Hudson, Raymond James v B.P. Australia Ltd

[1984] FCA 313

3,3

JUDGMENT No. .o.l.l.l ...,.,... I ,.,.l.,,.

IN THE FEDERAt COURT OF AUSTRALIA 1

)

NEW SOUTH W E S DISTRICT REGISTRY 1 No. G266 of 1984

)

GENE!RAL	DIVISION	)
RAYMOND JAMES HUDSON and BARRY F'REDERICK KURTZ

Applicants

m:

B.P. AUSTRALIA LIMITED

Respondent -

CORAM: FOX J.

m: 25 September 1984 ( E X TEMPORE)

REASONS FOR JUDGMENT

FOX J.

I am hearing an application f o r interlocutory relief

which is based upon the requirements of 5.17 of the Petroleum

Retail Marketinq Franchise Act 1980 ("the Act"). It is agreed by

the parties that if I take the view that a notice purporting to

have been given under that section is invalid, I may make an

order for final relief.

2.

The facts can be stated briefly. The applicants conduct

a service station in Ultimo, Sydney. The respondent owns the

land on which the business is conducted, and supplies petroleum

products to the applicants. The applicants held a lease of the

land from the respondent for	a term of three years which expired
on 31 July 1984.

The respondent had been considering the sale of the land

for some time. By letter dated 28 June 1984 it gave notice to

the applicants that it did not intend to renew the lease. The

letter is the notice to which I have referred earlier and it was

as follows (omitting formal parts):

“Re: Premises at 478-492 Wattle St., Ultimo“

Please take notice that our Company has decided not to

renew your Lease (franchise agreement) of the

abovementioned service station on the ground that our to sell its interest in those marketing premises to a

person not being an associate of our Company.

The facts relating to the ground upon which the

decision not to renew your franchise agreement are that

on 26th June. 1984 our Company entered into

negotiations with Mons Grove Developers Pty. Ltd. to agreement shall expire before the end of the ninetieth

sell the property and such negotiations are proceeding.

day after the receipt by you of this notice then

subsection ( 9 ) of section 17 of the Petroleum retail

CsicJ Marketing Franchise Act 1980 provides that the

term of your franchise agreement shall be deemed to be

extended until the end of that ninetieth day.

This notice also serves as a notice fixing the explry

date of your Lease for the purposes of sub-clause

5(viii) of that document.

Please note that if and when the terms of the Contract

for Sale are settled upon you will be offered BP’S

3 .

The general purpose and operation of the Act has been

dealt with in decisions of this Court (J.M. O'Brien Enterprises

Ptv. Ltd. v. Shell Co. of Australia (1982) 45 A.L.R. 81;

Chronopolous v. Caltex Oil Australia Ptv. Limited (1982) 45

A.L.R. 481; Richards v. Golden Fleece (1983) 49 A.L.R. 337).

Sectlon 17 relates to "renewal of franchise agreements". It is

common ground that the lease was a "franchise agreement": the

applicants being franchisees for the purposes of the Act and the

respondent a franchisor. I set	out	relevant	parts	of	the
section:

"17.(1) Subject to thls section, a franchisor shall

not fail or refuse to renew the franchise agreement

except on one	or more of the following grounds:
...

(c) in the case of a franchise agreement containing

provisions of the kind referred to in paragraph

(b) of the definition of 'franchise agreement'

in sub-section 3 ( 1 ) . the franchisor has, in

good faith and in the normal course of business

entered into agreement, an or

negotiations for an agreement. to grant

a lease of the marketing premises to

a

person other than an associate of the

franchisor for a use other than the

retail sale of motor fuel; or

entered into an agreement ,_ or negotiations for an agreement, (other

than agreement an containing a

provision having the effect of

prohibiting the use of the marketing

premises for the retail sale of motor

,

4

fuel) to sell its interest in the

marketing premises to a person other

than an associate of the franchisor.

(2) A franchisor shall not enter into an

agreement to sell its interest in the marketing

premises to	a .	person other than the franchisee
unless -

(a)

before entering into the agreement, the franchisor has offered the interest for

sale to the franchisee on terms that were

no less favourable to the franchisee than

the terms of the agreement with that

person; or

...

( 4 ) Where, before the xpiration of a

franchise agreement. the franchisor has, in the

manner described in paragraph (l)(c), entered into

negotiations for an agreement of a kind referred

to in that paragraph. the franchisor may, in lieu

of renewing the franchise agreement, extend the

term of the franchise agreement until -

(a) an agreement of that kind is entered

into; or

(b) the expiration of the period of 6 months commencing on the date on which, but for this sub-section, the franchise agreement

would expire,

whichever first occurs, or until such earlier time

as is agreed upon between the franchisee and the

franchisor.

...

(8) If a franchisor decides not to renew the

franchise agreement, it shall serve on the

franchisee, not later than 30 days before the

expiration of the agreement. notice in writing of its decision, setting out full particulars of the ground or grounds, including a statement of the

facts relating to each ground, upon	which	the
decision is based.

( 9 ) If notice is served on a franchisee under

sub-section (8) after the commencement of the

period of 90 days before the expiration of the

franchise agreement. the term of the agreement

shall be deemed to be extended so that it expires

I

5.

I	at the end of the ninetieth day after receipt	of
the notice by the franchisee.
...

(10) Subject to this section, a court shall,

on the application of a franchisee, make an order

directing the franchisor to renew the franchise

agreement unless -

(a) the franchisor has served on the

franchisee a notice in accordance with

sub-section (8);

(b) a ground specified in the notice is

established by the franchisor to the

satisfaction of the court; and

(c)

except where a ground so established is a the court is satisfied that it is just

l

and equitable, having regard to all the

circumstances, for the agreement and any

related agreement or agreements not to be

renewed. ”

The question is whether the letter of 28 June was a

sufficient notice for the purposes of sub-S. (8). It is common

ground that the reference in its opening lines is to para.

(cI(ii1 of s.17(1), and for the present purposes the sufficiency

of the notice is to be tested by reference to the language there

used.

The first, and I think insuperable difficulty in the way

of the franchisor is that the name used in the letter as the

company with which negotiations were taking place is wrong. The

respondent‘s officers thought that was the name of a company

represented by the individuals with whom it was having

discussions, but in fact there was no company of that name.

6.

There was a company called Monsgrove Pty. Limited, but the

difference, especially from the point of view of a recipient of

the notice, was not unimportant. The variance cannot be regarded

.	as simply a misdescription of the name of an existing company
recognisable as being without any reasonable doubt, the one

intended.

Subsection (8) has fairly strict requirements with

regard to the notices to which it refers. The notice has to set

out "full particulars" of the ground relied on "including a

statement of facts relating to each ground". The purpose or principal purpose is, as it seems to me, to give the recipient a full opportunity to investigate and test what is asserted, and to

decide its course of action accordingly. What exactly is

required will of course depend upon the circumstances, including

the particular ground relied upon.

The naming of a non-existent company would mean that the

franchisees would not be able to test the assertion that

negotiations were being carried on, or to approach the possible

purchasers concerning their own position. In relation to these

matters, they should not be left to speculate.

The applicants attack the notice on further grounds.

The submission is that it should have contained more than a	-
simple statement that negotiations for sale were being carried

on, and the name of the other party. I agree with this

I

I	7.
!
!

submission. Subsection (8) emphasises	the	need	€or full
information.

A requirement of sub-para. (c)(ii) is that the other

party should not be "an associate of the franchisor". It is also

necessary that the entering into "negotiations for an agreement"

should be "in good faith and in the normal course of business".

In my view the statement of facts which is required should at

least be sufficiently indicative of compliance with these

requirements. The franchisees were in possession and carrying on

business on the premises. They mightwell have been concerned

about their future, and as to the possible operation of

sub-ss. (Z), ( 4 ) and ( 9 ) . The stage which negotiations had

reached might also have been important to -them. The notice was

defective in regard to these matters. A further observation can

be made. The language of the sub-paragraph, having in mind in particular the words in parenthesis, suggests that negotiations

should have reached a stage where the terms of a particular

agreement are in contemplation, or at least where there is a

common understanding that it will not contain provision of the

nature referred to in the sub-paragraph. In sub-ss. ( 4 ) and ( 5 )

reference is made to agreements of the "kind" referred to in

para. (c) of sub-S. (l). The last-mentioned provision would

therefore seem not to be satisfied by negotiations the terms of

which are entirely at large; the negotiations must relate to

something more specific.

l	S.
!

I therefore declare that the letter of 28 June 1984 is

not a sufficient notice for the purposes of s.17(8), and I direct

. the respondent to renew the lease in accordance with the

provisions of the Act. I order the respondent to pay the

applicant's costs of this application. I give liberty to the

applicants to take out formal orders accordlngly, but otherwise stand the matter over with liberty to either party to apply on

three days' notice to the other for the purpose of any matter

arising under s.17(12) of the Act.