RFG class action dropped

But franchisees explore other options for redress

RETAIL Food Group executives have received their second piece of good news in the past four days after a class action by former franchisees was dropped.

The law firm leading the case, Bannister Law, said it was unable to secure litigation funding.

It follows news on Friday that RFG’s lenders had agreed to waive testing of the company’s financial covenants under its debt facilities for the past financial year.

Shares in the company, which has been dealing with the fallout from allegations it mistreated its franchisees, have risen almost 20 per cent from a low of 41.5¢ last week to close at 50¢ yesterday.

However, franchisees looking for compensation won’t be celebrating.

Franchise Redress spokeswoman Maddison Johnstone said it had begun discussions with litigation funders to see if there were other options for franchisees.

“We will work our relationships with litigation funders and enter into discussions into how these people can be helped,” she said.

Bannister Law announced its class action in January.

The firm was to look at three aspects: The disclosure provided to franchisees upon purchase and representations made to franchisees; the operation of the affairs under the franchise agreement; and any potential breaches in the Franchise Conduct of Conduct, the Australia Consumer Law and the Corporations Law.

However, in a letter released on Monday, principal Charles Bannister said, after reviewing documentation, and based on the merits of the case, it was unable to secure funding and had decided not to pursue it on behalf of franchisees.

Bannister Law has been working with Franchise Redress to bring the class action to court.

According to Franchise Redress’ Michael Fraser, it has two sources of income.

It takes on individual cases for people seeking settlements against banks or insurance companies. For example, when it helped a heart attack victim with a claim against an insurance company it would take a $1000 upfront fee plus 10 per cent of the eventual settlement.