Bytan Pty Ltd v BB Australia Pty Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2012 0084

BYTAN PTY LTD (ACN 051 216 025)
	First Appellant
GERD RUPERT LATTACHER	Second Appellant
JULIA EDWINA LATTACHER	Third Appellant
v.
BB AUSTRALIA PTY LTD (formerly known as BLOCKBUSTER AUSTRALIA PTY LTD) (ACN 058 986 673)
	Respondent

---

JUDGES:	WARREN CJ, OSBORN JA and CAVANOUGH AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	19 June 2012
DATE OF JUDGMENT:	31 October 2012
MEDIUM NEUTRAL CITATION:	[2012] VSCA 233
JUDGMENT APPEALED FROM:	BB Australia Pty Ltd v Bytan Pty Ltd [2012] VSC 171 (Pagone J)

---

CONTRACT – Construction of franchise agreement – Franchisor granted option to purchase ‘all the assets used in [the franchise business]’ – Whether the option extends to the franchisee’s freehold – Whether power to purchase assets and close the store conferred to enable franchisor to continue operating the franchise business on the site – Whether power could be used for a different purpose – Appeal dismissed – Equitable Life Assurance Society v Hyman [2002] 1 AC 408 not followed.

---

APPEARANCES:	Counsel	Solicitors
For the Appellants	Mr IR Pike SC	Marque Lawyers
For the Respondent	Mr F Kunc SC	A’Beckett Lawyers

WARREN CJ:

Introduction

1. This appeal concerns the interpretation of a franchise agreement for the operation of a ‘Blockbuster’-branded video store in Turramurra, NSW.  The first appellant, Bytan Pty Ltd (‘Bytan’) was the franchisee under the agreement.  The respondent, BB Australia Pty Ltd (‘Blockbuster’) was the franchisor. 

1. Bytan and Blockbuster executed the agreement in January 2002 for a term of ten years.  In January 2012, Bytan elected not to renew the agreement and it expired later that month. 

1. Clause 18.13 of the agreement gives Blockbuster an option, upon termination or expiry of the agreement, to ‘purchase from [Bytan] all the assets used in the STORE’.  If it chooses to exercise that option, cl 18.18 then gives Blockbuster a right to ‘require [Bytan] to close the STORE’ pending the completion of the purchase.  There is no dispute that the word ‘all’ requires Blockbuster, should it choose to exercise the option, to purchase all of the assets that fall within that clause.  Blockbuster cannot choose to purchase only some of the assets. 

1. Importantly for this appeal, Bytan owns the land on which the store is located.  In correspondence with Blockbuster, Bytan contended that the expression ‘all the assets used in the STORE’ includes its freehold.  Blockbuster rejected that construction.  On 3  February 2012, Blockbuster issued a notice purporting to exercise its right under cl 18.13 to purchase ‘all assets’ used in the store but expressly excluding Bytan’s freehold from the assets.  The notice also purported to require Bytan to close the store pursuant to cl 18.18.

1. Later that month, Blockbuster instituted proceedings against Bytan in the Trial Division of the Supreme Court of Victoria.  It sought a declaration that the expression ‘all the assets used in the STORE’ does not include Bytan’s freehold and that its 3 February 2012 notice was valid.  It also sought an injunction requiring Bytan…