Ringrow Pty Ltd v BP Australia Ltd

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FEDERAL COURT OF AUSTRALIA

Ringrow Pty Ltd v BP Australia Ltd [2003] FCA 1297

CONTRACT – whether an option to purchase a service station exercisable upon breach of an agreement relating to the operation of the service station is void as a penalty

EQUITY – relief against forfeiture – whether the exercise of the option involved an unconscionable forfeiture of property against which equity would relieve

STATUTORY CONSTRUCTION – whether the arrangements by which the applicants operated the service station are franchise agreements within the meaning of s 16 of the Petroleum Retail Marketing Franchise Act 1980 (Cth)

WORDS & PHRASES – ‘operational’ and ‘goodwill’

Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) s 6(1)
Petroleum Retail Marketing Franchise Act 1980 (Cth) s 3(1), 16, 16(2), 16(2)(f), 16(2)(j), 16(3), 16(4), 16(4)(b), 16(5), 16(6)

AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 applied
BICC PLC v Burndy Corporation [1985] 1 Ch 232 cited
CRA Ltd v NZ Goldfields Investments [1989] VR 873 cited
Federal Commissioner of Taxation v Murry (1998) 193 CLR 605 followed
Forestry Commission of NSW v Stefanetto (1976) 133 CLR 507 cited
Jobson v Johnson [1989] 1 All ER 621 applied
Legione v Hateley (1983) 152 CLR 406 followed
O’Dea v All States Leasing System (WA) Pty Ltd (1983) 152 CLR 359 referred to
Patel v Ali [1984] 1 Ch 283 referred to
PC Developments Pty Ltd v Revell (1991) 22 NSWLR 615 followed
Re Moore and Texaco Canada Ltd (1965) 50 DLR (2d) 300 referred to
Romanos v Pentagold Investments Pty Ltd [2003] HCA 58 cited
Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 cited
Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57 cited
The Minister for Home & Territories v Lazarus [1919] 26 CLR 159 referred to
Turner v Bladin (1951) 82 CLR 463 cited
Watson v Foxman (1995) 49 NSWLR 315 cited
Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 applied

Rossiter Penalties & Forfeiture (1992) p 66
Lanyon Equity and the Doctrine of Penalties (1996) 9 JCL 234
Meagher, Gummow and Lehane Equity Doctrines and Remedies (4th Ed)
Butt The Standard Contract for Sale of Land in New South Wales (2nd Ed)

RINGROW PTY LTD v BP AUSTRALIA LTD
N 278 OF 2003

ULTIMATE FUEL PTY LTD v BP AUSTRALIA LTD
N 279 OF 2003

NADER-ONE PTY LTD v BP AUSTRALIA LTD
N 280 OF 2003

HELY J
13 NOVEMBER 2003
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 278 OF 2003

BETWEEN:

RINGROW PTY LTD
APPLICANT

AND:

BP AUSTRALIA LTD

RESPONDENT

BETWEEN:

BP AUSTRALIA LTD

CROSS CLAIMANT

AND:

RINGROW PTY LTD

CROSS RESPONDENT

N 279 OF 2003

BETWEEN:

ULTIMATE FUEL PTY LTD

APPLICANT

AND:

BP AUSTRALIA LTD

RESPONDENT

BETWEEN:

BP AUSTRALIA LTD

CROSS CLAIMANT

AND:

ULTIMATE FUEL PTY LTD

CROSS RESPONDENT

N 280 OF 2003

BETWEEN:

NADER-ONE PTY LTD

APPLICANT

AND:

BP AUSTRALIA LTD

RESPONDENT

BETWEEN:

BP AUSTRALIA PTY LIMITED

CROSS CLAIMANT

AND:

NADER-ONE PTY LTD

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Details
Case
[2003] FCA 1297
Decision Date

CaseChat Overview and Summary

The case of Ringrow Pty Ltd v BP Australia Ltd dealt with the determination of the purchase price for the sale of a property, which was the subject of an option deed between the parties. The dispute arose from the interpretation of Clause 2 of the option deed, which outlines the method for determining the purchase price based on the market valuation of the property as an operational service station by an independent valuer. The core issue was whether the valuer should consider the goodwill of the business when determining the market valuation, as the option deed explicitly excluded any such allowance.

The court was tasked with interpreting Clause 2.5 of the option deed, which instructs the valuer to consider all relevant factors but specifically excludes goodwill from the valuation. The court also had to consider the role of the POSA (Petroleum Operator Site Agreement) and its impact on the market valuation. BP argued that the POSA, which imposed certain obligations on Ringrow, should be considered by the valuer when determining the market valuation. The court had to decide whether the terms of the POSA, including the obligations placed on Ringrow, should be factored into the market valuation of the property.

The court held that the valuer was not permitted to consider goodwill or any obligations arising from the POSA when determining the market valuation. The court emphasised that the exclusion of goodwill from the valuation was clear and unambiguous, and the terms of the POSA did not alter this requirement. The court found that the POSA, while relevant to the operational aspects of the property, did not affect the valuation process for determining the purchase price under the option deed. The court ordered BP to appoint an independent valuer to determine the market valuation in accordance with Clause 2 of the option deed, without considering goodwill or the terms of the POSA.

The court also ordered BP to bring in short minutes of order to give effect to this decision, ensuring that the valuation process would proceed without the inclusion of disallowed factors.

Orders

Orders of the court

1. The respondent bring in short minutes of order to give effect to this decision.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

HELY J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: HELY J

Clause 2 of the option deed headed ‘Determination of Price’ provides that the purchase price payable for the property will be calculated in accordance with the following formula:P = Vwhere‘P’ means the purchase price payable for the property.‘V’ means the market valuation of the property as an operational service station as determined by an independent valuer in accordance with Clause 2.(emphasis added) Clause 2.2 in each option deed is as follows:‘Within 14 days following delivery of the Notice of Intention, the grantor and the grantee must jointly appoint an independent valuer to determine the market valuation of the property in accordance with this Clause 2. If the grantor and the grantee fail to agree on an independent valuer within 14 day period the grantee may request the president (or if there is no president the senior office bearer) of the Australian Institute of Valuers and Land Economists to appoint an independent valuer in accordance with this Clause 2.’The ‘Notice of Intention’ is a document required to be delivered by the grantee to the grantor pursuant to Clause 1.1 of the option deed confirming the grantee’s intention to exercise the option to purchase. Clause 2.5 of each option deed provides as follows:‘The valuer shall be instructed to determine the market valuation of the property as at the date of the Notice of Intention and in making the determination shall have regard to all factors the valuer considers relevant but shall not include in the determination of the market valuation of the property any allowance for any goodwill attaching to any business conducted at the property.’ Special Condition 39 of each contract provided that concurrently with the completion of the contract BP and Ringrow shall enter into a POSA in the form annexed to the contract. Special Condition 41 of each contract provides that in consideration of Ringrow entering into a POSA with BP in accordance with Special Condition 39, BP agrees to sell to Ringrow the property on the terms and conditions specified in this contract.The POSA Under the POSA, the operator is required, inter alia, to:(a)manage the site in a manner and to a standard which reflects favourably on BP: see cl A3.7;(b)refrain from making any misrepresentations about the products offered for sale: see cl A3.9(a);(c)avoid conduct that might be detrimental to BP or its public image: see cl A3.13;(d) purchase all motor fuel for retail sale from BP: see cl A4.2;(e) refrain from selling any motor fuel other than BP motor fuel: see cl A4.2; and(f)refrain from selling any BP petroleum products which have been mixed or adulterated with non-BP petroleum products or pass off or represent non-BP petroleum products as BP petroleum products: see cl A4.16.1. Clause A4.7 of the POSA provides that the prices payable by the dealer for products and services purchased from BP are the prices specified by BP as applicable to the dealer at the place of delivery and on the date and at the time of delivery.