Lyndel Nominees, JTP Noldings and Anor and Wellcome Intl and Anor v Mobil Oil

[1998] HCATrans 268

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S36 of 1998

B e t w e e n -

LYNDEL NOMINEES PTY LTD

Applicant

and

MOBIL OIL AUSTRALIA

Respondent

Office of the Registry
  Sydney  No S37 of 1998

B e t w e e n -

JTP HOLDINGS PTY LIMITED & ROSEVILLE SELF SERVICE STATION PTY LIMITED

Applicants

and

MOBIL OIL AUSTRALIA

Respondent

Office of the Registry
  Sydney  No S73 of 1998

B e t w e e n -

WELLCOME INTERNATIONAL PTY LIMITED & W & JB THORPE PTY LIMITED

Applicants

and

MOBIL OIL AUSTRALIA

Respondent

Applications for special leave to appeal

GLEESON CJ
GAUDRON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 7 AUGUST 1998, AT 9.31 AM

Copyright in the High Court of Australia

MR R.W.R. PARKER, QC:  If the Court pleases, in each of those matters I appear with my learned friend, MR M.O. TUBBS, for the applicant.  (instructed by Stojanovic Solicitors)

MR T.F. BATHURST, QC:  If the Court pleases, I appear with my learned friend, MR G. O’L. REYNOLDS, for the respondent in each of those matters.  (instructed by Cowley Hearne Solicitors)

GLEESON CJ:   Yes, Mr Parker.

MR PARKER:   Your Honour, the papers are found relevantly at 233 and 260 of the book, if reference need to be made to them.  With respect, to action in contract, your Honour, two important questions are raised here.  The first, in what way does one judge whether or not a unilateral contract has come into existence?  Two, assuming that a contract has come into existence, can it be revoked by the offeror before the offeree has completed performance of a stipulated act?  The second question has never been decided or considered by the High Court ‑ ‑ ‑

GAUDRON J:   But do those questions have to be decided in this case?  Is there not a more fundamental question, namely, assuming you are correct on those issues, can you, in any event, get the relief that you sought, namely, specific performance?

MR PARKER:   Yes, I think we can, your Honour, and I will speak to that.  Your Honour, if I may, the second question has never been decided, as I have said, in 140 years.  The first question, in fact, has been answered by the High Court in Woollen Mills, but the test adopted by the High Court was to introduce what is thought as a preliminary step, the test stipulated by the High Court, was created a variation on a theme in deciding whether or not a unilateral contract has come into existence.  This is wrong.  Your Honours, may I just explain some of the facts shortly, to you?  In 1991 in Los Angeles, Mobil offered its Australian dealers from January 1992 a most alluring incentive scheme.  I adopt the words of the Court of Appeal.  The statement was made with authority and intended that the franchisees would take seriously and act upon the statements.

According to the applicants, who the trial judge unreservedly accepted, the words of Mobil were understood as the granting of extra tender, nine years franchise to those who, during the remainder of their term, achieved a perfect score, namely, succeeded in each of the yearly tests for greater efficiency in running their service stations.  We call them the nine-fo- six offer.  Those who did not obtain a perfect score believed they would achieve an extra year of franchise for every year they succeeded in the programme.  We call them the one for one.  As we have said, that was the belief of each of the applicants and that belief was accepted by the primary judge and, in turn, accepted by the Court of Appeal and the applicants acted on it as did the respondent, over four years.

There were tests, judgings and result.  If ever....is found here and provides demonstrable evidence and request coming from a person having a commercial interest in the subject matter.  Tenure performance would benefit both Mobil and Mobil dealers and there were no administrative difficulties and nothing tentative about their actions, and Mobil found a way to implement both offers.  The interesting thing, your Honours, is this:  the incentive scheme went on for four years and then without notice and without reasons, Mobil cancelled the programme.  The proceedings were then instituted by more than 150 dealers or franchisees in separate proceedings.

There was a preliminary hearing on short affidavit evidence but no cross-examination to determine whether there was a common question to be tried which Mr Justice Wilcox determined in the affirmative.  The significance of that I will explain.  When the hearing took place five of the franchisees were selected by consent as test cases.  Now, the Court of Appeal took the view that the words of representation or offer were uncertain so that there was no legal offer and therefore no contract and in doing so, they ignored the beliefs of the applicants and the fact that for four years both parties had acted on the basis that the incentive scheme was operational.

There was not a funeral note from Mobil that the incentive scheme was uncertain and on the question of contract or not, the Court of Appeal did not ask the proper test in Woollen Mills, that is, whether the statement or announcement which is relied upon as a promise was really offered as consideration of the doing of the act and the act was really done in consideration of a potential promise inherent in the statement or announcement.  It might be supposed that the question of whether the contract was sufficiently certain should be looked at, but only in the context the applicants’ belief and that the actions that they took in response to that offer.  The Court of Appeal looked at the offer from the offeror’s point of view and construed it against the offeree applicants but the primary judge had no difficulty in saying the contract was sufficiently certain.

In fact, the Court of Appeal does look at the operation of Woollen Mills at page 190 of the book.  With your Honours’ permission I will just show you that passage because it is inimical to the finding the court made.  It is actually at 191, your Honours.  The Court of Appeal said this:

We see no reason to disturb the trial Judge’s finding of fact that the scores of ninety per cent or better by Lyndel, Thorpe and Wellcome in all years down to the time when Mobil made further attainment of the score impossible, is something which they achieved in response to the supposed nine-for-six offer.

Then I ask your Honours, please, to go to page 207 line 15, the court says this:

It is apparent, from a practical, commercial point of view, that the incentive scheme was based on Mobil’s acceptance that 90 per cent compliance would represent an achievement over and above what was presently being obtained and accepted as adequate.  Uncontradicted evidence given by dealers was that special efforts were made to achieve more than what would otherwise have been accepted by Mobil as a sufficient performance.

We say that those two findings were sufficient to permit the court to dismiss the appeal.

GAUDRON J:   There is still the difficulty with the one-for-one promise.

MR PARKER:   Yes, I will explain how that happened, your Honour.  Briefly, it is this, we think it is significant on the question of the offer that the Court of Appeal itself was sufficiently uncertain of the answer to this question admitting they might be wrong.  This is an invitation to this Court to reconsider the matter.  The second important question is of tremendous importance.  It is a question of whether unilateral contract may be revoked before the offeree has completed performance.  The Court of Appeal was wrong to overrule the united, academic and judicial opinion of 140 years including the opinions of Justice McHugh and Lord Denning.  In fact, the view of Justice McHugh in Beaton v McDivitt, I do not think, is referred to.  If I can just take your Honours to that particular authority which is in our list, quickly.  The passage of Justice McHugh is at the bottom of 183 and it is this:

Once the plaintiff went on to the land and commenced to work the block, it was not open to the McDivitts to withdraw their offer.

And he quotes Errington.

GAUDRON J:   What is the jurisprudential basis for that proposition?

MR PARKER:   I think, your Honour, the jurisprudential basis of it is that once the offer has been made there is an implied term that it will not be withdrawn.

GAUDRON J:   An implied term or an estoppel?

MR PARKER:   I do not think it has been put on the basis of an estoppel, your Honours.  If I may just ‑ ‑ ‑

GLEESON CJ:   Just before you go, that question does not arise if the Full Court were correct on the issue of uncertainty, does it?

MR PARKER:   That is right.  That is why I have dealt with that first, your Honour, and I dealt with it on the basis of those two passages primarily I referred to your Honours, they did not look at Woollen Mills in the proper way.  When they did come to look at Woollen Mills at pages 191, which I quoted, and page 207, they effectively answered the question favourably to the applicant.

GAUDRON J:   But their Honours did go on further, at least in relation to the nine-for-six, and hold that even were there a unilateral contract and a promise or an obligation not to withdraw from it, you still were not entitled to specific performance and you did not claim damages.

MR PARKER:   Yes.  Your Honour, we did actually claim damages but we primarily want specific performance.  Justice McHugh in Beaton v McDivitt held, your Honour, to answer your Honour now precisely, that the commencing of the work provided enough consideration to permit the court to grant relief and I quoted that in my written submissions.  Do your Honours wish me to go to it?

GAUDRON J:   No.

MR PARKER:   But it does answer your Honour’s question, namely, that the consideration offered by the applicants in doing the work provides a basis for the court to grant specific performance.  I have the passage in the written submissions if your Honour would ‑ ‑ ‑

GAUDRON J:   Well, it may provide a basis for specific performance, but specific performance of what?

MR PARKER:   Specific performance to the grant of the extra tenure.  That is to ‑ ‑ ‑

GAUDRON J:   But in Justice McHugh’s judgment, would you get specific performance of the primary unilateral contract or would you get specific performance of the promise not to revoke?

MR PARKER:   The first one, your Honour, and he ‑ ‑ ‑

GAUDRON J:   Well, I wonder why that should be so?

MR PARKER:   Your Honour, I suppose it is so because in acting in purported performance of the agreement the applicant ‑ ‑ ‑

GAUDRON J:   Was it complete performance, in that case?

MR PARKER:   No, but it was not completed performance ‑ ‑ ‑

GLEESON CJ:   The key sentence in the reasoning is at page 193 of the application book in the first complete sentence on that page, is it not, and we, I think, need to know what your answer to that is?

MR PARKER:   Could your Honour point out the specific passage at page 193?

GLEESON CJ:   The first sentence on page 193 of the application book:

An order for specific performance.....was.....not available in the absence of the actual furnishing of the agreed consideration for that promise.

MR PARKER:   Yes, well, your Honour, that is contrary to Justice McHugh in Beaton v McDivitt and I will take your Honour to that passage if your Honour will just permit me to go to it. Yes, your Honour, I am sorry, the pages are at 184 and 187 of the book.  Your Honour, the passage at 184C:

By entering onto lot B and performing work, the plaintiff has suffered sufficient detriment to constitute consideration even though he was obliged to work the land until the time of subdivision before he was entitled to the transfer of lot B.

GAUDRON J:   As a matter of analysis and logic, would that not in the circumstances of this case simply support a promise not to revoke which you might either seek specific performance, if that is available, or injunction?

MR PARKER:   Yes.  Justice McHugh distinguished it, your Honour, from the passage that he quoted where he said that he would follow Errington.

GAUDRON J:   Yes, but in this particular case - you have not performed the obligations of what you assert is the primary unilateral contract.

MR PARKER:   That is right, your Honour.

GAUDRON J:   How could you get specific performance of it?

MR PARKER:   Your Honour, because by entering into the land and performing the work, we were giving sufficient consideration in the terms of Justice McHugh.

GAUDRON J:   I can well see why you might be giving sufficient consideration for a promise not to revoke which you might enforce by injunction, but that aside, I do not see how you could possibly go further in the circumstances of this case.

MR PARKER:   If that is so, your Honour, of course, we have the alternative limb in promissory estoppel, which is also a ground before you, and that would certainly be, we would submit, a basis by which the Court may grant specific performance.

GAUDRON J:   Well, you have very considerable difficulties in the face of Verwayen in that regard.

MR PARKER:   Well, there is a passage in Verwayen, your Honour, that the Court of Appeal did not look at and that is the passage of Sir Anthony Mason that says that if you act for a considerable time, it:

may give rise to an estoppel justifying a court in requiring the assumption to be made good. 

That is Sir Anthony Mason on the subject of proportionality at page 416, and that ‑ ‑ ‑

GAUDRON J:   Again, what would the assumption be?  The assumption, surely, would only be that the offer would not be revoked?

MR PARKER:   Correct, your Honour, but we would submit that the passage of proportionality ‑ ‑ ‑

GAUDRON J:   But it has been revoked.

MR PARKER:   Yes.

GAUDRON J:   And you did not seek any remedy at that point.

MR PARKER:   No, we did not, your Honour, but at that time our proceedings were on foot when they were revoked.  It is just that this passage of Sir Anthony Mason at page 416, if I may go to it, in Verwayen, and read it?  What Sir Anthony Mason says:

Each case is one of degree.  Reliance upon an assumption for an extended period may give rise to an estoppel justifying a court in requiring that the assumption be made good.

That, your Honours, is two pages after the leading passage about proportionality, the difference between 413 and 416.  Here, if ever there was a case where that ought to be given weight, it was where dealers in this particular position had acted for four years in the belief that the contract would come into existence.  I notice the light is on, your Honours, and I will proceed if I may?

The Court of Appeal determined the promissory estoppel on different grounds.  It determined the- his Honour only held against the applicants in detriment but the Court of Appeal determined the promissory estoppel on different grounds.  It determined the claim using the same wrong methods of construing the representations that had been used.  Now, we would wish to say, your Honour, that no distinction can be made between those with a perfect score and those without a perfect score because the primary judge in the Court of Appeal accepted the belief of each of the applicants.  The primary judge’s error was to bowl out the one-for-one category in the preliminary question before the full facts had been presented to him and he did that by an oversight by adopting his earlier view on the preliminary question.  When he got to the main hearing he adopted the view that he had formed on the question of the common question.

So, we would submit then, your Honours, with respect to that, that the matter should be thought of as open.  Now, with respect to Wellcome, who was the assignee, the common question is referred to above apply but has this special feature:  it was decided by the primary judge on material and affidavit evidence from the applicant and respondent, somewhat outside the confine of the pleadings, but submissions were made about that to the primary judge and of the Court of Appeal, and a letter was sent by me to the Court of Appeal setting out certain pages of the argument about the assignee and his position.  In this respect, a miscarriage of justice has occurred when the Court of Appeal says that no submissions were made to it and this is an additional reason for granting leave in Wellcome’s case.

Finally, your Honours, noticing the time, may I refer the Court to the fact that Mr Justice Tamberlin, one of the justices who participated in the hearing of the appeal and the judgment below in an application by the respondent, discharged a stay, considered the case to be special in that it was in the nature of a test case which may significantly affect the future occupations and livelihoods of many franchisees and, no doubt, their families.  He held, “I am not satisfied that the application for special leave is so clearly untenable that it could not succeed, particularly in circumstances where an experienced primary judge has reached a contrary conclusion” and, the judgment, your Honours, we have set out in the material we wish to place before you, but I have read the relevant passage.  So, your Honours, for those reasons, we would submit that special leave should be granted in this case.

GLEESON CJ:   Thank you, Mr Parker.  Yes, Mr Bathurst.

MR BATHURST:   If the Court pleases. The primary findings of the Full Court were these:  firstly, that the speech by Mr Stumbles was simply too vague and uncertain to give rise to either of the alternative offers propounded by the applicants; secondly, in dealing with the nine-for-six offer, in particular, if that offer was sufficiently certain to be capable of acceptance, there was no basis for an award of specific performance in relation to the contract pleaded which, for convenience, I will call the primary contract; thirdly, the speech of Mr Stumbles was not capable of giving rise to an expectation or assumption that the respondent would give one of the two alternative forms of tenure urged for by the applicants, such as to make it unconscionable for the respondent to depart from such an assumption; and, fourthly, in any event, the applicant suffered no detriment.  That finding was in accordance with the finding made by the trial judge.

Each of those findings, in our submission, was correct and, in any event, raises no question of principle such as to warrant the grant of special leave in this case.  In relation to the contract, the offer which was propounded was, in effect, an offer to vary the various applicant’s franchise agreements, capable of acceptance by the doing of particular acts.  For such an offer to be capable of giving rise to a contract the offer, we would submit, must be clear as to what is being offered and what needs to be done to accept it, the latter acts, of course, constituting consideration for the contract formed by the acceptance of such an offer.

The Full Court held that neither of those criteria have been made out.  The Full Court reviewed the speech, both in its context and taken as a whole, and with reference to particular portions upon which reliance was placed.  Their conclusions as to why it came to the view that no firm offer has been made are summarised firstly in the judgment at page 173 to 174 of the book.  At page 173 in various subparagraphs, they refer to certain parts of the speech which was emphasised by Mobil in that court, tending to show uncertainty, and then in the paragraph beginning below line 25 on page 174:

The extracts quoted, particularly in the light of the matters to which we referred earlier, strongly indicate the tentative and preliminary nature of the scheme as outlined.  We have come to the view that a proper construction of what Mr Stumbles said, paying due regard to the captions which appeared on the screen during the speech, was not in the nature of an offer of a promise of either the one-for-one or nine-for-six character.

Then at page 177 of the book, they refer to what might be described as the high point of the contract case, the extract from the speech of Mr Stumbles:

So we have more work to do and where we’re at at the moment is that maybe the only way to do this is to say that if you achieve 90% each year for the next 6 years then we’ll guarantee you another 9 years as of right, no fees just a renewal.  Now we’ve got a lot more work to do on this but the commitment that we’re making to you here today is that we will find a way to extend your tenure automatically no costs if you consistently achieve 90% or better.

That was described by the Full Court and we submit, correctly, at page 178 at the top of the page in this way:

The best that he could fairly manage was the sentence in question.  But in our respectful opinion, an offer of a promise to “find a way” to “extend [for an unspecified period]” a dealer’s tenure if the dealer “consistently [over some undefined period]” achieved 90 per cent or better in Circle of Excellence judgings, is simply too vague and uncertain to be capable of giving rise to contractual obligation.

The court did what, with respect, they had to do and that was to construe the speech in light of the surrounding circumstances.  The came to what we say is the correct conclusion that there was no ‑ ‑ ‑

GAUDRON J:   It might well find an estoppel, though.  Was that pleaded?

MR BATHURST:   An estoppel was pleaded.  The difficulty with the estoppel is firstly, we submit, as they found, that having regard to their reasoning, the representation was not sufficiently clear to give rise ‑ ‑ ‑

GAUDRON J:   Leave aside for the moment the exact terms of the representation, but a representation of that form, together with persistence, thereafter, for some time in the scheme without any indication that that was not going to happen, might well be sufficient to find an estoppel.

MR BATHURST:   The estoppel that was pleaded was an estoppel relying directly out of the speech itself as distinct from the - the speech itself, and I should say certain other documents which immediately thereafter were sent to some of the applicants.  The difficulty with estoppel, with respect, is, however, that both the primary judge and the Full Court each held that there was no detriment.  Now, Verwayen, we would submit with respect, at least five of the Justices emphasised the need for the proportion of remedy.  The findings in relation to estoppel can be shown at page 208 of the book in relation to Lyndel, between lines 30 and 35:

Against the detriment outlined above, his Honour -

that was the trial judge -

took into account the offer by Mobil to pay the sum of $32,209 compensation by way of reward in respect of the 1992 and 1993 years in which the 90 per cent Circle of Excellence level had been achieved by Lyndel.  The question of the degree of detriment, is of course, one of fact.....  Having considered the evidence concerning Lyndel and the submissions made in relation to that evidence, we consider that it was open to his Honour to conclude that the detriment was not proportionate to the grant of the nine year extension.

A similar approach was taken in relation to the other applicants who got varying, but lesser degrees of money, but the same finding was made and I will not take the Court to those findings unless the Court wishes me to.  That is the basic problem, we submit, with the estoppel case.

Now, if I could return to contract for a moment.  It is important to bear in mind that in this case there was no plea of an implied term not to revoke the offer which is the way in some of the cases this type of matter is dealt with.  There was no plea of a collateral contract which is the way it is dealt with in other cases and a fortiori there was no claim for specific performance by such an implied term or such collateral contract.  In that context, we would submit that in the passage of the Full Court referred to by the Chief Justice, the Full Court was undoubtedly correct.  I am reminded by Mr Reynolds that so far as estoppel is concerned, there was no suggestion of any representation not to revoke the promise.

For those reasons, we would submit, with respect, that leave should be refused.  If leave is to be granted, it is difficult to see how leave could be granted to all the applicants in any event, either the one-for-one applicants or the nine-for-six applicants, must inevitably fail because one cannot tease out of the speech the two representations and the assumption.  I do not make that point except to show in....., as it were, the difficulty of granting any relief in this case.  If there was any relief available to the applicants, it would have been relief by way of damages for the loss of opportunity they had by virtue of either the breach of the contract or the wrongful revocation of the offer which it may be.  That case was never pleaded and never raised and it would have been difficult to succeed having regard to both the trial judge and the Full Court’s finding on detriment.  They are our submissions if the Court pleases.

GLEESON CJ:   Thank you, Mr Bathurst.  Yes, Mr Parker.

MR PARKER:   I will be as short as I can.  Your Honour, dealing with the question of promissory estoppel, the way that the Court of Appeal was to reach its conclusion was to adopt the reasons of the trial judge.  Could I ask your Honours, please, to go to page 102.  The detriment each of them suffered was very considerable over the four-year period, but this is how Mr Justice Wilcox dealt with it at 102.  He found everything in the favour of the applicants on promissory estoppel.  He says:

The degree of detriment suffered by the three franchisees and the proportionality between the relief claimed by them -

“requiring the grant I think the franchisees fails”. 

Although the evidence does not enable me to quantify the cost of the detriment, in each case I think it is likely to have been comparatively small.  Mr Morris spoke of Mobil-approved-products costing “a few more dollars”. 

Then a little bit further down:

I am not satisfied that the total detriment suffered by any of the three franchisees would exceed the value of -

a “buy-out letter”, that is what he means by “‘reward” -

promised by Mobil to each of the three franchisees. 

So he made a comparison between what he through the monetary value was in comparison to what might be called a buy-out letter that had

been given to them.  But that, in the light of Verwayen, in that passage that I read you from Sir Anthony Mason is, with respect, quite wrong, because Sir Anthony Mason in that passage I quoted said that where parties have acted in the expectation that for a long time the only way in which it could be granted is to honour the promise.  I quoted the passage to your Honours.  Mr Justice Wilcox did not follow that.

Now, the second thing, to deal with the matter that Mr Bathurst dealt with is this:  you do not view the promises in the light of what might be called pure construction.  It is the effect on the applicants and each of the applicants believed - and the primary judge accepted their evidence that they were either getting a one-for-one or a nine-for-six.  It worked like an electric shock to them all, they all worked very hard for four years and for the reasons that I have given, that is the very error the Court of Appeal made.  The Court of Appeal viewed it as a pure matter of construction without looking at what the applicants thought and yet that is the very basis of - promissory estoppel must look at the effects on the representee.  They did not do that.  That, of course, is the error they made in contract because they did not look at the offer in contract from the basis of the way the applicants received it.

That was why I went to the trouble of reading the Court, in chief, the passages at 191 and 207, and it is quite clear from those passages that there was, in effect, an acting on the offer that had been made which is either in contract sufficient for Woollen Mills or to give rise to a promissory estoppel and, in those circumstances, we would submit that the two elements that Mr Bathurst has raised, really are, properly, the subject of consideration by this Court. 

I come back to the question of the grant of specific performance.  It could be granted, we submit, under promissory estoppel, as it has been in the past.  It would get over the question that Justice Gaudron is concerned with, but we would suggest that the authority of Justice McHugh is sufficient in a unilateral kind of situation to suggest that it provides enough consideration for the Court to grant relief.  If the Court pleases.

GLEESON CJ:   The application for special leave to appeal is refused for the reason that there is insufficient reason to doubt the correctness of the orders made by the Full Court of the Federal Court, and the case is not a suitable vehicle for considering the legal issues sought to be raised by the applicants.

Can you resist an order for costs, Mr Parker?

MR PARKER:   Your Honour, what we say in relation to costs is the matter set out in our note.  Yes, we do.  We suggest that there should be no order as to costs in these proceedings.

GLEESON CJ:   And the applicants are ordered to pay the respondent’s costs of the application.

MR BATHURST:   If the Court pleases.

AT 10.07 AM THE MATTER WAS CONCLUDED