J & M O'Brien Enterprises Pty Ltd v The Shell Co of Aust Ltd

[1982] FCA 261

Re: J. & M. O'BRIEN ENTERPRISES PTY. LIMITED
And: THE SHELL COMPANY OF AUSTRALIA LIMITED (1982) 70 FLR 33
Nos. G134 of 1980 and G11 of 1981
Petroleum Retail Marketing Franchise Act 1980 - Trade and Commerce

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SYDNEY REGISTRY
GENERAL DIVISION
Fox J.(1)

CATCHWORDS

Petroleum Retail Marketing Franchise Act 1980 - Application for Renewal of Lease - Lease expiring before Notices complying with Act could be given by Lessor - Effect of transition provisions - Notices given for later date - Whether grounds established - Whether just and equitable to make Order.

Petroleum Retail Marketing Franchise Act 1980 Sections 3(1), (2), (4), (4)(b), 6(1), (2), (4), (6), 11, 13, (2), (3), (4), (7), 16(1), (2), (2)(b), (2)(f), (2)(j), (3), (4), (6), (7), (8), 17(1), (1)(a), (2)(b), (3), (4)(a), (8), (9), (10), (11), (12), (14), (15), 18, 20, 21(4), 24(1).

Trade and Commerce - Petroleum Retail Marketing Franchise Act 1980 (Cth) - Franchise agreement - Applications for renewal of lease - Lease expiring before notices complying with Act could be given by lessor - Effect of transition provisions - Notices given for later date - Whether lessor bound to renew - Periodical tenancy - Applicability of Act - Petroleum Retail Marketing Franchise Act 1980 (Cth) ss 3, 6, 11, 13, 16, 17, 18, 20, 21(4), 24(1).

HEADNOTE

The applicant conducted a motor service station business on premises leased from the respondent. It bought motor fuel from the respondent pursuant to a dealer sales agreement, and used equipment of the respondent pursuant to an equipment agreement. The lease was a franchise agreement within s. 6(1) of the Petroleum Retail Marketing Franchise Act 1980 (Cth) (the Act) and the term came to an end on 30 September 1980, eleven days after the Act came into effect. By letter dated 23 June 1980 the respondent informed the applicant that it did not intend to enter into any further lease of the premises with it but would extend its occupation until approximately 31 December 1980. On 24 December 1980 the applicant commenced an action seeking orders that the respondent was bound under the Act to renew the three year lease or should be regarded as having done so. In late December 1980 or January 1981 the respondent served on the applicant a notice of termination of the lease and a notice of decision not to renew the lease. The applicant then commenced a second action claiming a declaration that the notice of termination was of no effect and an order that the respondent renew. The respondent counterclaimed for declarations that the notice of termination had effectively terminated the rights of the respondent to occupy the premises and carry on business there and that it was not bound to renew the lease, the dealer sales agreement and the equipment agreement.

Held: (1) The Petroleum Retail Marketing Franchise Act 1980 had no application where the expiration of the term of a lease followed so closely the commencing date of the Act that the scheme which s. 17 provides for could not be brought into effect. There had been no sufficient opportunity for the statutory thirty days notice before the term of the franchise agreement then current expired.

(2) In the period to 31 December 1980 there was a periodical (monthly) tenancy existing and the Act did not apply to leases which were not for a term. The notices dated 23 December 1980 did not revive the original lease.

(3) The notice of decision not to renew the lease served upon the applicant came too late and was ineffective.

(4) If contrary to the above the court had been of the view that the applicant had the protection of s. 17 of the Act it would not have been satisfied that it was just and equitable that the franchise agreement not be renewed and the court would have made an order to renew under s. 17(10) of the Act.

(5) Applications dismissed.

HEARING

Sydney, 1982, March 2-4, 8-12, 19, 23-26; June 2-4, 7, 10, 11, 15-19; December 7. #DATE 7:12:1982

APPLICATIONS.

In two actions heard together the applicant sought orders under the Petroleum Retail Franchise Act 1980 (Cth), that the respondent was bound to renew the lease held by the applicant or should be regarded as having done so, that a notice of termination of lease was of no effect and an order that respondent renew. The respondent by way of counterclaim sought various declarations in respect of the lease. The facts appear from the headnote and judgment.

R. W. P. Parker Q.C. and D. J. McCredie, for the applicant.

B. J. Tamberlin Q.C. and S. B. Austin, for the respondent.

P. R. Grogan, for the cross-respondent.

Cur. adv. vult.

Solicitors for the applicant: Warren Wells & Associates.

Solicitors for the respondent: Sly & Russell.

T.J.G.

ORDER

1. The applications in each of matters G134 of 1980 and G11 of 1981 be dismissed, with costs.

2. The cross-claims in each case be stood over generally with liberty to either party to restore on fourteen days' notice to the other.

3. Liberty to apply.

JUDGE1

These two actions are being heard together by consent. They are between the same parties, relate to the same subject matter and for practical purposes raise the same questions. The applicant in each case, which I will call O'Brien Enterprises, was incorporated in 1975. It conducts at Liverpool, New South Wales, a motor service station business, at which it sells motor fuel by retail. The business is carried on under the name "Collingwood Auto Port". The respondent, Shell, owns the premises on which the business is carried on, and has leased it to O'Brien Enterprises. Shell sells motor fuel to O'Brien Enterprises, in accordance with agreements to which I will refer. Mr. and Mrs. O'Brien were made parties to the proceedigs. They denied that they were parties to the lease I have mentioned. In the course of the hearing, after a body of evidence had been given, I was asked, by agreement between counsel, to decide whether or not they were. Some facts were agreed for the purpose of the argument. For reasons I gave at the time, I decided that they were not. It was common ground that in that event they should not be parties to the proceedings. I gave judgment in their favour.

The proceedings centre around the operation of the Petroleum Retail Marketing Franchise Act 1980 ("the Act"), which came into force on 19 September 1980. The broad intention of the principal provisions of this Act is to give greater security of tenure to companies and individuals marketing motor fuel by retail. One provision (s.20) deals with price discrimination in the supply of motor fuel to retailers. The central concept is that of a "franchise agreement". This term is defined in s.3(1):
"'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 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;"
The Act does not apply to a franchise agreement unless it contains, or is one of two or more which contain, provisions of the kind referred to in paras. (a) and (b), and either sub-para. (i) or sub-para. (ii) of para. (c) (s.6(1); see Centenary Investments Pty. Limited v. Total Australia Limited (Full Court of the Federal Court, judgment 9 September 1982). Even if it only satisfies this requirement by being connected or related to another franchise agreement, or other franchise agreements, it retains its individuality as a franchise agreement.

Section 16 prohibits the termination of franchise agreements, except in certain circumstances:
"(1) A franchisor may terminate the franchise agreement in accordance with the succeeding provisions of this section, but not otherwise.

(2) A franchisor shall not terminate the franchise agreement except on one or more of the following grounds:

(a) the franchisee is unable, by reason of physical or mental incapacity, to control the operation of the marketing premises;

(b) the franchisee makes a fraudulent misrepresentation in connection with the operation of the marketing premises;

(c) the franchisee performs an act, omits to perform an act, or makes a statement, where the act or omission, or the making of the statement -

(i) constitutes an offence punishable by imprisonment or, in the case of a franchisee being a body corporate, by a fine of $500 or more; and

(ii) in the case of a franchisee being a natural person, tends to show that he is dishonest or is otherwise not of good character;

(d) in connection with the operation of the marketing premises, the franchisee performs an act, omits to perform an act, or makes a statement (other than an act, omission or statement referred to in paragraph (c)), where the act or omission, or the making of the statement, constitutes a serious contravention of a provision of any law;

(e) the franchisee misrepresents the octane rating of, or wilfully adulterates, motor fuel supplied to him under the franchise agreement;

(f) without the consent of the franchisor, the franchisee wilfully passes off motor fuel supplied to him by a person other than the franchisor or a related corporation as being motor fuel supplied to him by the franchisor or a related corporation;

(g) the franchisee fails to operate the marketing premises (otherwise than by reason of an industrial dispute or an interruption, reduction or cessation of the supply of motor fuel or the compliance by the franchisee with an emergency law as defined by sub-section 10(7) or with a direction or order made under such a law) -

(i) for a period exceeding 7 consecutive days; or

(ii) for a lesser period or lesser periods, where the failure to operate the premises during that period or those periods is unreasonable, having regard to the interests of the franchisor, the normal operation of the premises and the reason for the failure;

(h) the franchisee operates the marketing premises in a manner likely to cause injury to persons or property;

(j) the franchisee otherwise commits a breach of a condition of the franchise agreement;

(k) the whole or a substantial part of the marketing premises is destroyed, or is damaged to such an extent as to render the operation of the premises impracticable, except where the franchisor or a related corporation is responsible for the destruction or damage."

Section 17 deals with the failure or refusal of a franchisor to renew a franchise agreement. In part, it reads as follows:
"(1) Subject to this section, a franchisor shall not fail or refuse to renew the franchise agreement except on one or more of the following grounds:

(a) the existence of circumstances, or the occurrence of an event, of a kind referred to in any of paragraphs 16(2)(a) to (k) (inclusive);

(b) the franchisor proposes, in good faith and in the normal course of business, to vary a provision of the agreement (other than a provision fixing an amount, or the manner of calculating or determining an amount, payable by the franchisee) and the franchisee does not consent to the variation;

(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 -

(i) entered into an agreement, 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

(ii) entered into an agreement, or negotiations for an agreement, (other than an agreement containing a provision having the effect of prohibiting the use of the marketing premises for the retail sale of motor fuel) to sell its interests in the marketing premises to a person other than an associate of the franchisor."

The word "agreement" is itself widely defined (s.3(1)) to include arrangements or understandings, formal or otherwise. (Section 3(2) extends the expression to include a proposed agreement, and a number of other situations.) The almost meaningless scope thus given to the expression suggests the need to bear well in mind the cautionary admonition, "unless the contrary intention appears". Several sections of the Act adopt a quite strict meaning of "agreement" (see secns. 11, 13).

The Act does not deal with the inter-relation between secns. 16 and 17. An inability to terminate could be said to lead to a more or less perpetual situation, in which renewal would not arise. The key is to be found in part in the meaning to be given to "terminate", a word which is not defined. In relation to leases it does not have a technical meaning. Halsbury's Laws of England, 4th ed., vol. 27, para. 419 refers to fifteen methods of determining a lease, one or two not having counterparts in New South Wales. In my view "terminate" must be understood as relating to a premature determination; some act done by the franchisor which brings an agreement to an end before its normal or natural expiry. The situation where an agreement can by its terms be brought to an end by the franchisor by some act, or some notice, is doubtless on the borderline, but it is not necessary to decide that matter in this case. Problems would arise in relating the period of notice (thirty days) required by sub-section (3) (see also sub-section (8)) with any period of notice for termination provided for in the agreement. "Renewal" relates principally, if not solely, to a situation where there has been natural expiry, as by effluxion of time. Section 17 repeatedly refers to "expiration of the (franchise) agreement". Plainly, the restraint imposed, and right given, by s.17 is not confined to cases where there is a pre-existing agreement or arrangement for renewal. On the other hand, if there has been a termination which satisfies s.16, a right to renewal cannot arise. In this connection it is to be noted that s.16(1) has a facultative as well as a prohibitory aspect. Normally, a franchisor will, if he wishes, give a notice under one section or the other, just as a franchisee can turn to one section or the other for relief. It is I think to be borne in mind that the sections are not directed simply to curial proceedings; they operate directly and naturally on situations to which their terms apply, court action being resorted to only when necessary.

What s.17 means by "renewal" where there has been a lease is an agreement for, or the grant of, a new lease. The provisions of the new agreement are regulated by s.3(4), and, additionally, as to duration, by subsections (2), (3) and (4) of s.13 and s.17(15). Where a Court is called on to make an order for renewal, s.17(12) gives it power to decide upon terms of the renewed agreement. The concept of renewal is not wholly lost. What is meant is a fresh agreement based on the earlier one, and following it except so far as the Act stipulates otherwise or provides for variation.

Prior to 1 October 1977 Mr. O'Brien (and possibly Mrs. O'Brien as well) had been a licensee of the premises, carrying on the same or a similar business as the company now does. On that date three agreements were entered into:

(a) a lease from Shell to O'Brien Enterprises for a period of three years, with a holding over clause;

(b) a dealer sales agreement for a period of three years, relating to the supply of fuel by Shell; and

(c) an equipment agreement, also for three years, relating to the use of Shell equipment on the premises.

On 5 December 1975 there had been entered into between Shell and Mr. and Mrs. O'Brien, an agreement called a Commercial Trade Through Retail Outlets ("C.T.T.R.O.") Agreement. This had been adopted by O'Brien Enterprises, so that, after 1 October 1977, that agreement was in operation between Shell and it. The C.T.T.R.O. agreement provided that the retailer, or dealer, would supply motor fuel without charge to holders of Shell authorisation cards. The dealer was to charge Shell at the wholesale price applicable at the time of last delivery to it, and was entitled to receive a dispensing fee from Shell for its participation in the scheme. It will be necessary to consider this agreement more fully later.

The lease was a "franchise agreement", and one to which the Act applied (see s.6(1)). The dealer sales agreement was also a franchise agreement, but was for practical purposes dependent upon the continuation of the lease (see also s.18). The term of the lease came to an end on 30 September 1980, eleven days after the Act came into effect. By letter dated 23 June 1980, Shell had advised O'Brien Enterprises as follows:
"At this point we give you the requisite notice under Clause 23(1)(a) of the said lease to the effect that we do not intend to enter into any further Lease of the premises with you after the Ending Date set out therein.
On this basis we would normally require you to vacate the premises by the 30th September 1980. However, having regard to our long association with you, we further advise that we will consent to your continuing in occupation of the premises until approximately 30th November 1980, at which stage we will give you the one month's notice of determination in writing as set out in Clause 34(1). This will effectively extend your occupancy under the lease to approximately the 31st December 1980.

We take this opportunity to confirm that, provided you vacate on or before the effective date, and are not then in breach of the lease referred to above and have maintained your accounts with Shell in conformity with the agreed terms, we will credit your Goods Account with $4,500.00 representing compensation at the rate of $500.00 per annum for the nine completed years as Shell Dealer tenants."

On 24 December 1980 O'Brien Enterprises made an application to this Court (No. G134 of 1980) supported by a statement of claim, in which it sought orders to the effect that Shell was bound under the Act to renew the three year lease, or, alternatively, a declaration that by reason of the agreement for continued possession, it should be regarded as having done so.

Notices dated 23 December 1980 were served by Shell on O'Brien Enterprises in late December 1980 or in January 1981 (the evidence on this point is conflicting). One was a Notice of Termination, the other a Notice of Decision Not to Renew. I set out the terms of the former:
"NOTICE OF TERMINATION

TO: J. & M. O'BRIEN ENTERPRISES PTY. LIMITED of 322 Homer Street, Earlwood; and JOHN JAMES O'BRIEN AND MONICA ALICE O'BRIEN both of 4 Homer Place, Burraneer Bay (which and who are hereinafter collectively called 'the Franchisees').

PURSUANT to Section 16(3) of the Petroleum Retail Marketing Franchise Act 1980 (hereinafter called 'the Act') THE SHELL COMPANY OF AUSTRALIA LIMITED (hereinafter called 'the Franchisor') HEREBY GIVES NOTICE to the Franchisees that the Franchisor hereby terminates to take effect on 31st March, 1981 the franchise agreements by virtue of which the Franchisees occupy and operate premises situate at 335-340 Hume Highway, Liverpool being the whole of the land comprised in Certificates of Title Volume 8002 Folio 141 and Volume 8061 Folio 1 and known as Collingwood Auto Port which said franchise agreements apart from provisions therein as to duration and other variations to comply with the Act are on the same terms and conditions as those contained in the lease and the dealer sales agreement between the Franchisor and Franchisees each of which was entered into on 1st October, 1977.

FIRST GROUND: The Franchisees have breached Section 16 (2) (b) of the Act in that in connection with the operation of the subject marketing premises they have in the course of claiming and receiving moneys from the Franchisor under what is known as the CTTRO Scheme fraudulently mis-represented that they have sold certain distillate which they had purchased from the Franchisor whereas in fact the Franchisees had purchased such distillate from a third party and not from the Franchisor.

Statement of Facts

1. The Franchisor operates a scheme in circumstances where the Franchisees have bought distillate from the Franchisor and have sold some of such distillate to approved commercial customers of the Franchisor who are entitled to buy their distillate on credit. The Scheme is now and is hereinafter referred to as 'the CTTRO Scheme' the relevant terms and conditions of which the Franchisees contracted in writing to agree to on 5th December, 1975.

2. The credit customers of the Franchisor within the CTTRO Scheme are billed direct by the Franchisor for the distillate which the credit customers have bought from the aforesaid service station premises (hereinafter 'the service staton') operated by the Franchisees.

3. In respect of each litre of distillate which the Franchisees have bought from Shell and sold to a CTTRO customer the Franchisees are entitled firstly to be reimbursed by the Franchisor for the purchase price which the Franchisees paid to the Franchisor when they originally bought the distillate and secondly to be paid by the Franchisor an agreed commission.

4. The price at which the Franchisor sells distillate to the Franchisees is the same as or only very marginally above or below the price charged by Shell to its CTTRO cutomers for their purchases of distillate. This means that in respect of each litre of distillate which is sold by the Franchisees within the CTTRO Scheme the only profit made by the Franchisor is the profit margin on distillate which it sells to the Franchisees after taking into account the commission per litre referred to above and distribution and administrative costs.

5. In circumstances where Shell has reimbursed the Franchisees within the CTTRO Scheme for a litre of distillate which the Franchisor has not in fact sold to the Franchisees this means that the Franchisor has suffered on average a loss of 5.43[ per litre.

6. According to the records of the Franchisor between 1st October, 1980 to 30th November, 1980 the Franchisor had sold to the Franchisees 66,000 litres of distillate whereas over that period the Franchisees have sold to CTTRO customers and claimed under the CTTRO Scheme 93,648 litres of distillate for which they have been reimbursed and paid commission by the Franchisor as outlined above.

7. The Franchisees have fraudulently misrepresented to the Franchisor that they have purchased at least 27,648 litres of distillate from the Franchisor whereas in fact the Franchisees have purchased such distillate from a third party.

8. The Franchisor presently estimates that as a consequence of the fraudulent misrepresentation referred to above the Franchisor has suffered a financial loss not less than $1500.00.

SECOND GROUND: The Franchisees have breached Section 16 (j) (sic) of the Act in that they have breached Clause 27 (1) of the lease referred to above (hereinafter called 'the lease') in that they have committed or carried on or permitted to be committed or carried on fraudulent acts or activities on or from the service station in that the Franchisees have made fraudulent claims under the CTTRO Scheme as referred to in the First Ground above.

Statement of Facts
See Statement of Facts for First Ground.

THIRD GROUND: John James O'Brien and Monica Alice O'Brien have breached Section 16 (c) of the Act in that they have performed acts or made statements constituting offences under Section 179 of the Crimes Act which are punishable by imprisonment and which acts have tended to show that they are dishonest and otherwise not of good character.

Statement of Facts

See Statement of Facts for First Ground.

FOURTH GROUND: The Franchisees have breached Section 16 (f) of the Act in that without the consent of the Franchisor they have wilfully passed off motor fuel supplied to them from the Amoco Agency Depot at Ingleburn Road, Eppington (hereinafter called 'the Amoco Depot') as being motor fuel supplied to them by the Franchisor or a related corporation.

Statement of Facts

1. At all material times the distillate dispensing pump at the service station has been a pump supplied by the Franchisor and identified as a 'Shell' pump and the only trade marks, brand names and colour schemes displayed at the service station in connection with the sale of motor spirit or distillate have been 'Shell's Identifications' as defined in the lease and the dealer sales agreement referred to above (hereinafter called 'the dealer sales agreement').

2. The Franchisees have been buying substantial quantities of distillate from a source or sources of supply other than the Franchisor and selling such distillate from the service station.

3. On 24th November, 1980 one of the Franchisees, Mr. J.J. O'Brien, admitted to two employees of the Franchisor, namely Messrs. A.P. Saunders and D. Wright that the Franchisees have for some considerable time been purchasing quantities of distillate from a source of supply other than the Franchisor and selling such distillate from the service station.

4. On two occasions on 20th October, 1980 between approximately 10.45 a.m. and 2.30 p.m. a cream Bedford Truck registration number GWB 564 fitted with a tank of approximately 2,000 gallon capacity (hereinafter called 'the truck') left the service station and proceeded to the Amoco Depot.

5. On both the occasions referred to in the preceding paragraph the tank on the truck had placed in it a dispensing pump leading from a large tank located in the Amoco Depot and an operation of filling the tank on the truck was carried out.

6. On each occasion after the filling operation referred to in the preceding paragraph was carried out the truck proceeded from the Amoco Depot to the service station and on the first occasion in question a hose from the tank on the truck was connected to a filling point in the ground of the service station by means of a hose and an operation of filling an underground tank from the tank on the truck took place. On the second occasion in question the truck parked at the rear of the service station.

7. At about 10.00 a.m. on 10th November, 1980 the truck was driven from the rear of the service station to a position near a service bay on the service station where a hose from the tank on the truck was connected to a filling point in the ground of the service station and a filling operation of an underground tank took place.

8. At about 1.00 p.m. on 10th November, 1980 the truck proceeded from the service station to the Amoco Depot where it was placed under a fuel loading facility to which the tank on the truck was connected by means of a pump hose. The truck was subsequently returned to the service station and was parked at the rear of the service station.

FIFTH GROUND: The Franchisees have breached Section 16 (j) of the Act in that they have breached the provisions of one or more of Clauses 6 (3) and 6 (4) of the dealer sales agreement and Clause 4 of the lease in that they have purchased certain distillate from the Amoco Depot and have sold, displayed for sale and offered for sale such distillate under or in association with Shell's Identifications as hereinbefore referred to.

Statement of Facts

See facts for the Fourth Ground

SIXTH GROUND: The Franchisees have breached Section 16 (j) of the Act in that they have breached Clause 20 (2) of the lease by without the consent of the Franchisor subletting, granting a licence in relation to or parting with possession of an estate or interest in the premises the subject of the lease, namely the workshops located at such premises.

Statement of Facts

On 24th November, 1980 one of the Franchisees, Mr. J.J. O'Brien, admitted to two employees of the Franchisor, namely Messrs. A.P. Saunders and D. Wright, that the Franchisees had been subletting the aforesaid workshops for 'some years'."
The Notice of Decision Not to Renew was made in reliance on Section 17(8) of the Act. The opening, operative, part was as follows:
"TO: J. & M. O'BRIEN ENTERPRISES PTY. LIMITED of 322 Homer Road, Earlwood; and JOHN JAMES O'BRIEN AND MONICA ALICE O'BRIEN both of 4 Homer Place, Burraneer Bay (which and who are hereinafter collectively called 'the Franchisees').

PURSUANT to Section 17 (8) of the Petroleum Retail Marketing Franchise Act 1980 (hereinafter called 'the Act') THE SHELL COMPANY OF AUSTRALIA LIMITED NOTICE to the Franchisees that the Franchisor has decided not to renew the franchise agreements relating to premises situate at 335-340 Hume Highway Liverpool being the whole of the land comprised in Certificates of Title Volume 8002 Folio 141 and Volume 8061 Folio 1 and known as Collingwood Auto Port which said franchise agreements are the lease and the dealer sales agreement between the Franchisor and Franchisees each of which was entered into on 1st October, 1977."
Ground 1 of this notice was the same as in the Notice of Termination except for paras. 5, 6, 7 and 8 in the statement of facts. In the Notice of Decision Not to Renew these were:
"5. In circumstances where Shell has reimbursed the Franchisees within the CTTRO Scheme for a litre of distillate which the Franchisor has not in fact sold to the Franchisees this means that the Franchisor has suffered on average a loss of 4.76[ per litre.
6. According to the records of the Franchisor between 1st January, 1979 to 31st October, 1980 the Franchisor had sold to the Franchisees 1,159,000 litres of distillate whereas over that period the Franchisees have sold to CTTRO customers and claimed under the CTTRO Scheme 1,619,981 litres of distillate for which they have been reimbursed and paid commission by the Franchisor as outlined above.

7. The Franchisees have fraudulently misrepresented to the Franchisor that they have purchased at least 460,981 litres of distillate from the Franchisor whereas in fact the Franchisees have purchased such distillate from a third party.

8. The Franchisor presently estimates that as a consequence of the fraudulent misrepresentation referred to above the Franchisor has suffered a financial loss not less than $21,900.00."
Grounds 2 and 3 were the same as in the earlier document except for paras. 5, 6, 7 and 8 of the statement of facts, which were the same as in Ground 1 of the later document (see above). Grounds 4, 5 and 6 of both notices were the same.

It was because of these two notices that O'Brien Enterprises commenced its second action (No. G11 of 1981) on 29 October 1981. In those proceedings, as amended, it claimed a declaration that the Notice of Termination was of no effect and an order that Shell renew. Shell counterclaimed for a declaration that the Notice of Termination had effectively terminated the rights of O'Brien Enterprises (and also of Mr. and Mrs. O'Brien) to occupy the premises and carry on business there. It also sought a declaration that Shell was not bound to renew any of the three following agreements, namely the lease, the dealer sales agreement and the equipment agreement.

Rent payments in accordance with the written lease were tendered by O'Brien Enterprises after 1 October, but the cheques were not cleared by Shell and on or about 29 December 1980 were returned.

A problem arises at the outset from the fact that the three year lease expired, according to its terms, less than thirty days after the Act came into force. There was no opportunity for Shell to comply with sub-section (8) of s.17. Section 17(9) therefore did not apply. One consequence could be that the prohibition in s.17(1) applied, unrelieved by the exceptions to it, the Court then being bound to make an order pursuant to sub-section (10). There seems no scope for abridging the time (cf. s.16(8)), or treating the requirement as merely directory. Another result could be that the section did not apply at all. In favour of this conclusion is a presumption that the intention was not to compel renewals without a franchisor having the prescribed time within which to make a decision, without regard to a case which he might wish to make under s.17(1).

It is necessary to turn to the provisions dealing with agreements entered into before the commencement of the Act. They are principally sub-sections (2) and (6) of s.6, but s.17(14) also bears on the subject:

Section 6 . . .
"(2) Subject to sub-section (1), the provisions of sections 10, 17 and 20, sub-sections 22(1), (2) and (5), sections 23, 24, 25, 26 and 27 and, to the extent necessary for the application of those provisions by virtue of this sub-section, this Part, extend to a franchise agreement in effect immediately before the commencement of this Act."
. . .
"(6) Subject to sub-sections (2), (3) and (4), this Act does not apply in relation to a franchise agreement that was entered into before the commencement of this Act."
Apparently, the intention is that an agreement (or arrangement) entered into before the Act can be terminated thereafter in accordance with the general law, but, if in force immediately before the commencement of the Act, can be renewed under the Act. The policy seems to be that rights to terminate available under the general law to a person who by reason of the Act becomes a franchisor are not to be affected by the Act (see in this connection s.24(1)). If, in exercise of those rights, he lawfully terminates a franchise agreement, the renewal provisions can have no place. In the present case, this means that a shadow was cast over the applicant's reliance on s.17.

In considering the application of these sections, it is to be borne in mind that what O'Brien Enterprises seeks is a renewal of the three year lease, what in s.13(4) is referred to as the original agreement. Section 6(2) is relied on. The letter of 23 June 1980 which I have set out gave notice in accordance with cl. 23(1)(a) of the lease that Shell did not intend to "enter into any further lease of the premises with the lessee". There was no obligation on it to do so. The letter thereafter proceeded, in my view, on the basis that on the expiration of the lease the holding over clause (cl. 34) would apply. This clause was as follows:
"34. (1) If the Lessee with the consent of Shell continues in occupation of the Premises beyond the expiration of the Term such continued occupation shall be deemed to be a monthly tenancy at the rental reserved in Clause 3 of this Lease determinable by one month's notice in writing (which may expire on any day) given by either party to the other and otherwise upon and subject to the same provisions as are contained in this Lease.

(2) If the Lessee continues so to occupy the Premises he shall extend the authority to be given to his Banker pursuant to his obligation under the heading 'Manner of Payment of Rent' in the First Schedule so that Shell shall continue to receive such payments at the commencement of every month during which the Lessee continues to occupy the Premises."
The letter indicated that the monthly tenancy for which this clause provided would continue until 31 December, the prescribed one month's notice to be given on 30 November 1980.

In the event, no such notice was then given. The monthly holding-over tenancy continued, although subsequently Shell returned the rental which had been tendered in respect of the period after 30 September 1980, and apparently sought to repudiate the existence of any tenancy after that date. This change in approach by Shell may have been brought about by reason of uncertainty as to the application of the Act. Eventually, in late December 1980, or in January 1981, a notice was given purporting to terminate the tenancy on 31 March 1981. That notice purported to follow the requirements of s.16(3). The Notice of Decision Not to Renew simply referred to non-renewal of the agreements of 1 October 1977.

To deal with the alternatives previously posed in connection with the commencement of the Act, it seems to me that on a proper construction the Act has no application to a case where the expiration of the term of a lease follows so closely the commencing date of the Act that the scheme for which s.17 provides cannot be brought into effect. In the present case, the applicant held over under the lease agreement, but there was no sufficient opportunity for the statutory thirty days' notice to be given before the expiration of its term.

It would be legally inaccurate, and probably contrary to ordinary usage also, to regard the term of the lease as having been extended beyond 30 September, by reason of the letter of 23 June, or conduct, or both. The Act in several places draws the distinction between the expiration of a term and its extension (see, for example, s.17(4)(a)). The letter was not treated as an offer to extend the term, and on its face it reads as a series of unilateral decisions by the lessor, centred around cl. 34. Nor is it permissible in my view to have a portmanteau or cumulative concept of a franchise agreement so that one adds together more than one agreement or arrangement, containing the ingredients provided in the definition, without regard to such matters as the agreed terms, or the duration and nature of the franchisee's rights. Despite its wide reach and the generality of some of its provisions, the Act plainly looks to particular, definitive arrangements, and not least of all to their duration. The requirement of a "term" is basic to the operation of the Act.

I shall express my views on some submissions made during argument. It is not my view that a lease for a fresh term was created in the period to 31 December 1980, except in so far as a periodical tenancy is regarded as being a grant of a succession of terms (Commonwealth Life (Amalgamated) Assurance Ltd. v. Anderson (1945) 46 S.R. (N.S.W.) at pp. 47, 50, 57). Renewal of any such further term is not sought in any event. There was during this period a periodical (monthly) tenancy. In my view the Act does not have application to leases (or franchise agreements) which are not for a term. Too much of the structure of the Act relates to "terms", and one can see policy and practical reasons why periodical tenancies are not within its purview. As I have already indicated, there cannot be some unusual metamorphosis simply because the lease becomes a franchise agreement, and indeed the Act recognises with a degree of technical understanding the situation of leases, as such (see, for example, s.13(7)).

The position from December on is more obscure. The notices issued by Shell were dated 23 December.

In my view the applications fail for the reasons I have given.

In case there is an appeal and a different view of the law, favourable to the applicants, is then taken, I shall discuss factual matters raised, as they were the subject of a considerable body of evidence, and much debate before me. I shall deal with them on the basis of the non-renewal notice, and at first assume that if the respondent does not make out a case under s.17, the applicant will be entitled to renewal of the three year lease.

In broad substance, the dispute arises from the fact that Shell wants the site redeveloped in accordance with plans approved by the Liverpool City Council several years ago, that it wants the outlet to operate on a selfserve basis, and that it wishes the operator to be its employee, with the advantage, among others, that the present Act will not apply. O'Brien Enterprises of course wishes to retain the site. Mr. O'Brien is not averse to the site being redeveloped, provided the economic interests of his company can be protected while this is being done, but he is opposed to it becoming solely a self-service station and he is not prepared to become an employee of Shell. A number of discussions took place with regard to these matters between senior Shell officers and Mr. O'Brien, and, frustrated by the lack of progress, Shell decided in 1980 not to renew the lease.

In the two Notices, of Termination and of Decision Not to Renew, Shell relied on a number of grounds. These grounds have already been specified, but in brief form relate to the making of fraudulent misrepresentations by O'Brien Enterprises, breaches of a number of conditions of the franchise agreements and wilfully passing off motor fuel within the meaning of s.16(2)(f) of the Act.

Of the matters relied upon by Shell, the most prominent concerns distillate supplied by O'Brien Enterprises to Shell customers under the C.T.T.R.O. agreement. This agreement was not a franchise agreement within the meaning of the Act. It was, however, an important agreement existing between O'Brien Enterprises and Shell, and the alleged breaches of it formed a substantial part of the respondent's arguments in this case.

Mr. J.J. O'Brien and Mrs. M.A. O'Brien entered into a C.T.T.R.O. agreement with the Shell Company of Australia Limited on 5 December 1975. This agreement became operative on 1 January 1976 and as from 1977 was effective between the Shell Company and O'Brien Enterprises. Under the agreement as thus adopted, O'Brien Enterprises agreed to supply motor gasolines and/or distillate and automotive lubricants on behalf of Shell to commercial customers' vehicles, upon production of a Shell Commercial Identity Card by the drivers of those vehicles. The vehicle registration number embossed on the Shell Commercial Identity Card tendered had to be identical with the registration number of the vehicle for which supplies were requested.

As previously mentioned, Shell was obliged under the agreement to pay the O'Briens a dispensing fee on each litre of gasoline or distillate supplied and to refund to them in respect of these sales, the value of the gasoline or distillate calculated at the wholesale prices applicable at the time of the last delivery made to them by Shell. At the time of the original signing of the C.T.T.R.O. agreement, the O'Briens were bound to purchase all fuel supplies from Shell. This requirement was affected by the Trade Practices Act 1974 and was modified as a result of rulings of the Trade Practices Commission made under that Act, so that the operator could not be required to purchase more than fifty per cent of his or its fuel requirements from a particular oil company.

O'Brien Enterprises does not deny that, purporting to act under the C.T.T.R.O. agreement, it supplied fuel, which, although it came from a Shell refinery, was not supplied to it by Shell. It claims that this was a proper compliance with the agreement. It does not dispute that on the dates charged in the notices (and other dates) it received distillate from Leon Laidely. This distillate was then dispensed through the distillate pump at Collingwood Auto Port. The pump was the property of Shell and was marked with a Shell logo, but at various times Mr. O'Brien covered the logo with a metallic sticker. Mr. Laidely gave evidence that he stored all of the distillate which he sold to O'Brien Enterprises in a separate tank at his Leppington depot. He did so pursuant to an agreement with Mr. O'Brien that he would supply him with distillate "ex Shell", that is, the fuel would originate from the Shell refinery at Parramatta. In the absence of any other evidence regarding the source of the fuel it can be accepted that the fuel kept for Mr. O'Brien was fuel "ex Shell". Mr. Laidely, however, purchased that fuel from Total and it was conveyed to his depot in a tanker with Total markings. It was delivered to O'Brien Enterprises in an unbranded tanker kept by Mr. O'Brien. Mr. O'Brien believed the fuel in question always came from the Shell refinery.

The evidence in this case, and also the Collins Report (The Marketing and Pricing of Petroleum Products in Australia, 4th Report of the Royal Commission on Petroleum,1976) (to which I was referred but which is not in evidence), indicates that oil companies themselves operate under various product exchange arrangements, whereunder, depending on location, one company may draw a large part of the product distributed and sold under its name from the refinery of another company, and sell it in an unchanged state. Mr. O'Brien was aware of this type of arrangement, and would as a result have recognised that the use of industry brand names was of special significance.

The concept of "brands" is also adopted by the unions whose members deliver the fuel. It appears that it is the policy of the Transport Workers' Union to deliver petroleum products from refineries only in company-branded tankers into branded pumps of the same company.

The C.T.T.R.O. agreement does not expressly state that the only fuel to be dispensed or for which a claim can be made, must be purchased from Shell. Reading the agreement as a whole, and in context, it nevertheless seems clear that the distillate to which it is referring is that which is purchased from Shell, and which is supplied by it under the brand name "Shell". O'Brien Enterprises was therefore acting in breach of the C.T.T.R.O. agreement when it treated the fuel obtained from Mr. Laidely as being supplied by it under that agreement.

The C.T.T.R.O. agreement, not being a franchise agreement, breach of a "condition" of it (see s.16(2)(j)) does not by itself constitute a ground for termination, or non-renewal. Fraudulent misrepresentation in connection with the operation of the marketing premises is, however, a ground (s.16(2)(b)). Shell alleges that O'Brien Enterprises made fraudulent misrepresentations by sending the Dealer Sales Invoices under the C.T.T.R.O. scheme to Shell, thereby, it is said, misrepresenting to Shell that all the distillate in respect of which refunds and dispensing fees were sought was purchased from Shell.

A second related ground, namely that expressed in s.16(2)(j) of the Act, can be mentioned here. Shell argued that O'Brien Enterprises had breached cl. 27(1) of the lease agreement, by committing or carrying on or permitting to be committed or carried on, fraudulent acts or activities at the service station by their alleged fraudulent C.T.T.R.O. claims. Shell alleges that it suffered damage by reason of the fraud.

O'Brien Enterprises regularly forwarded to Shell documents called Dealer Refund Forms in which it claimed refunds from Shell for fuel sold by it to C.T.T.R.O. customers. Some of the claims were, at least in part, for distillate dispensed by Mr. O'Brien which, to his knowledge, came to him via Leon Laidely, and was not purchased from Shell. Mr. O'Brien recognised that when he had fuel from Laidely on hand, this fact probably altered the proper brand to be used for the fuel dispensed by him, and because of this, as previously mentioned, he covered the Shell emblem on the distillate pump. His general practice was, he said, to do this when O'Brien Enterprises had purchased less than fifty per cent of the distillate on hand from Shell. There were two underground storage tanks for distillate at Collingwood Auto Port, feeding the one pump, and this resulted in anomalies in the plan. If the tank in use contained fifty per cent or more of Shell purchased fuel, then the Shell emblem was displayed, regardless of whether the other tank contained fifty per cent or more of fuel purchased from Laidely.

The representation said to have been made was that the fuel in respect of which claims were made was supplied by, i.e. purchased from, Shell. As I have said, I am satisfied that that is what on its proper construction the C.T.T.R.O. agreement related to. Mr. O'Brien's claims necessarily represented that they were for fuel supplied by Shell. The question is whether he knew the representations to be false. Put another way, did he know that the C.T.T.R.O. agreement related to fuel supplied by Shell, as distinct from fuel obtained from a Shell refinery? He says that he did not, and his counsel has strongly maintained an argument that Shell-distilled fuel was within the agreement. In my opinion, Mr. O'Brien believed that the C.T.T.R.O. agreement applied only to fuel supplied by Shell, but possibly nutured a hope that somehow the agreement might be differently construed. The claims were acted on by Shell, which for some time remained ignorant of the deception. The matter was of importance to it, for reasons it canvassed in the notices and to which I will refer again. The implied representation in my view constituted fraud in those cases where the claims related to fuel obtained from Laidely.

In December 1979 Shell became aware of the circumstances under which O'Brien Enterprises was obtaining and dispensing distillate, and from then on or very soon after, it could not be held to have been deceived by the representations. Prior to this time there were fraudulent misrepresentations and therefore grounds for terminating the C.T.T.R.O. agreement. The same circumstances would have satisfied the requirements of s.16(2)(b) and accordingly of s.17(1)(a) of the Act, but that Act did not come into force until nine months or so later. The C.T.T.R.O. agreement was terminated by Shell by notice dated 7 July 1981.

The fact that Shell continued to treat O'Brien Enterprises as a Shell dealer and to supply it with Shell fuel and other products does not necessarily mean that any right it had to terminate the franchise agreements existing between themselves and O'Brien Enterprises was lost. The Shell Company had, by January 1980, sought legal advice in respect of the actions of Mr. and Mrs. O'Brien and employed private investigators to keep surveillance on that business. That surveillance revealed not only that distillate was coming from Laidely, but that the process was, on occasion at least, carried out in a clandestine manner. As well as saying that he thought that Shell-refined fuel could probably be dispensed under the C.T.T.R.O. agreement, notwithstanding that it was not purchased from Shell, Mr. O'Brien explained in evidence (as he had in late 1979 and in 1980 to Shell officers) that the need for continuity of supply, having in mind industrial and other interruptions, virtually compelled him to have an alternative source of supply. He also needed greater storage accommodation. He was of course free to purchase fifty per cent of his fuel requirements from a source other than Shell, but the storage and the supply of it to customers was inhibited by the agreements respecting the use of Shell equipment and Shell brands.

The letter indicating Shell's intention not to enter into any further lease of the premises with the O'Briens was issued on 23 June 1980, but it does not appear to have been brought about by reason of the matters just discussed. Rather, was it attributable to the plans of Shell and the more general considerations already mentioned. The letter itself made no reference to the matter, and indeed gave O'Brien Enterprises what would seem to have been a liberal extension of time as a lessee.

Shell further alleged, in the Fifth Ground of the Notice of Termination and of the Notice of Decision Not to Renew, that O'Brien Enterprises committed a breach of s.16(2)(j) of the Act by selling, displaying for sale and offering for sale, distillate purchased from Mr. Laidely, under or in association with Shell's identifications. Clause 6 of the dealer sales agreement is relevant. Its terms are:
"6. (1) The Purchaser may use Shell's Identifications in relation to Shell Motor Fuels, Shell Lighting Kerosine and Shell Lubricating Oils delivered under this Agreement for the purpose of identifying and/or advertising the same at the Premises.

(2) The Purchaser shall not without Shell's consent in writing sell, display for sale or offer for sale any Shell Motor Fuels, Shell Lighting Kerosine or Shell Lubricating Oils under or in association with any other trade marks brand names or colour schemes than those comprised in Shell's Identifications.

(3) The Purchaser shall not sell, display for sale or offer for sale under or in association with Shell's Identifications (or any of them) any Motor Fuels, lighting kerosine or Lubricating Oils

(a) which are not delivered under this Agreement; or

(b) which, in the case of any such product, consist only as to part of Shell Motor Fuels, Shell Lighting Kerosine or Shell Lubricating Oils delivered under this Agreement.

(4) In the conduct of his business on and from the Premises the Purchaser shall maintain and protect the integrity of Shell's Identifications.

(5) If the Purchaser ceases to purchase Shell Motor Fuels, Shell Lighting Kerosine and Shell Lubricating Oils under this Agreement or if this Agreement terminates for any reason, the Purchaser shall, at Shell's request, immediately and completely discontinue the use of Shell's Identification at the Premises. If the Purchaser fails to do so Shell may, at the Purchaser's expense enter the Premises and remove, obliterate, paint over or otherwise delete or destroy all of Shell's Identifications in on or around the Premises and any trade name, trade mark or colour scheme similar thereto. The foregoing provisions of this sub-clause shall not apply where the Purchaser on ceasing to purchase Shell Motor Fuels, Shell Lighting Kerosine and Shell Lubricating Oils hereunder is purchasing or forthwith commences to purchase Shell Motor Fuels, Shell Lighting Kerosine and Shell Lubricating Oils from Shell under some other agreement between him and Shell or when on the termination of this Agreement the Purchaser is purchasing or forthwith commences to purchase Shell Motor Fuels, Shell Lighting Kerosine and Shell Lubricating Oils from Shell under another agreement.

(6) All signs and other advertising devices furnished by Shell to the Purchaser shall remain Shell's property, shall be used solely in connexion with the sale, display for sale or offering for sale of Shell Motor Fuels, Shell Lighting Kerosine and Shell Lubricating Oils delivered under this Agreement or of services associated in the course of business with Shell, and shall be returned to Shell immediately on demand, failing which Shell may enter the Premises and remove the same."

The distillate purchased from Mr. Laidely was not "Shell motor fuel" within the meaning of this agreement.

The practice about covering the Shell sign already mentioned was patently crude and arbitrary. The whole operation inevitably led to situations where, from time to time, O'Brien Enterprises dispensed distillate from Shell labelled pumps and likewise displayed fuel for sale as being Shell fuel, when it was not. As a result, breaches occurred of cl. 6(3) and possibly other sub-clauses as well.

Shell has alleged in the Fourth Ground of the Notice of Termination and Notice of Decision Not to Renew that O'Brien Enterprises breached s.16(2)(f) of the Act. The elements of such a breach are that O'Brien Enterprises, without Shell's consent, wilfully passed off motor fuel supplied to it by a person other than Shell as being motor fuel supplied to it by Shell. The distillate obtained from Laidely was not distillate supplied by Shell. Fuel purchased from Mr. Laidely was subsequently dispensed through Shell pumps. The pump bore a Shell emblem, and it was not always obscured when fuel not supplied by Shell was being sold. The premises bore prominent Shell signs, and not those of any other supplier; to the ordinary purchaser it was a "Shell station". There was no evidence from any person of deception or confusion, and no evidence as to whether Shell fuel and a Shell station signified fuel supplied by Shell, as distinct from fuel refined at a Shell refinery. So far as I am aware, the ordinary member of the purchasing public would regard as Shell fuel that which Shell produced. He may, or may not, have been surprised to learn that what he bought as Shell fuel could have been produced at, say, a Caltex or B.P. refinery, and was therefore commonly identical with the fuel sold under the name of that other, competing, supplier. However, the fuel not purchased from Shell was understood in the trade not to be Shell fuel. It was nevertheless sold with all the indicia that it was Shell fuel. It was not supplied by Shell, or sold under the Shell brand with its consent. A case is in my view made out under para. (f).

In the Sixth Ground of the two notices it was alleged that O'Brien Enterprises breached cl. 20(ii) of the lease and hence s.16(2)(j) of the Act by subletting the workshop at the Collingwood Auto Port. On the evidence it appears that Shell were aware of some form of subletting or parting with possession of the workshop premises from at least some time in 1975. No action was taken, although the matter was raised in discussions leading up to Shell's final decision not to renew the lease. The matter is trivial, and has been so regarded by the parties.

When a franchisor servies notice on a franchisee terminating a franchise agreement, it is open to the franchisee to apply to the Court for an order declaring the notice to have had, or to have, no effect (s.16(4)). The Court cannot find the agreement to have been terminated by the notice unless it is satisfied firstly that a ground specified in the notice is established by the franchisor and, secondly, that the termination of the agreement and any related agreement or agreements is "just and equitable", having regard to all the circumstances (s.16(6)). Similar provisions exist in relation to Notices of Decision Not to Renew franchise agreements (secns. 17(8) and (10)). In both instances, the "circumstances" are to include the conduct of the franchisor and the franchisee after the time when the franchisor became aware of the existence of the circumstances, or the occurrence of the event, constituting the ground for terminating or not renewing (secns. 16(7) and 17(11)).

I have found a number of the grounds set out in s.16 of the Act to have been made out. All that remains to be done (on the assumptions stated at the outset) is to see if it is "just and equitable" that the franchise agreements not be renewed (s.17(10)). Section 18 provides, inter alia, that if a franchise agreement is not renewed in accordance with s.17, all related agreements shall be deemed to be not renewed. As I have mentioned, the position concerning related agreements has to be considered before a court makes an order under s.17(10).

The phrase "just and equitable" has been considered in many contexts. Section 17(10) requires that regard be had "to all the circumstances". In the present case it seems to me that the two most material matters are the conduct of the parties and their plans for the future conduct of the outlet. I am not of the view that particular weight can be given to the consideration that Shell is owner or that the applicant is (or was) its lessee, although these factors are an important part of the background. It would be inconsistent with the purposes of the Act, and its intended effect, to give weight to the fact that the applicant originally had a lease for three years only, with no assurance of renewal.

With these considerations in mind, I shall deal with the significant factual matters raised by the parties.

It was stated earlier that the dispute between O'Brien Enterprises and the Shell Company stems from the latter's desire to redevelop the Collingwood Auto Port site as a self-serve outlet run on a commission agency basis. Mr. A.P. Saunders, the New South Wales Retail Manager for Shell, stated in evidence that "Shell were interested in self-serve outlets as a means of giving motorists another option of purchase and to introduce another concept in the dispensing of motor fuel". In other words, it was part of Shell's competitive strategy. Mr.Saunders said that self serve outlets are also cost effective when compared with a conventional fully-manned station. To establish these outlets, he said, requires a heavy investment by Shell in new equipment, and as a means of protecting this investment Shell introduced the outlets in conjunction with what he called the commission agent method of retail. The commission agent is in fact an employee. Under a commission agency arrangement Shell retains the power to set the price of fuel dispensed from the station and, perhaps more importantly, effectively ensures that only Shell products (in the sense of what Shell supplies) will be sold. The lessee dealer, on the other hand, has contracted to buy fifty per cent of its fuel and other automotive products from Shell. It seems apparent from the evidence that this fifty per cent limitation is not effective in practice. Service stations are commonly known as "Shell" or "Caltex" or "B.P.", and are commonly understood to sell only fuel of the respective suppliers thus indicated. A matter of importance is that the commission agent, or employee, does not get any security of tenure. He does not have a franchise agreement.

By around 1975 or 1976 Shell had decided upon Collingwood Auto Port as being one of the sites it desired to let on commission agency terms. Development approval for the Collingwood site was sought by Shell in 1977 from the Liverpool City Council, and was granted on 22 August 1977. This approval, as extended, lapsed in 1979 without any form of rebuilding having taken place. Fresh development consents were sought from the Liverpool City Council on 2 June 1980 and granted on 1 July 1980. There is a dispute as to the reason for the delay in carrying out the work, in, say 1978 and 1979. Shell alleges that Mr. O'Brien's refusal to co-operate and discuss the matter was the operative reason for delay. Removal to another site was one suggestion put to him. Mr. O'Brien, for his part, suggested a market survey be done to analyse whether or not some compromise between self-serve and full service would be better. Shell was not satisfied with this suggestion. The applicant, on the other hand, submits that Shell had the right pursuant to the lease to obtain the site for redevelopment, on three months' notice, and that any delay was merely at the whim of Shell. The real reason was, I think, a failure to agree on debatable matters, and Shell's wish not to act unilaterally.

Collingwood Auto Port appears to have been one of Shell's more successful outlets in terms of fuel supplied and dispensed. In November 1975 Mr. O'Brien put through a then record amount of 100,000 gallons of Shell product in a period of one month. Shell rewarded him with a luncheon with a number of its officers. The evidence indicates a growth in throughput from this site from 1975 onwards. Mr. Saunders admitted that the Collingwood Auto Port, while perhaps not being the best outlet Shell owned, was nonetheless doing very well.

Mr. O'Brien gave evidence that he had tankage problems at the Collingwood Auto Port. He sought amplified storage in late 1971 or early 1972 and made a number of complaints to Shell from 1973 onwards about the depot, stating that increased business meant that semi-trailers were queued up at the diesoline pumps and out onto the Hume Highway. The bringing onto the premises by O'Brien Enterprises of a truck (containing Laidely fuel) gave it needed extra storage space.

There were no structural improvements made at the Auto Port since May 1977 nor any painting done by Shell since about 1975. In general, it had allowed the maintenance work to fall well behind. Mr. O'Brien had taken it upon himself to re-sand and repaint the diesoline pump at one stage, to improve its otherwise shabby appearance. Shell objected to this as amounting to a debranding of their pump, but this is a complaint without substance.

The volume of diesoline purchased from Laidely was not insubstantial, and on a number of occasions exceeded, over a period of a month, the volume purchased from Shell. The total value of all purchases of fuel, that is, of diesoline, and super and standard petrol, was however, always much greater in respect of fuel purchased from Shell than in respect of the fuel purchased from Laidely. The price from Laidely was more than competitive with his Shell purchase price, despite additional costs incurred in bringing the fuel from the Laidely depot. Mr. O'Brien says that his purchase price from Shell at times made it impossible, having in mind the state of the market, to make a profit. He emphasises in this connection that Shell had a Shell agency service station not very far away (about seven kilometres in fact) which could and did undercut his prices. He also points out that the Shell rebate system, which was the means by which some dealers were able to sell at lower prices, operated unevenly, and to his detriment.

Mr. O'Brien stated in evidence, which I accept, that he had made Mr. Whitelaw, Senior Area Manager Special of the Shell Company, aware by about May or June of 1980 that the Laidely price was competitive. In 1979 he had informed Mr. Whitelaw that part of the distillate in respect of which he claimed under the C.T.T.R.O. agreement was purchased from Mr. Laidely. The extent of subsequent discussions about C.T.T.R.O. invoices is not clear. Invoices making C.T.T.R.O. claims were sent to Shell. These invoices, and in particular those sent during October and November 1980, did not indicate the prices at which O'Brien Enterprises had made purchases from suppliers other than Shell. Nor was notice in writing given at any time to Shell pursuant to cl. 6(2) of the dealer sales agreement, indicating a desire to sell "foreign" motor fuel from the premises. It has of course, always been Mr. O'Brien's contention that the Laidely fuel was Shell fuel within the meaning of relevant agreements. I have already stated the true position, as I see it.

It is relevant to note that Mr. O'Brien's initial reasons for purchasing distillate elsewhere stemmed from Shell's inability to supply him with fuel due to industrial troubles at its refineries. Clause 14 of the dealer sales agreement excuses all parties to the agreement from performing the obligations or complying with the stipulations of the agreement in certain circumstances beyond the parties' control. Industrial action is included, but the clause did not of course provide an excuse for the way in which the Laidely purchases were used under the C.T.T.R.O. scheme, or the sale of that fuel in Shell pumps. The reasons for O'Brien Enterprises' continued purchases from Laidely appear to have been the supply problem, and, more particularly, its ability to purchase at a better price from Laidely.

If I had been of the view that the applicant had the protection of s.17 of the Act, I would have made an order to renew under sub-section (10) of that section. I would not have been satisfied that it was just and equitable that the franchise agreement not be renewed. My view would be based principally on several considerations:

(a) the applicant has operated the outlet well, particularly so far as fuel sold is concerned;

(b) it (or Mr. O'Brien) has done so for over ten years;

(c) Mr. O'Brien himself works on the premises constantly, and manages its operations;

(d) the business, which is the sole or principal source of income for Mr. and Mrs. O'Brien, has been built up into a highly successful outlet by the personal efforts of Mr. O'Brien;

(e) the applicant has sought always to be competitive and to give a good service, and has many regular clients;

(f) the applicant is prepared to co-operate with Shell in having extensive alterations made to the premises, in accordance, generally, with Shell's plans, and to accept some self-serve units;

(g) the applicant's refusal to convert completely to self-serve at this stage is reasonable;

(h) that its refusal, and that of Mr. O'Brien, to operate on an employee basis is reasonable;

(i) that the conduct of Shell, as in the matter of rebates, insistence on cash payments, and inadequate maintenance of the outlet, was provocative;

(j) that the matters established against the applicant, relative to the grounds set out in s.16(2), while not to be overlooked or unduly minimised, all relate to the purchase of Shell-refined distillate from Laidely and its subsequent handling, in the circumstances already fully discussed;

(k) that Shell did not regard the matters now complained of very seriously in its correspondence and discussions with Mr. O'Brien in mid and late 1980, nor did it take action available to it in respect of those matters except to terminate the C.T.T.R.O. agreement.

The Court can make orders subject to conditions (s.21(4)) and the order I would make would be subject to conditions enabling the alterations to take place, and requiring some units to be self-serving.

I have considered the factual situation on a hypothesis that the franchise agreement to be renewed was the original lease of three years. I would be of the same view if the agreement to be regarded under the Act as the one to be renewed was one for the original three years, extended by a number of months. I would not, however, be of that view if by reason of what happened and the application of the Act to it, there had been a franchise agreement for a period of several months only, commencing at some time after 30 September 1980. It would then seem to me just and equitable that there not be renewal, principally because the short agreement would have arisen in a context where, to the knowledge of the franchisee, the franchisor was actively seeking to bring the agreement to an end. The franchisor would have voluntarily granted the franchisee a short indulgence, and thereafter would have been trying to apply the provision of secns. 16 and 17 of the new Act to the situation which had occurred. I mention, in relation to the duration and terms of a renewal, s. 3(4)(b), s.17(12)(b) and what appears to be the overriding effect of s.13.

As it is, I order that the applications in each case (G134 of 1980 and G11 of 1981) be dismissed, with costs.

It is unnecessary to make the first declaration sought in the cross-claim in proceedings G134 of 1980. I have not heard argument in relation to the other declaration and the order sought, and will stand over generally the further hearing of the cross-claim with liberty to either party to restore it on fourteen days' notice to the other. I make no order in respect of it at this stage. In matter G11 of 1981 the respondent is not entitled to the first declaration sought in the cross-claim, the second declaration is unnecessary, and, as in G134 of 1980, title to the other relief has not been argued before me. I therefore make no order in respect of it at this stage, but stand its further hearing over generally, with liberty to either party to restore it on fourteen days' notice.