Mobil Oil Australia Ltd Mogap Pty Ltd and Ors

[1998] FCA 810

FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE – stay of order of Full Court of the Federal Court pending application for special leave to appeal  - preservation of the subject matter of litigation – jurisdiction to grant stay – factors relevant to exercise of discretion to grant stay – whether appeal will be rendered nugatory if stay is not granted – whether benefit of Full Court judgment will be lost if stay is granted – whether likely that special leave to appeal will be granted – whether damages are an adequate remedy in all the circumstances.

Trade Practices Act 1974 (Cth)

Petroleum Retail Marketing and Sites Act 1980 (Cth)

Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR 197, cited

Jennings Construction Limited v Burgundy Royale Investments Pty Ltd [No 1] (1986) 161 CLR 681, applied

Marconi’s Wireless Telegraph Co Ltd v The Commonwealth [No 3](1913) 16 CLR 384, applied

Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health (1991) 65 ALJR 360, cited

Attorney-General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 61 ALJR 612, cited

CSR Ltd v Cigna Insurance Ltd (1996) 70 ALJR 565, cited

MOBIL AUSTRALIA LIMITED v

MOGAP PTY LIMITED & ORS
NG 841 OF 1995

TAMBERLIN J
SYDNEY
10 JULY 1998

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 841 of 1995

BETWEEN:	MOBIL OIL AUSTRALIA LIMITED APPLICANT
AND:	MOGAP PTY LIMITED & ORS RESPONDENT
JUDGE:	TAMBERLIN J
DATE OF ORDER:	29 MAY 1998
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The Short Minutes of Order presently in force be varied by substituting for the words “until further order of this Court or the Full Court” the words “until further order of the High Court.”

1. The application for discharge of the orders as so varied is dismissed.

1. If special leave is refused, the respondents should pay Mobil’s costs of this application.

1. If the special leave application is successful and the appeal is upheld, then Mobil should pay the respondents’ costs of this application.

1. If the special leave application is successful but the appeal is dismissed, then the respondents should pay Mobil’s costs of this application.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 841 of 1995

BETWEEN:	MOBIL OIL AUSTRALIA LIMITED APPLICANT
AND:	MOGAP PTY LIMITED & ORS RESPONDENT

JUDGE:	TAMBERLIN J
DATE:	10 JULY 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Mobil Oil Australia Limited (“Mobil”) has filed an application in this and two other related matters for discharge of what are, in effect, stay orders made in favour of W & JB Thorpe Pty Limited (“Thorpe”) and two other parties to the representative proceedings, Roseville Self Service Station Pty Limited (“Roseville Service Station”) and JTP Holdings Pty Limited (“JTP”). The three parties to the representative action are referred to as the franchisees.  The present proceedings are based on earlier orders made by the Full Court of the Federal Court in respect of the conduct of Mobil and statements made by it in relation to a dealer incentive scheme, where it was claimed that Mobil represented to the franchisees that the tenure of dealership premises would be extended.  Mobil was held to have engaged in misleading conduct.

The orders as originally sought to be discharged by Mobil are that:

“... until further order of this court or of the Full Court, the Respondent [Mobil] comply with its obligations under all existing agreements with the Applicant, [Thorpe, Roseville Service Station and JTP]. This order to be on the basis that the Applicant will comply with its obligations under its agreements and agree not to assert in these proceedings or in any other proceedings that this order amounts to circumstances that would entitle it to any right under the Petroleum Retail Marketing Franchise Act.”

At the conclusion of the hearing I ordered that the above orders be varied by replacing the words “until further order of this Court or the Full Court” with the words “until further order of the High Court.”

The present application arises in the context of an application filed by the franchisees for special leave to appeal to the High Court from the adverse decision of the Full Court: see Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR 197.

The Full Court judgment was given in respect of three appeals which were heard together.  The procedural and historical background of the matter is recounted in the above judgment.  It is not, therefore, necessary to repeat it at length here.  Suffice it is to say that the applications for relief were made by about 155 Mobil dealers in seeking to enforce contractual and equitable rights arising from the conduct by Mobil.  The claims have their genesis in statements made by a senior employee of Mobil at a Los Angeles Convention held in 1991 and the subsequent conduct of Mobil and its employees.

The trial Judge, Wilcox J, held that Mobil had not made any contractual promise as alleged of a yearly renewal of the dealers’ tenure for each year during which compliance with standards prescribed by a Mobil dealer incentive scheme was achieved.  However, he decided that Mobil had made an enforceable contractual promise that 9 years tenure would be granted in return for performance to the required level over each successive year of a 6 year period.  Accordingly, his Honour ordered that Mobil should grant to those franchisees, who had met that standard up to a specified time, a further franchise of 9 years of tenure in respect of the Mobil service stations occupied by them, commencing upon the expiration of their then current franchises and on the same terms and conditions as the earlier franchises.  His Honour ordered that two of the claims should be dismissed because they had not met the requirements of the scheme.  His Honour rejected the franchisees’ claims based on promissory estoppel and the Trade Practices Act 1974 (Cth).

Mobil’s appeal to the Full Court against the orders made in favour of the present applicants and the two other test case applicants was successful.  The appeals by the dealers were dismissed. 

The order in favour of the franchisees, which Mobil seeks to have discharged, is set out above.  The purpose of the order in each case is to preserve the position of the dealers as franchisees under the existing agreements until there has been a final determination of the proceedings by the High Court and to thereby prevent termination by Mobil of the agreements before such final determination.

Principles

Counsel for Mobil, in support of the application, points out that the present order, in substance, has the effect of an interim order for specific performance, pending the hearing of the application for special leave to appeal to the High Court.

The relevant principles on the issue of a stay, in the circumstances of this case, are set out in the judgment of Brennan J in Jennings Construction Limited v Burgundy Royale Investments Pty Ltd [No 1] (1986) 161 CLR 681 where his Honour, at 683, said:

“The jurisdiction to grant a stay ... depends on whether a stay is necessary to preserve the subject-matter of the litigation.  If an application for special leave to appeal would be futile unless a stay is granted, the jurisdiction arises. ... The present application for a further stay ... is made to preserve the statutory liens upon which the applicant relies as security for the money it alleges it is owed under its contract with the respondent for the construction of the Darwin Centre.”

At 684 his Honour said:

“ A stay to preserve the subject-matter of litigation pending an application for special leave to appeal is an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted.  If an order for a stay is made, the respondent is kept out of the benefit of the order of the court in which the matter is pending the hearing of the application for special leave to appeal.”

His Honour, in discussing the content of the expression “exceptional circumstances”, referred to the need for strong and special grounds to be shown. He cited Marconi’s Wireless Telegraph Co Ltd v The Commonwealth [No 3] (1913) 16 CLR 384 at 386 where it is said:

“This is a very peculiar case.  The conditions are such that, on the one hand if the stay is granted without more, the whole benefit of the action may be lost to the plaintiffs, while, on the other hand, unless a stay is granted on some fair terms the defendants’ appeal will be nugatory.”

The principles enunciated in  Jennings Constructions (supra) have been applied in subsequent cases: cf Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health (1991) 65 ALJR 360 at 361- 362; Attorney-General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 61 ALJR 612 and CSR Ltd v Cigna Insurance  Ltd (1996) 70 ALJR 565 at 566.

Submissions

Counsel for Mobil submits that the extent of loss which will be suffered by Mobil if the order is made amounts to between $90,000 and $900,000.  This broad range is given because the loss is said to depend on whether regard is had to the three specific applications presently before me or to the fact that the proceedings are representative of fifty-six applications in total.

Mobil contends that the undertakings as to damages proffered on behalf of the three applicants are worthless because of the apparent lack of resources in the dealers to meet the claim for the above amounts or to meet outstanding costs, which are said to be in the order of a $1,000,000.  Therefore, in the event that the High Court upholds the decision of the Full Court, it is said by Mobil that it would be exposed to substantial financial risk if the orders were stayed.

It is also said that the appeal will not be rendered nugatory if the present orders are discharged because the franchisees will have a remedy in damages.  Further, Counsel for Mobil contends that the appeal is futile because it seeks to set aside the unanimous decision of the Full Court and several unfavourable findings made by the primary Judge.

It is suggested that the findings as to the nature and effect of the representation made are concurrent findings of fact and would need to be overturned in the High Court for a reversal of the Full Court decision.  It is submitted by Mobil that such a result is extremely unlikely and therefore there is no realistic likelihood of special leave being granted.

For the franchisees, it is submitted that the continuation of the stay is required to preserve their interests in the extended tenure sought in the proceedings.  If the order is discharged it is obvious that steps will be taken to terminate the franchises and the franchisees will thereby be deprived of any possible benefit which would accrue if the Full Court decision were set aside and the orders of Wilcox J were restored. 

Further, it is said that the balance of convenience is clearly in favour of the franchisees.  Counsel for the franchisees sought to support an argument to the effect that if the franchises are terminated the evidence indicates that Mobil proposes to allow service stations to operate in breach of the Petroleum Retail Marketing and Sites Act 1980 (Cth) (“the Sites Act”).  It is claimed that this Court should not lend its assistance to the performance of what may be an illegal activity.

This latter submission fails at the outset because, in my view, the available evidence on this aspect, considered as a whole, does not indicate that Mobil has any present intention of exceeding the number of retail sites which it is permitted to operate.  It is not possible on the present state of the evidence to find that there is likely to be an infringement of the Sites Act by Mobil if no stay is granted.

Reasoning

In deciding whether the present orders should remain in force until determination of the special leave application there are, of course, a number of competing considerations which must be balanced.  First, the evidence indicates that Mobil may suffer significant detriment if the stay is not granted and it is ultimately successful on the leave application or the appeal.  I am not satisfied that the relevant franchisees are in a position to offer adequate security to support their undertakings as to damages.  Second, account must be taken of the fact that the applicants were totally unsuccessful in the Full Court and were only partially successful before the Primary Judge.

On the other hand,  the present case is special in that the proceedings are in the nature of a test case; the results of which may significantly affect the future occupations and livelihood of many franchisees and no doubt their families.  It is true that the Court has a wide discretion as to the amount of damages or compensation which can be awarded in the event that the franchisees are successful.  The Court may also, if appropriate, award substantial compensation.  However, these are not the controlling factors.  A large number of dealers have entered into relatively long-term business relationships with Mobil and for that reason I am of the view that this case is out of the ordinary.

Another important consideration in this case is that the relief sought by the applicants is the enforcement of representations and the grant of leasehold tenure. If a stay is not granted and the franchises are terminated then the principal form of relief sought is denied to the franchisees.  It is said that specific performance would not be granted in the present circumstances and that damages are a complete remedy.  I am not convinced that this question is beyond reasonable argument.

It is also suggested that the “concurrent findings of fact” as to the nature of the statements made by way of representations present an insuperable obstacle to the franchisees’ prospect of success on the leave application and that, therefore, leave is unlikely to be granted.   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.

In all the circumstances, I am satisfied that this is a case where the status quo should be preserved pending the hearing of the application for leave.  This means that the orders should remain on foot.  The same reasoning in relation to the appropriateness of the stay applies to each of the applications for discharge of the orders.

Accordingly, for the above reasons, I dismiss the application for discharge of the orders.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin

Associate:

Dated:            10 July 1998

Counsel for the Applicant:	Mr G O’L Reynolds
Solicitor for the Applicant:	Cowley Hearne
Counsel for the Respondent:	Mr R W R Parker QC Mr M O Tubbs
Solicitor for the Respondent:	Stojanovic Solicitors
Date of Hearing:	28 May 1998
Date of Orders:	29 May 1998
Date of Judgment:	10 July 1998