High Court rules in favour of driving instructors in franchise dispute

A group of driving instructors have won their High Court case against their franchise company after the judge found it had breached an implied duty of good faith in their agreements.

Mark Aspin Director and Head of Dispute Resolution reports on this recent case.

The court ruled that the instructors were entitled to treat their franchise contracts as terminated, after concluding that the franchisor’s conduct had undermined the trust and confidence central to the relationship.

Background

The claimants, who operated as self-employed driving instructors under the “John Benson” franchise model, alleged that the company had exercised its powers in ways that damaged their businesses. They argued that restrictive practices, inadequate support, and commercially damaging decisions frustrated their ability to benefit from the franchise.

The franchise agreements gave John Benson Ltd wide-ranging control over matters such as lesson pricing, pupil allocation, and marketing. The instructors said those powers had been applied in a manner that was unfair and contrary to the purpose of the agreements.

Issues before the court

The key legal issue was whether the agreements carried an implied duty of good faith, and if so, whether the franchisor’s behaviour amounted to a repudiatory breach — a breach so serious it entitled the instructors to terminate.

John Benson Ltd argued that no such duty applied and that its conduct was consistent with the contractual terms.

Judgment

Mr Justice Ellis held that while there is no general rule imposing good faith in commercial contracts, such a duty may be implied depending on the relationship.

He found that the franchise agreements were “relational” in nature: long-term, dependent on cooperation, and requiring mutual trust. On that basis, the court implied a duty not to act in a way that would seriously undermine that trust and confidence.

The judge concluded that the franchisor had breached this obligation. As a result, the instructors were entitled to treat the agreements as discharged.

Implications

The ruling does not create a universal principle of good faith in all contracts. However, it confirms that franchise agreements — particularly those involving dependent franchisees such as driving instructors — are open to judicial scrutiny.

If you would like more information about the issues raised in this article or any aspect of contract law and protecting your business please contact Mark on 01228 516666 or click here to send him an email.