Tony J Boulos Pty Ltd v BP Australia Ltd
[1999] FCA 531
•30 APRIL 1999
FEDERAL COURT OF AUSTRALIA
Tony J Boulos Pty Ltd v BP Australia Ltd [1999] FCA 531
PRICE DISCRIMINATION – price support scheme in the petroleum industry – whether schemes unlawful – whether discrimination was in good faith to assist a franchisee to meet a price or benefit offered by a competitor – “good faith” – “to assist”.
ESTOPPEL – collateral contract - whether alleged representations sufficiently particular.
COSTS – whether the litigation was a “test” case.
Petroleum Retail Marketing Franchise Act 1980 (Cth), ss 20(1), (2), (5)
Robinson-Patman Act (US), s 13(a), (b).Falls City Industries v Vanco Beverage 460 US 428 (1983), cited
FTC v National Lead Co 352 US 419 (1957), cited
FTC v Cement Institute 333 US 683 (1948), cited
FTC v A E Staley 324 US 746 (1945), cited
In the matter of Purolator Products Inc 65 FTC 8 (1964), cited
Purolator Products Inc v Federal Trade Commission 352 F 2d 874 (1965), cited
Standard Oil Co v Federal Trade Commission 233 F 2d 649 (1956), considered
Standard Oil Co v Federal Trade Commission 340 US 231 (1951), cited
Federal Trade Commission v Standard Oil Co 355 US 396 (1958), cited
Federal Trade Commission v Anheuser-Busch Inc 363 US 536 (1960), considered
Federal Trade Commission v Sun Oil Co 371 US 505 (1963), considered
Niehoff v Federal Trade Commission 241 F 3d 37 (1957), cited
BP Australia Ltd v Trade Practices Commission (1986) 12 FCR 118, considered
Cannane v J Cannane Pty Ltd (1998) 192 CLR 557, considered
Mid Density Developments v Rockdale Municipal Council (1993) 44 FCR 290, considered
Cbew v The Queen (1991-92) 173 CLR 626, consideredTONY J BOULOS PTY LIMITED V BP AUSTRALIA LIMITED
NG 749 OF 1998
JUDGES: BEAUMONT, O'CONNOR & DOWSETT JJ.
DATE: 30 APRIL 1999
PLACE: SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 749 OF 1998
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
TONY J BOULOS PTY LIMITED
AppellantAND:
BP AUSTRALIA LIMITED
RespondentJUDGES:
BEAUMONT, O'CONNOR & DOWSETT JJ.
DATE OF ORDER:
30 APRIL 1999
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
The appeal be dismissed, with costs.
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
NG 749 OF 1998
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
TONY J BOULOS PTY LIMITED
AppellantAND:
BP AUSTRALIA LIMITED
Respondent
JUDGE:
BEAUMONT, O'CONNOR & DOWSETT JJ.
DATE:
30 APRIL 1999
PLACE:
SYDNEY
REASONS FOR JUDGMENT
THE COURT:
INTRODUCTION
This appeal arises out of a claim of unlawful price discrimination in the petroleum industry.
Section 20(1), (2) and (5) of the Petroleum Retail Marketing Franchise Act 1980 (“the Act”) makes the following provision with respect to price discrimination in the petroleum industry:
“20. (1) A corporation that is a franchisor in relation to 2 or more franchise agreements shall not, in relation to motor fuel supplied or to be supplied under those agreements (whether by it or by any other person), cause or permit any discrimination between the persons who are franchisees in relation to those agreements in respect of:
(a)the amounts payable by the franchisees in respect of the fuel; or
(b)any discounts, allowances, rebates or credits given or allowed to the franchisees in respect of the fuel.
(2)Subsection (1) does not apply in relation to a discrimination if:
(a)the discrimination makes only reasonable allowance for differences in the cost or likely cost of raw materials, refining, distribution, sale or delivery resulting from the differing places to which, methods by which or quantities in which the motor fuel is supplied to the franchisees;
(b)the discrimination is constituted by the doing of an act in good faith:
(i)to meet a price or benefit offered by a competitor of the franchisor; or
(ii)to assist a franchisee to meet a price or benefit offered by a competitor of the franchisee; …
…
(5)In any proceedings:
(a)the onus of establishing that, by reason of subsection (2), subsection (1) does not apply in relation to a discrimination is on the person asserting that fact; ….” (Emphasis added)
The respondent, BP Australia Limited (“BP”), was a franchisor and the appellant, Tony J Boulos Pty Limited (“Boulos”), was a franchisee under the Act. Boulos carried on the business of a service station proprietor at two premises in the suburbs of Sydney, one known as “BP Kirrawee”, and the other as “BP Canterbury North”.
By its application under s 20 of the Act, Boulos applied for a declaration that BP had contravened that provision in the respects alleged in its statement of claim. Boulos also sought compensation under the Act accordingly.
By its statement of claim, Boulos claimed that BP had unlawfully discriminated against Boulos, contrary to s 20 of the Act, in respect of both its service stations, as follows:
“PRICE DISCRIMINATION
22.From 1980 and at all material times thereafter, service stations were operated within the Kirrawee and Canterbury market areas under franchise agreements within the meaning of the Act, between [BP] as franchisor and various parties as franchisees.
PARTICULARS OF MARKET AREAS
…
PARTICULARS OF FRANCHISEES
As to the Kirrawee market area:-
B.P. Sylvania Heights
B.P. Kirrawee (Cnr. Princes Highway and Oak Road.)
B.P. Kingsway
B.P. Sutherland Motors
B.P. South Hurstville
B.P. Carss ParkAs to the Canterbury market area:-
B.P. Canterbury (Cnr Canterbury Road and Howard Street)
B.P. Lewisham
B.P. Kingsgrove
B.P. Punchbowl
B.P. Clempton Park (Bexley Road)23.From about mid 1990 to 1992 [BP] from time to time provided to [Boulos] and other franchisees of [BP] certain discounts, allowances, rebates or credits (“Discounts”) in respect of fuel supplied by [BP] for the purpose of retail sale.
PARTICULARS
The Discounts were described as ‘rental assistance’ by [BP] and, so far as [Boulos] is aware, took the form of cheques forwarded by [BP] to [Boulos] and other franchisees of [BP]….
24.From about early 1992 to early 1993 [BP] provided to [Boulos] and other franchisees of [BP] other Discounts in respect of fuel supplied by [BP] for the purpose of retail sale.
PARTICULARS
The Discounts, so far as [Boulos] is aware, took the form of cash rebates or credits calculated at certain prices per litre of motor fuel supplied or sold….
25.In providing the Discounts referred to in [pars] 23 and 24 [BP], in relation to motor fuel supplied by it, discriminated or caused or permitted discrimination between [Boulos] and other franchisees of [BP] in respect of –
a.the amounts payable by [Boulos] and other franchisees in respect of motor fuel; and/or
b.discounts, allowances, rebates or credits given or allowed to the franchisees in respect of the fuel.
PARTICULARS
i.Rental assistance was provided on a differential basis between [Boulos] and other franchisees. The assistance provided to [Boulos] was less favourable than that provided to other franchisees.
ii.[Boulos] received Discounts in the form of cash rebates or credits calculated to enable it to maintain a margin of 2.7 cents per litre while other franchisees received Discounts calculated to enable them to maintain a margin of 3.3 cents per litre….”
By its amended defence, BP alleged, relevantly, the following:
“7A.(a) In further answer to the allegations in [pars] 17 – 27 of the Statement of Claim, [BP] says that if (which is denied) it did discriminate between [Boulos] and other franchisees then any such discrimination (the “discrimination”) was constituted by the doing of acts in good faith either to meet a price or benefit offered by a competitor of [BP] or to assist a franchisee to meet a price or benefit offered by a competitor of the franchisee.
(b)By reason of the matters referred to in subparagraph (a), the provisions of s 20(1) of the Act do not apply to the discrimination.”
THE DECISION AT FIRST INSTANCE
The primary Judge ordered that BP pay Boulos compensation in the sum of $500 plus interest on that amount. His Honour further ordered that Boulos pay 85 per cent of BP’s costs.
BOULOS’ APPEAL
Boulos now appeals from these orders. There is no cross-appeal by BP.
The main issue at the trial, and on the appeal, was Boulos’ claim that BP had contravened s 20 of the Act. Other subsidiary issues, in particular, claims of estoppel and of breach of collateral contract were dealt with by the primary Judge and were argued before us.
We will deal first with Boulos’ appeal on the s 20 aspect.
THE FINDINGS AND CONCLUSIONS OF THE PRIMARY JUDGE ON BOULOS’ CLAIM OF PRICE DISCRIMINATION
In order to understand the issues that arise in the appeal on the issue of price discrimination, it will be necessary to refer, in some detail, to his Honour’s findings and conclusions in this connection, in particular his findings as to the character and administration of a series of price support schemes conceived and implemented by BP. They were as follows:
BP’s Temporary Price Assistance Scheme – February 1989
During February 1989, BP provided “temporary price assistance” to its franchisees by way of rebates under the following scheme.
If a franchisee requested “temporary support” and provided BP’s Territory Manager with advice of the prices offered by “competing resellers” in the locality which the franchisee wishes to meet, the Territory Manager would advise the franchisee whether the request was granted, the level of the rebate granted, and the date from which the rebate would apply.
Under this scheme, a “competing reseller”, by reference to whose price BP’s Territory Manager might grant assistance, was known as a “marker”. The role of the marker was central to this scheme and to each of BP’s other support schemes described in his Honour’s findings (see below). The agreed price was known as the “supported pump price”. The level of rebate advised by BP’s Territory Manager depended upon the “supported margin”. At this time, that margin varied in amount according to the supported pump price.
The following illustration of this scheme, in its application to BP Canterbury on 10 February 1989, was given: BP agreed to a supported pump price of 49.9c/L. At this price, BP allowed a supported margin of 2c/L. Since the wholesale price was 51.65c/L, a rebate of 3.75c/L was required in order to produce the appropriate supported margin, i.e. –
Wholesale price 51.65 c
Less rebate 3.75 c
47.90 c
Plus margin 2.00 c
Pump price 49.90 cBP’s Temporary Rent Relief Scheme – February to June 1991
Under this scheme, “rent relief” was credited to franchisees as a rebate at a rate of $500 per week. In order to qualify, the retail price set by a franchisee had, throughout a period of 7 days, to be (1) less than 3c/L (later 3.5c/L) above the wholesale price; and (2) no more than the retail price of a marker specified by BP.
BP’s Temporary Price Support Scheme – February to June 1991
To qualify, the retail price set by the franchisee had to be no greater than the retail price of the marker at the beginning of that period. A supported margin of 2c/L was allowed. The level of rebate was calculated by reference to the wholesale price of deliveries to the franchisees during the support period.
This scheme was altered in April 1991. The franchisee was then required to notify the specified marker’s prices on each day during the 7 days’ support period. The average of the marker’s prices in effect provided the supported pump price for the period. A rebate was available if that supported pump price was less than 2.4c/L above the average wholesale price of deliveries to the franchisee during the support period. The difference between these averages was known as the “average available margin”. Different amounts of rebate, effectively providing a support margin between 2.4c/L and 2.6c/L, were fixed by reference to the franchisee’s average available margin and total sales volume for the 7 days’ period.
BP’s Scheme for Subsidising Disadvantaged Sites – April to July 1991
Under this scheme, BP provided a subsidy, credited as a rebate, of $250 per week or, if trading 24 hours per day, $500 per week. Qualifying criteria were (1) a “marker site” with a known practice of setting a pump price which afforded it a retail margin of less than 2.5c/L; (2) a limited potential to obtain a reasonable income from other activities at the site; (3) trading hours of not less than 16 hours per day; and (4) sales of more than 150,000L but less than 350,000L.
BP’s Ex-Gratia Rent Subsidy – June and July 1991
Under this scheme, credits in amounts at the discretion of BP’s NSW retail manager, were to be given as rebates where the retail price required to match a marker’s price was less than 3c/L above BP’s wholesale price.
BP’s Comparative Area Rental Subsidy (“CARS”) – June 1991 to February 1992
Under this scheme, the supported pump price was again calculated by reference to the prices of specified markers. In each period of 7 days, the franchisee’s available margin was reckoned from the average of the marker’s prices over that period (i.e. the supported pump price) and BP’s wholesale prices for deliveries to the franchisee. A new feature of this scheme was that the supported margin varied in accordance with the franchisee’s monthly sales. Initially, a supported margin was allowed on monthly sales of 2.5c/L up to 250,000L, with 4c/L allowed on any excess. Later, the supported margin was also varied in accordance with the franchisee’s trading hours. These criteria were varied from time to time.
CARS was credited weekly, based on historical data. It was a condition of the grant of this subsidy that it not exceed the amount of the rent payable by the franchisee to BP. If it did, the surplus was placed in a suspense account known as “kitty” which would be carried forward and credited to the franchisee in any subsequent week where the supported margin produced a subsidy less than the amount of the rent.
BP’s Competitive Area Subsidy (“CAS”) – 1992
In February 1992, BP dropped the rental subsidy element. Its price support scheme, renamed “CAS”, was otherwise essentially the same.
BP’s Price Support Automation (“PSA”) – 1993
This scheme was, in its essentials, the same as the CAS scheme.
BP’s administration of the price support schemes – general
The schemes “were administered in accordance with their design”, and “any differences were explicable by reference to the elements of the schemes themselves”.
Mr Boulos’ general knowledge of BP’s schemes
Mr Boulos “always knew that different levels of support and assistance were offered during discounting cycles at different locations. When assistance was given to [him], he always knew it was granted against a specified price that [he] was not receiving assistance…, this was because [he] chose not to do so”.
The effect of the schemes – general
Notwithstanding that there were gaps in information (in the evidence), Boulos has not made out any case that assistance was given to franchisees otherwise than pursuant to the schemes; that is, assistance “was not given on a whim or an ad hoc basis…”.
Although there were faults in administration of the schemes, and notwithstanding that Boulos did “miss[] out” on some payments or credits “to which it was ‘entitled’” (but which were subsequently paid by BP), there was “no suggestion that BP[]… [was] maliciously singling [Boulos] out… [The underpayments] were an oversight [and paying another franchisee was an act done in good faith within]… s 20(2)(b)(ii)… [in that it was] the franchisor’s intention… genuinely to assist the [other] franchisee… to meet a price offered by a competitor of the franchisee”.
The administration of the particular schemes
(a)The Temporary Price Assistance Scheme – February 1989
This assistance “linked the supported margin to the supported pump price”. The differences in levels of rebate which affected BP Canterbury North on several days in early February 1989 did not result from different supported margins, but from the lower supported prices granted to BP Canterbury and BP Kingsgrove. The higher level of rebate was given to assist those franchisees to meet their marker’s price and was thus within s 20(2)(b)(ii).
(b)The Temporary Price Support Scheme
Under this scheme, the “levels of rebate did… vary. But the competitive assistance was the same across the board in a way that BP plainly thought at the time was helpful to its franchisees”. Discrepancies did flow from the circumstance that support was granted for a period of 7 days, but was fixed by reference to a supported pump price on the first day. Yet such a consequence of the administration of the scheme “hardly betokens a lack of good faith”.
(c)Temporary Rent Relief
This relief, credited as a rebate, “was plainly designed to assist franchisees whose margins were all being similarly compressed”. The flat rate would be “of more value” to a franchisee with a lower, rather than a higher, volume, but there was nothing to suggest that such assistance was not granted in good faith.
However, BP did not explain, or justify, the denial of such a rebate or credit to franchisees who, as Boulos did, owned their own sites. It followed that in the period 18-28 February 1991, the making of such payments constituted discrimination, and was not done in good faith within s 20(2)(b)(ii). Such a payment was made on 27 February 1991 to the franchisee of BP Canterbury.
(d)Trading Hours Subsidy
With respect to the qualifying criteria for this subsidy, in particular volume and the absence of other sources of income such as a car wash activity, BP gave “an entirely rational explanation of how the criteria, taken as a whole, distinguish disadvantaged sites that are particularly susceptible and vulnerable to competitive pressures on prices” and thus within s 20(2)(b)(ii).
(e)Rental Subsidy
The Ex Gratia Rental Subsidy Scheme had an “obvious potential” to be discriminatory in operation. In the event, the larger volume outlets seem to have received the largest amounts of assistance. Boulos received more in respect of Canterbury North than did the franchisees of the other nominated sites. Only at BP South Hurstville did another franchisee receive more than Boulos at BP Sutherland. The larger amount was explained by BP’s officer, Mr Smith, as required to assist in meeting competition from a particular discounter. The payment was “plainly made in good faith”.
(f)CARS
Here, sales volume and trading hours were relevant considerations. But BP was entitled to have regard to the different cost structures and services of its franchisees.
The schemes “were not particularly transparent”. But BP was “genuinely concerned about commercial confidentiality”. The industry is “a mature market” in which oil companies “compete vigorously for market share”. Franchisees may not have known the details of the supported margins from time to time, but they could all calculate their own effective levels of rebate. Later, they all had access to the target figures by reference to which an individual franchisee’s assistance was provided. BP’s reluctance to disclose unnecessary details did not indicate a lack of good faith: it was “well justified prudence in the circumstances”.
CONCLUSIONS ON THE APPEAL – PRICE DISCRIMINATION
(a)The construction of s 20 of the Act and its application
The American Authorities
In the course of argument we were referred to numerous American authorities pursuant to legislation which is known as the “Robinson-Patman Act”, s 13 of which provides:
“(a)It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchasers involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them …
(b)Upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima facie case thus made by showing justification shall be upon the person charged with the violation of this section, and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: provided, however, that nothing herein contained shall prevent a seller rebutting the prima facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor.”
The Robinson-Patman regime is significantly different from that established by s 20 of the Act in that:
(1)It requires that the relevant discrimination may substantially lessen competition, tend to create a monopoly or injure, destroy or prevent competition. This requirement finds no place in the Australian legislation.
(2)The exculpatory provision in the Robinson-Patman Act requires that any discrimination be in good faith “to meet an equally low price of a competitor or the services or facilities furnished by a competitor”. Paragraph 20(2)(b) of the Act permits discrimination in either of two cases namely:
“(i)to meet a price or benefit offered by a competitor of the franchisor; or
(ii)to assist a franchisee to meet a price or benefit offered by a competitor of the franchisee …”
While sub-par (i) broadly reflects the exculpatory effect of subs 13(b) of the Robinson-Patman Act, namely to permit a supplier to meet competition from other suppliers, sub-par (ii) also permits assistance from a supplier to a franchisee to assist that franchisee in competition with its competitors. The American cases make it clear that the Robinson-Patman Act does not permit such assistance. With these matters in mind, we turn to a consideration of the more significant American cases referred to in argument.
It was submitted firstly that the American authorities support the proposition that any discrimination must be in response to a competitive price and not part of a general pricing mechanism. This seems to be the case. It was further submitted that any actions taken pursuant to the exculpatory provision “are to be properly examinable or capable of verification”. The authorities said to lead to this conclusion are Falls City Industries v Vanco Beverage 460 US 428 (1983); FTC v National Lead Co 352 US 419 (1957); FTC v Cement Institute 333 US 683 (1948); FTC v A E Staley 324 US 746 (1945); In the matter of Purolator Products Inc 65 FTC 8 (1964); and Purolator Products Inc v Federal Trade Commission 352 F 2d 874 (1965). We have found in these cases no authority for the proposition that any assistance must be examinable or capable of verification and doubt whether such an implication could be grafted on to s 20 of the Act. We consider, however, that the capacity to examine and verify the actions taken, purportedly to meet competition, may well be a factor in considering the question of good faith.
Numerous references were made in the course of the hearing to Standard Oil Co v Federal Trade Commission 233 F 2d 649 (1956), a decision of the United States Court of Appeals. Previous proceedings in the same matter were finally determined in the Supreme Court in Standard Oil Co v Federal Trade Commission 340 US 231 (1951). Those proceedings are not relevant for present purposes. A number of propositions emerge from the 1956 decision. Firstly, the Robinson-Patman Act does not protect a pricing system which is not responsive to competition. Secondly, that Act leaves a significant discretion with the supplier. We refer particularly to the following passage at p 654:
“We think that a seller must be permitted in the exercise of a sound judgment to determine when and under what circumstances it will reduce its price in order to meet that of a competitor, and a right to require that a purchaser be possessed of the facilities for storing, handling and distributing the product. The law did not require petitioner to reduce prices in any instance, it only authorized it to do so under the limitation imposed. Petitioner had the same right to reduce its price in order to retain a customer as it did to refuse to reduce with the risk of losing a customer. The ‘good faith’ defence would be meaningless if the seller was required, as the Commission appears to indicate, to reduce its price alike to all customers regardless of the quantity in which they buy, their facilities for handling the product and their ability to pay.”
Thirdly, the fact that other suppliers may be similarly offering discriminatory pricing, with a view to meeting competition in the same market place, will not deprive any of them of the benefit of the exculpatory provision. Certiorari was denied by the Supreme Court in respect of this decision. See Federal Trade Commission v Standard Oil Co 355 US 396 (1958).
We should mention three other cases to which reference was made in argument. The first is Federal Trade Commission v Anheuser-Busch Inc 363 US 536 (1960). That was a case in which the respondent supplier sold its beer to retailers in the St Louis area at a price which was less than that at which it was supplying retailers outside of that area. The Federal Trade Commission found that this was discriminatory pricing in breach of the Robinson-Patman Act, but the Court of Appeals reversed this decision upon the basis that all competing purchasers (within the St Louis area) were being offered the product at the same price and that there was, therefore, no relevant discrimination. The Supreme Court granted certiorari upon the basis that there was a discrimination as to price (as between St Louis retailers and retailers outside that area), which was sufficient to attract the operation of the legislation. The Court considered that the legislation was designed to protect competing suppliers (described in the judgment as “primary line competition”) as well as the various purchasers from the supplier in question. Clearly, the case has no relevance for present purposes.
The second case is the decision of the Supreme Court in Federal Trade Commission v Sun Oil Co 371 US 505 (1963). In that case, an oil company granted a price discrimination in favour of a retailer to assist it in meeting competition from a nearby retailer. This conduct was said to be beyond the protection prescribed by subs 13(b) of the Robinson-Patman Act. As we have already observed, the provisions of sub-par 20(2)(b)(ii) substantially extend the ambit of the exculpatory provision in the Act. By virtue of the presence of that sub-paragraph, the Sun Oil decision is of no relevance for present purposes. We were also referred to the decision of the Court of Appeals in Niehoff v Federal Trade Commission 241 F 2d 37 (1957), however we can find nothing of relevance in that decision.
The Present Application
We should record that BP relies upon the provisions of sub-par 20(2)(b)(ii) rather than those of sub-par 20(2)(b)(i). Further, BP does not seek to challenge the finding at first instance that there was a discrimination in supply price for the purposes of subs 20(1). In those circumstances the only question for determination is whether or not the primary Judge was in error in concluding that such discrimination was provided in good faith to assist a franchisee to meet a price or benefit offered by a competitor of that franchisee. In the course of argument, two questions of construction arose. The first relates to the requirement of good faith and the second, to the meaning of the expression “to assist”.
Good Faith
In BP Australia Ltd v Trade Practices Commission (1986) 12 FCR 118 at 119 – 120, Woodward J observed, in connection with the present legislation:
“Further, the Franchise Act excuses the company which ‘in good faith’ does an act (such as offering a rebate) to assist a franchisee to meet competition. It does not require any oversight by the company of the result. As long as its intention was genuinely to assist in bringing that result about, the act is excused.”
The other members of the Court did not consider this matter. Such an entirely subjective approach to the question of good faith is not always justified. In Cannane v J Cannane Pty Ltd (1998) 192 CLR 557, Kirby J considered this question, although in a dissenting judgment. His Honour observed at 596:
“The words ‘good faith’ and ‘acted in good faith’ appear in many statutes in virtually all countries of the common law. It would be erroneous to suggest that a single meaning could be adopted, indifferent to the particular statutory context. It has been remarked that, putting it broadly, the words ‘good faith’, or their Latin equivalents, have received ‘two divergent meanings’ … . The first is a broad or subjective view which requires inquiry into the actual state of mind of the person concerned, irrespective of the causes which produce it. The second involves the objective construction of the words by the introduction of such concepts as an absence of reasonable caution and diligence. The particular interpretation apt to the use of the words in the given legislative context will depend on the decision-maker’s elucidation of the purpose of the legislature.”
Similarly, in Mid Density Developments v Rockdale Municipal Council (1993) 44 FCR 290 at 298, the Full Court of this Court (Gummow, Hill and Drummond JJ) considered the expression “anything done or omitted to be done in good faith” in New South Wales environmental planning legislation in connection with the liability of a planning authority for supplying incorrect information. Their Honours said:
“‘Good faith’ in some contexts identifies an actual state of mind, irrespective of the quality or character of its inducing causes; something will be done or omitted in good faith if the party was honest, albeit careless: …(abstinence from inquiry which amounts to wilful shutting of the eyes may be a circumstance from which dishonesty may be inferred …). On the other hand, ‘good faith’ may require that exercise of caution and diligence to be expected of an honest person of ordinary prudence.”
Clearly, it is not possible to prescribe definitively the considerations which may lead to the more objective, rather than the more subjective approach. However we suggest that they would include the context of the transaction (eg domestic or commercial), the importance of the matter, possible adverse effects upon others and the likely expectations of others. In addition, there are the matters mentioned by the Full Court in Mid Density Developments at 299:
“These provisions, on their face, are designed to strike a balance between (1) the interests of the authority which is funded by public not private funds and which, pursuant to statute, provides the information, and (2) the interests of the recipient of the information and others reasonably acting upon it where, in the ordinary course, those persons may be expected to incur substantial liability on the faith of what is disclosed by the authority.”
Given the apparent purpose of s 20, namely to protect franchisees from discriminatory pricing policies, it may well be that a franchisor who wishes to take advantage of the exculpatory provisions of subs 20(2) should take steps to ensure that the information upon which it acts is accurate and that any assistance will be such as to help the recipient to compete with the price in question. If the franchisor fails to take those steps and as a result, offers assistance in circumstances in which it is not justified by subs 20(2), it may be liable for the consequences. BP bore the obligation of showing that the assistance was provided in good faith for the relevant purpose. It acted upon information derived from the relevant franchisees, and there is nothing in the evidence to suggest that this was done other than in good faith, or that there was any reason why BP ought not to have done so. Similarly, there is no reason to believe that the assistance was other than appropriate to bring about the prescribed purpose. Had Boulos been able to point to evidence suggesting that assistance had been offered to franchisees in circumstances in which subs 20(2) did not authorize it, then BP’s honest belief (as found by his Honour) may not have been sufficient to permit reliance on that sub-section in the absence of reasonable caution and diligence, to adopt and adapt the words of Kirby J. However the issue did not arise. Boulos’ case was rather that whatever the basis for deciding to give assistance, it was in bad faith because Boulos did not receive support at the same level. It was subjective good faith, not diligence, which was in issue. His Honour accepted that the respondent acted in good faith and no basis has been demonstrated which would justify our interference, the decision being substantially based upon his Honour’s view of the respondent’s witnesses.
“To Assist” – Purposive or Causative Meaning
In Cbew v The Queen (1991-92) 173 CLR 626 the High Court considered a statutory provision prohibiting an officer or employee of a corporation from making “improper use of his position as such an officer or employee, to gain … an advantage”. The question was whether or not the expression “to gain” should be given a purposive or causative construction. In other words, was it required that the action have the intention or purpose of gaining an advantage, or was it required that the act in question cause that result, namely the gaining of such an advantage? Not surprisingly, the Court concluded that this was a matter of construction. Paragraph 20(2)(b) is concerned with the doing of an act to assist a franchisee to meet a price. A purposive interpretation would require that the franchisor intend that there be such assistance. A causative interpretation would require that the steps taken by the franchisor have the effect of so assisting the franchisee.
For present purposes, the steps taken in each case involved the grant of price rebates or other financial assistance. There can be little doubt that they were appropriate to assist the franchisee to compete. The primary Judge accepted that this was BP’s purpose in so doing. The Act does not require that such assistance actually produce a competitive price. Indeed, the term “assist” implies that the assistance may be one of two or more elements contributing to the prescribed or desired result. Although in this case, BP generally required the franchisee in question to sell at a price equal to, or below that of a competitor, the Act does not require that step. Had it been intended that the franchisee’s selling at the competitive price be a condition of any assistance, one would have expected the section to say so. The words should be given a purposive meaning.
There is one further comment which we should make before departing from this aspect of the case. As we have said, Boulos’ real complaint appears to be, and always to have been, that it ought to have benefited equally with other franchisees, or at least those operating in the same geographical or market areas as its service stations. In particular, Boulos argues that there should have been no discrimination as between BP’s franchisees, dependent upon their respective sales volumes or other idiosyncratic factors. Had BP adopted such an approach, it would almost certainly have been in breach of the provisions of s 20. If, for example, BP were to have offered Boulos a discriminatory price advantage simply to reflect a similar offer made to another franchisee, such benefit would not have been offered in good faith for the purpose of assisting Boulos to meet a competing price, but for the purpose of treating Boulos equally with the other franchisee. That approach is not permitted by the Act.
Again, we can discern no error in the primary Judge’s approach here.
One Other Matter
On a number of occasions in the course of argument, Counsel for Boulos submitted that the supported pump price (which term has been explained above) was, itself, an allowance for the purposes of subs 20(1). It will be recalled that the supported pump price was the maximum price at which the franchisee was to sell in order to qualify for the receipt of a price rebate or other advantage. We see no way in which that price could constitute either “amounts payable by the franchisees in respect of the fuel” for the purposes of par 20(1)(a) or “any discounts, allowances, rebates or credits given or allowed to the franchisees in respect of the fuel” for the purposes of par 20(1)(b). The argument was put in a slightly different way in the written submissions which state:
“A difference in supported pump price is a discrimination of itself because the franchisee with a higher supported pump price is not allowed to match the competitor prices at the same level as a franchisee who was allowed a lower supported pump price. The option for the franchisee with the higher supported pump price is not to match the lower price and therefore suffer loss in volume, or to match to maintain volume but sacrifice profit margin. A difference in the supported pump price has two levels of discrimination: the ability to match competitor price (therefore affecting volume) and the end product, namely the level of rebate which is produced.”
In this form, the argument is that the difference between the supported pump price of one franchisee and that of another constitutes a “discrimination”. A “discrimination” for the purposes of sub-par 20(2)(b)(ii) is one of the discriminations referred to in subs 20(1). It must therefore fall within one of the descriptions mentioned in par 20(1)(a) or (b). Just as the supported pump price does not fall within any of those descriptions, neither can any difference in supported pump prices. It is the assistance offered to achieve that price which is the discrimination for the purposes of s 20. We again point out that the Act does not invite a comparison of the treatment by BP of its various franchisees inter se. We should say that we consider the first sentence of the above submission to be factually inaccurate. BP did not prohibit an assisted franchisee from selling at a lower price than the supported pump price. Such a franchisee could do so, but would probably find it uneconomical.
Boulos’ real complaint appears at pars 24 and 25 of the written submissions as follows:
“24. Many of the schemes are based on the proposition that s 20(2)(b)(ii) permits a franchisor to identify particular types of franchisee or individual franchisees which are suggested by the franchisor to need financial assistance so as to be able to stay in business or remain solvent or viable and so in some general sense meet ‘competition’.
25. The Primary Judge seems to have accepted that this was permissible; without explaining why that should be so, whether by reference to the express language of the statute or its purpose.”
This submission reflects the primary basis of much, if not all, of Boulos’ case, which is simply that there could be no assistance offered in good faith to any one franchisee if precisely the same benefit were not offered to other franchisees, possibly subject to some loose test of geographical or market proximity, which test was implied rather than asserted by Boulos. That approach is not supported by the wording of the section. Sub-section 20(2) contemplates there being a price discrimination as between franchisees; otherwise there would be no purpose to be served by its operation. The geographical or “market” proximity test is also not found in the Act, and it would be difficult to design or imply such a test. The Act prohibits all discrimination unless it can be brought within one of the exceptions prescribed in subss 20(2), (3) and (4). We refer to the passage from Standard Oil set out above and adopt it as appropriate to describe the effect of the Act. It does not require that a franchisor reduce prices in any particular case, but authorizes it to do so in prescribed circumstances. As long as the reduction granted to any particular franchisee is made in good faith for the prescribed purpose, it is protected. A refusal to grant the same support to other franchisees might, in some circumstances, be evidence of bad faith, but subject to that risk, it is not necessary that the franchisor prove that any such failure was in good faith.
This was a lengthy trial, and the argument of the appeal was also lengthy. The appellant advanced numerous arguments and views as to the operation of the Act, to many of which we have not expressly referred. We consider, however, that our views as to the proper construction of s 20 and of the appellant’s case effectively dispose of them. The appellant asked us to make numerous findings of fact inconsistent with those recorded by the primary Judge. We do not see any basis for doing so. The claim for relief in reliance upon s 20 must fail.
CONCLUSIONS ON THE APPEAL – OTHER ISSUES
(a)Boulos’ claims in estoppel
By its statement of claim Boulos alleged that on 6 December 1988 it entered into leases and sub-leases of the Canterbury and Kirrawee premises, together with product supply agreements, with BP (“the agreements”). Boulos then claimed that, as an inducement to it to enter the agreements, BP made the following representations to Boulos:
“a.[BP] would, during the currency of the lease and sub-lease, provide pricing assistance, to meet competition from service stations selling competing brands of motor fuel within the Kirrawee and Canterbury market areas during periods of discounting.
b.[BP] would, during the currency of the lease and sub-lease, treat [Boulos] equally with other service stations operated under [BP’s] signage within the Kirrawee and Canterbury market areas, by matching pricing assistance given by [BP] to those service stations (or any of them) to meet competition from service stations selling competing brands of motor fuel.
c.The market area of the Kirrawee and Canterbury marketing premises would be regarded by [Boulos] and [BP] for the purposes of the representations as covering defined areas, being the Kirrawee market area and the Canterbury market area.”
Boulos gave these particulars of the alleged representations:
“a.The representations were oral, made by Messrs. Jowett, Brisset and Williams on behalf of [BP] to Mr Tony Joseph Boulos on behalf of [Boulos].
(b)The representations were made at the offices of [BP] by Messrs Howett and Brissett at 110 Alfred Street Milsons Point; and by Mr Williams at Kirrawee and at Cronulla Leagues Club.”
Boulos next alleged that BP acted contrary to its representations and that Boulos suffered loss and damage as a result.
In this connection, his Honour made the following factual findings:
·Prior to its entry into the agreement, Boulos had been an independent reseller of fuel supplied by BP. In 1988, BP notified Boulos of a proposal to reduce rebates. Against that background, toward the end of 1988, Mr Boulos discussed with BP’s officers whether BP might lease the two sites, with Boulos becoming a franchisee under a sub-lease from BP. Mr Boulos “bargained keenly” in relation to the rent and royalty payable by BP under the proposed head leases.
·Mr Boulos met with officers of BP at BP’s premises on 6 December 1988. He lunched with Mr Jowett, BP’s State retail manager. He then met with Mr Brissett, one of BP’s territory managers. Together they looked at, and discussed, maps of local trading areas which contained information as to traffic flows and sales volumes of individual service stations. Mr Jowett then joined them. The following conversation took place:
“Boulos:‘Will I be able to remain competitive with the market when I become a franchisee?’
Jowett:‘Assistance will be granted to you when available to other BP sites.’
Boulos:‘I’m sure you will treat me equally to any BP site in my market area and that assistance will be available to me as well.’
Jowett:‘We’ll do the right thing, buddy.’”
Boulos’ case was that the effect of this conversation was that BP represented to Boulos that when Boulos became a franchisee (as it did two months later), it would be treated equally with any BP site in the area depicted on the local area maps, and that each service station site on those maps would be a marker site for the purpose of granting price assistance.
His Honour held that the alleged representations were not made out. He said:
“In Mobil Oil Australia Ltd v Lyndell Nominees Pty Ltd (1998) 153 ALR 198 a Full Court of this Court emphasized (at 235) how ‘unqualified, firm and specific’ statements must be in order to attract the application of promissory estoppel. It is a heroic submission to attempt to read into Mr Jowett’s bland assurance, especially in the context in which it was made, the specific elements asserted by [Boulos]. That would not, in my opinion, be a reasonable construction to place upon what he said. The apparent meaning of Mr Jowett’s comment was that BP would provide assistance to [Boulos’] service stations when that assistance was provided to other franchisees in their market areas. Moreover, I am sure that this is how Mr Boulos construed the remarks at the time. I regret to say that, if Mr Boulos’s evidence is to be taken as denying that conclusion, I do not accept his denial. Mr Boulos was very conscious of the Act’s provisions affecting franchisees. Had he wished to have had some additional assurance in respect of [Boulos’] future treatment, it would have been made the subject of a precise and specific written agreement. Mr Boulos is an extremely astute and obviously competent businessman. As I have mentioned, he was a very hard bargainer. His life is a great success story. Under his direction, [Boulos] has amassed very considerable assets that have been employed in a business with significant revenue streams. Mr Boulos would not be induced into any assumption on the basis of Mr Jowett’s bromide.”
Counsel for Boulos now challenge these conclusions. Specifically, they submit that the conversation was “sufficiently particular” to ground the representations alleged.
However, we are not persuaded that any error on the part of the primary Judge has been demonstrated in this respect.
In Mobil Oil, above (at 235), the Full Federal Court (Lockhart, Lindgren and Tamberlin JJ) spoke, as his Honour noted, of the need, in this area, to demonstrate that “statements as to [certain] proposals were sufficiently unqualified, firm and specific so as to induce an assumption that ‘a particular legal relationship’ would be established…”. Their Honours went on to hold (at 237) that a proposal raised was no more than “a generalised commitment to find a way to implement [a certain] scheme [and] cannot, in the present context, give rise to an expectation of a… ‘particular legal relationship’...”.
In the instant case, it appears that, in holding that Boulos had not demonstrated that an actionable representation had been made, the primary Judge applied this reasoning as, in his opinion, properly analogous to the present circumstances.
In our view, this conclusion was reasonably open. His Honour’s reference to Mobil was pertinent as an authoritative statement of the legal principles in this area. The actual application of those principles did, of necessity, depend upon the particular circumstances of the case at hand, specifically the language in fact used and its context. In our opinion, it was open to the trial Judge to conclude, from the facts he found, that BP’s statements and conduct were not, as was said in Mobil (at 237) “sufficiently specific and unqualified to attract the application of equitable estoppel in relation to the… proposal”.
The nature and significance of the assumptions said to be involved are important for present purposes; that is to say, the fact that they are positive in character (i.e. call for positive action by BP), their substantial duration (i.e. throughout the periods of the lease and sub-lease), and the nature of the undertaking alleged (i.e. equal treatment by matching pricing assistance). Given their nature and significance, it can readily be understood why, in the absence of unqualified, firm and specific language, a trial court would be reluctant to uphold a claim of equitable estoppel here.
Notwithstanding a concession apparently made by Mr Boulos in cross-examination (trial transcript at 302, 775), Counsel for Boulos also challenged his Honour’s negative finding with respect to the claim that Mr Boulos was induced to act in the present circumstances. Again, given especially the advantage of a trial judge in this essentially factual area, we are not persuaded that any basis for our interference has been established.
This aspect of the appeal should be dismissed.
(b)Boulos’ claim in collateral contract
This raises similar issues, and the same factual issues, as the estoppel claim. For essentially the same reasons, we would dismiss this aspect of the appeal.
(c)Costs of the trial
As has been seen, his Honour ordered that BP pay Boulos $500 compensation. This order should, however, be viewed, as the trial Judge did, in the broader context of the failure of a claim by Boulos for compensation in a significant sum in the following context: A trial which lasted for seven weeks. Boulos had alleged that unlawful discrimination had occurred on several hundreds of occasions over a five year period. And, except for the one short period mentioned, his Honour had held that BP had established the defence under s 20(2)(b)(ii). In those circumstances, his Honour ordered that Boulos pay 85 per cent of BP’s costs.
Counsel for Boulos now challenge this order. They say that this litigation was in the nature of a “test” case and that Boulos was successful in demonstrating that, s 20(2) apart, BP had contravened s 20(1).
We have difficulty accepting this argument.
In a trial of this length and complexity, it is clear beyond question that a trial judge has a particular advantage in the discretionary area of costs. We should therefore be reluctant to interfere, unless there are indications that the discretion has miscarried. But, if anything, the indications here are to the contrary. We agree with the submission of Counsel for BP that the costs order reflected the facts that whilst Boulos succeeded on a limited number of issues, the uncontroverted fact was that BP succeeded on substantially the whole of the case.
This part of the appeal also fails.
ORDERS
The appeal will be dismissed, with costs.
I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court. Associate:
Dated: 30 April 1999
Counsel for the Appellant:
R W R Parker QC with G R Waugh Solicitor for the Appellant: Stojanovic Solicitors Counsel for the Respondent: R M Smith Solicitor for the Respondent: Clayton Utz Date of Hearing: 8, 9, 10, 11 March 1999 Date of Judgment: 30 April 1999
0
3
0