Em-Es Petroleum Pty Ltd & Nader, J. v BP Australia Ltd

Re: EM-ES PETROLEUM PTY. LIMITED AND J. NADER
And: BP AUSTRALIA LIMITED
No. NG72 of 1987
FED No. 459
Petroleum Marketing

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Sheppard J.(1)

CATCHWORDS

Petroleum Marketing - applicants retail sellers of petrol - first applicant lessee of four service stations owned by petrol company - second applicant owner of fifth service station - service stations supplied with petrol by petrol company pursuant to volume allowance agreements - whether applicants franchisees for purposes of Petroleum Retail Marketing Franchise Act 1980 - in addition to volume allowance rebate applicants claimed entitlement to additional pricing assistance - dispute as to the terms upon which this payable - whether petrol company engaged in misleading or deceptive conduct - questions of fact.

Petroleum Retail Marketing Franchise Act 1980, ss. 3, 6, 7

Trade Practices Act 1974, s. 52

HEARING

SYDNEY

#DATE 18:8:1988

Counsel for the Applicants: Mr. R.W.R. Parker, Q.C. and Mr R.K. Eassie

Solicitors for the Applicants: Stojanovic and David

Counsel for the Respondent: Mr. R.A. Conti, Q.C. and Mr. M.F. Holmes

Solicitors for the Respondent: Clayton Utz

ORDER

The claim for the declaration sought in paragraph 1 of the application be dismissed.

The application be otherwise stood over generally with liberty to any party to restore to the list on three days' notice.

The applicants pay the respondent's costs of the proceedings to date.

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

JUDGE1

This application is concerned with the dealings of the parties in which the respondent ("BP") supplied motor spirit to the applicants ("EM-ES" and Mr. Nader). The applicants make three substantial claims. The first is for a declaration that they are franchisees of BP within the meaning of the Petroleum Retail Marketing Franchise Act 1980 ("the Act"). The second is for payments said to be due under, or for damages for breach of, an agreement said to have been made between the applicants and BP and known as a temporary pricing assistance agreement. Finally, there is a claim for damages for breaches of certain provisions of Part V of the Trade Practices Act 1974.

The Issues and Some of the Background

In the course of a directions hearing held on 30 November 1987 I made orders that the following issues be tried first:-

"(a) The question whether there exists a Franchise Agreement between the parties or any of them in respect of each of the sites operated by the Applicants.

(b) The question whether the Respondent is bound by a contractual obligation to afford the Applicants or either of them temporary price assistance in respect of their purchases of petrol at each of the sites operated by them.

(c) Whether the Respondent is in breach of s. 52 of the Trade Practices Act 1974 in respect of representations made to the Applicants or either of them concerning temporary price assistance."

The history of dealings between EM-ES and BP began in 1982 when BP supplied motor spirit to a service station at No. 550 Punchbowl Road, Lakemba which was owned by Mr. Michael Saklaoui who is a director of EM-ES. EM-ES was not then in existence. The supply was made pursuant to an agreement dated 13 June 1982. In circumstances later to be mentioned, Mr. Saklaoui in or about 1983, commenced to operate the service station under the EM-ES name. This was done with BP's approval. Eventually in 1984 EM-ES took leases from BP of a further four service station sites each of which was operated under the EM-ES name. The sites were No. 103-107 King George's Road, Wiley Park, No. 777 Canterbury Road, Belmore (in some of the documents referred to as Lakemba), No. 155-157 Rookwood Road, Yagoona (sometimes referred to as Potts Hill) and No. 930-932 Canterbury Road, Lakemba. EM-ES entered into possession of the first two of these sites on 8 February 1984. It took possession of the Yagoona site on 11 September 1984 and of the remaining site on 29 September 1984. In each case a formal lease of the premises was executed by the parties.
Mr. Saklaoui did not keep the Punchbowl Road site of which he was the owner but sold it to the Shell company. Mr. Nader owned premises at No. 324 Punchbowl Road, Belfield. These were converted into a service station which was operated by EM-ES. BP supplied motor spirit to it as well as to the other four service stations.
Punchbowl, Wiley Park, Lakemba, Belmore and Belfield are adjoining suburbs in south-western Sydney. Yagoona is a little to the west of these suburbs on the other side of Bankstown but not very far away from them. The evidence establishes - and it is a well known fact - that for many years there has been substantial discounting of petrol prices in this area. Price wars amongst the local service stations are common. Service stations operated by two independent companies, Solo and XL, and by each of the major petrol companies have for many years engaged in aggressive competitive conduct in the area. Obviously this can only occur because the petrol companies themselves are prepared to discount their wholesale prices to service station operators. Mr. Saklaoui, through EM-ES, has at all times been prepared to provide leadership in the discounting battles which have taken place. It is clear that he is a most aggressive competitor. Before he obtained leases of the four service stations additional to the one which he owned in Punchbowl Road, Lakemba, he was, so his evidence discloses, taken to task by Mr. Jowett of BP because of the low prices he was charging. Mr. Jowett at that time was the Metropolitan Retail Sales Manager of BP.
Mr. Saklaoui complained to Mr. Jowett at some time in 1983 that BP had either stopped or substantially reduced price support. He told Mr. Jowett, so he said, that he could not sell petrol without such support. Mr. Jowett said to him that BP was getting "backlash" from its dealers and from other oil companies. Mr. Saklaoui protested that he owned the site and should be able to do what he liked with it but Mr. Jowett said, "It doesn't matter - you've still got the BP flag up." Mr. Jowett said he would think about the problem. He then said, "Maybe we'll put up a different name, a different flag."
Mr. Saklaoui is of Lebanese descent. He had a Lebanese flag, the colours of which are green, red and white. The flag contained a tree. Mr. Saklaoui drew a diagram of the flag, but replacing the tree with his initials "MS". He gave the diagram to Mr. Ryan who has since died but was at the time the Territory Manager of BP. Subsequently the BP markings on the Punchbowl Road service station was replaced with the EM-ES brand name and with other markings and colours designed by Mr. Saklaoui for the EM-ES operation. The four leased service stations were similarly marked and have continued to be marked in that way down to the present time. The Punchbowl Road site ceased to be so marked when it was sold but Mr. Nader's site at Belfield has borne the EM-ES insignia since Mr. Saklaoui began to operate it as a service station.
The Written Agreements
The agreements between the parties in relation to each of the service stations are partly in writing, partly oral and partly implied as the result of the course of dealing between them. There is no issue concerning the written parts of the agreements. The issues arise because of conflicts in the evidence about what was said in relation to a variety of matters and the nature of the course of dealing which took place. In relation to each of the four leased sites there have always been two written agreements. The most recent agreements are agreements entered into in April 1986. The agreements comprise formal leases for each of the premises, each of which is undated but was undoubtedly signed in April 1986, and four volume allowance agreements, each of which bears the date 17 April 1986. In respect of Mr. Nader's premises, there is, of course, no lease, but there is a volume allowance agreement which, like the others, is dated 17 April 1986. The volume allowance agreements are all in similar terms. They are for a period of two years commencing on 1 March 1986. Each has thus expired. Each contains a clause, clause 2(g), which is as follows:-

"THE RESELLER (EM-ES) undertakes:

(g) To market motor fuel from the said premises under the brand name "EMES" and not to use the BP mark, insignia or colour scheme on or in connection with the said premises nor any marks insignia or colour scheme which might suggest an association with BP in connection with the retail sale of motor fuel at the said premises."

By the agreements BP agreed to allow EM-ES rebates in respect of motor spirit, diesoleum and lubricants. For motor spirit the rebate was to be four cents per litre.

The leases were each for a term of two years from 1 March 1986. Each of the leases contained a clause, clause 2(xxi), to an effect similar to clause 2(g) of the volume allowance agreements. Each lease also contained a clause, clause 4(1), which was as follows:-

"The business conducted by the Lessee at the said premises is the independent business of the Lessee and this lease shall not be construed as reserving to or conferring upon the Lessor any right to direct or control the Lessee or any of the Lessee's employees in the conduct of the Lessee's said business PROVIDED ALWAYS that the Lessee will not in any way indicate or represent that the Lessor is the owner or operator of the said business."

The Act

Before coming to deal with the evidence relating to the oral and implied parts of the agreements, it is convenient to refer to the relevant provisions of the Act. It confers a number of protections on what it describes as franchisees. In the broad these protect certain occupiers of service station sites from eviction from the premises which they occupy unless one of the grounds specified in s. 16 is made out and entitle a franchisee to a renewal of a franchise agreement unless he is shown to have been guilty of certain misconduct or other specified circumstances are shown to exist (see s. 17).
Paragraph 6(1)(a) of the Act is as follows:-

"6. (1) This Act does not apply in relation to a franchise agreement unless the agreement

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

"Franchise agreement" is defined in subsec. 3(1) as follows:-

"'franchise agreement' means an agreement containing

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

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

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

(i) a corporation (in this Act referred to as the

'franchisor') is accustomed, entitled or required to supply motor fuel to a person, being another party to the agreement (in this Act referred to as the

'franchisee'), for retail sale by that person at the premises to which the agreement relates; or

(ii) a person (in this Act referred to as the

'franchisee') agrees with a corporation (in this Act referred to as the

'franchisor') to acquire motor fuel from another person (whether a party to the agreement or not) for retail sale by the

first-mentioned person at the premises to which the agreement relates;"

"Franchisor" and "franchisee" are defined in subsec. 3(1) to mean the parties to a franchise agreement being the persons referred to as franchisor or franchisee, as the case may be, in the various paragraphs of the definition of franchise agreement.
Subsection 3(1) also defines the word "agreement". The definition is as follows:-

"'agreement' means any agreement, arrangement or understanding

(a) whether formal or informal or partly formal and partly informal;

(b) whether written or oral or partly written and partly oral; and

(c) whether or not having legal or equitable force and whether or not based on legal or equitable rights"

It remains to mention s. 7 of the Act. Subsection 7(1) provides that the Act applies notwithstanding any agreement to the contrary. 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 the Act or any right or remedy based on or arising out of a provision thereof. On the other hand, subsec. 7(2) provides that nothing in the Act shall be taken to affect the operation of an agreement to the extent that the agreement is capable of operating consistently with the Act.
"Franchisee" or not
I can now come to the first of the questions to be determined, the question whether the applicants are franchisees within the meaning of the Act. To be franchisees they must be parties to a franchise agreement. The case brought by Mr. Nader can be simply disposed of. Paragraph (b) of the definition of franchise agreement leads to the conclusion that an agreement will not be a franchise agreement unless it contains provisions under or by virtue of which a corporation, that is, a franchisor (BP in this case), grants a right to, or otherwise authorizes or permits, a person, being another party to the agreement, that is, the franchisee (Mr. Nader in this case), to possess, occupy or use the premises to which the agreement relates in connection with the retail sale of motor fuel by that person at those premises.
Notwithstanding the use of the word "or" at the conclusion of para. (b) of the definition and one's first impression that each of the paragraphs is an alternative, s. 6 of the Act makes it clear that the paragraphs, except for sub-paras. (c)(i) and (ii), are to be read cumulatively. The agreement will not be a franchise agreement for the purposes of the Act unless it contains provisions of the kinds referred to in paras. (a), (b) and either sub-para. (c)(i) or (ii). It follows that, although an agreement may fall within para. (a), it will not be a franchise agreement to which the Act applies unless it also falls within para. (b).
On no basis can it be said that Mr. Nader is a party to a franchise agreement in which BP is the franchisor. BP has not granted Mr. Nader any right or permission to occupy the Belfield premises. It would not have been within its province to do so. It has no proprietary interest of any kind in the premises. They belong to Mr. Nader. It is he who permits EM-ES to operate a service station on them pursuant to an agreement the nature of which is not described in the evidence. The fact that he, rather than EM-ES, is a party to a volume allowance agreement with BP may mean that EM-ES conducts the service station on his behalf. But it does not assist his case that he is a franchisee. All it does is to entitle him or EM-ES for him to certain discounts on motor fuel purchased from BP. That does not bring him within the provisions of para. (b) of the definition of franchise agreement in the Act.
It follows that the application for a declaration that Mr. Nader is a franchisee under the Act must be dismissed. Although his case fails at the outset, I shall continue to refer to evidence about the Belfield service station because some of it is interwoven with evidence concerning the other four sites.
More difficult are the questions which arise in relation to the claim by EM-ES that it is a franchisee of each of the service stations which it leases from BP. Plainly enough it occupies the service stations as a result of rights granted to it in the leases made between it and BP. It also occupies or uses the premises in connection with the retail sale of motor fuel. The issues which need to be resolved in relation to EM-ES do not stem from any consideration arising from para. (b) or para. (c) of the definition of franchise agreement. There was no argument of any substance by counsel for BP that the agreements and arrangements between BP and EM-ES did not fall within the provisions both of para. (b) and sub-para. (c)(i) of the definition. The issues rather arise under para. (a) of the definition, particularly the words, "permits or requires a person . . . to use, in connection with the retail sale of motor fuel by that person at the premises to which the agreement relates, a mark identifying, commonly associated with, or controlled by" the franchisor. The case propounded by counsel for BP was that none of the agreements could be franchise agreements because no mark identifying, commonly associated with, or controlled by BP was authorized or permitted or required to be used at any of the service stations. The mark which the service stations used in connection with the sale of motor fuel was the EM-ES mark and no other.
Counsel for EM-ES sought to overcome the problems with which this submission confronted them in three different ways upon which they relied both cumulatively and in the alternative. The three ways relied upon were as follows:-
1. There was clear evidence that there are, and have been at all material times, BP marks upon each site placed there with the authority and permission of BP given by it either expressly or by implication.
2. The get-up of each of the service stations, which BP had also expressly or impliedly authorized, suggested to independent observers that each site was in reality a BP site.
3. The EM-ES mark is, and at all material times, has been, a mark controlled by BP. It was its idea to use it. It was on the service stations with its authority and the necessary alterations to the premises to accommodate it were paid for by BP.
These three matters were the subject of a substantial amount of evidence and it is necessary now to go to that evidence and make findings about it. It is difficult to break the evidence up into compartments so as to refer only to one or other of the three ways in which the case was put. This is because it is more appropriate to refer to the evidence as a whole and to refer to it in chronological order. In many cases there are conversations or other matters which are relevant to each of the ways in which the matter was put.
In order to deal with the matter adequately one has to go back to conversations which occurred in the early stages of the parties' relationship in 1982 and 1983. It will be recalled that their relationship began when BP supplied motor fuel to the site which Mr. Saklaoui owned in Punchbowl Road, Lakemba. I have given some account of conversations which occurred between Mr. Saklaoui and Mr. Jowett of BP about that time. The account is taken substantially from Mr. Saklaoui's evidence but so much of it as I have stated would appear to be common ground between them. Mr. Jowett in his principal affidavit has dealt with matters in Mr. Saklaoui's principal affidavit with which he disagrees. He has given evidence of additional matters and obviously there are differences of emphasis of various matters which were discussed by them. But, by and large, it would seem to me that the reason for the adoption by Mr. Saklaoui of the EM-ES mark and for becoming independent of BP arose because the two agreed that as an independent he could provide discounts of his retail prices which would not bring upon BP the criticisms of other petrol companies and its own dealers which Mr. Jowett was anxious to avoid. On the other hand, I do not think there could be any doubt that Mr. Saklaoui saw advantages in becoming independent and, at least at one stage, envisaged that the EM-ES organization might become a very much larger network than to date has been the case. One of the advantages which Mr. Jowett saw was that Mr. Saklaoui, being of Lebanese extraction, would be likely to attract the loyalty of a great many customers in the area of the service stations because of the large Lebanese population which apparently lives in that area.

In evidence are a number of internal memoranda written from time to time by various of BP's executives about the EM-ES operation. I do not refer to them all but I propose to quote from three of them. The first is a memorandum headed "EM-ES" dated 7 November 1984. It was written by Mr. Jowett. One section of it is headed "History". Under that heading the following paragraphs appear:-

"One private site Punchbowl ex Shell (the Punchbowl Road site owned by Mr. Saklaoui) causing pressure on market, felt we could influence more responsible attitude. Felt we needed to gain expertise in market as well to ultimately avoid long periods of price support.

Signed @3.65 with 3.00 price support later to be scaled to 2.0 cpl, and ultimately wiped out altogether - there were many disagreements with Emes of who moved first, etc., and agreement of marker (sic) sites. Emes received two new tanks to support taxi trade and he commenced to dispense product ex service station. This practice was stopped. Emes showed he had ability to influence his Lebanese peers to respond to upward movement of prices and in fact on many occasions reluctantly was the first independent to follow majors.

The extension of Emes began with earnest discussion in the latter part of 1983, when the extent of our proceeds problems was linked with the extended period during 1983 of discounting.

The Canterbury area is the cesspit of price cutting and it was viewed that if this area could be stabilised then the arterial roads which fed off the area would support any movements."

The second of the memoranda is dated 25 September 1985 and concluded as follows:-

"By following the pricing history of the Emes network it becomes evident that its existence has not been successful in maintaining high retail prices.

Conversely, it can be shown that the initial start-up phase of the Emes Network has disturbed the equilibrium of the market resulting in substantial price discounting. Upon establishing a market presence, Emes has continued to price at an advantage over company owned outlets (resulting in substantial volume gains to his operation) and cannot be shown to have successfully influenced high retail prices. (The inability to influence the XL on Canterbury Rd to raise his price is perhaps the best example). Most recent pricing information, in fact, has pointed to Emes as having a downward influence on the market. Emes aggressive pricing behaviour and BP's reluctance to price assist company owned outlets has seen a significant decay in the company owned volume performance."

The third memorandum is of significance in relation to the temporary pricing assistance part of the case to which I shall come in due course. It is dated 31 December 1985 and is in Mr. Jowett's writing. The memorandum was prepared to record Mr. Jowett's recollection of an important conversation he had at dinner the previous evening with Mr. Saklaoui. But the record of the conversation is preceded by reference to the background of the EM-ES operation. Amongst other things Mr. Jowett said:-

"EMES was conceived to compete in a hostile environment where company outlets were being devastated by independent branded outlets XL/Solo. Michael Saklaoui operated an independent outlet to which we were very attracted and gained this business as a below market rate (0.5 cpl to 1.0 cpl) as part of the package with the networking. Success was evident in 1983 where through aggressive pricing and then moving up at appropriate times there was stability. This time was shortlived when Mobil in particular altered their pricing stance nationally. The additional problem of metropolitan distributors ringing the outskirts of Sydney has in recent months become a potential destabiliser.

The environment has now altered with the oil coys attempting to come to grips with the foreign fuel plague which is the growth sector of the business. The ultimate effect on coys like Shell/BP with high capital investment means we can

(a) Do the best to eradicate such practices by Court action

(b) Price the Brand to meet the threat

(c) Control the source as best one can knowing that some majors will always supply.

There are obviously other options, however each course of action leads to stumbling blocks.

It is fact that oil coys are restricted also in being able to take retail sites end of the market in these price sinks & we have seen closed outlets reopen. Consequently the POSS (Privately owned service stations) sector in these Price Sinks are the major driving force as outlets with peer locations rely & will continue to do so, solely on Price. One must wonder how with these factors can the price ultimately reach 4.0 cpl above list price allowing the oil coy to recover full list price & achieve an acceptable level of rent & volume. The Industry could rectify the position but the competition is fierce & it remains a pipe dream that stable pricing in areas with high number of outlets, high percentage of POSS & an insurgence of foreign fuel will occur.

EMES is a tactic to compete with the guerillas & has met the objective in that respect & despite reservations returns a positive leeway. Price the Brand or other tactics will be needed to keep us in the market in Price Sinks over the foreseeable future. I can't see BP Pricing the Brand."

The cost of changing each of the service station sites from a BP site to an EM-ES site was paid for by BP and the change-overs were carried out with BP's complete approval. None of the sites lost all the trappings of a BP site. Each has had all along a shop similar in get-up to shops on BP dealer sites. There is no sign indicating that the shop is a BP shop but in it are sold a variety of goods, mostly motor accessories of various kinds, which BP is able to make available, directly or indirectly, to its dealers at discounted prices so that they may sell them to their customers more cheaply than they could be purchased at other outlets. The goods sold are not usually BP products, although they sometimes are. In one shop is hung a certificate of merit awarded by BP. It includes the words, "BP Super Shop".
There is on each site an outlet for BP Zoom which is a two stroke fuel which comprises a mixture of petrol and oil. This is contained in a drum distinctly marked BP Zoom usually prominently displayed at each of the sites. There is also a pump from which the BP brand of kerosene - Coralite - is sold. It is marked with a BP shield. Another product which is prominently displayed is motor oil. This is usually marked, sometimes prominently and sometimes not, as having emanated from BP. That which is not marked prominently is usually a brand of oil associated in the trade with BP and known as Visco. Sometimes banners advertising the sale of this oil are displayed. The banners not only refer to Visco; they display the BP shield and the words "BP Visco". One of the sites has a prominent BP weather temperature gauge. Each has a Westpac Handyway charging facility arranged by BP with Westpac for a number of its dealer sites as well as for the EM-ES sites. Each of the sites is shown in the yellow pages of the Sydney telephone directory as a BP site. They appear also under an entry relating to EM-ES.
Much was made by counsel for the applicants of a comparison between the get-up of the EM-ES stations and that of the usual BP station. It was submitted that they were substantially similar. A photograph of an unidentified BP station appears on the cover of a service station safety handbook issued by BP. There are also in evidence photographs of some other BP service stations. The BP service stations have the BP shield prominently displayed on notice boards outside the service stations. The BP pumps display the BP shield and both on the facia boards of the service station buildings and on the notice boards appear the words "self serve". There is also, in smaller print, an indication that the service station carries the Handyway charging facility. The notice carries the letter "W" printed in red, that being the normal insignia adopted by Westpac. The colours of the service station depicted on the cover of the handbook are shown to be red, green, yellow and white. The facia board comprises four continuous horizontal strips coloured white, green, yellow and white again. The BP shield is green with the letters BP in yellow paint inside it. The self serve sign, although prominent, is in small print. The letters are white against a red background. As the other photographs show, not all BP service stations are got up in precisely the same way. Sometimes the self serve signs are green. Some facia boards are white; others are yellow. Some service stations are decorated with yellow and green bunting. The BP shields seem always to be green with the BP letters within them yellow.
There are a number of photographs in evidence, some tendered by the applicants and some by BP, showing the various EM-ES stations. The appearance of the EM-ES pumps is very different from that of the BP pumps. The colours are red and white; the colours green and yellow are not used. The pumps display the letters EM-ES in bold print between two red slashes. The service stations themselves do not prominently show the colour green. In some cases there is a white facia board; in others it is yellow, a point of similarity heavily relied upon. A notice announcing that each station is an EM-ES station is prominent and easily seen by passing motorists. Another point of similarity is the self serve signs which appear to be very similar to, if not identical with, those used on BP stations. Notwithstanding the similarity of some of the facia boards and of the self serve signs, it does not appear to me that there is a substantial degree of similarity between the get-up of a BP station and that of the EM-ES stations. The prominence of the EM-ES mark is such as to leave no reasonable observer in doubt that the station is what it purports to be, namely, an EM-ES station.
In reaching that conclusion I have taken into account the matters earlier mentioned relating to BP products on sale at the EM-ES sites, that is to say, the kerosene, the oil, the BP Zoom and the various products on display in the shops. I am of opinion, bearing in mind the prominent display of the EM-ES mark on the notice boards of the service stations and the petrol pumps, that no person could reasonably think that the petrol being supplied was necessarily BP petrol.
I turn now to a matter which I have so far left out of account and which received a great deal of attention in the evidence. It is Mr. Saklaoui's evidence that on each of the pumps in each of the service stations there was placed a small sticker upon which was displayed the BP shield with the letters BP inside it. In the course of his evidence there were tendered photographs of pumps at the various sites which show these stickers affixed to the pumps. The stickers are comparatively small being no more than about five centimetres (two inches) square in each case. The photographs upon which Mr. Saklaoui relies were taken on 18 and 19 May 1987 after the application in this matter had been filed. It is Mr. Saklaoui's evidence that stickers of this kind have been placed on each of the pumps on each of the sites during the whole of the period that he has occupied the service stations. This evidence is strongly contested by BP which has submitted that their presence on the pumps on 18 and 19 May 1987 was for the purposes of this litigation. Its case is that the stickers were placed there dishonestly by Mr. Saklaoui in order to overcome the problems with which he was confronted by para. (a) of the definition of franchise agreement in the Act. The matter is of some importance and it is necessary to go to the detail of the evidence about it.
As mentioned, in the early years of the relationship, the Territory Manager for the area in which the service stations were was Mr. Ryan. Mr. Ryan died in 1985. The negotiations which occurred in 1982 and 1983 were conducted partly by Mr. Jowett and partly by Mr. Ryan. According to Mr. Saklaoui, there was a substantial interval between his original discussions with Mr. Jowett which eventually led to his use of the mark EM-ES, and BP's decision to allow him to go ahead. Some time towards the end of 1982 he asked Mr. Ryan what the position was and he told Mr. Ryan that he proposed to ring Mr. Jowett to ask him what was happening. Mr. Jowett said, "We're having a bit of a problem with the TWU (the Transport Workers' Union). This is the first time that we've ever been involved in delivering BP fuel to a site marked with a different brand. That is why it's going to take a bit of time."
On the day the signs were being installed at the Punchbowl Road premises, Mr. Ryan attended. Mr. Saklaoui asked him whether the drivers, who were members of the union, were "all right". According to him, Mr. Ryan said, "We are having a bit of difficulty with the tanker drivers, because if the tanker drivers come out here and see the signs EM-ES they will not drop the fuel." Mr. Saklaoui asked him what was to be done and, so Mr. Saklaoui said, Mr. Ryan suggested that they put "little stickers on the pumps to cover ourselves." Mr. Saklaoui asked where the stickers were to come from. The two walked into the showroom. Mr. Ryan pointed to a packaged one litre oil container. Attached to it was a label which included the BP shield. Mr. Saklaoui peeled a label from the container, cut the shield from it and stuck it to the pump. According to him, Mr. Ryan said, "That is perfect." Mr. Saklaoui thereupon put stickers on the other fuel pumps on the site. It is Mr. Saklaoui's evidence that thereafter BP stickers were always attached to each of the pumps, not only on the Punchbowl Road site, but also on each pump on each of the leased sites and on Mr. Nader's site at Belfield. He acknowledged that from time to time stickers lost their adhesion and that there might have been short intervals when, for this reason, there was no sticker on a particular pump. But he said that by and large the stickers were usually attached to each pump on each site throughout the whole period which is involved. There is no issue between the parties that such stickers have been fixed to pumps at the four leased sites and Mr. Nader's site since 18 and 19 May 1987 when the photographs were taken. But BP disputes the presence of them in earlier years and contends that no stickers were on the pumps prior to the commencement of this litigation.
A number of BP representatives were called. None could remember seeing stickers of this kind prior to 1987. Mr. Jowett said that he knew nothing about the matter at any relevant time. Mr. Ryan could not be called. Thus the only evidence of what occurred at the commencement of the relationship in 1982 is that of Mr. Saklaoui. There is, however, some additional evidence which was called in the EM-ES case which, if accepted, would tend to corroborate him.
Mr. McIntyre is a director of a company, Southern Cross Petroleum (NSW) Pty. Limited, which is involved in the distribution of bulk supplies of motor fuel. He has been involved in the service station industry in various capacities for a number of years. He knows Mr. Saklaoui. Mr. McIntyre said that his association with him began when he was the owner of the service station in Punchbowl Road. Mr. McIntyre visited the service station on a number of occasions, not as a customer, but for the purpose of business discussions with Mr. Saklaoui who sought his advice in connection with matters related to the industry.
Mr. McIntyre remembered the installation of the EM-ES signs both on notice boards and on pumps. He said that, apart from these signs, he saw that there were displayed a number of BP marks and insignia of BP. He referred to a display of products bearing BP marks, presumably oil and kerosene. He also saw BP stickers on the petrol pumps and on products that were for sale in the shop. He said that, because of the affixing of the BP marks to the pumps, he believed that the motor fuel sold on the premises was fuel supplied by BP. Mr. McIntyre has not visited any of the four leased sites of Mr. Nader's site and gave no evidence of having seen BP marks attached to any of the pumps at these sites.
In his oral evidence Mr. McIntyre said that he visited the Punchbowl site in 1983 and on later occasions through to 1985. He said the BP stickers on the pumps were less than five centimetres square. He did not remember noticing every pump, but assumed they were on each pump. In the course of his cross-examination Mr. McIntyre said that he could not say for sure that each pump had the mark on it but said that it was "required under the T.W.U. regulations that every dispensing pump has the insignia on it." Mr. McIntyre said that he had not seen BP marks on pumps of the leased service stations because he had only driven past them. He said that it would be impossible to see them if one were only driving past. He said that he believed that if union drivers were continuously delivering a reasonable quantity of fuel into a service station, they may not continue to search for any mark or label showing the origin of the fuel. Mr. McIntyre also said:-

"I could not really say whether it has fallen into disuse or not. I know that it was, from the time it started supplying freehold sites or arranging supply for freehold sites the TWU were quite vigorous and that was from round 1980/81 through to probably about 84/85 but our growth in sites when they were making the original insistence stopped around about

84. We were not supplying extra sites at that time because of the lack of competitiveness and the prices we were able to offer. But I can only say that it was a very vigorously followed practice from 1980 through to about 83/84."

Mr. Wijesekera is employed by AMEV Finance Limited. He resides in Punchbowl and he purchases petrol at the EM-ES service station in Canterbury Road, Belmore. He has been a customer of the service station for the last two years and purchases petrol there about once each month. In addition to the EM-ES signs he has seen BP signs. One of these was a large banner attached to the canopy of the service station bearing the words "BP Visco". He said that he had also noticed BP signs attached to the pumps. In his oral evidence Mr. Wijesekera said that the petrol pumps had affixed to them on the top lefthand side stickers with the BP sign on them. He said they were about two inches square.
Mr. Wijesekera said that on one occasion upon which he visited the service station he saw there Mr. Stojanovic who is the solicitor for the applicants. Mr. Stojanovic was inside the service station and spoke to Mr. Wijesekera when he came to pay for his petrol. He asked him when he first remembered seeing stickers on the pumps. Mr. Wijesekera said ". . . I cannot confirm what actual dates are actually, I can confirm about nine months ago I started noticing the stickers. But before that it is only a vague memory and I cannot confirm."
Neither party called any official of the union to give any evidence of the practice which was said to have been the reason why the stickers were attached in the first place. Although I think it would have been helpful to have this evidence, it would have been available to each of the parties and no criticism can be made of either one of them for failure to call it. In those circumstances I am persuaded by Mr. McIntyre's evidence that in 1983 and perhaps 1984 there was a problem of the kind he mentioned which may have led to the necessity in those years of placing some mark on pumps not bearing the petrol company's name showing the origin of the fuel in a service station's tanks. But Mr. McIntyre was only able to speak of the position at the Punchbowl Road site which has long since been sold. He could not speak one way or the other of the position at any of the leased sites although it would be open to one to infer that the existence of the practice would have led to the stickers being used at those sites also. However, Mr. McIntyre substantially qualified his evidence when he said, in the passage I have quoted from it, that the union may have become used to the fact that the motor fuel being delivered to the sites was BP fuel and not worried about the matter any further. So Mr. McIntyre's evidence is really not of great assistance to the EM-ES case. Mr. Wijesekera has no real recollection of matters before the middle of last year, that is, at a time after the litigation commenced as to which there is no issue. Thus his evidence does not help the EM-ES case either.

The only other witness called in the applicants' case was a Mrs. Sweep who is an accountant employed by EM-ES. She has been employed by Mr. Saklaoui for 12 or 13 years and has been acting as his accountant for six or seven years. During that time she has been in private practice. She visits the EM-ES office twice a month. My understanding is that the office is not at any of the service station premises so that her opportunities to observe marks and signs at the service stations may not have been great. She was not called to deal with this matter, but for another purpose which need not be mentioned here. Thus she was not asked about any observations she had made of the get-up of the service stations and the signs and marks on them.
There were witnesses whom it is reasonable to think might have been called in the EM-ES case about this matter but who were not. These include Mr. Nader and a Mr. Hannah who is an employee of EM-ES and who is mentioned in the evidence from time to time. In addition to Mr. Nader and Mr. Hannah, there must have been other persons in Mr. Saklaoui's or EM-ES' employ who are familiar with the service stations and the signs and marks on them. The absence of these persons from the witness box strongly suggests that nothing they could have said would have been of assistance to the applicants' case.
As I have mentioned, a number of employees of BP gave evidence to the effect that they had not seen the stickers on the pumps until some time last year. They had to concede that, on their visits to the service stations, they were not particularly looking for the stickers and may have failed to observe them. But it seems to me to be significant that no one noticed them. Furthermore, there are in evidence photographs of the sites taken in the course of a survey of all BP outlets. None of the pumps in any of these photographs bears a BP sticker. There is also a video in evidence. It was filmed by one of the television stations for its news program. The pumps are shown at a distance but it does not appear that there is any sticker on any of them.
Having considered the entirety of the evidence which there is about the stickers on the pumps, I have reached the conclusion that I should reject Mr. Saklaoui's evidence of their continuous presence on the pumps from 1984 through to the present time. I think Mr. McIntyre's evidence warrants the conclusion that stickers may have been placed on the pumps at Punchbowl Road for industrial reasons in 1983, but I am not persuaded by that evidence that I should draw the inference that they were placed on the pumps at the four leased sites or Mr. Nader's site at Belfield. If there were a period during which the stickers were attached to the pumps at these sites, I am satisfied that it must have been comparatively short. It follows that until some time shortly before May 1987 there were no BP stickers on the pumps. Those that were placed there after the beginning of 1987 were placed there for the purposes of the case and without the authority of BP. I conclude, therefore, that the stickers play no part in the consideration of whether the applicants have brought themselves within para. (a) of the definition of franchise agreement in the Act.
There is one matter which remains to be mentioned. There is some evidence of the need to repair a panel on one of the petrol pumps at one of the sites and of the repairer unwittingly replacing the damaged panel with one which bore the BP shield. Mr. Saklaoui would not admit the repairer when he went back to replace the panel with one which did not carry the BP letters.
The question is whether the totality of the matters relied upon by counsel for the applicants leads to the conclusion that BP authorized, permitted or required EM-ES to use the BP mark in connection with the retail sale of motor fuel by it at the various premises. The predominant sign used at each service station in connection with the retail sale of motor fuel has at all relevant times been the EM-ES sign. If one leaves out of account the stickers as I have concluded one should, each of these service stations is one which is prominently marked EM-ES and which has petrol pumps upon which the mark EM-ES is prominently displayed. No other mark appears thereon. The question is whether the fact that there were a number of BP products at each service station other than motor fuel makes any difference. The products were principally two stroke fuel, oil of various kinds and kerosene as well as some other products sold in the shops. I do not think that it could be correct to conclude that the presence on the premises of BP products other than motor fuel leads to the conclusion that the BP marks on those products are in some way used in connection with the retail sale of motor fuel. The sites themselves and the pumps from which the motor fuel comes are so prominently marked with the EM-ES name that no one could reasonably conclude otherwise than that the only mark used in connection with the sale of motor fuel is the EM-ES mark.
There is then the get-up of the service stations. I have already expressed a view about this. I think the argument on get-up fails at the outset because the EM-ES stations are plainly distinguishable from BP stations partly because the EM-ES signs are so prominent and partly because the colour schemes of the two, when considered overall, are substantially different.
That leaves the submission that the EM-ES mark was really a BP mark. I have considered the evidence given in relation to this matter. The most important evidence is of the conversations had by Mr. Jowett and Mr. Saklaoui in the early stages of the parties' relationship. There is not a substantial conflict between the two as to what was said. In my opinion it is clear that the upshot of these conversations was that Mr. Saklaoui would become an independent dealer and, in the joint interests of the parties, thus be able to have more freedom to discount prices than he would have had if he had remained a BP dealer. The fact that the idea, as the earlier quoted memoranda tend to show, may have come from Mr. Jowett and may have been something which BP strongly supported is not to the point. The two made an arm's length business deal. This led to the various agreements which were entered into over the years culminating in those which were signed on 17 April 1986. I bear in mind that s. 7 of the Act provides that the Act applies notwithstanding any agreement to the contrary, but I should also bear in mind that it provides as well that nothing in the Act shall be taken to affect the operation of an agreement to the extent that the agreement is capable of operating consistently with it. On the findings I have made, there is no basis for the conclusion that the five service station sites were in reality masks or disguises for BP sites. I reject the submission made by counsel for the applicants to this effect. The deal was a perfectly straightforward business deal between two independent persons. The manner in which the deal was implemented over the years was consistent with the provisions of the agreements. In particular it was consistent with clause 2(g) of each of the volume allowance agreements and clause 2(xxi) of each of the leases which precluded EM-ES from marketing motor fuel under the BP mark. That, in my opinion, is precisely how the EM-ES business was conducted. The agreements are not at all in conflict with the parties' subsequent course of dealing or oral arrangements. It follows that the applicants have not established that they are franchisees because they are unable to bring themselves within the provisions of para. (a) of the definition. Mr. Nader, as I have earlier found, had the threshold difficulty of bringing himself within para. (b) as well. It follows that the declaration sought by the applicants will be refused.
Temporary Price Assistance Agreement
In order to understand the cases of the parties in relation to this matter it is necessary to state the background of what is known in the industry as temporary price assistance, or, as Mr. Saklaoui calls it, "support". It is to be distinguished from the volume allowance which was provided for in the volume allowance agreement made in respect of each of the service stations. In the way that BP administered its temporary price assistance scheme prior to 30 December 1985, when EM-ES contends that a different agreement was made, the grant or refusal of assistance was within the discretion of BP. Usually it was not granted to a service station operator who was not a BP dealer but from the inception of the arrangement made between Mr. Saklaoui and BP, temporary price assistance was regularly, although not continuously, made available. The reason for this was the aggressive competition which has always been a feature of the area in which the service stations are situated and to which I have referred earlier. In the words of some of the documents it was a "price sink". This is not to say that temporary price assistance was not at times made available to service station operators in other parts of the metropolitan area of Sydney and in certain other centres in New South Wales.
When temporary price assistance applied, the volume allowance payable under the volume allowance agreement became subsumed in the temporary price assistance figure. The starting point for an understanding of the scheme is the list or wholesale price of petrol at any given time. As I understand it, BP first of all decides whether it is prepared, during a given period, to make temporary price assistance available at all. If it is, it informs its territory managers on a daily basis, of the maximum level of price assistance which they can offer in particular areas. A consequence of this is that there results a "bottom" wholesale price. But this is not usually communicated to any of the dealers, although occasionally it is. BP thus reserves to itself the question whether price assistance will be granted at all and, if it is, the maximum amount of it at any given time. Another factor that is sometimes taken into account is the anticipated cost per litre of operating a service station over and above the cost of acquiring the fuel at whatever wholesale price applies. For a service station to break even, that is, neither to make a profit or a loss, there is a recognized figure calculated out at cents per litre which provides a guide to BP and its dealers of what the dealers need to charge by way of retail price in order to break even.
If, in a particular area, the market is stable at or about prices which enable the dealer to make a profit at the ruling wholesale price, it is unlikely that temporary price assistance will be granted. But in the area in question this was rarely the case. On the evidence the independent stations Solo and XL have continuously applied an aggressive marketing policy by reducing their retail prices well below what the petrol companies (the "majors" as they are referred to in the evidence) have regarded as economic. For a dealer to stay in business the price charged by the independents has to be met or at least closely approached. The way this is done is to provide the dealers as necessary with temporary price assistance for as long as it is reasonably needed in order that they may match the independents' prices. Sometimes the companies deliberately go underneath the independents' prices with a view to forcing them up and sometimes they will take away the assistance or substantially reduce it in an attempt to force the market up. The game which is played involves a large number of tactics, some of which are described in the evidence. The statement I have made of the scheme is no doubt superficial, but it is sufficient for the purposes of this case. It is to be emphasized that the three important elements of it are the discretion of BP to make temporary pricing assistance available at all, the level of that assistance at any given time, and the existence of a bottom price below which its territory managers are not authorized to provide assistance. There is a qualification to be made to the last element. There may be special circumstances in which a particular territory manager will be authorized to grant assistance at a level below the ruling bottom price but he does not have authority to grant it without first referring the matter to his superior.
It is the applicants' case that, so far as they are concerned, all this changed on or about 30 December 1985 when an agreement was made during a discussion between Mr. Saklaoui and Mr. Jowett over dinner at a restaurant in Redfern known as Dimitri's. It is BP's case that no agreement was made that evening but that matters discussed at the meeting became the basis of an agreement which was approved in February 1986. The question whether there was an agreement made at the meeting or a month or so later is not important. Both sides agree that an agreement was reached. The difficult question is to determine what the terms of the agreement were. The agreement is entirely oral. Mr. Saklaoui asked that it be put in writing but temporary price assistance agreements are never written down. For policy reasons they are always made orally.
It is the applicants' case that the agreement which they contend was made at the end of December 1985 resulted in a situation in which EM-ES was always entitled to price assistance when the market was such that the prevailing retail selling price was below a figure made up of the ruling wholesale price, less the four cents discount payable under the volume allowance agreement, plus a margin of 2.75 cents per litre to allow for operating costs. Thus if the ruling wholesale price were 52 cents per litre and the prevailing retail price in the area 42 cents per litre EM-ES was to be entitled to purchase motor fuel from BP at 39.5 cents per litre, not 48 cents per litre which would be the case if one had regard only to the volume allowance agreements.
It is now appropriate to go to the evidence of the conversation which occurred over dinner at Dimitri's. What was said during that conversation has to be understood against the background that it is common ground between the parties that up to that time the discretionary elements of temporary price assistance to which I have referred had always been present in their dealings. Indeed, BP's insistence on them had been the subject of continual complaint by Mr. Saklaoui. In Codelfa Construction Pty. Limited v. State Rail Authority of N.S.W. (1982) 149 CLR 337 Mason J. (as he then was) said (p. 352) that prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. One objective background fact is the parties' previous course of dealing.
The immediate background to the discussion at Dimitri's was the fact that leases granted EM-ES and Mr. Nader were due to expire at the end of that year. In order to preserve its position BP gave notices terminating the leases and the volume allowance agreements in November 1985. BP did not do this because of any particular complaint about the way the service stations were being run; it simply wished to be in a position to resume possession of the sites - except, of course, Mr. Nader's site - in the event that the negotiations were not successful.
Mr. Saklaoui's account of what occurred at Dimitri's is in para. 22 of his principal affidavit and is as follows:-

"Sometime in early 1986 (this is a mistake) I had dinner with Peter Jowett of the respondent at a Restaurant known as Dimitri's at Redfern. During the course of the dinner, I had a conversation with Peter Jowett in the following word or words to their effect: Peter Jowett said 'What do you want?' I said 'I will accept four cents on the top but we need support at the bottom level because we are not making money. What would it cost a company operated site to run, it is about 2.75 cents per litre isn't it?' Peter Jowett said 'Yes that is right' He then said:

'No we will give you a four cents per litre rebate off the top and we will give you a reducible level of price assistance according to how far the price goes down and it will start at three cents per litre to a maximum of 1.8 cents per litre at the bottom level. It doesn't matter about what the bottom level is you will be guaranteed 1.8 cents per litre once you hit bottom level.' I said 'Instead of going through changes of price all the time and causing so much paper work we don't want the three cents we don't want below 2.5. It will be to your advantage and my advantage to cut down the paper work why don't you give us 2.5 all the time when support is needed.'

Peter Jowett said 'O.K. that should be all right.'"

Mr. Saklaoui said that the agreement made at the meeting was not reduced to writing. He said that he did not expect that it would be because Mr. Jowett had told him that BP would not put that part of their agreement in writing. It was to be a "verbal understanding".
Mr. Jowett's account of the conversation is to be found in para. 45 of his principal affidavit. Before the meeting at Dimitri's, there had been earlier discussions in which one suggestion made had been that the BP owned sites revert to BP dealer sites. Mr. Jowett said:-

"After some initial conversation the discussion turned to EM-ES future with BP and words to the following effect were spoken: He said:

'Warren Wells (a solicitor) has told me not to accept your current offer to revert to BP branding specifically because of the goodwill you are asking for. I should pay nothing for the goodwill.'

He also said:

'the proposed rental at lakemba is too high.'

I said:

'come on - are these the only two problems you have got.' He said:

'I do not want BP branding as I have invested a lot of money, expertise and effort in achieving my current market position. When I read the letter of termination it hardened my attitude. The legal advice I have been given supports my view in not accepting your offer. I will remain under the EM-ES brand for two years and accept the reduced rebate figure for an improved rebate at the bottom.'

I understood that Saklaoui, in referring to 'improved rebate at the bottom' was referring to the margin he received (at that time 2 cents per litre) at bottom of the TPA scale when BP was offering EM-ES Temporary Price Assistance.

He also said:

'I need two years as a minimum term to allow me to keep the workshop viable.' I said:

'we can offer a number of options - 4 cents per litre with 2.5 cents per litre as a bottom margin when price support is offered. Alternatively 3.5 cents per litre as a volume allowance with 3.0 cents per litre as the bottom margin when price support is offered. The Belfield site could remain at a volume allowance rebate of 4 cents per litre.' We then discussed the manner in which the relationship in which BP and EM-ES would be conducted in the event that the sites were reverted to BP signalisation. I said: 'as a POSS (Privately Owned Service Station) site we will sell you fuel at, say, 4 cents per litre below list price. What you do with the margin is up to you. If you are a BP branded site we will sell fuel at the list price unless price support is being offered.' The discussion then reverted to the terms of a new Volume Allowance agreement between BP and EM-ES. After some discussion Saklaoui said:

'I would prefer to take your first offer of 4.0 cents per litre volume allowance with 2.5 cents per litre as a minimum margin of support.' I said:

'OK - we should delay the proposed change over from 1 February to 1 March so that I can discuss this with Ken Bangs when we get back from leave at the end of January.'

He said:

'O.K.'

Later in the course of our conversation he said:

'I want the price support scheme to be put into writing.'

I said:

'Look you know we can't do that we do not put the price support scheme in writing as it is purely at our discretion as to whether it is granted or not - you know that.'

He said:

'that is not very good it leaves me with no protection.'

I said:

'We can't do any more, that's the way it is.'

I say that in the course of a number of our previous conversations I had discussed the nature of Temporary Price Assistance with Saklaoui. On each of those occasions I said to Saklaoui words to the effect: 'Price support is given at the complete discretion of BP. There will be occasions when we can simply not offer to go any lower or when we have got supply problems. Sometimes it simply will not be available.'

With respect to paragraph 22 of Saklaoui's affidavit I deny that I said the words: 'It doesn't matter about what the bottom level is you will be guaranteed 1.8 cents per litre once you hit bottom level' attributed to me in the sixth sub-paragraph. I also deny that the words in the seventh and eighth sub-paragraph were said by Saklaoui and myself."

Mr. Jowett's superior was Mr. Bangs who was the State Marketing Manager for New South Wales. Mr. Jowett said that he obtained Mr. Bangs' approval to the proposal put by Mr. Saklaoui. This led to the new volume allowance agreements being entered into on 17 April 1986. These are the agreements referred to at the outset of this judgment. They provided for rebates of four cents per litre for motor spirit, five cents per litre for diesoleum and 35 cents for lubricants. The agreements were for a period of two years commencing on 1 March 1986 and ending on 29 February 1988. As mentioned, leases were also entered into in respect of the four leased sites.
On 31 December 1985 Mr. Jowett made a record of the background of the matter and of the discussions had the previous evening with Mr. Saklaoui. The record is in Mr. Jowett's handwriting and is written out on the back of some used computer printout paper. I have earlier referred to some of the contents of it. The note of the conversation refers to the fact that Mr. Saklaoui did not want "BP Branding". He said, "Our original letter of termination was a telling factor in his hard line attitude, and the subsequent legal advice had turned his attitude. One comment was that he would not be required to pay legal fees should the case not be won on his behalf." As I understand the the purport of these statements, it was that Mr. Saklaoui was originally pessimistic about the consequences of the notices of termination, but changed his mind after receiving legal advice from Mr. Wells. Mr. Jowett's note continued:-

"Eventually Michael (Mr. Saklaoui) indicated that his preference was to remain under the EMES Brand for a two year period and would accept a reduced volume allowance figure (currently 4.5 cpl) for an improved concession at the bottom (currently 2.0 cpl). Note two years was considered a necessary tenure to allow him to invest further. Several options were mentioned. 4.0 cpl on top with 2.5 cpl as bottom margin &, 3.5 cpl & 3.0 cpl. Further, an offer was stated that Belfield would be committed at current level of 4.0 cpl.

Discussion reverted to likely operation under BP Branding & the distinct possibility that price support would not be forthcoming at the very instant to suit EMES & consequently the foreign fuel option & the assignment to other undesirable operators were options to which we could face.

The likelihood of ultimate court action is very real & although it is not necessary to walk away, the final action should be considered carefully."

Mr. Jowett went on to list advantages and disadvantages for and against a return to the BP brand and concluded his record as follows:-

"It is felt that we delay the proposed changeover from 1/2/86 to 1/3/86 to allow discussions between State Mgr (Mr. Bangs) & myself on the return of both parties from leave on 28/1/86. In the meantime a financial assessment can be made of the several options presented by EMES (something concrete to which we have agreement) & a comparison against several scenarios under BP Branding."

Mr. Jowett was extensively cross-examined by counsel for the applicants in relation to this record. Much was made of the fact that there is no reference in it to any discretion of BP to determine whether temporary price assistance would or would not be available at any given time. Mr. Jowett's response to this was that this was how the parties' dealings had always been conducted and that it was tacitly understood that there would be no change in the way temporary price assistance had been administered in the past. BP would continue to have a discretion and there would always be a bottom price, something that is referred to in the memorandum. At one stage Mr. Jowett said:-

"The fact of the matter is that throughout our relationship now of three years old at that stage that the subject of discretion through practice and through conversation have been spoken about many times. I did not make a specific file note about it but I remember after seeing Michael's affidavit . . . where he wanted it to be put in writing jogged my memory so that I put it into the affidavit and clearly at that time when he asked could he put it in writing, I took the opportunity to again to repeat the discretionary aspects of price support."

In my opinion the significance which the omission of reference to a discretion might have had for the applicants' case is largely lost because of statements made in Mr. Saklaoui's own affidavit. Towards the end of para. 22 of his affidavit which I have quoted above, Mr. Saklaoui attributed to himself the words, " . . . why don't you give us 2.5 all the time when support is needed?" In the following paragraph, when explaining why there was no written agreement in relation to temporary price assistance, Mr. Saklaoui said that there was no written contract in relation to the agreed margin of 2.5 cents per litre "when assistance applied but I did not expect to receive any such document . . . " In my opinion the use by Mr. Saklaoui in his own affidavit of the phrases "when support is needed" and "when assistance applied" strongly suggests that he recognized all along that the negotiations were being conducted only as to the amount of the volume allowances and the amount of the temporary price assistance. They were not being conducted in relation to any change that was to come about in the way in which the parties were to do business in the event that agreement was reached about these figures. So far as a bottom price is concerned, Mr. Saklaoui's evidence refers expressly to it. At two points in his account of the conversation with Mr. Jowett he attributed to Mr. Jowett the expression, "bottom level". Furthermore, reference to it appears in Mr. Jowett's contemporary record of the meeting. And there is the fact that the parties' dealings down to that time had always been conducted upon the basis that BP fixed a bottom price from time to time below which temporary price assistance, if it were otherwise available, would not be paid.
Having considered the evidence of the two witnesses, the surrounding circumstances, particularly the parties' previous course of dealings, and the probabilities of the matter, I have reached the conclusion that the agreement which was made when Mr. Jowett communicated approval of it to Mr. Saklaoui reserved to BP a discretion whether to make temporary price assistance available or not and the amount of it, and a discretion to fix from time to time a bottom price below which assistance would not be available. What was therefore involved in their agreement was that there would be the volume allowance provided for in the volume allowance agreements and that, if BP decided to make temporary price assistance available, it would be available up to a payment which would yield a wholesale price to EM-ES of 2.5 cents per litre below BP's prevailing bottom price.
The acceptance of the applicants' case would involve a finding that Mr. Jowett had given Mr. Saklaoui carte blanche to compete with other dealers in the area knowing that he could reduce his retail price to any figure at all. To conclude that such an agreement was made would run counter to the inherent probabilities of the matter. Mr. Saklaoui was a renowned discounter. An agreement of the kind he claims was made would have had BP at his mercy. It would have put him in a position to lead the market down to any level knowing that he was entitled to supplies of fuel at list prices set at 2.5 cents per litre below whatever retail price he liked to fix. Mr. Jowett is an experienced executive familiar with the industry and with Mr. Saklaoui's way of doing business. There was no reason for him to enter into the agreement Mr. Saklaoui says was made. I am satisfied that he did not.
It follows that the issues concerning temporary price assistance are resolved adversely to the applicants. It will be necessary for any amount to which the applicants are entitled under the agreement or arrangement I have found to exist to be quantified. I understand that there is likely to be agreement about this, but if not, the matter will have to be determined at a subsequent hearing.
Trade Practices Act
The issues raised by the claim based on breaches of s. 52 and certain of the other provisions of Part V of the Trade Practices Act concern the temporary price assistance agreement and not the question of franchisee. It was contended by counsel for the applicants that the absence of any mention of there being a bottom price by Mr. Jowett in his discussion with Mr. Saklaoui at dinner on 30 December 1985 led to the conclusion that he had engaged in misleading or deceptive conduct for which his employer, BP, was responsible. In the words of the submission, "what was deceptive was the fact that apparently Mr. Jowett must have had in mind this bottom limit and did not say anything about it. Thus, the effect of the submission is that Mr. Jowett concealed the existence of the bottom limit from Mr. Saklaoui. I do not believe that Mr. Saklaoui did not know that there existed from time to time a bottom limit. Furthermore, I do not accept that he did not understand that the negotiations with Mr. Jowett were carried on against the background that such a bottom limit existed. This is not to say that Mr. Saklaoui was always aware, at any given time, of what the bottom limit was. I am satisfied that he would not have been told of it on all occasions. It was not BP's policy that persons with whom it dealt should know what it was. On the other hand, I am quite satisfied that a variety of territory managers did from time to time indicate that there was a bottom limit and, at times, told him what it actually was. Furthermore, Mr. Saklaoui's own version of the conversation in para. 22 of his affidavit earlier quoted attributed to Mr. Jowett the words, "It doesn't matter about what the bottom level is, you will be guaranteed 1.8 cents per litre once you hit bottom level." Plainly Mr. Jowett was speaking of the bottom level fixed, at any given time, by BP.
For the reasons I have given I reject the submission that BP engaged in misleading or deceptive conduct of the kind alleged against it by the applicants.
Other Witnesses
In the course of reaching my conclusions I have made only fleeting reference to the evidence of a number of witnesses called in BP's case. I should say something about them. Firstly, there was Mr. P.M. Stephenson, who has been employed by BP for almost 25 years. On 1 July 1985 he was appointed Senior Territory Manager. Since 1 January this year he has been assistant to Mr. Jowett. He has acted as territory manager for the area in question here from time to time. Then there are the territory managers themselves. These were Mr. P.J. Moate, Mr. G.H. Williams and Mr. B.D. Gardiner. Additionally, there was Mr. G. McNee who was at one time the territory manager for the Bankstown area in which the Yagoona service station is situated. Each gave evidence of the way in which the various stations had been conducted during the years 1984 to 1988 and of conversations and dealings with Mr. Saklaoui and Mr. Hannah. Upon the issues which have been submitted for determination, I accept generally the evidence each has given. Each impressed me as an honest witness endeavouring to recollect events to the best of his ability. I found the recollections of each witness reliable. To the extent that there is conflict between their evidence and that of Mr. Saklaoui I prefer their evidence, but I have not found it necessary to go to the detail of the few conflicts which there are because I have thought the most relevant evidence is that to which I have referred when dealing with the issues. I wish to emphasize that what I have said in relation to the reliability of these witnesses relates to the issues which were before me for decision. There is an outstanding question, which may need to be determined in separate proceedings, whether Mr. Saklaoui, or those employed by him, were always honest and accurate in statements made by them in written claims for temporary price assistance. That is not a matter which is before me for determination although, in the course of the evidence, some reference was made to it. I emphasize that nothing I have said about the reliability of the witnesses called by BP is intended to relate to their reliability in relation to that matter. It is not a matter about which all relevant evidence has yet been tendered, and, in any event, neither counsel made any submission about it because it would not have been appropriate for them to do so.
Guns
Mr. Saklaoui apparently has a licence to have in his possession one or more pistols. At one of the premises there is also a shotgun. A number of the BP witnesses complained of apparent threats made to them in the course of their dealings with Mr. Saklaoui when he displayed or handled firearms in their presence. The evidence about these matters was objected to on the ground that it was not relevant. I admitted the evidence subject to relevance and I think that it does have a background relevance to the matters which have had to be decided. Nevertheless, I think that relevance is marginal and I have not had regard to it in determining the various matters which were in issue. Normally, I would not therefore have mentioned the matter at all, but evidence of what Mr. Saklaoui is alleged to have done raises, in my opinion, serious questions whether Mr. Saklaoui has or has not engaged in criminal conduct in the past and about his fitness to hold a licence for a pistol. Mr. Saklaoui denied each of the allegations made against him. I do not refer to them all. I give some examples. Paragraphs 11 to 14 inclusive of Mr. Gardiner's affidavit are as follows:-

"11. In or about September 1985 I recall sitting in Saklaoui's office with another BP Territory Manager, David Hayward. We were talking with Saklaoui whilst there were a number of other persons of Lebanese appearance also in the office. On entering the room I had observed a shotgun leaning against a temporary wall. During the course of the conversation somebody outside the office struck the wall causing the shotgun to fall to the floor. As the shotgun fell it hit the floor pointing towards David Hayward and myself.

12. On another occasion I recall sitting in Saklaoui's office discussing pricing with Saklaoui and Joe Nader. Saklaoui was sitting at his desk and playing with his pistol whilst he was talking. During the course of the discussion he raised his arm pointing the pistol to the ceiling and then slowly lowered it until it was level with my shoulder. As he lowered the weapon he said:

'Any support Mr. Gardiner, any support?' I stood up to leave and said words to the effect:

'Stop playing around. If you're going to talk like this I'm going.' Saklaoui said:

'It's not loaded. See?' As he said that he pointed the pistol at Joe Nader's groin and pulled the trigger. There was a loud click but the weapon did not discharge. Joe Nader became visibly upset and angry and stood up as if to leave. I left the room as soon as possible thereafter.

13. On another occasion I was talking to Saklaoui in his office with Peter Hanna. In the course of the conversation Saklaoui said words to the effect:

'I've got a hit man - he does things for me.'

Saklaoui then spoke in a language I recognised as Lebanese. A very large man then came into the room at which point Saklaoui said:

'I have someone here for you - Mr. Gardiner.'

14. In early 1986 whilst Saklaoui was overseas Hanna said to me words to the effect:

'Michael is getting a golden bullet made for you.'"

On 13 June 1986 Mr. Gardiner prepared a memorandum for Mr. Jowett about incidents dealing with firearms. I do not set it out but it needs to be considered along with what Mr. Gardiner has sworn. Counsel for the applicants pointed to the use by Mr. Gardiner in the memorandum of the words, "idle threats" and "idle chatter". However, I think these expressions need to be read in the context of what else is said in the memorandum and I do not think the use of them by Mr. Gardiner takes away any of the effect of the evidence he has given in the paragraphs of his affidavit which I have quoted.

In his affidavit Mr. Moate said in paras. 23 and 24:-

"23. Regularly, when I visited him (Mr. Saklaoui) at his office, I would see or be shown guns. On many occasions, whilst talking to Saklaoui in his office, he would remove a pistol he carried from its holster and either place it on the desk or play with it whilst he spoke.

On occasions Saklaoui would point a pistol at me and say: 'This ones for you.'

24. On one occasion I was standing at the BP Penshurst service station talking to its operator Robert Khoury. Whilst I was talking to Khoury I felt something stick in my side. I turned around and saw Michael Saklaoui standing next to me with a pistol in his hand. I observed that it was the pistol that I had felt pushed against my body."

Mr. Moate said that he uttered an expletive. His affidavit continued:-

"He (Mr. Saklaoui) said: 'It just shows you how easy it can happen.'"

There can be no question but that Mr. Jowett and other more senior executives of BP knew of the general nature of the complaints which were being made by members of the field staff about the use of firearms by Mr. Saklaoui. Certainly they must have become aware of the position when Mr. Gardiner's memorandum was received in June 1986. I confess that their reaction to what was being said is disappointing to say the least. No independent investigation of the complaints appears to have been made nor was any of the incidents reported to the police either by the field officers themselves or by any more senior executive. If the evidence of the witnesses were accepted at its face value, there would be a question whether Mr. Saklaoui has been guilty of serious criminal conduct. Demanding money by menaces is one of the offences which comes readily to mind. Apart from criminal conduct, there is a serious question, if the allegations made be true, whether he is a fit and proper person to hold a licence for a firearm.

The relevant standard of proof of facts in a case such as this is proof upon a balance of probabilities; not proof beyond reasonable doubt. In determining whether to find serious allegations proved in a civil case one must take into account the nature of the allegations, the seriousness of the conduct alleged and the general considerations referred to by the High Court in Briginshaw v. Briginshaw (1938) 60 CLR 336. One must also bear in mind that, if the matter were being dealt with in the context of an allegation made in a criminal proceeding, an accused's state of mind becomes a very relevant factor. The tribunal of fact may not be satisfied that a person accused of crimes involving the use of firearms had the requisite state of mind and may therefore decide to acquit on that ground. It is irrelevant for me to enter into that area and I do not. All I say is that, on a balance of probabilities, not overlooking the considerations mentioned in Briginshaw v. Briginshaw, I am satisfied that the incidents referred to by Mr. Gardiner and Mr. Moate did occur.
I do not understand why BP did not have the matters investigated by the police at the time they were alleged to have occurred. Mr. Jowett could give me no satisfactory explanation and I am left to wonder whether the absence of any report to the police or other investigation was not associated with a desire on the part of at least some of the BP executives to do nothing which might inhibit the ongoing aggressive competitive conduct of Mr. Saklaoui in the area through which he has undoubtedly managed to dispose of a very large quantity of motor fuel during the years he has occupied the various sites. There may be a different explanation but the matter was raised squarely with Mr. Jowett and none was forthcoming.
In the circumstances these papers will be referred to the Attorney-General with a recommendation that they be referred in turn to the Attorney-General for the State of New South Wales for investigation by an appropriate authority whether there is evidence of any criminal conduct which warrants prosecution and whether Mr. Saklaoui is a fit and proper person to hold a licence for a firearm.
Conclusion
In the result the issues raised in the three paragraphs of the order made on 30 November 1987 are determined adversely to the applicants. I shall not today make any formal order. The matter will be stood over to a date convenient to counsel so that they may consider what I have said and make submissions both as to the form of any orders or declarations which should be made and as to what needs to be done in order to finalize the proceedings.

[1988] FCA 459

15 AUGUST 1988