Caltex Oil (Australia) Pty Limited v Best

[1990] HCATrans 200

sb1 AUSTRALIA,,~

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No MSS of 1989

B e t w e e n -

CALTEX OIL (AUSTRALIA) PTY

LIMITED

Appellant

and -

ROBERT JEFFREY BEST and GLENYS

MAREE BEST

Respondents

MASON CJ DAWSON J

TOOHEY J

GAUDRON J

McHUGH J

Caltex(2) 1 28/8/90

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 28 AUGUST 1990, AT 10.16 AM

Copyright in the High Court of Australia

MR D.E. HORTON, QC:  If Your Honours please, I appear with

my learned friend, MS M. SLOSS, for the appellant.

(instructed by Abbott Tout Russell Kennedy)

MR A.R. CASTAN, QC:  If the Court please, I appear with my

learned friend, MR J.G. JUDD, for the respondents.

(instructed by Phillips Fox)

MASON CJ:	Yes, Mr Horton.
MR HORTON:	Might we hand Your Honours the outline of the

appellant's argument.

MASON CJ:	Thank you.
MR HORTON:	I think Your Honours' associates would have a

copy from my friend of his outline.

MASON CJ:  I do not have a copy of the respondent's

outline, Mr Horton.

MR HORTON:	May I hand it up to Your Honour?
MASON CJ:	Yes, thank you.
MR HORTON:	Can I start by offering Your Honours a

reference to the relevant sections of the Act. the

first section, Your Honours, is in the definition section, section 3. Your Honours will find about

half-way down the page a definition of "franchise

agreement". The precise detail of it I will not

weary Your Honours with by reading it through, but

it is divided into paragraphs (a) and (b), and also

( c) whic.h is subdivided into ( i) and (ii) . Because

of the presence of the word "or" connecting

subparagraph (b) with (c) it would appear to be

tolerably plain that the definition of "franchise

agreement" is satisfied by the characterization of

an agreement by reference to any of (a), or (b), or

(c) (i), or (c) (ii).

Compendiously, (a) could be perhaps described

as a provision of an agreement that deals with the

permission to use trade marks, or the like - a

licence, I suppose one would describe it as - and

in the present case that means the signs that one

is all too familiar with of Caltex, Shell, and so

on, which one sees on pumps and beside the road on

service stations; (b) deals with rights to occupy,

generally speaking, one would imagine, leases of

service station premises where petrol and the like

is sold; and (c) deals, firstly looking from the point of view of the oil company, with a right to supply fuel for retail by the proprietor of the

service station, and two, looking at it from the

point of view of the service station proprietor, a

Caltex(2) 2 28/8/90

right to acquire fuel in order to retail it at his

site.

Your Honours perhaps need to look also at the

definition of "franchisee" which comes immediately

after those. That means:

a party to a franchise agreement, being the

person referred to as the franchisee in

paragraph (a) or (b) or sub-paragraph (c)(i)

or (ii), as the case may be -

which suggests that when I said it was tolerably

plain that these were alternatives, any one of

which would satisfy the description of "franchise

agreement", that that submission is correct. I do

not understand that there is any dispute between us

about that.

MASON CJ: Just stopping there for a moment, at the time the

agreement was entered into it fell within the

provisions of (a), (b) and (c).

MR HORTON: It did indeed, Your Honour, yes.

MASON CJ: And did it fall both within (c)(i) and (c)(ii)?

MR HORTON:  It probably did, Your Honour. I must say that I

myself have not stayed to analyse that, but we

would be prepared to concede that it did, that there was a right in the proprietor on the one

hand, and a right in us to supply.

TOOHEY J:  You describe it as a right, Mr Horton. I wonder

is paragraph (c) looking at obligations as much as

rights?

MR HORTON: Well, Your Honour, because of the word

"accustomed" and it is put in the alternative,

Your Honour sees in (c)(i) "accustomed, entitled or

required", "accustomed", I suppose, might not

connote a right.

TOOHEY J: If you look at (ii) for instance -

a person ..... agrees with a corporation ..... to

acquire motor fuel -

it seems to assume that there is, at least on one

side, an obligation to acquire motor fuel from

another.

MR HORTON: Yes, although no doubt, Your Honour, that would

encompass what is generally called a "requirements
agreement", such as "I will buy all my coal from

you at prices to be determined from time to time"

which may not go quite as high as to say that there

Caltex(2) 28/8/90

is an obligation to take any particular amount of

coal. It is just the amount of coal you want you
will take from the particular supplier.

But, Your Honours, clearly enough from other provisions of the agreement to which Your Honours

· will be taken shortly Caltex was entitled to supply

motor fuel to Mr and Mrs Best, the people involved

in this case, because they had a right to prevent passing off of other fuel as being Caltex fuel at the service station.

MASON CJ: Stopping you once again at this point, it is

suggested that the agreement ceased to fall within
paragraph (a) by reason of the revocation of the

permission to use the marks.

MR HORTON: In fact, no, Your Honour, only for this reason,

that this was a case commenced in order to resolve
the construction question of the Act and the

operation. There has, in fact, been no revocation

by Caltex of any of the rights, using that word

loosely, contained in the agreement at all. It is

a case mounted in the nature of a test case, I

suppose, by my learned friend.

It came before Mr Justice Brooking, a case

mounted on three fronts:  (1) an allegation that it

infringed the Act, the matter Your Honours are

concerned with; (2) a section 52 claim under the

Trade Practices Act, and (3) the complaint that it

infringed another statute to do with petrol station

sites. Mr Justice Brooking - - -

DAWSON J: What infringed, the agreement?

MR HORTON:  Yes, Your Honour, another statute with which

this Court is not concerned because what happened

in the court below at first instance was the

section 52 claim under the Trade Practices Act was

abandoned at or shortly bef.ore the hearing.

Mr Justice Brooking found in favour of Caltex on

the point under the other statute and found in

favour of Caltex on the point under this Act with

which Your Honours are concerned.

On appeal to the Full Federal Court the only

matter agitated on the appeal was the construction
of this present Act, the Retail Marketing Franchise

Act. So that there has, in fact, been no

revocation at all.

DAWSON J: But the Act does not prevent the making of an

agreement. It prevents people acting in a certain

way, does it not?

MR HORTON J: That is so, precisely, Your Honour.

Caltex(2) 4 28/8/90

DAWSON J: Is it not academic then at the moment?

MR HORTON: Well, Your Honour, that is something I thought

Your Honours might raise with me.

Mr Justice Brooking wondered whether it might be

academic but determined that it was appropriate to

. make the declaration because of the general

importance in the petrol reselling industry of this

Act, and apparently so did the Full Court. And, of

course, Your Honours granted leave in order to

bring it up here probably - I do not know what

motivated Your Honours - but I can imagine that
probably because of the impact of this Act on many,

many petrol reselling sites, and the numerous

agreements - not only Caltex, of course; there are

other companies as Your Honours know.

TOOHEY J:  Mr Horton, when Mr Justice Brooking said, at page

125 that:

The action has been tried without oral

evidence.

was he, in effect, referring to a question of

construction only that had been argued before him?

MR HORTON:  He was, Your Honour, and Your Honour sees, at

about line 15 on that page that Your Honour is

looking at, His Honour said he was doubtful whether

he:

should deal with the claims for declaratory

relief ..... much to be said for the view that,

if there was evidence of a dispute, the

controversy was not of a sufficient

immediacy -

and so on, but he determined none the less to do

so. So that in reality it is a declaratory

and I appreciate that, in a sense, that is academic

judgment from which the appeal comes to

as between the best from Caltex, but it may well be	that Your Honours will take the view that it is far
from academic in relation to entering into these
agreements in the future, because Your Honour's
finding may well decide whether these are
legitimate or not types of agreement to be entering into.

DAWSON J:	But you would not deciding ..... because if the Act does not prevent people from entering into
agreements, you cannot say that the agreement is
legitimate or illegitimate, it just may not be effective.
Caltex(2)	28/8/90
MR HORTON:	Your Honours, we would agree with that, with

respect, but the view taken by the Full Court - the

Full Court of the Federal Court - was that at the

moment of entry into of the contract it was

prohibited by the sections. We would say

otherwise, of course, that its operation is what is

struck out.

DAWSON J: - Does the section say no person shall enter into

an agreement such as this?

MR HORTON:  No. So, before I take Your Honours to the next

sections, what has happened if the clause which is

the subject of complaint, by my friends, were to be

invoked the agreement would still be a franchise
agreement as defined in section 3, without any

doubt, and that is accepted on both sides, but it

would cease to be a franchise agreement to which

the other, my friends would say critical, sections
of the Act apply and the reason why it ceases to be
a franchise agreement to which those critical

sections apply is because the Act says so.

DAWSON J:  What you have got now is, on any view of it, a

valid franchise agreement. Well, what you have is

a franchise agreement within the meaning of the

Act.

MR HORTON: Indeed, and it is a franchise agreement - - -

DAWSON J: And no one has done that which the Act forbids,

or does not forbid according to which view you

take.

MR HORTON:  Yes, indeed.

DAWSON J: And may never do.

TOOHEY J: Although you also have a declaration arising from

the judgment of the Full Court that clause 17.4 is

void to the extent that, and there are some words

that follow -

MR HORTON:  Yes, quite so, Your Honour.

TOOHEY J: If the judgment had stopped short that a

declaration in clause 17.4 is void, then there is a

judgment which has an immediate effect on the

agreement.

MR HORTON: Quite so, Your Honour.

TOOHEY J: But I am not sure that the declaration that was

in fact made by the Federal Court has an immediate

effect.

MR HORTON:  Would Your Honours allow me a moment?

Caltex(2) 6 28/8/90

TOOHEY J: It is page 174 in the judgment of

Mr Justice Jenkinson.

MR HORTON:  Yes. Of course, the very declaration, as

Your Honours pointed out to me, really throws up

the question in the terms of the declaration

because Their Honours declared that it was void to

the extent that it purports to have effect, or has

effect, I submit, while the dealer agreement is a

franchise agreement to which the Act applies.

McHUGH J:  What section 7(1) says is that it:

is void to the extent that it purports to

exclude -

and so on -

the operation of a provision.

MR HORTON: Exactly, exactly, Your Honour, though nothing

seems to have turned in Their Honours reasoning or

in my friend's argument, as I follow it, in the

court below on the question of it being, in the

terms of section 7 to which Your Honour

Mr Justice McHugh has just referred to the words:

exclude, limit or modify.

The thrust of Their Honours judgment and my

friend's argument, or his predecessor's argument

perhaps I should say, in the court below was that

the clause in the agreement which permitted

withdrawal of trade mark rights was otherwise

inconsistent with the operation of the provision of

the Act. Now, the first leg of section 7 really

did not enlarge for, perhaps, this good and

sufficient reason that there is another clause in

the agreement which I will take Your Honours to

later which says that if anything in this agreement

might be thought to exclude limit or modify the

provisions of the Act then it is to be read down so

that it does not "exclude, limit or modify". That

had left my friends in the position where they had

to pin their attack on inconsistency in the third
last line of section 7.

Your Honours, the nub of the case, really, is

this: one has an Act which describes franchisee in
the manner that we have looked at; one also has

other sections of the Act which say, "This Act only
applies to a franchise agreement which contains

each of the characteristics in (a) plus (b) plus

(c)(i) or (c)(ii)." So, it has got to be an

agreement which picks up a lease, or licence,

perhaps, trade mark rights, supply of petrol for

sale before the Act applies to it at all. And, the

Caltex(2) 7 28/8/90

nub of the case is if one has an agreement with a

bundle of disparate rights including trade mark

rights but containing a provision that, in certain

circumstances, the trademark rights may be

withdrawn and the licence utterly revoked whether

it can be said that in some way that provision is

· inconsistent with the Act when the Act itself says,

"M agreement which contains two out of three but

not three of those characteristics is not one to

which it applies at all."

TOOHEY J:  Well, Mr Horton, do you, in fact, have any

quarrel with the terms in which the declaration was

made?

MR HORTON:  Yes, Your Honour, because we would say that the

declaration avoids or declares that the clause is

void while the agreement is one to which the Act applies then we would submit that that cannot be

so. If it is void while the agreement is one to

which the Act applies it would seem that it is void

forever; one cannot have something which is partly

void. It is either good or it is bad.

TOOHEY J:	Do you mean the declaration would have the effect that your client could not invoke clause 17.4?
MR HORTON:	Yes, Your Honour.

TOOHEY J: Yes, I see.

MR HORTON:  And that must have been what Their Honours

intended, they were intending to declare that it

was struck down otherwise. Of course if one reads

it as being cast in terms which allows the right to

arise again, when the franchise agreement ceases to

be a franchise agreement it would seem to destroy

the thrust of Their Honours' judgment.

So, if I may then, Your Honours, pass to

section 6:

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 ..... (c).

Subparagraph (b) does not matter. The next relevant section, Your Honours, is one Your Honour

Mr Justice McHugh referred to a moment ago:

section 7. But may I take leave to refer to
section 7(2) first rather than 7(1) because

sometimes, as one finds in exclusion clauses in insurance policies and the like, the overriding clause appears later than the opening clauses and

7(2) is really the overriding clause:

Caltex(2) 8 28/8/90

Nothing in this Act -

it says -

shall be taken to affect the operation of an

agreement to the extent that the agreement is

capable of operating consistently with this

Act.

Then 7(1) says:

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.

Now, Your Honours, notwithstanding that

section 6 has already appeared in the Act and

describes franchise agreements to which the Act

applies as having to contain the cumulative three

ingredients, section 8A also says:

In this Part -

and this is the part dealing with recovery of

possession, to put it shortly -

unless the contrary intention appears,

"f;ranchise agreement" means a franchise agreement in relation to which this Act

applies, and "franchisee" and "franchisor"

shall be construed accordingly.

Now it is perhaps a little unusual to alter the

definition of "franchisee" and "franchisor" in that

way, but it seems to be tolerably clear that thus,

"franchisee" and "franchisor" in Part II of the Act

means a party to a franchise agreement which

contains cumulatively the characteristics in (a),

plus (b), plus (c) of the definition in section 3.

Your Honours, there are a number of sections

which follow and let me say it once that we accept

that the general intent and thrust of this Act is
to provide protection to service station

proprietors and to give them rights beyond those

which they would get contractually under their

agreements with the oil companies. Their Honours

in the Full Court went through a number of the

sections and came to that conclusion and we would

not wish to dispute it and indeed, as I understand

Caltex(2) 28/8/90

it, it was not disputed in any of the courts below,

but that does not, however, justify, we would

submit, a court in departing from the plain words

of the Act, that is to say, to conclude that it is

remedial to use the traditional language; to

construe the Act liberally and let it be construed

liberally, but we would submit that one cannot get

over the precise and direct words of the section

which limit the type of franchise agreement to

which the Act applies at all.

Your Honours, the principal section that

throws up and which was agitated before Their

Honours in the courts below, this question of

whether or not there is an inconsistency in

section 16. Your Honours will not need to look at

it in any detail. It goes on for a number of

subsections, but it does much the same sort of task

as Your Honours will recollect section 62 of the

New South Wales Landlord and Tenant Act and similar

sections in the other States did when they took

over the function of the National Security

Regulations in order to provide protection to

tenants from being ejected, except upon proof of

grounds which were specified in the Acts, in a

notice to quit before a magistrate, and it is that

sort of section. Section 16(1) says:

A franchisor may terminate the franchise

agreement in accordance with the succeeding

provisions of this section, but not otherwise.

And then it sets out a number of grounds which one

can terminate a franchise agreement upon and how

you go about giving notice of termination. There

are then provisions in 16(4), rather the opposite

of the Landlord and Tenant Amendment Act type

provisions which required the lessor, as

Your Honours recollect, to go to a court to get an

order and the tenant did not have to do anything

which he got a notice to quit containing a ground

under the Act. This reverses the onus, if I may

put it that way, and it is the tenant, the

franchisee, who has to make an application to the

court if he wants, to put it shortly, to have the

notice set aside or declared to be ineffective.

So 16 does this: it limits the grounds upon which the franchise agreement to which the Act

applies can be terminated, provides that a notice

has to be given and gives a right in the

franchisee, being a franchisee of course in the

terms of section BA, who is a franchisee under an

agreement containing a combination of the

characteristics of (a), (b) and (c) of the

definition, to make an application to the court.

Caltex(2) 10 28/8/90

And then there are quite a number of other

sections which Your Honours need not trouble with,

going on through the various lettered sections of

section 17 and so on, dealing with what happens in

court proceedings and I do not need to trouble

Your Honours with any of that.

Your Honours, in the appeal book Your Honours

will find at page 34 clause 17.4 which the case is

about. The agreement is a long one - Your Honours

will be pleased to hear that you need look at but

one or two paragraphs of it. It is divided into

parts, part A; this clause 17.4 appears in part B;

and there is another part, C.

Part A deals with the lease of the premises

and we are not concerned at the detail of that.

When one comes on page 34 to the motor fuel

franchise, Your Honours see in clause 17.1:

Caltex grants to the Dealer and the Dealer hereby accepts from Caltex licence and

authority to

(i) operate the Business from the Premises;

and

(ii) use the System -

"Business" is defined on page 25 in clause D and I

will not trouble to take Your Honours to it but it

includes the right to use Caltex trademarks.

Then at about line 21 on page 34 Your Honours

see:

The expression "property" for the purposes of

this Agreement refers to the CALTEX

identifications -

And then, corning down to line 30, one finds 17.4:

Notwithstanding anything herein contained to

the contrary, in the event that the Dealer

commits a breach of the provisions of -

various paragraphs of clause 20 or other paragraphs

of clause 22 - if Your Honours wish to look at

those Your Honours will find them on pages 36

and 40 but cornpendiously them can be described as

obligations to conduct the business properly and

not to do anything, broadly speaking, which would

bring the Caltex name into disrepute. So if there

are breaches of those sort of things or if he -

otherwise conducts the Business or other

operations carried on at the Premises in a

manner which, in the reasonable opinion of

Caltex(2) 11 28/8/90

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 -

. legal -

right or remedy of Caltex in respect of such

breach or conduct, Caltex shall have the right

by notice -

not less than forty-eight (48) hours notice,
to revoke the licence and authority granted by

paragraphs (i) ..... 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 -

can go in -

and remove and obliterate CALTEX

identifications and upon such removal -

over the page -

(i) the Dealer shall not use, simulate or copy

in any way CALTEX identifications ..... .

(ii) the Dealer shall have no obligation -

further.-

to pay -

any fee for the licence to use those marks, and

(iii) may be of some significance, at about line 8:

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.

So that when one gives a notice under 17.4 the

right to use the mark ceases and the provisions
granting that right are deemed to be deleted from

the agreement.

Caltex(2) 12 28/8/90

GAUDRON J: Is it then the same contract? Perhaps I should

go back before that, Mr Horton, and say it seems to

me that what might be lurking behind all this is

the question whether it is the one written document

with three separate contracts or one contract and that it may be that if it is the former, what you

have brought about is a termination exactly of what

falls for classification as a franchise agreement

to which the Act applies. You have terminated a

collection of rights and left extant two other

separate contracts.

MR HORTON:  If they are three separate contacts contained in

one document, Your Honour, which is a possibility,

well then we would submit that on the true
construction it is really one, then of course, none

of them are franchise agreements to which the Act

applies.

GAUDRON J: Well, it depends whether "agreement" in

section 6 means "contract". I mean, we are quite

used to an agreement being used to refer to the one

document which may, for example, embody several

different contracts.

MR HORTON:	Yes, that is possible.
DAWSON J:	You see, this was a contract to sell Caltex oil

as Caltex oil -

MR HORTON:	Yes.
DAWSON J:	- - - not a contract to sell an identified oil.
MR HORTON:	No, quite so, Your Honour. But, Your Honour, if

I may just return for a moment with Your Honours'

leave: if they are three separate contracts, then

none of them is a franchise agreement to which the

Act applies.

GAUDRON J: But the ihree together may be.

MR HORTON: Yes, while they exist together, the three

together may be.

GAUDRON J: And you may have terminated the franchise

agreement to which the Act applies if you resort to

clause 17(4) leaving some other agreement - leaving

a franchise agreement to which the Act does not

apply - comprised of two separate contracts.

MR HORTON: That may be so, Your Honour, but the agreement

is but one agreement in order to have these three
separate rights; the lease, the right to sell

Caltex petrol and the other rights to use various

equipment and so on, they are all part of the one

agreement.

Caltex(2) 13 28/8/90

It is true that the one agreement confers several disparate rights, there can be no doubt

about that but it is but one agreement. May I test

it this way, Your Honour: let us suppose that

shortly after the agreement is made one or other of

the parties comes to the other and says to the

other, "Now, within all the learning on this

subject I tell you categorically that I hereby

repudiate my obligations and I tell it to you so

that there is no shadow of doubt that I will not be

further bound". Now, the other party could

rescind, one would imagine, there being no room for

debate about whether there is really an abandonment

of the contract or not and you cannot rescind, as

is plain enough, part of an agreement.	You can
only rescind the whole.

One could not say Caltex - if the proprietor

said, "I repudiate; I won't abide by the lease, I
won't take any petrol, I won't do anything; I won't
pay you", Caltex could not say, "Very well, we will
rescind as to the lease but keep you tied to

selling Caltex products" or "rescind as to Caltex

products and keep you tied to the lease". So that,

looked at that way, Your Honours, it is but one

agreement containing we concede a number of

different rights and obligations but that is not

foreign to many agreements that one comes across.

Indeed, the whole thrust of the Act - and I

will not take much longer on that - is to only

bring within its reach, because of section 6 and

section 18, 8A, agreements which contain the three

combined characteristics. It is quite - - -

DAWSON J:	Can I stop you there, Mr Horton?
MR HORTON:	Yes, indeed.
DAWSON J:	If the franchise agreement was an agreement to

sell Caltex oil products as Caltex oil products and

you terminate that agreement by saying, "You can't use our trade mark", then you have terminated that contract, have you not?

MR HORTON:	Is Your Honour speaking of the Caltex oil
DAWSON J:	If you characterize the contract as one to do

those things, and you then withdraw the right

to - - -

MR HORTON:  Use the trade mark.

DAWSON J:  Yes - you have terminated that contract. You

may be left with a different contract, but you have

terminated that contract. I think that is the

point that Justice Gaudron is making.

Caltex(2) 14 28/8/90

MR HORTON:  Yes, Your Honour. We would submit not. All

that one has done is to withdraw pursuant to a

right given by the contract.

DAWSON J:  The agreement, but you have terminated the

contract which was the franchise agreement which

existed before you took that act.

MR HORTON:  We would submit not, Your Honour. The agreement

remains on foot. All that one has done is to

exercise the power given by a clause of the

agreement to withdraw one aspect of rights given under it and one can do that, of course, because

you are exercising a right under the agreement and

that presupposes necessarily that the agreement is

in existence and continues, in the same way as one
gets the contrast between rescinding a contract for

the sale of land, or the like.

DAWSON J: Well, you could put it another way; the

agreement gives you a right to substitute one type

of contract for another but with that goes the

first contract.

MR HORTON:  We would submit not, Your Honour. It is merely

the work of the first contract.

MASON CJ:	It depends what you mean by "contract".
MR HORTON:	I suppose it does, Your Honour, yes.
MASON CJ:	What has happened is, of course, that there has

been substituted for one aggregation of rights another aggregation of rights and obligations.

MR HORTON:  Indeed, but as the work of the one contract.

All it has done is to change the nature and

character of some of the rights -

MASON CJ:	When you say one contract, you mean instrument.
MR HORTON:	Well, I mean both, if I may be permitted to

say, Your Honour, both one instrument and one

doubt.

consensual act in the law for consideration, no

DAWSON J:  Well, can you put it this way; there are two

types of franchise agreement which the Act

contemplates. That is central to your argument, is

it not?

MR HORTON:	Indeed.
DAWSON J:	And you start off with one sort of franchise

agreement to which Part II applies, and then by the

exercise of this clause you destroy that and you

are left with another type of franchise agreement.

Caltex(2) 15 28/8/90

MR HORTON:	Yes, Your Honour, indeed, but one has not terminated the agreement.
DAWSON J:	Well, that depends how you look at it.
MR HORTON:	It is a different type of agreement - we

concede that at the outset - with different rights,

but it has not been terminated.

McHUGH J:  But you have terminated the franchise agreement,

have you not?:

MR HORTON:  No, Your Honour. No, we have not terminated

the agreement, we have terminated some rights under

it. It still remains a franchise agreement by

definition in section 3.

DAWSON J: But a different sort.

MR HORTON:  No, it is merely now one to which the Act does

not apply.

DAWSON J:  One to which Part II does not apply, yes. Well,

there are two different sorts.	I thought you
agreed with that.

MR HORTON:	Well, yes, that is right, Your Honour.
DAWSON J:	And one no longer exists so it has been

destroyed.

MR HORTON:  No, Your Honour. One no longer exists, I

suppose in a sense one can say, in that it is no

longer a franchise agreement having the

characteristic which attracts the operation of the

Act, but the agreement under which it was created

and the other rights were created has certainly, we

would submit, not been terminated.

DAWSON J:  That may be so, but out in the commercial world

it would be recognized as a completely different

agreement. It would not be recognized as a

franchise agreement, would it?

MR HORTON:  Well, certainly franchise agreement by

definition under the Act, Your Honour. It is no

longer one to which parts of the Act apply, that is

all, and the Act contemplates that that may be so,

otherwise there is no point, Your Honours, in

having a section 3 definition which is very wide,

which catches up the right in someone who owns his

own service station to sell Caltex petrol and put
the sign up, and yet saying the Act will not apply

to that sort of agreement.

McHUGH J: Take a common form of employment agreement which

gives the employer the right to regrade an

Caltex(2) 16 28/8/90

employee, a journalist agreement. A journalist is

employed as a super A, but he is downgraded to a

C grade journalist; I think there are a number of

cases which hold that it is a different agreement.

In one sense it is still the same agreement because

the employer has exercised his power under the

agreement, but he is no longer employed as a

super A.	It is not a contract to employ him as a
super A.	It is now a contract which employs him as

a C grade journalist.

MR HORTON:	No doubt, Your Honour, but that is the work of the original agreement; but one agreement. There
is not a new agreement and there would not be a new
agreement in these circumstances, if "agreement"
involves consensual - - -

DAWSON J: But all you are saying is, you may have an

agreement which compromises all sorts of different

franchise agreements.

MR HORTON:  Yes.

DAWSON J: Well, that does not affect the application of

part ( 2).

MR HORTON: But, Your Honours, the prohibition is against,

in section 16, terminating the agreement, and one

has to ask - - -

DAWSON J: Terminating a franchise agreement, is it not?

MR HORTON: Terminate a franchise agreement but to which the

Act applies, and this has not been terminated - I

mean, it obviously has not been - - -

DAWSON J:  No, ..... terminated the franchise agreement which,

by definition, is a franchise agreement of a

particular sort - Part A, section BA.

MR HORTON: 

Yes, and one has not terminated, Your Honour.

DAWSON J: Well, it is gone. 

McHUGH J: 

He certainly terminated an agreement containing

provisions relating to the use of a mark. Therefore
you have terminated a franchise agreement.

MR HORTON: But, Your Honours, if the franchise agreement

has been terminated - leaving aside rights to

approach the court, and so on - the lease is

terminated as well because one cannot partially

terminate an agreement. You can vary an agreement.

TOOHEY J:  You do not say that do you, Mr Horton? You

contend that the lease remains on foot, do you not?

Caltex(2) 17 28/8/90

MR HORTON:	Yes, I do, Your Honour.
TOOHEY J:	And the obligation to sell and buy petrol remains

on foot.

MR HORTON:  Yes, indeed, Your Honour.

DAWSON.J: -It was a question of whether the act of

prohibiting the use of the trade mark in fact puts

an end to that agreement; whether it becomes a

different agreement or not.

MR HORTON:  Well, we would not say that the Act puts an end

to it, Your Honour.

DAWSON J:  I meant the act of the oil company, yes.

MR HORTON:  The act of varying it or whatever, yes. the question. That is

DAWSON J:  And withdrawing the right to use the trade mark.

MR HORTON:  Yes. Does that amount to a termination of the

agreement? As I have said earlier, one simply

cannot partially terminate an agreement. You can

vary it but termination means complete abrogation

and the parties go their ways and that has not

happened.

DAWSON J:  You said "termination" means "rescind".

MR HORTON: Well, it could mean "rescind" or it could mean

"terminate" in the sense in which that is used in
conveyancing language to mean "bringing a contract

to an end completely", and the parties going their

own way, no longer in any relationship in relation

to the land or whatever the subject-matter is.

DAWSON J: But there must come a point where the agreement

to terminate it, short of denying every single

clause in the agreement, is within the meaning of

the Act.

MR HORTON:  What Your Honour means is chopping one clause

off after another and some -

DAWSON J: Yes. There must come a point.

MR HORTON:  Yes, when one chops the last clause off no doubt

one has terminated, but not until then.

DAWSON J:  And if you say that the use of trade marks is

essential to a franchise agreement of the sort to

which the Part applies, then you may say that it

terminates when you remove the right to use the

trade marks.

Caltex(2) 18 28/8/90

MR HORTON:  You have certainly terminated the right to use

the trade marks, Your Honour.

DAWSON J: And if that is essential to the agreement, then

you have really terminated the agreement.

MR HORTON:  No, Your Honour. You might have repudiated the

agreement which would throw up an election on the

part of the service station owner to cry foul, as

it were, and say, "You have repudiated because you

have refused to continue to supply a critical

element in the transactions. It is a fundamental

term that I should have the right to put 'Caltex'

up on my roof." He may then be able to rescind but

it is up to him to rescind. All the repudiation in

the world does not terminate a contract unless

accepted.

DAWSON J: Well, I suppose you would say if he refused to

supply the petrol that it was not a termination and

it still remains the lease.

MR HORTON:  It is still not a termination, Your Honour,

unless the other party elects to rescind for

repudiation.

DAWSON J:  It is not a termination of the agreement because

there is no franchise agreement left any longer.

MR HORTON: Well, there is. There is a section 3 franchise

agreement left but not one to which the Act

applies.

McHUGH J: Well, suppose the franchisee owned the premises

and the only agreement was in terms of

paragraph (a) and the right to use the mark? Now,

that constitutes a franchise agreement; it gives

the rights to supply and so on under the Act. If

you utilize clause 17 to terminate the use of the

mark that is the end of the agreement, is it not?

MR HORTON:  Yes. If that is the only content of the

agreement and you have a right under it to bring it

to an end, then that is the end of it, but that is
not an agreement, of course, to which the Act
applies because Your Honour sees that the Act only
applies if it is not an owned service station but a

leased one, together with the other two agreements.

TOOHEY J: Could I just follow your argument a little down

the track, Mr Horton? If you are right and

revocation simply removes from the original

instrument the right to use Caltex identifications,

there still remains, you would say, an obligation

in respect of the lease of the premises and an

obligation in respect of the supply and purchase of

fuel.

Caltex(2) 19 28/8/90

MR HORTON:	Yes.
TOOHEY J:	Now, those obligations presumably are then

controlled on your argument by the instrument and

no longer by the Act.

MR HORTON: That is right, Your Honour.

TOOHEY J:  And in that respect, is the determination of the

agreement arbitrary, or is it controlled by

provisions relating to default? I do not want you

to take us to it, but just in general terms, how

does the instrument work?

MR HORTON:	It is on page 45 of the appeal book, Your Honour, clause 49. Their Honours in the Full Court
took the view that 17.4, which we have been looking
at, may well have been all right if clause 49 had
not been in the agreement. Their Honours said that
49 was utterly otiose because you had to look to section 16 of the Act whilst the Act applied in
order to find grounds of termination.
Now, many of the grounds in 49 mirror, or are exact replicas, of the grounds in 16. There are
some additional ones which do not find expression
in section 16, but most of 49 is a reflection of
section 16 grounds so that once the Act ceased to apply one would be entitled to terminate the
leasehold interest, and no doubt with it the right
to sell petrol from the service station, if one
made out one of these grounds under 49 as a matter
of contract between the parties.

TOOHEY J: And as a matter of contract what is the position

of the dealer on your argument once revocation of

the identifications aspect of the agreement has

been revoked?

MR HORTON:  He remains there without any right to put Caltex

up on his roof - - -

TOOHEY J: What are his rights to withdraw from the

agreement?

MR HORTON:  None, Your Honour, that I am aware of except

perhaps asserting repudiation that I was discussing

with His Honour a moment ago.

MA.SON CJ:  Is he still obliged to order Caltex petrol?

MR HORTON: Yes, Your Honour.

MA.SON CJ: But he cannot label it as Caltex petrol?

MR HORTON: That is right.

Caltex(2) 20 28/8/90

MASON CJ: That is the one significant difference that

occurs?

MR HORTON:	Yes.
MASON CJ:	Any others?
TOOHEY J:	He is obliged to pay rent, I suppose.

MR HORTON:  Oh yes, Your Honour. There are other Caltex

signs and the like he cannot put up, and he does
not have to pay the fee for the licence to use the

Caltex mark. That stops.

MASON CJ:	Maybe he is better of.
MR HORTON:	He might be better off, and Caltex might be

worse off, but I suppose that is by the way. I

mean, he could, I suppose, call it just petrol and

sell it and not pay the fee. I do not suppose we

could complain about him calling it petrol,

Your Honour.

TOOHEY J:  Of course, he may not have a business that he can

dispose of, depending again on what the document

provides.

MR HORTON:  That is so. Of course, he has got to get

consent of Caltex to any assignment and the -

TOOHEY J: Yes, but while the arrangement falls within the

Act again it is subject to some control on the part of the court.

MR HORTON:  Yes.

TOOHEY J: But that would disappear presumably.

MR HORTON:	That would disappear, undoubtedly. We do not shrink from the fact that it is perhaps odd that
the legislature goes to so~e trouble to define
"franchise agreement" in three separate ways; it

says any one of these things; and yet to say the

Act will not apply unless you have these three

ingredients. It is odd, and we cannot shirk that

concession. But by the same token the words of the

Act, we would submit, are plain, and it is not only

in section 6. It is repeated in section SA and in

other sections dealing with other parts - but the

Act only applies to certain franchise agreements.

Why that is so I am afraid we are unable to offer

to Your Honours any explanation. But it could not

be more plainly expressed.	And it cannot have been
a mistake or an oversight or the like.	Why, one

asks, would you define "franchise agreement" so

that it would catch any of these rights, trade

marks, petrol, lease, and then say well, the Act is

Caltex(2) 21 28/8/90

not going to apply unless you have a combination of

all three.	And frankly, we cannot offer Your
Honour any explanation as to why you do that.	Why

have the wide definition of "franchise agreement"

in the first place is perhaps a better question.

Maybe it was picked up from other legislation, but

that is but speculation on our part, Your Honour.

Now, 49, Their Honours said in the Full Court

is otiose while the agreement remains one to which

the Act applies. We would submit, with all respect

to Their Honours, that it is far from otiose because

all section 16 does, in the same way as the various

sections of the Landlord and Tenant Amendment

Legislation did, was to put a fetter or a hurdle in

the way of a lessor - in this case a franchisor -
terminating the franchise agreement, exercising his

contractual or, in some cases, proprietary rights by

writ of ejectment to regain possession.

You see, 16 says - it does not really, in

spite of the use of the words "may terminate",

affect the contractual rights between the parties

by granting any right to the lessor or the

franchisor. What it does is to restrict the

franchisor in the way in which it may terminate and

to set forth the grounds.

But if there a contractual provision to the

effect that none of the grounds in section 16, for

example, shall be used by the franchisor/lessor in
order to assert a right to terminate the lease

then, no doubt, the presence of section 16 would

not help a franchisor who wanted to bring some

proceedings to terminate the estate in the land

which the franchisee has. You would have to look

to the instrument granting the estate to see upon

what circumstances one can bring it to an end

before it expires by effluxion of time.

DAWSON J:  Does your argument embrace the proposition that

you could leave the franchisee with a mere lease

and nothing else, no obligation to supply or right

to use trade - just leave them with a mere lease?

MR HORTON:  Yes, Your Honour.

DAWSON J: And, if you did that, then you have not offended

section 16 if you have not proceeded in accordance

with its provisions?

MR HORTON: That is so, Your Honour, yes. That is the

inevitable consequence, we submit, of the terms of

section 6 and section 8A of the Act.

DAWSON J: And he is left, you say, with his franchise

agreement?

Caltex(2) 22 28/8/90

MR HORTON:	Yes, which is neither - if I may be permitted to put it this way - here nor there because it would
not only - - -

DAWSON J: And he is not obliged to sell anything and you

are not obliged to supply anything?

MR HORTON: That is right.

DAWSON J: It is an odd result, is it not?

MR HORTON:  He has still got a lease of our service station

and we cannot put him out unless we can establish a

ground under clause 49 of the agreement. And it

may be that in some circumstances, as His Honour

the Chief Justice mentioned a few minutes ago,

things may work to the advantage of the franchisee

in those circumstances. Say petrol prices, because

of events in the gulf, went so high that people

started using bicycles or the like or rickshaws or

whatever and nobody wanted to buy petrol any more

because they simply could not afford it, the best

thing that could happen to a franchisee in those

circumstances would be to have a withdrawal of the

trade marks and, indeed, of the obligation to buy

fuel and he would be left with a lease that perhaps

he could do something with, repair bicycles and
rickshaws, motor vehicles, perhaps. But there are

circumstances in which it may work contrary to Caltex's interests and in the interests of the

franchisee.

DAWSON J: It would follow too that if you had that

particular sort of agreement you could leave a

franchisee with only the right to use the

identifications but nothing to use them with;	in
other words, no supply of anything, any product.

MR HORTON:  And perhaps the lease terms - - -

DAWSON J: And no lease.

MR HORTON:  And no lease, in which case I do not suppose he

has got a building to put the sign on anyhow,

Your Honour, but, leaving that aside, if he is

holding over or there is a licence or something so

that he is still there, that is a possibility, yes.

It may amount, of course, to common law repudiation

of the agreement. He may say that is an essential

term of the agreement although it is a little hard
to see that it is repudiation if you have got a

right to withdraw that aspect of the rights.

MR HORTON:  I am reminded by my learned junior that maybe

one could not withdraw. the right to retail motor

fuel and leave him there with a lease because in

(a) of the definition of franchise agreement, it is

Caltex(2) 23 28/8/90

enacted that it is an agreement containing

provisions which permit or require the person:

to use, in connection with the retail sale of

motor fuel.

· a mark, so that if one withdrew the right to

acquire motor fuel without withdrawing the right to

permit use of the marks, it may be that you could

not do that because you would then be infringing
the obligation you have to the use of the marks in

connection with the retailer's motor fuel.

DAWSON J:  It does not say in connection with motor fuel

supplied by the franchisor.

MR HORTON:	No, it does not. But I suppose while it would be a slight irritation, at least, I suppose to
Caltex to have Shell or whatever these other -
Ampol or whatever they are these days - fuel sold
through its site, it maybe could not complain if
that was the consequence of it withdrawing part of the agreement - part of the rights granted under the agreement.
McHUGH J:	The judgment in the court below is reasonably

easily avoided by you, is it not. If you amend

clause 49 so that you give 30 days notice and
strike out three or four clauses, that is the end

of the matter is it not, from your point of view?

MR HORTON: If we amend clause?

McHUGH J:	If you amend clause 49 by adding a 30 day notice provision and striking out three or four of those
paragraphs which do not duplicate section 16 - - -
MR HORTON:	Then we can give a notice, Your Honour means, which complies with 16?
MCHUGH J:	Yes .
MR HORTON: That, of course, then brings into operation the

right in the lessee to go off to court and to

obtain an order that notwithstanding the fact that
the ground is made out, possession shall not be
given, to put it shortly. And I think I am right
in saying, if I may, that the courts - mostly the

Federal Court deals with it - is pretty liberal in

doing that. I believe there has only been one

case, or the last time I was so instructed unless

there may be another since, in which the lessee has actually been ejected after the court has heard the

matter. So that, from a practical point of view,

one can confidently say that there is considerable

protection given to lessees by the Act and even if

one uses 49, makes out a ground under 16, it is by

Caltex(2) 24 28/8/90

no means certain that the oil company would regain

possession of the site.

Of course, if the Act does not apply as we

assert would be the case if 17.4 was invoked here,

one does not have that problem. One still has to

make out the ground under 49 and then the

consequences that Your Honour Mr Justice McHugh

suggested would follow, if you can reduce it to a

30 day notice. Yes, it is terminated.

Of course, that is the same situation in relation to plenty of tenancies and even,

Your Honours will remember perhaps, if I may digress for a moment, or at least Your Honours who

were at the New South Wales bar will remember, a

section called section SA was brought into the

Landlord and Tenant Amendment Act in about 1960 or

thereabouts which provided, shortly, that the part
of the Act which prevented a lessor obtaining

possession except upon certain grounds and order of

a magistrate, did not apply to premises which were

the subject of a lease containing various specified
clauses and which was registered in the office of
the rent controller.

Now, of course, as soon as that came in what

one did was to grant a concurrent lease over the
desired premises and register it at the office of

the rent controller, which was perfectly

permissible, and then have the concurrent lessee

give a writ of ejectment to the tenant and the

tenant went out willy-nilly and there were a string

of cases starting with, I remember, Ball v Greater

Union which said, "That is just unfortunate, the

Act so provides the lessee loses his protection".
Later on some - - -

McHUGH J: That was in the days of literal construction before purpose of construction was in vogue, I

think.

MR HORTON: Well, it seemed to work for quite a while,

Your Honour, and then of course they amended the

Act in due course to take the fun out of it, if I
may put it that way, Your Honour. So that you do

get situations in which rights granted by statute

can be taken away and on the list of cases that

Your Honours have and I was not going to take

Your Honours to them in any detail because they are

but instances - most of them are tenancy cases -

one finds that on several occasions the courts have

said prohibitions in the Acts against entering into
any contract to defeat or evade the operation of

the legislation, et cetera, words to that effect,

do not prevent a lessee surrendering his lease;

they do not prevent, in the Queensland case that is

Caltex(2) 25 28/8/90

on the list, Your Honours, a lessor giving a notice
converting a three-year term to a weekly tenancy
and they do not prevent someone deliberately

granting a licence and achieving his end in order

to prevent the operation of the Act on what would

otherwise perhaps have been a leasehold interest.

Those cases are on the list and I will not take time to take Your Honours to them.

So it is not by any means novel to find that a

provision of an Act which appears to give universal

protection to lessees and people of that ilk, none

the less, can be got around, not to put too fine a

point upon it, by an agreement and not withstanding

a provision in the Act which says, "You shan't

avoid or evade the Act".

McHUGH J: Well, supposing you took clause 49 out of the

agreement and just relied on your rights under the

Act if they are applicable, does the Full Court judgment prevent you from relying on clause 17.4

then?

MR HORTON:  They appear to say not, Your Honour, but

MCHUGH J: Yes.

MR HORTON:  - - - Your Honour will find in

Mr Justice Jenkinson's judgment at page 169 of the

appeal book, and 170 - towards the top of 169 at line S, His Honour, speaking for the Full Court,

says:

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 -

of course.

And the Act does contemplate -

says His Honour -

Caltex(2) 26 28/8/90

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 -

to include the plural, he says. Then, at the foot

of page 169, he says at line 30:

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.

Then he says:

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.

We would want to take issue with that, Your Honour,

because the section speaks of the "operation" of

the provision.

As at that time, clause 49.1 can be seen to

be, in itself, entirely otiose -

and we would take issue with that because you have

got to have a contractual right to terminate -

as a provision of a franchise agreement in

relation to which the Act applies. But the

two provisions, clauses 17.1 and 49.1

together, can be seen to exclude the operation

of s.16 and to be inconsistent with the
operation of that section.

He says:

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

Caltex(2) 27 28/8/90

agreements, namely sub-section 16(1), because

they enable that franchise agreement -

one to which it applies, obviously -

to be terminated otherwise than in accordance

with the succeeding provisions of that

section.

Those words we would take issue with, with

His Honour, Your Honour, because he says they

enable that franchise agreements, ie one to which

the Act applies, to be terminated otherwise in

accordance with the succeeding provisions of that

section, but they do not, of course. All they do
is to take the franchise agreement out of the reach

of the Act.

If the agreement -

he goes on, line 25 -

had contained no provision for termination, it

may be that clause 17.4 would not have been to

any extent avoided.

And that is perhaps the point that I was looking

for.

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 -

Well now, Your Honour - - -

McHUGH J: Well, can I ask you this? Why was not 49.1

declared to be void?

MR HORTON:  I do not know, Your Honour. I do not know. We

would submit it has nothing whatever to do with it.

Clause 49.1 - - -

MCHUGH J: But if 49 was void, then it means that 17.4 could

operate according to its terms.

MR HORTON:	Yes, that is what His Honour said. What effect that would have if you had no contractual right to
bring anything to an end might cause one to wonder
but we would submit, with all respect to Their Honours, that there is some confusion here,

Caltex(2) 28 28/8/90

that the presence of 49.1 is utterly beside the

point. All that that does is to say that if

section 16 does not apply, and that is the very

question, then 49.1 operates, and no one can

complain about that and my friends would not

complain about that, I have no doubt. The question

is, does section 16 apply? That is all. And

section 16 does not apply by the force of the very

words of the Act itself, once you take away the

trade mark right and that is all that one needs to

say about it really.

The other thing is that Their Honours seem to

be concentrating on looking at the agreement at the

moment of its inception, when it is signed, but

that, with all respect, we would suggest overlooks

the plain enough terms of section 7. In particular

it gives little, we would suggest perhaps, no

operation to subsection(2), which I suggested to

Your Honour was the over riding part of section 7:

Nothing in this Act -

it says -

shall be taken to affect the operation of an

agreement to the extent that the agreement is

capable of operating consistently with this

Act.

So 7(2) is looking at the operation of it, not at

the making of it, and 7(1) itself is speaking of

an agreement which 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.

Again, we would submit that one looks to the

occasion upon which the need for protection under

the Act arises and that is when the operation of it

is invoked and the operation is only invoked when

one gives, to put it shortly, a notice to quit.

That is the only time when the operation of a

provision is called into life, as it were, in order

to restrict the rights of Caltex and increase the

rights of the lessee, or the proprietor. Section

16 simply does not operate at all it is merely

sitting there waiting to be invoked.

Now turning the agreement from one to which

the Act applies into one to which it does not apply

has no impact upon the operation of any section of

the Act at all, except perhaps section 6 itself, so

as to take it outside of the Act altogether. So,

Your Honours, we appreciate that it makes one

Caltex(2) 29 28/8/90

wonder just what the legislature was about in order

to split up the characteristics of franchise

agreement carefully, then to require that they be

compendiously amalgamated, as it were, into one,

before the Act applies, and then to restrict the

prohibition in section 7 significantly below, as it were, the level of prohibition one found in similar legislation such as to refer to the Landlord and

Tenant Act again or ever the Income Tax Act; prohibitions upon agreements entered into which have the effect of defeating, evading or avoiding, is the sort of classical formulation of it; the operation of the Act or any rights under the Act, but they have not picked that up, they have not

used it. They have been careful, particularly in
7(2) to provide that it shall not effect something

which can operate consistently with the Act.

Nothing can be more consistent, we would

submit, than to take advantage of a right the Act
gives you in terms because the Act says, "If the
agreement is not at the time the Act operates", in

the sense of being called in to do battle on the

part of the proprietor, "one, to which it applies,

then you're outside it". And one would expect that

if the respondents' argument were correct, to have

found a section of the Act saying that "You shall

not turn a franchise agreement to which the Act

applies into one to which it does not apply", but

there is nothing like that in the Act.

And, indeed, there are indications, as

Their Honours recognize in the page to which I a

moment ago referred that various events could

happen which would turn a franchise agreement to

which the Act applied into one which it did not.

For example, section llA was introduced in order to

cover a situation where before llA was introduced a
franchise agreement to which the Act applied would

cease to be one.

McHUGH J: That is dealing with the unilateral Act?

MR HORTON: Yes, assignment. And, indeed, if by agreement

the proprietor wanted to cease to have Caltex signs

on his roof or wanted to cease to take all his fuel

from Caltex - which might happen in certain

circumstances, particularly if you get an oil

crisis and so on - and they entered into an

agreement to do so there is nothing in the Act

which prevents him from doing that. He can change

certain rights or obligations as between himself

and Caltex, consensually, and take the agreement

outside an agreement to which the Act applies.

Generally in statutes which impose these

fetters on one party and willy-nilly impose

Caltex(2) 30 28/8/90

benefits on the other whether they want them or not

one commonly finds provisions that the parties

cannot make an agreement so as to abandon those

rights, leaving aside the landlord and tenant cases
that are on the list where Their Honours, in a

number of the cases, said that it does not touch

_ agreements to surrender altogether your rights, you

can do that.

DAWSON J: There is no question that they can terminate the

franchise agreement within the Act by agreement, is

there?

MR HORTON:  Quite so, and just as one can surrender a

protected lease but one could not, under the

Landlord and Tenant legislation enter into an

agreement saying that the lessor could give you a

notice to quit on any ground he liked, whether it

was a ground under the Act or not. Under this

legislation the parties can enter into an agreement
taking what is called, I believe, "signage" in the

advertising industry - that is a terrible word,

Your Honour, I will not use it again.

DAWSON J: Signage?

MR HORTON: Signage. Caltex signs out of the purview of the

agreement altogether. They could stop being the

lessee.	They could do all manner of things and the
Act does not stop them doing it.	So that it is

not a net which has been woven small at all or cast

particularly wide and what we put, Your Honours, is

that we have done no more - or perhaps I should say

"would" do no more were we to invoke the clause

because that is in the future - than the Act

specifically requires and it is the work of the Act

which takes this agreement outside of it.

Your Honours, that, I think, is all that we

wish to put, Your Honours, in-chief. There is one

further clause of the agree~ent that is of,

perhaps, some little significance, particularly in

relation to the words in section 7(1) which I

allowed myself to say had little, if anything, to

do with the case and they are the words:

purports to exclude, limit or modify ..... the

operation of a provision of this Act -

and that is clause 68 which Your Honours will find

on page 52, and without troubling Your Honours to

go to it, it simply provides for severability of

any clause which happens to offend the legislation.

TOOHEY J: Mr Horton, could I just ask you this; the table

of amendments suggests that the Act was given a

fairly drastic overhaul in 1984. Would all the

Caltex(2) 31 28/8/90

arguments that you are addressing to us now have

been arguments that could have been addressed

before the Act was amended in 1984?

MR HORTON:  Yes, Your Honour, with the exception that I

think section BA and section llA came in in 1984.

. As I said to Your Honours when I took Your Honours

to section SA, it does not really seem to take

matters much further than section 6, except to vary
the definition of "franchisee" and "franchisor" so

that it is consistent with a section 6 application.

For some reason that I am unable to elucidate at

all for Your Honours, at the beginning of each of
the parts you find a similar section to

section SA - that is in Part II. One gets a

similar section at the beginning of Part III, which

is section 20A in miscellaneous, and it is not

immediately obvious, or perhaps I should say

obvious at all, why they amended it in 1984 in that
way.

McHUGH J:  I notice that the definition of "franchise

agreement" was amended in 1988 without changing the

words "the alternative clauses or".

MR HORTON:  I am unaware, Your Honours, and the researches,

my counsel in it before me and my learned junior -

I mean in the lower court - have not shown that

there was any decision of any court which would

suggest why those amendments were made.

McHUGH J:	In 1988?
MR HORTON:	Yes, or at all, Your Honour, for that matter.

Mc HUGH J: Yes .

MR HORTON: 

Because sometimes one can look at a decision and

you find the Act is amended afterwards and it
throws up some indication of what the legislature

had in mind, but we do not know of any such
decision. . I think I have already mentioned it -

but my learned junior is wanting me to put it

better than I did, Your Honours, no doubt

correctly - section llA was put in to prevent
unilateral -

MASON CJ: 

Yes, you mentioned that.

MR HORTON: 

Yes, I am obliged. Those then are our

submissions 

to Your Honours.

MASON CJ:  Thank you, Mr Horton. Yes, Mr Castan.

MR CASTAN:  If Your Honours please, my learned friends have

pointed out what they have called the somewhat

peculiar nature of the three-part characterization

Caltex(2) 32 28/8/90

that is necessary for an agreement to be a

franchise agreement to which the Act is applied and

then said, "Well, it's just too bad that it

therefore follows that steps can be taken to take

an agreement out of that category", and thereby

lead to the result that all these protective

provisions that are provided - and I will come to

t~em, they are not just to do with termination

under section 16 or others that are important - all

those simply fall by the wayside because it loses

one of those particular characteristics.

Our learned friend's argument, in our

respectful submission, to that effect really has to

involve saying to the Court that section 7 should

be ignored for the purpose of undertaking that

analysis and that that peculiar result will persist

notwithstanding the fact that there is a section

which prohibits contracting out and notwithstanding

that the change or alteration that he has referred
to, the removal of one of those three

characteristics, as they would have it, will be

brought about by an act of one of the parties

pursuant to an agreement which is designed,

intended to have that result.

In our respectful submission, that is

precisely the job that section 7 does, it is

precisely what you can not do. It may be that

this peculiar tripartite structure may cease

because of some extraneous events. There may be

some circumstances where some external event occurs

which is not by reason of something that is a

provision in the agreement, not by reason of a

unilateral act perhaps, but perhaps by reason of

some other extraneous circumstance.

I think His Honour Mr Justice Jenkinson in the Full Court referred to the possibility of a change

in shareholding of a related corporation which,

because of one of the provisions, would mean that

one of those clauses would cease to apply and that

may occur as a result of what are, in effect,

external events.

So, one can theoretically think of

circumstances where an agreement loses the

characteristic of an agreement to which the Act

applies and, therefore, loses the protections and

therefore other provisions come into operation.

And so the Act does, so to speak, contemplate that

possibility but what it does not contemplate is the
possibility that that result will be brought about

by consensual arrangements; by agreement.

The work that section 7 does is to prevent

that event occurring in that way. It says, "You

Caltex(2) 33 28/8/90

cannot agree that the Act will not apply". This Act applies notwithstanding any agreement to the

contrary. Now, the words of section 6 which talk

about the Act applying and not applying say:

This Act does not apply unless the agreement has certain characteristics.

The agreement has those characteristics the Act

then applies as we are all agreed on that. If the

Act applies then the Act applies and section 7

says:

This Act applies notwithstanding any agreement

to the contrary.

But the one thing you cannot agree to is agree that

the Act will cease to apply, otherwise the first

line of section 7(1) is being read out of the
legislation, and it is that simple proposition that
we would respectfully submit provides the answer to
the, what otherwise appears to be a total

peculiarity about the legislation. It may still

have some peculiarities but the one thing that

parties cannot do is agree that if it is an

agreement to which the Act applies, under

section 6, that the Act will not apply to it and

that is the, if we may say so with respect, the

flaw in the neatly constructed mechanism that has

been - - -

DAWSON J:  Why is it, why cannot you produce a situation in

which the Act does not apply?

MR CASTAN: 

You may produce a situation, there may be

circumstances - some external circumstances that
may have that result but, in our respectful

submission, section 7 says that:

any agreement to the contrary -

cannot be made. So, it is saying, 14.7 agreeing to

will not apply. the contrary, that is to say, agreeing that the Act

MASON CJ: But it is not literally an agreement to the

contrary is it?

MR CASTAN:	It is not in words saying, "This Act shall not apply", but it is words which say, "We agree that
one of the parties shall have the right to withdraw
one of the essential elements that will mean that
then the Act will not apply". That is the whole case that is founded for Caltex here.
DAWSON J: Why cannot you do that?	I mean if they agreed to

terminate the agreement the Act would not apply.

Caltex(2) 34 28/8/90

MR CASTAN:  But this is an agreement designed to, avowedly

designed to and intended to - - -

DAWSON J: It is an agreement to terminate the agreement

partially.

MR CASTAN: Well, in our respectful submission, you cannot

have an agreement which is designed to bring about

the result that there will continue to be an

agreement to which the Act does not apply if it is

an agreement to which the Act does apply, otherwise

the words:

This Act applies notwithstanding any agreement

to the contrary -

are - what is in effect being asked of the Court is

that those words be read as - - -

DAWSON J: Well, the Act forbids the termination of the

agreement unilaterally except in specified

circumstances, but this is not unilateral.

MR CASTAN:	No, no, I am sorry, perhaps I have missed the point of Your Honour, but this is unilateral in the
sense that - - -

DAWSON J: The parties have agreed that in certain

circumstances one party can take an action which

will take the agreement outside the Act.

MR CASTAN:  Yes. So they have agreed that to - - -

DAWSON J: That does not mean the Act does not apply.

MR CASTAN:  They have agreed that the circumstances will -

there will be the power to bring about the

situation in which the Act does not apply. We

would respectfully submit that the first part of

section 7 is not to be read as though the only

provisions that it would operate on were provisions

which said, "The Act shall not apply" or "This

should be an agreement to which the Act does not

apply".

Our learned friends do not resile from saying

that the purpose, that the effect, that what this

is about, 17.4, is to - in fact they rely on the

fact that its effect is that it brings about the

result that the Act does not apply and because the

Act does not - and they say that it is all it does, and so because it does that then we are to shut our

eyes to the fact that that means the provisions

preventing price discrimination.

DAWSON J: They do not say the Act does not apply. They say

you take the agreement outside the Act.

Caltex(2) 35 28/8/90

MR CASTAN:  You cause it to be then an agreement to which

the Act does not apply, and you no longer will have

a situation in which you are entitled to the

protection, which is an ongoing protection, of

forbidding price discrimination. You are no longer

to have a nine-year - what is effectively, without

going into the details for Your Honours - a nine-
year tenure for all service station proprietors
imposed by the legislation. That nine-year tenure

with no earlier termination and compulsory

renewals, in effect, that is gone. Rights to

assignment and a definition of what will be an

unreasonable withholding of assignment, that all

goes.

All those things go, and they are ongoing.

And that is why to some extent, of course, the

Court, and perhaps the courts below, have been

focused heavily on the section 16 point and
termination. But the effect of the operation of
17.4, taking the agreement out of being one to

which the Act applies, is not merely to bring about

a different set of termination provisions as a way

in which His Honour Mr Justice McHugh was focusing.

That is one aspect. But there are a whole lot of

other things that cease to operate, which we can

broadly call these protections.

Now, they exist at a given point of time.

They exist once the agreement is made. The right

not to have price discrimination or the right to a

nine-year security of tenure exists. If there is

then an agreement which provides on 48 hours notice

to a degree of reasonable - I think it is called

satisfaction of the franchisor - that there has

been some conduct that the franchisor does not like

then there can be a revocation of the right to use

the signs, the trade marks, then there is a

provision after 48 hours notice to take the

agreement out of the operation of the Act. That is

an agreement, we would respectfully submit, which

contradicts the first part of section 7(1). It is
not in terms saying the Act does not apply.	It is

a section which is an agreement or a clause which

brings about exactly that result and the words,

"notwithstanding any agreement to the contrary", we

would respectfully submit, in section 7(1) should

not be construed so as to be confined to an

agreement which said in words "the Act does not

apply".

MASON CJ: But do provisions of this kind ever have any more

effect than asserting that the Act shall operate

according to its terms?

MR CASTAN:  In our respectful submission they do. They

prevent parties from contracting so as to bring

Caltex(2) 36 28/8/90

price discrimination on an ongoing basis for every service station proprietor, day in and day out, then a provision which says that the Act applies notwithstanding any agreement to the contrary means that you cannot have a situation in which service station proprietors agree that notwithstanding the provisions of the Act the franchise or the oil company can charge them discriminatory prices. That would be the direct

about the results which are contrary to that set of prevents

provisions which the legislation itself provides.

and obvious and manifest case. And if there was

such a clause, presumably our learned friends would

acknowledge that a clause which said that

"Notwithstanding the provisions of section 20, I, a

particular service station proprietor, agree that

you, Caltex, can discriminate in price"; presumably

our friends would say "Well, that is manifestly" -

assuming it is an agreement to which the Act

applies - "void under section 7(1)."

If Caltex then puts into the agreement a

provision that enables it to bring about precisely

that result without otherwise terminating the

agreement, without providing for a nine-year tenure

as is required by the operation of sections 13 and

17(b) and so on, other provisions, then in our

respectful submission, it is doing the very thing

that section 7(1) says cannot be done. And it is

not an agreement which is capable of operating

consistently with the Act.

McHUGH J: Supposing after the franchise agreement was in

operation for some time the parties entered into a

further agreement under which the franchisee

purchased the service station, but otherwise the

other provisions of the original agreement

remained, would 7(1) have anything to say about

that?

MR CASTAN:  It would. I think, Your Honour, it would.be

necessary for the agreement to be terminated by

mutual consent pursuant to section 16 and the new

agreement to be entered into, which was not an
agreement to which the Act applied and 7(1) would

have an operation, we would respectfully submit.

It would be necessary to bring to an end that

agreement by methods which the Act itself does

permit.

McHUGH J: But section 16 only talks about the franchisor

terminating the agreement; it says nothing about

the parties terminating the agreement.

MR CASTAN: But, section 16(9) provides that:

Caltex(2) 37 28/8/90

This section does not prohibit a franchisor

from terminating the franchise agreement with

the consent in writing of the franchisee -

so it was a consent provision. So, a consent

termination of the entire arrangement is permitted

by the Act.

TOOHEY. J: Well, not by subsection (9).

MR CASTAN:  I am looking at section 16(9), Your Honour, page 28 of the print.

TOOHEY J: Just the use of the word "terminating", but you

read that as meaning that the parties can simply

agree to bring the agreement to an end.

MR CASTAN:  Yes, Your Honour. What we have assumed is that

subsection (9) is designed to provide a mechanism

whereby if both agree, notwithstanding the security

of tenure provisions, the nine-year provisions, the limited termination and other protections, then the

whole arrangement can be brought to an end so that

in the case contemplated by Your Honour

Mr Justice McHugh, there would, in our respectful

submission, be a mechanism but the answer to

Your Honour's proposition, we would respectfully

submit, is no, until such time as the agreement had

been brought to an end pursuant to the mechanisms

provided by the Act. A termination by consent

would be the obvious way and then they would enter

into a new agreement which would be one that did

not have all of those three requirements under

section 6 and other arrangements would be entered

into since he is an owner.

Now, in our respectful submission, in looking

at the operation of section 7, we have sought to
put the propositions in three ways; perhaps three

alternative ways or three cumulative ways might be

better. Firstly, what I have called the first limb

of section 7(1) applies; that is, the first line:	This Act applies notwithstanding any agreement
to the contrary -

and, to give sense to those words, in legislation

in which the test prescribed on section 6 is "the

Act applies", the very words, "this Act does not apply in relation to a franchise agreement" and

then it sets out the requirements. So the word

"applies" is used both in section 6, which is the

key section for the operation of the Act on a

particular agreement and in section 7, which is the

prohibition of contracting out and, to make sense

of the use of the word "applies" in this

legislation, it should be treated consistently and

Caltex(2) 38 28/8/90

it is incbnsistent with section 7(1) for there to

be a clause which provides, by agreement, for the

agreement to fall out of the application of the Act

under section 6 and that is what we would

respectfully submit section 17(4) does and our

learned friend's argument depends on it being -

DAWSON J: .You say 17(4). Is your argument entirely

independent of clause 49(1)?

MR CASTAN: For the purpose of this current submission, what

I will call proposition 1, yes, Your Honour. We

seek to put it in a number of ways but, certainly,

for the purpose of this proposition, entirely

independent and one can look at that by testing it

in relation to other provisions, other than 49

which deals with termination. One could take, for

instance, section - an interesting example is
section 17 of the Act.

Section 17 of the Act gives renewal rights and those renewal rights - there are various situations

in which:

A franchisor shall not fail or refuse to renew the franchise agreement -

and, without going into great detail with the

actual form of the legislation, it is sufficient to

take Your Honours to sections 17B(4) and (5) and I

will not go through them in detail but, in essence,

what one sees in subsection (5) is that section 17,
which requires renewal does not apply if the
franchise agreement is nine years or more and the

effect of subsection (4), without going into the

words, is that renewals up to nine years are

required.

So, to put it in short compass, there is a

nine-year tenure either by renewal or by saying the

agreement can be for nine years or more. Now, this

particular agreement with which we are concerned in

the present case has no contrary provision; it has

no equivalent of the dislocation that has been

looked at between clause 49 and the termination

rights in 16.

When one looks at 17B, the nine-year tenure,

there is no contrary equivalent. There simply are

no renewal rights of this kind. The agreement is

for a particular tenure - I think, just over four

years, from recollection, but that is it. So, what we have in this situation is an agreement which, if

one looks at the operation of clause 17.4 and looks

at the operation of section 17 of the Act, 17B of the Act and 7(1) - the prohibition of contracting out - you have got a situation that while this is

Caltex(2) 39 28/8/90

an agreement to which the Act applies, there is a right current at all times in the service station proprietor to have nine years, notwithstanding that

the agreement says four-odd years.

The effect of clause 17.4 is to give to the

company the right to take the agreement out of the

AGt by terminating the trade marks provision, under

17.4, and thereby not be subject to the requirement

of extending to nine years.

TOOHEY J: Could I just see that I understand that argument?

You do not appear to be saying that clause 17.4 is

struck down because it is contrary to section 16.

MR CASTAN:	No - - -
TOOHEY J:	You do not appear to be reading it - - -
MR CASTAN:	for the purposes of this argument at this

stage.

TOOHEY J: Yes, you do not appear to be reading 17.4 as

involving a termination of the franchise agreement

and to that extent you appear to go along with

Mr Horton.

MR CASTAN: That far, yes. For the purpose of this

proposition, yes, Your Honour.

TOOHEY J: Well then, for the purposes of this submission,

section 7, I understand you to be saying, operates,

not because of the conflict between 17.4 and

section 16 but because 17.4 represents an attempt

to take a particular situation outside of the Act.

Is that the way you are putting it?

MR CASTAN:  Yes, but it operates in a way that is contrary

to the application of the Act and, to go further,

we pick up then what we will call the second limb:

it purports to exclude, limit or modify.

Now, it does not do that - - -

MASON CJ:  You are taking up the second part of

section 7(1).

MR CASTAN: Yes, I am, Your Honour, and it is put as our

second proposition in our summary. It is perhaps

more conveniently illustrated, by something other

than section 16, by something like section 17 where

there is no contrary clause; there is simply an

absence of a clause. And we say that if you look

at what 17.4 does, it does purport, in result, it

is designed to; it is precisely what its task is:

Caltex(2) 40 28/8/90

it purports to exclude, limit or

modify ..... the operation - - -

TOOHEY J: Well, I do not understand the "limit or modify"

on the argument that you are putting to us. I

understand the "exclude" aspect because you appear

to be saying that 17.4 is designed to take the

agreement outside the operation of the Act. In

that sense it purports to exclude the Act.	How do
you "purport to limit or modify the Act"?

MR CASTAN: It says:

limit or modify ..... the operation of a

provision -

and it would depend which provision we are looking

at. In the case of the renewal provision that I

was referring to, section 17, it is "exclude". There may be others where there are some other

equivalent provisions. In other words, one would

have to look at each of the protections - if I can

call them that - that is provided if the agreement

is one to which the Act does apply and then look at

the agreement. So, in the case of section 17 and

17B it is "exclude" and in the case of section 16

it is perhaps more appropriately "limit or modify"

because there are some coincidences in the

circumstance that give rise to a right of

termination but there is an exclusion of that right

to go to a court and get relief.

So, it varies depending on which particular

provisions one looks at. It is:

exclude, limit or modify ..... the operation of

a provision -

So, certainly it is to exclude the discrimination

of the price discrimination provisions and the
nine-year provisions but it. is to modify the

operations, say, of the section 16 provisions

because some of those are similar to some of the

ones that would continue if 17.4 was invoked; some

are different. It varies depending on which clause

one looks at.

Then if one goes to the other words, it is:

exclude, limit or modify -

and I leave out the intervening words -

the operation of a provision of this Act or

any right or remedy based on or arising out of

a provision of this Act.

Caltex(2) 41 28/8/90

And the "right or remedy" that we would say exists

and that is excluded, to take two instances that I

have mentioned, one is the right to a nine-year

tenure effectively given and that is excluded.	And
that is excluded ab initio.	The fact that the

clause has not been invoked does not mean that the

reality of this agreement is one that does not have

a nine-year tenure. It just does not because there

is a clause there that provides that on 48-hours

notice of their dissatisfaction Caltex can

"revoke", as it is called, and thereby, if they are

effective and section 7 does not operate, can take

away, "exclude, limit or modify", the nine-year

tenure which the service station proprietor every

day of his life relies on. The operation of his

business, the way in which he operates, and what he

relies on is not merely what he does today but the

fact of the tenure that he has got and what he has

to sell or assign depends on the tenure, the

remaining portion of his tenure, and the nine-year
tenure in year 2 is dramatically different than a

four-year tenure in year 2 and the value of his

asset is dramatically different.

And we cannot ignore the reality of those things. And then, if we look to see does this 17.4

"exclude, limit or modify" that nine-year tenure,

one is drawn, we would respectfully submit,

inevitably to the conclusion that sitting as it

does with that clause in it it does "exclude, limit

or modify" that provision or that:

right or remedy -

but let.us take the word "right" -

based on or arising out of a provision of the

Act.

And then there are the words:

is otherwise inconsistent with -

and in our respectful submission they also have

application in varying degrees and, again, the

degree of inconsistency will vary depending on

which are the provisions. In the case of

section 16 one can see some consistency in

clause 49. In the case of section 17 which has

these nine-year rights, none at all. And so on. it is our respectful submission that to give

meaning to section 7 - or to put it the other way,

that our learned friend's submission involves

casting section 7 aside, rendering it virtually as

meaningless in the context of this particular case.

Caltex(2) 42 28/8/90

TOOHEY J:  Mr Castan, on the argument again that you are

putting to us at the moment, are you content with
the declaration made by the Full Court of the

Federal Court?

MR CASTAN:  Yes, Your Honour, because it does not advert to

any particular provisions. It is not confined in
any reference to section 16 or any other particular

provision and, in fact, the judgments there in the

Full Court were not so confined. His Honour

Mr Justice Jenkinson, in his reasons, in fact,

adverted to section 13 which is a part of the
duration provisions at pages 172 to 173.

I perhaps should just take Your Honours to

that so that Your Honours will see that although he
principally discussed the relationship between
section 16, the termination provisions, and

clause 49, he pointed out, at the foot of page 171,

having expressed the conclusion, which had focused

very much on section 16 and the particular
provisions dealing with termination, he did not

confine himself to that. At the bottom of page 171

he said:

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) -

and he goes on to set that out and says:

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 section 16. The expression "a
provision of this Act" in section 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

Caltex(2) 43 28/8/90

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

section 13 and also ordained otherwise than in

accordance with the provisions of section 16.

Clause 17.4 is inconsistent, in my opinion,

with that operation of those sections and is

for that reason avoided by section 7(1).

And so on. Now the declaration Your Honour asked

me about simply acknowledges the possibility that

there might be supervening events, apart from
action taken pursuant to contractual rights, and
that section 7 limits the exercise of purported

contractual rights, and so acknowledges that there

may be circumstances whereby, as a result of acts

other than the exercise of contractual rights which

are in effect forbidden by section 7(1), which take the agreement out of being a franchise agreement to

which the Act applies. So the answer to

Your Honour's question is, yes, we are content with

it in that form.

TOOHEY J: Thank you.

MR CASTAN:  I then go to the third proposition which is

perhaps somewhat narrower and it really picks up

what we might call the principal thrust of the

reasons of His Honour Mr Justice Jenkinson and the

way in which we put the proposition at the top of

page 2 of our summary, really is picking up what we

have understood to be the essence of the matters

that His Honour put in relation to the

interrelationship between 17.4 and 49.1. This is

what we might term the somewhat narrow basis of
contending that they, together, are inconsistent

with section 16 and therefore are forbidden by

section 7, and we draw attention to His Honour's

use of the phrase, at page 171, line 28, he refers

to the contractual provisions:

Those contractual provisions, -

he is referring to 17.4 and 49.1 -

which do not satisfy the requirements of

section 16, are without more the source of

means to terminate an agreement the

termination of which is required to be in

accordance with section 16.

We have picked up the phrase, coined the phrase,

and it is ours, we do not seek to attribute it

to His Honour Mr Justice Jenkinson, of an "enabling

mechanism", which we have referred to there, but

the source of the means to terminate the agreement

Caltex(2) 44 28/8/90

is, in our respectful submission, an apposite

description and we would respectfully submit that

as it was put in one of the variants of the famous
Latin maxim, in the passage in the Bank case that
is there referred to in the judgment of His Honour

Mr Justice Dixon, dealing with the operation of

. acquisitions otherwise than on just terms in

constitutional law that what cannot be done

directly cannot be done indirectly. There is a

short passage there where His Honour Mr Justice

Dixon points out why the Bank legislation fell foul of 51.(xxxi).

Can I turn briefly to the matters that are put

under heading 4, Erroneous Ground, and we seek to

qualify what is put in our summary as there set

out. It is perhaps, in the light of what has been

debated this morning, somewhat overstated, but we

were concerned, and I do not know that it effects,

as it turns out, the way in which my learned friend

has put his case, I do not know that it really is

of great significance. We were concerned at the

way in which ground 3 of the notice of appeal was

expressed because in terms, and it is to be found

at page 181, we draw attention to it because we

have a concern that it describes the Full Court as
having done something which we would respectfully

submit it has not done, and we would not want the

false issue to be taken up by this Court.

Ground 3 on page 181, is that:

The Full Court erred in rejecting the conclusion of the trial judge that section 16

does not regulate the doing of acts which may

cause a franchise agreement in relation to

which the Franchise Act applies to cease to be

such a franchise agreement.

In our respectful submission, the Full Court did not reject that conclusion. It is a conclusion of

the trial judges, we would respectfully submit,

non-controversial and does not really assist the
logic of the analysis.	We just draw attention to

page 169 of the book in which His Honour

Mr Justice Jenkinson said - I am sorry, no that

does not pick up that passage. Perhaps, all I need

to say about it is that there is no rejection of

that conclusion in the Full Court's judgment and it

cannot have erred in doing so since it did not

reject that conclusion.

There is, before turning to some of these general propositions on interpretation, we would

seek to add to those matters which are in the

summary - the matters which have fallen from the

Court this morning, which is to say that there is

Caltex(2) 45 28/8/90

and it was submitted below in the form of a

subsidiary argument but not much pressed, but there

has been some debate this morning to the effect

that clause 17.4, properly construed, does itself

amount to a termination of the franchise agreement

looked at as a whole. And that is not expressly in

terms encompassed in our summary here and we would,

respectfully, seek to adopt that additional

submission and to press the view that where an

agreement is an agreement which contains all of

those components that go to make up an agreement to

which the Act applies, including the granting of

rights in relation to the use of trade marks, the

use of premises and the supply of fuel for retail

sale, to provide for the revocation of one of the

essential components of such an agreement is to

terminate the agreement comprised in the totality
of that contract.

That is a question that seems to have been the question that very much took the mind of His Honour

Mr Justice Brooking, though he came to the

conclusion that 17.4 did not amount to such a

termination of the agreement as a whole. But we

would respectfully submit that in addressing that

question the proper conclusion is that it does.

Can I draw attention then to some of those matters which are put under the general rhetoric of

interpretation, towards the foot of page 2 and over

to page 3 of the summary. There is a document

which was provided, which is in the appeal book,

and which is provided to service station

proprietors and which formed part of the material

called a "statement of information", it commences

at page 59 of the appeal book, and we would draw

Your Honours attention, briefly, to that. It is

headed on page 60, "statement of information", and

it is a form of, perhaps, explanatory memorandum, I

suppose, to go with the service station to the

service station proprietor. · It commences on

page 60:  TO: Messrs .....

Dear Sir & Madam .....

we supply you with the information set out

below. We strongly recommend you read all of

the information.

DAWSON J:	How do we use this?
MR CASTAN:	I am using it to take Your Honours to the

particular way in which the appellant itself

describes the operation of its provisions.

DAWSON J: What is it, an admission against interest?

Caltex(2) 46 28/8/90

MR CASTAN:  It is not that, but it reveals - perhaps it is

significant that Your Honour should appreciate what

it is that the appellant itself says the effect of

49.1 is, both in submission and in its own

documents. Perhaps if I can take Your Honours

briefly to the provisions Your Honours will see the

significance of them.

The way in which it is put is, at page 69, in

dealing with termination, I will only take

Your Honours to a couple of lines, clause (g) 1.

termination under the Act, at page 69 says:

While the Agreement continues as a franchise

agreement to which the ..... Act applies the

provisions under the Act relating to

termination ..... are set forth in Section 16

thereof, which ..... is set out -

and so on, and then it sets them all out.

If one goes then to page 71, one sees the

alternative, which is headed, "2. Termination

under the Agreement". It commences:

Whether or not the Agreement continues as a

franchise agreement to which the Act applies,

the agreement in clause 49.1 identifies

circumstances which entitle Caltex to

terminate the Agreement.

Now, in our respectful submission, that

statement "whether or not" correctly reveals what
is the true position of the operation of

clause 17.4 unless clause 7 operates.

DAWSON J: What do you mean, that they formally terminate

the right to use the signs but everything continues

as usual, but they are able to terminate under the

agreement?

MR CASTAN:  It is more than that; it is "whether or not",

Your Honour. What they are saying is that whether

or not the agreement is one to which the Act
applies, so that what they are saying, and

correctly saying we would respectfully submit, is

that even if the Act applies, the real provisions

that operate are the ones that are in the

agreement; it is whether or not.

One situation is if - back on page 69 it was:

While the agreement continues as a franchise

agreement to which the Petroleum Retail

Marketing Franchise Act -

Caltex(2) 47 28/8/90

applies, one might have thought it would more

apposite to put, "and if it ceases to be" or "if it

is not under the Act". The words used are,

"whether or not" and that is, in our respectful

submission, a correct description of the reality of the operation of 17.4. The reality of 17.4 is that it is saying, "Regardless of what the Act says,

this is the real world" and that is what 17.4 is

designed to do and that is what it, in fact,

does.If I may say so, to draw the conclusion, it

points up the clear conflict with provisions under

the agreement.

With respect, passing to the next short matter

on page 3 of our summary, we simply point out as

His Honour Mr Justice Jenkinson did, and that is

referred to at page 173; I will not go back through

it, but His Honour pointed out that the passage of

enactment of section llA in 1984 is a clear case of

the legislature seeking to ensure that the

unilateral act of an oil company by exercising

rights outside dehors the agreement its right to

assign cannot or will not be permitted by the

legislature to remove the agreement from one of

those to which the Act applies and, of course, the

legislature did not need to go further than that

because section 7 already existed to protect

clauses which operated as clauses by agreement

seeking to do that, we would respectfully submit.

We then attached some references to the relevant passages in which courts have expressed

the various exhortations about interpreting

legislation which is remedial or beneficial in ways

that preserve rights and we would respectfully rely

on those provisions as particularly forceful, shall

we say, expressions of those views in the judgment
of His Honour Mr Justice Isaacs in the Hudson v

Australian Timber Workers' Union case, to which we would commend to Your Honours in the context of

this case. Those are the submissions, if

Your Honours please.

MASON CJ: Thank you, Mr Castan. Yes, Mr Horton.
MR HORTON:	Your Honours, my learned friend took

Your Honours to section 20. May I ask Your Honours

just to glance at that for a moment in relation to

him developing his argument that there were various

advantages intended to accrue to these proprietors

and one of them was that they should not be

discriminated against except in certain

circumstances in relation to price but Your Honour

sees that section 20 deals with discrimination in

relation to the price of fuel so it is to do with

the marketing exercise; how much you can sell your

petrol at the bowser, I suppose, but the

Caltex(2) 48 28/8/90

significant thing is, Your Honour, that

section 20(6) repeats again:

In this section, "franchise agreement" means a

franchise agreement in relation to which this

Act applies.

MR HORTON-:  So you get the somewhat odd situation - not the

only odd situation, of course, that one comes

across in this Act - that there is a prohibition
against discrimination in relation to pricing where

you have integers (a), (b) and (c) of subsection

(3) definition of "franchise agreement", but no

prohibition or protection or the like, where the

proprietor owns the service station himself, for

example, which is strange. And it serves to

emphasize that for some reason the legislature has

decided that it will protect - if that is the right

word; my friend would approve it, I am sure - only

those which have the three integers.

DAWSON J: But you start out with one of those in this case,

you see.

MR HORTON:  You do, Your Honour, yes. But you can lose one

of them, and then section 20, as a protection

against discounting and so on and so forth, goes

too. And there does not seem to be any particular

rhyme nor reason for that except, no doubt, a

policy decision, perhaps made in the lobbies for

all we know, when the pressures are on to put this,

that or the other provision into the Act. So that

it is a little difficult to say that logically this

should be so, and hence the Act should be construed

thus. ·rt simply does not follow.

Your Honour, my friend then sought refuge by referring Your Honour, I think Mr Justice McHugh,

to section 16(9) in relation to the proposition

that was put to him in order to test the argument,

of course, what if there was a sale of the

reversion to the lessee so there would be a merger
and the lessee would be the owner?	My friend, of

course, had to resort to section 16(9), to say, "Ah

but, you would cover that by having a consensual

termination", surrender, I suppose, "of the whole
of the agreement at the time". But the difficulty

is subsection (9) only qualifies section 16. It

does not touch section 7 at all. So that section

7, if my friend's argument is right in relation to

the whole of this case, would still prohibit an

agreement for sale, that is, if the opening words

have the wide thrust that he seeks to press upon

Your Honours. So that the very agreement for sale

would be struck down and section 16(9) does not

help him.

Caltex(2) 49 28/8/90

Now, Your Honours, just one or two other very

short things. My learned friend then said, "Well,

17.4 operates in relation to exclusions or

limitations or modifications." But, the fact is

that 17.4 constitutes - if it operates - an

annihilation of the subclause (a) element in the

definition, in section 3, of "franchise agreement".

It goes forever.

In that respect, perhaps we could say, with respect to His Honour in the Full Court, that the

remarks made by His Honour at page 164, lines 8

to 12, are not correct because His Honour

contemplates that, somehow or another, the

provisions of the subclause (a) part of "franchise

agreement" continue on - when you look at them and

say, "They are still there." - even though they

have been annihilated by the revocation. And, of

course, the closing words - which I read to

Your Honours in-chief and I will not go back to -

of 17.4 constitute an annihilation so that you
cannot say you still find them there in the

agreement. The print is there but the reality is

they are gone.

I think they are all the matters that I wanted

to say something about. Anything else would be but

repeating what I said in-chief and we are much

obliged to Your Honours.

MASON CJ: Yes, thank you, Mr Horton. The Court will

consider its decision in this matter and will

adjourn until 10.15 am tomorrow.

AT 12.28 PM THE MATTER WAS ADJOURNED SINE DIE

Caltex(2) 50 28/8/90