On 6 October 2026, Justice Lee of the Federal Court of Australia found that RAMS Financial Group, a franchisor wholly owned by Westpac, breached its contractual and Franchising Code obligations to act in good faith when it ended a mortgage broking franchise in Fairfield, Sydney.
The Court did not find that RAMS acted dishonestly, and it accepted that RAMS was entitled to rely heavily on Westpac's serious concerns. The breach lay in how the decision was made: RAMS's managing director had himself said he could not see the link between Westpac's concerns and supporting evidence, yet RAMS went ahead with the termination without resolving that gap and without giving the franchisee any opportunity to respond to the accumulated case against it.
The franchisee won on liability, but the Court found it was only entitled to 12.5% of its alleged losses as that was the percentage likelihood that a proper process would have kept the business going for a commercially useful period.
Relevant facts
RAMS operated a network of franchised mortgage brokers who sold RAMS-branded home loans. Westpac was the lender and made the final decision on each loan. Franchisees could only do the work if RAMS authorised them as "credit representatives" under its credit licence.
Sech Finance, run by its principal Daniel Lubarda, operated the Fairfield franchise. In late 2021, it signed a new five-year franchise agreement with RAMS. That agreement, and the Franchising Code of Conduct, required the parties to deal with each other in good faith.
During 2022, Westpac grew concerned about loan applications coming from Fairfield and subjected them to intensive review. That review used tools and information that ordinary brokers did not have. It flagged "anomalies" in 45 of 51 applications, including suspected inflated income, false payslips and misstated living arrangements. The Court identified that an "anomaly" did not by itself prove wrongdoing by a broker.
On 30 September 2022, Westpac recommended that RAMS remove Sech Finance and Mr Lubarda from its licence and end the franchise. RAMS's then managing director, Jake Bromwich, did not act straight away. He asked for more detailed information. After reading a briefing note, he wrote that while some concerns involved "pretty serious potential misconduct", he could not "get the link" between the concerns and evidence supporting them. Westpac replied that it had given all the information it could share, partly because of legal limits under anti-money laundering laws, and that the decision was his.
Four days later, Mr Bromwich decided to proceed on Westpac's recommendation, noting it was "unfortunate" that the investigators could not give him the evidence or details.
On 31 October 2022, RAMS revoked the authorisations, and the next day it gave notice that it would terminate the franchise. Before the decision, Sech Finance and Mr Lubarda were never told about, or asked to answer, the combined case being relied on by Westpace (and RAMS).
Issues for determination in respect of good faith
The main question the Court had to decide was:
Did RAMS act in good faith, as the franchise agreement and the Franchising Code required, when it used its broad powers to revoke the authorisations and move to terminate the franchise?
If RAMS breached its obligations, what did the franchisee lose as a result?
Court reasoning and outcome
What good faith did not require
The Court identified that:
RAMS had wide powers, including a statutory power to revoke an authorisation "at any time".
Good faith did not mean the Court could second-guess whether the decision was the right or most reasonable one.
RAMS did not have to repeat Westpac's investigation, ignore Westpac's views, give up its own legitimate commercial and regulatory interests, or disclose information the law prohibited it from sharing.
The five-year term was also not a guarantee that the franchise would last five years.
The contract did not give the franchisee a formal right to a hearing.
What good faith did require
However, drawing on earlier cases, the Court said good faith is "rooted in the bargain" and requires conduct that supports the deal rather than undermines it.
RAMS had to genuinely exercise its own powers, for purposes consistent with the agreement.
The way a decision is made can be relevant to whether it was made in good faith, particularly where the consequence is, in practice, the end of the franchisee's business.
Why RAMS fell short
The key facts were that:
RAMS's own decision-maker identified a gap in the evidence and treated it as important, and that gap was never closed. RAMS then completed its decision anyway.
the Court identified that there was an obvious source of further information: the franchisee itself. RAMS could have told Sech Finance and Mr Lubarda, within the limits of the law, that revocation was being considered because many applications had unresolved concerns, and invite a response about their practices, supervision and possible fixes. It did not do so.
The Court therefore found a breach of good faith. The breach was that RAMS finished its decision-making while a matter its own decision-maker considered material remained unresolved, and this lacked the "fidelity to the bargain" that good faith demanded.
The Court added that failing to call Mr Bromwich allowed it to draw that conclusion with more confidence, although the documents alone supported it.
There was no finding that Mr Bromwich was dishonest, acted on a whim, or had an improper motive
Loss
The franchisee had argued if the authorised credit representative agreements had not been terminated, leading to a termination it would otherwise have kept running the franchise for the rest of its term.
The Court rejected that observing that Westpac was entitled to keep scrutinising the franchise loans whatever happened, and only a few applications were getting through. RAMS also stopped accepting new home loan applications in August 2024. Claims for lost renewal and alternative products were rejected.
What the franchisee lost was the chance that a fair process might have led to a better result, such as conditions, training or continued trading for a time. The Court valued that chance at 12.5%. The dollar amount is still to be worked out, and the Court strongly encouraged the parties to mediate, noting the ‘lost’ amount is likely to be modest compared to the legal costs already incurred.
Key takeaways
Broad powers are still subject to good faith. Being able to end a relationship "at any time" or "in our discretion" does not remove the need to exercise that power genuinely and consistently with the deal.
Relying on others is allowed, but the decision must still be your own. A franchisor can give significant weight to a parent company's or lender's assessment. But if its own decision-maker flags a gap in the information, it should address that gap before acting.
Hearing from the other side can matter, even without a contractual right to be heard. Where serious consequences are on the table, inviting a response, within legal limits, can be important evidence that a decision was made in good faith.
Records are critical. The case was decided largely on emails and briefing notes. Decision-makers should record what they considered and how concerns were resolved.
Winning on breach is not necessarily the same recovering all losses. The franchisee proved a breach but recovered only a share of a limited lost chance. Prior to commencing an action, both sides should weigh the cost of litigation against what is realistically recoverable.
