Britton & Britton v Kinsey Nominees Pty Ltd

[1992] QCA 316

IN THE COURT OF APPEAL	[1992] QCA 316
SUPREME COURT OF QUEENSLAND	Appeal No. 80 of 1992
BETWEEN:

GEORGE CLIFFORD BRITTON and

EVOL JOY BRITTON (Plaintiffs) Respondents

AND:

KINSEY NOMINEES PTY LIMITED

(Defendant) Appellant

REASONS FOR JUDGMENT OF THE COURT

Delivered the 30th day of September 1992

This is an appeal against a judgment for $38,387.59 for damages for breach of contract together with interest at the rate of 18% from 1 May 1988 up to the date of judgment. The contract dated 11 April 1986 was one by which the appellant, described as the vendor, agreed to lease to the respondents, described as the purchaser, its right, title and interest in its business of a service station known as "Mobil Longreach Service Station", including fixtures and fittings, for a term of four years from 21 April 1986.

The breach of contract which his Honour the trial judge found and for which he gave judgment for the above damages was, he thought, a breach of both clauses 6(5)(a) and 7(i) of the contract. Those clauses were respectively in the following terms:

"The Vendor shall be entitled to all revenue arising from the business up to the close of business on the date of settlement and shall pay and bear all expenses of whatsoever nature in connection with the business up to that time.

After settlement the purchaser shall be entitled to all revenue arising from the business and the benefit of all contracts entered into by the vendor in connection with the business and shall pay, bear and be responsible for all expenses incurred in the business after the settlement date."

"The vendor will use its best endeavours to arrange the assignment or novation to the purchaser of the benefit of all existing contract licenses agencies undertakings or other benefits entered into or held by the vendor (or by others on behalf of the vendor) in connection with the business."

There was uncontradicted evidence, and his Honour appears to have found, that rebates on the sale of petroleum products from the service station business from 21 April 1986 to 29 April 1988 were paid to Louis James Kinsey and Maxine Kinsey, husband and wife directors of the appellant, by Mobil Oil Australia Limited, the supplier of petrol to the service station, pursuant to an oral agreement between them.

This appears to have been made in 1986 about the same time as the contract sued on. However, as appears from what we say below there had been a previous agreement pursuant to which the Kinseys were receiving rebate payments. The above sum of $38,387.59 was the agreed total of those rebates for the above period. During the whole of that period the rebate cheques received by Mr and Mrs Kinsey were endorsed to the appellant, banked to its account and declared by it as assessable income.

His Honour held that the respondent was entitled to those rebates because they were "revenue arising from the business" of the service station within the meaning of clause 6(5)(a) and a benefit held by others on behalf of the vendor in connection with the business of the service station within the meaning of clause 7(i).

The appeal is against his Honour's conclusion in both of those respects. The main grounds of appeal which were pursued in this Court were grounds 1 and 2 which were in the following terms:

"1. That his Honour erred in finding that the rebates received by Mr and Mrs Kinsey as proprietors of the service station premises were part of the income or revenue of or arising from the business.

2.   His Honour erred in finding that the defendant received the said rebates as income (or at all)."

The other grounds of appeal which were pursued relate to interest. However, we were informed at the commencement of hearing of the appeal that the parties had agreed that the rate of interest which should have been awarded, if his Honour was correct in giving judgment for damages, was 14% per annum for the period for which he awarded interest.

There was a separate claim for rectification at the trial and a ground of appeal against his Honour's refusal to grant rectification. However, that ground was not pursued or his Honour's refusal to grant rectification otherwise put in issue on appeal.

Mr and Mrs Kinsey were the owners of the land upon which the service station was situated and they granted a separate lease of the land to the respondents for the term referred to above. The business had originally been conducted by Mr and Mrs Kinsey in partnership. They had been receiving rebates from Mobil on the sale of petroleum products for some years prior to 1984 when the appellant was incorporated and constituted the trustee of a family trust and the service station business transferred to it. Mr Kinsey said that he and his wife had a written agreement with Mobil with respect to those rebates, but was unable to find it. Mobil was never advised of the transfer of the business from the partnership to the appellant and, until the appellant leased the business to the respondents, the letterhead on the company's stationery and other documents showed the proprietors of the business as L.J. and M. Kinsey.

From the date on which the business was transferred from Mr and Mrs Kinsey to the appellant Mr and Mrs Kinsey, on their accountant's advice, endorsed the rebate cheques to the appellant and paid them to the appellant's account. No evidence was given of what that advice was except that it was "for the purpose of paying income tax". This practice continued after April 1986.

Mr Kinsey in evidence agreed with the description by his own counsel of the rebate as a "freehold owner's rebate". This is consistent with evidence of a Mr Archibold, a Mobil employee, whose job it had been in 1986 to negotiate and recommend rebates in respect of service station owners in areas which included Longreach. He said that usually those rebates were paid to the owner of the freehold site, the reason being that owners of freehold sites demanded this as a return on their investment and, in effect, were able to negotiate payment of such rebates. That evidence is in turn supported by exhibit 13, a form of contract described as "service station owner's contract", which Mr Archibold sent to Mr Ryan, a solicitor who had acted for the Kinseys but who, in this transaction, acted for both parties, shortly prior to the execution of the contract sued on, for signature by the Kinseys. The document, which is in printed form, envisages that while the owner remains the registered owner of the service station and the dealer (the person who carries on the business of the service station) continues to observe and perform the provisions of a reseller contract between Mobil and the dealer, Mobil would pay rebates to the owner of the service station. The document was never executed. This was the only evidence relevant to the terms of the oral agreement between the Kinseys and Mobil and, consequently, of the character of the rebate.

The appellant included the amount of the rebates as income in its income tax returns for the relevant years and presumably Mr and Mrs Kinsey did not include those amounts as income in their income tax returns for that period. However, his Honour did not rely upon that alone for his conclusion that the rebates were revenue arising from the business within the meaning of clause 6(5)(a). He also thought that this was so because it was the business which created the revenue, not any activities carried out by Mr and Mrs Kinsey.

This last conclusion appears to be inconsistent with the evidence to which we have referred from Mr Kinsey and Mr Archibold supported as it is by what were apparently the terms of a standard agreement which at that time Mobil entered into with owners of service station sites and which it sought to have executed by the Kinseys. Although this evidence was slight it was the only evidence relevant to this conclusion. Accordingly, it was not the carrying on of the business which gave rise to the entitlement to the rebate, but the allowance by the owners of their premises to be used for the selling of Mobil's petroleum products.

Of course the mere fact that the rebate cheques were endorsed by the Kinseys to the appellant and declared by the appellant as its assessable income could not make the amount of those cheques revenue arising from the business. It does not even make that amount revenue of the appellant. An inference which is open on Mr Kinsey's evidence in this respect is that the accountant suggested this course, not because the income was rightly that of the appellant, but rather because he thought that there were some income tax advantages in the appellant deriving or appearing to derive this income rather than Mr and Mrs Kinsey. One can see how this would be so if, as appears to be the case, the appellant was the trustee of the family trust.

It is not clear how his Honour concluded that the right to receive the rebates was a benefit held by Mr and Mrs Kinsey on behalf of the appellant in connection with the service station business so as to bring the right within clause 7(i) of the contract. On the uncontradicted evidence, slight though it was, the rebates appear to have been derived by Mr and Mrs Kinsey beneficially because they were the owners of the service station site. Nor could it be said, in our view, that the rebates were benefits held by the appellant in connection with the business merely because they were paid to it by Mr and Mrs Kinsey and the amount of the payments were presumably fixed by reference to the amount of petrol sold by the business. The clause, in our view, is limited to benefits held by the vendor in connection with the business at the date when the contract was made.

We add that the respondents in their statement of claim alleged only an agreement between the appellant and Mobil pursuant to which Mobil made payments to the appellant. However, as appears from what we have said, we do not base our conclusion on any defect in the respondents' pleading. Accordingly, as no entitlement of the respondents arise under either of these clauses, the appeal should be allowed with costs, the judgment for the plaintiff for $38,387.59 and costs should be set aside, and in lieu there should be judgment for the defendant on the plaintiffs' claim in the action, together with the costs of the action. There was also an appeal from the judgment dismissing the defendant's counterclaim in the action. However, this matter was not pursued before us, and to that extent the appeal is dismissed.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND	Appeal No. 80 of 1992
Before the Court of Appeal
Mr Justice McPherson Mr Justice Davies Mr Justice Moynihan
BETWEEN:

GEORGE CLIFFORD BRITTON and

EVOL JOY BRITTON (Plaintiffs) Respondents

AND:

KINSEY NOMINEES PTY LIMITED

(Defendant) Appellant

REASONS FOR JUDGMENT OF THE COURT

Delivered the 30th day of September 1992

MINUTES OF ORDER: Appeal allowed with costs to the extent that the judgment for the plaintiff for $38,387.59 and costs is set aside and in lieu thereof judgment is given for the defendant on the plaintiffs' claim in the action with costs.

Appeal in relation to the defendant's

counterclaim in the action is dismissed.

CATCHWORDS:	CONTRACT - CONSTRUCTION AND INTERPRETATION - appellant, the lessee of a service station, claimed rebates from petrol supplier ought be paid to it and not lessors - whether rebates were income or revenue of or arising from business - whether rebate arose out of business
Counsel:	I. Molloy for the Appellant K. Boulton for the Respondents

Solicitors: Stubbs Barbeler Grant t/a for S.R. Wallace

and Wallace for the Appellant

P.W. Skewes & Dempster for the Respondents

Hearing Date(s):  14 September 1992

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND	Appeal No. 80 of 1992
BETWEEN:

GEORGE CLIFFORD BRITTON and

EVOL JOY BRITTON (Plaintiffs) Respondents

AND:

KINSEY NOMINEES PTY LIMITED

(Defendant) Appellant

__________________________________________________

__

MCPHERSON JA
DAVIES JA

MOYNIHAN SJA

__________________________________________________

__

Reasons for Judgment of the Court delivered the

30th day of September 1992

__________________________________________________
__

"APPEAL ALLOWED WITH COSTS TO THE EXTENT THAT THE JUDGMENT FOR THE PLAINTIFF FOR $38,387.59 AND COSTS IS SET ASIDE AND IN LIEU THEREOF JUDGMENT IS GIVEN FOR THE DEFENDANT ON THE PLAINTIFFS' CLAIM IN THE ACTION WITH COSTS.

APPEAL IN RELATION TO THE DEFENDANT'S COUNTERCLAIM
IN THE ACTION IS DISMISSED."