Andrews v Caltex Oil (Australia) Pty Ltd

[1982] FCA 49

Re: RICHARD EDWIN ANDREWS AND JOHN RICHARD MATTHEWS
And: CALTEX OIL (AUSTRALIA) PTY. LTD. (1982) 60 FLR 261
No. G85 of 1981
Petroleum Retail Marketing Franchise Act - Costs - Practice

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)

CATCHWORDS

Petroleum Retail Marketing Franchise Act - application for security for costs respondent - consideration of O. 28 R. 3 of Federal Court Rules, specifically the construction of the word "benefit" - whether the applicants suing, not for own benefit, but for the benefit of some other person - whether the applicants will be unable to pay the costs of the respondent if ordered to do so.

Petroleum Retail Marketing Franchise Act 1980 (Cth.) s. 20

Federal Court Rules Order 28 Rule 3

Costs - Application for security for costs - Federal Court - Rules of court - "Benefit" - Meaning of - Whether benefit merely financial - Public benefit - Federal Court Rules, O. 28, r. 3 - Petroleum Retail Marketing Franchise Act 1980 (Cth), s. 20.

Practice - Security for costs - Application for - "Benefit" - Meaning of - Whether "benefit" merely financial - Public benefit - Federal Court Rules, O. 28, r. 3 - Petrol Retail Marketing Franchise Act 1980 (Cth), s. 20.

HEADNOTE

Andrews and others (the applicants) conducted, in various locations, automobile service stations under franchise from Caltex Oil (Australia) Pty. Ltd. (the respondent). The applicants instituted proceedings against the respondent company, which has franchises throughout Australia for the sale of motor fuel to the public, alleging infringements by the respondent of certain provisions of the Petroleum Retail Marketing Franchise Act 1980. The respondent applied to the court for an order for security for costs pursuant to O. 28, r. 3 of the Federal Court Rules.

Held, that the application for security for costs should be dismissed because, even if the meaning of "benefit" in O.28, r. 3 of the Federal Court Rules is construed in the sense of a "financial benefit", which it should not be, the court was not satisfied that the applicants are not suing for their own benefit and because it had not been established that the applicants will be unable to pay the costs of the respondent if ordered to do so.

Semler v. Murphy, (1968) 1 Ch 183; Cowell v. Taylor (1885), 31 ChD 34, referred to.

HEARING

Sydney, 1981, December 18; 1982, March 24; April 5. #DATE 5:4:1982

APPLICATION.

Application by the respondent for an order for security for costs.

J. D. Heydon, for the applicants.

J. J. Garnsey, for the respondent.

Cur. adv. vult.

Solicitors for the appellants: McDonnell Moffitt Dowling Tayler.

Solicitors for the respondent: Moore & Bevins.

E. F. FROHLICH

ORDER

The application be dismissed with costs.

JUDGE1

This is an application for security for costs which raises an interesting question as to the construction and operation of Order 28 Rule 3 of this Court's Rules. The Rule provides, so far as relevant:

"3 (1) Where, in any proceeding, it appears to the Court on the application of a respondent -

. . .

(b) that an applicant is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that the applicant will be unable to pay the costs of the respondent if ordered to do so;. . .

the Court may order that applicant to give such security as the Court thinks fit for the costs of the respondent of and incidental to the proceeding."

The question is what meaning should be given to the word "benefit". Before turning directly to the question, it is necessary to say something about the issues in the case.

Caltex Oil (Australia) Pty. Limited ("the respondent") has franchisees throughout Australia who sell motor fuel to the public. Under franchise agreements the respondent agrees to supply the franchisees, being the proprietors of automobile service stations, with motor fuel for sale to the public.

Raymond Edwin Andrews ("the first applicant") together with his wife, conducts an automobile service station at Maroubra under franchise from the respondent. John Richard Matthews ("the second applicant") and his partner conduct an automobile service station at Blakehurst also under franchise from the respondent.

The applicants assert that from about 1 June 1981 the respondent engaged in discrimination between its franchisees in relation to the supply of motor fuel by it, otherwise than for retail sale in bulk, in relation to amounts payable by its franchisees in respect of fuel and in relation to discounts, allowances, rebates or credits given or allowed to the franchisees in respect of fuel; and thereby infringed s. 20 (1) of the Petroleum Retail Marketing Franchise Act 1980 ("the Act").

The respondent calls in aid s. 20 (2) (b) by way of defence and says that the discrimination was constituted by the doing of an act in good faith:-
(a) to meet a price or benefit offered by a competitor of the respondent; or

(b) to assist each of the applicants to meet a price or benefit offered by his competitor.

Section 20 of the Act provides:-
"20. (1) A franchisor shall not, in relation to motor fuel supplied or to be supplied by it, discriminate between its franchisees in relation to -

(a) the amounts payable by the franchisees in respect of the fuel; or

(b) any discounts, allowances, rebates or credits given or allowed to the franchisees in respect of the fuel.

(2) Sub-section (1) does not apply in relation to a discrimination if -

(a) the discrimination makes only reasonable allowance for differences in the cost or likely cost of raw materials, refining, distribution, sale or delivery resulting from the differing places to which, methods by which or quantities in which the motor fuel is supplied to the franchisees;

(b) the discrimination is constituted by the doing of an act in good faith -

(i) to meet a price or benefit offered by a competitor of the franchisor; or

(ii) to assist a franchisee to meet a price or benefit offered by a competitor of the franchisee; or

(c) the discrimination results only from compliance with a law of a State or Territory fixing the wholesale price, or the maximum wholesale price, of motor fuel.

(3) In any proceedings, the onus of establishing that sub-section (1) does not apply in relation to a discrimination by reason of sub-section (2) is on the person asserting that fact.

(4) This section does not apply in relation to the supply of proposed supply of motor fuel to franchisees for retail sale in bulk."

The evidence adduced on the hearing of this application was rather scanty; but it seems that, if a franchisee faces difficulties in selling petrol to the public because petrol is sold at cheaper prices by competitors in his area, he may seek a reduction in the price for petrol to be purchased by him from the respondent for resale at his service station. If the request is granted, he receives a concession in the form of a rebate off the petrol purchased from the respondent. The respondent expects in return that the benefit of the lower price to the franchisee will be passed on to the public in the form of a lower retail price; so that the franchisee is not able to buy petrol at a cheaper price than normal from the respondent and yet maintain his normal selling price to the public.

The respondent contends that "benefit" should be construed in the sense in which it is usually understood in corresponding Rules of Court in England and Australia namely, a financial benefit; see Semler v. Murphy (1968) 1 Ch. 183.

The respondent asserts that there is no financial benefit to the applicants in respect of the subject matter of this case; even if they are successful no benefit will accrue to them. If any benefit accrues at all, it is said that it will be a benefit to the Service Station Association of N.S.W. Limited ("the Association) which, so far as I can glean from the evidence, is a public company the objects of which are to protect and advance the interests of its members who are proprietors of service stations in New South Wales including franchisees of the respondent.

It is true that the word "benefit" in Rules of Court relating to security for costs has been construed in the sense contended for by the respondents; but there are various matters which point to the need for caution before applying so immutable and narrow a meaning to the word in 0.28 R.3

First, Rules of Court relating to security for costs generally concern disputes between parties over proprietary rights or liabilities and only infrequently involve considerations of benefit to the public. Questions of public benefit are necessarily involved in much of the work of this Court; for example, cases arising under the Trade Practices Act 1974, Administrative Appeals Tribunal Act 1975, Administrative Decisions (Judicial Review) Act 1977, Conciliation And Arbitration Act 1904, and the very Act involved here.

Second, there is the eclectic character of this Court's jurisdiction conferred essentially by Acts of the Commonwealth Parliament covering a wide and diverse range of subject matters.

Third, Parliament intended to depart from established common law and equitable principles and remedies in various matters. For example, under the Trade Practices Act 1974 (s.80) and the Act involved in this case (s.21) damages need not be established in order to found injunctive relief, and injunctions may be granted whether or not the respondent has previously engaged in conduct of the relevant kind and whether or not there is an imminent danger of substantial damage to any person.

Doubtless, there are other considerations; but these three are sufficient to convince me that it would be wrong to construe "benefit" merely in the sense of financial benefit. More important, it is unnecessary, in my opinion, to attribute to the word some fixed meaning necessarily applying to each and every case of the wide and varied cases that come within the Court's jurisdiction. Indeed, any such definition may be so general as to be meaningless.

The Rule is addressed to the fixing of security "in any proceeding". In my view, the meaning of "benefit" is to be gleaned from the character of the particular case before the Court. It derives its complexion from the specific statute involved and the circumstances of the case. Its meaning is ambulatory.

The present case concerns s.20 of the Act. Plainly, considerations of benefit to the public are involved. Price discrimination in the sale of motor fuel by a franchisor to franchisees is prohibited, subject to sub-s.(2) of s. 20. Parliament regarded such discrimination as inimical to the public interest. The claim here is for injunctive relief only. Damage need not be established

The respondent asserts that the applicants are really nominal applicants, mere puppets or shadows, bringing the case on behalf of the Association.

The applicants are proprietors of service stations in the Sydney Metropolitan area. In essence, they are alleging that the granting of discounts or rebates by the respondent to other service station proprietors, also franchisees of the respondent, is discriminatory and constitutes an infringement of s. 20 of the Act.

The evidence before me in this application is sparse both as to any "benefit" of the applicants and as to any absence of "benefit". It is not for the applicants to satisfy me that there is a requisite benefit; rather, the respondent must establish that the applicants are suing, not for their own benefit, but for the benefit of some other person.

Doing the best I can with the allegations and admissions in the pleadings and the evidence adduced in this application, it seems to me that if the applicants are successful in the case, they may achieve the result that discriminatory discounts or rebates will not be allowed by the respondent to its franchisees, so that a measure of stability of price will operate which may be of real commercial or financial benefit to the applicants in the conduct of their respective businesses. Thus, even if "benefit" is construed in the sense of a financial benefit, I am not satisfied that the applicants are not suing for their own benefit. The very fact that applicants in proceedings under s. 20 will be generally, if not necessarily, franchisees complaining of price discrimination of a franchisor, must mean that it will be only in a rare case that an applicant could be said not to have a financial benefit. However, I do not think it is necessary to limit the notion of "benefit" in a proceeding under ss. 20 and 21 of the Act to financial benefit.

Perhaps if it could be established that a franchisee is nothing but a puppet for some third party, a mere shadow, in the sense that he has parted with any right he may have had in the subject matter and become a merely nominal plaintiff (Cowell v. Taylor (1885) 31 Ch. Div. 34), it would probably follow that he has brought the proceeding not for his own benefit but for the benefit of another.

It must not be forgotten that there are two aspects of "benefit" namely, first that the proceeding is not brought for the benefit of the applicant and second, that it is brought for the benefit of some other person. Proof of the former does not necessarily establish the latter.

I reject the respondent's contention that the applicants are suing for the benefit of the Association. It is paying the applicants' costs of this proceeding. The solicitors for the applicants are also the solicitors for the Association. Those solicitors are instructed by the Association on general aspects of this case; and by each applicant so far as he is specifically concerned.

It does not follow that the proceeding is brought, not for the benefit of the applicants, but for the benefit of the Association. If every member of the Association, being a service station proprietor, were joined as an applicant, it would be a nonsense to say that the proceeding was brought, not for the benefit of the members themselves, but for the benefit of the Association. Indeed, when injunctive relief is the only relief sought, it would be undesirable in the interests of the parties and for the efficient despatch of this Court's business that encouragement be given to the joining of unnecessary parties or to the bringing of unnecessary applications for appointment of representative parties.

Nor has the respondent pointed to anything which could be described as a benefit to the Association itself.

It is the evident purpose of s. 20 that price discrimination between franchisees is prima facie contrary to the public interest. Everyone knows that it is very difficult for a challenge to such practices to be brought by small businessmen against a corporate colossus. Some may need financial aid; but, generally, it would be comforting for them to have the support of their fellows, either as co-applicants or through their trade association. To say that in these circumstances the case is brought, not for the benefit of the applicants but for the benefit of the Association or, for that matter, for the benefit of other members of the Association, is misconceived.

Nor has the second limb of 0. 28 R. 3 (1) (b) been established namely, that there is reason to believe that the applicants will be unable to pay the costs of the respondent if ordered to do so. The applicants are businessmen on a small scale who have experienced difficulty in running their business profitably, for various reasons, from time to time. Sometimes their businesses have run at a loss - after deducting their own not inconsiderable drawings. I know little about the financial position of the applicants, save for the contents of various documents in evidence which were prepared for the purpose of supporting a case to the respondent of the need for financial aid to meet increased competition from other service station proprietors. The evidence is that the respondent's costs of this case may be in the order of some $25,000.00 of which they should be able to recover on taxation, if successful, about $20,000.00. Although the financial position of the applicants is not particularly buoyant, it has not been established that there is reason to believe that they will be unable to pay the respondent's costs if ordered to do so.

The application is dismissed with costs.