Best, R.J. v Caltex Oil (Australia) Pty Ltd

[1989] FCA 289

Re: ROBERT JEFFREY BEST and GLENYS MAREE BEST
And: CALTEX OIL (AUSTRALIA) PTY. LIMITED
No. VG 394 of 1988
FED No. 289
Trade and Commerce
87 ALR 1

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Woodward(1), Northrop(2) and Jenkinson(3) JJ.

CATCHWORDS

Trade and Commerce - petroleum retail marketing franchise - Franchise agreement - Whether provision in agreement giving franchisor power in certain circumstances to revoke licence to use its trade mark and related signs is void because inconsistent with relevant Act.

Petroleum Retail Marketing Franchise Act 1980 ss 3 (1) "agreement", "franchise agreement", 6, 7, 8A, 9, 9A, 10, 11A, 13, 16, 17, 17A, 17B, 18

Acts Interpretation Act 1901 s 23 (b)

HEARING

MELBOURNE

#DATE 9:6:1989

Counsel for the Appellants : Mr. A.H. Goldberg Q.C. and Mr.

J.G. Judd

Solicitors for the Appellants: Phillips Fox

Counsel for the Respondent : Mr. J.H. Karkar Q.C. and Ms. M.

Sloss

Solicitors for the Respondent: Abbott Tout Russell Kennedy

ORDER

The appeal be allowed and the orders of the Supreme Court of Victoria that there be judgment for the defendant with costs be set aside.

It be declared that clause 17.4 of the agreement in the pleadings described as the dealer agreement is void to the extent that it purports to have effect while the said dealer agreement is a franchise agreement in relation to which the Petroleum Retail Marketing Franchise Act 1980 applies.

Otherwise the plaintiffs' claims in the proceeding be dismissed.

The proceeding be remitted to the Supreme Court of Victoria for further hearing and determination of questions of the costs of the proceeding.

The appellants' costs of this appeal be paid by the respondent.

NOTE: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.

JUDGE1

I agree with the orders proposed by Jenkinson J and with his reasons for those orders.

JUDGE2

I concur with the reasons for judgment given by Jenkinson J and agree with the orders proposed by him.

JUDGE3

Appeal from a judgment of the Supreme Court of Victoria exercising jurisdiction under the Petroleum Retail Marketing Franchise Act 1980.

1. One of the questions resolved by that judgment was whether a provision in an agreement between the plaintiffs in that Court, who are the appellants, and the defendant, who is the respondent, is void to any extent by reason of the operation of sub-section 7(1) of that Act. The question was resolved in the negative. The appellants seek by their appeal to challenge only the Supreme Court's resolution of that question.

2. Sub-sections (1) and (2) of s.7 of the Act provide:
   

"(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."

1. The agreement between the parties was one which when it was made fell within the meaning of the expression "franchise agreement" as defined in the Petroleum Retail Marketing Franchise Act 1980, and was a franchise agreement in relation to which that Act applied. Although every franchise agreement in relation to which the Act applies is within the defined meaning of the expression, not every agreement which falls within the definition of "franchise agreement" is a franchise agreement in relation to which the Act applies. In the Act, unless the contrary intention appears, "franchise agreement" means an agreement containing:
   

"(a) provisions, whether express or implied, under or by virtue of which a corporation (in this Act referred to as the 'franchisor') authorizes, permits or requires a person, being another party to the agreement (in this Act referred to as the 'franchisee'), to use, in connection with the retail sale of motor fuel by that person at the premises to which the agreement relates, a mark identifying, commonly associated with, or controlled by, that corporation or a related corporation;

(b) provisions, whether express or implied, under or by virtue of which a corporation (in this Act referred to as the 'franchisor') grants a right to, or otherwise authorizes or permits, a person, being another party to the agreement (in this Act referred to as the 'franchisee'), to possess, occupy or use the premises to which the agreement relates in connection with the retail sale of motor fuel by that person at those premises; or

(c) provisions, whether express or implied, under or by virtue of which -

(i) a corporation (in this Act referred to as the 'franchisor') is accustomed, entitled or required to supply motor fuel to a person, being another party to the agreement (in this Act referred to as the 'franchisee'), for retail sale by that person at the premises to which the agreement relates; or

(ii) a person (in this Act referred to as the 'franchisee') agrees with a corporation (in this Act referred to as the 'franchisor') to acquire motor fuel from another person (whether a party to the agreement or not) for retail sale by the first-mentioned person at the premises to which the agreement relates."

"Motor fuel" is defined to mean "any fuel to be used in propelling road vehicles other than diesel fuel or liquefied gas". Sub-section 6(1) provides:

"This Act does not apply in relation to a franchise agreement unless the agreement -

(a) contains provisions of the kinds referred to in paragraphs (a) and (b), and of the kind referred to in sub-paragraph (c)(i) or (ii), of the definition of 'franchise agreement' in sub-section 3(1); or

(b) is one of 2 or more franchise agreements that together contain provisions of the kinds referred to in paragraphs (a) and

(b), and of the kind referred to in sub-paragraph (c)(i) or (ii), of that definition, where -

(i) the franchisees in relation to those agreements are the same person or are connected with each other;

(ii) the franchisors in relation to those agreements are the same corporation or are related to each other; and

(iii) those agreements relate to the same marketing premises."

Thus the Act applies only in relation to a "franchise agreement" which answers a description contained in each of paragraphs (a) and (b) of the definition and a description contained in either sub-paragraph (c)(i) or (c)(ii) of the definition, or in relation to one of 2 or more franchise agreements that together satisfy those requirements. The agreement which the parties to this appeal made was a franchise agreement to which the Act applied when the agreement was made, but in certain events the agreement would cease, the parties were agreed, to be a franchise agreement in relation to which the Act applied, unless a particular provision in the agreement were void. That provision is clause 17.4 of the agreement.

1. The agreement, which was in writing and made in or about June 1988, consists of recitals, five separate parts and a number of schedules. Part A consists of provisions concerning a lease for a term of 4 years and 2 months of land at a corner of an intersection of two suburban streets in Melbourne, commencing on 1st July, 1988. It is provided in Part A that the premises "shall be used only to carry on the service station business of an automobile service station and such other ancillary or associated service station business approved of in writing by Caltex" (sic). In the agreement the word "Caltex" signifies the respondent. Part B consists of provisions concerning the grant to the appellants by the respondent of "a service station business franchise to sell" at the premises petrol, "and diesel where the Premises are appropriately equipped", supplied by or on behalf of the respondent "in conjunction with the registered trade mark 'Caltex' and other trade and service marks and trade names, devices, designs, advertising matter, signage and colour schemes which are distinctive of Caltex, and which Caltex uses or hereafter may use or licence in connection with Caltex automobile service stations, the marketing of petroleum products and associated services (all of which marks, names, designs, logos, devices, advertising matter, signage and colour schemes are hereinafter collectively referred to as 'Caltex Identifications')". (It did not appear whether the premises the subject of the agreement were "appropriately equipped" for diesel.) Part B provides also for the grant to the appellants by the respondent of authority to use during the "period of the lease a service station business records system developed by Caltex". The "service station business franchise" to sell the respondent's petrol in conjunction with the Caltex Identifications which is the subject of the former grant is in the agreement called "the Business". The business records system is in the agreement called "the System". The expression "the Property" is used in the agreement to designate "the Caltex Identifications and the System and any part thereof". Part C of the agreement consists of provisions concerning the purchase by the appellants from the respondent for sale at the premises of such quantities of petrol, diesel, lubricants and other petroleum products "as are necessary to satisfy customer demand for such products at the Premises during the continuance of this Agreement". Part D consists of provisions concerning loan of equipment by the respondent to the appellants for use at the premises. Part E consists of a number of diverse provisions of the agreement.

2. The agreement thus contained provisions satisfying a description in each of the three lettered paragraphs of the definition of the expression "franchise agreement" and was therefore an agreement in relation to which the Petroleum Retail Marketing Franchise Act 1980 applied when the agreement was made.

3. Clause 17 is the first clause of Part B of the agreement. Clause 17.1 contains the grants of authority with which that Part is concerned. Clause 17.2 contains promises by the appellants not to use "the Property" otherwise than in connection with the business conducted by them at the premises and not without the respondent's consent to grant any right in respect of the Property. Clause 17.3 expresses an acknowledgment by the appellants that "the Business" shall be conducted by them on their own behalf as proprietors under their own names. Clause 17.4 provides:
   

"Notwithstanding anything herein contained to the contrary, in the event that the Dealer commits a breach of the provisions of paragraphs (i), (ii), (iii), (iv), (viii),

(xv) or (xvii) of Clause 20 hereof, or paragraphs (ii), (iii), (v), (vii) or (viii) of Clause 22 hereof, or otherwise conducts the Business or other operations carried on at the Premises in a manner which, in the reasonable opinion of Caltex, is prejudicial or harmful to or detracts from the commercial reputation or goodwill associated with Caltex or CALTEX Identifications, then without affecting any other right or remedy of Caltex in respect of such breach or conduct, Caltex shall have the right, exercisable by giving to the Dealer not less than forty-eight (48) hours notice to revoke the licence and authority granted by paragraphs (i) and (ii) of Clause 17.1 hereof, or either of them, as shall be specified in such notice, and upon revocation of the licence and authority granted by paragraph (i) of Clause 17.1 hereof Caltex and its servants, agents and contractors shall have the right to enter the Premises and remove and obliterate CALTEX Identifications and upon such removal or obliteration:

(i) the Dealer shall not use, simulate or copy in any way CALTEX Identifications or otherwise represent that any service station business carried on or petroleum products sold at the Premises has any connection or association with Caltex;

(ii) the Dealer shall have no obligation to pay to Caltex the periodical franchise fees which would thereafter otherwise become due and payable pursuant to the terms hereof; and

(iii) the provisions of this Agreement, whether express or implied under or by virtue of which Caltex authorises, permits or requires the Dealer to use CALTEX Identifications or any other mark identifying or associated with Caltex in connection with the retail sale of motor fuel and other petroleum products by the Dealer at the Premises shall have no further force or effect and shall be deemed to have been deleted from this Agreement."

Paragraph (i) of clause 17.1 contains the grant of authority to conduct "the Business". Paragraph (ii) contains the grant of authority to use "the System". The periodical franchise fees to which reference is made in clause 17.4.(ii) are sums of money which are agreed in clause 19 to be paid by the appellants to the respondent "for the rights hereby agreed to be provided by Caltex". On the proper construction of the agreement it appears reasonably clear that the word "hereby" should be understood as signifying "by clause 17.1 of the agreement". Clauses 20 and 22, like clause 19, fall within Part B. Those paragraphs of clauses 20 and 22 to which reference is made in clause 17.4 contain covenants by the appellants to conduct "the Business" diligently and in accordance with a number of specific prescriptions.

1. Clause 17.4 of the agreement is said by the appellants to be void by reason of the operation of sub-section 7(1) of the Petroleum Retail Marketing Franchise Act 1980. The provisions of the Act suggested by the appellants as attracting the operation of sub-section 7(1) are those contained in s.16 thereof. That section reads:
   

"(1) A franchisor may terminate the franchise agreement in accordance with the succeeding provisions of this section, but not otherwise.

(2) A franchisor shall not terminate the franchise agreement except on one or more of the following grounds:

(a) the franchisee is unable, by reason of physical or mental incapacity, to control the operation of the marketing premises;

(b) the franchisee makes a fraudulent misrepresentation in connection with the operation of the marketing premises;

(c) the franchisee performs an act, omits to perform an act, or makes a statement, where the act or omission, or the making of the statement -

(i) constitutes an offence punishable by imprisonment or, in the case of a franchisee being a body corporate, by a fine of $500 or more; and

(ii) in the case of a franchisee being a natural person, tends to show that he is dishonest or is otherwise not of good character;

(d) in connection with the operation of the marketing premises, the franchisee performs an act, omits to perform an act, or makes a statement (other than an act, omission or statement referred to in paragraph

(c)), where the act or omission, or the making of the statement, constitutes a serious contravention of a provision of any law;

(e) the franchisee misrepresents the octane rating of, or wilfully adulterates, motor fuel supplied to him under the franchise agreement;

(f) without the consent of the franchisor, the franchisee wilfully passes off motor fuel supplied to him by a person other than the franchisor or a related corporation as being motor fuel supplied to him by the franchisor or a related corporation;

(g) the franchisee fails to operate the marketing premises (otherwise than by reason of an industrial dispute or an interruption, reduction or cessation of the supply of motor fuel or the compliance by the franchisee with an emergency law as defined by sub-section 10(7) or with a direction or order made under such a law) -

(i) for a period exceeding 7 consecutive days; or

(ii) for a lesser period or lesser periods, where the failure to operate the premises during that period or those periods is unreasonable, having regard to the interests of the franchisor, the normal operation of the premises and the reason for the failure;

(h) the franchisee operates the marketing premises in a manner likely to cause injury to persons or property;

(j) the franchisee otherwise commits a breach of a provision of the franchise agreement;

(ja) the whole or a substantial part of the marketing premises is, or is to be, acquired by, or by a public authority of, the Commonwealth, a State or the Northern Territory under a law relating to the compulsory acquisition of land;

(jb) the sale of motor fuel at the marketing premises is prohibited by or under a law relating to the use of land;

(k) the whole or a substantial part of the marketing premises is destroyed, or is damaged to such an extent as to render the operation of the premises impracticable, except where the franchisor or a related corporation is responsible for the destruction or damage.

(3) The termination of a franchise agreement by the franchisor shall be effected by the franchisor serving on the franchisee notice in writing -

(a) informing the franchisee that the agreement is to be terminated on a specified date, being a date that, subject to sub-section (8), is not earlier than 30 days after the day on which the notice is served; and

(b) setting out full particulars of the ground or grounds, including a statement of the facts relating to each ground, upon which the termination is based.

(4) Where a franchisor serves notice on the franchisee under sub-section (3) terminating the agreement, the franchisee may apply to a court for an order declaring the notice to have had, or to have, no effect.

(5) Where an application is made under sub-section (4), the Court may, by order, either -

(a) declare the notice referred to in that sub-section to have had, or to have, no effect; or

(b) declare that notice to have terminated, or to terminate, the agreement on the date specified in the notice or on such later date as is specified in the order, and may, in either case, make such ancillary or consequential orders as it thinks fit, including orders directing the preparation and execution of documents.

(6) In any proceedings under sub-section (4), the court shall not declare the notice referred to in that sub-section to have terminated, or to terminate, the franchise agreement unless -

(a) a ground specified in the notice is established by the franchisor to the satisfaction of the court; and

(b) the court is satisfied that the termination of the agreement and any related agreement or agreements is just and equitable, having regard to all the circumstances.

(7) Without limiting the generality of paragraph (6)(b), the circumstances referred to in that paragraph include the conduct of the franchisor and the franchisee after the time when the franchisor became aware of the existence of the circumstances, or the occurrence of the event, constituting the ground referred to in paragraph (6)(a).

(8) A court may permit a franchisor to serve a notice under sub-section (3) specifying a date for the termination of the franchise agreement that is earlier than 30 days after the day on which the notice is served, if the court is satisfied that it is desirable to do so by reason that the continued possession, occupation, use or operation of the marketing premises in question by the franchisee is likely to cause substantial damage to the business, property or reputation of the franchisor.

(9) This section 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."

1. Part II of the Act comprises ss. 8A to 19A. Section 8A provides that, unless the contrary intention appears, "franchise agreement" means in that Part a franchise agreement in relation to which the Act applies, and that "franchisee" and "franchisor" shall be construed accordingly. It was submitted by Mr. Goldberg Q.C., who appeared with Mr. Judd for the appellants, that exercise by the franchisor of the right conferred by clause 17.4 to revoke the authority granted by paragraph (i) of clause 17.1 would produce the result that after that revocation the agreement would no longer contain a provision of a description expressed in paragraph (a) of the statutory definition of "franchise agreement". Next it was submitted by Mr. Goldberg that because the agreement would lack a provision of that description it would cease to be an agreement in relation to which the Act applied, by reason of the operation of s.6(1)(a). Being an agreement in relation to which the Act did not apply, it could be terminated by the franchisor upon grounds, and by acts, other than those prescribed by s.16, and against the efficacy of such a termination the franchisee would have no right to invoke the powers of a Court which sub-sections (4), (5), (6) and (7) of that section confer, Mr. Goldberg submitted. In Part E of the agreement clause 49.1 confers on the respondent the right to terminate the agreement on any one of a number of grounds, not all of which are to be found in sub-section 16(2), by notice in writing. The agreement does not contain any express provision about such a notice similar to any of the requirements of sub-section 16(3) with respect to the notice with which that sub-section deals. The provisions of clause 17.4 would enable the operation of sub-section 16(1) to be limited, and are inconsistent with that operation, in Mr. Goldberg's submission, because those provisions would enable the franchisor to terminate, by a notice given under clause 49.1 after the exercise of a right given by clause 17.4, a franchise agreement to which the Act applied, free of the curial control for which sub-sections (4), (5), (6) and (7) of s.16 make provision, and upon a ground not prescribed by sub-section 16(2), and by a notice which did not comply with the requirements of sub-section 16(3).

2. The first and second steps in Mr. Goldberg's argument, that revocation of the authority granted by paragraph (i) of clause 17 would entail the consequence that the agreement would cease to be a franchise agreement in relation to which the Act applied, had the support of Mr. Karkar and Miss Sloss of counsel for the respondent, both in the Supreme Court and in this Court. In the Supreme Court Brooking J. observed of this first step : "Since both sides accept that this is so, I shall proceed upon this conventional basis without considering the matter for myself and I express no opinion on it".

3. In my opinion revocation, in pursuance of clause 17.4, of the authority granted by clause 17.1(i) would produce the result that the agreement was no longer a franchise agreement in relation to which the Act applied. It could be said of an agreement in writing, such as this agreement is, that it contained after such a revocation, as it had before the revocation, provisions the language of which expressed what paragraph (a) of the definition specifies as part of the content of the agreement which is defined. It might be difficult to say as much of an oral agreement, and even more difficult to say of some other consensions within the defined meaning of the word "agreement" which s.3(1) of the Act gives:
   

"'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."

Section 11A of the Act expressly contemplates that grant or transfer by a franchisor of an interest in marketing premises to which a franchise agreement relates, or assignment of one or more of the franchisor's rights under such an agreement, might produce the result that the Act would cease to apply in relation to the agreement by virtue of the operation of paragraph 6(1)(a) or sub-paragraph 6(1)(b)(ii) of the Act. Section 11A prevents any such a result by forbidding grants, transfers and assignments which would produce that result, and by declaring void a purported grant, transfer or assignment to the extent that it would have that result. The legislative assumption which s.11A discloses accords with a construction of paragraph (a) of the definition of "franchise agreement" which understands the words, "under or by virtue of which", in that paragraph as requiring the actual existence of the authority or the permission or the requirement postulated in the paragraph, and not merely as forming part of a summary description of the terms of a provision contained in the agreement when that agreement was made, or when it commenced. That is the construction which I think those words in that paragraph should receive. Accordingly, when a revocation of the authority granted by clause 17.1(i) produced the result, as it would unless it were void by reason of s.7(1), that there was no provision of the agreement under or by virtue of which an authority or a permission or a requirement of a description contained in paragraph (a) of the definition subsisted, the agreement would in my opinion cease to be a franchise agreement in relation to which the Act applied.

1. "The principal purposes of the Franchise Act are to give security of tenure to retail operators of service stations, and a protection against price discrimination by corporations supplying motor fuel to them" : per Fox J. in Chronopoulos v. Caltex Oil (Australia) Pty. Ltd. (1982) 45 ALR 481 at 484. That statement has been cited with approval by a Full Court of this Court : see Mobil Oil Australia Ltd. v. Brian Brindle (1985) 9 FCR 17 at 24, 18, 22; 62 ALR 89 at 96, 90, 94. Some of the provisions of the Act which are designed to promote the former purpose are a prohibition of a corporation's entering, as franchisor, into "a franchise agreement that contains a provision imposing an obligation on the franchisee that is likely to be impossible or unreasonably onerous to perform at the time when it is required to be performed" (s.9(1)); a provision reducing to what is not unreasonable the amount of an unreasonable increase of any amount, not being an amount payable in respect of motor fuel or other stock in trade, which under a franchise agreement the franchisee is obliged to pay and the franchisor has a right to increase (s.9A(1)); a provision requiring a franchisor to supply during the term of the franchise agreement "to the franchisee at the marketing premises such quantity of motor fuel as is reasonably required by the franchisee for retail sale by him at the premises (s.10(2)); provisions (already mentioned) prohibiting and avoiding grant or transfer by a franchisor of any interest in any marketing premises to which the franchise agreement relates, or assignment of any of the franchisor's rights under the franchise agreement, to a person other than the franchisee if, as a result of the grant, transfer or assignment, the Act would, by virtue of the operation of paragraph 6(1)(a) or sub-paragraph 6(1)(b)(ii) of the Act, cease to apply in relation to the franchise agreement, whether wholly or so far only as it relates to any particular marketing premises (s.11A); provisions forbidding a corporation to enter, as a franchisor, into a franchise agreement for a term less than the term prescribed by the Act in respect of each of several circumstances (s.13); and provisions forbidding a franchisor to fail or refuse to renew the franchise agreement except in specified circumstances (ss. 17, 17A, 17B, 18).

2. Promotion of security of the tenure of the retail operators of service stations being a principal purpose of the Act, a provision of a franchise agreement, such as clause 17.4, which affords a franchisor the opportunity, in circumstances not contemplated by s.16(2), to bring about the termination of the agreement without the franchisee's consent, is to be characterised, according to Mr. Goldberg's submission, as a "provision .... inconsistent with the operation of" s.16. Reliance was placed on the language of sub-section 16(1), particularly the phrase "but not otherwise". Although it is clause 49.1 of the agreement, not clause 17.4, which confers on the respondent a right to terminate the agreement in certain circumstances, s.7(1) operates to avoid the provisions of clause 49.1 to the extent that those provisions are inconsistent with the operation of s.16. But there is inconsistency only for so long as the agreement remains a franchise agreement in relation to which the Act applies, for it is only of such an agreement that s.16 speaks. Clause 17.4 is also avoided by s.7(1), according to Mr. Goldberg's submission, because by the exercise of rights which the clause confers the agreement, a franchise agreement in relation to which the Act applies, may be made subject to termination otherwise than in accordance with the provisions of s.16. A contractual provision conferring such rights purports to limit and to modify the operation of s.16, and is inconsistent with the operation of that section, according to the submission.

3. Mr. Karkar's contrary argument rests on the premise that the Act clearly contemplates that what is a franchise agreement in relation to which the Act applies when it commences may by reason of the occurrence of subsequent events and the operation of sub-section 6(1) cease to be an agreement of that character. The provisions of s.11A in my opinion demonstrate the correctness of that premise. If the premise be correct, another example of subsequent events in consequence of the occurrence of which the Act could cease to apply in relation to a franchise agreement is provided by a consideration of the defined meaning of the expressison "related corporation" in paragraph (a) of the definition of "franchise agreement". Section 4 of the Act defines the expression by reference to control of the composition of the board of directors, to control of votes at a general meeting and to share holding, all of which may so change that corporations related to each other when a franchise agreement was made may thereafter cease to be related.

4. Section 11A demonstrated, in Mr. Karkar's submission, not only a legislative recognition that subsequent events may produce the result that the Act ceases to apply in relation to a franchise agreement, but also a legislative intention that the fact that a voluntary act of a party to the agreement, done in exercise of a right conferred by a provision of the agreement, produces that result should not involve the conclusion that the provision is for that reason inconsistent with the operation of s.16, and therefore avoided by s.7(1). That was why s.11A was enacted by an amending Act, according to Mr. Karkar's submission.

5. It was not suggested that an exercise of the right conferred by clause 17.4 would directly effect the termination, in the sense in which the word is used in s.16, of the franchise agreement. It may be - it is unnecessary to decide - that, considered without regard to the provisions of clause 49.1, clause 17.4 cannot be said to be inconsistent with, or to limit or modify, the operation of s.16 by reason of the effect, which the exercise of the right clause 17.4 confers has, of causing the Act to cease to apply in relation to the franchise agreement. The operation of s.16 is in respect only of franchise agreements in relation to which the Act applies. And the Act does contemplate, in my opinion, that acts and other events may cause the Act to cease to apply in relation to a franchise agreement. But the expression in sub-section 7(1), "a provision in any agreement", ought in my opinion to be understood as including "provisions of any agreement", no intention contrary to that inclusion appearing in the Act. (Acts Interpretation Act 1901, s.23(b).) Clause 49.1 provides that the franchisor "may .... terminate this Agreement by notice in writing upon the occurrence of any of the following events". Although some of the "following events" are described in the terms in which are described "grounds" specified in sub-section 16(2), there is no provision in clause 49.1 or elsewhere in the agreement for compliance with any of the requirements of sub-section 16(3). It may be - I need express no opinion - that by reason of the provisions of s.7(2) clause 49.1 would be effective to sustain a notice given, while the agreement remained a franchise agreement in relation to which the Act applied, in pursuance of clause 49.1 which was grounded upon an "event" specified as a ground in sub-section 16(2) and which complied with the requirements of sub-section 16(3). That possibility apart, clause 49.1 is in my opinion void to the extent that it purports to have effect while the agreement remains a franchise agreement in relation to which the Act applies, because it is to that extent inconsistent with the operation of s.16. Further than that, the provisions of clause 17.4 and 49.1 are in my opinion inconsistent with the operation of that section. The provisions of the agreement are to be considered, for the purpose of determining what s.7(1) strikes down, at the time when the agreement is made. As at that time, clause 49.1 can be seen to be, in itself, entirely otiose as a provision of a franchise agreement in relation to which the Act applies. But the two provisions, clauses 17.4 and 49.1 together, can be seen to exclude the operation of s.16 and to be inconsistent with the operation of that section. As provisions of a franchise agreement in relation to which the Act applies they are inconsistent with the operation of a provision of the Act which applies in relation to such agreements, namely sub-section 16(1), because they enable that franchise agreement to be terminated otherwise than in accordance with the succeeding provisions of that section. If the agreement had contained no provision for termination, it may be that clause 17.4 would not have been to any extent avoided. If clause 49.1 remains an effective provision of the agreement after the agreement has ceased to be a franchise agreement in relation to which the Act applies, then together clause 17.4 and clause 49.1 are in my opinion provisions of the agreement inconsistent, at the time when the agreement was made and thereafter until the agreement ceases to be a franchise agreement in relation to which the Act applies, with the operation of sub-section 16(1). If and when by reason of the occurrence of an act or event other than one which clause 17.4 authorises the agreement ceases to be a franchise agreement in relation to which the Act applies, clause 17.4 thereupon ceases, as does clause 49.1, to be inconsistent with the operation of sub-section 16(1), for the sub-section will thereafter have no operation in relation to the agreement.

6. It is true that the agreement under consideration will, if clause 17.4 be not void, have ceased to be a franchise agreement in relation to which the Act applies, and that therefore it will have ceased to be subject to the operation of s.16, before the termination of the agreement by means of the acts authorised by the two clauses, 17.4 and 49.1, could have been achieved. It is nevertheless in my opinion true to say of those clauses, while the agreement remains a franchise agreement in relation to which the Act applies, that they are provisions of that agreement inconsistent with the operation of sub-section 16(1), in that they are provisions which authorise acts by means of which a franchise agreement in relation to which the Act applies at the time of speaking may be brought to an end without observance of the requirements of s.16, without the occurrence of any other act or event as a result of which the section would cease to apply in relation to that agreement. Those contractual provisions, which do not satisfy the requirements of s.16, are without more the source of means to terminate an agreement the termination of which is required to be in accordance with s.16.

1. That conclusion is in my opinion strengthened when regard is had to s.13. Falling as it does within Part II of the Act, s.13 contains provisions with respect to franchise agreements in relation to which the Act applies. The section does not only forbid, in sub-section 13(1), a corporation to enter, as franchisor, into such an agreement "the term of which does not comply with the requirements of this section". The section's requirements are as to the duration of the term of a franchise agreement in relation to which the Act applies. The requirements vary according to circumstances specified in the section. The section also provides, in sub-section 13(10), as follows:
   

"Where a corporation purports to enter into a franchise agreement in contravention of a sub-section of this section or this Act commences to apply in relation to an existing franchise agreement whose term contravenes a sub-section of this section, the franchise agreement is not thereby invalidated, but the term of the agreement is -

(a) in the case of a contravention of sub-section (3) -

(i) if the marketing premises are held by that corporation or a related corporation as lessee under a lease in respect of which the lessor is not a corporation related to the lessee and the term of the lease will expire less than 3 years after the commencement of the agreement - a period expiring immediately before the expiration of the term of the lease; or

(ii)if sub-paragraph (a)(i) does not apply - 3 years; or

(b) in any other case - the term, or the minimum term, as the case may be, provided by the sub-section contravened."

The Act thus operates to ensure that a franchise agreement in relation to which it applies shall have a term of a duration that is within limits prescribed by the Act, and operates to ensure also that such an agreement shall not be terminated before the expiration of the term except in accordance with the provisions of s.16. The expression "a provision of this Act" in s.7(1), like the expression "a provision in any agreement", is in my opinion to be understood as including a plurality of provisions. Sections 13 and 16 together operate, in my opinion, to override contractual provisions by means whereof a franchise agreement in relation to which the Act applies could endure for a period which was both shorter than the period prescribed by s.13 and also ordained otherwise than in accordance with the provisions of s.16. Clause 17.4 is inconsistent, in my opinion, with that operation of those sections and is for that reason avoided by s.7(1).

1. Section 11A in my opinion provides no basis for the submission Mr. Karkar rested on it. Although freedom to do the acts proscribed by sub-section 11A(1) and avoided by sub-section 11A(2) might be controlled by terms of a franchise agreement, they are acts which a franchisor is commonly free to do without the agreement of the franchisee. If no provision of the agreement between franchisor and franchisee regulated the franchisor's freedom to do those acts, sub-section 7(1) would not restrict the franchisor's freedom. Section 7(1) strikes only at contractual provisions. Those circumstances sufficiently explain the enactment of s.11A, in my opinion.

2. In my opinion clause 17.4 is capable of operating consistently with the Act if the Act were to cease to apply in relation to the agreement by virtue of the occurrence of an act or other event which was not avoided by s.7(1). The declaration to give effect to my conclusion ought to be limited accordingly, having regard to the provisions of sub-section 7(2) of the Act.

3. In my opinion the order of the Supreme Court of Victoria that there be judgment for the defendant should be set aside and in lieu thereof the following orders should be made:
   

(i) Declare that clause 17.4 of the agreement in the pleadings described as the dealer agreement is void to the extent that it purports to have effect while the said dealer agreement is a franchise agreement in relation to which the Petroleum Retail Marketing Franchise Act 1980 applies.

(ii) Order that otherwise the plaintiff's claims in the proceeding be dismissed.

1. This Court is not in a position satisfactorily to determine what order should have been made in respect of the costs of the proceeding in the Supreme Court, in which another question was also raised and determined against the appellants. I would set aside the order made by that Court with respect to costs and remit the proceeding to that Court for further hearing and determination of questions of the costs of the proceeding.

2. The appellants' costs of the appeal should be ordered to be paid by the respondent.