Tony J Boulos Pty Ltd v BP Australia Ltd
[1998] FCA 628
•9 JUNE 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 589 of 1994
BETWEEN:
TONY J BOULOS PTY LTD
APPLICANTAND:
BP AUSTRALIA LIMITED
RESPONDENTJUDGE:
WHITLAM J
DATE OF ORDER:
9 JUNE 1998
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
Proceeding is stood over to 24 June 1998 at 9.30am for the purpose of fixing hearing dates for argument on the orders to be made, including orders as to costs.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 589 of 1994
BETWEEN:
TONY J BOULOS PTY LTD
APPLICANTAND:
BP AUSTRALIA LIMITED
RESPONDENT
JUDGE:
WHITLAM J
DATE:
9 JUNE 1998
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Service stations, like ships, have distinctive names. This case concerns two service stations in the suburbs of Sydney known as BP Canterbury North and BP Sutherland. BP Canterbury North is located at the corner of Canterbury Road and Duke Street, Canterbury. BP Sutherland is located at the corner of Princes Highway and Waratah Street, Kirrawee. Both service stations are operated by the applicant and sell motor fuel supplied by the respondent (“BP”).
The applicant’s primary claim against BP in this proceeding is for compensation under s 22 of the Petroleum Retail Marketing Franchise Act 1980 (“the Act”). The applicant alleges that BP contravened s 20(1) of the Act. Section 20 of the Act relevantly provided:
“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) . . .
(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; or
(c) . . .
(3) . . .
(4) . . .
(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; and
(b) . . .
(6) In this section, “franchise agreement” means a franchise agreement in relation to which this Act applies, and “franchisee” and “franchisor” shall be construed accordingly.”
The alleged discrimination relates to specific days during discrete periods. In respect of BP Canterbury North the applicant alleges discrimination between it and the franchisees of five other service stations known as BP Canterbury, BP Clemton Park (later BP Campsie), BP Kingsgrove, BP Punchbowl and BP Summer Hill. In respect of BP Sutherland the alleged discrimination relates to six service stations known as BP Cawarra (later BP Caringbah), BP Carrs Park, BP Kirrawee, BP South Hurstville, BP Sutherland Motors and BP Sylvania Heights. BP accepts that it supplied motor fuel under franchise agreements to which the Act applied to all these service stations except BP Sutherland Motors.
The specific acts of discrimination relied upon by the applicant were originally identified by its managing director, Tony Joseph Boulos, in a spreadsheet marked “TJB3” referred to in a witness statement that he signed on 20 April 1995. He claimed that at BP Canterbury North the applicant had “suffered” discrimination on 412 days between February 1989 and January 1994, and that at BP Sutherland it had “suffered” discrimination on 457 days between March 1991 and January 1994. This document has since been substantially refined so that, in its present form (exhibit A125), it encompasses the specific acts of discrimination alleged by the applicant.
The impugned acts involve various forms of price support given to its franchisees by BP. Such assistance was commonly provided by oil companies to their franchisees during retail discounting cycles in the periods in question. BP made assistance available under a succession of distinct schemes recognised by Associate Professor Neville Norman, the economics expert called by the applicant. Those schemes should now be described.
During February 1989 BP provided “temporary price assistance” to its franchisees by way of rebates. The franchisees claimed such rebates by completing and submitting to BP a Price Assistance form. This document set out terms which provided:
“This form is part of the arrangements by which BP may grant temporary price assistance to you for the purpose of your meeting a retail price offered to the public by one or more of your competitors.
A request for temporary price assistance must come from you. You acknowledge that BP never suggests or proposes price assistance to you.
Your request for temporary support is to be made by telephone or in person to BP’s Territory Manager together with verbal advice to BP of the prices offered by competing resellers in your locality which you wish to meet. BP’s Territory Manager will advise you whether your request is granted, the level of rebate granted and the date from which the rebate will apply.
Subject as below, the rebate granted will apply to the volume of your sales of the BP product concerned (based on meter readings) from the time of introduction of the rebate until the time of its withdrawal by BP. Withdrawal will be advised by telephone to you and can take place at any time.”
This plain prose masks the jargon used in the petroleum retail industry. A competing reseller, by reference to whose price BP’s Territory Manager grants assistance, is a “marker”, and the agreed price is the “supported pump price”. The level of rebate advised by BP’s Territory Manager depended on the “supported margin”, which at this time varied in amount according to the supported pump price.
The scheme may be illustrated by showing (with figures expressed in cents per litre) how the level of rebate was calculated for BP Canterbury North on 10 February 1989. 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. This was the level of rebate advised to the applicant.
The next relevant discrete period covers the temporary financial assistance made available to franchisees by BP between February and June in 1991. This took two forms: Temporary Rent Relief and Temporary Price Support.
The so-called rent relief was credited to franchisees as a rebate at a rate of $500 per week. Initially, in order to qualify for such a credit, the retail price set by a franchisee had, throughout a period of seven days, to be (1) less than 3c/L above the wholesale price and (2) no greater than the retail price of a marker specified by BP. Towards the end of this period the first of those conditions was relaxed so as to recognize a retail price averaged over the period of seven days that was less than 3.5c/L above the wholesale price.
Between 18-28 February 1991 Temporary Rent Relief was not available to franchisees which owned their service station sites. The applicant was such a franchisee.
Temporary Price Support was also made available for periods of seven days. At the start eligibility required that, throughout such support period, the retail price set by a franchisee be no greater than the retail price at the beginning of that period of the marker specified by BP. Against this supported pump price BP allowed a supported margin of 2c/L. The level of rebate was calculated by reference to the wholesale price of deliveries to the franchisee during the support period. (BP also permitted a one-off credit by way of the same rebate on the volume of stock already held in underground tanks by the franchisee when support was first granted.)
The scheme may be illustrated by showing how the rebate was calculated for BP Canterbury North in respect of the period 11-17 March 1991. The supported pump price was 59.9c/L and the wholesale price was 61.8c/L. The level of the rebate required to yield a supported margin of 2c/L was thus 3.9c/L, and the amount of the rebate was calculated at that rate on the total value of deliveries made during that support period.
The Temporary Price Support scheme was changed in early April 1991. The franchisee was now required to notify the specified marker’s prices on each day during the seven days’ support period and, of course, not to exceed those prices. The average of the marker’s prices provided, in effect, 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 two averages was referred to as the “average available margin”. Different amounts of rebate were fixed by reference to the franchisee’s average available margin and total sales volume for the seven days’ period. Effectively these amounts provided eligible franchisees with a support margin between 2.4c/L and 2.6c/L.
Two other schemes may be briefly mentioned. On 30 April 1991 BP introduced a trading hours subsidy for “disadvantaged sites”. In Sydney the rate of the subsidy was $250 per week or, if trading 24 hours per day, $500 per week. The subsidy was credited as a rebate. A franchisee was required to meet all the following criteria:
“1.Have a marker site in its trading area with a known practice of setting a pump price which affords it a retail margin of less than 2.5cpl on Motor Spirit eg: Solo.
2.Limited potential to obtain a reasonable income from other activities at the site. This factor will exclude all Food Plus sites, sites with car washes and sites with LPG sales over 100,000 litres per month.
3.Trading hours of 16 hrs per day or more . . .
4.Sales of more than 150,000 litres and less than 350,000 litres per month of motor spirit.”
The other short-lived scheme applied for six weeks from 22 June 1991. It is described as the ex-gratia rental subsidy. Credits were to be given as rebates against unleaded motor fuel. The only qualification was that the retail price required to match a marker’s price was less than 3c/L above BP’s wholesale price. The amount of such credits was left to the complete discretion of BP’s retail manager for New South Wales. The total amount available for the scheme was $230,000 which, according to BP’s internal memorandum, “equates to 0.6 cpl over the franchised network in Sydney for six weeks”. Both these schemes were discontinued by the end of July 1991.
BP then introduced a new scheme called Comparative Area Rental Subsidy (“CARS”). This scheme was also based on the underlying concepts of a supported pump price and a supported margin. The supported pump price was again calculated by reference to the prices of specified markers, which the franchisee agreed not to exceed. In each period of seven days the franchisee’s available margin was reckoned from the average over that period of the marker’s prices (that is, the supported pump price) and BP’s wholesale prices for deliveries to the franchisee.
The new feature of CARS was that the supported margin varied according to a franchisee’s monthly volume of fuel sales. So, initially, a supported margin was allowed on monthly sales of 2.5c/L up to 250,000L and of 4c/L on the remainder. Soon after the supported margin was also varied according to a franchisee’s trading hours. Since CARS was credited weekly, BP used historical data to determine the amount of subsidy. The trading hours and volume criteria were adjusted from time to time.
A quirk in CARS was that the subsidy in any week was limited to the amount of rent paid to BP by the franchisee. If the franchisee’s supported margin otherwise justified in any week a sum in excess of that rent, the excess was placed in what was somewhat confusingly called the “kitty”. This surplus was credited to the franchisee in any subsequent week where the supported margin produced a subsidy less than the amount of the rent.
In February 1992 BP dropped the rental subsidy element. Its price support scheme was now called Competitive Area Subsidy (“CAS”), and the essentials remained the same. There was some fine-tuning. Supported margins were calculated using average monthly, rather than actual weekly, sales volumes. As at 20 March 1992, the supported margins varied according to trading hours and monthly sales volumes as follows:
24 Hours up to 250,000 L 3.3c/L
remainder 0.4c/L18 - <24 Hours up to 250,000 L 3.1c/L
remainder 0.4c/L15 - <18 Hours up to 200,000 L 3.0c/L
next 50,000 L 1.5c/L
remainder 0.4c/L<15 Hours up to 200,000 L 2.8c/L
next 50,000 L 0.5c/L
remainder 0.4c/L
This scheme ran until the end of 1992 when, for the apparent administrative convenience of BP, it was redesignated as Price Support Automation (“PSA”). But the essence of PSA was the same as CAS. At different times in the period up to January 1994 with which this case is concerned, the trading hours and volume bands were altered together with the applicable supported margins. BP calculated for each franchisee a target weekly payment.
All the schemes described above had other qualifying criteria, such as the wearing of BP uniforms and the like. I have, however, set out what were the essential features. The twin concepts of a supported pump price, fixed by reference to the price of a marker specified by BP, and of a supported margin were fundamental to the operation of the significant schemes. Mr Boulos was reluctant to concede the use of markers in CARS and CAS. However, as I later explain, I am quite satisfied that the role of markers was central to the operation of those schemes. It may, however, be said at this stage that, from the point of view of the franchisees, the schemes were hardly transparent.
Put simply, the applicant’s case is that the differences in supported pump prices and rebates reflected in exhibit A125 constitute discrimination within the meaning of s 20(1)(b) of the Act. BP submits, on the other hand, that discrimination under s 20(1) does not mean a difference, but an unjustified differentiation, and that the applicant has never sought to prove a case that the identified differences were not justified.
BP’s submission on the meaning of “discrimination” in s 20(1) may, in my opinion, be quickly disposed of as representing an unwarranted gloss on the natural and ordinary meaning of that word. I do not think that anything said in Street v Queensland Bar Association (1989) 168 CLR 461 about s 117 of the Constitution supports such a restricted construction of
s 20(1). The provision focuses on discrimination in specified monetary aspects in respect of the motor fuel supplied under the franchise agreements. In the context discrimination is apt to mean, quite simply, the making of a difference in particular cases in favour of, or against, a person. That is, as I understand it, the ordinary meaning of the word. Such an interpretation would promote the purpose or object of the Act. The gloss for which BP contends would, if correct, render subs (2) of s 20 otiose. It follows that I consider that the different levels of rebate reflected in exhibit A125 constitute discrimination between the applicant and the franchisees of the services stations listed there.
BP has mounted a formidable case in discharge of the onus it bears under subs (5) in establishing a case under s 20(2)(b)(ii) of the Act. Mr Boulos’s efforts in cobbling together the applicant’s case from the discovery process have been far exceeded in the energy that BP has brought to bear in a detailed factual analysis of the competitive situation confronting each of those service stations on the days where a difference in treatment is shown. This has produced a mass of paper from BP’s own records. Mr Boulos was detained in cross-examination for days whilst he was confronted with much of this material and various hypotheses constructed from it. I say hypotheses because there were gaps in BP’s information, particularly in respect of the prices of markers against which supported pump prices were set.
This extremely detailed case run by BP was one with which, I think it is fair to say, the applicant did not engage forensically in the same detail. This may, in part, have resulted from Mr Boulos’s advocacy in his own testimony. It may have reflected a sanguine view of the onus upon BP under s 20(5).
In my view, it is not necessary or desirable that specific findings of fact be made to underpin any conclusions in respect of the specific days shown in exhibit A125. By that, I mean that, for example, it is not necessary to find that on 22 May 1993 BP Carrs Park was granted assistance to meet a price of 61.7c/L set by, say, the Astron service station which was its marker further north along the Princes Highway at Carlton, and then to go on and find why the applicant was granted assistance to meet a price of 61.9c/L. The evidence as to the differences in treatment is referred to, day by day, in BP’s written submissions where it is analysed in exquisite detail over literally hundreds of pages. It would be tedious to regurgitate that material. The applicant did not directly confront the clear picture that emerged from that analysis, namely that the schemes were administered in accordance with their design. That is to say, any differences were explicable by reference to the elements of the schemes themselves. The applicant chose instead to snipe at days where there were gaps in historical information or errors in record-keeping. The conclusions contended for by BP in respect of each day are accepted. Its rigorous analysis stands effectively unchallenged.
The particulars of discrimination shown in exhibit A125 can be considered against the evidence of the terms of schemes and of how they operated. BP called the officers primarily responsible for their design, John McCrindle and James Honey. In particular, Mr McCrindle was cross-examined at length as to the alleged complexity of the schemes. The cross-examination was based largely on BP’s internal documents. He explained, by reference to conventional marginal analysis, the rationale for the various trading hours and volume bands in CARS and CAS. More importantly, BP called the territory managers who administered the various schemes on the ground and serviced BP Sutherland and BP Canterbury North. Naturally they knew all local competition and also looked after the other BP outlets in the area. They were Vanessa Knight, Margaret O’Sullivan and Don Smith. The persons with whom they dealt on behalf of the applicant were the applicant’s managers, Frank Li and Kerry Vine, and, of course, Mr Boulos.
I found BP’s witnesses impressive. Mr Smith was an obviously enthusiastic manager who worked very hard and long hours for his employer and in the interests of its franchisees. He was concerned that the schemes, which were devised from the time CARS was introduced and which called for no documentation to be completed by franchisees claiming assistance, were somewhat opaque. Mr Smith was concerned that the schemes should be more easily intelligible to franchisees, and he said so in internal correspondence. This caused him to be cross-examined for some time. Mr Smith frankly acknowledged too gaps in BP’s records after all this time, but he consistently gave credible explanations of local market conditions that convincingly justified the different treatment accorded BP franchisees. He was frank about the imperfect state of market knowledge, both that emanating from independent industry monitors such as Price Watch and from BP’s dealer network. Mr Smith seemed to rub along well enough with Mr Boulos who, no doubt, loomed as a larger than life character, and who, Mr Smith obviously thought, would ask for the world if he could get away with it.
The point of these last observations is that issues of credit do not, at the end of the day, much affect the applicant’s case on discrimination save in one respect. That is the question of how much the applicant knew of BP’s so-called profitability 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 the applicant, he always knew it was granted against a specified price that the applicant had to meet. I do find that at the times the applicant was not receiving assistance made available by BP under the various schemes, this was because Mr Boulos chose not to do so.
I turn now to the effect of the schemes. Notwithstanding gaps in information, I do not consider that the applicant has made out any case that assistance was given to franchisees at the nominated service stations otherwise than pursuant to the schemes. That is, it was not given on a whim or an ad hoc basis by BP. I do not mean to say that there were not faults in the administration. There were. Indeed, the applicant missed out on payments or credits to which it was “entitled”. These have now been made by BP to the applicant, who has only accepted such payments without prejudice to its rights under the Act. But, of course, the question remains whether paying another franchisee in a timely manner may still be done “in good faith” so as to bring that act within s 20(2)(b)(ii) of the Act. It was not submitted that such other payments were not so made. Why, indeed, it may be asked, would it be otherwise. There is no suggestion that BP’s personnel who authorized and processed payments were maliciously singling the applicant out in respect of such underpayments. They were an oversight, and s 20(1) cannot, by virtue of s 20(2)(b)(ii), apply in relation to any such discrimination.
At this point I should confirm what is implicit in my last statement, namely that, in my opinion, the “good faith” requirement of s 20(2)(b)(ii) is satisfied if the franchisor’s intention, when doing the discriminatory act, was genuinely to assist the franchisee (in whose favour the act was done) to meet a price offered by a competitor of the franchisee. In so holding, I respectfully agree with the view expressed obiter in BP Australia Ltd v Trade Practices Commission (1986) 12 FCR 118 by Woodward J at 119-120. I do not understand the applicant to contend for a contrary construction.
It is not altogether clear, but the applicant seems to submit that supported pump prices are “allowances” covered by s 20(1)(b). I could not accept such a submission. The fixing of a supported pump price, by itself, does not result in any monetary allowance being given. The rebates or credits under the various schemes where a supported pump price is used are a product of the level of rebate, which is derived from the supported pump price, the wholesale price, and the supported margin. The discrimination is found in the level of rebate.
The “temporary price assistance” available in 1989 linked the supported margin to the supported pump price. The difference in levels of rebate identified by the applicant as affecting BP Canterbury North on several days in early February 1989 in respect of this scheme did not result from different supported margins, but from the lower supported prices granted BP Canterbury and BP Kingsgrove. The higher level of rebate was given to assist those franchisees to meet their marker’s prices. So s 20(1) did not apply by virtue of
s 20(2)(b)(ii).
The Temporary Price Support scheme provided franchisees with the same level of supported margin at all times. The levels of rebate did, of course, 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 support being granted for a period of seven days fixed by reference to a supported pump price on the first day. On the second or subsequent day of such a support period, another franchisee might be granted a lower supported pump price and thus receive a higher rebate in respect of the overlapping days of the applicant’s unexpired support period. Such a consequence of the scheme’s administrative requirements hardly betokens a lack of good faith.
The Temporary Rent Relief available at the same time was something of a misnomer. It was credited as a rebate. Again it was plainly designed to assist franchisees whose margins were all being similarly compressed. The flat rate of $500 per week or the daily aliquot part of such rate would, in any given week, of course, be of more value to a franchisee with lower volume deliveries than one with a higher volume. But again there is nothing to suggest that such assistance was not granted in good faith. What does, however, remain unexplained, or at least, unjustified is the denial of such a rebate or credit to franchisees who owned their service station sites. Professor Bob Officer, the economics and finance expert called by BP, offered some rationalisation for such an exclusion. But Mr McCrindle failed to explain a rational basis which informed the original decision not to make it available to head lessors. Accordingly, in that narrow period of 18-28 February 1991, the making of such payments to other franchisees constituted a discrimination that was not done in good faith for the purposes of s 20(2)(b)(ii) of the Act. Such a payment was made on 27 February 1991 to the franchisee at BP Canterbury.
The volume criteria for the trading hours subsidy disqualified the applicant from participating in that scheme, as did a source of income from a car wash at BP Sutherland. The applicant is particularly critical of the criterion as to income from other services provided on site. BP, however, gives an entirely rational explanation of how the criteria, taken as a whole, distinguish disadvantaged sites that are particularly susceptible and vulnerable to competitive pressure on prices. I am quite satisfied that the payments made under this transitory scheme to the franchisees of BP Punchbowl and BP Summer Hill were made in good faith to assist them in meeting the prices or benefits offered by their competitors.
The ex gratia rental subsidy scheme had an obvious potential to be discriminatory in operation. In the event, larger volume outlets seem to have received the largest amounts of assistance. The applicant received more in respect of BP Canterbury North than did the franchisees of the other nominated sites. Only at BP South Hurstville did another franchisee receive more than the applicant at BP Sutherland. The larger amount was explained in Mr Smith’s evidence as being required to assist in meeting competition from a particular discounter. The payment was plainly made in good faith.
With the introduction of CARS the sales volumes and trading hours of franchisees became relevant. I said earlier that Mr McCrindle justified these criteria for different supported margins by reference to conventional marginal analysis. Professor Officer opines that a good reason for offering a greater rebate to small volume resellers is that their fixed costs per unit litre of motor spirits sold are likely to be greater than for large volume resellers and that a greater rebate is necessary for them to meet these fixed or overhead costs in order to remain competitive. He also accepted that different trading hours were capable of being related to different competitive conditions. The cost of an extra unit of sales is a marginal cost that must affect a firm’s competitive position. Mr McCrindle had to wrestle with devising and adjusting supported margins that would assist BP’s franchisees that were participating in CARS and successive schemes to meet the prices of their competitors. BP was entitled to have regard to the different cost structures and services of its franchisees.
The schemes were not particularly transparent. BP was genuinely concerned about commercial confidentiality. The retail petroleum industry is a mature market in which the various oil companies compete vigorously for market share. BP had a legitimate interest in maximising its sales volumes by utilizing a network that included viable franchisee operators. All price support cost BP money. It was no doubt anxious to ensure that such expenditure or foregone revenue was effective in assisting to shore up the competitive position of its franchisees. Those franchisees who did participate may not have known the details of the various supported margins from time to time, but they could all calculate their own effective levels of rebate. Later, of course, they all had access to the target figures by reference to which an individual franchisee’s assistance was provided. BP’s reluctance unnecessarily to disclose details of the way in which payments were calculated does not indicate a lack of good faith. On the contrary, it was a well justified prudence in the circumstances. The frustration exhibited by its territory managers in explaining schemes to franchisees is natural. It appears to be implicit in the applicant’s submissions that assistance given in good faith would involve each franchisee receiving the same nominal or percentage rebate per litre of fuel delivered. But that criticism finds no basis in the evidence of the economic experts and certainly cannot impeach BP’s good faith in the design and administration of these schemes.
It is essential to the legitimacy of all the schemes that they assist franchisees to meet the prices or benefits offered by competitors. The marker system is central to this aspect of the schemes. The applicant is particularly critical of BP’s discretion in specifying marker prices. There is a certain tension in the flexibility that BP has to specify supported pump prices by reference to particular markers where different franchisees have the same potential marker sites. This has obviously been a vexed question for the applicant in the case of sites at the perimeter of the area of close competition for BP Sutherland.
The applicant has directly challenged BP’s good faith in implementing its schemes as they affect the applicant. This has included an assault on something called the “ABC strategy”. Precisely what this strategy involved at various times is not all that clear, but I am quite satisfied that it was nothing sinister. It appears to have been, in effect, no more than a shorthand way of characterizing the degrees of discounting in the market place as varying from A to C on an increasing scale of intensity. Such expressions are beloved by marketing personnel. The fact is that the level of support remained to be determined by the territory managers. I have already said how impressed I was by these witnesses. They were patently honest and apparently capable employees. There is no suggestion that any of them were motivated by malice against the applicant or by corruption or any natural favour and affection towards any other franchisee. The discretion reposed in these managers was a necessary feature of the schemes and there is no evidence that such discretion was abused. The concept of discrimination connotes favouring one franchisee. Not a jot of evidence suggests that any manager of BP was acting other than in complete good faith whenever he or she agreed to support a franchisee by reference to a marker’s prices. The schemes did have complexities. They required energy and attention to detail in their implementation on the part of BP’s staff. Importantly too, franchisees had to wish to participate in the schemes. The schemes were refined from time to time, particularly with a view to smoothing their administration and making them easier to run from BP’s point of view. As I have said, interests of commercial confidence imposed constraints upon the extent to which BP could broadcast their elements.
In the result it does not matter whether BP Sutherland Motors was operated by a franchisee. BP has established that the acts relied on by the applicant all fall within s 20(2)(b)(ii) of the Act, save for one discrete payment of Temporary Rent Relief on 27 February 1991.
The applicant also claims against BP for causes of action based on promissory estoppel, collateral contract and breach of s 48 of the Trade Practices Act 1974. The source of the promissory estoppel claim is a meeting Mr Boulos had at BP’s New South Wales Head office at Milsons Point on 6 December 1988 prior to entering into its franchise agreements with BP.
The applicant had formerly been an independent reseller of fuel supplied by BP. Its service stations traded under the name Cheapa Petrol. (Mr Boulos obviously retained an affection for this name and continued to use it on the applicant’s letterhead after the service stations commenced trading in BP’s livery.) In 1988 BP notified the applicant of a proposed reduction in rebates. Against that background Mr Boulos held discussions towards the end of 1988 with BP’s officers about BP leasing the two sites and the applicant becoming a franchisee under sub-leases from BP. Mr Boulos bargained keenly in relation to the rent and royalty payable by BP under the proposed head leases.
Mr Boulos visited the Milsons Point office on 6 December 1988 to lunch with Peter Jowett, BP’s retail manager for New South Wales. After lunch Mr Boulos went off to the office area with one of BP’s territory managers, a Mr Brissett. Together they inspected a wall map depicting service station sites in Sydney. Mr Brissett also showed Mr Boulos a file containing maps of local trading areas, two of which related to the Cheapa Petrol sites at Canterbury North and Kirrawee. Each of the maps had attached to it information relating to traffic flows and the sales volumes of individual service stations. They briefly discussed the file material. Mr Boulos asked for a copy of it, and Mr Brissett said: “Well I’ll see.” Mr Jowett then joined the two others. He referred to the file material (known as the MPSI study) and confirmed that it was a model used by BP as a marketing tool. A conversation then ensued to the following affect:
“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.””
The applicant alleges that the effect of that conversation was to represent to it through Mr Boulos that, when it became a franchisee (which it did two months later), the applicant would be treated equally with any BP site in the area depicted on the local area maps in the file and that each service station site on those maps would be a marker site for the purpose of granting price assistance. (Mr Boulos recollects the area depicted on the file maps as extending well beyond the MPSI local area maps admitted in evidence. The MPSI maps in evidence apparently date from the Cheapa trading days, but BP is unable to say whether they were the maps actually seen by Mr Boulos on 6 December 1988. In the event, I do not think anything turns on the question of the larger areas, including BP Sans Souci and other areas on the northern side of Georges River, which Mr Boulos claims to recollect.)
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 the applicant. 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 the applicant’s 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 the applicant’s 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, the applicant 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.
The alleged representations are not made out. This means, in the way in which the case was developed, that both the promissory estoppel and collateral contract counts must fail. (It may be that the pleadings also raise questions of implied terms in the parties contractual arrangements, but those issues have, for obviously good reasons, not been pursued.)
That leaves the question of the Trade Practices Act claim. This rests on a conversation between Mr Smith and Mr Li on 18 October 1993, in which Mr Smith remonstrated with Mr Li about lowering the applicant’s retail price to match a competitor without first speaking to BP. Mr Smith expressly eschewed any intention to influence the retail price offered by the applicant. His remarks could, in my view, be reasonably interpreted as merely conveying his frustration that there should be any assumption on the applicant’s part that BP would support it at the lower price. This also appears to be the way that Mr Li construed Mr Smith’s outburst at the time. The conversation did, after all, take place at the end of a price discounting cycle. Accordingly, I do not consider that Mr Smith on behalf of BP attempted to induce the applicant not to sell its fuel at less than a specified price. This claim also fails.
The upshot is that the applicant has succeeded in making out a single contravention of the Act. The question of damages was not dealt with at the hearing. Whether at this stage that question should now be explored in relation to this contravention or some other order be made, is a mater on which I shall need to hear the parties. There is also, of course, the question of costs. In the circumstances I shall direct that the matter be stood over for directions on 24 June 1998 at 9.30 am when I shall hear an outline of the parties’ proposals for the disposition or further conduct of the case. If time is needed for substantial argument, that topic can be discussed at the directions hearing.
I certify that this and the preceding sixteen (16) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Whitlam
Associate:
Dated: 9 June 1998
Counsel for the applicant: R W R Parker QC and P H Blackburn-Hart Solicitors for the applicant: Stojanovic Solicitors Counsel for the respondent: R M Smith Solicitors for the respondent: Clayton Utz Dates of hearing: 29-31 July, 1-2, 5-8, 13-15, 20-22, 26-30 August, 2-5, 11-13 September,
3-6 December 1996Final written submissions received: 20 December 1996
Date of judgment: 9 June 1998
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