I. THE RIGHT TO BE FORGOTTEN

In a recent landmark UK High Court decision, a businessman who fought for his “right to be forgotten” prevailed in his action against Google. In essence, the right to be forgotten is synonymous with the right to erasure. It gives individuals the power to request the removal of their personal data when there is no compelling justification for its continued processing by a company.

The judge ruled in favour of Google removing search results and delisting links regarding the businessman's past crime and conviction. The judge was of the view that the businessman's offending and sentence which was served over a decade ago was of little if any relevance to future business activity. The businessman had previously applied to Google to have his search results deleted from the search engine, but was refused. It is noteworthy that following from the decision, EU's General Data Protection Regulation which comes into effect on 25th May 2018 (the “GDPR”), will enshrine the right to be forgotten into EU law.

Digital presence is now an innate part of our daily lives. Given the permanence of our footprints and data on the Internet, the act of forgetting is certainly difficult to enforce. Regardless, at its core, the principle of the right to be forgotten seeks to uphold and support personal privacy by expunging outdated, inaccurate or irrelevant information.

Straits Times website ＜https://www.straitstimes.com/world/europe/google-told-to-remove-links-to-businessmans-criminal-case?xtor=CS3-18.＞ Accessed 7 May 2018.

II. FRANCHISING DISCLOSURE REQUIREMENTS

Finding an appropriate balance between the protection of personal privacy and the public's right to access lawful information can often be an onerous task. In light of the landmark decision above, past and spent convictions or any personal data regarding any individual can now be removed from search engines and social media sites upon request, if, among other things, the data is no longer necessary to serve the purposes for which it was originally processed. In effect, your past is no longer just a click away, as it can now be erased.

This can certainly have implications on franchising and in particular, on franchising pre-sale disclosure requirements. As a result of the right to be forgotten, franchisors or franchisees may not be able to access information regarding the other party due to the erasure. Therefore, franchisors or franchisees might not be able to make fully informed decisions as to whether to enter the franchise.

In this regard, the decision raises a few questions for disclosures and due diligence relating to franchising. For instance, should there be an obligation on the franchisor to disclose personal information of its directors or senior executives, such as any past criminal convictions or other information which might bring their reputation into disrepute, given that such information may not be readily accessible in light of the right to be forgotten? In other words, would the decision engender calls for greater transparency in relation to disclosure requirements on franchisors? Further, if there are indeed such disclosure requirements, what would the consequences be for errant franchisors that do not comply with them? Additionally, would the franchisees have any recourse upon subsequently discovering such information, not having been possessed of it before?

This article seeks to explore the various issues stated above and to provide a brief overview on franchising disclosure requirements in general in relation to the laws and regulations of Singapore as well as other jurisdictions such as Malaysia, Indonesia and Japan.

This article is not intended to be a legal opinion nor shall it be construed as legal advice in relation to the contents therein.

III. THE POSITION IN SINGAPORE

A. Is the right to be forgotten applicable in Singapore?

It is not likely that the right to be forgotten applies in Singapore. There is no written law in Singapore providing for such a right, nor any legal precedent laid down by Singapore courts. Further, it should also be noted that there are differences in data protection laws between Europe and Singapore as well as the contrasting approaches that each jurisdiction takes towards balancing the freedom of expression and public interest to access lawful information with an individuals' right to privacy.

Further, it should be noted that in Singapore, there is no constitutional right to privacy. There are also no general privacy laws, save for laws regulating the processing, collection and use of personal data. The closest and most relevant of such laws is the Personal Data Protection Act of 2012 (the “PDPA”). However, the PDPA does not provide for the right of erasure of an individual's data from search engines or social media sites. Rather, the PDPA establishes a data protection law that comprises various rules governing the collection, use, disclosure and care of personal data. In other words, while the PDPA regulates the collection and use of the personal data, including the right for individuals to withdraw consent for the use of personal data by companies that have collected their data, it does not as far as to ensure that individuals have the “right to be forgotten”. In particular, the provisions of the PDPA do not apply to personal data that is “publicly available”, such as search results on the Google search engine.

Section 17 of the PDPA, read with the Second Schedule, Third Schedule, and Fourth Schedule to the PDPA.

B. No franchise-specific laws in Singapore

Singapore does not have any franchise-specific legislation. In particular, there is no statutory requirement in Singapore for a franchisor to make prescribed disclosures relating to their franchise system and other details to their franchisees.

In Singapore, the Franchising and Licensing Association of Singapore (FLA) Code of Ethics regulates franchising affairs between its members by prescribing, for instance, that a franchisor shall disclose to the franchisee certain information within a time specified. However, given that franchisors do not have to register with the FLA in Singapore in order to operate its franchise system, franchisors can choose not to be bound by the FLA Code of Ethics.

Notwithstanding the lack of franchise-specific laws in Singapore, there are other principles which govern the franchise relationship that relate to disclosure.

C. Principles governing the franchise relationship in relation to disclosure requirements

Given that the franchise agreement is essentially a contract between the franchisor and the franchisee, it follows that general contract law and principles will govern the relationship between the franchisor and the franchisee. Further and in addition to contract law, the tort of deceit or fraud and the Misrepresentation Act also play a part in regulating the relationship and conduct of the franchisor and franchisee.

Misrepresentation Act, Rev. ed. Cap. 390 (1994).

Contract Law

Given that general contractual principles govern the franchise relationship, the franchisee's main avenue through which it can assert its rights is through the franchise agreement entered into between the parties. In this regard, the franchisor and franchisee determine the terms of their franchise agreement.

Franchisors often rely on contract to require disclosure of personal information of the franchisee. Franchisee application forms can require the franchisee and its directors and shareholders to disclose whether they have had prior convictions for criminal offences, particularly involving dishonesty or fraud. Declining to provide such information may result in the franchisor refusing to grant the franchise. Where such information is withheld and is later discovered, such omission may entitle the franchisor to rescind or terminate the franchise agreement for breach of warranty.

In theory at least, the franchisee can make it a condition of the franchise agreement for the franchisor to provide and disclose the requisite details necessary for the operations of its franchise outlet and further, details in relation to the franchisor's officers and key personnel (such as the past convictions of its officers, if any). If the franchisor breaches the condition of the franchise agreement, general contractual principles would dictate that the franchisee would be entitled to terminate the contract and claim damages where damages are suffered.

In the Singapore High Court case of The Best Source Restaurant Pte Ltd v Wan Chai Capital Holdings Pte Ltd,  the franchisee alleged that the franchisor had breached the franchise agreement by failing to provide the recipes for several food items on the menu. The Court held that there was a common intention between the parties to regard the franchisor's obligation to provide full details of the franchise system and the operation of the business as an essential obligation. The franchisee was thus entitled to terminate the contract and the franchisor was ordered to pay damages to the franchisee.

Even though the case above does not specifically touch on the franchisor's obligations in relation to the disclosure of its personal information and data, the same contractual principles should extend to any term in the franchise agreement. This freedom of contract in Singapore ensures that parties have the leeway to enter into commercial contracts on their own terms.

Thus, where the franchisee wishes to obtain and to be able to rely on key information regarding the franchise and/or the franchisor, it would be prudent for the franchisee to make it a term of the franchise agreement. However, the franchisor may not agree to such a provision. In such cases, the franchisee's remedies would have to lie in general law.

[2009] SGHC 266.

The Tort of Deceit or Fraud

One area of law that may be relevant in the regulation of the franchise relationship and particularly in relation to the details that have to be disclosed by the other party would be the tort of deceit or fraud. This area of law seeks to protect the franchisor and the franchisee by ensuring that statements made by either party are not false.

In the Singapore High Court case of Mentormophosis Pty Ltd and others v Phua Raymond and another, the Court laid down the elements that have to be proved for the tort of deceit or fraud. The five elements of the tort of deceit or fraud are: (1) There must be a representation of fact, made by words or conduct; (2) The representation must be made with the intention that it should be acted upon by the complainant; (3) It must be proved that the complainant had acted upon the false statement; (4) It must be proved that the complainant suffered damage by so doing; and (5) The representation must be made with knowledge that it is false; it must be willfully false, or at least made in the absence of any genuine belief that it is true.

The Court ruled that the franchisor had deceived the franchisees into believing that the franchisor had the backing of the Da Vinci Group. The franchisees had acted upon the false statements made by the franchisor to that effect and had suffered damage as a result. This case illustrates how franchisors can incur liability for making false statements. This should also extend to false statements made relating to any past criminal records of the franchisor's officers, or the lack thereof, especially where the franchisee has indicated that such information is relevant to their decision to take up the franchise.

It should be noted that for the tort of deceit or fraud, the franchisor or franchisee can incur liability for false statements without there being a contractual obligation on the franchisor's or franchisee's part to disclose any personal information or data, e.g. by virtue of the franchise agreement. For example, the franchisor or the franchisee can make false statements to the other party in order to deceive the other party into acting on the false statement and entering into the franchise agreement. In other words, the requirement for disclosure is not an underlying basis upon which the liability for the tort of deceit or fraud may arise.

That being said, where the information was not requested for, and no statement on past criminal records was made, it is unlikely that the tort of deceit or fraud would apply. In addition, the person seeking to rely on the tort will have the burden to prove that the statement be willfully false or made in the absence of any genuine belief that it is true. This is not always easy to prove in court.

[2010] SGHC 188.

Misrepresentation Act (Cap. 390)

In Singapore, some of the obligations in relation to statements and representations made by parties are provided for in the Misrepresentation Act.

Section 2(1) of the Misrepresentation Act provides that there a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof even if the misrepresentation had not been made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.

The Misrepresentation Act thus strengthens the position of the party claiming damages for misrepresentation beyond what is afforded by the common law tort of deceit or fraud, by putting the burden of showing that there were reasonable grounds to believe that the statements made are true on the person making the statements.

Just as with the tort of deceit or fraud, the franchisor or the franchisee can incur liability for misrepresentation apart from the franchise agreement. Thus, a franchisor might make a misrepresentation to the franchisee even though it is not obliged to provide disclosure.

However, where information regarding past criminal offences by the franchisor or franchisee is not requested for by the other party, and there is merely an omission to disclose the existence of such criminal record, it would be difficult to establish misrepresentation.

Conclusion of the Position in Singapore

As explained above, under Singapore law, it is the franchise agreement that mainly governs the rights of each party in the franchise relationship. Accordingly, the negotiation stages in the franchise relationship are crucial in determining where the parties stand in relation to pre-sale disclosure.

However, in the franchise relationship, the franchisee usually has weaker bargaining power relative to the franchisor. For this reason, it is especially prudent for franchisee to state clearly what information it requires in relation to the disclosure of information, i.e. the franchisee should state the specific information which it requires from the franchisor in order to protect its rights and if necessary to rely on it at a later stage.

Likewise for franchisors, it is important to consider whether issues such as past criminal convictions of a franchisee or its directors and shareholders are relevant to the decision to appoint the franchisee. If so, then the information should be sought up front, and the importance of such information to the decision to appoint the franchisee be made clear in writing.

IV. THE POSITION IN OTHER JURISDICTIONS

A. MALAYSIA

In Malaysia, there are franchise-specific laws in relation to pre-contract or pre-sale disclosure requirements. The Malaysia Franchise Act 1998 states that a franchisor must submit to the prospective franchisee the relevant disclosure documents at least ten (10) days before the parties sign the franchise agreement. The disclosure document is as prescribed in Form BAF1.

Further, the Malaysia Franchise Regulations 1999 provides guidance on the type of information that must be provided in the disclosure documents. Such information includes details of the personnel including an organizational chart of the members of the board and senior executives, whether there is any past or pending legal action against the franchisor or its directors (whether criminal or civil), and whether the company and board of directors are free from bankruptcy.

Therefore, in Malaysia, there is an obligation on the Franchisor's part to disclose personal information relating to past convictions, even if the franchisee does not request for the same. Even if the right to be forgotten were to apply in Malaysia, the requirements of the Malaysian legislation would nevertheless need to be complied with.

Section 15(1) of the Franchise Act 1998, Act 590.

B. INDONESIA

In Indonesia, a franchisor must provide a disclosure document to a prospective franchisee at least two weeks before the franchise agreement is executed. Further, the disclosure document must contain among other details, information about key executives and the organizational chart or structure of the franchisor.

Further, under the regulations, this disclosure prospectus and the franchise agreement must be registered with the Ministry of Trade in order for the franchisor to obtain a franchise registration certificate. It should be noted that administrative sanctions can be imposed on franchisors who fail to register the same.

It is not clear from the Indonesian regulations whether information about key executives would necessarily include information regarding the criminal history of the key executives, if any.

Government Regulation No. 42 of 2007 on Franchising; Regulation No. 53/M-DAG/PER/8/2012 (Reg. 53).

C. JAPAN

In Japan, the general duty of disclosure is provided for in the Medium-Small Retail Business Promotion Act of 1973. However, this general duty of disclosure covers mainly administrative matters such as matters relating to upfront fees and deposits, the terms and conditions on which products are sold to the franchisee, and the duration of the agreement and matters relating to renewal and termination of the franchise agreement. Thus, it appears that disclosure in relation to personal information of the franchisor or its officers or executives is not required under the Act. Further, it should be noted that the Medium-Small Retail Business Promotion Act does not cover all franchises; rather, it affects only those relating to the conduct of retail business and those mainly targeting medium and small-scale franchisees.

Notwithstanding the above, the Japan Fair Trade Commission (JFTC), the competition authority of Japan published certain guidelines on franchising in relation to the disclosure of necessary information at the time of the offer of a franchise. Under the guidelines, the failure to provide sufficient disclosure information would constitute deceptive customer inducement, which is an unfair trade practice under the Antimonopoly Act in Japan. However, similar to the disclosure requirements under the Medium-Small Retail Business Promotion Act, the disclosure requirements in the guidelines do not expressly cover matters in relation to the personal information of the franchisor or its key personnel, such as whether there are any past criminal records.

Guidelines Concerning the Franchise System under the Anti-monopoly Act ＜http://www.jftc.go.jp/en/legislation_gls/imonopoly_guidelines.files/franchise.pdf＞ Accessed 8 May 201

V. CONCLUSION

In countries like Singapore, where there are no franchise-specific laws and regulations requiring disclosure of information to franchisees, the parties will need to depend on contractual provisions to obtain any relevant information on each other, and to form the basis for reliance on such information. The laws relating to deceit and fraud as well as misrepresentation also apply, but only if the failure to provide information on past criminality can be proven to satisfy the requirements of fraud or misrepresentation.

For countries such as Malaysia, Indonesia and Japan that have franchise-specific laws and regulations, the degree of disclosure required under each jurisdiction differs from country to country. For instance, Malaysian laws specifically provide that the franchisor disclose whether there is any past or pending legal action against the franchisor or its directors (whether criminal or civil). However, in Indonesia and Japan, such specific requirements are not provided; instead, only broad and general disclosure requirements are required under the respective laws and regulations.

In conclusion, parties to a franchise relationship should be clear about their rights in relation to disclosure requirements and to specify these rights in the franchise agreement where necessary. Further, parties should ensure that due diligence has been conducted before entering into the franchise agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.