Savcorp Pty Ltd v Ampol Petroleum (Queensland) Pty Ltd

Re: SAVCORP PTY LIMITED
And: AMPOL PETROLEUM (Q'LAND) PTY LIMITED
Nos. Q G30 of 1988 and G176 of 1987
FED No. 385
Petroleum Retail Marketing - Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BRISBANE DISTRICT REGISTRY
GENERAL DIVISION
Spender J.(1)

CATCHWORDS

Petroleum Retail Marketing - franchise agreements for service station - whether provisions for monthly licence fee or for goodwill impossible or unreasonably onerous to perform - increase in monthly licence fees alleged to be unreasonable - construction of franchise agreements - whether disclosure statement served on the franchisee prior to execution of franchise agreements - validity of notices of termination of franchise agreements.

Trade Practices - alleged false representations as to the historical performance of a business antecedent to the execution of franchise agreements - whether representations made and relied upon - damages.

Petroleum Retail Marketing Franchise Act 1980 ss. 3, 6, 9, 9A, 15, 16, 22.

Trade Practices Act 1974 ss. 52, 53A, 82.

Federal Court of Australia Act 1976, s. 51A

HEARING

BRISBANE

#DATE 26:7:1990

Counsel for the applicant: Mr. Tubbs

Solicitors for the applicant: Stojanovic and David

Counsel for the respondent: Mr. E. Lennan QC and Mr. D. Jackson

Solicitors for the respondent: Morris Fletcher and Cross

ORDER

The application be dismissed with costs to be taxed.

The parties to bring in short minutes of orders to give effect to the reasons for judgment on the cross-claim.

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

JUDGE1

This is an application by the applicant, Savcorp Pty Limited ('Savcorp'), seeking relief under the Petroleum Retail Marketing Franchise Act 1980 ('the PRMF Act'), and under the Trade Practices Act 1974 ('the TP Act') in respect of franchise agreements by Savcorp with Ampol Petroleum (Q'land) Pty Limited ('Ampol') concerning the Ampol Belyando service station operated by Savcorp in the central Queensland mining town of Moranbah and the conduct of the parties in relation thereto.

By a notice dated 1 September 1987 Ampol purported to terminate the franchise agreements with Savcorp.
By an application filed on 28 September 1987 in No. G176 of 1987, Savcorp sought, pursuant to the provisions of s. 16(5) of the PRMF Act, to have the Notice of Termination declared to be of no effect, along with other relief.
In proceedings No. G 30 of 1988, Savcorp claimed breaches of ss. 52 and 53A of the TP Act antecedent to the execution of the franchise agreements on 12 September 1986.
The matters were consolidated. By the consolidated application in its final form, Savcorp sought under the PRMF Act an order declaring that a purported notice under s. 16(3) of the PRMF Act dated 1 September 1987 to have had and to have no effect; alternatively, that the alleged obligations of Savcorp to pay to Ampol $15,000.00 on 1 April 1987 and $15,000.00 on 1 August 1987, being alleged provisions of the franchise agreement, is void pursuant to s. 9 of the PRMF Act. An order was sought pursuant to s. 9 of that Act varying the terms of the agreement, it being asserted that the provisions imposed obligations that were likely to be impossible or unreasonably onerous to perform. Alternatively, a declaration was sought that the amount of the monthly licence fee payable pursuant to the franchise agreement be by the force of s. 9A of that Act $4,500.00 or such greater sum as to the court seems meet.
It sought a declaration that Ampol was in breach of s. 15 of the PRMF Act and an order declaring the franchise agreement 'avoided'. "Damages and compensation" pursuant to s. 22 of the PRMF Act was sought, as well as interest pursuant to s. 51A of the Federal Court of Australia Act. It sought an order declaring a purported Notice of Termination dated 7 June 1989 to have had or to have no effect.
The consolidated application sought damages pursuant to s. 82 of the TP Act for breach of s. 52 or alternatively s. 53A of the TP Act "in and about the promotion and vesting of an interest in a certain petroleum outlet at Moranbah..." It alternatively sought an order pursuant to s. 87 of the TP Act relieving Savcorp from paying the sums totalling $30,000.00 earlier referred to, or relief against so much thereof as to the court seems meet. Interest on damages was again claimed.
The PRMF Act, as the name indicates, concerns franchise agreements relating to the retail marketing of motor fuel. It is necessary to set out many of its provisions. Section 9 of the Act prohibits the franchisor from imposing impossible or unreasonable obligations. It provides:
"(1) A corporation shall not enter, as franchisor, into a

franchise agreement that contains a provision imposing 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.

(2) Where a franchise agreement contains a provision of a kind referred to in sub-section (1), the provision is void.

(3) This section shall not be taken to affect the operation of the law relating to frustration of contract.

(4) Where a provision of an agreement is rendered void by the operation of sub-section (2), the validity of the agreement is not otherwise affected, but, if that provision is not severable, the franchisee may -

(a) avoid the agreement; or

(b) apply to a court for an order under sub-section (5).

(5) In any proceedings under sub-section (4) in relation to an agreement, the court may make -

(a) an order varying the agreement in such manner as the court considers just and equitable for the purpose of enabling the provisions of the agreement to have effect to the extent that they are not rendered void by the operation of sub-section (2); and

(b) such ancillary or consequential orders as it thinks fit, including orders directing the preparation and execution of documents."

The following section prohibits the franchisor from increasing payments by a franchisee unreasonably. It relevantly provides:

"9A. (1) Where -

(a) a provision of a franchise agreement or any other agreement to which the franchisee is a party has the effect, directly or indirectly, of conferring a right on the franchisor to increase an amount, or the aggregate of the amounts, that would, but for the exercise of that right, be payable by the franchisee in accordance with, or in a manner calculated or determined under, the franchise agreement;

(b) in the exercise of that right, the franchisor increases such an amount, or the aggregate of such amounts; and

(c) the whole or part of the amount of the increase is unreasonable, having regard to the market value of any interest, goods or services to which any amount included in the increase relates, the amount of the increase is, by force of this section, reduced by so much of the amount of the increase as is unreasonable.

...

(3) For the purposes of this section, where a franchise agreement has been renewed, the franchise agreement and the franchise agreement as renewed shall be treated as a single franchise agreement."

Section 15 provides for disclosure of information by the franchisor. Sub-section (1) provides:
"A corporation shall not enter into a franchise agreement

as franchisor unless, not less than 3 business days before the day on which the agreement is entered into, it has supplied to the franchisee a statement in writing containing all information in the possession of the franchisor and related corporations, being information relating to the operation or proposed operation of the marketing premises and reasonably likely to influence the decision of the franchisee to enter into the agreement."

Sub-section (2) specifies in some detail the matters in respect of which information is required to be furnished under sub-section 1. Sub-section (5) provides:

"Where a franchisor enters into a franchise agreement

in contravention of sub-section (1), the agreement is voidable at the instance of the franchisee."

And sub-section (6) provides:

"An agreement is not voidable under sub-section (5) by

reason of the failure by the franchisor to disclose, or the false, misleading or incorrect statement by the franchisor of, any information unless -

(a) the information was material to the operation, including the profitability of the operation, of the marketing premises; and

(b) the franchisee would not have entered into the agreement if the information had been duly and correctly disclosed to him."

By a combination of ss. 16(1) and 16(2)(j), the franchisor is permitted to terminate a franchise agreement if a franchisee commits a breach of a provision of the franchise agreement. Section 16(3) provides for termination of franchise agreements. It provides:
"The termination of a franchise agreement by the

franchisor shall be effected by the franchisor serving on the franchisee notice in writing -

(a) informing the franchisee that the agreement is to be terminated on a specified date, being a date that, subject to sub-section (8), is not earlier than 30 days after the day on which the notice is served; and

(b) setting out full particulars of the ground or grounds, including a statement of the facts relating to each ground, upon which the termination is based."

By sub-section (4) a franchisee served with such a notice may apply to a court for an order declaring the notice to have had, or to have, no effect and on such an application by sub-section (5) the court may make such a declaration concerning a notice, or declare the notice to have terminated or to terminate the agreement.

Section 22(1) and (2) provide for compensation:
"(1) Where a party to a franchise agreement suffers loss

or damage by reason of the other party to the agreement contravening a provision of this Act or of the regulations, that other party is liable to compensate the first-mentioned party for the loss or damage.

(2) Where a franchisee avoids the franchise agreement under sub-section 9(4) or 15(5), the franchisor is liable to pay to the franchisee such amount of compensation as is necessary to put the franchisee in the same position as the franchisee would have been in if the agreement had not been entered into."

The similarity of these provisions to s. 82 of the TP Act as defining the entitlement to recovery, and the measure of damages under the TP Act for a contravention of Part IV or V is clear.

Section 52 of the TP Act prohibits a corporation from engaging in trade or commerce in conduct that is misleading or deceptive or likely to mislead or deceive. In the circumstances of this case the reliance on s. 53A which is directed to representations concerning a characteristic of land duplicates the nature of the representations said to constitute breaches of s. 52 and it is unnecessary to consider s. 53A further.
Ampol is a trading corporation which was the lessee from a company in the Robertsons Consolidated Group of companies (Robertsons), of land at the corner of Bacon Street and Belyando Avenue, Moranbah and on the land there were facilities for the operation of a retail petroleum outlet. Robertsons until 30 June 1986 operated the "Shell Moranbah Driveway" from those premises.
Pursuant to a series of agreements made on or about 12 September 1986, Savcorp, as licensee, agreed with Ampol, as licensor, to take possession of the land and to operate the petroleum outlet on that land. There were four agreements: the service station franchise licence agreement dated 12 September 1986 (the 'licence agreement'); a franchise supply agreement of the same date; a trade mark licence agreement of the same date; and a goodwill agreement dated 12 September 1986 (the 'goodwill agreement'). The term of the franchise agreement was three years. Pursuant to the goodwill agreement, Savcorp agreed to pay to Ampol $40,000.00 on or about 12 September 1986 and two amounts of $15,000.00, the first on 1 April 1987 and the second on 1 August 1987. Savcorp paid Ampol the first sum of $40,000.00 about 12 September 1986, but Savcorp has not paid to the respondent the remaining sums under the goodwill agreement.
By its admission of para. 18 of the consolidated statement of claim, Ampol admitted that each of the four agreements was a franchise agreement within the meaning of the PRMF Act and Savcorp was a franchisee and Ampol a franchisor within the meaning of that Act.
Insofar as the allegations under the TP Act are concerned the pleadings have undergone serious revision from the commencement of the first application in September 1987. There has been a significant shift of ground as disclosed by those amendments, having serious evidentiary consequences to the claims under the TP Act.
The applicant's case as finally formulated and as appears in the amended consolidated statement of claim filed in court on 10 October 1989 is that, prior to entering into the franchise agreements, Ampol through one Mr. D. Spencer made certain representations in writing by a document dated 2 June 1986 to Mr. Kevin Bishop, a director of Savcorp and its servant or agent. Savcorp says the representations were made in trade or commerce to induce Savcorp to enter into the agreements and Savcorp was induced to enter into the agreements and only paid or agreed to pay the sums under the goodwill agreement by reason of those representations.
The representations on which Savcorp relies are these:

"9. Prior to entering into the agreements the Respondent represented as a fact to the applicant that:-

(a) The sales history in respect of the outlets from July, 1984 and 2 June 1986 showed an average Supergrade petroleum usage of 165,000 litres per month;

(b) Such sales history and/or alternatively current rates of sales shortly prior to 2 June 1986 indicated an improvement of the gross profit to be earned from the operation outlet;

(c) Gross profit from fuel sales was 61% of total income;

(d) Monthly expenses were $14,240.00;

(e) The capital investment required for the business was $176,572.00. "

It was said on behalf of Savcorp that those representations were false, in that:
"(a) The operation of the outlet had a monthly

average of 150,000 litres per month for the six months from January 1985 to June 1985;

(b) The operation of the outlet had a monthly average of 140,000 litres per month for the period from July 1985 to June 1986;

(c) The current rates of sale shortly prior to 2 June 1986 indicated a reduction of gross profit in operating the outlet;

(d) Gross profit from fuel sales was 44%;

(e) Expenses required to operate the outlet were $21,000.00 (approximately) per month.

(f) The capital investment required to operate the business was $250,000.00 (approximately)."

Ampol admits that Mr. D. Spencer was its servant or agent and that Mr. Spencer provided a document dated 2 June 1986 to Mr. Bishop, but the case for the respondent is that the representations alleged in paragraph 9 were not made in that document or at all. Savcorp says that by reason of reliance on the representations it claims were made to it, "that it was obliged to expend additional capital expenditure of $65,260.00 required to viably operate the outlet."
By the original statement of claim filed on 17 February 1988, Savcorp simply asserted that prior to entering into the agreements the respondent represented to the applicant that:
"(a) The sales history in respect of the outlets from

July, 1984 to 2nd June, 1986 showed an average supergrade petroleum usage of 165,000 litres per month;

(b) Such sales history and/or alternatively current rates of sales shortly prior to 2nd June, 1986 indicated an improvement of the gross profit to be earned from the operation of the outlet."

In a further amended statement of claim filed on 12 May 1988 the nature of the representations alleged were enlarged. In that document paragraph 9 appears as follows:
"Prior to entering into the agreements the respondent

represented as a fact to the applicant that :-

(a) The sales history in respect of the outlets from July, 1984 to 2nd June, 1986 showed an average supergrade petroleum usage of 165,000 litres per month;

(b) Such sales history and/or alternatively current rates of sales shortly prior to 2nd June, 1986 indicated an improvement of the gross profit to be earned from the operation outlet; and represented as a future matter to the applicant:-

(c) Gross profit from fuel sales could be expected at 61% of total income;

(d) Monthly expenses to be expected were $14,240.00;

(e) The capital investment required for the business was $186,572.00."

By a further amended statement of claim filed on 6 December 1988 there was added a further representation as to a "future matter" in these terms:

"9(f) That a franchise fee of $70,000.00 was a fair and

reasonable capital expense to be paid by the Applicant to the Respondent in consideration of the representations referred to in paragraphs 9(a)-(e) above."

This representation as a future matter asserted in para. 9(f) is no longer asserted as a precontractual representation in Savcorp's case as finally pleaded.
As finally pleaded, what previously had been asserted as "future matters" in paragraphs 9(c), (d) and (e) are now asserted as representations as to fact. Instead of assertions that the gross profit to be expected was 61% of total income and monthly expenses to be expected were $14,240.00, it is asserted that these were represented to Mr. Bishop by Mr. Spencer as assertions of present fact. Also, the sum of the capital investment required has undergone an arithmetical change.
As to the matters in issue under the PRMF Act, Savcorp asserts that the disclosure statement required by s. 15(1) of the Act was not served on Savcorp in accordance with the requirements of s. 15(1). Savcorp claims that the purported statement was not served at all on the applicant prior to the applicant entering into the agreement, and as a consequence Savcorp asserts that the agreement is voidable at Savcorp's instance and was avoided.
The second matter arising under the PRMF Act concerns a purported notice under s. 16(3) of the Act of intention to terminate the franchise agreement by letter dated 1 September 1987. The ground in that notice asserts a breach constituted by the failure of the applicant to pay to Ampol the two sums of $15,000.00 earlier referred to. Savcorp says that that notice of termination was invalid and of no effect and has made application to the court under s. 16(4) of the Act in respect of that notice.
Next Savcorp asserts that the licence fee of $4,500.00 per month provided for in cl. 5(a) of the licence agreement imposes an obligation on the applicant that is likely to be impossible and unreasonably onerous to perform by the applicant at the time when it is required to be performed pursuant to s. 9(1) of the Act and that thereby "such provision was void pursuant to s. 9(2) of the said Act". Savcorp further says that the failure to pay the sums of $15,000.00 referred to in the goodwill agreement "was not a breach of the franchise agreement constituted in part by the licence agreement and the goodwill agreement" in that "the provision of the Franchise Agreement so constituted imposing an obligation to pay such moneys was impossible and unreasonably onerous for the applicant to perform at the time when it was required to be performed" and was also void pursuant to s. 9(2).

Finally there is an issue whether an increase in rental of which notice was given by Ampol was unreasonable. By letter dated 10 July 1987, Ampol had written to Savcorp giving notice of an increase in calendar monthly rental payable in respect of occupation by Savcorp of the Moranbah outlet from $4,500.00 to $4,950.00. In giving that notice, Ampol had relied on cl. 5(a) of the licence agreement. Savcorp asserted that such a provision was a provision of a franchise agreement within the meaning of 9A(1)(a) of the Act; that the whole or part of the increase of $450.00 was unreasonable having regard to the market value of the interest, goods and services to which that increase related; and that pursuant to s. 9A(1) of the PRMF Act the amount of the increase be reduced by so much of the increase as was unreasonable.
Ampol, by way of cross-claim, claims a sum of $30,000.00 made up of the non-payment of the two instalments of $15,000.00 due on 1 April 1987 and 1 August 1987 agreed to be paid by way of goodwill.
Concerning the increase in the monthly rental payment, cl. 5(a) of the licence agreement provided:
"The licensee shall pay to the licensor monthly in

advance a licence fee for the licence hereby granted of $4,500.00 or such other amount as may be notified by the licensor prior to each successive anniversary of the date of this agreement. Subject to sub-clause (e) of this clause should the licensee consider that the amount of the licence fee payable hereunder shall exceed the market values of the interest hereunder then the licensee shall within 14 days of the date of a notice from the licensor varying the licence fee give to the licensor written notice of same upon receipt of which both the licensee and the licensor shall within thirty (30) days of such latter notice each nominate a qualified valuer who shall value such interest whereupon the licence fee for the period expiring on the next anniversary date of this agreement shall be the average of the two values."

Ampol asserts, and this is supported by the evidence, that Savcorp did not advise Ampol within fourteen days of the date of the notice of 10 July 1987 that it considered the amount of the licence fee exceeded the market value of the interest thereunder. By cl. 27(a)(ix) of the licence agreement, a breach of the licence agreement entitled the respondent to terminate the licence agreement.
Ampol in its cross-claim asserted:
"By cl. 8 of the goodwill agreement...a breach of cl. 2 of

the goodwill agreement was agreed to be a breach of, inter alia, the licence agreement."

Savcorp admits this paragraph but asserts that Ampol "is estopped from relying on the clause referred to in that paragraph."
Ampol asserts that it was entitled to give notice to determine the licence agreement pursuant to s. 16(3) of the PRMF Act, and that it gave notice to terminate the licence agreement by the letter of 1 September 1987. Alternatively, Ampol asserts that there has been a breach by Savcorp to pay the full amount of the licence fee, the unpaid balance being $54,450.00. It asserts that such non-payment constitutes a breach of the licence agreement, entitling Ampol to terminate it; that by letter dated 7 June 1989 it gave notice pursuant to s. 16(3) of the PRMF Act and that Ampol is entitled to possession of the premises which Savcorp has failed to deliver up. A claim alleging non-payment for fuel was abandoned during the hearing.
The evidence establishes that Mr. Kevin Bishop in February 1986 approached a number of oil companies including Caltex, Ampol and Mobil Oil to enquire about the availability of franchised petrol station sites. He received a telephone call from a Mr. Berry of Ampol, who referred to a service station site at Gladstone, and Mr. Bishop inspected a number of service station sites in Gladstone, but in May of 1986 Mr. Bishop was advised that the Gladstone site had been committed. In the first week of June 1986, Mr. Bishop first spoke with Mr. Dan Spencer of Ampol who informed him that there was an Ampol site available at Moranbah.
The first meeting between Mr. Bishop and Mr. Spencer was on 6 June 1986 at the office of Mr. Spencer. Mr. Spencer in the course of that discussion indicated to Mr. Bishop that the prospects in relation to the Moranbah site were good and spoke encouragingly of the future of the town. I accept that Mr. Bishop indicated to Mr. Spencer at that first meeting that he had no experience in the industry and was not familiar with Moranbah.
In the course of that meeting a document central to these proceedings was handed to Mr. Bishop by Mr. Spencer. It is headed "Estimated Financial Precis" and is dated 2 June 1986. In a column headed "GROSS PROFIT" appears the following:

$ Super M/S 165000 @ 6.48 10,692 Distillate 14000 @ 9.28 1,299 Bulk Oil $3,167 @ 30% 950 Vending

Cigarettes etc. $22,500 @ 17.5% 3,938 Accessories $9,750 @ 20% 1,950 W'shop Parts

Cont.Labour $4,333 @ 40% 1,733 Video $2,000 @ 30% 600 ________ GROSS PROFIT 21,162 LESS TOTAL EXPENSES 14,240 ________ NET PROFIT 6,922 ________

In a column headed "EXPENSES" the following appears:

$ Payroll (incl.all Prov.) 4,217 Licence Fee 5,000 Telephone 200 Light and Power 596 Laundry and Uniforms 70 Service Charges 87 Insurance 231 Gen. Expenses - Int./Bank Charges 1,500 Account'y Fees 157 Depreciation 390 Station Usage 364 Motor Vehicle Exp. 323 R. and M. 65 Adv. and Promotion 200 Equip. Rent/Lease 840 Discounts - _______ TOTAL EXPENSES 14,240 _______

And in a third column headed "EST. CAPITAL REQ'D.", the following appears:

$ Super M/S 50000 @ 44.42 22,210 Dist. 10000 @ 43.62 4,362 Bulk Oil Stock 3,000 Accessories 15,000 Cigs., Drinks, Etc. 12,000 _______ SUB-TOTAL 56,572 Equip./Tools - Basic Leased Cafe Equipment $30000 Other Equipment Leased Credit Provision 22,000 Cash Provision 8,000 Franchise Fee 90,000 Others _______ 176,572 _______

At the foot of the document this appears: "Estimated Profit based on Sales History since 1984. Current rates of sales indicating improvement of gross profit."

In an affidavit sworn on 24 September 1987, Mr. Bishop referred to this document as "A Financial precis of figures, expenses and projected earnings with respect to the site." He says that:
"I accepted the figures somewhat at face value as I felt

that Ampol had the experience in dealing in the service station area and that it was in our mutual interests as prospective franchisor/franchisee of the site that the representations to me be substantially true."

On 11 June 1986 he inspected the service station site at Moranbah and met the manager, John Allardyce, who managed the site on behalf of Robertsons Pty Ltd from whom Ampol subsequently purchased the site.

On 19 June 1986, after inspecting the site, Mr. Bishop again met with Mr. Spencer. Ampol was seeking $90,000.00 for the granting of the franchise as was indicated in the financial precis. On 19 June, Mr. Bishop offered $70,000.00 for the right to acquire the franchise and offered $4,250.00 per month by way of rental. Mr. Spencer indicated that the offer of $70,000.00 was acceptable on 24 June 1986; negotiations as to rental continued thereafter with a figure of $4,500.00 finally being agreed upon. Mr. Bishop again visited Moranbah on 27 June 1986 and with his wife attended a service station operator's course conducted by Ampol in Brisbane in the week commencing 9 July 1986. On 20 July 1986 Mr. Bishop moved his family to Moranbah to rented premises in anticipation of taking over the site on 1 August. Settlement was delayed. On 28 July 1986 Mr. Bishop purchased plant and equipment for the site from Robertsons for about $21,000.00. On 5 August he learnt from the local council that a union co-operative petrol site was to be established at Moranbah. On 6 August Mr. Bishop phoned Mr. Laird, the local Ampol representative, complaining that the matter was serious and that "Ampol should do something about it."
On the following day Mr. Bishop rang Mr. Spencer and withdrew his offer and indicated a desire to renegotiate the proposal. Mr. Bishop suggested that Savcorp be granted a twelve month interim franchise during which to assess the impact of the union co-operative site. This proposal was rejected by Mr. Spencer. Subsequently Mr. Bishop inspected other sites in Cairns, Townsville and Middlemount. He had a telephone conversation on 20 August with Mr. D. Allen, who was then his accountant. On 29 August 1986 he wrote to Ampol "setting forth a new offer". The letter was in these terms:-
"I refer to our prior discussions regarding the payment

of a franchise fee for a period of nine years on the above site. As we are both aware the situation has changed considerably since the date of our original discussions due to the imminent opening of the union site at Moranbah. It is beyond question that this site will affect to some reasonably substantial degree the turnover of all of the oil company sites in Moranbah.

For this reason, I understand that the profitability of the site will be impaired and in turn the goodwill factor attaching to the site will be affected. Therefore, I can now only offer $50,000 for the goodwill for the site as I believe that this is a realistic figure in view of the changed circumstances. I propose that the goodwill figure be paid as $20,000.00 initially on granting of the franchise and a further $30,000 at the end of the initial twelve months. This arrangement would be embodied in the franchise agreement which I understand is a legally binding document. However, the payment of the $30,000 is offered on the basis that the turnover of the site is not less than 100,000 litres of Super grade fuel per calendar month at this time."

In early September, Mr. Bishop says that Mr. Laird told him that unless he proceeded with the franchise on the terms as previously arranged, the site would be granted to another purchaser for a fee of $90,000.00. In his affidavit sworn 24 September 1987 Mr. Bishop says:
"It was finally resolved that the franchise fee would be

$70,000.00 to be paid in one initial payment of $40,000.00 and two subsequent instalments each of $15,000.00 due on 1 April 1987 and 1 August 1987."

There is no suggestion in that affidavit that the disclosure statement in respect of the site pursuant to s. 15 of the PRMF Act had not been seen by Mr. Bishop prior to the execution of the franchise licence agreement or the goodwill agreement. The disclosure document indicates that until 27 June 1986 the site was operated by Robertson Consolidated under a re-seller arrangement, and from 28 June 1986 to 6 August 1986 was company operated. In respect of the period operated by Robertson Consolidated, an analysis is attached in the disclosure document, and there appears the statement:
"Ampol accepts no responsibility for the accuracy of

the information contained therein. Any queries in relation thereto should be referred to Robertson Consolidated".

The document indicates a sales volume for the period 27 June 1986 to 29 July 1986 of 142,113 litres of motor spirit and 14,165 litres of distillate. The first page of the attached documents covers the twelve months period to June 1985, the next page the six months period to December 1985 and the third document headed "Expected service station operating analysis" is for the period twelve months to December 1986 and estimates a sales volume of 2,162,039 litres of motor spirit and 108,125 litres of distillate.

It should be noted that the "disclosure statement" refers to the franchise licence agreement, the franchise supply agreement and the trade mark licence agreement, but makes no reference of a goodwill agreement. The goodwill agreement indicates that in consideration of the payments in cl. 2 of that agreement of $40,000.00, $15,000.00 and $15,000.00, Ampol agreed to enter into the franchise agreements referred to in the Schedule. As above, cl. 8 of the goodwill agreement provided that a breach of cl. 2 of that agreement was deemed to be a breach of the Franchise Agreement.
The union cooperative service station opened on 28 February 1987. By a letter of 7 April 1987 Ampol wrote concerning the non-payment of the $15,000.00 due pursuant to the goodwill agreement on 1 April 1987 and pointing out that this non-payment was a breach of the franchise agreements and seeking payment before 14 April 1987.
On 13 April 1987 Mr. Bishop rang Mr. Spencer and shortly thereafter Mr. Bishop wrote concerning that non-payment and indicated:
"Upon my accountant's return a submission will be

formulated and presented to you for your consideration."

This letter was acknowledged on 5 May. Mr. Bishop indicates that he instructed his accountants, Messrs. Fell and McGarry of Gympie "to prepare a submission to Ampol to highlight the viability difficulties that Savcorp was experiencing and, more particularly, how the business had failed to measure up in all respects to the projections contained in the original financial precis". The accountants prepared a submission and in a letter to Ampol of 26 May 1987, Mr. Fell indicated, inter alia:

"We have prepared the financial accounts for the

abovenamed for the period to February 1987. We have also examined the estimated financial precis prepared by D. Spencer dated 2 June 1986 and presented to our clients by you."

There follows then a comparison between actual performance and the abovementioned precis. The letter continues:

"As illustrated above, the business has not performed in

some respects in the manner expected by the Directors. This has contributed to a short term cash flow problem for the company."

A renegotiation of both $15,000.00 instalments due under the agreement was sought.

On 5 June 1987, a further letter referred to developments which would have an adverse effect on the operation of Ampol Belyando/Moranbah service station, including the closure of a mine with the loss of 50 employees, a reduction of staff in nearby Copperbella causing a loss of 100-150 jobs in the area, a major contractor in the area leaving, and a significant reduction in staff in the surrounding mines.
Ampol replied to these representations on 24 June 1987. That letter said in part:
"Confirmation of historic petroleum product sales volume,

as a guide to possible future performance, was not available. This was identified to your client and it was suggested that your client confirm details with the previous owners/operator, Robertson Consolidated Group."

and later:

"The figures provided by this Company were given as an

estimate only to the capital necessary and the profit to be gained from the operation.

Discussion and negotiation took place with this Company over a period of approximately 6 weeks during which time your client conducted his own investigation of the viability of the outlet and subsequently agreement was reached by both parties on the level of premium and licence fees payable."

The letter noted the negotiations concerning the "premium", and the monthly licence fee, leading to the reductions in the franchise documentation.

Payment of $15,000.00 was sought within 14 days and balance on 1 August 1987. Ampol indicated that failure to pay as set out would be considered a breach of all agreements and a ground for termination.
On 6 July, Mr. Bishop sought an extension of time for payment. Two postdated cheques were enclosed. He said in that letter:
"We now have a business that is quite viable even though

it took considerably more money to get it up and running."

Ampol refused the proposal, and returned the cheques. On 1 September, it sent the Notice of Termination, which prompted the first application on 28 September 1987.
It is convenient to deal first with the applicant's case under s. 52 of the TP Act.
The applicant's case is that the contents of Exhibit A to Mr. Bishop's affidavit dated 24 September 1987, i.e. the financial precis, were representations that were not promissory in character. Mr. Tubbs of counsel who appeared for Savcorp made it plain that Savcorp was not saying that Exhibit A was an estimate or a forecast or a prediction. Savcorp's case is not that there were predictions made which were not reasonably entertained by Spencer or Ampol or in respect of which no reasonable basis existed for making such forecasts or predictions. He said:
"The applicant's case was that it was given facts which

are alleged to have occurred in this service station and would occur when he took over."

In my opinion, with one exception, the representations pleaded were not made and Savcorp was not induced to execute the documents of 12 September 1986 by the representations pleaded in the consolidated statement of claim as finally amended. The document of 2 June 1986 did represent that current rate of sales indicated improvement in gross profit, as in the allegation in para. 9(b). For reasons which appear below, I am not satisfied this was false, but also, having regard to the detailed enquiries, further information and experience acquired by Mr. Bishop prior to 12 September 1986, I am not satisfied that this representation was a material inducement to the execution of the agreements.
I have to deal with the case as pleaded. If the applicant's case had been that it was induced to enter into the contract by misrepresentations constituted by predictions as to future performance of the service station, it would be necessary to enquire into whether there was any reasonable basis for the prediction and whether it was genuinely entertained. It may have been the case that Mr. Spencer's view was not only sanguine but was lacking sufficient basis, being the basis of liability averted to in Global Sportsman Pty Ltd v. Mirror Newspapers Pty Ltd (1984) 2 FCR 82, where the Full Court of the Federal Court (Bowen C.J., Lockhart and Fitzgerald JJ.) said at 88:
"Many statements, for example, promises, predictions

and opinions, do involve the state of mind of the maker of the statement at the time when the statement is made. Precisely the same principles control the operation of s. 52(1) with respect to the making of such statements. A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or by implication) that the maker of the statement had a particular state of mind when the statement was made and, commonly at least, that there was basis for that state of mind. If the meaning contained in or conveyed by the statement is false in that or in any other respect, the making of the statement will have contravened s. 52(1) of the Act. Compare Lyons v. Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114."

There are grounds for thinking that the contents in the estimated financial precis were somewhat arbitrary. Mr. Dan Spencer had been employed by Ampol for approximately 22 years with quite wide experience, particularly in the marketing and sales development areas and has been since 1980 particularly involved in franchising. He says that this particular site was different from his previous experiences in preparing financial precis in that Ampol was not the owner of the property. This particular case was the first in which he was involved where Ampol was leasing the premises from someone else. There is in evidence an estimated financial precis prepared by Mr. Spencer dated 9 May 1986 based on the twelve months' period to December 1986 (Exhibit 27). It is based on motor spirit sales of 180,170 litres and in many respects differs from the estimated financial precis of 2 June 1986. It shows a net profit of $10,075.00. Other estimated financial precis are in evidence (Exhibits 24, 25, 33). Exhibit 25, which is undated, is based on motor spirit sales of 130,000 litres and shows a net profit of $4,422.00. Exhibit 33, which is noted 'one month profit based on 12 months to December 1986' is based on a motor spirit sale of 180,170 litres, shows a different expenses figure from Exhibit 27 and a net profit of $9,075.00. Exhibit 24, which is headed "One month's profit based on six months to December 85" is based on motor spirit sales of 151,565 litres and shows a net loss. The figure of 151,565 litres is based on actual performance at the site to December 1985. Mr. Spencer said in evidence that in the early part of 1986 his belief was that the site "was on a growth curve". The figure of 180,170 litres is based on the projection by Robertsons for the twelve months' period ending December 1986. The tendered documents in respect of the lease by Ampol from Robertsons in respect of which was previously the Shell Moranbah driveway shows fuel volume sales of 2,099,641 litres to the twelve months ending 30 June 1985 and in the following six months fuel volume sales of 992,723 litres. It was suggested this indicated, to December 1985, a downward trend in sales and gave no room for confidence. Mr. Spencer admitted:
"I was certainly guided by the Robertson Group with

their projection figures."

In the period of time of approximately 11 weeks during which Ampol had itself conducted the service station prior to Savcorp assuming the operation on 12 September 1986, motor spirit sales were considerably less than the 165,000 litres referred to in the precis of 2 June 1986. However, as I indicated, it is not the applicant's case that the precis of 2 June was represented as a prediction or forecast of the performance of the service station on Savcorp assuming control.
Mr. Kevin Bishop appeared to me to be ambitious, hard-working and intelligent. In my opinion he did not regard the precis of 2 June 1986 as representing the performance that had been achieved at that service station. Contrary to what is pleaded as the applicant's case, Mr. Bishop regarded that document as giving a forecast or estimate on which he could rely. In my opinion, the franchise agreement was entered into on 12 September 1986 because Mr. Bishop thought, on the basis of the enquiries that he had made and negotiations he had conducted, that the operation would be profitable. The contents of the precis of 2 June 1986 played a part in this confidence but that part recognised its promissory character.
In his affidavit sworn on 24 September 1987, Mr. Bishop, when speaking of the document of 2 June 1986, said:
"I was handed a financial precis of figures, expenses

and projected earnings with respect to the site."

In the same affidavit he later referred to:

"...the projections contained in the original

financial precis."

And later:

"...the precis was represented to me by Spencer as

reflective of the projected trading position of the site."

In paragraph 31 of that affidavit he stated:

"The trading reality has differed from the precis..."

In respect of pure motor spirit he said:

"The precis represents or projects sales of 165,000

litres per month."

He said:

"Distillate projections of 14,000 litres have never been

attained."

He referred to the "projected wages figure" and that the precis projected advertising and promotion expenses were to be $200 per month.

The precis of 2 June 1986 spoke of a monthly licence fee of $5,000.00 then being sought by Ampol. This cannot be an historical cost and must relate to the proposed operation of the service station by Savcorp. Similarly, the item for bank charges, in my view, acknowledges that Savcorp will have borrowings to service in its operation of the centre.
The representations alleged in para. 9 of the final consolidated statement of claim, in my opinion, played no part in the decision to execute the franchise agreement on 12 September 1986. I am satisfied that Mr. Bishop, prior to that date had made enquiries concerning the performance of the site, had inspected books of Robertsons and, as a result of his inspections and enquiries, had negotiated a reduction in the franchise fee and its payment by instalments and in respect of the licence fee; these negotiations being based in part on a recognition that the performance at the service station was lower than indicated in the precis of 2 June 1986.
Exhibit 6 is an important document. It is a schedule in Mr. Bishop's handwriting showing the turnover and litreage for each of the months January to June 1986 inclusive. The lowest litreage is the June figure of 123,000, while the May figure was highest at 161,000. The average litreage is 136,000 and the analysis by Mr. Bishop indicates an average gross monthly profit of $17,316.00. There is the notation "turnover dropped from 140,000"
The figures for January to May show litreage of 145,000; 124,000; 137,000; 128,000 and 161,000. These 'current sales' before 2 June 1986 are variable, but I do not regard the opinion that they support a conclusion of improving gross profit as necessarily false.
In the course of his evidence when being questioned as to his knowledge before 12 September, Mr. Bishop said:
"I only knew of those six months that I had obtained

myself."

He later said:

"All I was going on was the amount of profit we would

make while we were there."

In support of the submission that the precis of 2 June represented historic performance, Mr. Tubbs drew attention to the exactness of many of the figures: $596.00 for light and power, $231.00 for insurance, capital $176,572.00, profits of $6,922.00. He submitted that Mr. Bishop would be entitled to conclude:
"This is factual information I can rely on."
As opposed to that is the motor fuel sales which show a rounded figure of 165,000 litres. Mr. Tubbs refers also to a field report by Mr. Laird, who was not called as a witness. In the course of that report Mr. Laird had written:
"Capital requirement was nominated by Ampol and

accepted by the Bishops prior to taking over the site."

This reference to "nominated by Ampol" it was submitted was inconsistent with the precis being a forecast or prediction. However the field report placed that observation in context. It continued:

"If capital as nominated had to be borrowed from the

directors, I consider this must be in addition to original capitalisation - this is not verified."

Mr. Bishop visited Moranbah a few days after the meeting of 6 June 1986, where he inspected the site and spoke to Mr. Allardyce, the manager. He went with Mr. Allardyce to the place where Robertsons had an office and inspected some books of Robertsons and says that he jotted down the litreage, total dollars turnover and some other sales for the six months' period from December 1985 to May 1986. Subsequently there was the offer by Mr. Bishop of 19 June 1986 seeking to reduce the franchise figure to $70,000.00 and monthly rental to $4,250.00. In relation to this Mr. Bishop said:
"I just thought I would try and get them down in their

price. I had been to Moranbah. The figures that I had been shown were a little less."

And later:

"I just thought that since the figures were down a bit I

might be able to screw the price down a bit, so I went along to Spencer on that basis."

Plant and equipment for the site was purchased by Savcorp from Robertson for approximately $21,000.00 in July. As to the successful efforts by Mr. Bishop to reduce the franchise fee and the monthly rental, Mr. Spencer said that Mr. Bishop had mentioned an additional service station to be developed in Moranbah and that Mr. Bishop:
"...had done some of his own checking in relation to the

sales of the site and had come back with the fact that the projected numbers that we were looking at were higher than the actuals as at that particular time and consequently that formed the basis of the negotiations."

The reality of the situation, as I see it, is that Mr. Bishop anticipated a net profit of the order set out in the precis of 2 June 1986; that those hopes were not realised, and that the financial position of Savcorp was exacerbated by the significant downturn in activity in the Moranbah area. Mr. Bishop views Ampol as the author of his misfortune and, in an attempt to salvage what can be salvaged, attempted to make a case which was contrary to what in fact had been represented to him. He himself repeatedly, and in my view correctly, described the information supplied by Mr. Spencer as predictions and it was not until the second day of the trial that the applicant's case dramatically altered.
I am not satisfied that the contraventions of s. 52 alleged in the consolidated statement of claim have been made out.
Ordinarily, notwithstanding that conclusion, I would assess damages. The applicant's claim as appears from Exhibit 43 totals $749,554.00 or alternatively $767,293.00. However there is a significant number of items in that computation which are outside the measure of "reliance loss", by which the measure of damages under s. 82 of the T.P. Act should be assessed. The amount claimed seeks projected profit of $266,497.00, refund of franchise fee paid of $40,000.00, capital contribution of $252,832.00, as well as interest on borrowings of $98,542.00. The primary measure of damages under s. 82 for contravention of s. 52 is the difference in value between the service station as represented and the service station as acquired, with such consequential losses as might properly be allowed. I accept that the approach in Gould v. Vaggelas (1984-5) 157 CLR 215, whilst a case of deceit, is appropriate in the context of a s. 52 contravention.
In this case there is significant downturn in the activity in and around Moranbah subsequent to the acquisition by Savcorp of the service station. Further, significant changes were made by Mr. and Mrs. Bishop in the operation of the service station. The service station was conducted in a way where significant sums were paid by Savcorp to or on account of Mr. and Mrs. Bishop. They had accumulated tax losses as primary producers and there was an incentive so to structure the operation. In the year ending 30 June 1988 they were paid a salary of $38,700.00, interest on borrowings of $14,069.00, superannuation of $4,200.00, a contribution to home rental of $2,400.00, plant and equipment had been purchased from Robertsons rather than being leased, and in addition a video library worth approximately $30,000.00 had been purchased. Previously the video hire service had been conducted on commission without the need for capital expenditure. Mr. Bishop also introduced trailers for hire and assumed an Avis car rental agency.
In addressing the proper measure of damages there is a valuation from Mr. James Turner, a valuer and real estate agent, who gave evidence for the applicant. Mr. Turner had been chairman of the Belyando Shire Council for more than 25 years, but I am unable to accept the several bases of his valuation. He assessed the rental per calendar month as at September 1986 at $3,000.00 per calendar month and concluded his report by saying:
"I would further recommend that a reduction in rental as

from that date be made owing to the downturn in business, and the economy of the town as it stands in 1989 with businesses going to bankruptcy and close downs."

Both his report and evidence do not contain the enquiries that one would expect to support a valuation of this kind. One of the bases he suggested was 2% of gross turnover which he claimed was based on 'industry recommendations' as an appropriate method of valuation, but it appears that this information derives from a lone service station friend in Rockhampton. On a return on capital expenditure basis, he applied 20% to a figure of $180,000.00 as the cost of building the complex. On that basis, he derived a rental return of $3,000.00 per calendar month. His evidence as to the cost of construction was deficient and, having regard to the evidence of Mr. Greville, this approach by Mr. Turner would seem to support the monthly rental negotiated by Mr. Bishop. He also referred to two service stations, one in Emerald and one in Blackwater. The Emerald service station he said had a monthly average litreage of 140,000 litres and was paying $1895.00 per month, while the Blackwater service station had a monthly average litreage of 100,000.00 and was paying $2,600.00 per month. No further details of these comparisons were made, and Mr. Turner indicated that he made no detailed enquiries of the other service stations in Moranbah; in particular, he made no enquiries of the Ampol Moranbah service station. This service station commenced operating under lease from Ampol by Filigree Investments Pty Ltd at about the same time as Savcorp commenced. A relation of Mr. D. Laird, the local Ampol representative, had an involvement in this station. In particular, no enquiry as to franchise fee or monthly rental in respect of this service station was made.
Were I to assess the diminution in value on the basis of a contravention of s. 52, constituted by misrepresentations as to predicted performance, it would necessarily be very broad brush. I think a fair basis would be the average litreage in the six months to June 1986 which Mr. Bishop calculated in Exhibit 6. The average for those months of 136,000 litres is a reduction of 17% on the 165,000 litres contained in the precis of June 1986. I would have assessed the diminution in value by adding 17% of the goodwill fee, and the difference in the present day, or capitalised, value of $4,500.00 monthly over three years, and $3,712.50 monthly over three years. Consequential losses would be no greater than the operating loss of approximately $25,000.00 referred to by Mr. Fell.
Mr. John Fell gave useful evidence as to the actual performance of Savcorp and how its financial performance was structured. In the performance in the 9 months to 30 June 1987, the gross profit was $25,541.00 per month compared with the amount in the precis of 2 June 1986 of $21,162.00, but the contributions to performance from fuel sales was lower than in that precis and that from non-fuel sources higher than in the precis. Mr. Fell's evidence does not suggest that Savcorp was trading unprofitably in the periods to 31 August 1987 but, of course, the profit would have been higher had the fuel sales corresponded with that contained in the precis of 2 June 1986.
I turn now to the claims under the PRMF Act.
Savcorp now asserts that, contrary to the obligation imposed by s. 15(1) of the PRMF Act, Ampol did not supply a disclosure statement not less than three days before the day on which the franchise agreement was entered into. There are some curious features about this claim. First, Exhibit 11 consists of both a duplicate and original of the document headed "Disclosure Statement". Each provides for signature on behalf of Ampol and acknowledgment of receipt by the franchisee, but neither the original nor duplicate is executed.
Mr. Don Laird, the local Ampol representative in central Queensland, relatives of whom had connections with the other Ampol site in Moranbah and who had dealings with Mr. Bishop, was not called as a witness. On the other hand, the defence to cross-claim dated 28 June 1989 by Savcorp alleged that the disclosure statement was served after early September 1986 (and by inference before 12 September 1986), and that by that statement Ampol made certain representations which were relied on by the applicant for the purpose of continuing the legal arrangements between the parties. An estoppel was pleaded. That claim was abandoned and it was then asserted that the disclosure statement was not served before 12 September 1986. No satisfactory explanation for this change appears to me from the evidence, and it is curious that Mr. Bishop says that he first saw it in his barrister's office. No explanation is offered how it first came into his possession or the possession of his legal advisers. The about-face happened by amendments made by the consolidated statement of claim on 7 March 1989.
This point has troubled me, but in the end I am persuaded that the disclosure statement was in Mr. Bishop's possession at least by 20 August 1986. His diary records a conversation with his then accountant, Mr. Allen, on 20 August 1986. Mr. Allen recalls discussing proposals to be put to Ampol concerning the terms of the franchise agreement. While he has no personal recollection of the telephone conversation, he said in evidence that a diary note which he made on 20 August 1986 of a conversation with Mr. Kevin Bishop would be a correct record of what passed between him and Mr. Bishop. The diary note is headed "Re counter offer to Ampol" and notes "Disclosure statement given to Kevin by Ampol". There is reference to turnover for the dates 27.6.86 to 29.7.86, which corresponds with the time period referred to in the disclosure statement of Ampol's operation of the site. There then is a note of offers suggested by Mr. Allen to be made to Ampol. I have no doubt as to the genuineness of the note and there is no reason to doubt the correctness of what it records.
I am satisfied there was no breach of s. 15 of the PRMF Act.
The next question is whether Ampol terminated the agreements by notice dated 1 September 1987. Savcorp submitted that:
"The evidence taken as a whole clearly shows that the

goodwill agreement was a part of an arrangement between the parties which constituted in its entirety a franchise agreement and was therefore susceptible to regulation under the Petroleum Retail Marketing Franchise Act 1980."

Such a position has of course to be the case for relief in respect of the $70,000.00 which Savcorp seeks.

I am satisfied that the goodwill agreement is part of the arrangement which, viewed as a whole, constituted a franchise agreement. I have had regard to the definition of "franchise agreement" in s. 3(1), and to the provisions of ss. 3(8) and 6(1)(b).
The effect of ss. 16(1), 16(2)(j) and 16(3) of the PRMF Act is that for a breach of a franchise agreement by the franchisee, the franchisor can terminate the agreement, but only by giving 30 days' notice in writing and setting out the grounds for the termination. In my opinion, a notice in accordance with s. 16(3) has been given. The Notice of Termination of 1 September 1987 was in these terms:
"Notice of Termination

AMPOL PETROLEUM (Q'LAND) PTY. LIMITED

("Ampol") hereby gives you notice that the Service Station Franchise Licence Agreement, Franchise Supply Agreement and Trade Mark Licence Agreement each dated September 12, 1986 between Ampol and SAVCORP PTY. LTD. ("the Franchise Agreements") are to be terminated on the Seventh day of October, 1987 on which date you are required to cease your use of the Ampol Service Station at Cnr. Bacon Street and Belyando Avenue, Moranbah ("the Service Station") and deliver up possession thereof to Ampol.

The ground of termination upon which Ampol relies is that you have committed a breach of the Franchise Agreements full particulars of which, including a statement of the facts relating to the ground, are as follows:- Ground

Savcorp Pty. Ltd. is in breach of Clause 2 of an Agreement with Ampol dated September 12, 1986. By virtue of Clause 8 of that Agreement Savcorp Pty. Ltd. has agreed that a breach of Clause 2 of the Agreement shall be deemed to be a breach of the Franchise Agreements. Particulars

The aforesaid Clause 2 provides that Savcorp Pty. Ltd. shall pay to Ampol for the goodwill of the business carried on at the Service Station the sum of $70,000 by the following instalments:-

(i) $40,000 on September 12, 1986

(ii) $15,000 on April 1, 1987

(iii) $15,000 on August 1, 1987

Savcorp Pty. Ltd. has failed to pay the said instalments due on April 1, 1987 and August 1, 1987. Dated this First day of September, 1987. For and on behalf of

AMPOL PETROLEUM (Q'LAND) PTY. LIMITED

(Sgd.) A.K. RAPSON

MANAGER QUEENSLAND"

A Notice of Termination purported to be given under s. 16 of the PRMF Act must be clear and unambiguous: J. and M. O'Brien Enterprises Pty Ltd v. Shell Co. of Aust. Ltd. ((1983) 47 ALR 537.
In my opinion, the notice was valid, and the agreements were terminated on 7 October 1987. Savcorp and Ampol agreed by cl. 8 of the goodwill agreement that failure to pay the sum of $15,000.00 on 1 April 1987 or $15,000.00 on 1 August 1987 would constitute a breach of the franchise agreements. There were breaches of cl. 2 of the agreement which, in my opinion, entitled Ampol to terminate the lease pursuant to s. 16 of the PRMF Act. The application by Savcorp pursuant to s. 16(4) was made within the period limited by the notice: cf. Magic Australia Pty Ltd v. Caltex Oil Australia Pty. Ltd. (1988) 84 ALR 483.
The next issue concerns Savcorp's submission that a notice by Ampol dated 10 July 1987, the effect of which was to increase the rent to $4,950.00 per month effected a wholly or partly unreasonable increase.
By a letter dated 10 July, purporting to rely on the provisions of cl. 5(a) of the franchise licence agreement, Ampol gave notice to Savcorp of an increase in the licence fee to $4,950.00. Rent payable by Ampol for its lease of the site was $6,000.00 per month as at 12 September 1986 and Ampol received notice from the head lessor that the rent payable pursuant to the head lease was to increase to $6,528.00 per month.
Savcorp submits that cl. 5(a) of the licence agreement (which is earlier set out) had the effect of conferring a right on Ampol to increase the amount that would, but for the exercise of that right, be payable by the applicant in accordance with the licence agreement and was thereby a provision of a franchise agreement within the meaning of s. 9A(1)(a) of the PRMF Act. Savcorp submitted that the whole or, alternatively, part of that amount was unreasonable having regard to the market value of the interest, goods and services to which the amount in the increase relates, and Savcorp asserts that the amount of the increase is, by force of s. 9A(1) of the Act, reduced by so much of the amount of the increase as was unreasonable.
At the threshold in respect of this aspect of the matter is a question of construction of cl. 5(a) of the licence agreement.
In my opinion, cl. 5(a) is not a provision of a franchise agreement which has the effect either directly or indirectly of conferring a right on Ampol to increase the amount of a monthly licence fee. Clause 5(a) permits Ampol to give a notice to increase the fee. If Savcorp disagrees, it can require the amount of the licence fee to be valued by independent valuers. The fee for the subsequent period is to be the average of the valuations. Depending on the valuation of the respective valuers, the fee so determined might be reduced.
It was further said on behalf of Savcorp that the provisions of cl. 5(a) requiring payment of a licence fee of $4,500.00 per month, and the provision requiring Savcorp to pay the two sums of $15,000.00 referred to in the goodwill agreement, were each provisions that imposed an obligation on Savcorp that is likely to be impossible or unreasonably onerous to perform by Savcorp at the time when they were required to be performed, and such provisions were void pursuant to s. 9(2) of the PRMF Act.
Section 9(1) is not a licence for the court to rewrite the bargain between the parties according to how successfully the applicant trades. Whether a franchise agreement contains a provision of that described in s. 9(1) is to be determined at the date of entry into the franchise agreement, in the context of the circumstances obtaining at the time of the entry into the franchise agreement. Those circumstances would include the taking account of factors which might reasonably be in contemplation of the parties at the time of making the franchise agreement, but the nature of the provision cannot be characterised in hindsight simply on the basis that events subsequent to the making of the agreement have impacted adversely on the business of the franchisee.
The licence agreement was arrived at after arms length negotiations between Mr. Bishop and Mr. Spencer, with Mr. Bishop using the results of his enquiries at Moranbah and the possibility of further competition to secure a significant reduction in the proposed goodwill figure and the monthly licence fee. During the first 9 months of trading Savcorp paid the licence fee and still made a profit notwithstanding it paid significant salaries to Mr. and Mrs. Bishop during that period and paid interest on all the funds required to establish the business. The paying of the licence fee was not impossible and, in my opinion, in amount, it was not unreasonably onerous. The business was able to operate profitably notwithstanding the payment of those fees, and no acceptable comparisons with comparable licence fees appears from the evidence. I say that notwithstanding the bald statements contained in Mr. Turner's report.
As to the sums payable under the goodwill agreements, those sums represented part of the purchase price. While the payment of the purchase price might be thought to sit a little oddly with the terms of s. 9(1), it may be that the obligation to pay a purchase price or to pay a purchase price over several instalments is within the nature of an obligation proscribed by s. 9(1).
Savcorp was a two dollar company and the obligations under the franchise agreements were to be met by Mr. and Mrs. Bishop from loan funds injected by themselves or external borrowings by the company. In fact only slightly more than $100,000.00 was borrowed by Savcorp by way of a small business loan, the other moneys being provided by Mr. and Mrs. Bishop. Savcorp paid interest on those borrowings. Mr. and Mrs. Bishop by 30 June 1987 received interest of $4,450.00 from Savcorp and in the following year $14,069.00 and in the next 11 months nearly $16,000.00 by way of interest. During that period the amount of the business loan was substantially reduced. By 31 May 1989 it was reduced to $62,685.00.
I am not satisfied that the applicant was unable to borrow the balance of the payments required for goodwill from either the directors or some external source, nor do I think any such borrowing would be unreasonably onerous. Given the structure of the business adopted and the amounts involved, the obligations to make the two payments of $15,000.00 in accordance with the goodwill agreement, in my opinion, are not provisions within s. 9(1).
It is not irrelevant to this conclusion to note that on 6 July 1987 Mr. Bishop wrote to Ampol proposing payment of the outstanding goodwill payments on 1 October 1987 and 31 December 1987 and forwarded postdated cheques to Ampol with that letter. Ampol advised by letter of 21 August 1987 that that amended repayment proposal was unacceptable and the postdated cheques were returned. It should also be noted that Savcorp was able to acquire significant capital items including a video library, at a cost totalling some $30,000.00.
As to the next matter, should I be wrong in my conclusion that the franchise agreements were terminated on 7 October 1987 pursuant to the notice issued under s. 16(3) of the PRMF Act, I am of the view that a notice of termination dated 7 June 1989, which appears as Exhibit A to the affidavit of Mr. Bishop sworn 10 July 1989 is, at least so far as it alleges breaches of cl. 5(a) of the service station franchise licence agreement, particularised in the first schedule of that notice of termination, a valid notice complying with the provisions of s. 16 and was effective to determine the franchise agreements on 8 July 1989.
For the above reasons, Ampol is entitled to the $30,000.00 in respect of the unpaid instalments under the goodwill agreement. Each of those amounts should attract interest at the rate of 15% from 1 April 1987 and 1 August 1987 respectively.
The respondent is entitled to a declaration as to the termination of the franchise agreements from 7 October 1987. As I understand Schedule 1 to the Notice of Termination dated 7 June 1989, it is not asserted there were unpaid licence fees as at 7 October 1987, the 12th of each month being the anniversary of the rent period. The respondent is entitled by way of mesne profits from 7 October 1987 to date of judgment. It seems to me right that the mesne profits should be calculated at the rate of $4,950.00 per month. Credit should be given for such sums as have been paid by Savcorp by way of licence fees since 7 October 1987.
The applicant should pay interest on the mesne profits calculated at 7% of the total amount to be paid.
I dismiss the application with costs to be taxed. I propose to give judgment for the respondent on the cross-claim as indicated in these reasons. I will ask the parties to bring in short minutes of orders to give effect to these reasons.

[1990] FCA 385

26 JULY 1990