BB Australia Pty Ltd v Bytan Pty Ltd - [2012] VSC 171

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

List A
No. 776 of 2012

BB AUSTRALIA PTY LTD (formerly known as Blockbuster Australia Pty Ltd) (ACN 058 986 673)	Plaintiff
v
BYTAN PTY LTD (ACN 051 216 025) (and others in accordance with the schedule attached)	Defendants

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JUDGE:	Pagone J
WHERE HELD:	Melbourne
DATE OF HEARING:	30 April 2012
DATE OF JUDGMENT:	4 May 2012
CASE MAY BE CITED AS:	BB Australia Pty Ltd v Bytan Pty Ltd and Ors
MEDIUM NEUTRAL CITATION:	[2012] VSC 171

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Contract – Construction – Meaning of “all the assets used in the STORE” - Franchise Agreement – Whether “all the assets used in the STORE” includes an option to purchase Franchisee’s freehold interest in Site – Termination of Franchise Agreement - Franchisor’s right “to close the STORE” to facilitate the acquisition of franchise assets – Whether the Franchisor’s right “to close the STORE” depends upon its intention to maintain the operation of the STORE.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr F Kunc SC	A’Beckett Lawyers
For Defendants	Mr I Pike SC	Marque Lawyers Pty Ltd

HIS HONOUR:

The principal issue in this proceeding is the correct meaning of the words “all the assets used in the STORE” in clause 18.13 of a Franchise Agreement between the plaintiff, as Franchisor, and the first defendant, as Franchisee. The words appear in a clause giving the Franchisor an option which it has purported to exercise. The Franchisee contends that the purported exercise of the option has not been effective because it does not seek to purchase the freehold at which the franchise business was conducted.

The Franchise Agreement was entered into by the Franchisor (“Blockbuster”) and the Franchisee (“Bytan”) on 24 January 2002 for a term of ten years with an option for a further five years. The Franchisee did not exercise its option to extend the term of the Agreement which, therefore, expired on 24 January 2012. The Agreement gave the Franchisee the right to operate what was defined as the “STORE at the Site” using the Blockbuster system and the marks and business names set out in a schedule to the Agreement. The Franchise Agreement entered into between the Franchisee and the Franchisor was Blockbuster’s standard form of Franchise Agreement issued to all franchisees. It was not specifically tailored to the particular circumstances of Bytan beyond the completion of various items in the schedules and the inclusion of particular matters as the standard form ordinarily contemplated. The schedule identified “Blockbuster Turramurra” as the business name and the Site as 8 Eastern Road Turramurra, New South Wales. The Franchisee was the registered proprietor of that land at the time of entering into the Franchise Agreement. Until then it had been operating a video hire store from the premises but not by reference to Blockbuster or the plaintiff’s franchise.

The Franchisee had become the registered proprietor of the land on 25 August 1995 upon a…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2012] VSC 171
Decision Date: 4 May 2012

CaseChat Overview and Summary

BB Australia Pty Ltd sought relief from Bytan Pty Ltd, arguing that the latter had breached the terms of a franchise agreement by not transferring all assets used in the operation of a store to BB Australia. The matter was heard in the Supreme Court of Victoria. The primary issue before the court was the interpretation of the term “all the assets used in the STORE” within the franchise agreement, particularly whether it included an option to purchase Bytan’s freehold interest in the site. The court was also required to determine whether BB Australia’s right to close the store and facilitate the acquisition of franchise assets depended on its intention to continue the store's operation.

The court found that the phrase “all the assets used in the STORE” was ambiguous and required construction in the context of the agreement. It held that the term did not include the option to purchase Bytan’s freehold interest in the site. The court reasoned that the agreement did not explicitly mention the freehold interest as an asset to be transferred, and the parties' conduct did not imply such an inclusion. Furthermore, the court rejected BB Australia’s argument that its right to close the store was contingent on its intention to maintain the store's operation, holding that the right to close the store was independent of any future operational plans.

In light of these findings, the court dismissed BB Australia’s claims for relief. It concluded that Bytan had not breached the franchise agreement by not transferring the freehold interest as part of the assets. The court's decision underscored the importance of the plain meaning of contractual terms and the necessity for clear expression when intending to transfer real property interests.

Orders