Gap flagged by managing director left unresolved, but franchisee’s lost chance put 12.5 percent
The Federal Court has found that RAMS Financial Group breached its good-faith obligations in cutting off a mortgage-broking franchisee.
In Sech Finance Pty Limited v RAMS Financial Group Pty Limited (Initial Trial) [2026] FCA 1458, handed down on 6 October 2026, the court held that RAMS acted on Westpac's recommendation while a gap its own decision-maker had identified remained unresolved.
Sech Finance ran RAMS' Fairfield franchise under a five-year agreement that required both parties to deal with each other in good faith. The Franchising Code of Conduct imposed a similar obligation. Westpac, then RAM’s parent and the credit provider behind its home loans, reviewed 51 Fairfield applications in August and September 2022 and raised concerns or potential anomalies in 45 of them, including suspected false payslips and possible deposit staging. The court noted that these were concerns, not findings of misconduct.
Westpac recommended that RAMS consider ending the relationship. On 5 October 2022, RAMS' managing director wrote that he could not see the link between the concerns and supporting evidence. Westpac replied that it had shared everything it could and that the decision was his. On 14 October, he decided to proceed, noting that it was "unfortunate" that the investigators could not provide "the evidence or details." RAMS then revoked the credit authorisations Sech Finance and its principal needed to arrange loans and gave notice of proposed termination.
The court accepted that RAMS could rely substantially on Westpac without repeating the bank's investigation, and that anti-money laundering laws limited what Westpac could disclose. However, the court found that RAMS completed its decision-making with that gap unresolved. Although loan writers were asked about individual applications, the franchisee had no opportunity to answer the accumulated case against it. The court said that RAMS could at least have told the franchisee that revocation was under consideration and invited a response, without revealing protected information.
The court stressed that the breach was narrow. It made no finding that the managing director acted dishonestly or for an ulterior purpose. It also rejected the franchisee's unconscionable conduct claim, saying that it "goes nowhere."
The court put the chance that a proper process would have kept the franchise running for a commercially useful period at 12.5 percent. RAMS stopped taking new home loan applications in August 2024, and the court rejected a claim for a lost renewal opportunity as misconceived.
The court said that the amount recoverable was likely to be "very modest" compared with the costs already incurred. It proposed mediation before any hearing on damages.
