McPhillips, W. v Ampol Petroleum (Vic) Pty Ltd
[1990] FCA 53
•23 FEBRUARY 1990
Re: WILLIAM McPHILLIPS and VALERIE McPHILLIPS
And: AMPOL PETROLEUM (VICTORIA) PTY LTD
No. V G256 of 1989
FED No. 53
Trade Practices - Petroleum Retail Marketing
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Woodward J.(1)
CATCHWORDS
Trade Practices - petroleum retail marketing - franchise agreement of service station - alleged false representations as to likelihood of renewal - whether representations made and relied upon - whether any reasonable grounds for making representations - whether notice of intention not to renew complied with Petroleum Retail Marketing Franchise Act - whether breach of warranty or equitable estoppel established - whether damages a sufficient remedy.
Petroleum Retail Marketing - meaning of 'renewal' - whether franchise agreement 'renewed' after holding over - whether aggregate of terms of franchise agreements should include holding over period.
Trade Practices Act 1974 ss 51A, 52, 87
Petroleum Retail Marketing Franchise Act 1980 ss 3, 13, 17B
R T and M I Abela Pty Ltd v Esso Australia Ltd (Hill J, unreported, 5 September 1989) followed
HEARING
MELBOURNE
#DATE 23:2:1990
Counsel for the Applicants: J R Dixon
Solicitors for the Applicants: M J Gilbert & Co
Counsel for the Respondent: C M Maxwell
Solicitors for the Respondent: Blake Dawson Waldron
ORDER
1. It be declared that:
(a) the respondent has contravened s 52 of
the Trade Practices Act 1974 and the applicants are accordingly entitled to damages to be assessed, and
(b) the respondent has contravened
sub-section 13(2) of the Petroleum Retail Marketing Franchise Act 1980 and so, pursuant to sub-section 13(10) of that Act, the terms of the applicants' franchise agreements with the respondent do not expire until 31 March 1990.
2. The further hearing of this application proceed before another judge of the Court and, to that end, a directions hearing be fixed for 2 March 1990.
3. The respondent pay the applicants' costs of the application to this date.
4. The cross-claim be dismissed with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
This is a claim for relief under ss 52, 53 and 53A of the Trade Practices Act 1974 and under the Petroleum Retail Marketing Franchise Act 1980 ('The Franchise Act'). Breaches of warranty, negligence and equitable estoppel are also alleged. The claim relates to a service station business situated on the corner of Scott and Robinson Streets, Dandenong. The respondent has cross-claimed for possession of the premises and mesne profits. It is agreed between the parties that any questions as to the amount of damages which the applicants should receive, if otherwise succesful, should be determined later.
Immediately before 15 May 1987 the respondent ('Ampol') was the owner, or at least entitled to possession, of the subject premises. On or about 15 May 1987 Ampol entered into -
(a) a franchise licence agreement,
(b) a franchise supply agreement, and
(c) a trade mark licence agreement ('the franchise
agreements') with Jareda Nominees Pty Ltd ('Jareda') with respect to the subject premises.
By a deed dated 10 August 1987 between Jareda as assignor, the applicants ('the McPhillips') as assignees and the respondent, Jareda assigned to the applicants, with the consent of the respondent, its rights and obligations under the franchise agreements.
It was a term of each of the franchise agreements that it was effective for a period of two years, five months and eighteen days, commencing on 1 April 1987 and expiring on 18 September 1989. This is a date of some significance, as a number of service station franchises were due to expire on this date in accordance with certain provisions of the Franchise Act.
There is a question to be considered as to the true duration of these 1987 agreements having regard to the provisions of the Franchise Act. However it is convenient to deal first with the facts relevant to the other claims. These are the events that took place from just before the signing of the deed of assignment, up to the McPhillips' application in writing to Ampol for the renewal of the franchise agreements, and Ampol's refusal to grant fresh agreements and its demand that the McPhillips deliver up possession of the premises to it on or before 18 September 1989. Some of the events occurring after that demand will also need to be considered.
Mr McPhillips had previously worked as a mechanic at General Motors for 15 years. He told me, and I have no reason to doubt his word, that he only had one day off in that time. He obviously wanted to branch out on his own account and buy a business which, with hard work, would be profitable. Accordingly he and his wife were looking for a service station which had a substantial workshop business. As he said in evidence, they saw the petrol sales in such a business as being only the cream on the cake.
I place significance on the fact that the McPhillips looked first at an Esso service station which they liked, but the proprietor told them frankly that he could give them no guarantee about the renewal of the lease from Esso when it expired, and so they did not proceed with the purchase.
In the case of the subject premises, Mr Oliver, who had been running the business for Jareda, his family company, told the McPhillips they would have no trouble getting successive three-year renewals for the franchise for a total of at least nine years. In the light of this assurance the McPhillips made tentative plans to arrange finance of $60,000, which was the asking price of the business, and which included a provision of $25,000 for goodwill. The McPhillips were able to raise some $10,000 from their respective superannuation policies and the balance was to be borrowed from a bank, on the security of their home, if the bank approved the details of the loan proposal.
Mr Oliver gave Mr McPhillips an Ampol form to fill out, applying for the transfer of the franchise. The McPhillips filled out the detailed form and signed it in anticipation that the deal would proceed. It was at this point, about mid-July 1987, that they had their first meeting with a representative of Ampol.
It is alleged by the applicants in paragraph 6 of their amended statement of claim that, in negotiations before the execution of the Deed of Assignment, Ampol represented and warranted that -
"(a) upon the expiry of the franchise agreements on 18 September 1989 the Respondent would renew the franchise agreements with the Applicants;
(b) the Respondent had previously considered selling the site and relocating the service station, but having seen Dandenong Council development plans for the ensuing nine years, had determined to retain the site;
(c) the assignor had allowed it to run right down and if the Applicants were willing to put up with hardship for the first one to two years, they would make a lot of money in the future as it had a lot of potential."
These alleged representations were oral, constituted by conversations between Mr R Moffat on behalf of the respondent and the McPhillips.
A meeting between these parties undoubtedly took place at the McPhillips home at some time about mid-July 1987. Mr McPhillips said in evidence that,
"(Mr Moffat) told me that I would have that time (approximately two years and three months) plus another three by three. You know, that is three three-year terms, right. I said, 'Its not on there'. He said 'Its just a formality, and that's all it is'. That is what he said to me.....and then he also said 'You can have it for 21 years if you want it'. I specifically asked that because we were concerned, because we had already been told in the Esso one that they could not guarantee the lease".
Later he said,
"Ray Moffat had even told me that, that it had been run down. He told me in my home, and it proved it when the people came in to tell me that thank God it was under new management .... and Ray Moffat told me it would be hard for the first one and half years .... I expected to lose money in the first 12 months anyway. I expected that because he told me that. He is Ampol's representative and, you know, you have to suit him, to do what he says, and I believed everything that he told me, everything."
And later still,
"He said he had seen the council plans for the next nine or something odd years, 10 years, and he said that the 'tax office' was going up, there is quite a few large car parks and all the extensions and everything around there. He said, 'It would be a gold-mine for you and your wife'. That is the exact words he said."
Mrs McPhillips was also present at this meeting and her evidence of the conversation that took place generally confirmed that of her husband. Among other evidence she gave was the following,
"Dealing with the conversation with Mr Moffat, he has deposed that he made no reference to any period of 21 years that you would have the lease for?...He did. He was joking at the time. He said you can even have it for 50 but naturally at your age you would not do it. He was laughing and joking at the time, but it was definitely said. He has said that he did not tell you that the business was run down and in fact he has said his opinion was that it was operating satisfactorily?...Yes, I have read that and that is a laugh because he did tell us that it was run down. In fact Mr Oliver had told us before we had seen Mr Moffat that it had been run down and that he had had a manager in that had helped it run down and we spoke to Mr Moffat about that on the day he was there. So he knew about that and he was very uncomplimentary to Mr Oliver so I do not know where his stories are coming from. You do not think that it is Mr Oliver's statement about the business being run down that you remember rather than Mr Moffat's?... No, I remember Mr Moffat. It was so important to me, Mr Moffat's conversation, and I had spoken to him and I would have trusted him with my life. I could not believe his affidavit when I read it."
On the other hand Mr Moffat's recollection of this meeting is somewhat vague, perhaps understandably, since he no doubt had other similar conversations in the same general period.
Counsel for the respondent, while leading Mr Moffat's evidence, put to him,
"You said in your affidavit, that you and Mr McPhillips discussed the duration of the franchise agreements and you said that you specifically told Mr McPhillips that all he would obtain was an assignment of the existing franchise held by Jareda Nominees Pty Ltd and you specifically told him that if his application were approved he would get no more and no less than that. Are you able to say whether you recall specifically stating these matters?"
Mr Moffat replied, "No, I am not".
He was then asked, "So to that extent do you wish to qualify what you put in that paragraph?" He replied, "Well I cannot be specific about it because I cannot recall." The questioning continued,
"What was your understanding at that time about the prospect of renewal of this franchise?.... I had no idea as to whether it was going to continue or not. I was not in a position to know. I did know that there was something in the air that was going to happen in September, 1989 but I just do not know, because I was not told what it was or what it was going to be."
It is further alleged by the McPhillips that the respondent represented to their banker on or about 17 June 1987 that it was a formality that upon their expiry on 18 September 1989 the franchise agreements would be renewed.
The representation was said to be oral, constituted by a telephone conversation on or about the date alleged between Mr N Jury on behalf of Ampol and David Clark, manager of the Moorabbin Central Branch of the State Bank.
Although he swore to such a conversation in his affidavit, Mr Clark admitted in cross-examination that he could not recall the actual words used in the phone conversation with Mr Jury. He had only a faint recollection that he rang and spoke to Mr Jury, and that he was left with "a favourable impression that there would not be any problems" about the "lease agreement .... being extended".
Mr Jury's evidence was just as unsatisfactory as Mr Clark's. He said that he had many conversations with bank managers similar to the one alleged, and he had no recollection of that particular one. He said that he would not have given any assurance of renewal beyond September 1989, but could not explain how he had recommended the approval of the assignment to the McPhillips in a company document which showed 31 March 1990 as the expiry date of the licence.
I accept that, as Mr McPhillips said in his affidavit and oral evidence, he was told by Mr Clark that he had checked with Ampol and received reassurance about renewal of the licence. I think it inherently likely that such a check would have been made and that some reassurance must have been given, although I can make no finding about the form that it took.
The conclusion I have reached on this point is not inconsistent with the only documentary evidence which could be found in the bank records. It is a written record of an interview with Mr McPhillips by David Jamieson, who was a relieving manager at the relevant branch. The note was dated 17 June 1987 and read,
"Purchase service station lease 9 years .... provided figures etc. ok."
Also, the fact that the bank granted Mr McPhillips a loan for the business on 23 July 1987 - made up of a term advance of $45,000 and an overdraft of $5,000 - is, in itself, some evidence that the bank had received a favourable answer to the question which, I accept, was asked, as to whether the business would operate for a reasonable period of time.
Even before any representations had been made by Mr Moffat to the McPhillips or by Mr Jury to Mr Clark, the McPhillips had paid a deposit of $2,000 to Mr Oliver, of Jareda, as a down payment for the proposed assignment of the franchise.
This assignment required the official approval of Ampol, and the loan had to be approved by the bank, so various forms and other documents had to be completed by the respective parties. This took some time. When all parties were satisfied, the applicants executed the deed of assignment, completed their agreement with Jareda and took possession of the premises. This execution of the deed took place on 10 August 1987 at the service station.
After going into possession, Mr & Mrs McPhillips encountered many day-to-day problems while learning and running the business; they particularly had trouble with the pumps and the hoist. They also had various other concerns with the appearance of the site.
Late in 1987 Mr Moffat visited the site with Mr M Kevin and Mr N Jury. This visit gave some concern to the Ampol representatives as they felt the site was untidy and dirty and that the performance of the applicants in this area was not of an acceptable standard.
Mr Moffat said in evidence that, at one stage during the inspection, he was standing with Mr McPhillips. Mr Kevin and Mr Jury were standing a short way off, and he heard Mr Kevin say to Mr Jury that on the first available opportunity Ampol should sell the site. He said, "I have no doubt that Mr McPhillips heard that comment." Mr Jury recalled the comment, but could not say if Mr McPhillips was within earshot.
Mr McPhillips was asked "Did you hear Mr Kevin say to Mr Jury that Ampol should sell?" His answer was "No".
The next incident of some note took place on 1 June 1988 during a visit to the service station by Mr G Smith and Mr B McComas. Mr Smith was the retail sales manager for Eastern Victoria and Mr McComas had replaced Mr Moffat as the area representative for Ampol.
Mr Smith claims that on this day he "advised dealer that at end of franchise '89 would result in sale of property". A diary note in these terms was exhibited to Mr Smith's affidavit. Mr McPhillips however denies this allegation. He said in evidence that,
"They were only there for about five minutes at the place and they complained that it was dirty, old motors laying around everywhere from jobs the previous day, and virtually that was all".
Later on in evidence he said that Mr Smith said to him during that visit "You have to get your litres up because you never know what happens." He did not understand what Mr Smith meant by this remark.
Other points noted by Mr Smith in his diary at the same time included:
"- Site cleaner than previously noted by retail manager
- Dealer very mechanically orientated - 700 series pumps in poor shape - Very low volume - Good mechanical business"
This last entry would tend to confirm the likelihood of something being said about getting litres up. Doing the best I can with this conflicting evidence, I think it probable that Mr Smith gave some warning of the possibility that the property would be sold when the franchise expired in September 1989, but in order to keep the McPhillips working hard and not losing heart, he qualified his statement by suggesting that better performance could stave off the closure. The resulting ambivalent statement apparently made no great impression on Mr McPhillips.
In October 1988, Mr E Thompson became the Ampol area representative responsible for the McPhillips' site, among a number of others. In evidence Mr Thompson said,
"I was sympathetic towards their case because I could see that they were in a site that did not have a future.... When I was appointed to the territory, one of the first instructions I got was that site - we would not re-enter a new lease, come September 1989..... Well, the site had not been maintained as a prime Ampol service station, therefore working conditions I considered were reasonably awkward. For instance, the pumps were a major problem. We had a problem in April with a pipeline rupturing. While we had that fixed, of course, I could see that initially 1989 was the cut off point of Bill and Val."
This decision not to renew was formally conveyed in a letter sent from Ampol to the McPhillips dated 22 November 1988. The letter read,
"We confirm that, at the expiration of your current Franchise Agreements on 18 September, 1989, we do not intend to enter into new Franchise Agreements with you for a further term.
Accordingly you are required to vacate the marketing premises referred to in the Licence Agreement on or prior to 18 September 1989."
The McPhillips reaction to this letter is best described by direct reference to sections of the transcript, which are set out below. First, Mr McPhillips, in cross-examination:
"It was, after all, a letter telling you that at the expiration of your current franchise agreement there was no intention to enter into new agreements and that you would be required to vacate. Would you like to have a look at the letter to confirm what it said?...No, I have read it.
.....
Had you previously been been told that you were going to have to vacate in September 1989?...No.
.....
You do say, do not you, that Mr Moffat had told you beforehand, before you took an assignment of these agreements, that you could extend the term virtually as long as you wanted to?...Yes.
.....
I take it then that his letter must have come as a very rude shock to you?...Yes, it did. But from what you told us just a moment ago, when you saw Mr Thompson at an Ampol dinner in December, what you were concerned to complain about was the pumps?...Yes. As I understood your evidence, as I heard your evidence before, you made no other reference to the letter you had received except, "I suppose they won't fix the pumps because they want me out?"; is that right? Is that all you said about it?...It was leading up to that thing, yes.
But it is correct, is not it, that the concern you say you raised was a concern about the pumps?...Yes.
......
HIS HONOUR: What is being put to you is that that sounds as if you were accepting at that time the fact that you would have to go?...No. You are being asked to say whether that is true or not?...Yes. It is a catch-22 situation really. It is sort of like, you know, my livelihood is in that. That is what I am saying. I would say no. My livelihood is in that place and I expected to have it for the duration of the time. The real question, Mr McPhillips, is this: if as you say you had been promised before you went into the place that there would be no problem about an extension when the time came, why did you not complain, write to the company or go and see a solicitor or something as soon as you got the letter?...The way Graham Thompson spoke to me, as if it would be handled within the company. But that is as a result of your discussion at the party?...Yes.
But before you ever get to that the question arises why did you not do something the day you got the letter, which as you say came as such a shock to you? You did not go and see a solicitor at that stage?...No. You did not ring anyone in the company and say, "What's all this about? I have been promised that I can have an extension"?...No. But you took the opportunity a few weeks later to talk to Thompson?...Yes. And you understood from what he said to you later, after he had talked to other people, that things would probably be all right; is that what you are telling me?...That is what I understood, yes.
MR MAXWELL: Even whan you spoke to Mr Thompson you did not make a song and dance, did you, about the letter you had received? You did not jump up and down and say, "This is terrible and I have been lied to and that is not what you told me last year." You did not say anything like that, did you?...I did not jump up and down. I just asked him, you know, "What's the story? What happens to me?" He said, "Well you will be adequately compensated."
When did he say that?...Later on this year after the discussions.
Let us take it one step at a time. We are talking about December at the moment;.... What you said in you evidence earlier was, "If I could get my money back I would be quite happy. I would go by the end of the month?" ...Yes.
That was an offer to leave early, as I understand it?...Yes, because I did not think they were going to do anything with the pumps. HIS HONOUR: What did you mean when you said if you could get your money back; what money were you talking about?...All the money I had put into the place to buy it, additional equipment and everthing like that."
Secondly, Mrs McPhillips, also in cross-examination:
"Out of this state of uncertainty the letter of 22 November arrived, did it not?...Yes. .....
Why did not you or your husband take any action to register a protest about that?...I had spoken to the legal rep, not the legal rep, the VACC rep that came around to the service station. I had spoken to him on a couple of occasions before Mr Craven came around.
.....
I am talking about the period after you have received the letter in November?...Yes. And I am asking you why you did not make any protest after you received the letter?...Well we did shortly after.
.....
Well your husband gave evidence this morning that when Mr Thompson rang him after the November letter to invite him to the Christmas party he accepted the invitation and he made no reference to the November letter; you heard that evidence, did you not?...Yes. You would agree with me that that was an opportunity upon which he might have registered a complaint about the letter?... That is why we went to the party because I did not want to go and that was the only reason we went and agreed to go.
.....
MR MAXWELL: But at some stage in the evening you and your husband made a point of speaking to him, did you not?...Yes. And the complaint you made a point of registering was the complaint about the pumps?...Bill did. I spoke to him about other things.
HIS HONOUR: What did you speak to him about?...I spoke to him about the lease and what was going to happen to us and we told him that we had been having a hard time coming up to the Christmas period with the pumps and they were a real concern at the time and we spoke to him about all that and he said that he would look in and see what he could get done for us. I said the equipment had been so bad at one time that we were not making the money and I was putting more into it and I told him if they were not renewing the lease I was not going to put any more money into it and I wanted to know where we stood. He said he would look into it and that was when he rang back in January.
.....
So this (representations Ampol had made about renewal of the franchise) was not specifically discussed at the dinner?...Not specifically. It was just one of the points. But I had discussed it with him a few times and he even asked me one time if I would be prepared to write down the facts because he and Mr Smith were not there at the time and they did not know what went on."
Mr Thompson's evidence-in-chief of the discussion that took place at the Ampol Christmas party was as follows:-
"Now, evidence has been given about what happened at the Christmas party. Were you at the table with the McPhillips or not?...Well, I was host. I was drifting around. There were maybe 20 or so tables involved and I was looking after each and every one, so I was not at a particular table.
Mrs McPhillips has given evidence .... about a conversation with you in which she discussed with you the future of their tenure of the site and that this was separate from Mr McPhillips speaking to you about the pumps. Do you have any recollection of any such separate conversation with her?... No, I do not recall that conversation. How many conversations did you have with the McPhillips's on that night? When I say conversations, apart from greeting them at the door, conversations which related to matters affecting the site?...Well again, I only recall the one conversation and that was concerning the pumps.
And were they together when you spoke to them? ...Yes.
And who did most of the talking?...Bill. Now, Mrs McPhillips has said in evidence that the question of promises made to them was not specifically raised at the Christmas party because she had had a previous conversaton with you about that and you therefore were aware of it. Do you recall any such conversation with her prior to the Christmas party when she had raised that matter?...No.
Mr Thompson was then asked by counsel when Mr McPhillips had first said anything to him about the alleged representations.
He replied,
"In regard to Bill mentioning the fact that he had been promised an extended tenure, I believe it was about January that he first mentioned that particular matter to me. And what time do you first recall hearing Mr Moffat's name mentioned in relation to the promise of renewal?...It was not mentioned at that stage. Bill at first suggested to me that people from Ampol had indicated to him that he would have extended tenure, but he did not mention Mr Moffat's name at that stage, and I did not ask. And it would have been later on in the year that the names of Mr Moffat and Jury were mentioned.... From recall it would have been about May."
From the beginning of the year through to June, the McPhillips say, they continued to press Mr Thompson for some answers as to their position, and the question of compensation was in fact discussed in late May or early June. Mr Thompson conceded that they spoke to him on the subject on four to six occasions during that period. Mr McPhillips was apparently requesting either a further term or compensation. Mr Thompson said that he continually told the McPhillips that there would be no renewal of the franchise and denied, in cross-examination, that he said the McPhillips would be adequately compensated -
"I deny saying anything like that. Bill knew that I had neither the authority nor the position to offer that compensation".
I accept Mr Thompson's evidence that he gave no assurance of compensation. However it is clear that he had sympathy with the McPhillips, and the question of compensation was discussed a number of times. I believe that Mr Thompson would have said, and did say, that he would do his best for them and would make representations on their behalf. Ampol was generally willing to compensate owners, for the expense of removal in September 1989, by returning to them one month's rent. The company would also provide independent advice "in identifying future business opportunities". Mr Thompson may have hoped to improve on these offers in the case of the McPhillips.
During these discussions from January to June with Mr Thompson, Mr McPhillips was also consulting his Solicitor, Mr Giliberto. 1 February 1989 was the date of his first consultation. In the course of cross-examination, Mr McPhillips agreed that on this occasion he gave Mr Giliberto a copy of the original franchise agreement and the assignment of the franchise. He told Mr Giliberto that he had recently been advised that Ampol intended to sell the property in September 1989 and that he would not receive any compensation. He also told Mr Giliberto that he did not have the right to a renewal of the lease and mentioned that he had spoken to Mr Thompson at the Ampol Christmas party "about him saying we would be adequately compensated". Mr McPhillips also said he believed that he said something to Mr Giliberto about the statements by Mr Moffat.
From Mr Giliberto's evidence it seems that there was no written record of any alleged representations by Mr Moffat or Jury to be found in correspondence to or from the McPhillips, Ampol and Mr Giliberto, or in file notes, until well after June 1989. However Mr Giliberto informed the Court that the representations were mentioned to him by Mr McPhillips from the outset of their discussions.
"The misrepresentations were repeated to me quite a number of times from the initial stages both at the office and at the service station where I would fill up with petrol, get my car serviced, sir.... I simply put in the back of my mind that there were misrepresentations made by a number of people and I did not make any notes of exactly what was said or the names of those people, sir. Later on, once the matter became more pressing in relation to these representations then I did ask Mr McPhillips to identify who was Moffat, who was Clark, who was Jury et cetera."
On 1 June 1989 Mr Giliberto sent a letter to Ampol stating that he was acting on behalf of the McPhillips and raising a number of pertinent matters, including direct allegations of misrepresentations made to the McPhillips and their bankers.
Ampol replied to this letter on 26 June, stating that it would not be renewing the franchise agreements or granting fresh agreements and denying any assurances to the contrary by its representatives.
Meanwhile, on 2 June 1989 Mr McPhillips, acting on Mr Giliberto's advice, sent an application in writing requesting renewal of his franchise. The response to this was a general letter from Ampol to all dealers concerning franchise arrangements after 18 September 1989.
Before this, the McPhillips had also been in contact with the Victorian Automobile Chamber of Commerce ('VACC'), representatives of which were speaking to a number of franchisees affected by the 18 September 1989 expiry date.
One of those representatives of the VACC helped Mr McPhillips complete a questionnaire entitled "CONFIDENTIAL NON-RENEWALS DETAILS" on 2 March 1989. One of the answers on this form clearly states that the McPhillips were told by the area representative that they would be compensated.
Another interesting item of evidence was a valuation of the property done by L J Hooker at the request of Ampol. This was dated 19 June 1989. Some of the statements made in the valuation report suggest the possibility of extended tenure; for example:
"The property is currently occupied under a franchise arrangement to September 1989 and we understand further terms may be available to the occupant".
"FRANCHISE DETAILS
We understand the subject property is occupied on the following terms: ......
Term - three years plus two three year options.
......
Rent Reviews - next review is due September 1989 at which time an option to renew the occupancy becomes due".
None of the witnesses representing Ampol could explain where L J Hooker gleaned this information. It certainly suggests a degree of confusion within the Ampol administration which could easily have led to misrepresentations being innocently made to the McPhillips.
These events finally culminated in a meeting that took place on 14 August 1989, between Mr Smith, Mr Thompson, Mr McPhillips and Mr Giliberto. The outcome of this meeting was that Ampol was still insisting on vacant possession, and so the McPhillips said they would begin proceedings to seek compensation.
When Ampol discontinued supplies of petrol from 19 September 1989 the McPhillips sought an interlocutory injunction from this Court. It was then agreed that certain undertakings should be exchanged to preserve the existing situation, and the interlocutory hearing should be treated as the trial of action.
Having considered all the disputed questions of fact before me, I have come to the conclusion that the applicants' claim under s 52 of the Trade Practices Act must succeed, but that they have not made out the breach of warranty alleged. It is not necessary to consider any alleged breaches of ss 53 or 53A of the Trade Practices Act.
Having seen and heard the applicants give their evidence, I am satisfied that they have told me the substantial truth about the representations allegedly made to them by Mr Moffat. I think that he believed at the time that the applicants would have no trouble getting an extension of their franchise after the initial term was completed. He would have been used to seeing such extensions and he had no clear idea in his mind of any general scheme for licences to terminate in September 1989.
On the other hand, I believe he spoke in general terms of their having nothing to worry about. Whatever he said was not sufficiently specific to be given contractual effect, even if the Court were satisfied that such a commitment was within the scope of his ostensible authority - which I do not believe it was.
I think the non-contractual nature of the representations is underlined by the way the McPhillips reacted when told that the term of their franchise would not be extended. Had they believed they had a firm arrangement to extend the franchise for an identifiable term, I believe they would have protested quite vigorously and seen a solicitor if their protests had been rejected. As it was, their failure to protest immediately about the misrepresentations is somewhat puzzling, but having observed Mr and Mrs McPhillips in the witness box, I can understand their inaction. I think they are ordinary hard-working people, unused to significant business dealings, who were disappointed when someone's word proved to be unreliable, but who took the view that, in dealing with a big company, there was not much they could do about it, other than appeal for a fair deal. It probably did not occur to them, since the statements made had not been in writing and had been expressed in general terms, that they had any legal redress.
I accept Mr Giliberto's evidence that the misrepresentations were reported to him by the McPhillips at an early stage of their solicitor-client relationship; but he did not pay particular attention to them, because he was conscious of special rights given by the Franchise Act and was anxious to explore the possibilities of such a statutory remedy.
For the reasons that I have given, I am satisfied that Mr Moffat did, no doubt innocently, mislead the McPhillips about their security of tenure of the franchise. I think he gave them to understand that they would be able to stay in the business for a considerable time - probably as long as they wished to, and that they acted on his assurances, without feeling that they had been given any contractual rights beyond those set out in writing.
I believe that they acted on those assurances, confirmed as they were through their bank manager, in deciding to go ahead with the contract they had tentatively entered upon. I am quite certain that, if Mr Moffat had told them that the franchise would be terminated after two years and three months, or that it was unlikely to be extended, or even that he had no idea whether it would be extended or not, they would have withdrawn from their provisional commitment and demanded the return of their deposit from Mr Oliver, who seems to have already misled them - although I can make no clear finding on that issue since he was not called to give evidence.
After being put off the Esso service station by the honest answers of that vendor, I am satisfied the McPhillips would not have taken on an equally doubtful (or perhaps more doubtful) venture if they had not been misled by the respondent's employees.
For the reasons given, I believe the applicants have made out their allegation in paragraph 6(a) of their statement of claim, referred to earlier in these reasons, that the respondent, through its servants Moffat and Jury, represented that it would renew the franchise agreements with the applicants when they expired in September 1989.
I believe that the representations set out in the paragraphs lettered (b) and (c) in paragraph 6, above, were also made by Mr Moffat, in terms at least similar to those alleged. However these only served to reinforce the vital representation referred to in paragraph (a) and I need not deal with them further, apart from saying that the allegations have a distinct ring of truth.
All these representations were, in my view, made carelessly and without reasonable grounds, within the meaning of s 51A of the Trade Practices Act, since the respondent had already determined to sell (or, in its unattractive usage, 'disinvest') the premises. Only the timing of the sale remained to be decided. A memorandum dated 26 November 1986 referred to the premises as having been "listed for disinvestment some time ago". It went on to say "... at that stage we made the decision to wait ..... it would seem timely for us to re-assess the situation". A firm decision to sell was made early in 1988.
For the same reasons given above about the absence of any contractual warranty in the present case, I find that the applicants have not made out a case in equitable estoppel. Apart from the absence of anything which could properly be called unconscionable conduct, there was no sufficiently clear promise made for equity to step in and enforce it. The statements made were representations, and nothing more; see Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. I believe the respondent was entitled to refuse to renew the franchise agreements, subject only to the provisions of the Franchise Act, which I shall shortly consider, and any rights the respondents might have to have the term of the agreements extended pursuant to s 87 of the Trade Practices Act.
In my view, damages as for deceit are an appropriate and adequate remedy in the present case and, in the exercise of my discretion, I decline to order under s 87 that the term of the franchise agreements be extended so as to enable the applicant to remain in possession. I think it is generally undesirable to order parties who have fallen out to remain in a contractual relationship. It is not difficult to imagine problems arising over such questions as maintenance of the premises and levels of rent.
Further, to refuse to allow the respondent to sell its property might cause it unintended and excessive damage. And there is no evidence before me to show that there would be any great benefit to the applicants in extending their franchise for what would have to be an arbitrary period.
The damages to which the applicants are entitled are those occasioned by their entering into the contract, not damages for lost expectations. The basic question to be answered would seem to be - how much have the applicants lost, on balance, from their actions in purchasing and running the business? See Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 12. But the precise questions to be asked will be a matter for argument and decision in a later hearing if the matter cannot be settled by negotiation. I shall order that the amount of damages, if it has to be litigated, be determined by another judge of this court.
I turn now to the last matter I have to decide, that arising under the Franchise Act. This was raised late in the hearing by way of amendment to the statement of claim. Counsel for the respondent was given leave to reply by way of written submission, which was received by the Court with a covering letter dated 4 December 1989.
That submission conveniently sets out the relevant legislation and undisputed facts as follows:
"1. The Petroleum Retail Marketing Franchise Act 1980 (Cth.) ("the Act") came into force on 19 September 1980. There has been one amending act, the Petroleum Retail Marketing Franchise Amendment Act 1984 ("the Amendment Act").
2. The relevant sequence of franchise agreements relating to the Dandenong site between 1979 and 1989, including assignments, is as follows:
(i) 24 April 1979: service station licence agreement and dealer supply agreement (both in writing) and trade mark agreement (partly oral and partly to be implied from the use, with Ampol's consent, of Ampol trade marks), between Nolan and Ampol, effective for a period of 21 months from 1 March 1979 ("the 1979 agreements"). The term fixed by the 1979 agreements expired on 30 November 1980. Clause 4(b) of the licence agreement provided for the licensee to remain in occupation after the expiration of the term with the consent of Ampol, as a licensee from fortnight to fortnight subject to the terms of the licence agreement.
(ii) 9 June 1981: franchise licence agreement, franchise supply agreement and trade mark licence agreement between Nolan and Ampol, each effective for a period of 3 years from 1 April 1981 ("the 1981 agreements").
(iii) 13 October 1982: assignment by Nolan to Darby of the 1981 agreements.
(iv) 10 May 1984: franchise licence agreement, franchise supply agreement and trademark licence agreement between Darby and Ampol, each effective for a period of 3 years from 1 April 1984.
(v) 17 July 1985: assignment Darby to Jareda Nominees Pty. Ltd. (David Oliver).
(vi) 15 May 1987: franchise licence agreement, franchise supply agreement and trade mark licence agreement between Jareda and Ampol, each effective for a period of 2 years, 5 months and 18 days commencing on 1 April 1987 and expiring on 18 September 1989 ("the 1987 agreements").
(vii) 10 August 1987: assignment Jareda to McPhillips.
3. The question at issue is the duration of the 1987 agreements. Duration is governed by s.13 of the Act. Sub-sections 13(2) and 13(4) (not amended by the Amendment Act) relevantly provide: "(2)...the term of -
(a) .....
(b) a franchise agreement entered into by way of renewal, other than an agreement referred to in sub-section (4), shall be not less than 3 years.
(3)....
(4)...where -
(a) a corporation enters, as franchisor, into a franchise agreement by way of renewal; and
(b) the term of the original agreement amounts, or the terms of the original agreement and of any previous renewal amount in the aggregate, to a period of more than six years and less than nine years, the term of the agreement so entered into shall be a period that is not less than the difference between the period referred to in paragraph (b) and nine years."
4. It is common ground that the 1987 agreements were entered into by way of renewal. It is therefore necessary to determine for the purposes of s.13(4) the term of the original agreement and the term of any previous renewal."
(Note. The reference to paragraph 13(2)(b) in paragraph 3 above has been added for the sake of completeness.)
There are two issues to be considered in the present case. The first is whether there can be a 'renewal' of a franchise within the meaning of the Act, after one term has expired and there has been a holding over for some months, pursuant to the conditions of the earlier franchise agreement, before a fresh agreement is executed.
The second question is whether such a period of holding over, even if it does not break the chain of renewals, can be counted as part of aggregate terms amounting to "a period of more than six years and less than nine years" within the meaning of sub-section 13(4), above. See also s 17B(4).
As to the first question, I have no doubt that a lease, licence or franchise can properly be said to be 'renewed' in spite of the fact that there has been a holding over between two terms - at least so long as that holding over is in accordance with the conditions attaching to the first term. This is, I believe, confirmed in the case of the subject legislation by a consideration of the scheme and purpose of the legislation and, in particular, the wording of sub-sections 3(2) and 3(4) of the Act. They are in the following terms:
"(2) Except so far as the contrary intention appears, a reference in this Act to an agreement shall be read as including a reference to a proposed agreement, an agreement as requested or proposed to be renewed, or a terminated or expired agreement and, in relation to such an agreement, a reference in this Act to a party to the agreement shall be read as a reference to a person who would be a party to the agreement if the agreement were in effect.
(3) ......
(4) For the purposes of this Act, where, at the expiration of a franchise agreement, the franchisee and the franchisor ...... enter into a new franchise agreement concerning the same subject matter, the new agreement shall be taken to be a renewal of the earlier agreement notwithstanding that the provisions of the new agreement may differ from those of the earlier agreement."
I believe that a franchise agreement has not reached its 'expiration' within the meaning of sub-section 3(4) until the completion of any holding over period provided for by that agreement; its conditions are still in operation and even though its initial term has expired, the agreement itself has not.
I am strengthened in the view I have taken by the decision of Hill J in R T and M I Abela Pty Ltd v Esso Australia Ltd (unreported, 5 September 1989), although his Honour reaches his conclusion on the point by a slightly different route.
The other question I find more difficult; but again I am disposed to follow the decision of Hill J. in the same case, where he said,
"Without regard to authority, it seems to me that the Act requires the term of a franchise agreement to be calculated at the time the franchise agreement is entered into or renewed, as the case may be and not by reference to what actually happens to occupation under it."
His Honour then goes on to consider a number of authorities and draw attention to s 3(13) of the Act which reads,
"Unless the contrary intention appears, references in this Act to the term of an agreement do not include references to any period of extension of the agreement by holding over or otherwise."
In my view there is a consistency in the Act in its use of the phrase 'term of the agreement' as meaning the fixed period provided for by the franchise agreement, without regard to any holding over provision. I can see no contrary indication in sub-section 13(4) and so I believe the terms to be aggregated for present purposes are:
(i) 3 years from 1 April 1981,
(ii) 3 " " 1 April 1984,
(iii) 2 years, 5 months and 18 days from 1 April 1987.
Since these do not add up to 9 years, the respondent did not bring itself within sub-section 13(4) and so was in breach of sub-section 13(2).
Sub-section 13(10) of the Act provides,
"(10) Where a corporation purports to enter into a franchise agreement in contravention of a sub-section of this section ......the franchise agreement is not thereby invalidated, but the term of the agreement is -
(a).....
(b).....the term, or the minimum term, as the case may be, provided by the sub-section contravened."
Thus, by operation of the Act, the terms of the current franchise agreements become three years, expiring on 31 March 1990.
The aggregated terms of the relevant franchise agreements, with that amendment, total 9 years and so, pursuant to s 17B(4) of the Act, ss 17 and 17A of the Act no longer apply and the applicants are not entitled to any further renewal of the franchise agreements after 31 March.
Until that time is reached, the applicants are under no obligation to deliver up the premises to the respondent, and so the cross-claim is dismissed with costs.
The respondent must also pay the applicants' costs of the application to this date.
I shall therefore declare that:
(a) the respondent has contravened s 52 of the
Trade Practices Act 1974 and the applicants are entitled to damages; and
(b) the respondent has contravened sub-section
13(2) of the Petroleum Retail Marketing Franchise Act 1980 and so, pursuant to sub-section 13(10) of that Act, the terms of the applicants' franchise agreements with the respondent do not expire until 31 March 1990.
I shall order that the further hearing of this application proceed before another judge of the Court and, to that end, a directions hearing be fixed for 2 March 1990.
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