BURGER KING CORPORATION v HUNGRY JACK’S PTY LIMITED (S175/2002)

Court appealed from: Supreme Court of New South Wales (Court of Appeal)

Date of Judgment: 20 November 2001

Date of grant of special leave: 19 April 2002

The appellant was the franchisor of the second largest food chain in the world. The respondent was the largest franchisee in Australia and for many years had been the sole franchisee. The respondent used its own name Hungry Jack’s for its franchised stores rather than the Burger King brand name.

In 1990 after several years of disputes the parties entered into four agreements, which together with the individual franchise agreements in respect of each of the respondent’s stores, governed the contractual relationship of the parties, including the respondent’s development rights in Australia.

Under the Development Agreement, the respondent had an unrestricted non exclusive right to develop throughout Australia and was required to develop a total of at least four restaurants per year in Western Australia, South Australia and Queensland.

There were continuing disputes between the parties which developed and intensified from 1993 onwards. On 18 November 1996 the appellant served two Notices of Termination of the Development Agreement. On 26 November 1996 the respondent commenced proceedings against the appellant. The primary judge made various findings against the appellant including that the Notices of Termination were invalid and that the appellant had breached its implied obligations of good faith and reasonableness in the Development Agreement. Damages were awarded to the respondent under four heads. The first head of damage awarded by the primary judge was for delay in opening company-owned restaurants. His Honour had a choice of 3 Samples of existing restaurants for the calculation of damages and adopted Sample 1.