Mobil Oil Australia Ltd v Brindle, Brian

PETROLEUM RFPAIL MARKETING - Renewal of franchise aureement -

Breach of agreement by franchisee in relation

to payment for fuel

delivered - marketing practises of franchisor - Jurisdiction to

make orders on application

of franchisor for delivery

possession - Wether lust and equitable to order renewal

Appropriate terms of renewal - Costs.

Petroleum_Retail Marketins Franchise

Act 1980 ss.9. 10, 13, 16,

17, 18, 26.

MOBIL OIL AUSTRALIA LIMITED V B R I M BRINDLE

G.425 OF 1983

WILCOX J

19 OCTOBER 1984

SYDNEY

- .

IN THE FEDERAL COURT OF AUSTRALIA

)

NEW SOUTH WALES DISTRICT REGISTRY

)	No. G.425 of 1983

)

GmI?RAL

DIVISION

)

BED-:	M m L OIL	AUSTRALIA
LIMITED

Applicant

m:	BRIAN BRINDLE

Respondent

m: BRIAN

BRINDLE

Cross-Claimant

MOBIL OIL AUSTRALIA

LIMITED

Cross-Respondent

C ! W :	WILCOX J
DAA!L :	19 OCTOBER 1984

PUCE: SYDNEY

Application

d smissed.

2 .

Upon

the

Cross-claim:

NOTED that the Applicant acknowledues that before 14 September 1984 the respondent. in accordance

with the Reasons

for Judaement of 14 Auaust 1984.

paid to the applicant the

sum of $34.109.77

together with interest at the current rate

applicable in the Supreme Court of New South Wales.

b)	ORDER that the Lease bearinu date 1 April 1981 from the applicant to the respondent of the Service Station premises at Corner Pioneer and Towradui

Roads. Towradai (the marketina premises) be renewed

on the terms set forth in the Lease

In Annexure B

of the Affidavit of

M Leahv of 2 July 1984 save

that:

(i)	the rental in the renewed Lease shall be:

Year 1	$11,600.00 per annum
Year 2	919.800.00 per annum
Year 3	$24,000.00 per annum

(ii) Clause 3 of the Lease be amended bv deletina

the words from	"FROVIDED HOWEVER" to the end
of Clause 3 .

ORDER that the Reseller Contract dated

1 A m i 1 1981

between the applicant and the resPondent in respect

of the marketinu premises be renewed on the terms

set forth in the Reseller Contract in Annexure

B of

the Affidavit of

M Leahv of 2 July 1984 and that

the renewed Reseller Contract contain a Clause

l(l)(ba) in the followinu terms:

"l(l)(ba) Nothinu in this Contract shall

obliae Dealer to purchase a "Refined" Product

whilst:

(1)	Hobil is offerina for sale, to any retailer within the City of Wollonuonu, petrol at a wholesale price below the Mobil List Price: OK

(ii) Mobil‘s wholesale price to Dealer is

less than five

( 5 ) cents below the

retail price then beinu Charged at any commission agency site operated by Mobil within the Citv of

Wollonaona:

and in relation to any month within

which

either of such events occurs the obliaation

of the Dealer to purchase a minimum

of 58.500

Litres of petrol

shall not apply”.

ORDER that the Equipment Loan Contract dated

A~ril

1981 between the applicant and the respondent

in respect of the marketina premises be renewed on the terms set forth in the Equipment Loan Contract

in Annexure

B of the Affidavit of M Leahv of 2 Julv

1984 save that clause 4 shall be amended bv

insertinu after the words “Reseller Contract”

the

words “or products permitted bv the terms

of the

said Contract to be purchased otherwise than from

Mobil”

3 . ORDER that the applicant pay to the respondent

two-thirds of his costs whether incurred in the Application or in

the Cross-claim.

4. Upon the application of the applicant for a stav of

DKOCeedingS pending appeal and upon the applicant undertakinu:

a)	To prosecute with all possible expedition its

Appeal auainst the orders made herein today: and

Pendinu the disposal of the Appeal to conduct

itself in its relations

with the Respondent

Cross-Claimant as if it were bound by contractual

obligations in accordance

with the terms

of the

documents orderd to be entered

into.

ORDER that the orders made herein be stayed pendinu

the disposal

of the Appeal or further order of the Court or of a Judue.

IN 'RIE FEDERAL COURT OF AUSTRALIA

)

N M SOUTH HUES DISTRICT REGISTRY

)	No. G.425 of 1983

)

GENERAL

DIVISION

B-:	HOBIL OIL	AUSTRALIA
LIJMIrn
Applicant

ANN :

BB IAN BRINDLE

Respondent

REASONS FOR JUDGEMENT

cm:

WILCOX J

DATE:

AUOUST

- 1984

P=:

SYDNEY

This is a dispute between an oil company and one dealers. the lessee of a site uDon whlch he carries on

of its

a service

station business.

Both an Application

and a Cross-claim have

been filed. Each partp seeks relief under the provisions of the

Petroleum Retail Marketins Franchise Act 1980.

The affidavit

evidence on each side

is voluminous, much of it beina at best

peripheral to the ultimate issues in the

case: whether it is

'just and equitable' that the Court Order the aDplicant to renew

its existinu contractual arrangements with the respondent. in

respect of his service station at Towradai

and. if so. upon what

terms. I will refer only to the evidence which is significant in relation to those issues.

Mr Brian Brindle, the KeSDOndent. has operated Mobil service stations. within the Wollonuonu

district. for more than

21 years. He has, from time to time. leased various sites. At the present time he occupies two sites: at Towradai, where he

has been for about

8 years. and at UnandeKKa. for about 6 years.

Each of these current businesses is. and -

at least durina

recent years - has been. conducted by Mr Brindle in partnership

with his wife. Daphne.

FOUK documents were executed by the aoplicant. Mobil Oil

Australia Limited. and Hr Brindle to uovern their relationship. in respect of the Towradui site. for a period of three vears from

1 April 1981.

First. there was a lease of the service station

for a term endinu on

31 March 1984.

The lease contained various

covenants by the lessee includinu a covenant to

complv with the

provisions of the Reseller Contract between the parties.

Secondly, there was a Reseller Contract. to operate

contemporaneously with the

lease. whereby it was aareed that

Mobil should sell and MK Brindle should purchase. inter alia. not

less than 2 . 0 0 2 . 0 0 0

litres of refined petrol per year for

Towradui: but subject to

a proviso that MK Brindle would not be

required, in any particular contract vear. to purchase from Mobil

a quantity exceeding

50 per cent of the petrol sold at Towradgi.

The price was to be "Mobil's List Price". This

term was defined

as meanina "the price stipulated bv Mobil for Resellers at the

time and for the place of deliverv

...".

The Reseller Contract

was made interdependent with the third contractual document. a

Meter Wholesale Contract. The Meter Wholesale Contract also

applied for a three year period from 1 April 1981.

It related to

a system of supplv. apparently commonly used by Mobil but

otherwise uncommon in the oil industry, whereby Mobil provides

petrol to a service station on a consignment basis. The fuel is

delivered to the storaue tanks of the service station at such

times. and in such quantities. as is convenient to Mobil.

The

petrol remains the property of Mobil until. in the course of sale

to a customer. it is dispensed through a bowser. At that time

it momentarily becomes the property

of the dealer, who then

becomes liable to pay Mobil for

it at the wholesale

"List Price".

The Meter Wholesale Contract required

Mr Brindle, each Mondav and

I . -

Thursdav. to prepare

an invoice settinu out particulars

of the

quantity of each urade of petrol dispensed since the previous

readinu bp reference to the totaliser

on each pump. and

containinu a calculation of the amount of money pavable to Mobil

accordinu to the then current List Prices. The invoice was to

posted to Mobil. together with a cheque for the total amount

owina under the invoice, by noon on that day. The agreement

provided for Mobil to enter the service station at anv time to

4 .

conduct an audit. The contract provided for its suspension by either party, inter alia. upon breach of the contract by the other party. Finally, there was an Equipment Loan Contract.

co-terminous with the lease and entitlina the lessee to use

various items of plant owned by Mobil and located at the service

station.

Durino the whole of the Period since 1

April 1981. and

indeed for a considerable time before that, Hrs Brindle has

worked full time at Towradui. Currently. she works about

hours per week at the service station. sharina duties on the

console with her dauahter Susan. Between them they supervise

petrol sellinu operations. which

- since buildlnu works in

1977-78 - are conducted on the "self-serve'' principle. durinu

hours per day. seven days

a week. Mr Brindle is also at the

Towradui site much	of the time.	H i s son John manaaes the
Unanderra site.

The respondent has filed seven affidavits. sworn by customers of the Towradai site.

as to his manner

of conduct of

that business. The deponent3 speak of the lonu hours worked by members of the Brindle family. the courtesv and assistance extended by them. and their staff, to customers. their honestv in

relation to repairs. the efficiency of the ooeration and the

pleasant appearance and tidiness of the site. They say that the

business was run-down when the Brindle family took over but has

been built up by them into what is apparently a very successful

business offerina petrol

at competitive prices. The evidence of

those deponents was not contested. On the contrary,

Mr DH

Hurray. the Territory Hanauer of Hobil. who has SuDervised

Brindle's activities for over 15 vears. aave evidence that on a number of occasions he had written to his superiors "in alowina

terms" about the respondent. He said

that he had found

Brindle "to be a good merchandiser

. . . to be a aood hours

operator and operate a very clean and tidy site". He aareed that

Mr Brindle. his wife and children had worked hard for many vears

and that Hr Brindle "had really put his whole heart and soul into

the business".

Hr Brindle's evidence is that he and his

w fe have taken

out of their various businesses only modest livina expenses. holidaps or luxuries. No sucraestion has been made by the

applicant that either Hr or Mrs Brindle

is spendthrift. There is

evidence to the contrary. Mr HD Dawson. Manaaer of a local bank

with whom Mr & Mrs Brindle have dealt for some 11 years.

described them in his evidence as "thrifty people".

Notwithstandinq these matters, the current financial

position of Mr and

Mrs Brindle is not aood. For some vears they

owned a home. close

to the Towradai service station. but

this was

sold in 1982 in order to pay debts.

The residue of the proceeds

of sale. amountinu

to about $30.000. was subsequentlp used

bv Mr

Brindle to purchase a petrol tanker. At the present time. apart

6 .

from the two businesses.

Mt- & Mrs Brindle's assets consist of

equity of about $30,000 in a vacant block

of land at Towradai. in

the name of Mrs Brindle,

a one half share in a block of land at

Nowra. the value of which land

was recentlv estimated as belnu

$18.000, the petrol tanker purchased for

$30.000, a caravan

estimated to be worth $2,000 and a water ski boat estimated to be

worth $4,000.

MK Brindle operates overdraft accounts with his

bank and the total owina under these accounts, tomether

with a

small personal loan debt to a different bank. is currently about

$50.000. At the date of the hearinu he owed Mobil the sum $26.982.00. a debt which arose in circumstances to which

I will

refer later. In the result, Mr Brindle's liabilit~es

sliuhtlv

exceed the totalitv of his assets, other than the two leasehold

businesses.

The reason for the familv's modest financial position,

in relation to their effort over 21 vears. emerued clearlv from

the evidence of the respondent and of three experienced service

statlon operators,

MK LR Fletcher. Mr BN Rvan and

Nr NE3 Johnson.

. .

the evidence of whom was unchallenaed.

Hr Fletcher. who has

oDerated Mobil service stations in the Wollonaonu district for

nearlv 12 TJears. expressed the oDinion that price

is the maior

factor influencinu sales

of retail motor fuel

In the Wollonuonu

district. He aave reasons for this view. related both to the

urban aeoaraphy of the district and the nature

of employment ln

the area. Mr Fletcher said that until late 1978

OK early 1979

the market was relatively stable but that since that time there

7 .

had been severe price competition. Under those circumstances.

the nature of the opposition has become verv relevant. There

are. within the district, sites known

as "freeholders", that is

service stations conducted on land owned by the proprietor of the

service station business. The proprietor purchases fuel from

oil company. whose name is identified with the site. but the oil

company has no interest in

the land. Mr Fletcher said, and Other

witnesses aureed. that

it is the practice of each of the oil

companies to supply freeholders with fuel at a substantially

lower orice than

that at which the same oil companv supplles fuel

to its lessee dealers. There are two 'freeholder' sites near

Brindle's Towradui service station. One. a Total site, is about

half a mile away. on the same side of the road. The

other,

sellinu NA Petroleum. is about a mile away. on the same main

road. Secondly, there are now sites

knom as "commission auencv

sites": that is sites owned and operated by oil companies and

manaued by commission aaents. Under this arranuement he oil

companv owns the fuel stored at the site and itself retails to

the public. payinu to

the commission auent

a commission on sales

, -

by way of remuneration. The various oil companies are able at

will to adlust, and in practice do adlust. the retail price at

commission auency sites to meet competition.

There are two

commission agency sites, one owned bp

BP and one by

Shell, in the

near vicinity of

Mr Brindle's Towradui service station.

8 .

"he effect of the Mobil Meter Wholesale Contract is

that. notwithstandinu the

50% proviso in the Reseller Contract.

dealer operatlnu under that contract has to take the whole of his

petrol supplies from Mobil. The contract. for good practical

reasons. prohibits the introduction of fuel purchased on the open

market - known in the trade as "forelun"

or "secondarv" fuel

into the storaue tanks containinu the fuel held on consignment.

Under the Reseller Contract Hob11 has the sole riaht determine the wholesale price

of the fuel suoplled to the dealer.

That price 1s adiusted to return to the dealer a speclfic retall

maruin. Durina recent pears this has usually been of the order

of 3 to 3.5 cents per litre. MK Murrap said that "we try to

enable the dealer to remain competitive within the tradina area".

No doubt this is true: Mobil's sales volume would otherwise be

affected. But. of course, consistently with this it is in

Mobil's financial interest to maximise the wholesale price. thus

minimlsinu the available retail marcrin. The complaint of the

, -

respondent. which has been supported by other dealers.

is that a

margin of 3 to 3.5 cents is lnsufficlent even in normal times to

meet costs and to provide

a reasonable Income to the dealer.

The

situation becomes worse durina times of severe

price competltlon.

At such times it is necessary for dealers to reduce retail prices in order to match the prices charued by their competitors.

Althouah Mobil

has a policy of crivina some reduction in the

wholesale price. in such circumstances. there is often delav in

this beinu done

- durins which

period the dealer

has to reduce

his margin, sometimes eliminatinu it entirelp. in order to retain

his customers. MOreOVer. complaint is made at the extent of the

concessions qranted. Accordina to Mr Fletcher. there have been

numerous occasions on which freehold and commission auencv sites

in Wollongonu have been sellinu fuel at a retail price less than

the wholesale price charued to him by Mobil.

He save specific

detail as to prices charsed

at particular dates. For example, he

referred to

4 October 1983 when the price beinu charued by

various service stations in his area was 38.9 cents auainst his

retail price of 45.5 cents. On that day. and bv wav of

concession. Mobil reduced the wholesale price to

him

4 0 . 4

cents per litre. still 1.5 cents himher than the retail price

his competitors.

Mr Johnson, who has conducted a Mobil service

station at Wollongona for some

20 pears on a site

now owned bv.

and leased from, Mobil. referred to occasions on which he

has

filled his own car at an opposition service station at

retail

price lower than the wholesale price than beinu charaed to	him bv
Mob1 1.

The consequences to

Mr and MKS Brindle of these problems

became manifest in June 1980. Their bank overdrafts had reached.

or exceeded, permissible limits. Audits undertaken

bv Mob11

10.

established that HK & HKS Brindle owed $20.881.30

in respect of

Towradqi and

$25,167.71 in relation to Unanderra which they could

not immediately pap. Thev paid to Hobil the sum of

$20.000.

obtained by short term loan from a finance company, and repaid

the balance bp revular instalments each month until November

1981.

As a result of the arrangements made.

Mr E, Mrs Brindle

were allowed to continue on the Meter Wholesale Contract in

respect of both their sites. By early 1982 thev were auain in

difficulties with their overdrafts. Thev owed money on other

loans incurred to finance the

busmess.

Thev sold their house

and this DrOVided the funds to reduce their overdrafts

permissible limits and to pay out the

Other debts.

As mentloned,

there was a SUKQ~US

of about $30,000 left over.

However. the tradinu situation did not improve. There was severe competition in the Wollonuona retall market in 1982.

Mr Brindle found that many of his competitors were purchasina . .

fuel at prices lower than the Mobil wholesale price. He found frequentlv been possible to buy foreiun fuel at a price

that it was possible to buv foreian fuel at prices well below the

sufficient to allow

a retail mark up of about seven cents. and

to 8.5 cents. per litre: more than twice the mark up usuallv

available on the Hobil List Price). Mr Brindle reached the

conclusion that he could no lonqer afford to purchase the whole

11.

of his petrol from Hobil.

However, for him to bup

in his own

fuel he would need his own tanker.

He used the $30.000 left over

from the sale of the house to bup a second hand

vehicle. In

early 1983 he commenced to purchase foreign fuel.

Some he

wholesaled to other dealers.

Some he took to Unanderra.

Initially. as I understand the Dosition. the foreiun fuel merely supplemented that purchased for Unanderra from Mobil. throuuh the Meter Wholesale Contract. but in April 1983 Mobil suspended that

contract. in relation to that site. by "closlnu out" the

conslanment arranuenents. The company has a view - which is

quite reasonable - that significant leual and audit difficulties

arise from the mixina. In the storaue tanks of a service station.

of Mobil petrol owned by the company with "foreiun" fuel owned by

someone else.

At the time of termination an audit was made disDensed at Unanderra and Mr Brindle Durchased from Mobil

of Detrol

the

balance of its fuel in the tanks. raisinu a debt of $24,177.38.

Mr Brindle was not in a position to oay this amount but it was

, -

eventuallv agreed that the

money should be paid bv monthly

instalments.

Payments were made in accordance with the

arranaements and completed last May.

Since Unanderra was "closed out"

Mr Brindle has bouaht

only foreian petrol for that

site. with substantial savinus

cost to him.

However, he continued to purchase from

Mobil other

products, particularlv distillate and

oil. for Unanderra on the

12.

Towradui account. After about two months Mobil required him to

pay cash on delivery. at either site. for these products.

Brindle then arranued with another Mobil dealer. Mr Ian Rolfe.

for the purchase of such items

on the latter's 30 day account.

Mr Murray became aware of this arranaement but raised no

objection. However. on 21 November 1983. the Wollonuonu office

of Mobil received a telex requirinu the local officers to

terminate all credit arranaements in respect of distillate. This

was done and all dealers. includinu Mr Rolfe. were required to pav their accounts immediately. The result was that

Mr Brindle

had immediately to pay about

$12.000. for distillate delivered to

him, off the Rolfe account. Additionallv, he needed

$6,000 to

pay cash on future deliveries

of distillate from Mobil.

Mobil prides itself on its close association with its

dealers. The company reuularly obtains from its dealers

information to assess their tradlnu position. In addition.

accordincr to Mr Brindle, he had emphasised his financial position

to Mobil executives. particularlv

Mr Murrav. on numerous

. .

occasions over the years in relation to his requests for a executives at which Mr Brindle. and others. had explained their

reduction in the wholesale price. This was corroborated by Mr

position and, as

Mr Fletcher put it. "pleaded

with Mobil" for a

more competitive wholesale price. At one such conference. in

March 1983. with Mr John McAffrey. the then Area Manauer for

Mobil. and Mr Murrav.

Mr Brindle had said that he needed to

13.

increase his earninus by $2.500 per month to remain viable.

evidence, Hr Murray acknowledaed that, over "a lonu

period of

time". he had been aware

of Mr Brindle's financial position in

relation to both Unanderra and Towradai. He had

accepted that Mr

Brindle was unable to pay for stock delivered

to Unanderra and,

for this reason. the company had extended time to pav the

Unanderra debt.

He said that Mr Brindle had told him that

he was

not makinu money at Towradcri but he never said that

he could not

pav his debts at that site as they fell

due. However, in

November 1983 Mr Brindle did tell

Mr Murray that financially he

was "in desperate trouble".

It was two davs after that

conversation that Mr Hurray called at the service station and

asked Mr Brindle to pay the distillate account. Mr Brindle

indicated that he did not know where he would aet the

money but

this debt was subsequently

paid: presumably out of the proceeds

of the sale of the petrol which was delivered on and before

November and not paid for in accordance	with the Meter Wholesale
Contract.

, -

The April 1981 lease reserved rentals of $900.00 per month, $2,100.00 per month and $2.500.00 per month durino the

three respective years of its term.

The first pear fioure was,

bv the lease itself, made subiect to a reduction to

$600.00 per

month durlncr each of the first six months

if the lessee complied

with the terms of the lease.

No similar concession was provided

for the remainder

of the term but. at least after the end

of the

first year. the rental fiaure was

not treated seriously. Rather.

14.

it was the practice

of the local Mobil officers from time

to time

to discuss with MK Brindle the appropriate level

of a

"concession" rent. havinu KeaaKd to his financial position.

The

fiuure they aareed would be submitted

to Sydnev for approval and

a credit put throuuh for the difference between the nominal

rental and the real rental.

Accordina to MK JM Ryan. Mobil's

Resale Manager for New South

Wales. this was consistent with

company practice throuahout Australia in relation to dealers who

were In difficulties. The actual rental paid by MK Brindle after

1 April 1982 was $1.200 per month. a concession of $900 per month

in the first 12 months and thereafter

of $1,300 per month. Mr

Ryan denied that. in decidinu whether to urant a concession. he

took account of the question whether the dealer was purchasinu

all his petrol from Mobil. He said that the only question was

the profitabilitp of the site. However. the position was not so

understood by the men in the Wollonuonu office.

his

memoranda of 19 September 1983 and of 27 October 1983. seekincr

rental concessions for

MK Brindle at Towradgi. Mr Upson. who had

become Area Manauer in succession

to Mt- McAffrev. specificallp

mentioned that MK Brindle was purchasina all his petrol from

Mobil. Mt- MUKKay said in evidence that it would be "virtuallv impossible" to keep a concession rental for a dealer who

purchased any foreiun fuel.

MK Murrav's understanding is

summarized in this evidence. at p 97 of the transcript:

15.

"Q. So the rental he pays is directly related

to whether or not he buys secondary

market fuel, if he is on a concesion

rebate situation?

A. Yes."

MK BN Ryan. a local Caltex dealer industry. claims that this practice is widespread.

with 26 vears in the

At para 17 of

his affidavit he said:

'I...

many oil companies ... provide the lessee

dealer with a rental arranuement wherein the rental paid is excessive havinu reuard to the

facilities provided and rental income

which

could be expected to be received from the real estate upon which the service station is

erected under normal circumstances. This

achieved by advisinu the dealer that althouuh

the rental has been set at a hiuh rate such

rental will not be charued and a rebate will

be uranted to such dealer. It is my opinion,

havinu reuard to the fact that

I own real

estate within the environs

of Wollonaonu that

the rental charued by oil companies for

service stations within that area

is far in

excess of what is reasonable havinu reuard to

the rental value of comparable properties

within the same area.

... if a service

other sources. such rebate is withdrawn by

station proprietor ... purchases fuel from

the oil companv so that the site auain

becomes economically unviable ... "

This evidence was not challenued.

Mr Brindle was lead to believe that there was a relationship between the rental rebate and the purchase

foreiun fuel.

In his evidence he

said that. whilst he was still

on the Meter Wholesale plan for

Towradai. he had discussions with

Mob11 representatives reuardinu the purchase

of secondary market

16.

fuel and he was told

that if he purchased secondary market fuel

Mobil "could not apply" the rental rebate any more.

MK Brindle

would have to pay $2,500 per month. and this notwithstandina the

view expressed by Mr Hurray in his evidence that a rental

$2,500 per month "was excessive

based upon the down trend in the

business and in the Wollonuonu area aenerally". The dilemma.

then. was either to

pay an admittedly excessive

rental or to

purchase the whole

- not merelv the 50% referred to in the

Reseller Contract - of his petrol from Mobil at that companv's above market price.

MK MUKKay interviewed MK Brindle at the Towradgi service station on 26 or 27 October 1983 in relation to the preparation

of a new lease to operate	from the expirv of the then current
lease. on 31 March 1984.	He showed MK Brindle some calculations

and informed him that he was

prepared to recommend a rental

$1.400 durlnu the first

vear of the new lease. which he explained

"would not be concessioned unless there was

a maior disaster such

as a serious shortaue of product. or if the place aot blown

down". $1.650 per month durina the second

vear of the term and

$2.000 per month durina the third these fiuures were reasonable and	vear. Mr Brindle aareed that
MK Murrav promised to send a
report to Sydney seekina approval	of the fiaures.

On Mondav 28 November 1983 Mr Brindle. in companv with some other Mobil dealers from the Wollonuona area. iourneved to

Sydney to attend a conference with senior

Mobil executives. lead

17.

by MK JM Ryan.

The dealers prepared an auenda of topics for

discussion. Item 1 related

to marains and complained. in effect,

that the retail marain was insufficient because the Mobil

wholesale price was too hiuh. MK Brindle uave evidence that he

reaarded the matter of a reduction in the wholesale

price as

beinu one of the purposes of the meetina and

that a sufficient

reduction would be a way

of overcomina his financial

difficulties.

In fact. Mobil did not auree to reduce the price.

Mr Brindle said that he was "very upset" about this

but he denied

that he made	an immediate decision to discontinue his pavments	to
Mobil.

MK Brindle had made reaular payments.

in relation to

Towradui. as required by the Meter Wholesale Contract up to and

includinu the cheque sent on Thursday 24 November 1983.

He was

due to read the meters auain on the followina

Mondap. but he was

in Sydnev on that

day.

He did not in fact read the meters or

send an invoice and

cheque, on the followincr dav, Tuesdav 29

November. as he should have

done.

On that same day there was a

, -

delivery of fuel to the service station.

Mr Brindle denied

requesting. OK even knowinu of. that deliverv.. There was no

evidence to the contrary and I accept his evidence.

He explained

that the service station had no control

over deliveries and that

he and his staff would onlv rina for a delivery "when we thouuht

they miqht have foruotten it" and the tanks were very

low. Even

after that delivery the tanks were apparently	onlv about one
quarter full.

18.

It is clear that Hr Brindle made

decision after the

meetinu in Sydney that he would discontinue payments under the

Meter Wholesale Contract. I think that it is likely that he had

been hoping

to achieve a reduction

in the wholesale price and

that when this hope was disappointed he decided. either that

evening or the next morninu. that he would

uo off the Meter

Wholesale Contract and purchase foreiun fuel for Towradui, as

had been doina for some months in respect

of Unanderra. He did

not, however. inform anybody at Hob11 of

that decision with the

result that a further delivery was made by Mobil, in the belief

that MK Brindle still reaarded himself as bound by the Meter

Wholesale Contract.

The practice of Mobil is Meter Wholesale Contract is not paid, the dealer aoes on

that, If a cheque due under the

to a

"delinquency list". Mr Brindle knew of this Dractice and

realised that. after he failed to post his cheque on

29 November,

he would be placed on the delinquencv list and denled further

supplies. In the event, there was no further deliverv after

November but it was not until either Friday

9 December or Mondav

12 December that there was any contact between Mobil and

Brindle reuardina non-payment. On that dav

Mr Upson telephoned

Mr Brindle and asked the reason for non-pavment.	Mr Brindle said
that he could not pay.

19.

On 12 December Mr SW Twist attended at the service station to audit the meters.

He found that petrol havinu the

wholesale value of $26,721.81 had been dispensed since the

last

invoice and that the value of petrol still in the tanks was

$7.307.96.

Mr Brindle forthwith siuned invoices acceptins

responsibility for the payment

of the total of these sums, namely

$34,109.77, but, at a meeting with

Mr Upson on the followinu day,

indicated that he could not

pay immediately and that

he did not

know when he would be able to

pay.

Since 12 December 1983 Mr Brindle has been purchasinu foreign petrol for Towradui. He has purchased some other

products from Mobil. indirectlv throuuh another dealer.

On 15

December 1983 Mobil wrote to

Mr Brindle requirinu payment of the

invoices amountinu to $34,109.77 within seven davs. failinu which the companv would take leual proceedinus. includinu proceedinas for non-renewal of the Franchise Aureement. Mr Brindle replied

on 20 December stating that this was impossible

but referrinu t o

, -

an offer of payments bv instalments, apparentlv alonu the lines

of the Unanderra arranuement. which had previouslv been made

t o

Mr Murrav.	In this letter Mr Brindle said that this offer s t i l l
stands.

Mobil did not respond to this offer but, on

23 December

1983 it served upon the respondent a Notice

of Termination

pursuant to the Petroleum Retail Marketins Franchise Act.

This

2 0 .

notice purported to terminate all written agreements. and also

any agreement which

may have arisen out of the conversation

between Mr Brindle and Mr Murrap reaardinq rent. as at 14

February 1984.

This notice was accompanied

by a Notice of

Non-renewal of the existinu aureements.

On 29 December 1983 the applicant filed an Application in this court seekinu the followinu

relief:

1 .

A DECLARATION that the Lease from the

Applicant to the Respondent bearinu date

First April 1981 in respect of the

marketinu premises known as the Mobil

Service Station Corner Pioneer and

Towradui Roads Towradui (the Franchise

Aqreement) terminated on Fourteenth

Februarv 1984 pursuant to the Petroleum

Retail Marketinu Franchise Act 1980.

A DECLARATION that the Reseller Contract bearinu date First April 1981 and the Equipment Loan Contract bearinu date

First April 1981 made between

the

Applicant and the Respondent terminated

on Fourteenth Februarv

1984.

3 .

A DECLARATION that the Respondent will

not be entitled to anv Renewal of the

Franchise Aureement. the Reseller

Contract OK the Equipment Loan Contract

pursuant to the Petroleum Retail

Marketinu Franchise Act 1980.

aareement between the Applicant and the

Respondent arisinu out of discussions

between Mr. Murrav of the Applicant and

the Respondent in about November 1983 as

reaards the marketina premises known as

A DECLARATION that anv franchise and Towradgi Roads Towradui terminated on

Fourteenth February 1984

pursuant to the

Petroleum Retail Marketinu Franchise

Act

1980.

21.

A DECLARATION that the Applicant was entitled to vacant possession of the

marketinu premises as

of Fourteenth

February 1984.

6. AN ORDEX that the Respondent quit and deliver up possession of the marketing premises to the Applicant."

Prior to the Application coming before the January 1984, the solicitors for the applicant made an open offer

Court. on 26

to the respondent:

to discontinue the proceedings and to enter

into a fresh

lease for three years from

1 April 1984. with an

associated Reseller Contract and Equipment Loan Contract for the

same period. sub-lect to payment to Mobil of the sum of

$34,109.77, with interest at 13.5%. by 10 February 1984. pavment

of outstandina rental at the rate

of $2,500 per month - Mr

Brindle had been continuino to

pay the rebated fiaure of $1,200

per month - and payment of Mobil's costs. The draft lease. which was enclosed with the letter, provided for rentals sianificantlv

hiaher than those discussed between

Mr Murrav and Mr Brindle viz

an annual rental

of $33.000 ($2.750 per month). risina to $36.000

($3,000 per month) in the second vear and $39.000 ($3,250 per

, -

month) in the third year.

The Reseller Contract provided for

purchase from Mobil of not less than 58.500 litres of petrol per

month, subject to a proviso that purchases need not exceed

50% of

the sales of petrol at the service station. The offer was not accepted and on 24 February 1984 a fresh Notice of Non-renewal was served.

22.

The fresh Notice of Non-renewal referred to the outstandinu debt of 934,109.77, in relation to which

arrangements had then been

made: according to Mr Brindle in his

evidence because he had been waiting for a response to his letter

of 20 December. On 5 March 1984 the solicitors

for the

respondent wrote to the applicant's solicitors advisinu that

the

respondent would reduce the debt by payments

of $2,000 per month.

such payments to commence immediatelv, until the whole

debt was

paid. The respondent also offered interest in accordance with the rate approved in the Supreme Court. In fact the first

instalment was paid shortly thereafter and, at the date

of the

hearinu commencinu on 9 Julv, five Instalments

of $2,000 each had

been paid.

However. with interest at Supreme Court rates on the

amount outstanding from time to	time.	the balance w i n g was then
still $26.982.54.

On 4 June 1984. the respondent filed a Cross-claim

seekinu the followinu

relief:

, -

"l.

An order declarinu a purported notice under section 17(8) of the Petroleum Retail Marketinu Franchise Act, 1980 and

dated the 24th February. 1984 uiven

the cross-defendant to the cross-claimant

to have had, and have, no

effect.

2. An order directlnq the cross-defendant to

renew the franchise agreement.

3. An order determining an amount. or the

manner of calculatinu an amount, to be

23.

payable by the cross-claimant to the cross-defendant under the franchise aqeement as to be renewed. same to be the

franchise fee.

4. An order or orders determining anv other

provisions of the aureement as

to be

renewed.

5. Orders directinu the preparation and

execution of the documents (that

is the

renewal of the franchise aureement)

includinu orders if necessary authorisinu

the Registrar of the Federal Court

Australia to execute documents if either party fails or neulects to execute anv

documents within fourteen days

of the

receipt of such documents.

6. F’urther and in the alternative. if the

cross-defendant acquires the property of the cross-claimant bv the operation of a provision of the Petroleum Retail

Marketinu Franchise Act. 1980. the

cross-claimant seeks a determination

this Honourable Court

as to the amount of

compensation payable bv the

cross-defendant to the cross-claimant in

accordance with the terms

of the

Petroleum Retail Marketinu Franchise

Act

uenerally and more particularlv

but not

exclusivelv. section 23 of that Act.

7. Further and in the alternative that the cross-claimant and cross-defendant have acrreed to a fresh franchise aureement which arises out of discussions between a Eepresentative of the cross-defendant and the cross-claimant in or about November 1983.

8. F’urther

and alternatively. a

determination bv this Honourable Court as

to the amount

of compensation payable by

the cross-defendant to the cross-claimant

in accordance with the terms

of section

22 of the Petroleum Retail Marketing

Franchise Act.

24.

The Petroleum Retail Marketinu Franchise

Act defines the

term "franchise agreement" so as to include an aoreement

containinu provisions by virtue of which a corporation (the

"franchisor") grants to another

party to the aureement (the

"franchisee") the riaht to occupy or use premises in connection

with the retail sale

of motor fuel by that person at those

premises.

The lease between Hobil and Mr Brindle falls within

that definition.

The term "franchise aoreement" also includes an

aareement under which

a franchisor is entitled

or required to

supplv motor fuel to a franchisee for retail sale

by that person

at particular premises or under which a franchisee aorees to

acquire motor fuel from

a franchisor for retail sale

by the

franchisee at particular premises.	The Reseller Contract falls
within this definition.

The policy underlpinu the J in Rlchaxds v Owlden Fleece Petroleum Ptv

Act was referred to

bp Toohev

Lim-	(1983) 49 ALR

337 at pp 347-340:

"The leuislation seeks to

put franchisees in

the position of independent operators.

protectina them aoainst termination

of their

aureements and uivinu them rights

of renewal

of those aoreements. Franchisors and

franchisees do not stand in the relationship

of master and servant, principal and auent,

or in any fiduciary capacity that imposes

riuhts and obligations apart from those which

the parties have contracted, controlled as

they are

by the legislation.

25.

In particular the legislation seeks to give franchisees greater securitv

of tenure than they would have

enioved under their contractual arrangements. standing alone:

see J & H O’Brien Enterprises Ptv Limited

v Shell Companv

Australia (1982) 45 ALR 81 at p 82. Richard3 at p 347.

Part I1 of the Act deals with franchise

agreements.

Sections 9 and 10, although not directly applicable, uive an indication of the principle of fairness Underlying its

provisions. Section 9 provides that a corporation shall not enter, as franchisor. into a franchise aureement that contains a

provision imposina an obligation on the franchisee that

is likely

to be impossible or unreasonably onerous to perform at the time

when it is required to be performed.

Any such provision is void.

Section 10 deals with the

supply of motor fuel, obliuatinu a

franchisor who has contracted to supply,

or who has taken from

the franchisee a covenant to purchase motor fuel, to supply

during the term of that aureement such quantitv

of motor fuel as

is from time to time

reasonably required by the franchisee for

retail sale by him at the premises.

Specific provision is made

for any case where supply is not possible because of shortaae of

supplies. an industrial dispute or circumstances bevond the

franchisor’s control.

In such a case the franchisOK is bound to

use its best endeavours

26.

"to supply motor fuel to its franchisees in

such manner as is fair and equitable as

between each of its franchisees and as

between its franchisees and any other persons

to whom it supplies motor fuel, havinu regard

to the respective needs

of its franchisees.

of those other persons and of the public".

Section 13 deals with the duration

f franchise

agreements. It provides, with immaterial exceptions. for a

minimum tetm of three years. both in the case or oriuinal and

renewed aureements.

Section 16 limits the circumstances in which a franchisor may terminate a franchise aureement.

Termination may

take place only on one or more of specified arounds.

Those

arounds include:

"the franchisee otherwise commits a breach of a

condition of the franchise aareement": see s.l6(2)(i).

Section 17 is directly relevant to the circumstances of

this case. It provides:

"17.(1) Subject to this section. a franchisor

shall not fail or refuse to renew the

franchise aureement except on one	or more of
the followinu urounds:

(a)

the existence of circumstances. or the occurrence of an event, of a kind referred to in anv of

parauraphs 16(2)(a) to (2)(k)

inclusive:

(b) ...

27.

( 3 )	...
( 4 )	...

( 6 ) For the purposes of sub-section (1). a franchisor shall not be taken to

have failed or refused to renew

franchise aareement if the aareement

is not renewed by reason only of a

stipulation by the franchisor that

an amount payable by the franchisee

under the franchise aureement as

proposed to be renewed (other than

an amount payable in respect of

motor fuel or other stock in trade)

is to exceed, or is to be calculated

in such a manner as to exceed, the

correspondina amount payable under

the existina aqreement. where the

amount of the excess is reasonable,

havinu regard to the market value,

at the time when the aqreement is

proposed to be renewed, of the

interest. goods or services in

respect of which the amount is

payable.

( 7 )

Notwlthstandlna anythina in the

precedina provisions of this

section. where -

a franchisor. bv notice in

writina served on the

franchisee not later than

days before the expiration

the franchise aureement. offers

to renew the

aureement: and

after that notice is served,

the franchisee fails to serve

on the franchisor ... a notice

in writina acceptinu the

offer

of renewal, the franchisor is

not required to renew the

agreement.

( 8 )

If a franchisor decides not to renew

the franchise aureement,

it shall

serve on the franchisee, not later than 30 days before the expiration

28.

of the agreement. notice in writina

of its decision, setting out full

particulars of the uround or

grounds. includina a statement of

the facts relatina to each uround,

upon which the decision

is based.

( 9 )

...

(10) Subject to this section. a court

shall. on the application

of a

frachisee, make an order directinq

the franchisor to renew the

franchise aareement unless -

the franchisor has served on

the franchisee a notice in

accordance with sub-section

(8)

a around specified in the

notice is established by the

franchisor to the satisfaction

of the court: and

except where a around so established is a uround referred to in parauraph l(c).

the court is satisfied that it

is lust and equitable, havinu

reuard to all the

circumstances. for the

agreement and anv related

agreement or aureements not to

be renewed.

(11) Without limitinu the aenerality

’

referred to in that paraaraph

include the conduct of the

paraaraph (lO)(c), the circumstances the time when the franchisor became aware of the existence of the circumstances. or the occurrence of the event, constitutina a around referred to in paraqraph (10)(b) ...

(12) Where the court makes an order under sub-section (10). it may make -

(a)	orders determining any amount, or the manner of calculating

29.

any amount, to be payable	by
the franchisee under the
franchise aareement as to	be
renewed:

(b)

orders determining any other provisions of the agreement as to be renewed: and

(c)

such ancillary or consequential orders as it thinks fit. includinu orders directinu the

preparation and execution

documents.

(13) ... (14) . . .

(15)

. ..

(16) . . ."

Section 18 provides that where a franchise aareement

one of two or more related aureements and that franchise

aareement is not renewed then the related aareement shall be not

renewed. Section 26 confers lurisdiction on this Court "with respect to all matters arisina under this Act".

It is. in my opinion. clear that in the absence of the

, -

Cross-Claim the Court would have no power to w a n t anv of the relief sought by the applicant in this case. It is a notable feature of the Act that. with one exception, it does not in

express terms confer anv power upon the Court

to urant relief to

franchisors. The reason, no

doubt. is that the constitutional

foundation of the legislation is the power granted to the

Commonwealth Parliament, under s.51(XX) of the Constitution to

make laws with

respect to tradinu and financial corporations.

30.

The purpose of the legislation is to reaulate the conduct

of such

corporations in relation

to franchise agreements which

they enter

as franchisors. Legislation conferring upon

the Court a power.

in the absence of any application by the franchisee, to declare

that a franchisor has validly terminated an agreement and to make

consequential orders such as for the possession of land would

extend beyond that purpose	and, arguably, beyond the relevant
constitutional power.

The exception I have noted is s.16(5) which provides

that in a case where the franchisee has sought an order that a

notice of termination is of no effect:

"the court may. bp Order. either -

(a)

declare the notice referred to in

that sub-section to have had,

or to

have, no effect: OK

(b)

declare that notice to have terminated. or to terminate, the

aqreement on the date specified

the notice OK on such later date as

is specified in the order,

and may. in either case. make such ancillarv

or consequential Orders as

it thinks fit.

including orders directing the preparation

and execution of documents."

For reasons unclear to me. s.17. non-renewal, does not confer any Similar power upon the Court.

in dealing with

Counsel for the applicant argued that this did

not matter, that

s.26 of the Act confers IuriSdiCtiOn upon the Court to determine

applications made to it under the Act

- including apRl.ications by

way of Cross-Claim - and that once the jurisdiction

is invoked

31.

then the Court

has jurisdiction under 3.32 of the Federal Court

Act to resolve all matters

in dispute and power under

ss. 22 and

23 of that Act to make all appropriate

orders. includinu Orders.

such as for possession

of land, not otherwise within power.

think that this submission

is Correct and that the result

of the

filing of the Cross-Claim is that the Court is able to uive

effect to whatever conclusions are reached upon the Issues	posed
by s.17(10) of the Act.

The respondent concedes that the franchisor has served upon him a notice in accordance with

s.17(8) of the Act namely

the Notice of Non-renewal dated 24 February 1984, which was

served upon the respondent on 27 Februarv. That Notice specified

three arounds for non-renewal. each of them based upon s.l6(2)(j)

of the Act. The first breach Brindle to prepare and post invoices in respect of the period 24

related to the failure bv MK

November 1983 and 11 December 1983.

The second breach alleued

was the failure

of MK Brindle to pav for the petrol dispensed

, . . -

durinq that period, in accordance with the requirements

of the

Meter Wholesale Contract.

The third uround related

to the

failure of Mr Brindle to pay for the petrol in	the storaue tanks
at the date of the final audit.

The respondent did breach of the Meter Wholesale Contract, and therefore

not contest the claim that he was in

of the

Reseller Contract and lease, in relation

to each of the matters

32.

particularised in that Notice.	The requirement of para (b) of
s.17(10) is made out.

Under these circumstances. the critical question is that

arising under s.l7(l)((c):

whether the court is satisfied that

it is "just and equitable" for the relevant aureements not to be

renewed.

If the Court is not satisfied that it is just and

equitable for the aureements

not to be renewed then the Court

must order renewal and the question will arise as to the terms

renewal.

Section 17(12) empowers the Court to make orders

determining the provisions of the aareement as to be

renewed.

The primary submission made

by counsel for the applicant

I s that it is not lust and equitable for the aareement to be

renewed and that, therefore, the court should refuse the relief

sought by the respondent in his Cross-claim. Counsel relies

two matters in support

of this submission: the conduct

of the

respondent and his financial

position.

, ~. .

There was a considerable volume regarding the circumstances

of affidavit evidence

in which the respondent incurred the

debt of $20,881.30 in respect of Meter Wholesale Purchases at

Towradgi in June 1980.

In one affidavit, sworn bp Mr KW Walker.

Internal Auditor of the applicant, the sugaestion was made that.

at that time, the

respondent had deliberately understated the

readings on his meters so as to reduce the amount which was then

due by him to Mobil.

Mr Walker set out some calculations to

33.

indicate that the "back reading" as

it was called, amounted to

about 60,000 litres.

In a later affidavit. in reply to the

respondent. he conceded that this calculation

was wrong but

maintained his suggestion in respect

of a figure of 18.750

litres. Mr Brindle strenuously denied that he had ever been guilty of "back reading" and there was filed on his

behalf an

affidavit sworn by Mr John Galloway, who has since

l ft Mobil's

employment but who was the man who

did the audit at Towradqi in

June 1980.

Mr Galloway - though understandably vaaue on some

details such as the actual time

of his audit - sets out an

explanation consistent with the respondent's return havinu been

correctlp compiled.

I have no doubt that Mr Walker makes his

alleuation honestly but his computation does depend upon certain

assumptions. includinu the assumption that Mr Galloway carried

out his audit at his usual time in the dav. In the face of the

denial of the respondent and the evidence

of Mr Galloway which,

at least. casts doubt upon the validity of that assumption, it

would not be proper

to make any findinu adverse to the respondent

in respect of this matter.

In anv event. as counsel for the

, -

applicant accepted during

araument. any alleuation of misconduct

in June 1980 must be reuarded as peripheral to the question

whether it is lust and equitable, in 1984. that the franchise

aureement not be renewed.

With knowledae of whatever events had

occurred in June 1980, the applicant

in 1981 entered into the

agreements uivinu rise to these proceedings.

34.

The second matter relatinu

to conduct is much more

pertinent. The applicant criticizes the behaviour respondent in relation to his decision to uo

of the

off the Meter

Wholesale Contract in late November 1983.

The applicant aruues

that, if Mr Brindle had reached

a decision that he

could no

longer afford to take the whole

of his petrol from

Mobil. the

open and honest course for him

to take would have been to

inform Mobil, to arranue an

Imediate audit of the fuel In his

tanks and to

pay Mobil immediately for all petrol which had been

delivered to the service station.

In contrast, the applicant

says. the respondent failed

to notify Mobil of the decision he

had made on

or before the laorninq of Tuesday 29 November. with

the result that on that day further fuel was delivered to the service station. Despite the close working relationship he had

had with the

local officers of Mobil, Mr Brindle did not contact

them at all.

Rather he left it to the Mobil officers to contact

him. nearly two weeks later,

in relation to his failure

to send

cheques.

Then, it is said. when the audit was done there was

, -

found to be an amount payable. for petrol already delivered,

$34.109.77.

Althouuh the respondent acknowledged his

indebtedness for this amount,

he was not able to make

pavment

immediately.

The effect, according to the aruument

of the

applicant, is that the respondent

by his conduct put Mobil in the

position of making to him an involuntary loan of the proceeds of sale of the relevant petrol. which proceeds he, inter alia. used

to purchase "foreiqn" fuel for use

in the service station in

35.

substitution for Uobil fuel.

Mobil submits that it is not lust

and equitable to require it to continue in a business

relationahip with a franchisee who has acted in this manner.

The factual analysis contained in the foregoinu argument

is correct. The criticism made by the applicant of the respondent's conduct is. in my view, well founded. The honest.

open way of dealinu with the

problem which confronted Mr Brindle

on 28 and 29 November 1983 would have been for him to have discussed the situation with

Mr Upson or Mr Murray and to have

made mutuallv satisfactory arrangements for an audit and for

payment of the monevs which were

found to be due on the

audit.

The course taken by Mr Brindle had the result, perhaps

unintended, of Mob11 deliverins further fuel to the

s rvice

station at a time when

Mr Brindle had decided to

uo off the Meter

Wholesale Contract and was aware that he was

not in a position to

make immediate payment for deliveries already made.

The effect

was to obtain an involuntary loan from Mobil. That loan was

critical to him

in beina able to

carrv on the business.

, -

particularly in reuard to the necessitv to pay cash for "foreiun"

fuel .

Mr Brindle was asked

in cross examination as to the

reason why he did not

contact Mobil in relation

to his declsion

to uo off the Ueter Wholesale Contract.	His answer was: "I was
havinu a lot of problems at the time."	This is not an adequate

excuse.

It would have taken very little ffort for Mr Brindle to

36.

have put through a telephone call to Mr Upson or Mr Murrav.

However, I do not think that Mr Brindle acted, or failed to act.

with dishonest intention.

I think that he was

in a position of

considerable financial strain and worry as a result

of which he

procrastinated.

An intent to act dishonestly is inconsistent

with the character

of Mr Brindle as portrayed in the

evidence.

Mr JM Ryan, the senior officer of Hobil called to aive evidence before me. in his evidence expressly disclaimed any suugestion that Mr Brindle had ever been dishonest with the company.

The fact that his relationship with the franchisor does

a dealer has acted improperly in reqard to

not necessarily mean

that it is just and equitable that his franchise aureement not be

renewed.

This proposition is illustrated

bv &‘B.r_iE in which the

“just and equitable”

issue was determined in favour

of the

franchisee notwithstandinu a findinu of conduct amountinu to

fraud. p 97, and Richards where the franchisees

ucceeded despite

a findinu that they had deceived the franchisor

reuardinq the

purchases of foreiqn fuel, p 349. The conduct of Mr Brindle in

, -

relation to his uoinu

off the Meter Wholesale Contract,

thouuh

reprehensible. was less serious than the conduct found against

the franchisees in these two cases.

This conduct is to be taken

into account but it does not conclude the enquiry whether

it is

just and equitable not

to renew.

37.

The other matter financial position of the respondent.

relied upon by the applicant is the

The applicant arques that

the respondent's contractual obligations in reuard

to the

Unanderra site will require

him. in conformity with the

50%

proviaion. to purchase his Unanderra fuel from

Mobil at normal

wholesale prices during the remainder

of 1984; he having already

purchased "foreign" fuel for more than

half the year. This will

mean that the profits which have been made

at Unanderra as a

result of the purchase of "foreiun" fuel, and which have enabled

the respondent to reduce his outstanding debts,

will no lonuer be

available. Moreover.

it is said that under the usual Reseller

Contract Mr Brindle would have to purchase

50% of his Towradui

fuel from Mobil and this would adverselv affect his posltion, as

compared with the period since early December 1983 durina which

the whole of his Towradgi fuel has been purchased on

the open

market at lower prices.

Counsel for the applicant aruues that an

assumption that Mr Brindle will comply with the

R seller Contract

leads to a result that the Towradui business

is not profitable

, -

and that it is unfair to his

client to require it to enter into a

renewal arrangement with	a franchisee who 1s operatinu an
unprofitable business.

It appears to me to

be a cur1ous situation for a

franchisor to aruue that

a business is not viable because

of the

price which it charges to a franchisee. beinu more than the price

at which fuel could be obtained from alternative

sources. and on

the b&Bis of that lack of viability to contend that the franchise

agreement ahould not be required to be

renewed. The Reseller

Contract stipulates the price

of fuel as beinu

"Mobil's List

Price".

This means that the price is adlustable by Mobil at

will. To accede to the the opportunity for a franchisOK to subvert the

applicant's aruument would be to provide

policy of the Act

by unilaterally raising its price and then arguinu

that, at that

price, its franchisees could not remain viable so that the

franchises should not be renewed.

If it is otherwise proper, in

the present case. that the franchise be

renewed. and if the only

leqitimate oblection to such a course

is a discriminatory price

charqed by Mob11 for its product then it seems to me to be

appropriate to make an order which will eliminate

discrimination and thus uive to the franchisee

a reasonable

opportunity of carrying on a competitive business durinu the

period of the renewed franchise: not to refuse the

renewal.

There are, to my mind. two malor circumstances favourina

the vlcw that Hr Brindle's franchise ouaht to be renewed. The

. .

first of these is the disastrous consequences to him and to

hls

wife of non-renewal. As

I have mentioned, the assets of MK and

Mrs Brindle, after many vears

of hard and efficient work, consist

substantially of their two service station businesses.

If there

is no renewal then the Towradui business

i lost, without

39.

compensation to them.

Although I have criticized MK Brindle's

conduct in November-December 1983, such a loss would be quite

disproportionate to the

degree either of his fault or of any

. disadvantage suffered by Mobil as a result of that conduct.

Secondly, I must have regard to the circumstances

surroundinq the breaches

of the agreement specified in the Notice

of NOn-reneWal, and upon which Mobil has successfully relied.

Brindle failed to comply with his obligations under

the Meter

Wholesale Contract because of his financial position and,

particular. the fact that the price he was forced to

pay under

that agreement was considerably hiaher than the price of alternative sources of fuel and the price at which his

competitors were supplied. "here

is no evidence of anv

particular "freeholder" service station

supplied by Mobil at

prices lower than those

charged to Mr Brindle. but there is

seneral evidence that it is the practice of the various oil

companies to supply freeholder sites in Wollonuons

at lower

prices than those charged to their lessees.

This aeneral

, -

statement is wide enough to include Mobil.

I note that there has

not been any denial by Mobil of the accuracy, or of the

applicability to it. of

this general statement. Similarly, there

is no evidence of any particular Mobil commission agency site

directly competitive with

Mr Brindle's Towradgi site but. once

again. there is ueneral evidence that the various oil companies

operate commission agency sites within the Wollongong	area:
presumably the seneral statement includes Mobil.

40.

There is evidence that there is price competition throughout the Wollongong district. Any concessions

siven by

Mobil to freeholders or at commission auencv Sites anywhere in the Wollongong district are likely to cause at least an indirect

disadvantage to Mr Brindle.

The evidence is clear, and

unchallenged. that the reasons for his present financial

difficulties. and therefore for his breaches of the Meter

Wholesale Contract. were the disadvantages Suffered by him

because of the small marain allowed to its lessee dealers bv

Mobil and because of the pricing policies of the various oil

companies. in relation to freeholders sites and commission agency

sites: those practices occurring in a hlghly competitive retail

environment in which demand was static or falling. Section 9 of

the Act, dealing with supply in times of shortaue, requires that

there should not be discrimination between lessee dealers on the

one hand and freeholder dealers on the other. That particular

requirement is not directlv applicable

but the Court should take

note of the legislative policy it embodies in considering what

lust and equitable in a particular case.

It seems to me that if

a franchisee does discriminate. in relation to

price. asainst

lessees and. as a consequence. a franchisee breaches his

franchise agreement. it will not normally be lust and equitable

to refuse renewal on that uround.

41.

Counsel for the applicant

put an alternative submission,

designed to overcome any reluctance

by the Court to take a course

which meant the immediate forfeiture

by MK Brindle of his rishts.

The submission was that there

should be a renewal but for a short

period. say three months, to allow the sale

of the business by Mr

Brindle. The aruument was that this would enable him to recoup some capital without exposina Mobil

to the problem of havins a

franchisee who was not able to trade profitably. It was said

that. if this course was taken, Mobil would be prepared to enter

into a franchise aureement with the purchaser for an initial

period of three years. with the subsequent rights

of the

franchisee being uoverned bv the Act.

If MK Brindle succeeded in

selling within the three month

period then he could

repay his

debt to Mobil out of the proceeds of sale.

This course would

have the advantaue

of avoidinu the total

loss of the business by

MK Brindle but it is not a course which I reuard as beinq

appropriate.

It would put MK Brindle in the posltion of havins

to make a forced sale within

a limited period. It may be

, . . .

extremely difficult for him to realise anything like the true

value of the business upon such a sale.

MOreOVeK. I see no

reason for such a limited renewal.

The evidence is that Mr and

MKS Brindle are first class operators. Given a

nOn-discKiminatOKy pricing policy by Mobil they could, I am sure,

indefinitely operate the service station

with profit to

themselves and with advantaqe, in terma of sales volume, to

Mobil.

Further, I bear in mind evidence from

MK Brindle that, as

42.

a reault of changes in the main road system,

i is likely that

traffic at Towradgi will increase during the next year or two

with a consequent prospect of an increase in turnover at the

service station. I think that MK Brindle should be given the

opportunity of reaping the benefit of this change. particularly

as he had to bear the disadvantage of the loss of business during

a period of four months in

1977-78 when there were major

alterations made to the service station.

It is submitted by the applicant that. If the lease is

to be renewed for a longer period of time than three months. this

should be subject to certain conditions. First. It 1s armed

that it ouuht to be

a condition precedent to anv renewal that the

existing indebtedness to Mobil be discharged. I agree with this.

I have already commented adversely upon the circumstances in

which this debt arose and

I o not think that it would be

appropriate for the Court to take the course

f compelllng Mob11

to enter into

new contractual arrangements with a franchisee who

continued to be indebted to

it under those clrcumstances. The

Court should not subject Mobil to the continuation of an involuntary loan. Put another way, in terms of s.17(10). It

would be just and equitable not to renew the aoreement of

Brindle if he further persist8 in failino to repav

that

involuntary loan.

It will not be easy for

MK Brindle to pav off

the debt immediately but

I think that. aiven his assets and

financial credit, this	will not be impossible. He should be
given the chance.

43.

Secondly. it is said that the rental under any new term should be the amount proposed

by the franchisor for the first

year, le $33,000 per year or $2,750 per month. Alternativelv.

is said that the rent should be the figure

of $2.500 per month.

the Contracted rental for the final year

of the prior aureement.

I do not accept this submission.

It seems to me that the rental

reserved by the franchise aureement

has never been reuarded

the parties as beinu a true indication

of rental value of the

site. Mr Murray has admitted that it was excessive during 1983 and there is nothinu to indicate

that the positlon has changed

since that time.

The parties did neuotiate rentals for the

period of anv renewal viz

$1,400 per month durinu the

first year,

$1,650 per month during the second year and

$2,000 per month

during the third year.

I think that these rents should obtain

durina any renewal, sublect to a qualification to be mentioned.

Thirdlv, the applicant submits that there should be a Reseller Contract pursuant to which the franchisee

is required to

take 50'1 of his product from Mobil.

The applicant points out

that Mobil owns service station sites not merely. and perhaps not

mainly. to earn rental income but to promote the

sale of its

product.

It would be unreasonable. it was argued, to force upon

Mobil a renewal of its franchise agreement without ensurinu that at least half of the petrol sold from the site would be purchased

directly from Mobil.

I think that there is substance in this

aruument but the position	of the franchisee must also be
-.

44.

considered. I do not think that the Court should force upon the franchisee an obligation to purchase fuel from

Mobil at Mobil’s

List Price if, at that same time, Mobil

is selling fuel at a

cheaper wholesale rate

to freeholder competitors of the

franchisee or is, as a retailer. Using its ability to COntKOl the wholesale price to undercut the franchisee at commission agency

sites. There is in the standard Reseller Contract a proviso excluding the operation

of the contract durinu such times as

Mobil shall be unable to supplv fuel.

I think that it would be a

proper term of any renewal that the proviso extend

to exclude

from the provisions

of the agreement any fuel which mav be sold

by the franchisee from the site durinq

a period when Mobil

offering for sale. to any retailer within the City of Wollonsons,

petrol at a wholesale price below the Mobil List Price.

The

QKOViSO should also ensure an adequate marqin to the franchisee in relation to the sale price fixed by Mobil at anv commlssion auency site which it operates in the City of Wollouonu. Various marains have been mentioned in evidence, ranulnu from 2.5 cents

per litre durinu periods of discountins up to

8.5 cents per lltre

, -

realised bv the respondent when he has been fortunate enough

purchase foreiun fuel at particularlv favourable rates.

A marcrin

of 5 cents per litre seems to be a fiuure which will enable an

efficient service station operator to cover his costs and

to make

a reasonable return from the site. It

seems to me that if Mobil

wishes to have the

right to supplv at least 50% of the throuuhput

of the Towradgi site, durinu the period

of anv renewal. it should

be on the basis that the wholesale price at which

MK Brindle can

45.

purchase will allow him

a margin of not less than 5 cents and

still be competitive with

any Mobil operated commission agency

site within the City

of WOllOngOng.

The proviso ought therefore

to require that it is not to operate during any time

at which

Mobil’s wholesale price to the franchisee is less than 5 cents

below the retail

price then beins Charged at any Mobil operated

commission aaency site within the Citv

of Wollonqong.

Finally, the applicant contends for

a renewal of the

Equipment Loan Contract. There is no contest about this matter.

It is mutually desirable for there

to be a renewal of that

contract during the term

of any new lease.

There is one other issue outstandmu between the

parties: whether or not Mr Brindle should pav to Mobil the difference between the contracted

rent. $2.500 per month. and the

concession rent. $1,200 per month, in relation to the period

December 1983 to date. As mentioned. Mr Brindle has continued

payments at $1,200 per month. Mobil claims $2,500 savinu, as is

the fact, that it has not uranted a concession for these months.

I have already commented upon the attitude parties to the contracted figure. The fair position would be for

of the

the rental paid to reflect the understanding between

HK Murray

and MK Brindle. that is $1.200 for each of the months of

46.

December, 1983, January, February and March 1984 and $1,400 for

each month thereafter.

The figure of $1,400 should apply until

and including March 1985. the figure of $1.650	commencina in
April 1985.

I do not think that I have any power directly Mobil to waive the difference between

to compel

$2,500 and the lesser

figure during the months

from December 1983 to the date

of the

renewal.

But the terms of the renewal may reflect any failure by

Mobil to waive this sum. If

Mobil is not willina to alve an

undertakina to waive this sum then

the terms of the renewal

should Include a provision that no rental be	paid until the
relevant amount has been offset.

The amount owlna audit last November, as at 12 July last was $26 .982 .54 and

by Mr Brindle to Mobil. pursuant to the

interest was then accruing

- assessed at the current rate

applicable in the Supreme Court of New South Wales

- at $10.30

per day. Further payments may have been made between that dav and the date of this judgement.

It will be a condition precedent

to any order requiring the renewal

of the franchise aareement

that the whole of the outstandina indebtedness be paid.

propose to allow a period of one month for that purpose.

If the

outstanding balance is paid to the applicant on

or before Friday

14 September 1984 then there ouaht to be an order for renewal

the franchise agreement for

a term expirina on

31 March 1987.

The terms should be those contained

in the lease, Reseller

47.

Contract and Equipment Loan Contract - but not. of course, the only to the specific modifications indicated herein and such

other modifications as the parties may agree.

If payment is not

made by 14 September, then there ought to be a declaration that

it is lust and equitable that the aareements not be	r newed. with
consequential orders in favour of the franchisor.

I should add

respondent in relation to payment, and thus whatever the prlmarv

orders to be made. the relief claimed in paraaraphs 6. 7 and 8 of

that. whatever the course taken

bv the

the Cross-claim should be refused.

Section 23 of the Act,

referred to in para 6, deals with compensation for acquisition

property.

It has no application to this case.

Paragraph 7

depends upon the view

that the discussions between Mr Murray and

Mr Brindle created a fresh franchise agreement. I do not think

that either man believed that he was then enterinu

to a bindinu

contract.

The two men were discussina one

term of a complex

arranaement to be set out in documents vet to be prepared.

It is

doubtful that Mr Murray either had authority

or was believed bv

Mr Brindle to have authority to contract,

as diztlnct from to

negotiate. on behalf of Mobil.

Paradraph 8 refers to S . 22 of the

Act but this deals with compensatlon to

a franchisee for loss

suffered as a result of a contravention by the franchlsor of the this case.

40.

The matter will stand over

to a convenient date

shortly after 14 September for the purpose

of making Orders to

aive effect to these reasons, the terms

of which will depend

upon

whether payment has been made

of the outstanding debt and for

which Short Minutes should	be brought in by the applicant.	At
that time I will also hear	any argument as to costs.

I certify that this and the

preceding pages are a true

copy

o d the

Reasons for Juduement herein

of his

Honour MK Justice Wilcox.	-
Associate:

BETWEEN :	MGXL OIL AUSTRALIA
LIMITED

Applicant

&NN :

BKIg BRINDLE

Respondent

i&m :	WILCGX J
5 s :	L ? CCTOBER 1384
F E C Z :	SYDNEJ

After 3dell;.et-d-

of luduement In r h l z matter on 14 Auuust

I stood the matter over until

14 September for the purpose

making formal orders. There has been some delav in

the

preparation of the appropriate Short Minutes but this has now

been done and

I now

make orders in accordance with the Short

Minutes dated today and placed with the papers.

There remains outstandinq the matter of costs.

Each

party seeks costs. The applicant acknowledges that the

Application falled and that there ouuht not therefore to be

order in its favour for costs in respect

of the Application.

However, it says. the bulk of the costs were incurred in relation to the Cross-claim. The applicant acknowledues that the

50.

defendant was ultimately successful

on his Cross-claim in the

sense that

he obtained an order for the renewal of

the franchise.

However, it points out that the price of the renewal was

immediate payment by

Mr Brindle to Mobil of the whole of

the

moneys owing by him. Counsel for the applicant points out

that,

at an early stage of the litigation. his client had offered to

renew the franchise provided

that Mr Brindle immediately repaid

the amount owlnu. He says. therefore. that the view taken by the

Court - leavinu aside the terms of the renewal

- reflects the

situation which his client was prepared to accept prior

to the

incurrinu of the overwhelming majority of the costs. Counsel

concedes that the terms of the renewal as ordered

by me are

materially different from those upon

which his cllent was

PreDared to renew but he savs

that the Act is concerned wlth the

fact or otherwise of renewal and that the terms must be

disreuarded. He also aruues that the Court should take into

account both the fact of Mr Brindle's breach of his previous

aureement wlth Mobil and the fact that thls was

a substantial and

continuina breach, as reflected in the requirement of the Court

for repayment prior to any order for renewal.

The matters of fact to which counsel referred

a , of

course. correct. However, it is unrealistic to disreaard the

terms of the renewal. There is a conslderable difference between

the terms upon whlch Mobil were prepared

- whether prlor to or

durinu the proceedinus

- voluntarily to renew the franchise and

those in relation to which

I have ordered renewal. The

51.

differences extend both to the price to be charued for petroleum

and the rental of the service station: these beina

the critical

matters in dispute between the parties and which have uiven rise

to the whole

of the problem between them. I do not think it can

be said that Mob11 has been successful in relation

either to the

Application or to the Cross-claim.

I do not. therefore. see anv

basis for orderina Mr Brindle to

Dav Mobil’s costs.

In support of his claim for costs the solicitor for

Brindle arcrues that

the Court found substantlallv in hls favour.

especially in relation to the critical factual matters: the

approoriate price for petroleum and the appropriate rent	of he
premises. He Dolnts out that the policv of the Act - as

evidenced in s.17(6)

- is that anv increase in

a charue made by

the franchisor under

a renewal of the franchise aureement shall

be reasonable. He contends that his client not only succeeded in

resistinu the Application but substantlallv succeeded in hls

Cross-claim. He also submits that whllst his client was in

breach of the previous agreements the cause of the breach was

directly related to the unreasonable requirements of the

franchisor and that Mr Brindle had alwavs intended to pav the

amount that was owina.

It seems to me

that there is considerable force in what

is sald on behalf of

Mr Brindle. He has succeeded in resistincr

the Application. In relation to the Cross-claim

- the malor

battlearound before me

- Mr Brindle has been substantiallv

5 2 .

successful. His failure to make payment to Mobil of the moneys

owina by him

is related to the terms of his arranaements with

Mobil.

I think that it is probable that. if Mobil had offered to

grant to Mr Brindle the terms which I have reuarded as reasonable on condition that he immediately pay the amount owina. he would have acceDted that offer. However, Mr Brindle has not had

complete success. The fact is

that at no time. whether before

durina the hearinu, did he make

an offer immediately to Day the

outstandinq debt. This has been forced upon him by my order

and,

to that extent. he has achieved less than full success. Whilst

think that he

1 s entitled to an order in

his favour, In relation

to costs, an order for the payment of the whole of his costs

would not be an accurate reflection of

the result.

The strict aDProach would be to reauire the

amlicant to

Day the whole of the costs of

the reSDOndent on the ADplication

and to Dav to him

a proportion of his costs on the

Cross-clam.

However. the assianment of Darticular items to the ADplication or

the Cross-claim would present difficulties upon taxation.

think that the better approach

1 s for me to select

a Droportion

of the total costs, havinu reuard both to the fate

of he

Application and the dearee of success of the Darties on the

Cross-claim. Anv proportion necessarilv lnvolves a deuree of

53.

arbitrary assessment but

I -that

it would be a reflection

all relevant matters for me to order

that the applicant pay to

, the respondent two-thirds

of his costs of the Proceedinas whether

.incurred in the Application

or the Cross-claim. I so order.

I certify that this and the W $

L O ( - S l )

precedinu paaes are

a true copv of‘

the

Reasons for Judgement herein	of his Honour
Mr Justice Wilcox.

Associate ,f(w

‘%&lJ&+q

[1984] FCA 356

19 Oct 1984