inPerth or Brisbane, ultimately both parties would be at a disadvantage.

Federal Magistrate Lucev relied on the law set out by the court in the Sherwood Overseas case in which the Court had regard to the following issues:

·residence of the parties;

·residence of the witnesses;

·expense to the parties;

·the place where the cause of action arose; and

·the convenience of the court itself.

The Federal Court identified other factors to consider, including:

·that the choice of venue should not be capricious;

·whether a party might receive a legitimate juridical advantage (such as the ability to claim damages or additional damages, or to be awarded pre-judgment interest, in one venue and not the other);

·the governing law of any contract;

·the size and nature of any businesses concerned;

·the degree of connection with the respective venues, and in particular the subject matter of the litigation (especially    where a view or inspection might be required by the court);

·the location of Counsel, solicitors and other advisers, particularly those with actual knowledge and relevant experience;

·case and docket management considerations, particularly whether a case can or ought to be managed and heard in one Registry, or managed in one Registry and heard in another, which might include consideration of what steps have been taken in the litigation, and if steps have been taken, the nature of those steps and how many steps;

·that the Court can sit, take evidence and hear witnesses anywhere in Australia; and

·whether witness statements or affidavits have already been taken, and whether a change of venue might render them redundant.

Having regard to all of the above factors, the Court dismissed the franchisor’s application to have the proceedings transferred from Perth to Brisbane.