Sid Marz Services Pty Ltd v Caltex Oil (Australia) Ltd

[1987] FCA 739

CATCHWORDS

TRADE PRACTICES - Misleadlng conduct - Alleged representation

by lessor of service station that	freehold had been sold -
Damage claimed to be suffered.
NEGLIGENCE - Claim by lessee for cost of repairs	to customers'
motor vehicles by filling with distillate rather	than petrol

as a result of mistake in delivery by lessor's employee.

PETROL RETAILING - Notice of termination of franchise by lessor by reason of defaults by franchisee - Validity of notice - Notice of non-renewal of franchise - Validity of

notlce - Whether it 1s "just and equitable" for franchisor not

to renew franchise.

Trade Practices Act 1974 s . 5 2 .

Petroleum Retail Marketing Franchise Act 1980 ss.3, 16, 17,

11 December 1987

17A.

NSW G.230 of 1987

SID MAR2 SERVICES PTY	LIMITED V CALTEX OIL (AUSTRALIA) PTY
LIMITED NSW G.476 of 1987

CALTEX OIL (AUSTFUILIA) PTY LIMITED v SID MARZ SERVICES PTY

LIMITED

_- .

Wilcox J
Sydney

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	) NSW G.230 Of 1987
)
GENERAL DIVISION	)

BETWEEN:	SID MARZ SERVICES PTY LIMITED
Applicant

AND:	CALTEX OIL (AUSTRALIA) PTY LIMITED
Respondent
AND:	CALTEX OIL (AUSTRALIA) PTY LIMITED
Cross-Clamant
AND:	SID MARZ SERVICES PTY LIMITED
First Cross-Respondent PHAEON MARZOUK Second Cross-Respondent

SAEED GIRGIS ABDOU MARZOUK

Third Cross-Respondent
CHRISTINE MARZOUK

Fourth Cross-Respondent

CORAM :	WILCOX J
PLACE :	SYDNEY
DATE :	17 DECEMBER 1987

MINUTES OF ORDER

THE COURT ORDERS THAT:

1.        Judgment be entered in favour of the appllcant against the respondent in the sum of flve thousand

six hundred and ninety-eight dollars and thirty-flve

cents ($5,698.35).

2.        Judgment be entered In favour of the cross-claimant against the first, second, third and fourth cross-respondents in the sum of ninety-nlne thousand nine hundred and eighty dollars and nineteen cents

($99,980.19).

3 .	The amount payable pursuant to the ~udgment referred
to in order 1 herein be set off against the amount
payable pursuant to the judgment referred to in order 2 herein leaving a judgment debt of ninety-four thousand two hundred and eighty-one dollars and eighty-four cents ($94,281.84) due and payable by the
first, second, third and fourth cross-respondents to

the cross-claimant.

4.         The applicant and the second, third and fourth cross-respondents pay to the respondent ninety percent (90%) of the respondent/cross-claimant's

costs of the proceeding.

Note :	Settlement and entry of orders is dealt with in Order
36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA	)

NEW SOUTH WALES DISTRICT REGISTRY NSW G.476 Of 1987

)

DIVISION GENERAL )

BETWEEN: CALTEX OIL (AUSTRALIA) PTY

LIMITED

Applicant

AND:	SID MAR2 SERVICES PTY LIMITED
Respondent

CORAM :	WILCOX J
PLACE :	SYDNEY
DATE :	17 DECEMBER 1987

MINUTES OF ORDER

THE COURT ORDERS THAT:

1.        The applicant be adjudged entitled to vacant possession of the land situate at 880 Hume Hlghway, Bass H111 in the State of New South Wales being the land comprised in Certificates of Title Volume 7151

Folio 100 and Volume 7106 Folio 132 together wlth a l l

improvements thereon.

2.        The appllcant have leave to issue a Writ of possession in respect of the land and improvements specified in order 1 herein.

3.	Execution of the writ referred to in order 2 be
stayed up to and including 20 December 1987.
4.	The respondent pay to the applicant ninety per cent
(90%) of the applicant's costs of this proceedlng.
Note:	Settlement and entry of orders  is dealt with in Order

36 of the Federal Court Rules.

NSW G.476 of 1987

BETWEEN:	CALTEX OIL (AUSTRALIA) PTY LIMITED
Applicant

AND:	SID MAR2 SERVICES PTY LIMITED
Respondent

CORAM :	WILCOX J
PLACE :	SYDNEY
DATE :	11 DECEMBER  1987

EXTEMPORE REASONS FOR JUDGMENT

There are before the Court two matters, Nos.G.230 of

1987 and G.476 of 1987, which, by consent, have been heard

together. In the first of these two matters the applicant is Sid Marz Services Pty Limited, a company controlled	by Mr
Saeed Marzouk.	The respondent is Caltex Oil (Australia) Pty
Limited, which is the owner of the freehold of certain land,
at Hume Highway, Bass	Hill, leased to Sid Marz Services for
the purpose of the conduct of a service station.	In the

second proceeding the applicant is Caltex Oil and the

respondent is Sid Marz Services.

In the former of those two proceedings there is a

claim made by Sid Marz Services which depends upon s.52 of the

Trade Practices Act 1974 and in relation to which it is

alleged that false representations were made on behalf of

Caltex. There 1s a claim in negligence relatlng to the fact that a Caltex employee placed distillate in a petrol storage tank at the service statlon, causing certaln customers'

vehicles to be supplied with distillate rather than petrol, whereby damage was caused to those vehicles, which damage Sid

Marz Services had to make good.	The amount involved in that
latter claim is $4,824.

In that same proceeding a Cross-claim has been

brought by Caltex against Sid Marz Services, and also agalnst

three persons who have guaranteed the obllgatlons of that

company pursuant to the lease and reseller agreement entered

into between Caltex and Sid Marz Services.	Those three
persons are Mr Saeed Marzouk, his wlfe, Chrlstine Marzouk,	and
hls brother, Phaeon Marzouk.	In the Cross-Clalm, Caltex
claims as agalnst all four cross-respondents rent, at	the rate

of $3,750 per month, for the period from September 1986 untll the present time, together with certaln moneys said to be due in respect of the tradlng account between Caltex and Sld Marz Services. There was some dlspute as to the amount payable on

that account, but durlng the hearing the parties reached

agreement that the relevant figure is $28,534.29.

In the second proceeding , G.476 of 1987, Caltex

claims possession of the premises	upon the basis that It has
valldly terminated the leasehold	interest of Sld Marz Services
and is not obliged to renew the lease.	This latter claim

involves some questions under the Petroleum Retail Marketlng
Franchise Act 1980.

I will deal with each of the issues to which I have

referred in turn. The first questlon which arises is whether

there is a good c l a m for damages by Sld Marz Services against

Caltex under s . 5 2 of the Trade Practices Act. The basis of

the claim is a meeting which took place between Mr Marzouk, on

behalf of Sid Marz Services, and Mr William Lyons and Mr Gary

Nelson, on behalf of Caltex. There is a question as to the

date of this meeting. Mr Marzouk says that it took place on

27 September 1985, whereas	Mr Lyons and Mr Nelson put the date
as being 2 2 October 1985.	It is common ground that the

meeting took place in the office of Mr Lyons at North Sydney and that the sub~ect matter of the meeting was the possibility

of the sale of the service station site and the relocation of

Sid Marz Services.

So far as the date is concerned, I think it is

probable that Mr Marzouk is correct In flxlng the date as
being 27 September. My first reason for taking that vlew 1s

that Mr Marzouk has a note in his diary of an appointment with

Mr Nelson on that day, and no similar note in his diary
against 2 2 October.	Secondly, Mr Lyons' diary, whlch was
produced during his evidence, also has	a note of an

appointment with Mr Marzouk on 2 7 September and no note of an

appointment on 2 2 October. However, I would not dispose of

the matter entirely on the basis of the diary notes, because

it is possible that an appointment was made but, for some

reason, the meeting was postponed. The more slgnlficant

evidence on this matter is a diary note of the bank manager

handling the account of Sid Marz Services which records a whlch Mr Marzouk claimed to have had with Caltex representatlves regarding the sale of the slte and the

telephone conversation between hlmself and Mr Marzouk on

possible relocation of his business.	There is no reason to
doubt the authenticity of the diary note, which	is contained
I n the records of Westpac produced on subpoena.	This note
seems strongly to corroborate	Mr Marzouk's evidence that there
was a discussion with Caltex representatives	on 27 September.

It is inconsistent with the evidence of Mr Lyons and Mr Nelson

that the first such discussion took place on 2 2 October.

However, the significant aspect of the meeting is not

the date upon which it took place, but the content of the

conversation which ensued. According to Mr Marzouk, Mr Lyons told him that Caltex had sold the land which it leased to him

for the purposes of the service station.	It is this
representation upon which he relies,	and which he claims to be

false. It is quite clear that Caltex had not in fact sold the

land on that day, and indeed that it has not yet sold It.	I
mean by this, not only that it had not exchanged contracts for

sale on 27 September 1985, but that it had not even reached a firm agreement with a purchaser for the sale of the land. It appears that an offer had been recelved by Caltex prlor to 2 7 September, but there is no evidence to suggest that the offer

had been accepted.	The only evidence on the matter is that
the offer was left	in abeyance pending a discussion wlth Mr

Marzouk about a relocation of Sid Marz Services to a different

service station. That relocation never occurred.

Counsel for the applicant has pressed me to prefer Mr

Marzouk's version of this conversation to that of Mr Lyons and

Mr Nelson. He has correctly pointed out that hls client's

memory of the date seems to be more accurate than that of the
other two gentlemen. He has pointed out that no note of the
conversation has been produced in evidence, notwithstanding
the fact that, according to Mr Nelson, Mr Lyons took some

notes during the meeting. I give weight to these matters, but

I find It extremely difficult to accept that Mr Marzouk was unequivocally told that the property had been sold. My first reason for being unable to accept that evidence is that I

cannot see what advantage Mr Lyons would have seen in

misinforming Mr Marzouk of the position. Apart altogether
from the desirability of being honest and frank with a
franchisee of the company, one would have thought that It
would be contrary to the interests of Caltex to lead Mr

Marzouk to believe that Caltex had already committed itself to

a sale of the land leased to his company. For Mr Marzouk to

have been so informed would have been to lead him to believe

that he was in an extremely powerful bargaining	position wlth
Caltex in relation either to relocation to	a different site or

to being bought out by the payment of compensation moneys.

There was no advantage to Mr Lyons in making an untrue

statement that the property had been sold. Mr Lyons was the

l.

officer of Caltex handling the negotiations with the

prospective purchaser and he must have known the true

position.

My second reason for rejecting Mr Marzouk's verslon

of the conversatlon arises out of subsequent correspondence.

On 25 October 1985 a letter composed by Mr Lyons, but despatched over the signature of Mr G J Cocks, the Manager,

Retall Sales, New South Wales, of Caltex was sent	to Mr
Marzouk at his home.	That letter refers to what was called
"your recent discussions with our Messrs Nelson	and Lyons" and
goes on to outllne what was	called "the course of action we

wish to adopt following'the receipt by us of a third party

offer to purchase the freehold of the subject sale". The

writer of the letter then went on to state two prelimlnary

matters, the first of which was as follows:

"(a) that we have not yet accepted the sald

offer to purchase; we are at thls stage,

still considering an appropriate course

of action."

After those two prefatory statements, the letter referred to a

proposal for which Mr marzouk's consent was sought "in the

event that we did decide to accept the offer to purchase".
The proposal dealt with relocation	and the absorption by
Caltex of various costs.	This letter seems to me quite

inconsistent with a position that there was already a flrm

agreement to sell the site, whether or not that agreement had

been consumated by an exchange of contracts of sale.

a.

If Mr Marzouk had been told, on 27 September 1985,

that there was already a firm agreement for sale, it seems to
me that he would have been likely to have sustained surprise
upon reading the letter of 25 October. However, there 1s no

indication that there was any surprise. He took the letter to

the solicltor then acting for him, Mr J A Peden, who replied
on 31 October to Mr Cox. That letter refers to Mr Cox's

letter of 25 October "regarding the possible sale of the

freehold of the subject marketing premises".	The letter then
went on to set out certain terms for relocation	and ended with

a plea for a prompt resolution of the matter "so that further

disruption to normal operatlons is alleviated". Finally, Mr

Peden asked for prompt advice "of your company's intentlons on sale of the freehold and relocatlon of our client's busrness".

Mr Marzouk said in evidence that he had kept in close contact with Mr Peden and had discussed the matter wlth him

between the date of the meeting wlth the Caltex officers and

the receipt of the letter of 2 5 October and that he had a

further discussion with	him between the receipt of that letter
and Mr Peden's letter of 31 October.	If Mr Marzouk had been
told that the property had been sold, and then received the

letter of 25 October, it seems to me highly probable that he
would have pointed out to Mr Peden that the letter was

inconsistent with his previous information and that Mr Peden

would have made some observation about	that matter in hls
reply. On the contrary, Mr Peden seems to have accepted that the whole question was still	open. Mr Marzouk was asked

whether he discussed this inconsistency with Mr Peden. His
reply was that Mr Peden thought the letter was not different

in effect from his previous understanding.

The combination of the two matters to which I have

referred leads me to reject the evidence of Mr Marzouk that he

27

was told on September, or indeed at any other time, that have formed the impression that a sale was extremely likely; as indeed it was -- on the evidence -- provided that a suitable alternative site could be found for Sid Marz

the property had definitely been sold. There is no doubt that

Services. But I do not accept that Mr Marzouk was told that

there had definitely been a sale.

Thls finding is enough to dispose of the claim under

s.52 of the Trade Practices Act; because this is the only

false representation which, in the event, is relied upon by

the applicant.	Strictly, therefore, it 1s not necessary for
me to deal with the matter of damages.	However, I should
perhaps indicate that I am not persuaded that the applicant
suffered any damage as	a result of what was said to Mr Marzouk
at the meeting with Mr Lyons and Mr Nelson.	I readily accept
that the intimation of a possible sale was	unsettling to Mr

Marzouk and to the applicant. The applicant had gone into possibility, even a probability, of his company having to
possession of the property very recently -- namely, on 1
September 1985 -- and it must have been disconcerting for Mr

move. But, when one analyses the evidence as to what was done

that would not otherwise have been done, or what was not done that would otherwise have been done, ~t is very difficult to see that there was any result, in terms of loss of profits,

from the information being given.

It is clear that Mr Marzouk had plans to promote the

business.	He had outlined these plans in a letter to Caltex
dated 16 September.	The major feature of hls plans seems to

have been the installation of a steam cleaning machine. Thls would have required the approval not only of Caltex, but also of Bankstown City Councll, and there is no reason to belleve

that the steam cleaning machine could have been installed

within the perlod durlng which Mr Marzouk was under any
misapprehension as to the future of the business. On any vlew

of the evidence, he realized, by the beglnning of April 1986,

that he was not likely to be relocated. I do not thlnk that

it would be safe to assume that the steam cleanlng machine

could have been installed by that date. There was no attempt

made by Mr Marzouk to install the machine after 1 April 1986.

Consequently, it is imposslble to know whether the
installation of a steam cleanlng machlne	would have improved

the profitability of the business or otherwise.

Another proposal which was referred to by Mr Marzouk

was the installation of a sign stating that full driveway

service was available. This was apparently not pursued, even

after the situation became clear. There was also a reference

to having certain giveaway presents for	customers. It may be
that the understanding which	Mr Marzouk had caused hlm not to

proceed with giveaways; but whether or not this would have improved profitability is a matter entirely of speculation.

The site had a frontage to the Hume Highway and it is

reasonable to suppose -- and indeed the evldence confirms thls

-- that a major source of custom was from passing traffic. It

is difficult to see that giveaways would have made much

difference to that portion of the trade.

What is clear is that the takings from petrol sales were very susceptible to the price charged. It appears that,

in mid February 1986, Mr Marzouk decided to sell petrol at a

price below that ruling'at nearby service stations.	The
taklngs then improved quite signiflcantly;	March 1986 being

the best month ever in terms of gross petrol sales. There 1s no lnformation before the Court to indicate the profitability in that month, as compared with other months when Sid Maarz

Services was not discounting. When asked in evidence why he

ceased to discount at the end of March, Mr Marzouk gave the reason that he did not wlsh to upset his competitors in the area. It is abundantly clear, as counsel for the applicant

has pointed out, that, after March 1986, the takings of the

business fell away. The figure in April was much the same as the figure in September 1985; that is the first month during which the applicant was in possession of the servlce statlon

site. But the May figure for petrol sales was about $10,000 below that of April, and June was down once again.

Thereafter, there was a fairly steady drop untll June 1987,

when petrol sales ceased all together.

An explanation has been offered, but that does not change the

underground petrol tank and that he was negligent in so doing.

situation. The evidence of Mr Marzouk was that some customers had distillate put in their cars by mistake and that this

caused problems for them of varying degree. Not unnaturally,

take the cars into the workshop and to make good the damage.	they complained to him and, quite properly, he felt obliged to calculated in the usual way including labour, materlals and
fuel to refill the petrol tanks.	The total cost came to

$4,824. The ]ob cards were handed by Mr Marzouk to the Caltex

area representative. He apparently took them to a relevant
officer in head office and later returned them to Mr Marzouk,
claiming that further information should be supplied. I can
agree that, in some cases, the Information is a little scanty:
but in most cases I would have thought that it would be
possible to determine the accuracy of the claim. Be that as

it may, the only evidence before me is the evidence from Mr

Marzouk that in fact the work claimed on each of the job cards was done and that this work was in rectification of problems

caused by the mix up of fuel. Under those circumstances, the

sum is recoverable. It follows that, in the claim by Sid Marz

Services, there ought to be ~udgment for the applicant in the

sum of $4,824.

In relation to the cross-action, it is conceded that the sum of $28,534.29 is payable in respect of the trading

account. It is also conceded that no rent has been paid for the period commencing on 1 September 1986 and extending until

the present time. Caltex claims rent. In the view that I

take, the lease was effectively terminated on 30 September
1987 and I think that a payment, properly described as rent,
should be awarded in respect of the period to that date. In
relation to the period since that date, a slmilar amount
should be awarded by way of mesne profits, the leasehold
interest having terminated. There is no issue raised about

the validity of the guarantees. It follows that there should

be Judgment against all four cross-respondents In respect of

these amounts.

Interest is clalmed under s.51A of the Federal Court of Australla Act 1976 and I think that interest ought to be

allowed on the amounts recovered. As the amounts have accrued

over a period, there would be some dlfficulty In calculating

Interest if interest was applied in respect of each item as It

fell due. I think that the better course might be to

calculate interest on the basis of three monthly rests as at

the end of March, June, September and December each year.

This will simplify the calculation, which I propose to invite

counsel to undertake before formal orders are made.

I confess that I am totally mystified as to why the

petrol sales fell away so significantly after the end of April
1986. This has not been explained in the evldence. It may

have had something to do with llquidity problems.	It may have
had something to do	with a slackening of effort on behalf of
those who were managing the service station, although	Mr

Marzouk has said that he continued to be at the service

station for most of every day until June 1987. Whatever the

reason might be, I cannot relate it to uncertainty about relocation because, as I have said, it is clear that this uncertainty was removed at the beginnlng of Aprll 1986. In

this situation, I would'have had difficulty in holding that
any damage had been sustained from the representatlon said to
have been made by Mr Lyons had I found that the representation

was in fact made. The claim under s.52 of the Trade Practices

- Act must fail.

The claim for $4,824 in respect o f the cost of

repairing cars ought to succeed. It is conceded by Caltex

that the tanker driver put diesel fuel , or distillate, in the

In relation to the claim for possession, whlch is

made by Caltex in G.476 of 1987, the position is that the

lease, which was taken by Sid Marz Services by way of

assignment in 1985, expired on 28 February 1987. The lease

contained a holding-over clause providing for termlnation on three months' notice. It also contained a clause permitting

not less than 30 days' written notice of termination, Inter	termination at any time during the currency of the lease on
alia, where there was a breach of a condition of the lease.
In order to exercise that power, the lessor was obllged to set
out particulars of the ground or grounds relied upon in its notice of termination.

In the present case the lessor served two notices of

termination. The first of these was glven on 26 June 1987.

It purported to terminate the tenancy as at 30 September 1987.
The apparent intention was to take advantage of the right,

given in the holding-over clause, to termlnation on three

months' notice. No default was referred to. The second

notlce was dated 27 August 1987.	It also purported to
determine the lease as from 30 September 1987 but,	on this
occasion, grounds were stated.	They included non-payment of
rent and the fact that Sid Mar2 Services	had committed a

breach of the franchise agreement in that it had not paid for

petroleum products supplied to it by Caltex.	Each of these
grounds has been made out in the current proceedlngs.	Thls
second notice did not give three month's notice.	But I thlnk

that Caltex was entitled to give notice of less than three
months, provided that the notice was at least 30 days, where
the notice specifies a breach of a condition of the lease;

and that such a notice effectively terminates the tenancy if

Caltex is able to make out that ground.	These conditions have
been fulfilled.

Section 16 of the Petroleum Retail Marketing

Franchlse Act limits the	power of a franchisor to terminate a
franchise agreement.	The term "franchise agreement" is

defined by s.3 of that Act as including an agreement

containlng:

"(b) provisions, whether express or Implied,

under or by virtue of which a corporatlon

(...the 'franchisor') grants a right to,

or otherwise authorizes or permits, a
person, being another party to the
agreement (...the 'franchlsee'), to
possess, occupy or use the premises to

which the agreement relates in connectlon

with the retail sale of motor fuel by

that person at those premises ..."

The	lease granted by Caltex, which was asslgned to Sid Marz
Serv	,ices, was a "franchise agreement" wlthin the meanlng of

that definition. Sid Marz Services continued to hold over

under that lease after the expiration of the term and,
consequently, the lease continued in operatlon as a franchise

agreement.

Sectlon 16(1) provides that a franchlsor may

terminate a franchise agreement in accordance with the
succeeding provisions of that sectlon, but not otherwlse.

Section 16(2) prohibits the termination of a franchlse

agreement except on one or	more of the grounds specifled In
that sub-section.	These grounds include para.(j):

"The franchisee otherwise commits a breach of a

provision of the franchise agreement."

Section 16(3) relevantly provides:

"The termination of a franchise agreement by the

f ranch	,isor 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 ... 1s
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 ... upon which the termination is based."

These conditions were fulfilled by the notice of 27 August.

I take the view that, in order to effectively

terminate the relationship of lessor and lessee, having regard
to the terms of both the lease and the Petroleum Retail

Marketing Franchise Act, Caltex had to serve a notlce which

gave the notice required under the lease	and which also
complied with the Act.	It would not have been good enough to

simply give a notice which answered the requirements of the lease, but not the Act, or vice versa. It follows that the first notlce of termination, which answered the requirements

of the lease, but not of the Act, was	ineffective to determlne
the tenancy.	But for the provision of the lease permitting a

30 day notice, in lieu of a three months' notice, where a breach was relied upon, 'the second notice would have been

insufficient.	However, because of that provision, the second
notice did comply with the lease;	and it also complied wlth
s.16 of the Act.

Section 16(4) gives to a franchisee who has received

a notice under s.16(3) terminating the agreement the right to

"apply to a court for an order declaring	the notice to have
had, or to have, no effect".	Where such an application is

made, the court has	power so to declare. However no
application along those lines has	been made by Sld Marz
Services.

The other aspect of the matter relates to the

operation of ss.17 and 17A of the Act	in respect of renewal.
In December 1986, Caltex wrote to Sid	Marz Services offering

renewal; but this offer was not accepted. A counter-offer

was made which was unacceptable to Caltex. Therefore, but for the operation of the Petroleum Retail Marketing Franchlse Act, there would have been no question of an obligatlon to renew.

However, s.17A(5) provides that, except ln relation to cases dealt with in s.l7A(4)(b), that is cases where there has been an offer to renew:

franchise agreement unless it has served on the	"... a franchisor shall not refuse or fall to renew the
franchisee, before the date of explry of the agreement,
notice in writing of its declsion not to renew the
agreement, setting out full particulars of the ground or
grounds, lncluding a statement of the facts relating to the ground or each ground, on which the decision is based. "

Caltex served a notice in purported compllance with

s.l7A(5) on 6 June 1987.	There were certain typographlcal
errors which were corrected	in a supplementary notice served
on 1 July 1987.	I think that it is clear that, read together,

these notices answered the requlrements of s.l7A(5), sub~ect to one matter. That matter is a point raised on behalf of the

applicant:	whether or not the notice was served "before the
date of expiry of the agreement".	It is argued on behalf of

the applicant that the result of this requlrement is that the

notice should have been served	before 28 February 1987, when
the term of the lease expired.

I am unable to accept that submiss ion. The Petroleum

Retail Marketing Franchlse Act makes a dist inction, in a

number of places, between the term of a lease and the
operation of an agreement. I think that the requirement of

sub-s.(5) is directed, not to the explration of the original

leasehold term, but to the date	when the agreement itself
would expire.	Where there is a holding-over clause, the
agreement may continue	to operate, perhaps for a conslderable

time, after the expiration of the term. It cannot be sa .id

that the agreement has explred	until the date when the
holding-over clause ceases to have effect.	In thls case the
holding-over clause, as is common ground, continued to	have
effect until 30 September 1987.	Consequently, sub-s.(5)
required that notice be served before that date.	Thls was
done.

Notwithstanding the fact that a valld notlce of

non-renewal was served, it was open to	Sid Marz Servlces, as
franchisee, to apply	to'the Court for an order directing

Caltex to renew the franchlse agreement. Sid Marz Servlces

took that course. Section 17A(7) provides that, exceptlng a

case which is presently irrelevant:

"... a court shall, on the	application of a franchlsee,
make an order directing the franchisor to renew	the
franchise agreement unless--

(a) the franchisor has served on the franchisee a notice in accordance with sub-section (5);

(b) a ground specified In the notice 1s	established by the franchisor to the
satisfaction of the court: and

(c) except where a ground so established is a

ground referred to in paragraph 17(l)(d),
the court is satisfied that It 1s lust
and equltable, having regard to all the
circumstances, for the agreement and any
related agreement or agreements not to be
renewed. "

The requirements of paras.(a) and (b) are clearly

satisfied. A question arises under para.(c) whether the Court ought, in all of the circumstances, to be satisfled that it is lust and equitable for the agreement between Caltex and Sid

Marz Services not to be renewed.	On behalf of the applicant,
counsel submits that the Court could not be so satisfied.	He
refers to evidence of	the failure of Caltex to dellver petrol

on a number of occasions. Mr Marzouk has itemised 11

occasions when, he says, petrol was either not delivered, was

delivered later than a reasonable time after being ordered, or

was short delivered. There has not been much lnvestigation of

these claims. In some cases, Caltex denles that the order was

given.	On other occasions I think that there would be a
question as to whether the delivery was	so late as to cause
any legitimate complaint to arise.	On other occaslons, the

delivery was less than the order: but I do not think that the

short delivery was	so significant as to be a legitmate cause
of concern.

Mr Marzouk gave evidence that there was a problem with water in the underground distillate tank, which

contamination caused difficulties €or some customers, and that

there was delay by Caltex in investigating the problem. Upon

investigation, the water was discovered and was pumped away.

I do think that Mr Marzouk has a legitimate complaint about

the time taken by Caltex to respond to, and solve, this

problem.	Apparently the matter dragged on for some two or
three months.	It is difficult to see why that should have
been so.	There was also the matter of the mlsplacement of the

distillate in the underground petrol tank, causing the damage generally.
to the motor vehicles to which I have already referred. But
this seems to have been an isolated act of carelessness by a
particular employee. However irritating it may have been to

Mr Marzouk, I do not think that it says anything about

There have undoubtedly been difficultles in the

relationship between the parties and I do not think that the

fault has all been on one side. However, the applicant has a

major obstacle in resisting the claim that it is lust and

equitable to permit Caltex not to renew the lease.	That
obstacle is the fact that, for a	period extendlng over about
14 or 15 months, no rent has been paid.	No explanation has
been given for this omission and, when	I asked counsel whether

his client was prepared to give any undertaking that this

money would be paid, he informed me that his client was not in

a position to do so.

A similar situation applies in regard to the tradlng

account. It is true that, until today, the applicant was

taking the attitude that less than the agreed sum of $28,534.29 was due. But it seems to me that, on any

reasonable approach to the matter, it would have been clear

that significant moneys were owing. There seems to have been

insufficient effort to ascertain the amount of these moneys

and to clear up the account. Moreover, no undertaklng is

offered in relation to the payment of the amount which is now
conceded to be due.

It seems to me that it would be an intolerable

position to force Caltex to grant a fresh lease to a lessee

who 1s In such significant default, whose default has

continued over such a lengthy time and who now makes no offer

to remedy the default. The requirements of s.l7A(7) are

satisfied. Caltex is free not to renew the lease.

It follows from the rejection of the arguments put by Sid Marz Services, in regard to renewal and non-renewal, that

an order for the issue of a writ of possession ought to be

made. I think that the appropriate course for me to take, having expressed my vieJs on all of the matters litigated, is

to stand over the matter until a convenient date next week.

At that time, I will be in a position to make orders upon the
basis of Short Minutes of Order, whlch I would invite counsel
for Caltex to prepare and bring in on that occasion. He wlll
no doubt discuss the draft wlth counsel for Sld Marz Services,
in the hope that agreement can be reached as to the form of
the orders. The orders should include a calculation of the

appropriate amount of interest.

I should have added that I think that Sid Marz

Services is also entitled to interest on the amount that I

have allowed of $ 4 , 0 2 4 ,	calculated in the way that I have
indicated.

I 23.

I certify the twenty-two (22)

preceding pages to be a true copy of

the Reasons for Judgment	of
his Honour Justice	Wilcox.

Assoclate: /-p Date: 16 Dece er 1987

NSW G.230 Of 1987

Counsel for the Applicant

and Cross-Respondents:	Mr I M Khan
Solicitors for the Applicant
and Cross-Respondents:	Stojanovic & David
Counsel for the Respondent
and Cross-Claimant:	Mr G C Lindsay
Solicitors for the Respondent
and Cross-Claimant:	Moore and Bevlns
NSW G.476 of 1987

Counsel for the App ,licant: Mr G C Lind say

Solicitors for the Applicant:	Moore and Bevins
Counsel for the Respondent:	Mr I M Khan
Solicitors for the Respondent:	Stojanovic & David
Date(s) of hearing:	9, 10 and 11 December