Marshall, T.S. v BP Australia Ltd

[1994] FCA 459

459 99

JUDGMENT No. ..,------------l -A . .

b

FEDERAL COURT OF AUSTRAL14	)
DISTRICT REGISTU	) NO. QG 72 of 1994
1

BETWEEN :  D O M A S STEP- and

MARSHALL First Applicants

AND :

Second Applicant

AND:

First Respondent

AND :

Second Respondent

S	-	Spender J
g	-	14 June 1994
WHERE:	Brisbane

(i)      the injunction sought by motion dated 10.6.94 be refused;

(ii)     the costs of that motion be the respondents' costs in the principal proceedings.

PRINCWAL

m:  Settlement and entry of orders is dealt with in 0. 36 of
the -.

RECEIVED
19 1 U L 1994
MERAL mum OF
AUSTRALIA

COURT OF A U S T U 1

- S I D ) No. QG 72 of 1994

- 1

BETWEEN:	mm S T E P H E N	and v
HARauu

First Applicants

AND I

Second Applicant

AND:

First Respondent

AND I BP REPIN= fBULWER ISLAND) LIMITED

Second Respondent

m:	Spender J.
M:	Brisbane
L ? z a z	14 June 1994

This is something of a hard case, but I will not make the interlocutory injunctive order soughtinthe notice of motion for the following reasons.

On 31 May 1994, Thomas Stephen Marshal1 and Gayle Prances Marshall, who are husband and wife, as first applicants

and New Formula Motors Pty Ltd as second applicant, filed an	application against BP Australia Limited as first respondent, and
BP Refinery (Bulwer Island) Limited as second respondent, claiming, amongst other things, specific performance of an agreement made between the applicants and the respondents for the grant to the second applicant of a petroleum retail marketing franchise and sublease of the premises situated at 101 Kingsford Drive, Hamilton, Brisbane ('the premises').
It also claimed damages for breach of warranty, contravention of S. 52, breach of contract and interest on damages. It sought an injunction restraining the respondents, whether by their servants, agents, contractors, employees or otherwise frominterferingwiththe second applicant's possession and enjoyment of the property and acting in derogation of the applicant's equity of expectation with respect to the second applicant's enjoyment of the property for a period of 10 years from 1 October 1988. It also sought an injunction requiring the respondents to do all things and acts as may be necessary to procure the renewal of the the respondents' tenure of the premises, to enable the property to continue to be occupied and enjoyed by the second applicant until 30 September 1998.
There is further relief sought in the principal application, but by way of interlocutory relief, the application of 31 May sought an injunction pending trial restraining the respondents from interfering with the second applicant's use or possession of the property, and an injunction pending trial
possession of the property. The application was accompanied by requiring the respondents to secure the second applicant's
a statement of claim, and for the purposes of this interlocutory application, I have proceeded on the basis that Mr Marshall has sworn that at least the facts alleged in the statement of claim are true.
A notice of motion was filed on 10 June 1994 whereby the applicants sought inter alia that pending trial, BP Australia Limited be restrained, whether by its servants, agents, contractors, employees or otherwise howsoever, from interfering
with the property, premises and facilities presently situated at 101 Kingsford Smith Drive, Hamilton as threatened in the letter from the first respondent's solicitors to the solicitors for the applicants dated 7 June 1994.
It is not useful, given the time frame available, to refer in great detail to the mass of material contained in the various affidavits relied on by the parties. It is sufficient for the purposes of these reasons, having regard to the canvassing of the material with counsel in the course of submissions, if I refer to the skeletons of the submissions for the parties.
Mr and Mrs Marshall, at least since 1985, have conducted a BP service station at 101 Kingsford Smith Drive. This service
station adjoins the Brisbane River. There were negotiations
subsequent to the franchise agreement entered into between Mr and
Mrs Harmhall and BP Australia Limited (BP) in 1987 concerning the

future conduct of that service etation. In an important letter

of 1 July 1988 to Mr and Mrs Marshal1 from BP, BP wrote:

" BP Australia L h i ted (BP) hereby offers to enter

into new franchise agreements with you for BP Hamilton Marina for the term and subject to the terms and conditions set out in the BP Brand Franchise Agreement ('the Franchfse Agreement')

and BP Service Station Lease ('the Lease')

accompanying this letter. "

A later paragraph dealing with tenure in that letter stated:

" Subject to the provisions of the PRKFA, BP is pleased to offer you tenure of ten (10) years. This will consist of an initial Term of three years together with a first renewal of three

yeare and a second renewal for a four year Tern, but BP will continue to have the rights not to renew the Franchise Agreement and Lease in the circumstances set out in the PRMFA. This tenure will be available to you and to any subsequent assignee approved by BP. "

A further paragraph headed "Head lease" provided:

* Your Franchise Agreement and Lease are subject to a Head Lease to BP which expire6 on 31 August

1993. BP expects to renew the head leaee and your Franchiee Fee has been calculated on the basis that the head leaee will be renewed. Should the Head Lease not be renewed, then the current term of your Pranchiee Agreement and Lease will expire in accordance with the PRKFA. *

being a reference to the -oleum Franchise m A a r e e m

1980 (Cth). The letter then proceeded to quantiiy the amount of repayment.

It is the contention on behalf of the applicants that this letter constituted, in the context of the circumstances then applying and the dealings that had passed between the parties, an agreement, or at least a collateral warranty to the execution of the franchise agreements that were executed later in 1988, that BP would grant to the applicants such entitlements to tenure

premises and conduct a BP service station on them until 1998; and of the service station as would permit them to occupy the further, that the reference to "should the head lease not be renewedm, in the context, implied an obligation on the part of BP to use its best endeavours to secure a renewal of the head lease 80 as to permit the continued enjoyment of the premises by the applicants as a BP service station for the term promised by that letter.

There was a discussion between a representative of BP,

Mr Marshall, and a proposed assignee of the Marshal1 franchise

(Paul Aeton) in December 1990 which evidences, if at the trial the matter be accepted, that the question of the head lease and difficulties attended thereto was the subject of discussion in that meeting. I couch my observations in those terms to indicate that this is an interlocutory application, that there is no attempt on my part to indicate what might be the position at trial, that the questions for present purposes, particularly in relation to factual disputes between the parties, are directed simplyto what is the appropriate inierlocutory order that might be made. Having uttered that caution, there is a internal note by Mr Horder on behalf of BP that:

" The sub jec t o f Head Lease arose, and Tarn Marshal1 explained t o Paul t h a t a l l his requests

to BP i n the past had r e s u l t e d i n BP s t a t i n g

t h a t a t this poin t i n t i m e they had no plans not

to renew. H e show4 Paul his f i le n o t e s on this

s u b j e c t . I explained to Paul t h a t this was

still the case , however plans could change

w i t h i n the ensuing years a s we could not foresee

t h a t f a r ahead. I f we d i d not renew the head

l e a s e a l l he would receive a s conpensat i on would

be pro r a t a of what Tom Marshal1 had paid to BP

connected a t a l l to the amount Paul i s now	i n i t i a l l y f o r the 10 year f ranchise n o t
paying Ton a s f ranchise fee, (Goodwill) . "

On 6 July 1992 BP wrote to the second applicant and that

letter indicates that:

"	Our records i n d i c a t e the terms of each of the BP Brand Franchise Agreement and BP Serv ice S t a t f on
Sub-Subleases e x p i r e s on 30 September 1992.
Pursuant t o Sec t ion 17A o f the Petroleum Re ta i l
Marketing Franchise Act (the A c t ) , BP Aus t ra l ia
L h i t e d (BP) i s pleased t o o f f e r you a renewal
o f each o f those agreements for a new term o f 11
months less two days commencing on 1 October 1992 and expiring 29 August 1993. "

Paragraph 2A of that le t ter provided, and I set it out in f u l l :

" Your new Franchise Agreement and Leases are subject to Head Leases to BP Refinery (Bu lwer	Island) L M ted (previously BP O i l D i stributi on
Limited) which expire on 31 August 1993 and Sub- Leases to BP which expire on 30 August 1993.
until one day prior to 30 August 1993 and cannot Therefore BP i s only able to o f f er tenure up
guarantee any tenure beyond 29 August 1993. However, should BP seek to extend the Head Leases and be successful, then the renewal term w i l l expire three (3) years from the commencement date of the new Franchise Agreement and Leases. "

This paragraph, it seems t o me, i s important. I t seems

t o me, a t least a t f i r s t impression to make it plain, that so f a r

a6 BP was concerned the question of an extension of the head

lease was a matter within BPs choice, and not as i s contended by the applicants a matter o f obligation on the par t o f B P , but which at tempt m i g h t be frustrated by circumstances or causes outaide BPs control. On 2 1 May 1993 BP again wrote to Mr and Mrs Marshal1 saying:

"

You would be aware o f the forthcoming expiry o f your BP Brand Franchise Lease and related Agreements on 29 August 1993, and the fact that

our abil i ty to o f f e r you an extension o f your

current term i s dependent on our negotiations

with the Head Lessor.

S . .

W e advise that we are currently discussing the

prospect o f renewal with our Head Lessors. I f	negoti a ti one are successful the PRMFA w i l 1 allow
simply by an exchange of let ters. " arrangements with us to a total of three years	us to extend the current term of the

And later it referred t o the fact that the retail development manager w i l l keep the Marshalls informed of the progress of BP and advise:

you	of any d i f f icu l t ies i n his discussions	which
may af fect our abil i ty to o f f e r you	an	extension
of our current term. "

On 27 August 1993 BP again wrote, inter alia, eaying:

we regret to advise that we have s t i l l not

received confirm4 ti on from the Head Lessors that the current arrangements w i l l be renewed,

however, we wish to formally o f f e r you an

extension of your current Brand Franchise Lease,

Headlease on the s i te . This extension i s	subject to the successful renewal o f our and related Agreements to a total o f three years
offered on the same terms and conditions as those which currently apply and w i l l advance the expiry date o f your current term to 30 September	1996. Although BP w i l l make every e f for t to secure a further term with our head lessors, we wish to advise that should our tenure be

concluded BP w i l l have no alternative other than to terminate your agreement as provided i n the Petroleum Retail Marketing Franchise Act. *

This letter is again consistent with the submissione of the applicant that it was the intention of the parties that there was an agreement for a 10-year tenure, affected of course maybe by a number of separate term agreements, but that the expectation of that 10-year term might be frustrated for causes outside BPs control.

On 28 January 1994, BP wrote to the Brisbane City Council who had part of the land on which the service station was conducted. BP advised:

" You would be aware that BP sought advice from terms under which lease of the above property	Council and the Department of Lands regarding
could be renewed on expiry o f the previous leases on 30 August 1993.
. . .
After a reassessment o f the potenti a1 risk and costs which would be borne by BP i n continuing
to store and dispense petroleum products a t this location, the company has decided to withdraw
its applications to renew the leases, and to remove our underground bulk storage tanks, associ a ted pi pevork, di spensi ng equi pnen t , and
corporate i den ti fi ca ti on ma teri a1 currently
installed on the property and the wharf.
We propose that our existing temporary tenure terminate on 31 Xdy 1994. Our operator, Mt Tom Xdrshall, has been informed of our decision and will be asked to vacate premises by 30 April 1994. "

While I think it is not necessary to make any final determination concerning the matter, there is some material to muggest that this claim in respect of environmental risk to which

BP was exposed is not a convenient and late excuse for its choi~e

not to pursue a further lease from the Brisbane City Council or the Queensland Crown for the land on which the service station was occupied.

There is an undated internal comment directed to the risk of pollution from the site into the Brisbane River. That question, of course, is not a matter which can sensibly or profitably resolved on interlocutory application. On 15 February

indicating the attitude of BP to the renewal of the head leases,	1994, in response it seems, the letter written to the Marshalls
Mr Uarshall said amongst other things:

" I acknowledge receipt of your letter dated January 28 regarding the termination of my franchise with BP because BP will no longer seek renewal of the head lease.

I believe the effects of the closure of my business which I have conducted profi tably at the site since January l, 1985, will have a severe financial impost and I request BP to enter into negotiations regarding compensation. I believe BP is in breach of contract, as I have correspondence and records of conversations over a period since 1988 whereby BP has consistently continuation of the appropriate head leases. " implied that every effort would be made to seek

He then refers to various matters and negotiations and discus-

sions with officers of BP. And continued:

The fact that BP have continually assured me that all efforts arere being made to renew the head lease at the same time as nunours of imminent closure were emi tting from BP Hamilton has caused me consi derable mental anguf sh with regard to my staff loyalties and family concern, that I had to request a meeting to bring this situation to a head, only compounded the anguf sh .

. . .

I do not pursue this matter of compensation li ghtly and have figures and records to support a claim of $200,000. "

There is further material relating to an event in about
the middle of February where there was a leak from a fuel tank

into the river. This caused some concern on the part of Mr and

Mrs Marshal1 that there was an attempt by BP to prevent the

continuing tenure of the service station past the end of April

1994 as referred to in the correspondence.

There was correspondence between BP and Mr Marshal1 concerning financial matters. Mr Marshall, on 18 March, 1994 wrote supplying certain details of financial imposts which he said would result from the closure of the business, and said:

" David, I believe that this supply of information should be sufficient to answer your requests and trust that an early settlement can be achieved to my original claim. "

BP, on the other hand, in a letter which is exhibit "t" to BSB1, (which appears to be undated) expressed the view that at least since 12 December 1990 in the discussions with Mr Aaton and Mr Horder, the uncertainty of the future of the marina was discussed in plain terms.

There is a reference made in that letter to a letter of 28 September 1992, in which Mr Marshall was advised in September 1992 that any renewal of the franchise was conditional upon renewal of the head lease to BP by the Brisbane City Council. This letter does not, in fact, address the primary issue between the parties, that being whether the agreement in 1988 envisaged

a circumstance where BP would chooee not to renew the head lease,

or whether the only basis on which BP was relieved from any contractual obligation in respect of agreements totalling a ten- year tenure was in circumstances where non-renewal was outside BP'S control.

There was correspondence of a detailed kind between

solicitors for Mrs Marshal1 and BP. It is unnecessary to set out

in full the details of the letters from Meesrs Atherton on 28 March 1994 and 21 April 1994 and 22 April 1994, but they are not insignificant for the resolution of the present circumstances. Because of concerns as to the obligations of BP under the act, the term of the second applicant was extended by BP until 31 May, and then there is various discussions concerning options that might be open to Mr and Mrs Marshall.

One option which is still, it seems to me, a viable one, is that Mr and Mrs Marshal1 or a company controlled by them continue to operate a service station on the premises at 101 Kingsford Smith Drive. It seems to me that commercial sense would indicate that any items of plant and equipment necessary to run that service station should be sold at what it would cost BP to remove them and realistically that figure would not be great.

The material seems to suggest that there would be no difficulty in the ~ r s h a l l s obtaining a direct lease from the owners of the land on which the service station is presently conducted and, I understand, further that BP is prepared to supply petroleum products to such a service station conducted in that way, but on terms that fuel would be supplied on a cash b a d s and the price of which would be determined on the daily equity retail prices, if the fuel were to be supplied by BP.

I ehould refer also to some material in the affidavit of the matters referred to by Mr Bolton as emanating from Mx	Brett Sinclair Bolton, filed today by leave, and in particular
O'Loughlin, the retail development manager of BP, contained in paragraph 5 of Mr Bolton's affidavits. It seems to me that the position, so far as interlocutory relief is concerned, is plain.
I think that there is, at the very least, a serious question to
be tried as to whether there was a collateral warranty or contract between BP and the Marshalls or the second applicant in 1988 concerning the tenure to be given by BP to them in the conduct of the service station at 101 Kingsford Smith Drive. The
question is, really, where does the balance of convenience lie?
The fact is that the head lease has expired, that is to say, the lease between BP and the Brisbane City Council and The Crown in the right in the State of Queensland. It seems that there is no practical or legal reason why BP would not be granted a further lease of those premises should it be minded so to do and that it could carry out its obligations to the applicants if it be established at the trial that the applicants are entitled to what they claim.
On the other hand, if it be the case that the original agreement was subject to a choice by BP whether to seek to renew the head lease so as to permit BP to be in a position to grant tenure to the applicants for a period totalling 10 years, to require BP to embark on the steps of obtaining a further head lease would be, in truth, to anticipate the results of the trial. In those circumstances, one is in the difficult position that, on either view, this interlocutory application must constrict the
opportunities available to the parties, by way of remedy, at the trial.
In those circumstances, the question to be asked is whether damages is not an adequate remedy and my view simply is that I am not persuaded that damages are not an adequate remedy. The financial basis on which a claim for damages might be launched is known. I accept that there is always, in relation to the computation of damages, some difficulty particularly where, as here, there is the possibility of a competitor in the vicinity from BP which will skew any results of future trading, if that be the case, and, further, there is the uncertain assessment of the loss of the BP credit facilities to customers of the service station conducted at 101 Kingsford Smith Drive.
There is, however, generally speaking, always a difficulty about the assessment of damages in the absence of interlocutory relief and I think it right to say that the court should acknowledge that difficulty by erring, should the legal entitlement to damages be established, on the generous side for those entitled to damages. I am quite conscious of the difficulties that this decision places in the path of Mr and &S
Marshal1 and the company they control but it seems to me that, having regard to the principles in Ptv Ltd v.

trv w e e s 3 PCR 55, and the

other cases dealing with interlocutory relief, this is a case where they have clearly demonstrated a serious question to be tried as to a contractual entitlement to a longer term than that asserted by BP but that the balance of convenience is against the

grant of interlocutory relief.

I decline to grant what is, after all, the rather limited interlocutory relief sought in the notice of motion. It seems to me, nonetheless, that the parties should be well advised to consult their commercial interests as to what should happen between now and trial, in particular as to whether Mr and Mrs Marshal1 wish to continue to operate a service station on those premises on the basis of a lease between the owners of the land and them and also in respect of the question of the availability of the plant and equipment necessary to operate such a service station and the commercial sense, if it be their choice to continue to operate a service station, of acquiring the plant and equipent presently on site for what is, realistically, the cost that it would be to BP to remove that plant and equipment.

That, however, is by way of gratuitous advice. So far as the legal questions that I have to determine are concerned I have already expressed my opinion. I decline to grant the relief sought in the notice of motion filed on 10 June 1994. The costs of this application are to be the respondents' costs in the principle proceedings.

I certify that this and the preceding

thirteen (13) pages are a true copy of the reasons for judgment herein of the Honourable Mr Justice Spender.

Associate

Date: 14 June 1994

Counsel for the applicants:  Mr Quinn

Solicitors for the applicants:  Atherton & Co.

Counsel for the respondents:	Mr Sofronoff Q. C. and Mr Newton
Solicitors for the respondents:	Sly 6 Weigall Cannan & Peterson
Date of Hearing:	14 June 1994