Sandersons Eastern Suburbs v Mercedes-Benz Australia/Pacific - [2018] NSWSC 52

Supreme Court

New South Wales

Medium Neutral Citation: Sandersons Eastern Suburbs v Mercedes-Benz Australia/Pacific [2018] NSWSC 52
Hearing dates: 12/12/2017
Date of orders: 06 February 2018
Decision date: 06 February 2018
Jurisdiction: Equity - Commercial List
Before: McDougall J
Decision:
Proceedings dismissed pursuant to UCPR r 13.4.
Parties to make written submissions as to costs.

Catchwords:
CIVIL PROCEDURE — Summary disposal — Dismissal of proceedings — Abuse of process
CONTRACTS — Construction — Termination clause — No question presently arises — Hypothetical proceedings
Legislation Cited: Civil Procedure Act 2005 (NSW)
Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth)
Federal Court of Australia Act 1976 (Cth)
Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited: Allphones Retail Pty Ltd v Weimann [2009] FCAFC 135
Australian Gas Light Company v Australian [2003] ATPR Competition and Consumer Commission (No.2)
Dormer v Solo Investments Pty Ltd [1974] 1 NSWLR 428
Galaxy Communications Pty Ltd v Paramount Films of Australia Inc [Court of Appeal, unreported, 27 March 1998]
Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73
Category: Principal judgment
Parties: Sandersons Eastern Suburbs Pty Limited (Plaintiff)
Mercedes-Benz Australia/Pacific Pty Limited (Defendant)
Representation:
Counsel:
S Couper QC / P Silver (Plaintiff)
DR Pritchard SC / S Golledge (Defendant)
Solicitors:
HWL Ebsworth (Plaintiff
Robinson Legal (Defendant)

File Number(s): 2015/71826

Judgment

HIS HONOUR: On 16 January 2003, the plaintiff (Sandersons) and, under a former name, the defendant (MBAP) entered into a “dealer agreement”. Under that agreement, MBAP authorised Sandersons to sell Mercedes Benz vehicles and associated products. It is common ground that the Franchising Code of Conduct (the Franchising Code) established under the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth) applies to the dealer agreement.
The parties are at odds as to the proper construction of cl 8 of the dealer agreement, read in context and in conjunction with the Franchising Code. As drafted, cl 8 appears to provide that the dealer agreement would subsist for a period of one year, and would renew automatically thereafter unless MBAP gave prior notice, within a defined time, of its decision not to renew.
For reasons that will be explained, each party has filed a notice of motion. Sandersons’ notice of motion sought the separate (and presumably prior) determination of specified questions. I say “sought” because, in the course of the hearing, Mr Couper of Queens Counsel, who appeared with Mr Silver of Counsel for Sandersons, stated that Sandersons was not pressing the notice of motion. Subsequently, I dismissed it with costs.
MBAP’s notice of motion seeks orders that the proceedings be dismissed pursuant to UCPR r 13.4 or struck out pursuant to r 14.28. It is the issues raised on that notice of motion that require decision.

Chronology

From time to time, MBAP indicated an intention not to renew the dealer agreement. On 6 February 2014, it sent a letter to Sandersons stating that the dealer agreement would be renewed for 2015 and 2016, but would not be renewed beyond 31 December 2016. Sandersons thereupon commenced a variety of proceedings, including in this court, the Federal Court and NCAT. By one means or another, the issues raised in all those proceedings have been brought before this court.
The “pleadings” progressed with a great deal of complexity, and a vast volume of lay and expert evidence was prepared and served.
On 14 April 2016, MBAP wrote to Sandersons stating that it would renew the dealer agreement for the calendar year 2017, but would not do so thereafter. That led to an amendment to the pleadings.
The matter was listed for hearing to commence on 18 July 2016. At a directions hearing on 15 July 2016, I considered the issues relating to the letters of 6 February 2014 and 14 April 2016. I expressed the view (which, if I may say so, was inarguably correct) that they were not notices pursuant to cl 8 of the dealer agreement and were not effective to notify non-renewal of the dealer agreement. The parties accepted those propositions and I made consent declarations accordingly.
That might have been thought to bring the proceedings to an end. It did not do so. After an unsuccessful mediation in July 2016, the parties resumed their war of correspondence in February 2017. MBAP stated at one point that it would renew the agreement for 2018, but not thereafter. At another point, MBAP stated that its then intention was that it would not renew the agreement beyond 31 December 2018. However, MBAP has not (as at December 2017) given any notice pursuant to cl 8 of the dealer agreement that (if valid) would be effective to bring to an end the chain of automatic renewals under cl 8.

Relevant terms of the dealer agreement

Clause 8 of the dealer agreement reads as follows:

SECTION 8: TERM OF AGREEMENT
This Agreement shall commence on the date upon which the same is made as set out in the first line of this Agreement and shall expire on the last day of the calendar year in which it is made. Unless written notice of non-renewal is given by DCAuP to the Dealer at least 90 days before the date of expiry, then upon expiry this Agreement shall revive automatically and continue in force until the last day of the next calendar year and thereafter shall be renewed automatically on its expiry at the end of each calendar year unless and until not less than 90 days prior written notice of non-renewal shall have been given by DCAuP to the Dealer prior to any expiry date.
This clause shall be read subject to Clause 9 and, where appropriate, points 13 and 14 of Part 3 of the attached Operating Schedule.

Clause 9 deals with termination. In very brief terms, it provided for:

termination at any time by mutual consent;

termination by Sandersons on giving 60 days’ written notice;

termination by MBAP for unrectified breach; and

immediate termination in circumstances such as bankruptcy, fraud and the like.

Clause 8 provides its own problems of interpretation. Unfortunately, those problems of interpretation are compounded by cl 14 of the “Operating Schedule”, which, it appears to be common ground, has contractual effect by force of cl 10 of the dealer agreement. Clause 14 reads, so far as it is relevant, as follows:

14. Special Conditions
…
(i) The initial Term of this Agreement shall commence on the date upon which the same is made as set out in the first line of this Agreement, and shall expire three (3) calendar years from 31 December of the calendar year in which this Agreement commences;
…
If, at the expiration of the initial Term as set out in point 14(i) of this Part 3 – Operating Schedule, the Dealer has met all the obligations and requirements pursuant to this Agreement, then, after reasonable review and consultation with the Dealer in respect of the Dealer’s performance against targeted criteria during the previous Term, a further 3-Year Term shall be granted.

The nature of Sandersons’ claim

Sandersons’ second further amended further summons filed on 11 August 2017 seeks the following relief:

1.   A Declaration that on the proper construction of clause 8 of the Dealer Agreement (Clause 8), it operates continuously and is terminable only upon substantial breach or on reasonable notice.
2.   Alternatively to 1 above:
2.1   a declaration that under s145 of the Motor Dealers and Repairers Act 2013 (MDRA), clause 8 is unfair;
2.2   an order under MDRA s147 that the first unnumbered paragraph of clause 8 be deleted and replaced with the following:
“Each party can terminate the agreement on reasonable notice”.
3.   A declaration that in the absence of substantial breach by Sanderson, Mercedes may only terminate the Dealer Agreement by notice given pursuant to s28(3) of the Franchising Code of Conduct (FCC).
4.   A declaration that a notice purporting to terminate the Dealer Agreement on 31 December 2018 given in 2018 will not be a reasonable notice.
5.   A declaration that Mercedes was not entitled to issue:
5.1   the Notice to Not Renew;
5.2   the Notice of Intention to Not Renew;
5.3   the 2017 letters.
6.   A declaration that sending the 2017 Letters was:
6.1   unjust conduct under MDRA s147;
6.2   conduct in contravention of the good faith obligation pursuant to FCC s6;
6.3   a breach of the obligation of good faith in the Dealership Agreement;
6.4   unconscionable conduct in contravention of s20 or s21 of the Australian Consumer Law (ACL).
7.   A declaration that a notice purporting to give effect to the intention of Mercedes specified in the 2017 Letters would constitute:
7.1   unjust conduct under MDRA s147;
7.2   conduct in contravention of the good faith obligation pursuant to FCC s6;
7.3   conduct in breach the obligation of good faith in the Dealership Agreement;
7.4   unconscionable conduct in contravention of ACL s20 or s21.
8.   A declaration that if clause 8 has the construction contended for by Mercedes in FFACLS paragraphs 53AAAF, termination of the Dealership Agreement by Mercedes under clause 8 would be:
8.1   unjust conduct under MDRA s147;
8.2   conduct in contravention of the good faith obligation pursuant to FCC s6;
8.3   conduct in breach the obligation of good faith in the Dealership Agreement;
8.4   unconscionable conduct in contravention of ACL s20 or s21.
9.   A declaration that in delivering the clause 18 letter to Sanderson with a disclosure document containing an Annexure “A”, describing it as the current standard Dealer Agreement and requesting Sanderson to execute item 23 of the disclosure document, Mercedes:
9.1   engaged in misleading or deceptive conduct or conduct that was likely to mislead or deceive, in breach of ACL s18;
9.2   engaged in unconscionable conduct, in breach of ACL s20 or s21.
10.   A declaration that the clause 18 letter was invalid and ineffective insofar as it purported to have the effect that the Dealer Agreement ended on 31 December 2018.
11.   A declaration that reliance by Mercedes on clause 8 to end the Dealer Agreement on 31 December 2018 would:
11.1   constitute unjust conduct under MDRA s147;
11.2   constitute unconscionable conduct under ACL s 20 or s21;
11.3   a breach of its obligation of good faith under the FCC s6;
11.4   A breach of the obligation of good faith under the Dealership Agreement.
12.   A declaration that at no material time has there been a valid basis to give effect to an intention on the part of Mercedes to terminate the Dealership Agreement.
13.   An injunction restraining Mercedes from taking any step to give effect to the intention to terminate the Dealer Agreement on 31 December 2018.
14.   An injunction restraining Mercedes from making threats to act upon its intention to terminate the Dealer Agreement.
15.   Damages.
16. Damages under s236, or s237 and/or s243 of the Australian Consumer Law.
17.   Interest.
18.   Costs.
19.   Any further or other order this Honourable Court thinks fit.

The first further amended commercial list statement “pleads” Sandersons’ case in about 139 paragraphs from 1 to 59, passing along the way through paragraphs numbered 53AA to 53AAAAB.
In part, the pleadings assail the validity of the notices of 6 February 2014 and 14 April 2016: that is to say, the notices that have been both agreed and declared to be ineffective for the purposes of cl 8.
The pleadings refer to further correspondence, including what are called “the 2017 letters” (one of which is also called, somewhat confusingly, “the clause 18 letter”). One way or another, the pleadings seek to articulate the case that:

by deciding (as it is alleged MBAP has done) to terminate the dealer agreement,

in threatening to give a cl 8 notice giving effect to that decision, and

by engaging in the correspondence war to which I have referred (including the notices declared to be invalid and the 2017 letters),

MBAP has engaged in various forms of reprehensible conduct, the effect of which conduct is said to be to invalidate any attempt to give effect to its alleged decision not to renew the dealer agreement.

The pleadings also allege that MBAP’s asserted decision not to renew the franchise agreement is one reached in bad faith and by taking into account ulterior motives, for all sorts of reasons that are rehearsed at length.
Underlying all these multitudinous and confused assertions is the proposition that the dealer agreement is not one from year to year (as, at least after the expiry of the initial periods of three years to which cl 14.1 of the operating schedule refers, it appears to be) but, rather, one indivisible agreement of indefinite duration, terminable only in accordance with cl 28 of the Franchising Code. Clause 28 provides, in substance, that absent breach (Sandersons wishes to say, “substantial breach”) or consent, a franchise agreement is terminable only upon reasonable written notice which must state the reasons for termination.
In short, Sandersons says – and this is really, I think, its principal case at present – that the question is not one of non-renewal. It is, rather, one of termination. It follows, Sandersons says, that cl 28 of the Franchising Code governs the situation.

The competing positions

Mr Pritchard of Senior Counsel, who appeared with Mr Golledge of Counsel for MBAP, submitted that the proceedings should be dismissed or struck out. He submitted that there was no reasonable cause of action shown, because the relief claimed was either otiose (in the case of the letters of 6 February 2014 and 14 April 2016) or hypothetical. He submitted that there was no present controversy capable of being quelled by declaratory relief, because on any view of the facts MBAP had not given (nor could it presently – i.e. as at 12 December 2017, when the motion was heard – give) an effective notice pursuant to cl 8 of the dealer agreement of its intention not to renew that agreement beyond 31 December 2018.
Mr Pritchard did not state that such a notice would not be given. MBAP’s position was, rather, that it would consider the matter at the appropriate time – between 1 January and 30 June 2018 – and make a decision based upon relevant facts at that time. Mr Pritchard submitted that it was only when such a decision was made, and given effect by a notice under cl 8 of the dealer agreement, that there would be any justiciable controversy.
Alternatively, Mr Pritchard submitted, it was oppressive and an abuse of process to keep the proceedings on foot, with constant amendments as events evolved. He submitted that there could be no prejudice to Sandersons if the proceedings were dismissed or struck out. He referred to s 91(1) of the Civil Procedure Act 2005 (NSW).
Mr Couper submitted that there was a present controversy between the parties, at least in relation to the proper construction of cl 8 of the dealer agreement, that was capable of being quelled by the grant of declaratory relief. He emphasised the distinction between the jurisdiction to grant declaratory relief and the considerations attending the discretion whether to do so. Mr Couper submitted further that the fact that declaratory relief was sought in respect of events that might occur in the future was not, of itself, a bar to the grant of a declaration of right.
The submissions for each side were more complex, and more subtle, than that very brief outline suggests. However, I have said enough to give some understanding of the way in which the parties approached the issues. I add that each side referred to decided cases; I shall deal with those to the extent that it is necessary.

Decision

I start by observing that there is on any view a difference between the parties as to the proper construction and operation of cl 8 of the dealer agreement, and as to the applicability of cl 28 of the Franchising Code. That difference has been exposed in correspondence, and in the course of submissions.
Sandersons contends that read as a matter of substance not form, the dealer agreement continues unless and until (of present relevance) MBAP gives notice of termination. MBAP can only do so, Sandersons says, in accordance with the requirements of cl 28 of the Franchising Code.
MBAP says that cl 8 of the dealer agreement should be construed according to its terms. Those terms are (and again, I leave aside the inconvenience introduced by cl 14.1 of the operating schedule) that the dealer agreement runs from year to year; its term is one calendar year from 1 January to 31 December; and it is automatically renewed at the end of each calendar year unless, between 1 January and 30 June of that calendar year, MBAP has given written notice of non-renewal. In those circumstances, MBAP says, cl 28 of the Franchising Code has no operation.
Although, in the real world, that difference between the parties exists, it is not one which has been exposed, in a way that might have legal consequences, by the giving of something purporting to be a written notice of non-renewal pursuant to cl 8 of the dealer agreement. In that sense, the difference is theoretical, because it may never require resolution. No doubt, the parties would like to have it resolved. No doubt, there may be good commercial reasons why they should know the basis upon which the dealer agreement may be brought to an end by one without the consent of the other. But it does not necessarily follow that there is a present controversy between them which, if not quelled by a decision on that point, will have some adverse consequences for the legal rights of one party or the other.

The relevant principles

Mr Couper relied on the decision of the Full Court of the Federal Court of Australia in Allphones Retail Pty Ltd v Weimann [1] . The respondent to the appeal was a party to a franchise agreement with the applicant. He sought a declaration as to the proper construction of a clause of the franchise agreement. The dispute over the proper construction of that clause concerned a number of franchisees. The applicant sought to convert his proceeding into a representative proceeding, pursuant to s 33C of the Federal Court of Australia Act 1976 (Cth). There were two groups of franchisees whom he claimed to represent. The first comprised franchisees who had exercised (or purported to exercise) their rights under the relevant clause. The second comprised franchisees who were not presently able to exercise that right, but would become able to do so with the passage of time.
1. [2009] FCAFC 135.
The primary judge held that both groups of franchisees had a “claim” against Allphones for the purposes of s 33C (and, more generally, Pt IVA of the Federal Court Act). The Full Court unanimously upheld the decision of the primary judge. The only difference between the members of the Full Court was that Siopis J would have refused leave to appeal, whereas Tracey and McKerracher JJ granted leave but dismissed the appeal.
Although I perceive no particular difference in approach between the reasons of Siopis J and the joint reasons of Tracey and McKerracher JJ, I shall refer only to the reasons of the latter. Their Honours concluded [2] that there were real issues in dispute between Allphones and the second group (Group B) of represented franchisees. They said[3] that “the purely temporal difference between group A and group B franchisees is the only material difference which distinguishes the two groups. All franchisees have… an entitlement which they seek to have clarified in light of the current disputation”.
2. At [71], [72].
3. At [72].
Allphones submitted that the declaratory relief sought, at least in respect of Group B members, was no more than hypothetical[4] . However, Tracey and McKerracher JJ distinguished[5] between the jurisdiction to grant declaratory relief on the one hand, and on the other, the exercise of discretion [6] involved in granting it. It followed, their Honours said[7] , that “[if] in a particular instance, for whatever reason, a declaration is not granted … it does not mean for present purposes that there is no claim, matter or jurisdiction”.
4. See Tracey and McKerracher JJ at [77].
5. At [78].
6. It is not necessary to refer to their Honour’s indication of the kinds or nature of those discretionary considerations.
7. Again at [78].

Tracey and McKerracher JJ referred[8] to the decision of Holland J in Dormer v Solo Investments Pty Ltd [9] . His Honour there cautioned against declaring contractual rights contingently on the basis that a party may take some course that it has not taken, need not take, and may not take. Tracey and McKerracher JJ were prepared to “assume without comment the correctness” of that decision[10] . However, their Honours said, it did not follow that in the case before them, there was no “claim” for the purposes of s 33C of the Federal Court Act.
8. Again at [78].
9. [1974] 1 NSWLR 428.
10. At [79].
Tracey and McKerracher JJ referred to other authority, including the unreported decision of the Court of Appeal of this State in Galaxy Communications Pty Ltd v Paramount Films of Australia Inc [11] and the decision of French J in Australian Gas Light Company v Australian Competition and Consumer Commission (No.2) [12] . The latter case, their Honours said[13] , was authority for the proposition that “the fact that declaratory relief relates to future conduct does not place it outside the bounds of federal jurisdiction”. Their Honours added:

The future remains an unknown country and the facts upon which any declaration as to future conduct is made or an injunction granted may change. There is nothing in that circumstance which goes to jurisdiction. The question whether the court should, in the exercise of its discretion, make the declarations sought falls for determination in the final judgment.
11. [Court of Appeal, unreported, 27 March 1998].
12. [2003] ATPR 41-962.
13. At [83].

The controversy in Dormer concerned a contract for the sale of land. The plaintiff (purchaser) sought a declaration that he was entitled to rescind the contract because of non-disclosure. Holland J found that there been non-disclosure of relevant matters, but in circumstances that did not involve “fraud, innocent misrepresentation, breach of any term of the contract or act of deliberate concealment by the vendor” [14] . His Honour added that the case for rescission:

… is based on no more than silence by the vendor as to a future possibility of which he was aware. The vendor is presently able to give fully the title to the land which he contracted to give. The existence of the possibility could presently affect only the current market value of the property and would not necessarily affect [even] that….
14. At 432.

In those circumstances, Holland J held [15] that the defendant had no duty of disclosure and thus that the plaintiff had no entitlement to rescind on the ground of non-disclosure.
15. At 434.
Having said that, Holland J said [16] that even if he had concluded in the plaintiff’s favour, he would have had doubts whether the jurisdiction of the court to make a declaration of right ought be exercised. His Honour said:

I should observe that, if I had been in the plaintiff’s favour, I would have had doubts whether the jurisdiction of the court to make a declaration of right ought to have been exercised in the present case. I am not the least inclined to find limits on the beneficial jurisdiction of this Court to make declarations of right, but it is one thing to declare present contractual rights of the parties, another to declare them contingently on the plaintiff electing to take some course that he has not yet taken is not bound to take and may not take. In the present case the plaintiff has said that, if I were to find that he was entitled to rescind, then he would rescind, but he would not in any way have been bound to do so if I had made the declaration that is sought.
It seems to me that, although the claim in the summons is for an order that the plaintiff is entitled to rescind, in substance, the relief that is sought is a declaration that, if the plaintiff elects to give a notice of rescission, that notice of rescission will be effective to terminate the contract.
I think the court ought to hesitate to make declarations as to the potential effect on the contractual position of the parties of events upon which a party has not yet acted and which would not alter the existing contractual rights unless he did so act.
16. Again at 434.

I turn to the decision of the Court of Appeal in Galaxy Communications. The claimant and the opponents in that case were parties to a long-term distribution agreement. Under a clause of that agreement, a party could terminate by notice to the other if the other “becomes insolvent”. The opponents claimed that they were entitled to terminate because the claimant had been insolvent; alternatively, they said, they would be entitled to terminate on the ground that the claimant “remains insolvent up until and including the making of the declarations sought”.
The Court of Appeal held that clause in question, on its proper construction, required that the party to whom notice was given be insolvent at the time the notice was given. Thus, the only available ground of termination was the alternative one stipulated: namely, that the claimant would remain insolvent up until the making of the declaration. All three members of the court considered that in those circumstances, the proceedings should be dismissed.
Priestley JA said that the ground of termination would be available only if the allegation of insolvency were proved, a declaration of insolvency were then made immediately (at the conclusion of the evidence providing the proof), and a notice of termination then served immediately. It would only be in those circumstances, his Honour said, that “the making of the declaration would be a practical matter of commercial importance to the opponents”. However, his Honour said, in reality that was not going to happen, and thus the case was one in which, by reason of the Court’s decision on the point of construction, no reasonable cause of action was disclosed [17] .
17. Unreported judgment at 3-4.
Stein JA, with whom Meagher JA agreed, reasoned to similar effect. After dealing with the construction point (in favour of the claimant, as Priestley JA had done), Stein JA considered whether the opponents’ action should be dismissed summarily or stayed. His Honour referred to a number of authorities, including the decision of Holland J in Dormer. Stein JA cited [18] the passage from the judgment of Holland J in Dormer that I have set out at [37] above. His Honour said [19] :

It is one thing to declare the present contractual rights of the parties, another to declare them contingently on the plaintiff electing to take some course that he has not yet taken, is not bound to take and may not take and may not take.
18. At 14 (34).
19. At 15 (35).

Stein JA continued:

… the relief here sought is, in substance, that if the opponents elect to give a notice of termination, that notice will be valid and effective to terminate the agreements on the basis of the court’s finding on insolvency. I do think that the court should hesitate in lending itself to such potential effects on the contractual position of the parties….

In those circumstances, Stein JA concluded [20] that, on the proper construction of the clause in question, the proceedings which remained were an abuse of process, and were unreasonably oppressive to the claimants. That was so because the remaining proceedings involved hypothetical future rights which might not produce any foreseeable consequences. They had the potential to affect the contractual positions of the parties in circumstances where one party had not yet acted and might not do so. It followed, his Honour said, that the proceedings should be stayed pursuant to SCR Pt 13 r 5 [21] .
20. At 15 (37).
21. As it then stood.
The decision in Galaxy Communications was cited with evident approval by Sheller JA (with whom Mason P and Powell JA agreed) in Sanderson Computers Pty Ltd v Urica Library Systems BV [22] . Sheller JA said [23] :

For reasons which are described in the judgment of Priestley JA in Galaxy, there will always be a problem where a claimant which has not terminated an agreement, seeks a declaration that it is entitled to do so. The declaration speaks from the time that it is made. Before a notice of termination is given or expires, events may overtake its validity. It is undesirable that questions such as waiver, and even more undesirable that questions about relief against forfeiture, be dealt with at all before there is a completed termination. Even if the respondent presently intends to give a notice of termination, it may delay it and fresh questions about election and waiver may arise. Such considerations firmly support the conclusion that in the present case his Honour’s exercise of the discretion to grant such a declaration miscarried. With all respect to his Honour, until such time as the respondent elected to terminate, the question as to whether it was entitled to do so remained hypothetical and abstract.

22. (1998) 44 NSWLR 73.

23. At 80.

Application of those principles

In my view, the factual situation in Allphones is distinguishable, in a significant way, from the facts of this case. The Full Court was required to consider whether, on the facts pleaded and assumed to be correct, the group B class members had a “claim” for the purposes of s 33 of the Federal Court Act. Their Honours’ decision depended on the proper construction of that section, read in its statutory context. It is authority for the proposition that a claim to a right which has not yet accrued, but which will or may accrue in the future, is sufficient to enable the claimant to form part of a class of represented persons for the purposes of s 33. By contrast, the question for me to decide is whether claims for declaratory relief as to the contractual consequences of events that have not yet occurred, and that may or may not occur in the future, ought be entertained.
I accept that the Full Court in Allphones was correct to point out the distinction between the jurisdiction to grant declaratory relief and the discretion to do so. It may be – I express no view – that the decisions in Dormer, Galaxy Communications, and Sanderson Electronics somewhat elide that distinction[24] . Nonetheless, the two Court of Appeal decisions to which I have referred are clear authority for the proposition that a claim for a declaration as to the contractual consequences of a future event that may or may not occur may be characterised as vexatious and oppressive.
24. Even if they do, it is obvious that the distinction was present to the mind of Sheller JA in Sanderson Computers, as the passage that I have set out at [44] above demonstrates.
SCR r 13.5 was substantially similar to UCPR r 13.4. I set out r 13.5 [25] :

5   Frivolity etc
(1)   Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings:
(a)   no reasonable cause of action is disclosed,
(b)   the proceedings are frivolous or vexatious, or
(c   the proceedings are an abuse of the process of the Court,
the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.
(2)   The Court may receive evidence on the hearing of an application for an order under subrule (1).
25. As it stood in 1998.

The only difference (and I do not think it is significant) is that SCR r 13.5 authorises the court to stay or dismiss, whereas UCPR r 13.4 talks only of dismissal. That does not seem to me to be important, because the court’s inherent power to control its own process would permit it to stay proceedings if, among other things, they were found to be frivolous or vexatious, or an abuse of the process of the court.
I turn to Sandersons’ prayers for relief. I accept that prayers 1 and 3 relate to a matter presently the subject of disagreement between the parties: namely, the proper construction and effect of cl 8 of the dealer agreement, read in conjunction (as it must be) with, in particular, cl 28 of the Franchising Code. What I do not accept is that there is any present action on the part of MBAP, the legality of which would depend upon, so as to require a resolution of, that dispute. There is no extant notice of non-renewal. It is only by the giving of such a notice that the proper operation of cl 8 will be called into question and require resolution. I can see in an abstract sense that it might be beneficial to the parties to have a decision as to the proper construction and effect of cl 8. However, I see no particular reason why the court should undertake that task now, when it cannot be assured that its consideration of the question will have any effect on contractual rights and liabilities.
Prayer 2 is framed in the alternative to prayer 1. However, it does not involve a simple question of construction. Its resolution would require consideration of all material circumstances, as they emerge from the pleadings and the evidence. More importantly, it would require consideration only if the questions of construction thrown up by prayers 1 and 3 were answered unfavourably to Sandersons. Finally (for present purposes), a resolution of the questions posed by prayer 2 would have practical impact, and practical benefit, only if MBAP had taken some action, the validity on which depended on cl 8 being construed as MBAP contends it should.
It cannot be doubted that if MBAP does give notice of non-renewal under cl 8 of the dealer agreement, litigation will ensue. It seems to me to be highly desirable that all questions be considered at once, and upon the basis of all relevant evidence, when a dispute arises that requires their resolution. It does not seem to me to be desirable that the questions should be decided piecemeal. In saying this, I accept that a resolution of the questions of construction raised by prayers 1 and 3 would require attention to factual context; and a fortiori, so would the resolution of prayer 2.
Prayer 4 seeks a declaration, which (if made) would speak from the date it is pronounced, as to the quality and legal effect of a notice that has not been given and might not be given. Whether any notice, if given, would (or would not) be reasonable must depend on a consideration of all relevant circumstances in existence, and perhaps reasonably foreseeable as likely to come into existence, at the time the notice is given.
Prayer 5 does not seem to me to raise any controversy that the court should be required to resolve. MBAP has not purported to act on “the Notice to Not Review” as defined, or on “the Notice of Intention to Not Renew”. It is very hard to see how there can be any question of “entitlement” to “issue” correspondence in any event. And as for “the 2017 letters”, they consist of no more than argumentative correspondence passing between lawyers. It does not seem to me that the court should be troubled to consider the validity of the assertions and counter-assertions made in correspondence of that nature, in the absence of any real controversy in the context of which those questions are raised and must be resolved.
Prayer 6 seeks a declaration characterising the 2017 letters in various ways. Whether or not those letters can be so characterised is a question that ought be decided when the characterisation, if decided in Sandersons’ favour, might have some legal significance. In the context of this dispute, such conduct could only have legal significance if MBAP gives notice of non-renewal pursuant to cl 8 of the dealer agreement. That it has not done and, I repeat, might not do. The proper characterisation of the conduct requires, in part, consideration of the purposes for which that characterisation is required. At present, that aspect of the task that prayer 6 seeks to initiate is lacking.
Prayer 7 in effect follows on prayer 6. It seeks a declaration that a notice purporting to give effect to the intention said to have been specified in the 2017 letters should be characterised in various ways. No such notice has been given. What I have said as to prayer 6, and the undesirability of deciding it when there is no purpose to be served by doing so, applies equally to prayer 7.
Prayer 8 seeks an “if… then” declaration as to an event that might or might not occur in the future. It is doubly hypothetical and, at least, doubly unsuitable for present determination.
Prayers 9 and 10 relate to what is called “the clause 18 letter” (which is also the second of “the 2017 letters”). In that letter, MBAP notified Sandersons “of our decision to extend the current term for a further one (1) year term”. It noted that the dealer agreement “will now continue on foot until 31 December 2018”. The letter thereafter set out MBAP’s current intention not to renew the dealer agreement beyond 31 December 2018.
It seems that when MBAP sent the clause 18 letter, it enclosed something called “an Updated Disclosure Document”. If that document was in evidence, I was not taken to it. Regardless, I simply do not understand the utility of deciding, as an abstract question, whether sending that letter accompanied by that document could be characterised as prayer 9 contends it should be. Nor can I see how the resolution of that question would have any immediate practical impact on the rights and liabilities of the parties.
The short answer to the relief sought by prayer 10 is that the clause 18 letter does not have the effect ascribed to it. It did no more than notify an intention current at the date the letter was sent (29 June 2017).
Prayer 11 returns to the all too familiar theme of seeking a declaration, speaking at the time it is made, as to the proper characterisation of an event that may or may not occur in the future, in circumstances where the characterisation of that event would inevitably require consideration of all circumstances existing or reasonably foreseeable at the time it occurred. For the reasons I have given in relation to prayers 4 and 7, that is not an exercise that the court ought be asked to undertake, nor one that MBAP should be put to the expense of defending.
Prayers 12, 13 and 14 all assume that the question of construction posed by prayer 1 is resolved in favour of Sandersons. That is because, one way or another, they talk of MBAP’s terminating, or intending to terminate, or threatening to terminate, the dealer agreement. It is not immediately clear why the court should be required to decide questions which assume, in favour of the parties seeking their resolution, a favourable decision on an unresolved contentious issue between that party and the other. I add that, as a matter of language, MBAP has not threatened to terminate, or notified an intention to terminate. At most, it has from time to time indicated an intention (not carried into effect) to give Sandersons a notice pursuant to cl 8 of the dealer agreement, notifying Sandersons of non-renewal.
In summary, the majority of the prayers for relief “involve hypothetical futurities which may produce no foreseeable consequences for the parties”, because they depend on one party “electing to take some course that [it] has not taken, is not bound to take and may not take” [26] . The relief sought in those prayers is, in substance, that a notice that one party may give, but is not bound to give, to the other will be invalid and ineffective if given; and they require the resolution of that question now, when by necessity the circumstances prevailing and foreseeable at the time the notice is given (if it is given) cannot be considered.
26. See Stein JA in Galaxy Communications at 15 (37).
By analogy with the reasons given in Galaxy Communications, those aspects of the prayers for relief are an abuse of process and are unreasonably oppressive to MBAP. The proceedings should be dismissed at least in so far as those prayers for relief are concerned.
As to the remaining prayers for relief, they do not suffer from the vice that they require the determination of future and hypothetical questions. They do, to some extent, relate to or arise out of matters that are the subject of disagreements between the parties at the present time. But their resolution is not presently required, because neither party has taken an action, the validity of which requires their resolution. It is in my view vexatious and oppressive to put MBAP to the cost of defending the claims for those prayers for relief, when inevitably (if it gives a cl 8 non-renewal notice), the same factual issues, and no doubt many others, will be traversed. And conversely, if no such notice is given and the issues do not require decision, it is nonetheless vexatious and oppressive to insist on their decision in the absence of any commercial or other reason for doing so.

In my view, the entirety of Sandersons’ proceedings, as presently constituted, should be dismissed summarily. As I have said, that will not occasion any prejudice if the questions do need to be litigated in the future, because, by s 91(1) of the Civil Procedure Act, the dismissal would not prevent Sandersons from bringing fresh proceedings or claiming the same relief in fresh proceedings unless the court orders otherwise. Mr Pritchard did not suggest that the court should order otherwise, and I do not propose to do so.
If I were wrong in concluding that grounds have been made out for the proceedings to be dismissed summarily, I would nonetheless have concluded that they should be stayed, at least until MBAP took some actual step that imperilled Sandersons’ continued enjoyment of its position as a franchisee. The reasons that I have given for making the order of summary dismissal would, in my view, have justified, equally, a stay. At one stage, indeed, I inclined to the view that a stay was the relief that ought be granted. But reflection has suggested that it is better to bring the proceedings to an end, and stop – for a moment at least – the haemorrhage of money for costs that must have occurred over the past two years.
There will no doubt be costs applications. I think the better course is to require the parties to provide written submissions (and any evidence) as to costs, and to decide the question of costs on the papers.
Before I make orders, I will repeat in substance what I said in the course of the hearing. I do not understand why Sandersons has struggled to keep its proceedings alive, following the making of the consent declarations in July 2016. Those declarations resolved the only matters that were then in actual controversy between the parties. Since then, although there has been a lot of huffing and puffing (a process in which Sandersons appears to have engaged eagerly, and to some extent by its correspondence, to have invited), there has been no actual notice given. The logical course would have been to procure the proceedings to be dismissed or discontinued, and to wait until (if it ever happened) MBAP took a step that actually threatened Sandersons’ continued enjoyment of its rights as a franchisee. Sandersons did not take that course. Instead, it persisted in coming back before the court on various occasions for directions, and in seeking to reformulate its summons and list statement so as to present at least the appearance of an extant dispute, the resolution of which it was entitled to seek. That course of action seems to me to have achieved nothing but the waste of time and costs, and to have been utterly at odds with the requirements of s 56 of the Civil Procedure Act 2005 (NSW).
I make the following orders:

order that the plaintiff’s proceedings be dismissed summarily pursuant to UCPR r 13.4.

Direct the parties, by 20 February 2018, to serve and deliver to my Associate, submissions not exceeding 10 pages in length as to the appropriate costs orders that ought be made, accompanied by any affidavit or other evidence on which they intend to rely on the question of costs.

Direct the parties, by 27 February 2018, to serve and deliver to my Associate submissions in reply, not exceeding 5 pages in length, and any evidence or other material in reply.

Direct that, subject to the further order of the court, the question of costs be dealt with on the papers thereafter.

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Endnotes

Decision last updated: 06 February 2018

Medium Neutral Citation:	Sandersons Eastern Suburbs v Mercedes-Benz Australia/Pacific [2018] NSWSC 52
Hearing dates:	12/12/2017
Date of orders:	06 February 2018
Decision date:	06 February 2018
Jurisdiction:	Equity - Commercial List
Before:	McDougall J
Decision:	Proceedings dismissed pursuant to UCPR r 13.4. Parties to make written submissions as to costs.
Catchwords:	CIVIL PROCEDURE — Summary disposal — Dismissal of proceedings — Abuse of process CONTRACTS — Construction — Termination clause — No question presently arises — Hypothetical proceedings
Legislation Cited:	Civil Procedure Act 2005 (NSW) Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth) Federal Court of Australia Act 1976 (Cth) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Allphones Retail Pty Ltd v Weimann [2009] FCAFC 135 Australian Gas Light Company v Australian [2003] ATPR Competition and Consumer Commission (No.2) Dormer v Solo Investments Pty Ltd [1974] 1 NSWLR 428 Galaxy Communications Pty Ltd v Paramount Films of Australia Inc [Court of Appeal, unreported, 27 March 1998] Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73
Category:	Principal judgment
Parties:	Sandersons Eastern Suburbs Pty Limited (Plaintiff) Mercedes-Benz Australia/Pacific Pty Limited (Defendant)
Representation:	Counsel: S Couper QC / P Silver (Plaintiff) DR Pritchard SC / S Golledge (Defendant) Solicitors: HWL Ebsworth (Plaintiff Robinson Legal (Defendant)
File Number(s):	2015/71826