Ampol Ltd v Calaby Pty Ltd

[1991] FCA 427

Re: AMPOL LTD
And: CALABY PTY LTD
No. D G3 of 1991
FED No. 427
Trade and Commerce
30 FCR 426
(1991) 110 ALR 343

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NORTHERN TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Spender(1), French(1) and Von Doussa(1) JJ.

CATCHWORDS

Trade and Commerce - Petroleum Retail Marketing Franchise Act - assignments - partnership franchisee - sale of service station business to company - partners controlling company - franchisor consents - whether assignment of agreement new arrangement or understanding - subsequent franchise agreement with company - whether agreement by way of renewal.

Petroleum Retail Marketing Franchise Act 1980

Supreme Court Act (NT) s.70

Fourth Report of the Royal Commission on Petroleum 1976

Caltex Oil (Australia) Ltd v. Best (1990) 97 ALR 217

Esso Australia Ltd v. R.I. and M.I. Abela (1989) 91 ALR 476

Beckford Nominees Pty Ltd v. Shell Co of Australia Ltd (1986) 73 ALR 373

Waltons Stores (Interstate) Ltd v. Maher (1988) 164 CLR 387

Foran v. Wight (1989) 168 CLR 385

Commonwealth v. Verwayen (1990) 170 CLR 394

HEARING

DARWIN

#DATE 25:7:1991

Counsel for the Appellant : Mr A. Wyvill

Solicitors for the Appellant : Mildrens

Counsel for the Respondent : Mr P. Tiffin

Solicitors for the Respondent : Cridlands

ORDER

The Court orders that the appeal be allowed.

The order of Angel J. made 12 September 1990 be set aside.

The matter be remitted to the learned trial judge to determine according to law whether any further orders are necessary and appropriate.

The respondent pay the appellant's costs of the appeal and of the proceedings before Angel J.

Note: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Introduction

The Ampol Stuart Park Service Station in Darwin has been operated by Calaby Pty Ltd, a company controlled by Cleve and Leanne Kumnick, since 1 July 1986. Before that time the Kumnicks carried on the business themselves as a partnership. Franchise agreements entered into in 1987 between Calaby and Ampol Ltd, the owner of the site, expired on 31 July 1990. Ampol advised the company in 1989 that it did not intend to renew the agreements and that Calaby would be required to vacate the site upon their expiry. Calaby maintained that Ampol was obliged to renew the agreements by virtue of the provisions of the Petroleum Retail Marketing Franchise Act 1980. It said in essence that the agreements it entered with Ampol in 1987 were fresh or original franchise agreements attracting a statutory entitlement to renewal for two successive terms of three years. Ampol contended that the 1987 agreement was a renewal of a pre-existing franchise agreement and that upon its expiry there was no further statutory entitlement to a renewal. Calaby brought proceedings against Ampol in the Supreme Court of the Northern Territory and obtained a declaration that the agreements were not entered into by way of renewal for the purposes of the Petroleum Retail Marketing Franchise Act 1980. The Court also ordered that Ampol renew the agreements pursuant to the provisions of the Act. Ampol now appeals to this Court against that judgment. The case raises questions concerning the proper construction and operation of the Act.

1. There was no significant challenge to the findings of fact made by the learned trial judge and the following background reflects those findings and matters of fact which were not in dispute.
   Factual Background

2. Cleve and Leanne Kumnick have been involved in the operation of the Ampol Stuart Park Service Station in Darwin since March 1982. The premises are owned by Ampol. Initially the Kumnicks operated the service station in successive partnerships with a Mr and Mrs Mueller and later Mr and Mrs Faehrmann. However, since at least 1 August 1984, they have run it themselves. On that day they entered into three written agreements with Ampol Ltd, being a franchise supply agreement, a service station franchise licence agreement and a trade mark licence agreement. Each was for a term of three years commencing on 1 August 1984. Broadly their effect was to permit the Kumnicks to carry on the business of service station proprietors at Ampol's Stuart Park premises and to sell fuel from those premises under the Ampol name. It is common ground that the agreements were franchise agreements to which the Petroleum Retail Marketing Franchise Act 1980 applied.

3. In mid 1986 the Kumnicks, acting on advice from their accountant, decided to operate the business through a company. They acquired a shelf company, Calaby Pty Ltd, of which they became the sole shareholders and directors. Without notice to Ampol they sold the service station business to the company raising the purchase price by way of shareholders' loan accounts, effectively by book entry. The business has been carried on through the company since 1 July 1986. There was no written agreement evidencing the sale, but it was recorded in the minutes of a meeting of directors of the company dated 1 July 1986 and signed by Mr Kumnick as chairman. Later in July, Mr Kumnick told Mr Bill Arthur, Ampol's manager for South Australia and the Northern Territory, of the new arrangements. Mr Arthur said that was "O.K.", but it does not appear that the change was noted in Ampol's records. Invoices for the supply of petroleum products continued to be addressed to the Kumnicks and paid for by Calaby.

4. On 27 May 1987, Allan Thompson, then Ampol's South Australian Sales Manager, Country, with responsibility also for the Northern Territory, sent the Kumnicks a letter in the following terms:
   

"Dear Sir and Madam,

Re: Service Station Franchise Licence Agreement, Franchise Supply Agreement and Trade Mark Licence Agreement dated the 1st day of August 1984 - Ampol Stuart Park Service Station. Ampol Limited ("Ampol") by this notice given pursuant to Section 17A(1) of the Petroleum Retail Marketing Franchise Act 1980 (as amended) hereby offers to renew the abovementioned agreements on their date of expiry. Ampol proposes, in good faith and in the normal course of business, that the agreements, as proposed to be renewed, contain the following provisions which differ from your present agreements:-

1. Period of renewal to 18th September 1989.

2. Rental for period 1st August 1987 to 31st July 1988 of $960.00 per month. If you wish to accept Ampol's offer of renewal as referred to herein you must do so in writing within 30 days of the date of service of this notice. Yours faithfully,

(A.B. Thompson)

SALES MANAGER, COUNTRY"

On 14 June 1987 the Kumnicks responded with a letter headed "Calaby Pty Ltd T/as Ampol Stuart Park". The letter said:

"Dear Alan,

We take this opportunity to accept Ampol's offer to renew the lease on the Service Station as laid out in your letter dated the 27th May 1987. Yours Sincerely,

Cleve Kumnick (Dir)

14/6/87

Leanne Kumnick (Dir)

14/6/87"

In a conversation following Mr Thompson's receipt of their letter of 14 June 1987, he asked Mr Kumnick who Calaby was. Mr Kumnick told him about the arrangement which had been in place since 1 July 1986. This was the first Mr Thompson had heard of it and he expressed his dissatisfaction that Ampol had not been informed earlier. Mr Kumnick said in evidence that he thought he told Mr Thompson of his earlier conversation with Mr Arthur, but there was no finding on the point. The renewal period mentioned in the letter of 27 May was 2 years only, but after this was queried by Mr Kumnick and inquiries made by Mr Thompson, Ampol agreed it would be a three year renewal. Agreements were prepared by Ampol and executed by it and by the Kumnicks on behalf of Calaby. Each agreement was dated 1 August 1987 and expressed to expire on 31 July 1990. They comprised a franchise licence agreement, franchise supply agreement and trade mark licence agreement. They were to the same broad effect as the 1984 agreements between Ampol and the Kumnicks.

1. On 18 August 1987, Mr Thompson wrote to Calaby in the following terms:
   

"We refer to your letter dated 14th June 1987 and note that you have an incorporated company, controlled by you, to which you wish to assign shares to new Distributors. Ampol consents to this change, provided that :-

(1) The company undertakes to ensure that, other than you, no further person or persons become, or together with any other person becomes, the holder or holders of a beneficial interest or interests in more than fifty per cent (50%) of the shares in the issued capital of the company conferring a right to vote without first obtaining Ampol's written consent thereto.

(2) The company nominates the name of the person acceptable to Ampol who is to undertake personal management of the business conducted on the subject premises. Please indicate that the company agrees to this undertaking by signing and providing details as requested on the attached copy of this letter on behalf of the company and returning same to Ampol. Yours faithfully,

A.B. Thompson

SALES MANAGER, COUNTRY"

The letter carried a consent clause which was completed and executed by Mr Kumnick so that it read:

"1. Calaby Pty. Ltd. agrees to be bound by the undertaking referred to herein.

2. Calaby Pty. Ltd. nominates Cleve Kumnick to undertake personal management of the business conducted on the subject premises. Signed for and on behalf of Calaby Pty. Ltd. C. Kumnick

Director"

1. On 1 February 1989 Mr Thompson wrote to Calaby referring to conversations of the same date with the Kumnicks and confirming that the franchise licence agreement would not be renewed upon its expiry. Vacant possession of the premises was requested from 31 July 1990. A letter reiterating this decision was sent on 6 February 1990, although it was then said that the position might be reviewed if improvements were effected in the volume of sales and the standards of site operation. The Kumnicks consulted solicitors and on 7 July 1990 a letter was sent to Ampol by Messrs. Ward Keller acting for Calaby. The solicitors contended "that any assignment of any pre-existing franchise from Mr Cleve Ronald Kumnick and Mrs Leanne Kumnick to Calaby Pty Ltd was not a legal assignment and...therefore not an assignment caught by the provisions of Sec.11 of the Petroleum Retail Marketing Franchise Act." This being so, it was said the franchise agreement between Calaby and Ampol made on 1 August 1987 was not a renewal of any franchise agreement. Calaby was therefore said to be entitled under ss.17, 17A and 17B of the Act to two further three year renewals, in effect a continuation of the franchise agreement until 31 July 1996. Ampol maintained its position that no new franchise agreement would be offered.

2. On 5 July 1990, Ampol placed an advertisement in the Northern Territory News calling for interested persons to apply to become franchisees of the Stuart Park Service Station. Calaby's solicitors then wrote indicating that unless suitable undertakings were received, injunctive relief would be sought in the Northern Territory Supreme Court. On 10 July 1990, Calaby commenced proceedings in that Court by way of originating motion claiming declarations that the agreements of 1 August 1987 constituted a franchise agreement within the meaning of the Petroleum Retail Marketing Franchise Act 1980 and that Calaby was entitled to two renewals of the agreement for periods of three years commencing on 1 August 1990 and 1 August 1993 respectively. A mandatory injunction for renewal of the agreements was also sought. By consent, given by Ampol on the basis that there would be an expedited trial of the action, an interlocutory injunction was granted by Kearney J. on 12 July 1990. On 7 August 1990, the action came on for trial before Angel J. On that day, no pleadings having been filed, his Honour directed the filing of points of claim and defence and adjourned the trial to the following day. The next day points of claim, a defence and counterclaim and a reply were handed up in court. By its counterclaim Ampol sought a declaration that the franchise agreement had come to an end on 31 July 1990. The trial proceeded, largely upon affidavit evidence, with cross-examination of deponents. The hearing went on over 8, 9 and 10 August. On 10 August, the evidence having been completed, his Honour directed written submissions to be filed and adjourned the trial sine die. It came on again on 31 August and 6 September. On 6 September his Honour delivered an ex tempore judgment. Final orders were made by his Honour on 12 September 1990 in the following terms:
   

"THE COURT ORDERS AND DECLARES THAT:

1. As between the Plaintiff and the Defendant, the agreements entered into between them on 1 August 1987 were entered into other than by way of renewal for the purposes of the Petroleum Retail Marketing Franchise Act 1980.

2. Pursuant to Section 17A(7) of the Petroleum Retail Marketing Franchise Act 1980, the Defendant renew the aforesaid agreements.

3. The Defendant's Counter-claim be dismissed.

4. The parties have liberty to apply generally.

5. The Defendant pay the Plaintiff's costs of the Claim and the Counter-Claim."

Ampol instituted its appeal from that judgment in the Court of Appeal of the Northern Territory on 9 October 1990. That Court however transferred the appeal to this Court. This Court has jurisdiction under s.26(4) of the Petroleum Retail Marketing Franchise Act which provides:

"An appeal lies to the Federal Court of Australia from a judgment or order of a court of a State or Territory exercising jurisdiction under this Act."

Terms of the 1984 Franchise Agreement

1. Before turning to the statutory framework and his Honour's reasons for judgment, it is convenient to refer to certain key provisions of the 1984 Agreements between the Kumnicks and Ampol. The service station franchise licence agreement and the franchise supply agreement contained standard "entire agreement" clauses, 25 and 16 respectively. Each of the three agreements contained a clause prohibiting the assignment of any rights created under the agreement other than with the prior consent of Ampol which consent was not to be unreasonably withheld. In the case of the service station franchise licence agreement and the franchise supply agreement, the consent was to be in writing. These were clause 26 of the service station franchise licence agreement, 14 of the franchise supply agreement and 14 of the trade mark licence agreement. Clauses in the service station franchise licence agreement and franchise supply agreement dealt with waiver and variation of those agreements. Only cl.16 of the franchise supply agreement provided expressly for variation of that agreement, the relevant part of that clause being in the following terms:
   

"...No variation modification or waiver of any of the provisions hereof shall be binding on Ampol unless made in writing and signed by its Secretary, a General Manager, Head Office Divisional Manager or Branch Manager of Ampol."

Statutory Framework

1. The problem of security of tenure for lessee service station operators was well known before the enactment of the Petroleum Retail Marketing Franchise Act 1980 and had been the subject of inquiry and discussion not only in Australia, but in other countries including the United States and Canada. It was adverted to in the Fourth Report of the Royal Commission on Petroleum published in 1976 and was one of the factors which led to the passage of the Act. It has been accepted in a number of decisions in this Court and recently in the High Court that one of the purposes of the Act is to provide security of tenure to franchisees. The Act, it is said, seeks to achieve that purpose "chiefly by regulating the duration of a specified category of franchise agreements the renewal and termination of such agreements and the assignment of rights and interests under such agreements" - Caltex Oil (Australia) Ltd v. Best (1990) 97 ALR 217 at 222.

2. The principal protective provisions of the Act are ss.13, 16, 17, 17A and 17B. Section 13 prohibits corporations from entering, as franchisors, into franchise agreements the terms of which do not comply with its requirement (sub-s.13(1)). Subject to exceptions and conditions which are not material for present purposes, the term of a franchise agreement, whether original or by way of renewal, must be not less than three years (13(2) and (3)). And in the event that a corporation which is the owner of the relevant premises purports, contrary to the Act, to enter into a franchise agreement for a lesser term, the agreement is not invalidated but its term will be three years (s.13(10)(a)(ii)). Section 15 requires a corporation before entry into a franchise agreement to provide to the franchisee a written statement containing information including information specified in the section relating to the operation of the premises. Section 16 sets out the conditions upon which a franchisor may terminate a franchise agreement. Sections 17, 17A and 17B, read together with s.13, provide a legislative scheme under which a person entering into a franchise agreement is entitled to two renewals of that agreement. This has the effect of ensuring to the franchisee a statutory tenure of nine years. Central to the scheme is s.17B(4) which provides:
   

"(4) Where -

(a) a franchise agreement (in this sub-section referred to as "the original agreement") has been entered into otherwise than by way of renewal;

(b) the provisions of section 17 of this Act as in force before 1 January 1985, or of sections 17 and 17A of this Act as in force on and after that date, or both, have applied in relation to a renewal, or 2 or more consecutive renewals, of the original agreement; and

(c) the term or terms of the agreement as so renewed together with the term of the original agreement, amount in the aggregate to 9 years or more, sections 17 and 17A of this Act as in force on and after that date do not apply in relation to the renewal of the agreement when the term of the agreement next expires, but, if the franchisor voluntarily renewals the agreement, those sections and this section (subject to section 6) apply again as if the agreement as so voluntarily renewed were entered into otherwise than by way of renewal."

Section 17 prohibits a franchisor from refusing to renew a franchise agreement except on one or more grounds set out in s.17(1). That obligation, however, cuts out by virtue of s.17(4) after the expiry of the third term of a franchise agreement. Section 17A specifies procedures to be followed in relation to renewals, including a requirement for notice to be given by the franchisor (s.17A(1) and (2)). It also empowers the Court to make orders directing a franchisor to renew a franchise agreement (s.17A(7)).

1. The terms "franchise agreement" and "agreement" are defined in s.3(1) of the Act. Franchise agreements are defined as agreements which contain various types of provision relating to the use of a franchisor's mark in connection with the retail sale of motor fuel, the right to possess, occupy or use premises to which the agreement relates in connection with the retail sale of motor fuel and the supply of motor fuel for retail sale by the franchisee at the premises to which the agreement relates.

1. The broad scope of the Act is indicated by the definition of "agreement" in s.3(1) which is in the following terms:
   

"3(1) In this Act, unless the contrary intention appears - "agreement" means any agreement arrangement or understanding -

(a) whether formal or informal or partly formal and partly informal;

(b) whether written or oral or partly written and partly oral; and

(c) whether or not having legal or equitable force and whether or not based on legal or equitable rights."

The circumstances in which one agreement may be treated as a renewal of another are set out in s.3(4):

"3(4) For the purposes of this Act, where, at the expiration of a franchise agreement, the franchisee and the franchisor or, in circumstances described in sub-section 17B(2), another franchisor, enter into a new franchise agreement concerning the same subject matter, the new agreement shall be taken to be a renewal of the earlier agreement notwithstanding that the provisions of the new agreement may differ from those of the earlier agreement."

Reference should also be made to the somewhat enigmatic language of s.3(2), although it does not appear critical to the disposition of this case:

"3(2) Except so far as the contrary intention appears, a reference in this Act to an agreement shall be read as including a reference to a proposed agreement, an agreement as requested or proposed to be renewed, or a terminated or expired agreement and, in relation to such an agreement, a reference in this Act to a party to the agreement shall be read as a reference to a person who would be a party to the agreement if the agreement were in effect."

Section 6 sets out the circumstances in which the Act will apply to a franchise agreement. It is common ground in the present case that the Act applies to the 1984 and 1987 franchise agreements. Section 7 prevents parties from contracting out of the operation of the Act:

"7(1) This Act applies notwithstanding any agreement to the contrary and, in particular, but without limiting the generality of the foregoing, a provision in any agreement is void to the extent that it purports to exclude ,limit or modify, or is otherwise inconsistent with, the operation of a provision of this Act or any right or remedy based on or arising out of a provision of this Act.

(2) Nothing in this Act shall be taken to affect the operation of an agreement to the extent that the agreement is capable of operating consistently with this Act."

Sub-sections 7(3), (4) and (5) are not material for present purposes.

1. Section 8 of the Act provides:
   

"8. This Act is not intended to affect the operation of a law of a State or Territory to the extent that that law is capable of operating concurrently with this Act."

The legal assignment of rights under franchise agreements is dealt with in s.11 which expressly excludes equitable assignments from its purview. The section applies, inter alia, to franchise agreements containing provisions which prohibit the franchisee from assigning all or part of its interest without the consent of the franchisor and requires that such consent be not unreasonably withheld (s.11(3)). Where a franchisor withholds consent to an assignment to a person who is neither a person with prescribed experience nor a member of the franchisee's family nor a company controlled by the franchisee, then the consent of the franchisor is deemed to be reasonably withheld (sub-s.11(4)). There is provision for notice to be given of proposed assignments and for what amounts to a first right of refusal or termination for equal consideration to be exercised by the franchisor (sub-ss.11(5) and (5A)). If the franchisee fails to serve such notice or assigns to a person other than one nominated by the franchisor under sub-s.11(5A), then the franchisor's consent is deemed to have been reasonably withheld (sub-s.11(6)). Nothing in the section is to be taken to limit the grounds upon which consent to an assignment may be reasonably withheld (sub-s.11(8)). Sub-section 11(9) provides, inter alia, for the assignee of a franchise agreement to be bound by the franchisee's obligations under the franchise agreement and sub-s.11(10) for the transfer of obligations where there is an assignment of an interest in one of two or more related agreements. Sub-section 11(12) provides:

"11(12) Where an assignment of obligations under a franchise agreement occurs by virtue of paragraph

(9)(a) or (10)(c), then, for the purposes of sections 13, 15, 17, 17A and 17B, the franchise agreement as subsisting after the assignment shall not be taken, by reason of the assignment, to be a new agreement."

1. Addition of further franchisees by novation is covered by s.12 of the Act. Where a franchisee, by written notice served on the franchisor requests its consent to a novation of the franchise agreement, the sole purpose of which is to join a person or persons specified in the notice as an additional franchisee or franchisees, the franchisor shall not unreasonably withhold its consent and, where its consent is unreasonably withheld, it shall be deemed to have granted its consent. An evident purpose of the section is to enable a franchisee to bring into the franchise agreement a person with prescribed experience or a member of its immediate family or a company controlled by the franchisee. Sub-section 12(2) provides:
   

"12(2) Where a franchisor withholds consent to a proposed novation the sole purpose of which is to join, as franchisee, a person who is none of the following:

(a) a person with prescribed experience;

(b) a member of the franchisee's immediate family;

(c) a company controlled by the franchisee, then, for the purposes of sub-section (1), the consent of the franchisor shall be deemed to be reasonably withheld."

Nothing in the section is to be taken to limit the grounds upon which consent to a proposed novation may be reasonably withheld (sub-s.12(4)). And by sub-s.12(5) it is provided:

"12(5) Where, in relation to a franchise agreement, there occurs a novation of the kind referred to in sub-section (1), sections 13, 15, 17, 17A and 17B apply in relation to the new agreement as if it were a continuation, without interruption, of the first-mentioned agreement."

Trial Judge's Reasons for Judgment

1. The learned trial judge observed in his reasons for judgment that it was common ground that the 1984 and 1987 agreements were franchise agreements to which the Act applied. The principal issue debated before him was whether the 1987 agreements constituted fresh or original franchise agreements attracting the statutory rights of renewal in their full measure i.e. for a further two terms after the expiry of those agreements, or whether they were to be regarded as having been entered into by way of renewal of the 1984 agreements. Calaby maintained that what happened in 1986 did not constitute an assignment of the 1984 agreements to Calaby and that there were no consequences of the purported sale in law or in equity. Alternatively, it was put that at best there was an equitable assignment, no assignment at law having been effected as the provisions of s.70 of the Supreme Court Act had not been complied with. The execution of the 1987 agreement was said to be a novation giving rise to fresh franchise agreements, not amounting to a renewal of the pre-existing agreements. The Act, it was said, recognised only legal assignments and reference was made to sub-s.11(1). His Honour then undertook a lengthy review of the authorities in relation to the assignment of contractual interests and obligations. He concluded that:
   

"...as a matter of general law, notwithstanding the plaintiff's purchase of the service station business on 1 July 1986 as a going concern and running it thereafter until 30 June 1987, which events constituted an equitable assignment... that there was no privity of of contract between the plaintiff and the defendant."

He went on to hold that there was neither a statutory assignment nor a novation effected upon the sale to Calaby in July 1986. Ampol had never discharged the Kumnicks from liability under the 1984 agreements and this fact was evidenced by it continuing to send invoices to the Kumnicks for goods supplied. He then considered the effect of Calaby taking over the operation of the service station and Ampol's acquiescence in that arrangement. It was his Honour's view that although the equitable assignment was not effective to create privity between Calaby and Ampol "...it nevertheless by reason of the defendant's acquiescence therein, would seem to constitute a new franchise agreement to which the Act applies by virtue of section 6(1)".

1. His Honour observed that it seemed the 1984 agreements between the Kumnicks and Ampol and the franchise agreement between Calaby and Ampol which arose upon Ampol consenting to the use of the premises and trade mark and the retail sale of motor fuel by Calaby, constituted two series of franchise agreements, each series comprising a franchise agreement to which the Act applied. That result would have been consistent with Calaby's performance of its agreement with Ampol discharging, pro tanto, the Kumnick partnership from its obligations under the 1984 agreements. Nevertheless, his Honour held that this situation was "inconsistent with s.7(1) of the Act" and that he was bound in the absence of any discharge of the 1984 agreements to hold that any such agreement between Calaby and Ampol before August 1987 was to be treated as void for the purposes of the Act.

2. His Honour rejected an argument from Ampol that the 1987 agreements, having been treated as renewals by the parties, should be so regarded by the Court. Because Calaby never became a party to the 1984 agreements, the 1987 agreements could not constitute a renewal of them. The assumption of Calaby and Ampol to the contrary was to be treated as a mutual mistake of law:
   

"The inherent character of the 1987 agreements, as a matter of law deduced from the Act under which they operated and the circumstances of their execution, subject to any question of estoppel, cannot be changed by agreement of the parties."

1. Ampol had contended in its defence that Calaby was estopped from denying that a 1987 agreement constituted a renewal of the 1984 agreements and invoked both common law and equitable estoppel. His Honour held there could be no common law estoppel as there had been no unequivocal representation by Calaby of the existence of a statutory assignment. He also rejected the defence of equitable estoppel saying that on the evidence before him, Calaby did nothing to give rise to a belief in Ampol of which Calaby knew or ought to have known, that there had been a statutory assignment from the Kumnicks to Calaby, that Calaby was a party to the 1984 agreements or that the 1987 agreements were to be regarded as renewals of the 1984 agreements.

2. In summary his Honour held that Calaby was neither, at general law nor by virtue of the provisions of the Act, a party to the 1984 agreements prior to the execution of the 1987 agreements and was not precluded by common law or equitable or any other estoppel from so asserting. The 1987 agreements, he held, were agreements entered into otherwise than by way of renewal for purposes of the Act. Calaby was therefore entitled to judgment.
   Submissions on the Appeal

3. Ampol submitted that upon the proper construction of the Act, the 1987 agreements were to be treated as renewals if entered into by reason of the obligations imposed under ss.17 and 17A. and not as an act of free will on the part of the franchisor. In this case Calaby, it was said, could have compelled Ampol to enter into the 1987 agreements. The Court should look through the formalities to the commercial reality which was that the change from the Kumnicks to Calaby was nominal and that the parties achieved consensually what Calaby could have compelled Ampol to do. Alternatively by reason of sub-s.3(2) or alternatively para.3(9)(c), Calaby was said to have been franchisee immediately prior to 1 August 1987, being deemed to be a party to the 1984 agreements by reason of sub-s.3(2) or para.3(9)(c). If privity at law were required, there had been part performance of the equitable assignment and equity would not permit the parties to resile from that position. The most unequivocal act of part performance of the assignment was said to be Calaby's exercise of the franchisee's right under the Act to compel Ampol to grant a renewal of the 1984 agreements upon their expiration and Ampol's acceptance of the exercise of that right by Calaby. Alternatively, the learned trial judge was said not to have been bound to hold that there was no privity of contract between Ampol and Calaby prior to the execution of the 1987 agreements. It was suggested as a further alternative submission, that the requirements of s.70 of the Supreme Court Act for a valid legal assignment to Calaby were met by the record of it in Calaby's minutes. Finally, Ampol repeated the submission put to the learned trial judge that Calaby was estopped from alleging that the assignment to it was defective or incomplete at law or that it was not a franchisee immediately prior to the execution of the 1987 agreements.

4. Counsel for Calaby contended that the 1987 agreements were not renewals as Calaby was not a party to the 1984 agreements and was not deemed to be a party by virtue of para.3(9)(c) of the Act. Although Calaby had, prior to the signing of the 1987 agreements, become a franchisee and although there was a franchise agreement between it and Ampol by virtue of s.3(1) of the Act, this new arrangement was void because of s.7(1). Absent any representation by Calaby that there had been a statutory assignment of the Kumnicks' interests to it, it was not estopped in law from denying that the 1987 agreements were entered into by way of renewal. Nor was it so estopped in equity. It had neither created nor encouraged any such assumption by Ampol and was not aware, nor ought to have been aware, that Ampol was relying upon anything said or done by it. Nor was there anything to suggest that its present stance was unconscionable. There was no legal assignment of the 1984 agreements and no novation in July 1986. If the 1987 agreements constituted a novation, then they were new agreements and not a renewal. If there was merely an equitable assignment of the 1984 agreement, then Calaby could not have exercised the assignor's rights because it was not a party. Calaby could not have compelled Ampol to grant it a renewal. The right to renewal was statutory, not contractual. It belonged to the Kumnicks as franchisees. What occurred in 1987 was an entirely new arrangement.
   The Effect of the 1986 Transaction

5. There are two threshold features of this case which set the scene for its proper resolution. First, there is nothing to suggest that either Calaby or Ampol intended or believed that the accession of Calaby as operator of the service station in July 1986 would have effect for the purposes of the Act as anything other than a simple substitution of Calaby for the Kumnicks. Counsel for Calaby properly so conceded. It is apparent from that concession, and the facts as found by his Honour, that neither the Kumnicks, as Calaby's controllers, nor Mr Arthur on behalf of Ampol in consenting to the new arrangement, considered that it would have any impact on the position under the Petroleum Retail Marketing Franchise Act 1980. The findings proceed on the basis that it was the common assumption of both parties that Calaby simply succeeded to the rights and obligations of the Kumnicks under the 1984 agreements. Counsel for the respondent accepted that all parties shared the assumption that nothing had changed as a result of the "sale" apart from the legal identity of the franchisee. So to conclude does not involve questioning his Honour's findings, which with respect appear to be correct, that as between the Kumnicks and Calaby, the 1986 transactions effected an equitable assignment of the Kumnicks' interests in the 1984 agreements.

6. The second feature of the case puts these findings in their proper perspective. That is the statutory framework within which the transaction is to be viewed. For what is apparent from the definition of "agreement" in sub-s.3(1), is that the operation of the Act is not confined to agreements which give rise to rights or obligations at law or in equity but a wider range of relationships described by the words "arrangement" and "understanding". These need not give rise to any such rights or obligations. The Full Court in Esso Australia Ltd v. R. T. and M.I. Abela Pty Ltd (1989) 91 ALR 476 at 485 referred to the width of the sub-section and cautioned "against too readily carrying over into a consideration of the operation of the statute, doctrines and concepts flowing from the law of landlord and tenant". That caution could properly be extended to doctrines and concepts flowing from the law of contract.

7. His Honour was prepared to find that a franchise agreement to which the Act applied arose between Calaby and Ampol in July 1986 when Ampol, through Mr Arthur, consented to Calaby using the Stuart Park premises for the sale of motor fuel by retail and the Ampol trade mark in connection with such sales. His Honour nevertheless held that sub-s.7(1) of the Act would operate to avoid any such agreement. But assuming that a franchise agreement did arise in the circumstances described, it would not have been rendered ineffective by operation of sub-s.7(1). That sub-section prohibits contracting out of the statute - Caltex Oil (Australia) Pty Ltd v. Best (1990) 97 ALR 217 at 221 (Mason C.J., Gaudron and McHugh JJ.). That it is concerned to prevent the creation of legal rights or obligations inconsistent with the statute is evident from the use of the word "void" to describe its effect upon any provision of an agreement that purports to exclude, limit or modify or is otherwise inconsistent with a provision of the Act or any right or remedy based on or arising out of a provision of the Act. What it affects are legal or equitable rights or obligations arising by virtue of an agreement and inconsistent with those created by the Act. It is concerned with the content of such an agreement - Caltex Oil (supra) at 228 (Toohey J.). It does not prevent the creation of rights or obligations flowing from the application of the Act to agreements, arrangements or understandings properly within its purview. It does not prevent consensual abandonment of a franchise agreement. As Toohey J. noted in Caltex Oil (supra) at 228, sub-s.16(9) expressly contemplates that parties to a franchise agreement may agree to rescind their arrangements. For that sub-section provides that s.16 "does not prohibit a franchisor from terminating the franchise agreement with the consent in writing of the franchisee given at any time after the commencement of the agreement".

8. Bearing in mind the purpose of the legislation, there is nothing in its terms which would prevent parties to an agreement, arrangement or understanding which constitute a franchise agreement to which it applies, from agreeing to vary it in a way that does not involve any exclusion, limitation or modification of any right or remedy based on or arising out of a provision of the Act. In relation to assignments and novations, neither s.11 nor s.12 establishes a code by which such alterations in franchise agreements must be achieved. Their function is to enable the franchisee to assign or effect a novation even against the will of a franchisor in appropriate circumstances and to protect the franchisor from being thrust into new relationships with persons who may not be suitable or have no relationship to the franchisee. They do not obstruct consensual reorganisation of parties to a franchise agreement. And by virtue of sub-s.3(1) such consensual reorganisation may be contractual and properly described as an assignment or novation or may be effected by way of an arrangement or understanding which supplants a pre-existing contract but which in the absence of the Act would have no impact as an assignment or alteration of rights at law or equity. That is not to say that estoppels may not arise from such reorganisations. Pincus J. expressed the opinion obiter in Beckford Nominees Pty Ltd v. Shell Co of Australia Limited (1986) 73 ALR 373 at 378 that although there is nothing explicit in s.7 about exclusion of the provisions of the Act by estoppel a de facto contracting out of the Act cannot be achieved by that means. Whether that view is correct or not it could only apply to a case in which the estoppel relied upon interferes with the exercise of rights or obligations created by the Act. Indeed it may be the case that, having regard to the terms of s.8, s.7(1) has no application to the doctrines of estoppel. All the elements of equitable estoppel as developed by the successive decisions of the High Court in Waltons Stores (Interstate) Ltd v. Maher (1988) 164 CLR 387; Foran v. Wight (1989) 168 CLR 385 and Commonwealth v. Verwayen (1990) 170 CLR 394 appear to have been present in this case.

1. Within the framework of the Act, agreements, arrangements and understandings have equal status in the application of its principal substantive provisions. In a broad sense, it invites examination of the substance rather than legal or equitable forms surrounding the relationship between franchisor and franchisee. The substance of the relevant arrangement in this case is properly described by saying that in July 1986, Calaby, with Ampol's consent, succeeded to the Kumnicks' rights and obligations under the franchise agreements. That may not properly describe the legal or equitable effect of the sale of the business at 1 July 1986. It does however describe an "arrangement" or "understanding" to which all parties acquiesced in July 1986. In the context of the Act there was an effective "assignment" of the Kumnicks' rights and liabilities to Calaby even if as between the Kumnicks and Calaby outside the framework of the Act a legal transfer had not been effected. For where arrangements of a non-contractual nature are concerned, the Act is the source of the rights and obligations of franchisee and franchisor. On that consensual basis, Calaby became the franchisee for the balance of the term of the 1984 agreements and enjoyed the same rights of renewal as had been enjoyed by the Kumnicks before that rearrangement. It follows from this conclusion that the 1987 franchise agreements could not be treated as new agreements attracting statutory rights of renewal for two further terms.

2. For these reasons the appeal must be allowed. The Court was informed by counsel for Ampol that it seeks to have the orders of the trial judge set aside, but does not seek consequential relief other than an order referring the matter back to the trial judge. The reason for this was said to be that s.17B(4)(b) of the Act requires an examination by his Honour of what occurred prior to 1 August 1984 in order to determine what was the original franchise agreement for the purposes of that section. This proposed course was common ground between the parties. Given that the matter was not debated before the Court and in the hope that common sense will prevail and the parties not take up the time of the Supreme Court on matters which should be able to be resolved by agreement, the Court will make orders in accordance with counsel's proposal. In the circumstances the Court proposes to make the following orders:
   

1. The appeal be allowed.

2. The order of Angel J. made 12 September 1990 be set aside.

3. The matter be remitted to the learned trial judge to determine, according to law, whether any further orders are necessary and appropriate.

4. The respondent pay the appellant's costs of the appeal and of the proceedings before Angel J.