Kimlee Pty Ltd v Caltex Oil (Australia) Pty Ltd

[1982] FCA 123

Re: KIMLEE PTY. LIMITED
And: CALTEX OIL (AUSTRALIA) PTY. LIMITED
No. G79 of 1982
Practice

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Fitzgerald J.

CATCHWORDS

PRACTICE - pleadings - particulars - pleadings to aver material facts relied on - pleadings not to be delayed until after discovery and interrogation.

ADMINISTRATIVE LAW - petroleum retail marketing franchises - proceedings to determine whether notice terminating franchise is effective - onus of proof.

Petroleum Retail Franchise Marketing Act 1980, s.16

HEARING

BRISBANE

#DATE 24:6:1982

ORDER

1. That on or before Monday 28 June 1982 the applicant, Kimlee Pty Limited, by its Reply and Defence to Cross-Claim state each and every material fact relied upon in support of the allegation in paragraph 4 of its Defence to the Cross-Claim that "having regard to all the circumstances it is not just and equitable that the franchise agreement herein be terminated".

2. That the applicant, Kimlee Pty. Limited, pay the taxed costs of the respondent, Caltex Oil (Australia) Pty. Limited, in respect of proceedings herein on Tuesday 22 June, Wednesday 23 June, and Thursday 24 June 1982.

JUDGE1

Caltex Oil (Australia) Pty Limited has served on Kimlee Pty Ltd which operates a service station retailing Caltex motor fuel, a notice pursuant to s.16 of the Petroleum Retail Marketing Franchise Act, 1980, terminating Kimlee's franchise. Kimlee has brought an application pursuant to s.16(4) of the Act, asking for an order declaring the notice to have had, and to have, no effect. The status quo has been preserved by an undertaking given by Caltex which is anxious to have the matter disposed of expeditiously.

On 31 May 1982 I gave directions including the following:
1. The applicant deliver a Statement of Claim herein on or before 7 June 1982.
2. The respondent deliver a defence (and cross-claim, if any) on or before 14 June 1982.
3. The applicant deliver a reply (and defence to the cross-claim if any) on or before 21 June 1982.
4. Each party make discovery to the other pursuant to Order 15, rule 2 on or before 30 June 1982.
Pleadings have been exchanged and the adjourned application for directions has now come back before me. Caltex Oil (Australia) Pty Limited seeks a date for trial as soon as possible and indicates that two days will be required. Kimlee's current estimate is 5-7 days, although an earlier recent estimate was 14 days. Both estimates also include, I think, time necessary to deal with two other similar applications - No. G80 of 1982 Hans Lesquillier v. Caltex Oil (Australia) Pty Limited and No. G85 of 1982 Victor Gordon Boon and Jill Vera Boon v. Golden Fleece Petroleum Limited. Caltex Oil (Australia) Pty Limited also asks that Kimlee be required to give further and better particulars of its allegations for the usual reasons, including the need to define the ambit of discovery and the issues to be litigated at the trial. Kimlee quite categorically asserts the right to refuse to disclose its hand.

Those advising the service station operators found their attitude upon s.16(6) of the Act which provides as follows:

"(6) In any proceedings under sub-section (4), the court shall not declare the notice referred to in that sub-section to have terminated, or to terminate, the franchise agreement unless -
(a) a ground specified in the notice is established by the franchisor to the satisfaction of the court; and
(b) the court is satisfied that the termination of the agreement and any related agreement or agreements is just and equitable, having regard to all the circumstances."

Sub-section (6) is expanded by sub-section (7) which provides:

"Without limiting the generality of paragraph 6(b), the circumstances referred to in that paragraph include the conduct of the franchisor or 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 referred to in paragraph 6(a)."

The Statement of Claim contains no more than the incorporation of Caltex and Kimlee, a description of Kimlee's business, and assertions that the Act is in operation, that Kimlee is a franchisee and Caltex a franchisor within the meaning of the Act, that there was at all times in effect between the parties a franchise agreement within the meaning of the Act, that the notice was given, that the application has been made, and that Kimlee claims the relief specified in its application.

By its defence, Caltex sets up the breach relied upon in the notice which is, in effect, that Kimlee, without the consent of Caltex, wilfully passed off motor fuel supplied to it by a person other than Caltex as being motor fuel supplied by Caltex. The defence also states that Caltex is the owner of the site at which Kimlee carries on business, and that the breach specified in the notice also involved a breach of a lease between Caltex and Kimlee and of a Reseller Supply Contract between the parties. These circumstances are said to make the termination just and equitable. By a cross-claim, a declaration that the notice of termination was effective and an order for delivery of possession of the premises are sought.

Kimlee's Reply does little more than join issue with matters which are in dispute, including the allegation by Caltex that the termination was just and equitable. Paragraph 4 of the Defence to the Cross-claim is in the following terms:

"If the Cross Respondent establishes to the satisfaction of the court the grounds specified in the Notice of Termination . . . (which grounds are denied), then having regard to all the circumstances, it is not just and equitable that the franchise agreement herein be terminated.
Further particulars will be supplied on completion of discovery and interrogatories herein.

A letter from the solicitors acting for Kimlee to the solicitors for Caltex, dated 18 June 1982, is in the following terms:

"RE: KIMLEE PTY LIMITED V CALTEX OIL (AUSTRALIA) PTY LIMITED
We enclose copy of the reply by applicant to Defence and Defence by Cross Respondent to the Cross Claim, noting the same has been forwarded to Brisbane for filing. We are instructed to require you to furnish on behalf of your client full and complete particulars of all matters relied on by the Respondent in its allegation in paragraph 5 of the Defence that "in all the circumstances it is just and equitable that the said Franchise Agreement be terminated."
As indicated in the Defence to Cross Claim, the Cross Respondent will supply similar particulars on completion of discovery and answers to interrogatories herein. In relation to that matter, we understand from the material already filed on behalf of your client in the matter that your client relies on the presence of the CX-3 additive as being distinctive of your client's motor fuel and indeed advertises its fuel on that basis and relies on the absence of such additive as an essential part of the proof of its case.
We confirm that on our instructions, that if your client's claims are correct, the samples taken by your client should have contained such additive.
As presently advised, we anticipate that the particulars under paragraph 4 of the Defence to Cross Claim will include an allegation that on the Respondent's own case it has been engaging in illegal conduct and inter alia we refer to Section 52 of the Trade Practices Act.
Accordingly, you are notified that in preparing its list of documents and related matters the Respondent should discover the material relevant to this issue in the proceedings."

I do not propose to express a concluded view with respect to the onus of proof in this matter. I am content to assume at this point that the ultimate burden of satisfying the court concerning the matters in both paragraphs of s.16(6) of the Act will rest upon Caltex. Thus, it will be for Caltex to establish the ground of termination specified in the notice and also to satisfy the court that the termination of Kimlee's franchise is just and equitable. No doubt, on that assumption, it will be for Caltex to establish any matters which it seeks to have taken into account by the court in arriving at its conclusion as to whether or not termination is just and equitable.

It does not follow that it will be for Caltex to negative all matters of fact which Kimlee wishes the court to take into account in forming its conclusion, much less that it will be necessary for Caltex to disprove all factual matters which might be relevant to the decision of what is just and equitable. There is even less justification, in my opinion, for Kimlee's present attempt to say that not only does it not have to prove matters of fact upon which it wishes to rely in respect of the question of what is just and equitable, but it does not even have to disclose to Caltex in its pleadings what those matters are.

Of course, cases do arise in which it is appropriate for discovery to precede particulars. Counsel for Kimlee made no suggestion that this was such a case, and, in my opinion, it plainly is not. An assertion that the termination of an agreement is or was not just and equitable is not an allegation of material facts in a pleading sense. The material facts required to be pleaded are those sought to be relied upon to support a conclusion as to what is just and equitable. Whilst, in an appropriate case, it may be that further particulars should not be ordered of such material facts until after discovery, no possible justification exists for not requiring that the material facts themselves be pleaded.

Especially is this so, when it is plain from the letter written by the solicitors for Kimlee that it is intended to embark upon a fishing expedition by discovery and interrogatories. It is, to me at least, an extraordinary notion that Caltex can be required to make discovery in respect of a matter alleged to amount to illegal conduct in order to permit Kimlee to decide whether or not it wishes to raise that allegation. The impertinence of such a demand is emphasised by the reference to alleged illegality. It is not for me to speculate whether, if the allegedly illegal conduct had been put forward by Kimlee as a matter to be taken into account in respect of what is just and equitable, a claim for privilege might be made by Caltex. Whilst it is true that breach of s.52 of the Trade Practices Act 1974, as amended, is not a criminal act, the same conduct may amount to a contravention of another provision of Part V of that Act and thus constitute an offence. I say nothing at this point of the relevance or otherwise of the allegation which has been hinted at or with respect to the question of whether, if Kimlee has been selling Caltex fuel, its position is markedly different from that of Caltex.

The only particular matter to which counsel for Kimlee made reference was that a perusal of affidavits already filed will reveal some issues in respect of which discovery is required by his client. Those affidavits were filed before the pleadings were exchanged, but, in any event, in a matter in which pleadings are exchanged, affidavits filed do not afford a satisfactory substitute as a means of defining the issues.

I order that on or before Monday 28 June 1982 Kimlee by its Reply and Defence to Cross-claim state each and every fact relied upon in support of the allegation in paragraph 4 of its Defence to the Cross-claim that "having regard to all the circumstances it is not just and equitable that the franchise agreement herein be terminated". I further order that Kimlee pay the taxed costs of Caltex in respect of the proceedings before me this week.