7-Eleven Stores Pty Limited v Caltex Australia Petroleum Pty Limited

Case •

[2004] NSWSC 457

•

19 May 2004

No judgment structure available for this case.
CITATION: 7-Eleven Stores Pty Limited v Caltex Australia Petroleum Pty Limited [2004] NSWSC 457
HEARING DATE(S): 19/05/04
JUDGMENT DATE:
19 May 2004
JURISDICTION:
Equity Division
Commercial List
JUDGMENT OF: Einstein J
DECISION: Motion dismissed.
CATCHWORDS: Separate Question Orders
LEGISLATION CITED: Business Franchise Licences (Petroleum Products) Act 1987 (NSW)
Business Franchise Licences (Petroleum Products) Act 1979 (Vic)

PARTIES :

 7-Eleven Stores Pty Limited (Plaintiff)
Caltex Australia Petroleum Pty Limited (Defendant)
FILE NUMBER(S): SC 50068/02
COUNSEL: Mr A Gee (Plaintiff)
Mr TGR Parker (Defendant)
SOLICITORS: Glashen & Quilty (Plaintiff)
Acuiti Legal (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Wednesday 19 May 2004 ex tempore
Revised 27 May 2004

50068/02 7-Eleven Stores Pty Limited v Caltex Australia Petroleum Pty Limited

JUDGMENT

1 By it's notice of motion filed on 3 May 2004 the defendant seeks a separate determination order in terms of the issues defined by paragraph 9 of the amended points of defence filed on 6 April 2004.

2 It is unnecessary to repeat the record.

3 The position taken by the defendant is to contend that the plaintiff is not entitled to the relief which it claims in the summons. However, its stance is that if it would otherwise have an obligation to make restitution to the plaintiff in respect of part of the amounts paid by the plaintiff for petroleum products sold during the relevant period, that obligation does not accrue or falls away, by reason of particular arrangements which are said to have required the re-organisation of the defendant's billing and administrative systems, which re-organisation is said to have resulted in substantial costs to the defendant.

4 The proposition contended for is that in reliance upon the understanding that it would not have to make restitution to retailers who purchased petroleum products from the defendant, the defendant failed to pursue a claim with the New South Wales or Victorian governments to recover these re-organisation costs and instead absorbed those costs itself. That understanding is apparently said to be underpinned by the allegation that retailers - here, the plaintiff - who purchased petroleum products from the defendant, failed to foreshadow any claim for restitution until about 2002 and that the plaintiff failed to institute these proceedings until mid-2003.

5 The gravamen of the instant application of the defendant is the proposition, as I understand it, that the just, quick and cheap approach to this litigation [as dictated by the overriding-purpose rule] mandates the separate determination order here sought. This is said to be by reason of the fact that determination of the quantum of the costs and losses incurred by the defendant in putting the above-described arrangements into place is likely to be a time-consuming exercise involving collection and analysis of a substantial amount of documentation and probably expert opinion. The proposition put forward is that it is clear that the defence in paragraph 9 of the amended points of defence will only arise if the plaintiff's claim is otherwise successful and if the other defences to the whole of the claim are unsuccessful.

6 Mr Parker, of counsel, who appears for the defendant, has carefully taken the Court through the issues of centrality in terms of the current pleadings. As I have understood the position, the burden of the plaintiff's claim is for restitution for total failure of consideration, and the question which arises is whether or not the Court will be able to discern any severable or separately identifiable consideration. That question, as I have understood Mr Parker, is intended to be litigated by the defendant, in terms of essentially objective materials, namely, there will be a number of written documents which will presumably be tendered going to the contract issue. If there were any oral dealings, then there will have to be evidence as to those matters [an example being what were the terms of relevant trade]. An issue will arise as to the nature of the payments made by way of the petroleum tax.

7 The questions, generally being objective, will be, as I have understood Mr Parker, litigation of how the parties externally manifested their dealings - that is to say, what passed between the parties and what was said. Apparently other parameters may include what was said on a telephone price line, which I understand was apparently in place. Other matters will concern, as I understand it, the nature of relevant stationery. Mr Parker's central submission was that it was highly likely, as I understood him, that in the main the materials to which I have just referred going to the objective question of whether or not there was any severable and separately identifiable consideration.

8 The second of the issues currently raised by the pleadings includes the proper identification of the defendant. The submission of the defendant, I understand, will be, and its case will be, that the proper arrangements were, in fact, made with a different company to the defendant and that the defendant supplied the petroleum as agent for this other entity.

9 Next there will apparently be limitation issues.

10 Next there are some other aspects of liability. Apparently the defendant will be relying, for example, upon fuel card arrangements, including arrangements for rebates and the like, which the defendant may contend are antithetic to the notion of a tax here being a severable consideration. Those questions will also apparently go as having some relevance to quantum.

11 As I have understood Mr Parker, the defence in paragraph 9 which is sought to be separately determined after determination of all other issues in the proceedings, should that become necessary, assumes the success of the plaintiff on the question of the ability to prove restitution for total failure of consideration and involves the defendant then contending that, as I have said, it spent particular funds on reorganisation. That issue is said to involve substantial factual issues as to what was done, at what cost and, in terms of a reliance issue, what relationship, as it were, can be proven as between what was done and the defendants not having received at the material time, any claim to have repayment of the tax.

12 In relation to the separate paragraph 9 issues, the defendant has put forward a case for the separation order based upon the proposition that the timeline can essentially be bifurcated - the period up to 6 August 1997 and the period thereafter. Apparently on the paragraph 9 issue, expert evidence may be called including evidence involving management personnel at Caltex, line management personnel as to what the defendant actually did to upgrade its systems.

13 It is fair to say that both counsel in the course of the application made the point that it will be important for various reasons to ascertain what are the moneys the subject of the relevant claims. Is the Court dealing with 37 days of moneys or six days of moneys? In a fashion which the Court expects of counsel, bearing in mind their obligation to the Court on applications such as this, Mr Parker has used the term "never say never" in terms of the defendant's central contention that it is unlikely that there will be an overlap on any issues or a significant overlap on any issues.

14 The plaintiff has put forward a number of factors which, on its submissions, mandate the dismissal of the motion. These include the submission that there is a strong interrelationship or overlap between the change-of-position defence pleaded in paragraph 9 of the points of defence and the defendant's other defences, which are said to make a separate determination inappropriate. Other matters put forward have included the following:

· that the defendant's change of position defence has a relevance to questions in issue of the amounts paid by the plaintiff (including amounts referable to licence fees) to the defendant during the relevant period and what amounts of petroleum licence fees were passed by the defendant to the relevant State governments with respect to sales for that period;

· in that regard, paragraph 6(a) of the amended points of defence is referred to, which pleads that until approximately the end of July 1997 the defendant paid licence fees in respect of petroleum products sold purportedly imposed by the Business Franchise Licences (Petroleum Products) Act 1987(NSW) and the Business Franchise Licences (Petroleum Products) Act 1979 (Vic);

· the submission is then that questions of whether the defendant has actually remitted to the relevant State governments licence fees with respect to petroleum products sold to the plaintiff in July 1997, as apparently claimed, or whether it has, in fact, retained amounts of licence fees with respect to sales during both July 1997 and the first five days of August 1997, remain questions in issue.

15 It is then put that there is a question of the direct relevance to the change-of-position defence, namely, as to how much of the moneys paid by the plaintiff to the defendant were, in fact, absorbed by re-organisation costs, as contended for by the defendant:

· the submission is that with respect to that issue it is not clear whether the defendant contends that all amounts referable to licence fees paid by the plaintiff to the defendant with respect to sales of petroleum products during the whole of the relevant period were absorbed by re-organisation costs or only those paid with respect to the first five days of August. That is said to be related to the question of reliance or interrelated to the question of reliance pleaded in paragraph 9(d);

· the submission is that paragraphs 9(c) and (d) of the amended points of defence raise the issue also of the question of whether the defendant believed it was receiving amounts referable to licence fees which might be the subject of a claim. That question is said to be relevant to the plaintiff's contentions, which the defendant denies, that:


          - the course of dealings between the parties confirmed the separation between the licence fee and the total amount payable for petroleum products;

          - the plaintiff paid and the defendant received amounts referable to licence fees as contended by it in the summons;

          - the amount of the licence fee was a separate and severable consideration payable by the plaintiff to the defendant.

· the further submission is made that the defendant's change-of-position defence pleaded in paragraph 9 has some relevance to the agency defence. The proposition is that the change of position defence and the affidavit of Ms McInnes of 11 May 2004 indicate that:

· it was the defendant and not Caltex Petroleum that allegedly changed its position on the basis of the receipt of the moneys paid by the plaintiff;

· the change of position involved the defendant incurring reorganisation costs rather than, for example, paying the moneys to Caltex or to the relevant State Government.

16 The plaintiff has also submitted that there is the possibility that the defendant may call evidence from witnesses concerning elements of the change-of-position defence, including the question of reliance pleaded, as well as going to other defences. The submission is that there is nothing in Ms McInnes's affidavit to suggest otherwise and that the plaintiff should be entitled to the benefit of being able to cross-examine all witness at the same time in the same hearing in the interests of efficiency so as to avoid what I will put as the problem of adverse credit findings which would disqualify the judge, [or may], from later hearing a change-of-position defence.

17 The submission put by the plaintiff is that Ms McInnes's affidavit essentially only address the question of the quantum of the alleged re-organisation costs, being a question said by the defendant to be for separate determination by a referee and not the other fundamental elements of the paragraph 9 defence. The point is made that that paragraph pleads the issue of reliance and also raises the change-of-position question and that precisely how that change of position occurred and why the expenditure incurred by the defendant on the re-organisation costs took place makes this a candidate for present litigation without severance [in terms of the burden upon the defendant of making clear why it is said to be unjust for it to have to return payments immediate by the plaintiff].

18 Further, the plaintiff has accepted that if the discovery of documents relating to the quantum of the alleged re-organisation costs is going to be oppressive to the defendant, it is prepared to reach an agreement with the defendant limiting the documents sought. It is said that it may even be possible that the quantum of the alleged re-organisation costs can be agreed prior to the hearing. However, the plaintiff requires, apparently, so it has submitted, documents which show generally what the alleged re-organisation costs are and how payments made by the plaintiff to the defendant were retained by the defendant as part of the process of absorbing the alleged re-organisation costs. The plaintiff has also submitted that evidence from relevant officers from the defendant addressing the elements pleaded in paragraph 9 comprise a significant forensic entitlement, which the plaintiff wishes to engage.

19 I have given careful consideration to the motion. To my mind the motion is one of some difficulty in terms of the proper exercise of the Court's discretion. I intend after dealing with the reasons which follow, to treat with a number of matters, including the possibility that the way forward by utilisation of limited interrogatories or notices to admit facts would be efficient. To my mind, at least at present, the defendant has not made good the application which is pursued on this motion. A particular consideration in this regard is that it seems to me simply inapt for the Court to allow a defence of change of position to a restitutionary claim to be treated in a bifurcated way. It seems plain that all parameters of a restitutionary claim and, indeed, of a defence to that claim, should be before the Court to be weighed against the relevant principles. That in itself seems to me to be a proper reason for the exercise of the relevant discretion in terms of the failure to accede to the present application.

20 There are a number of other of the factors relied upon by the plaintiff which it seems to me are of substance. One of those is that I accept that the plaintiff should have the opportunity of viewing the defendant's evidence on change of position as part of a single hearing because that defence and the legal principles relating to it may, indeed, impact upon forensic decisions which the plaintiff will have to make regarding the conduct of its case.

21 There are further questions, always possible in separated-out part 31 orders, which arise in terms of commonality of witnesses, or may arise. It is one thing for the defendant on a hearing for a separate question to indicate, as Mr Parker has, that it seems unlikely that they will occur, but once a separate question order is made, if that unlikelihood turns out to have been incorrect, then, with all the benefit of hindsight, the fact of life may be that there is an abortive hearing and a major wastage of expenditure in relation to the manner of the final hearing going forward.

      Further, Mr Gee has taken the Court to the segment of the affidavit of Ms McInnes of 18 May, where reference has been made to the accounting treatment of moneys received by Caltex up to the invalidation of the legislation. Ms McInnes has deposed that the determination of whether there is an obligation to make restitution from the defendant's point of view is likely to simply involve tender of documents and the making of a submissions on legal questions. She has deposed that the documents in question will be documents relating to the licences, the terms of trading between the parties and perhaps documents, possibly together with supplementary evidence, going to the accounting treatment of the moneys received by Caltex up to the invalidation of the legislation. To my observation, the possibility that there will be evidence going to the accounting treatment of moneys received by Caltex up to the invalidation of the legislation, makes clear the possibility that there will be more of an overlap than the defendant has currently been submitting for.

22 Mr Parker has submitted that there is this central distinction to be discerned here concerning the factual overlap for the determination of two separate issues. As I understood him, the defendant contends that the clear utility and strength of the application for the separation order is that the issue as to whether or not it is six days worth of funds or 37 days of funds should be determined, and although in one sense that would a link, should one ever get to the defendant's back-stop defence, in an important sense, it makes, as I understood him, a substantial foundation for the separation-out question.

23 I do not accept that submission as pervasive in the present environment.

      Essentially, where one has an application for a separate hearing and part 31 order, it is important for the Court to be sure about the exercise of the discretion. To my mind, the issues presently thrown up on the pleadings have a number of cloudy areas or areas where it is by no means certain that a separate question will not ultimately lead to difficulties down the track.

24 Having said that, I return to the matter that I said I would deal with, namely, the possibility that the efficient way forward will see steps such as the entitlement of parties to interrogate in limited fashion and/or the entitlement of parties to seek admission of particular facts.

25 The spectre which the defendant has put forward of a massive amount of materials, including live evidence, being mobilised for the purpose of the separate section paragraph 9 defence may turn out to be the case. However, to my observation, every effort should be made by both parties in a spirit of comity to try to cut down the ambit of what will happen. In that regard, limited interrogatories and notices to admit facts and, arguably, further approaches to discovery should be investigated.

26 Finally, during the course of argument, I made the observation that sometimes one is able during the course of case managing proceedings up to final hearing to persuade the Court to deal with the final hearing in two alternate tranches, that is to say, without a separate-question order being made, the Court simply proceeds in a consensual fashion to determine certain issues. I do not suggest that that sort of case management way forward is impossible in the present environment. To my observation, the parties should in the light of this judgment endeavour to reach an accommodation as to ways in which to cut down the apparently burdensome difficulties which the defendant has put forward. It may be, depending upon the result of those attempts, possible to have an accommodation so that the parties are able to approach the Court, no longer on a motion for a separate question to be determined, but on a motion for, as a matter of case management, the Court to endeavour to bifurcate the final hearing. Indeed, there are a number of complexities in the present proceedings which could mean that there will be some innovative thinking, and some other matters may occur to the parties to be conveniently, as a matter of case management, bifurcated into a later hearing.

27 Finally, in so far as the part 72 reference has been the subject of submission, it having been put to the Court that in a real sense significant issues raised by the defence part 9 would be appropriate to be referred out, it may be that those issues may be able to be dealt with by a court-appointed expert. That is something which does need to be looked at very early in the piece, and I commend to the parties the notion of investigating that possibility. The Court is able, of its own motion, to appoint a court-appointed expert, and if a court-appointed expert is appointed, it may be that the otherwise problems with the Court retaining parameters of the matter will be able to be minimised.

28 The way forward, it seems to me, is to simply dismiss the motion. I propose in terms of the motion not to deal with costs but to reserve costs. That is not to say that the plaintiff is not entitled to pursue costs of the motion but is for the purpose of the parties coming before the Court, perhaps in a few weeks, to apprise the Court of the extent to which some of the Court's suggestions may have been able to be put into place.

29 It seems to me that this is a circumstance in which both parties ought to be astute to try to get the matter on before the Court for final hearing as soon as possible, and the Court is entitled to take the whole of the parties' approach to this part 31 notice of motion, as well as the way forward in case management mode into account when deciding what should be the proper costs of these interlocutory steps. Whilst it may be somewhat unusual, I do not see it as presently appropriate to deal with costs of the motion. The matter is simply not that clear-cut. The defendant has failed on the motion, but it may well have succeeded in a deal of what it otherwise is seeking to put before the Court, but to be achieved, if it can be, by some perhaps more unusual routes but routes nevertheless.


      I certify that paragraphs 1 - 29
      are a true copy of the reasons
      for judgment herein of
      the Hon. Justice Einstein
      given on 19 May 2004 and
      revised on 27 May 2004

      ___________________
      Susan Piggott
      Associate
      27 May 2004

Last Modified: 06/07/2004

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