United Petroleum Franchise Pty Ltd v Gold Fuels Pty Ltd

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION
GENERAL CASES LIST

Revised
Not Restricted
Suitable for Publication

Case No. CI-15-01714

UNITED PETROLEUM FRANCHISE PTY LTD (ACN 127 764 989)	Plaintiff
V
GOLD FUELS PTY LTD AS TRUSTEE OF THE NIJHAWAN FAMILY TRUST (ACN 153 627 484) & ORS (according to the Schedule attached)	Defendants
AND BETWEEN:
GOLD FUELS PTY LTD AS TRUSTEE OF THE NIJHAWAN FAMILY TRUST (ACN 153 627 484) & ORS (according to the Schedule attached)	Plaintiffs by Counterclaim
V
UNITED PETROLEUM FRANCHISE PTY LTD (ACN 127 764 989) & Anor (according to the Schedule attached)	Defendants by Counterclaim

JUDGE:	HER HONOUR JUDGE KENNEDY
WHERE HELD:	Melbourne
DATE OF HEARING:	1, 2, 3, 4, 7, 8, 9, 10, 11 and 15 March 2016
DATE OF JUDGMENT:	29 April 2016
CASE MAY BE CITED AS:	United Petroleum Franchise Pty Ltd v Gold Fuels Pty Ltd
MEDIUM NEUTRAL CITATION:	[2016] VCC 292

REASONS FOR JUDGMENT
---

Catchwords: CONTRACT – Claim for outstanding loan payments in respect of franchise arrangement against franchisee/guarantors – Counterclaim for damages for wrongful termination where franchise agreement terminated for non-payment of electricity – whether franchisee liable for electricity – whether termination was otherwise wrongful – whether there was a breach of franchise agreement concerning the car wash at the site in terms of failure to maintain car wash equipment and/or car wash revenue entitlements and/or payment of commission – whether there was statutory unconscionability under section 21 Australian Consumer Law – quantum of plaintiff’s claim

APPEARANCES:	Counsel	Solicitors
For the Plaintiff/Defendants by Counterclaim	Mr P Bick QC Mr C Truong	Mr D Hopwood
For the Defendants/Plaintiffs by Counterclaim	Mr A Rollnik	HWL Ebsworth

HER HONOUR:

United Petroleum Franchise Pty Ltd (“United”) and Gold Fuels Pty Ltd (“Gold Fuels”) were parties to a Franchise Agreement entered into in relation to a petrol station business conducted at Narre Warren North between November 2011 and February 2015. The agreement was terminated in February 2015 following service of a breach notice by United for unpaid electricity payments.
United now claims $66,194.91 as outstanding monies pursuant to a loan given in relation to the franchise fees payable under that agreement.[1] This amount is claimed against Gold Fuels as well as each of the guarantors to that loan (Mr Ram Nijhawan, Mrs Kirti Nijhawan, and Mr Dinesh Nijhawan (“Dinesh”)).
[1] This amount corresponds to the “total claimed” in a document entitled “Plaintiffs’ Quantum Claim” handed up in closing.
Gold Fuels filed an extensive Counterclaim. It claimed that the termination was wrongful and that Gold Fuels had no liability to pay for electricity charges. Further, that United engaged in misleading and deceptive conduct in asserting that Gold Fuels was so liable.
Gold Fuels further makes claims for damages in relation to the treatment of the car wash operating at the site: alleging that it, not United, was entitled to car wash revenue; that United failed to maintain the car wash equipment; and that certain car wash commissions were wrongly withheld.
Gold Fuels also claims damages for statutory unconscionable conduct with Mr Nijhawan and Mrs Nijhawan also claiming compensation for vexation and anxiety.
Finally, Gold Fuels claims damages for conversion of chattels.
The defendants otherwise make no direct challenge to the loan or guarantee though some miscellaneous quantum issues were raised, including the appropriate amount to allow in respect of certain chattels which were allegedly left at the site on the day of termination.
Accordingly, the issues in the case were:
·    who was to pay for the electricity;
·    whether the termination was wrongful;
·    in terms of the car wash: whether there was a failure to maintain car wash equipment; whether United was entitled to car wash revenue; whether commission payments had been wrongly withheld;
·    whether there was statutory unconscionability; and
·    the appropriate quantum if United was successful. [2]
[2]This statement of the issues is based on a document entitled “Defendants’ Statement of Issues dated 2 March 2016” which Counsel for the defendants accepted was exhaustive (TS 152).
Prior to dealing with the issues however some background is necessary.

Background

Parties

Mr Nijhawan was a director of Gold Fuels and was primarily responsible for operating the Franchise Business as the nominated operator. He was a commerce graduate and had worked in banks in Australia and India.
His wife, Mrs Nijhawan, and son, Dinesh, were also directors of Gold Fuels. They had both worked in Coles Expresses. Mrs Nijhawan had been diagnosed with cancer in February 2011 and only worked in the business part time. It was unclear precisely how much Dinesh worked but he stopped after approximately one year to resume his studies.
United operates a retail petroleum business and has approximately 400 sites throughout Australia. The majority of United stores (some 350) are owned by United and operate by commission agents who run the business and are paid commission at rates on fuel and store sales as agreed to. Approximately 50 of them are set up as franchises.
Pre signing
The evidence of Mr Nijhawan was that he decided he wanted to look at a franchise business after his wife was diagnosed with cancer and it was apparent that she would never return to full time employment. Mr Nijhawan believed that given that she and Dinesh had some experience in fuel stations at Coles Express that “everyone could contribute” and a franchise could be an “easier option.”
Mr Nijhawan then met with Ms Jodie Kiska (National Franchise Manager), at United who forwarded an email of 26 August 2011 which provided him with a list of sites “within a total budget of up to $750,000” in the east/south-east area. The list included the Narre Warren North site which was priced at $415,000.00 plus GST ($270,000.00 for goodwill and $145,000.00 for franchise fees).
After a further meeting and some discussion with his family, Mr Nijhawan decided to put in an offer of $195,000.00.
Following some further negotiation, he increased his price to a total of $370,000 plus GST ($225,000.00 for the goodwill and $145,000.00 for the franchise fee). He completed “an acceptance of offer” document which included the following statement:
“I acknowledge that should the purchase of the franchise not proceed, that I will be entitled to a refund of deposit less any reasonable expenses incurred by United Petroleum Franchise Pty Ltd, as well as refund of Training Fee in the instance training has not yet commenced.”
Gold Fuels also paid a deposit on the same day of $43,600.00.
Mr Nijhawan accepted that he made this decision without undertaking any real assessment as to what the goodwill of the business was worth, saying it was just a “hypothetical” figure.
During the course of October 2011 – November 2011 Mr Nijhawan visited the Narre Warren North site on a number of occasions. There was objective evidence that the Narre Warren North site was relatively old and tired. This included a condition report (of 23 November 2011) which notes that a number of items are a “bit tired” as well as evidence that concrete near the carwash was visibly cracking (even as early as August 2011).
Mr Nijhawan agreed that the site looked “old” and that “they” told him it was in need of refurbishment, but claimed that the need for refurbishment did not influence his decision.
Post offer
By email of 21 October 2011, Ms Joanne Stewart provided Mr Nijhawan with a copy of the Franchise Agreement. She also provided details of fuel and shop sales from 2004 – 2010. The figures showed that, while shop sales were reasonably steady since 2007 (around $83,000.00), fuel sales had steadily declined each year from that time (from $535,700.00 in 2007 to $434,100.00 in 2010). She stated that the commission agent who came in 2010 did not have the same enthusiasm as the predecessor.
Mr Nijhawan did not undertake any investigations in relation to this trend but said that he relied on the “potential” of the business.
On 21 October 2011, Mr Jonathon Walker (then Franchise Development Manager) also provided Mr Nijhawan with a completed template for income and expenses with some figures for wages (in yellow) included which are said to be “variable and should be adjusted.”[3] He noted that EBIT was almost “break even” on the basis of these figures but where you start seeing dividends is when there is growth.
[3] In fact a figure of $4,237.00 monthly was inserted for a “non- franchisee” worker. The evidence of Mr Walker was that this figure of $4,237.00 monthly was derived from reviewing expenses together with Mr Nijhawan and was a rough guideline based on award wages for one nightshift person (TS 852).
In the Deed of Prior Representations (later) executed by Mr Nijhawan he states that actual “income/profit and expenses” were “not advised” by United; further that only a “hint of possible expense heads” were advised. It further transpired, as he accepted, that he made an incorrect assessment of wages and under-estimated the wages bill.
By letter of 15 November 2011, Mr Nijhawan received detailed independent legal advice from Wisewould Mahoney Lawyers (“Wisewould”) following receipt of the proposed franchise documents (Franchise Agreement, Disclosure Document, Licence Agreement, Lease and Car Wash Agreement).
By letter of 15 November 2011, Mr Nijhawan then raised a wide variety of concerns with United, particularly relating to the state of the site. Despite his evidence that the state of the site did not influence his decision, concerns about the state of site were repeated often during the course of the relationship.
The response from United included the following:
“I have indicated to you quite a few times that you are becoming the franchisee for Narre Warren North on a “as is” basis. While it is our intention to refurbish sites and franchise sites are generally given a priority we cannot confirm a timeline if and when refurbishment will occur. I would therefore advise you to print out any in-shop concerns on equipment or fit out that is either not working or needs repairing at the time of the site inspection.”
Mr Nijhawan is further told in an email of 18 November 2011 that they seem to be “going around in circles” and that the contractual documents “should be the basis of your ultimate decision whether to proceed…”
In the result, settlement was pushed back to 22 November 2011 from 16 November 2011.
Settlement
On 22 November 2011, the following agreements were entered into by the parties:
·    Franchise Agreement;
·    Licence Agreement for Gold Fuels to occupy the premises;
·    Supplementary Services (Carwash) Agreement;
·    Loan Agreement (including guarantee); and
·    Fixed & Floating Charge.
The Franchise Agreement provided a commencement date of 29 November 2011 with a term of 6 years and one renewal term of a further 6 years, though there was also a 7 day cooling off period (clause 32).
The Franchise Agreement further provided for the grant of the right to use a retail sales “System” and “United Image” at the Licensed Area (clause 2.1). Gold Fuels was to be paid a Motor Fuel Commission at $0.0182 per litre with a Minimum Fuel Commission of $10,300.00 per month (Schedule Item 13).
The initial franchise fee was $370,000.00 (plus GST) constituted by a franchise fee of $145,000.00 and goodwill of $225,000.00. There was a further initial training fee of $6,000.00 payable plus GST.
The Loan Agreement was entered into in circumstances wherein Mr Nijhawan had applied for finance with the NAB and ANZ and was rejected by both.
The “Deed of Prior Representations” document also records that United “did not advise” on the likely success or viability of the Franchised Business.
Post signing
On 29 November 2011, Gold Fuels commenced operating the Franchised Business. However, the business never operated successfully and, as conceded by Mr Nijhawan, there was never any “surplus.”
Thus, the general trend in sales continued downward in 2012 and 2013. Moreover, even after refurbishment in 2014 the site performed poorly ($347,123.00 for fuel and $63,218.00 for the shop; less than the numbers provided in 2010 above in paragraph 21).
Although various complaints were made about the franchise model by Mr Nijhawan, according to Mr Rocco Pratico some 90% of United franchised businesses were profitable. There was also objective evidence of various Key Performance Indicator “dashboards” adduced into evidence which compared the performance of the site (in terms of sales) with the total franchise network. This showed that the Narre Warren North site consistently performed below that of other franchisees.
Mr Pratico suggested that stock levels, customer service and cleanliness were issues at the Gold Fuels site. Mr Walker suggested that he tried to reinforce what Mr Nijhawan should focus on i.e. what “he could control directly” and what to leave alone. In particular, he suggested that he should focus on stock, supplies, people and cash. However, that these were getting “pushed aside” to focus on refurbishment, maintenance and the general condition of the site. Moreover, that Mr Nijhawan did not implement his advice and suggestions.
This was consistent with my own general observations of Mr Nijhawan as reinforced by the objective evidence that, too often, Mr Nijhawan became distracted by issues of relatively low significance. This is exemplified in his approach in taking time to send emails asking for “out of order” signs to be prepared by United.
In any event, given the issues before this court, I do not consider that it is ultimately necessary to resolve the precise cause for the failure of the business save to say that there appear to have been considerable efforts made by United personnel to assist Gold Fuels.
Refurbishment
In about August 2012 the manual car wash was shut down after a leakage incident. It did not reopen until after refurbishment, though there was a conflict in the evidence about whether this was at the request of Mr Nijhawan or United. In any event, the automatic car wash continued to operate.
In about 18 June 2013 to 22 August 2013 the premises were refurbished by United at a cost of approximately $500,000.00 borne by United. During the time of refurbishment Gold Fuels also continued to receive Minimum Fuel Commission.
On 16 August 2013, Mr Nijhawan and Mr Cavan Palmer (Franchise Development Manager) had a meeting which will be referred to below. Following this meeting, Mr Nijhawan wrote an email of 16 August 2013 claiming that he had decided to “bring the curtain down” on his relationship with United and had decided to offer the business to them for $700,000.00.
In the result, however, no sale was ever effected and United did not purchase the business. Instead, as Mr Nijhawan conceded, sales continued to decline post refurbishment with Mr Nijhawan also having difficulty in meeting the expenses of the business including electricity payments (as is detailed further below; although as indicated already he now denies liability for these expenses).
Breach notices and termination
On 5 November 2014, United served Gold Fuels with a breach notice in respect of outstanding car wash revenue which (it now appears) was based on an audit process which will be referred to below.
On 31 December 2014, United served Gold Fuels with a formal letter of demand requiring it to pay outstanding electricity bills in the amount of $18,821.84.
On 8 January 2015, United served Gold Fuels with a breach notice in respect of the then outstanding electricity payments in the amount of $17,071.84 requiring Gold Fuels to pay the outstanding amount within 14 days.
In the early hours of 20 February 2015, United retook possession of the premises. A formal Termination Notice was also served as will be detailed below.
From February 2015, United appointed a commission agent to operate the premises.
On 20 March 2015, United demanded that both Gold Fuels and the guarantors repay the loan.
On 10 April 2015, United issued this proceeding to recover outstanding amounts from Gold Fuels and the Guarantors.
On 11 June 2015, Gold Fuels filed an extensive Counterclaim.

Witnesses

Mr Nijhawan was the primary witness for the defendants and he was not an impressive witness.[4]
[4] Given the extensive Counterclaim of Gold Fuels, it was agreed that it should lead evidence first.
Thus, his evidence was dominated by self-serving and unresponsive answers. Even his Counsel had to (properly) concede that he was argumentative. As will be seen below, his evidence was also, at times, internally contradictory and implausible.
Consistent with the tenor of his extensive emails, he appeared to have an unrealistic view of the role of a franchisor, describing it as a “godfather,” “parent,” and “guardian.” He also appeared ready to provide long ranging speeches apparently designed to assist his cause (against United) rather than providing probative evidence of any value.
Some of his difficulties might be explained by the fact that English was not his first language. However, his non-responsive and argumentative approach meant that I am unable to rely on his evidence in the absence of appropriate contemporaneous objective evidence in support.
It is indeed unfortunate that Mrs Nijhawan had suffered a serious illness. However, her highly emotional presentation also detracted from the inherent reliability of her account.
Mr Yumesh Munjal, on the other hand, gave relatively straightforward evidence about the events of 20 February 2015.
United called a number of witnesses.
Mr David Rabe and Mr David Walker were former Franchise Development Managers (who are no longer employed by United). Both provided evidence of the support extended to Mr Nijhawan. Mr Walker, in particular, was an impressive witness.
Ms Stewart was the former Compliance Manager from 2010 – 2012 (who is also no longer an employee of United). Ms Stewart gave evidence of the training programme which she organised for Mr Nijhawan and was a straightforward witness.
Mr Pratico presented as a senior experienced person of some authority. He is the National Operations Retail Manager at United. He gave evidence of a particular meeting with Mr Nijhawan, which will be referred to below, as well as the re-entry into the site on 20 February 2015.
Mr Robert Hopes and Mr Ajith Abeynaike were also called. Mr Abeynaike is currently employed as the Group Financial Controller for United and is an accountant. Mr Hopes was a Car Wash Co-ordinator. Both gave evidence, in particular, about a car wash audit conducted in October 2014 which will be referred to below.
Finally, Mr Brian Walsh (the current Audit/Regional Area Manager at United) was called. However, given no claims were pursued about the refurbishment, his evidence need not be referred to.
As a general matter I found the witnesses called for United to be professional and straightforward. Gold Fuels made no credit submissions generally about any of these witnesses.

Was Gold Fuels liable to pay AGL for electricity?

Pursuant to clause 6.14(i) of the Franchise Agreement, the Franchisee at its expense “must pay for all gas and electricity used by the Franchised Business.” This was consistent with clause 16.11(a) which provided that the Franchisee was responsible for electricity as denoted in the Repair and Maintenance Matrix.
However, Gold Fuels alleged that it was not obliged to pay for electricity, citing, in particular clause 4.1(a) of the Licence Agreement.[5] Further, that the inconsistency between the Lease and the Franchise Agreement should be resolved in its favour.[6]
[5] Amended Defence and Counterclaim of the defendants, dated 1 March 2016 at paragraph 7(b); Closing Submissions of the defendants, dated 15 March 2016 at paragraph 65.
[6] Closing Submissions of the defendants, dated 15 March 2016 at paragraphs 127 - 131.

It further alleges that representations to the contrary by United were false and United thereby engaged in misleading and deceptive conduct[7] (a claim for mistake was no longer pursued).
[7] Amended Defence and Counterclaim of the defendants, dated 1 March 2016 at paragraphs 48 - 49.
The Licence Agreement sets out the Franchisee’s obligations in terms of the Lease (as between itself and United) in clause 4. More particularly, it sets out which of the tenant’s obligations under the Lease must be complied with by Gold Fuels.
Thus, clause 4.2(a) provides that, prima facie, Gold Fuels must “observe and comply with the provisions of the Lease [except] to the extent that the Franchisee is not otherwise required to observe or comply with those provisions pursuant to this Licence.” (The need for the word “except” to be included was self-evident; otherwise the clause made no sense. It appeared to be read by both Counsel this way).
Clause 4.1 then “carved out” the provisions which the Franchisee was “not required to” comply with as follows:
(a) to pay any Rent and outgoings payable under the Lease.
(b) effect any insurance policy required under the Lease.
(c) comply with the clauses of the Lease specified in Annexure One.
Gold Fuels alleges that payments for electricity was an “outgoing under the Lease,” placing emphasis on the absence of a capitalised “outgoings” and submitting that “outgoings” therefore include all the usual outgoings under the lease which would include electricity.
However, the concept of “outgoings payable under the Lease” can only be understood by reference to the terms of the Lease document between United and its landlord.
Pursuant, then, to clause 1.2 of that Lease, “Outgoings” are defined to mean “all statutory rates, taxes (excluding land tax) and charges separately assessed in respect of the Premises.”
Although generally headed “Outgoings”, clause 4 then incorporates a distinction between “Outgoings” as defined and “Utilities.” Thus, clause 4.1 makes provision for “Payment by the tenant of Outgoings” and provides that the tenant “must pay the Outgoings” within 14 days “after the landlord provides invoices.” This is to be contrasted with clause 4.2 which provides a separate liability for “Charges for Utilities” and provides that the tenant is to also pay directly to the relevant authorities all charges “for gas, electricity, water, telephone and removal of waste and sewerage that are separately metred to the Premises.”
Consistent with the definition contained in the Lease, the concept of “outgoings payable under the Lease” under clause 4.1(a) of the Licence (for which the Franchisee is not liable) is therefore referrable to statutory rates and charges separately assessed in respect of the Premises and incidental to actual ownership (rather than use). However, this “carve out” of liability does not extend to liability for “Utilities” which concern recurrent expenses related to the tenant’s actual use of the premises (like electricity).
Such a construction is also consistent with the contents of Annexure One which specify lease clauses which the Franchisee does not have to comply with. Thus, if liability for “Utilities” was to be excluded it would be expected that clause 4.2 would be included.
Such a construction also has the benefit that it complements clause 6.14(i) of the Franchise Agreement.[8] Given the agreements were executed as a “suite” and the Franchise Agreement is referred to in the Licence (e.g. see recital C, clause 2.1) this further fortifies my finding.
[8] See also clauses 15.4(c), 31.4(l) and Annexure One Part B (Repair and Maintenance Matrix) item “Utility-electricity” of the Franchise Agreement.
I am therefore satisfied that Gold Fuels was also liable for electricity under clause 4.1(a) of the Licence given it was generally obliged to observe and comply with the provisions of the Lease including the obligation to pay for electricity contained in clause 4.2. Further, that clause 4.1(a) of the Licence does not operate to exclude liability given payments for electricity (as a “Utilitity”) are not “outgoings payable under the Lease.”
If this construction was wrong, there would in any event be an issue as to what should be the result given the clear terms of clause 6.14(i) of the Franchise Agreement. Thus, in my opinion, clause 6.14(i) of the Franchise Agreement is crystal clear in imposing a liability on the Franchisee to pay for electricity “used by the Franchised Business.” The better view is that this would therefore impose an independent obligation on which United might rely regardless of whether the Licence also imposed such an obligation.
However, in the light of my finding above, it is unnecessary to consider this further.
I also do not consider this result to be “capricious or unjust” as suggested by Gold Fuels. To the contrary, a construction that imposes liability on the occupant to pay for services utilised by that occupant appears perfectly appropriate.
I am therefore satisfied that Gold Fuels was liable for electricity such that the claim for reimbursement of electricity payments fails, as does the claim that United engaged in misleading conduct by seeking reimbursement for electricity.

Termination

A range of complaints were originally made about termination. In the result, however, the defendants claimed that the repossession by United was unlawful for 5 reasons only as follows:[9]
·    by taking possession prior to delivery of the Termination Notice;
·    by relying on an invalid breach notice dated 8 January 2015;
·    by acting in breach of its obligation to act in good faith;
·    by acting in breach of its obligation to make every effort to resolve the dispute; and
·    by failing to take steps to mediate in breach of the Trade Practices (Industry Codes – Oilcode) Regulations 2006 (Cth) (“Oilcode”).
[9] Closing Submissions of the defendants, dated 15 March 2016 at paragraph 41.
Gold Fuels further claimed the sum of $225,000.00 by reason that it “lost the opportunity” to sell its Franchise Business.[10]
[10] Amended Defence and Counterclaim of the defendants, dated 1 March 2016 at paragraph 84(ii).
In order to properly assess this claim some further background is necessary.
Background
From, at least, August 2012 Mr Nijhawan advised of difficulties in paying electricity bills. By February 2014 Mr Nijhawan advised that he was “struggling” to pay electricity claiming his bills with Power Direct (the then provider) had increased to $4,000.00 per month ($48,000.00 per annum).
On 25 February 2014 United entered into an agreement to change its supplier to AGL to supply electricity to all Victorian sites. Sites were advised of this changeover on 18 March 2014 with a statement that “most sites will see a decrease in electricity bills.”
On 18 March 2014 Mr Nijhawan requested advice as to the new rates. Then, by email of 19 March 2014 he was told that “Currently yearly is about $39,000 without car wash, this will now be $23,000 yearly.”
On 30 May 2014 Gold Fuels raised concerns regarding the invoices, saying that instead of the bills going down to under $23,000.00 the AGL bills were actually higher.
On 9 July 2014 Mr Nijhawan advises United that he had contacted “and explained the issue” to the Ombudsman. He states “I am sure with involvement of regulatory authorities AGL will have to agree to what was offered i.e. $23,000 per annum.”
By email of 10 July 2014 United states that the $23,000.00 figure was an estimate that was given by a broker and not AGL, therefore AGL had no agreement for the bill to be $23,000.00. However, they were in the process of changing brokers.
By email of 14 August 2014 Mr Nijhawan is advised that Power Direct would provide a credit of $7,600.55. Further, that Mr Nijhawan should “organise immediate payment for the balance of the account.” The outstanding amount as at that time was $16,730.06.
On 27 August 2014 (11.25 am) United again asks Gold Fuels to start paying AGL “ASAP” as he had “not paid bills for some months now.” Mr Nijhawan responds (11.40 am) stating that he was seeking AGL to send “corrected bills” referring to his “earlier many emails requesting for this correction.” Mr Nijhawan is asked again to pay the bills (11.45 am): “I need you to start paying AGL bills.” Mr Nijhawan responded (11.50 am) saying that the “rate have to be as per offer that you conveyed before signing.”
On 2 September 2014 (10.56 am) Mr Nijhawan is asked to start paying AGL and that United was in legal proceedings with the broker but this would take some time. In the meantime he was asked to set up a payment plan and start paying.
On 2 September 2014 (12.14 pm) Mr Nijhawan advised that he would start paying the amount that would have been payable “as per the quote” and requests help arranging a payment plan with AGL or if United could help with an interest free loan.
On 2 September 2014 (3.01 pm) and 5 September 2014 United make further requests for payment.
Mr Nijhawan responds on 5 September 2014 (10.36 am) saying “I shall start today” and in the meantime when charges are “corrected” the exact figure can be assessed which should be cheaper also because of the carbon tax repeal.

100.Mr Nijhawan thereafter made a $3,000.00 payment on 10 September 2014.
101.No payment was made in October 2014.
102.On 16 October 2014 (10.46 am) United asks if Mr Nijhawan has made any more payments as “AGL are chasing me as the balance is increasing.”
103.Mr Nijhawan responds (10.52 am) saying that his car wash commission was payable and appears to suggest that this might be used to pay AGL (this had been withheld as detailed below). He states he will also be waiting for the final figure after “corrections.”
104.On 17 October 2014 (11.18 am) he is told that he needs to call AGL and start a payment plan and stick to it before they switch the power off and that the situation is “getting out of control” such that he needs to make a large payment. He is further advised that the balance owing was some $19,000.00 whilst he was only owed $3,000.00 in respect of the car wash commissions.
105.Mr Nijhawan responds on 17 October 2014 (11.34 am) saying they need to “correct the bills” and that monthly costs should be only $1,900.00 (which was apparently based on the $23,000.00 estimate) and $1,600.00 (following the carbon tax repeal).
106.By email of 17 October 2014 (11.45 am) United advised that “as mentioned earlier the $23,000 was an estimate which the broker had got wrong.” United was now in legal action with the broker. United states “However this does not change the fact the current bills are well due and need to be paid ASAP.”
107.By email of 17 October 2014 (11.59 am), Mr Nijhawan responds as follows:
“Yatish,
I that was not an estimate but the main factor being agreed cost, for United to sign up with AGL. I am liable to pay up to that extent that I shall arrange to pay which is why I said, once the car wash commission is released, that will be paid straight to AGL while balance I shall arrange to pay without delay.
As per information I had on your behalf from Ombudsman, the broker belonged to AGL who have ratify his actions. Well if the United did not match the rates with the quotes, it will still not be my mistake.”

108.By email of 17 October 2014 (1.13 pm) Mr Nijhawan is told “you can’t have an agreed cost with electricity, please pay bill ASAP.” Mr Nijhawan responds (1.17 pm) “I will pay but what was agreed/advised by you. You can’t sign up for anything and make me pay for, any cost.”
109.By email of 17 October 2014 (3.08 pm) AGL requires an “urgent payment” on the account noting that no payment had been made since 10 September 2014 and there was currently $19,204.69 outstanding.
110.By further email of 21 October 2014 Mr Nijhawan is told that they needed a payment “today” as AGL had escalated and have threatened to turn the power off.
111.On 7 November 2014 Mr Nijhawan then made a $1,000 payment.
112.Mr Nijhawan further wrote again on 21 November 2014 (10.29 am) furnishing his calculation that he was liable to pay “as per the offer that should have been accepted. We all know an offer made becomes a contract when accepted.” The calculations appear to be again based on the $23,000.00 figure ($1,900.00 per month) and to also encompass a reduced rate (post July) for the carbon tax. He indicated that he would pay “pending correction of bills as per offer.” He also asked for his car wash commission to be released immediately.
113.The response of United is that his offer was “a joke.” (11.05 pm). However, he was invited to calculate months at $2,100.00 per month (with GST) from the time of transfer.
114.As conceded by Mr Nijhawan, United also invited him to find his own supplier if he wished.
115.Mr Nijhawan responds on 21 November 2014 (11.26 pm) asking United not to call it a “joke.” He says “for now” I shall recalculate figures but “ad hoc.” Further that the carbon tax repeal made a difference of $250.00 – $300.00. He therefore includes figures of $2,100.00 for 6 months (no GST) and $1,850.00 for 4 months and says he would pay $5,100.00 in one week. He further says he would need formal confirmation that his account would be up to date with this and he would “receive corrected bills thereafter.”
116.On 1 December 2014 Mr Nijhawan made a payment to AGL of $5,100.00.
117.On 30 December 2014 AGL sent a disconnection notice to United in respect of the overdue electricity account for $18,921.84. The notice advised that if the bill was not paid consequences may include disconnection and an adverse credit rating. As Mr Nijhawan accepted in evidence, there were in fact multiple disconnection notices such that this was not the first one.
118.On 31 December 2014 United sent a letter of demand to Gold Fuels seeking payment of $18,921.84 outstanding in relation to electricity charges. The letter includes the following:
“As you are aware, you are required under the Franchise Agreement to ensure that all AGL electricity bills are paid on time. This obligation arises pursuant to clauses 12.2(a) and 15.4(c) of the Franchise Agreement and by operation of clauses 4.2(a) of the Licence (and associated Lease of the Site), both of which form part of the Franchise Agreement.
I am instructed that as at 9 December 2014, you had outstanding electricity bills with AGL totalling $18, 921.84. Further amounts may have accrued since this time.
The failure to pay outstanding electricity accounts risks electricity being shut off from the Site, causing closure and significant loss to my client.
I demand that you immediately pay in full all outstanding electricity accounts you hold in relation to the Site within seven days from the date of this letter.”

119.In response, on 31 December 2014 Mr Nijhawan writes raising a myriad of matters but making clear that he had paid “based on the rates offered while now it is for United to get AGL to honour the offer…I expect that I should not be made to suffer for that.”
120.On 5 January 2015 Mr Nijhawan pays an amount of $1,850.00 in respect of the letter of demand. He also writes an email that day saying he is waiting to hear “when the mistake between yourself and HO is fixed” and noting that the matter concerned the site’s ability to afford “incorrect payments.”
121.He is told by email of the same day that the matters in the letter of 31 December 2014 are reiterated and that payment should be made before 7 January 2015.
122.He then writes on 6 January 2015 referring again to being “incorrectly charged” and demanding full information of actions taken by legal department “for this error.” He finishes, saying:
“In the meantime, I can consider bearing the brunt of this onslaught should United decide to take back their business and pay my monies, then do what they wish. This will help both sides to be at peace. In saying so, I fully understand from the developments over many months that I stand at huge risk of being thrown out without paying any money and circumstances support my fears.” (emphasis added)

123.On about 8 January 2015 United then served a letter entitled “Franchise for Narre Warren North – Breach notice.” The material parts, read as follows:
“Nature of Dispute
TAKE NOTICE THAT you are in breach of the Agreement in that you have failed to pay to AGL Energy Limited the amount of $17,071.84 for electricity use at the Site.
Specifically, the Agreement provides:
(a) at clause 12.2(a) – you must devote sufficient time and attention to the Franchised Business and perform the administrative, marketing, promotional, compliance and accounting functions required in operating the Franchised Business and in making the Franchised Business profitable;
(b) at clause 15.4(c) – you must not do anything which may bring the System into disrepute or which may damage the interests of United of the Network (including failure to pay any supplier); and
(c) at clause 4.2(a) of the Licence – you must observe and comply with the provisions of the Lease to the extent that you are not otherwise required to observe or comply with those provisions pursuant to the Licence.

By failing to pay AGL the amount of $17,071.84 for electricity use incurred at the Site, you have breached clauses 12.2(a) and 15.4(c) of the Agreement and clause 4.2(a) of the Licence in that you have:
(a)failed to perform the administrative, compliance and accounting functions required in operating the Franchised Business and in making the Franchised Business profitable;
(b) caused damage to the interests of United and the Network by failing to pay a supplier; and
(c) failed to comply with the provisions of the Lease; specifically, clause 4.2 of the Lease that requires payment to relevant authorities for all charges for (amongst other items) electricity.

Actions Required
To remedy the breaches referred to in this Notice above, you must within 14 days from the date of this Notice and at all times thereafter for the remainder of the term of the Agreement:
(a) pay AGL the outstanding amount of $17,071.84; and
(b) pay all future AGL invoices as when they fall due and payable.
(c) at clause 4.2(a) of the Licence – you must observe and comply with the provisions of the Lease to the extent that you are not otherwise required to observe or comply with those provisions pursuant to the Licence.

United allows you a reasonable time from the date of this Notice, namely the period of 14 days set out above, in order to remedy the breaches in the matter set out above.
Notice to Terminate
Take notice that if you fail to undertake the actions detailed above within the time stipulated above, United reserves its rights under the Agreement to terminate the Agreement, including the right to terminate pursuant to clause 31.1(h) of the Agreement.
This Notice of Breach is without prejudice to United’s rights, and does not constitute a waiver of United’s rights, in respect of any other breaches of the Agreement committed by you.”

January meeting
124.A meeting thereafter occurred in January 2015 between Mr Nijhawan and Mr Pratico.
125.Mr Nijhawan gave incoherent and contradictory evidence about this meeting. He stated that Mr Pratico came to his site and offered to cash his bank guarantee. Mr Nijhawan also alleged Mr Pratico told him “don’t worry about the breach notices, they’ll be laid to rest anyway. They’re part of protocol or formality.” However, he then said that Mr Pratico further said (in the same meeting) that they could not cash the bank guarantee.
126.Mr Nijhawan also stated that this all had to be understood in the context of another (earlier) meeting earlier wherein Mr Pratico had said “you don’t know how big they are, your are messing with United, they can achieve what they want to so you’d better pay….”

127.Mr Nijhawan also claimed to have had a telephone call wherein Mr Pratico said they could cash the guarantee and further that the directors were willing to pay $100,000.00 for the business. Mr Nijhawan’s response was: “I can’t sell it for $100,000. That’s my investment and that’s not actually my money, it’s money I have to return to family and friends.”
128.Mr Pratico’s account was that Mr Nijhawan asked for a meeting around this time so he met him at a coffee shop. Mr Nijhawan further said that he was going to go to India to raise more money. Mr Pratico said “well that’s great” and left it at that. There were no discussions about the breach notice.
129.Under cross examination Mr Pratico maintained that he had not told Mr Nijhawan not to worry about the breach notice. Further, he said that the reason he did not respond to Mr Nijhawan’s many emails at all was because “it just keeps going on, and on, and on…” Mr Pratico never made an offer to purchase the business for $100,000.00 and did not know of any such offer.
130.I accept and prefer the account of Mr Pratico as to his discussions with Mr Nijhawan. The account of Mr Nijhawan was inherently implausible and contradictory. Thus at one point Mr Pratico is agreeing to lay breach notices to rest; at another he is telling him not to “mess” with United. It was also highly unlikely that Mr Pratico would tell him “not to worry about the breach notice” for no good reason. Moreover, Mr Nijhawan’s own actions were inconsistent with any such representation being made given he went overseas to obtain funds and given his subsequent emails (which show that he is aware that he is at risk unless he can get Mr Pratico to commit to writing to “relax” the breach notice).
Events leading to termination
131.By email of 21 January 2015 Mr Nijhawan raises a range of matters (said to be raising a “dispute” by Gold Fuels). The email appears to be entitled “Sorry. Too much pressure, need to talk to release a bit” and covers a range of matters including his emotional state following a funeral. He alleges that Mr Pratico had “informed me that Mr Avi Silver has offered $100K & Mr Adrian Gallace valued at $200K - 250K.” Mr Nijhawan also said he had “kindly advised me that the Breach Notices have been put to rest but I request you to kindly see if I could have any communications in that regard to get some relief.” In respect to electricity he states “kindly advise me on the issue of Electricity and Car Wash Commissions please if I could get that paid as I am penny tight now with month end arrived again. I need support.”
132.By email of 27 January 2015, Mr Nijhawan writes alleging that “you had kindly asked me to relax on Breach Notices but I plead to you to please let me have some communication for withdrawal as I continue to remain fearful.”
133.By email of 30 January 2015 Mr Nijhawan writes to Mr Pratico saying “I request you to please see if there is a way you can get me help in these terrible circumstances.”
134.On 31 January 2015 he says “I understand you advised me not to worry about notices and I am sure they will be laid to rest but I shall be thankful for a communication.”
135.He further writes again on 2 February 2015 asking “if there was an update” and asking Mr Pratico to “advise and help” him.
136.Finally on 9 February 2015 he writes:
“After talking to you this Friday, I perceive the message that anything extreme could be just around, even though I am not at fault even least for that.
I am writing this just to let you know that I am going to make another desperate attempt to beg for help from my sources, outcome of which is not known for which I will be away from work for a week or ten days. So, please bear with us and help for not letting the situation become worse for me.
Should I not succeed in borrowing more money, with all due regards to all of you, I will have no option but to put my body organs up for sale to those who might need them as a last resort. At least, this will help me ease my immediate financial pressure. This is the only option because that is the only asset I have that is not encumbered. Not being able to withstand the stress, I am going to perish soon anyway.
In the mean time, should United decide to stand besides me and rehabilitate the business or decide to buy back or make it easy to sell it soon, please do communicate to me as that might inject a new life to my dying hopes.” (emphasis added)

137.In the result, no further payment was made in respect of electricity, although Mr Nijhawan travelled overseas to try to obtain funds.
138.On 20 February 2015 United repossessed the premises.
139.The evidence of Mr Pratico was that he attended the site with 2 security guards, Mr Walsh, and Mr Rabe at around 4.30 am in order to terminate the agreement. They walked in and spoke to the console operator and told him “from this time on its termination, we’re terminating you out.”
140.The events then unfolded as follows:
·Mrs Nijhawan received a call from the night operator at around 4.30 am saying he had been locked out whereupon she was “shocked and just fainted”;
·Mrs Nijhawan then called her husband who told her to contact a friend. She and Dinesh went to the friend’s house who suggested they attend the police station. She also called Mr Munjal;
·After receiving a call from Mrs Nijhawan around 6.00 am, Mr Munjal said he then attended the site;
·Mr Munjal received the Termination Notice at the site at around 6.30 am; and
·After calling Mrs Nijhawan, Mr Munjal then met her at the nearby police station and handed the notice to her, which she then handed to her son.

141.The Termination Notice was also served:
·by email of 9.23 am on 20 February 2015 addressed to Mr Nijhawan (as director and as guarantor); and
·by post dated 20 February 2015 addressed to Gold Fuels.

142.The Termination Notice included a notification that the Franchise Agreement was terminated on the grounds that the Franchisee had failed to remedy the breach set out in the Breach Notice dated 8 January 2015 in accordance with that Breach Notice (either in part or at all).

Resolution

Taking possession prior to service of Notice
143.The allegation of Gold Fuels is that United breached the Agreement by taking possession before serving the Termination Notice.[11]
[11] Amended Defence and Counterclaim of the defendants, dated 1 March 2016 at paragraph 82.
144.As the findings above make clear, the evidence suggests that United did take possession prior to service of the Notice. Thus, while the repossession appeared to take place at around 4.30 am, Mrs Nijhawan (as director of Gold Fuels) did not receive the Notice until around 6.30 am.
145.United, however, claims that it was unnecessary for it to serve the Termination Notice to terminate the Agreement.
146.Clause 31.3 of the agreement provided as follows:
31.3 Subject to notice by Franchisor
If the Franchisee commits an Event of Default, the Franchisor may terminate this Agreement by notice in writing to the Franchisee if:
a.the Franchisor gives written notice to the Franchisee which:
i.specifies the breach;
ii.states that the Franchisor intends to terminate this Agreement if the breach is not remedied;

iii.states what the Franchisor requires to be done to remedy the breach; and
iv.allows the Franchisee a reasonable time (but not exceeding 30 days) to remedy the breach; and

b.the Franchisee fails to remedy the breach in accordance with the Notice of Breach.

147.I reject the contention of United that no separate Termination Notice was required. Rather, as the ordinary terms of clause 31.3 suggest, the Agreement contemplates that termination will only occur after two notices have been given. The first (referred to in paragraph a) is to give “written notice” of the breach which allows an opportunity for the breach to be remedied; the second (referred to in the second line) is to give “notice in writing” of the actual termination.
148.I therefore accept that the taking of possession was unlawful and will also accept, for present purposes, that it constituted a repudiation.
149.However, as conceded by Gold Fuels, in order to rely on any such repudiation Gold Fuels needed to accept it. This also needed to occur prior to the service of the actual Termination Notice which was received by around 6.30 am.[12]
[12] When served on a director: see s 109X(1)(b) Corporations Act 2001 (Cth).
150.Gold Fuels submitted that there was an acceptance given Gold Fuels “took no steps to regain possession of the store or its equipment and/or stock” after being advised by the police that United had taken over operation of the store.
151.However, I am unable to be satisfied that such inaction constitutes a communication of an unequivocal election to terminate.[13] Nor was the “stunned shock” of Mrs Nijhawan sufficient.
[13] See Rick Bigwood, Nicholas Seddon and Fred Ellinghaus, Cheshire & Fifoot Law of Contract (LexisNexis Butterworths Australia, 10^th ed, 2012) 1078-1079 at [21.23] including cases cited therein.
152.It follows that, notwithstanding the dispossession without notice, that the agreement formally remained on foot after 4.30 am until it was formally terminated by notice around 6.30 am.
153.Any breach of the Agreement in the meantime is therefore of no consequence.
Whether breach notice invalid
154.There were 2 complaints made about this Notice: first that it did not evince an intention to terminate for non-compliance; secondly that Gold Fuels was not in breach of any of the clauses relied upon by United.
155.In summarising the relevant principles in the decision in Aura Enterprises Pty Ltd v Frontline Retail,[14] (“Aura”) Brereton J stated:
[14] [2006] 202 FLR 435.
…a notice will sufficiently specify a breach if from its terms a reasonable recipient, who has knowledge of the terms of the contract, would, taking into account the surrounding circumstances, be able to identify the obligation and the manner in which it is alleged to have been breached – for which purpose reference to the relevant provision of the franchise agreement may in some cases suffice, but reference to facts describing how the breach is said to have occurred may sometimes also be necessary.[15]
[15] Aura Enterprises Pty Ltd v Frontline Retail [2006] 202 FLR 435 [41].

156.Further, in Pan Foods Importers and Distributors Pty Ltd v ANZ Banking Group Ltd,[16] Kirby J stated:
[16] [2000] 170 ALR 579.
In my view, such documents should be construed practically, so as to give effect to their presumed commercial purposes and so as not to defeat the achievement of such purposes by an excessively narrow and artificially restricted construction … It should eschew artificialities and excessive technicalities for these will not be imputed to the ordinary businessperson. Business is entitled to look to the law to keep people to their commercial promises. In a world of global finances and transborder capital markets, those jurisdictions flourish which do so.[17]
[17] [2000] 170 ALR 579 [24].

Notice to terminate
157.In relation to the first point, it is true that the Breach Notice stated that if there was a failure to remedy, “United reserves its rights under the Agreement to terminate the Agreement…”
158.However:
·    The “reservation of rights” occurs under a heading entitled in bold “Notice to Terminate;”
·    The Notice followed on from an earlier letter of demand of 31 December 2014 which was in strong terms and which had already requested “immediate payment;” and
·    The action taken by United in late 2014 documented above evinced an intention that termination was imminent unless a payment was made. Mr Nijhawan himself obviously read the actions of United in this light.

159.In relation to the last point, the responses of Mr Nijhawan were increasingly desperate culminating in a trip overseas to obtain funds and a suggestion that he might sell his organs. There can be no doubt that in these circumstances he appreciated that United possessed an intention to terminate absent payment and suffered no prejudice from the way the notice was framed.
160.Eschewing “artificialities and technicalities”, I am therefore satisfied that a reasonable recipient, with knowledge of the contract and surrounding circumstances would appreciate that the Breach Notice was giving notice of an intention to terminate.
161.I am fortified in this approach by the decision in Aura wherein breach notices in similar terms were upheld.[18]
[18] Aura Enterprises Pty Ltd v Frontline Retail [2006] 202 FLR 435 [86] - [90] (6 December Notice), [94] (30 January Notice).
Gold Fuels not in breach of clauses cited
162.It will be recalled that the Breach Notice cited clauses 12.2(a), 15.4(c) and 4.2(a) rather than clause 6.14(i).
163.Gold Fuels alleges that it was not in breach of any of these clauses.
164.United conceded that clause 12.2(a) was inapplicable but relied on clause 15.4(c) and clause 4.2(a). It further said that it did not matter whether the clauses were correct given the substance of the breach (a failure to pay the AGL electricity bill of $17,071.84) was clearly identified.
165.Turning then to clause 15.4(c) it provides as follows:
The Franchisee must: …
(c) not do anything which may bring the System into disrepute or which may damage the interests of the Franchisor or the Network (including the failure to pay any supplier).

166.Gold Fuels submitted that there must be more than the failure to pay a supplier given the reference to “including.” However, I do not accept this submission. Rather the explicit reference to a failure to pay a supplier clearly recognises that such an act might constitute potential damage to the interests of the franchisor.
167.Gold Fuels then highlighted that electricity was never disconnected; that progress payments were being made; that other Franchisees were not paying; and that the bank guarantee should have been used.
168.However, at the time of service, there had been a repeated failure to pay with a number of disconnection notices served. As highlighted above, the possible disconnection further carried the risk of an adverse credit rating.
169.Although progress payments had been made, there was no payment plan entered into with the result that a large bill remained unpaid. More significantly, the clear stance of Mr Nijhawan evidenced in his correspondence was that he was not prepared to pay AGL bills that were actually owing, but would only pay in accordance with the $23,000.00 estimate.
170.Even if other franchisees were not paying, this is also of no assistance without an understanding of the context in which this was occurring in any individual case. Moreover, the evidence of unpaid accounts appeared to be related to commission agents rather than Franchisees (as per reference to “CAs” in the email relied upon).
171.In terms of the bank guarantee, as has been seen above, Mr Nijhawan gave conflicting evidence about this matter. In any event, his evidence (cited below) was also that he did not want United to use the bank guarantee because he did not want to be bound to continue to pay the AGL rates.
172.This was not simply a case of a single bill unpaid. Rather, payments made by Mr Nijhawan had been sporadic and deficient over a long period of time. It was also apparent that he was not prepared to pay the AGL bills as they became due in the future as he was obliged to under the agreements. In such circumstances, I accept that the breach in this case “may” damage the interests of the Franchisor (including the failure to pay any supplier) such that clause 15.4(c) was properly engaged.
173.In terms of clause 4.2(a), as indicated already, this clause imposed an obligation on Gold Fuels to comply with the terms of the Lease as between itself and United except to the extent that such an obligation was excluded. Given there was an obligation to pay electricity as a “utility” (in clause 4.2 of the Lease) which was not excluded it follows that clause 4.2(a) is also engaged.
174.Moreover, the fact that an additional clause is referred to (clause 12.2(a)) is insufficient to vitiate the notice.[19]
[19] Aura Enterprises Pty Ltd v Frontline Retail [2006] 202 FLR 435 [84].
175.I am therefore satisfied that relevant breaches were identified and in existence.[20] Further, that a reasonable recipient, with knowledge of the contract and surrounding circumstances would be able to identify the obligation (to pay electricity) and also the manner in which the obligation was breached (by failing to pay the electricity).
[20] This would also satisfy clause 35(1)(a) of the Oilcode which was raised in the Counterclaim but not pursued in closing submissions in any event.
176.It follows that the Breach Notice is not defective.
Whether termination in breach of obligation to act in good faith
177.Two issues arise in relation to this allegation; whether any such obligation existed; and if so whether it was breached.
178.In terms of the first issue the defendants properly accepted that the Victorian Court of Appeal has rejected the notion that a broad duty of good faith ought be implied into every commercial contract. However, they cited passages from the decision in Esso Australia Resources v Southern Pacific Petroleum[21] (“Esso”) to suggest that the Court should infer such a duty given the relationship between United and Gold Fuels was “clearly unbalanced” and that Gold Fuels was “at a substantial disadvantage and particularly vulnerable.”
[21] [2005] VSCA 228.
179.In Esso, Warren CJ emphasized that the modern law of contract had developed on the premise of achieving certainty in commerce. She further stated:
Ultimately, the interests of certainty in contractual activity should be interfered with only when the relationship between the parties is unbalanced and one party is at a substantial disadvantage, or is particularly vulnerable in the prevailing context. Where commercial leviathans are contractually engaged, it is difficult to see that a duty of good faith will arise, leaving aside duties that might arise in a fiduciary relationship. If one party to a contract is more shrewd, more cunning and out-manoeuvres the other contracting party who did not suffer a disadvantage and who was not vulnerable, it is difficult to see why the latter should have greater protection than that provided by the law of contract.[22] (emphasis added)
[22] Esso Australia Resources v Southern Pacific Petroleum NL [2005] VSCA 228 [4].

180.After also rejecting that commercial contracts should generally carry an implied term of good faith, Buchanan J further stated that it may be appropriate to import such an obligation “to protect a vulnerable party from exploitative conduct which subverts the original purpose for which the contract was made.” This would be done pursuant to the BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of Shire of Hastings[23] (“BP Refinery”) test rather than implication as a matter of law.[24]
[23] (1977) 180 CLR 266.
[24] Esso Petroleum Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228 [25] (Buchannan J).
181.I do not consider that Gold Fuels was at a “substantial disadvantage” and/or “particularly vulnerable” such as to depart from the ordinary position that no general duty is appropriate.
182.As cited above, Mr Nijhawan had the benefit of fulsome legal advice; had appropriate qualifications and experience (with a commerce degree) and, although English was not his first language, he was able to give extensive evidence without an interpreter, and to also assert his position (in extensive emails) at length.

183.There is no basis in such circumstances to imply a duty of good faith.
184.It is therefore unnecessary to consider this matter further, particularly since it appeared that Gold Fuels sought to rely on matters not pleaded in final submissions.[25] Thus, there was a suggestion that United turned a “blind eye” to evidence that Gold Fuels was unable to pay award rates, despite the fact that Mr Walker had actually forwarded a wages guide about the operation of the Award to Gold Fuels. It would be of great concern if award rates were not paid but, given the matter was not properly pleaded, the issue was not fully investigated and I cannot comment further.
[25] Closing Submissions of the defendants, dated 15 March 2016 at paragraph 86.
185.Many of the other matters raised are dealt with in relation to the unconscionability claim, below.
186.Moreover, insofar as the termination itself was concerned, I am satisfied that United was entitled to terminate the contract based on the failure to comply with the Breach Notice and following extensive engagement with Gold Fuels. No breach of good faith is established.
Whether termination in breach of obligation to make every effort to resolve the dispute
187.Gold Fuels next claimed that the termination was undertaken in breach of the obligation to “make every effort” to resolve the dispute pursuant to clause 36.3 of the Franchise Agreement.
188.Clause 36.3 (a) read as follows:
36.3 Dispute resolution
a) Where a Dispute occurs the following procedure must be adopted to resolve such Dispute:
i.the complainant must promptly advise the respondent in writing of the nature of the Dispute, the outcome the complainant desires and what action the complainant believes will settle the Dispute;

ii.the parties to the Dispute must make every effort to resolve the Dispute by mutual negotiation; and

iii.should the parties not resolve the Dispute within three (3) weeks from the date of receipt of the Dispute Notice by the respondent, then either or any party to the Dispute may seek the dispute resolution procedures specified in Part 4 of the Oilcode.

189.A “Dispute” was defined under clause 1.1 as follows:
Dispute means any dispute, difference or question arising between the Franchisor and the Franchisee and/or Guarantor concerning the interpretation of this Agreement or the rights and obligations of the Franchisor and the Franchisee and/or Guarantor under this Agreement.

190.There was no evidence that Mr Nijhawan sought to engage these dispute resolution procedures under the Agreement. In particular, Gold Fuels did not point to any document said to constitute the initial advice by him as complainant which complied with clause 36.3(a)(i).
191.In any event, I accept the submission of United that it did make every effort to resolve the “Dispute” (presuming for present purposes that there was one). Thus, United did not terminate the instant a breach was apparent, but instead attempted to engage with Gold Fuels to reach a solution. This included the offer of 21 November 2014 to calculate months at $2,100.00 per month (with GST) from the time of transfer; the invitation for him to take up a different supplier; as well as that he organise a payment plan.
192.Instead, Mr Nijhawan displayed a completely inflexible position that AGL had somehow bound itself to accept payment at the rate estimated by United (through its broker) irrespective of the obligations of Gold Fuels under the Agreement and the entitlements of AGL.
193.I am not satisfied that there was any breach of clause 36.3 by United.
Whether termination in breach of the Oilcode
194.Finally, Gold Fuels submitted that the termination was undertaken in breach of the Oilcode, particularly clause 44.[26]
[26] Amended Defence and Counterclaim of the defendants, dated 1 March 2016 at paragraph 81.
195.Part 4 of the Oilcode contains a Dispute Resolution Scheme and applies to a dispute arising between the parties to a fuel re-selling agreement (clause 40(b)). United did not challenge the application of this Part which included clause 44.
196.Clause 44(1) (which applied to disputes other than under s 43) provided that “the parties must attempt to agree about how to resolve the dispute.”
197.Pursuant to clause 44(2) this may involve reference to provide mediation or other assistance, or if the parties cannot agree on such a reference, the notification of a dispute resolution advisor who must appoint an appropriate person to provide mediation or other assistance.
198.Gold Fuels claimed that United had failed to take steps to mediate the dispute pursuant to clause 44 prior to “jumping” to termination.
199.United however relied on the decision in Trans Petroleum (Australia) Pty Ltd v White Gum Petroleum Pty Ltd[27] (“Trans Petroleum”) and submitted that the obligation in the Oilcode conferred a joint obligation on the parties and, if neither party invokes these procedures, there is nothing unconscionable or unlawful in a party exercising a right to terminate without first exhausting such procedures.
[27] [2012] WASCA 165.
200.It is therefore necessary to consider the decision in Trans Pretroleum which both parties made reference to.
201.The decision in Trans Petroleum concerned whether written notice of termination of a fuel re-selling agreement was valid. The appellant submitted that it was invalid on various grounds. One of the reasons advanced for invalidity was that the notice of termination had been served without having invoked the dispute resolution procedure provided for in s 44 of the Oilcode. This was said to constitute unconscionable conduct.
202.The trial judge dismissed the claims that the notice of termination was void and made a declaration that it was valid. An appeal from this decision was dismissed.
203.In dealing with the allegation concerning s 44 , Buss JA (with whom Murphy JA and Pullin JA agreed) stated that the respondent did not act unconscionably in serving the notice of termination in circumstances where:
Section 44(1) of the Oilcode imposed a joint obligation on the parties. After the respondent served the notice, the appellant did not itself seek to invoke or rely upon the dispute resolution procedure in the Oilcode or the agreement. It elected, instead, to commence proceedings immediately in the Supreme Court. In these proceedings, the appellant litigated the validity of the notice. The respondent did not commence any proceedings in the Supreme Court or elsewhere in relation to the notice of termination, but merely counterclaimed in the proceedings commenced and prosecuted by the appellant.[28]
[28] Trans Petroleum (Australia) Pty Ltd v White Gum Petroleum Pty Ltd [2012] WASCA 165 [173].

204.Gold Fuels sought to distinguish this decision submitting that the termination in the case was not for cause and was unconnected with any dispute. Further, that the failure to mediate is not just unconscionable but a limitation on the power to terminate, and finally, that the Oilcode in this case is mandatory.[29]
[29] Closing Submissions of the defendants, dated 15 March 2016 at paragraph 104.
205.However, the finding that clause 44 imposed a “joint obligation” did not depend on any of the factors highlighted by Gold Fuels. Rather, the decision is directly applicable to the present case wherein Gold Fuels “did not itself seek to invoke or rely upon the dispute resolution procedure in the Oilcode or the agreement.” Indeed, it would be wholly unsatisfactory if parties could avoid contractual obligations by later claiming that dispute resolution procedures should be undertaken in circumstances where they had taken no steps to invoke such procedures.
206.I am satisfied that United was entitled to serve notice of termination under the agreement and that it acted in good faith in so doing.
207.In all the circumstances, I am therefore satisfied that the termination was lawful and that there was no unconscionability by reason of the Oilcode.
208.There may also be an issue as to whether there even was a “dispute” for the purposes of s 44 (which is not defined) in circumstances where Gold Fuels appeared to be simply refusing to pay. However, it is unnecessary to consider this further in the light of the above findings.
Loss and Damage
209.I am satisfied that the termination was valid. It follows that it is unnecessary to consider whether the loss claimed would be sustainable.
210.For the sake of completeness, however, I will express a summary of my views about this matter, below.
211.As indicated already, in its pleading Gold Fuels claimed the lost opportunity to sell the business at $225,000.00.[30] This was also repeated in the Statement of Issues.[31]
[30] Amended Defence and Counterclaim of the defendants, dated 1 March 2016 at paragraph 84(ii).
[31] Defendants’ Statement of Issues dated 2 March 2016 at paragraph 3.
212.However, in closing submissions Gold Fuels further sought to claim that it would not be liable for the loan, and further that the bank guarantee should not be deducted (with associated costs).
213.In terms of the loan, the non-payment of the electricity would constitute an event of default[32] which would justify enforcement of the loan under clause 10.1. The failure to pay the loan instalments would also have the same result.[33]
[32]See clause 10.2(2) and see also clause 10.2(8); pleaded in Statement of Claim of the plaintiff, dated 7 April 2015 at paragraph 20.
[33] See clause 10.2(1).
214.In terms of the guarantee, although the Franchisor was obliged to return the guarantee under clause 30, clause 17.5 provides that the Franchisee consents to United offsetting against any payments due to the Franchisee any moneys owed to it.
215.Turning then to the more substantive issue of the alleged loss of a sale opportunity, Gold Fuels relies on Sellars v Adelaide Petroleum NL[34] seeking damages for deprivation of a commercial opportunity to sell his business.
[34] (1994) 179 CLR 332.
216.In its Counterclaim it cited:[35]
[35] Amended Defence and Counterclaim of the defendants, dated 1 March 2016 at paragraph 84.
·    an alleged offer from United to buy the business at $100,000.00 (citing an email from Mr Nijhawan of 21 January 2015);
·    A statement from United in an email of 5 September 2014 that: “if you are willing to sell your business between $250,000 and $300,000 I think you have a good chance of selling it prior to Christmas;” and
·    An email of 30 October 2014 from United stating “you could realistically sell your business for $200,000 goodwill.”[36]
[36] Email cited of 23 December 2014 was not in evidence.

217.In terms of the alleged offer of $100,000.00 from United, the oral evidence about this matter is extracted above. For reasons already given, I reject the evidence of Mr Nijhawan about this matter which is not the subject of any documentary evidence from United in support. In fact, the email of 5 September 2014 (also cited by Gold Fuels above) states “As I have discussed with you many many times, United Petroleum will not be taking up the option to purchase your site.”
218.In any event, the evidence of Mr Nijhawan in response to this alleged offer was:
“I can’t sell it for $100,000. That’s my investment and that’s not actually my money, it’s money I have to return to family and friends…”

219.In terms of the email of 5 September 2014, it is true that Mr Gallace suggests he might have a good chance to sell the business at between $250,000.00 –$300,000.00. However, the amounts suggested by United vary (in an email of 15 October 2013 a range of $100,000.00 – 150,000.00 is suggested; on 30 October 2014 an amount of $200,000.00 is cited).
220.Mr Gallace was not called and his estimates were not provided or admitted as opinion evidence. Indeed, no expert statement was provided by him or anyone else as to the value of this business immediately prior to termination.
221.Even if the business was worth something, there was also absolutely no evidence whatsoever that a purchaser was likely to be found who would pay $225,000.00 or anything for that matter, nor the precise conditions on which United would consent to any such arrangement under clause 27 of the Franchise Agreement. Although Mr Nijhawan made vague reference to the existence of “purchasers” none were identified or called.
222.Finally, even if all of these hurdles were overcome, there was no evidence that Mr Nijhawan would sell the business for anything like $225,000.00 (as claimed). Put a different way, there was no evidence that Mr Nijhawan could and would have taken the opportunity to sell the business at a price of $225,000.00 or anything less than his full investment.[37]
[37] See Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 [362] (Brennan J).
223.Gold Fuels relied on some vague evidence of Mr Nijhawan to the effect that although he did not want to sell for less than $370,000.00 it would “depend” on the situation.
224.However, the preponderance of the evidence weighed against him selling for anything that involved a loss. For example:
·The email dated 15 October 2013 wherein Mr Gallace said “This would mean that you would need to be willing to sell your site for approximately $100,000 - $150,000, thus, incur a loss that you have expressed, that you are not willing to do.”
·The email dated 15 October 2013 where Mr Nijhawan said “So, selling this business is inevitable. Other thing critical to achieve this without incurring losses.”
·The email dated 20 October 2015 wherein Mr Nijhawan said “I am not able to accept your suggestion to sell my business for whatever price as the price that you suggested was almost 50% of my investment.”
·On 30 October 2014 Mr Gallace sent an email to Mr Nijhawan stating “the only reason you have not be able to sell you business is because you are seeking $450,000 in goodwill, this is too far over the market value and is completely un-realistic.”
·The email of 30 October 2014 wherein Mr Nijhawan says “the business cannot sell, I cannot afford to cop the loss.”

225.Overall, then, I am unable to be satisfied that Mr Nijhawan would have sold the business for anything less than what he had paid ($370,000.00 plus GST). There was no evidence that the business was worth anything like this (there was no evidence the business was worth anything) nor was there any evidence that a purchaser was available who would pay this.
226.In such circumstances, even if (contrary to the above) the termination, was unlawful, I am not satisfied that Gold Fuels lost an opportunity (of any value) to sell the business.
Summary
227.I am not satisfied that the termination was wrongful.
228.Even if it was, no loss is established.

Car wash

229.There were three aspects to the car wash claim: first who was entitled to the gross revenue; second whether United was entitled to add $10,452.00 to the outstanding amount because of carwash revenue not paid; third whether Gold Fuels was entitled to loss and damage by reason of a breach of the Carwash Licence Agreement given the breakdown of the manual car wash.
Entitlement to car wash commission
230.It is not in dispute that from the commencement of the Agreements, Gold Fuels paid Gross Revenue from the carwash to United.
231.However, Gold Fuels now says that it was actually entitled to this revenue and seeks the return of the payments made claiming it was misled into paying them and/or that it made the payments under a mistake.
232.More particularly, Gold Fuels alleges that it is entitled to the Gross Revenue pursuant to an implied term relying in particular on the definition of Gross Revenue in clause 1.1 and clauses 5.1- 5.4 of the Carwash Agreement.[38]
[38] Amended Defence and Counterclaim of the defendants, dated 1 March 2016 at paragraph 56(f).
233.United relies on a term of the Carwash Licence Agreement or alternatively the Franchise Agreement that:
Gold Fuels was required to make weekly payments to United Petroleum of the Gross Revenue generated by it pursuant to the Carwash Licence Agreement.

234.They say this term was both express and to be implied and rely in particular on clause 1.6 of the Franchise Operations Manual.[39]
[39] Amended Reply and Defence to Counterclaim of the plaintiff, dated 3 March 2016 at paragraph 39(c)(iv).
Relevant provisions of Agreements
235.United (the second defendant to Counterclaim) and Gold Fuels entered a Supplementary Services Agreement (Carwash). Recital C recited that the parties had requested that United grant Gold Fuels the right to operate a carwash providing the Supplementary Services to customers from the Designated Area.
236.Pursuant to clause 2.1 United granted to Gold Fuels (as Licensee) the right to provide the “Supplementary Services” solely from the Designated Area which were to be provided strictly in the manner specified by United in that Agreement and in the Franchise Operations Manual as amended from time to time (clause 2.3). The “Supplementary Services” were defined as the provision of automatic and manual car wash facilities, services and related assistance to customers in accordance with the terms of this Agreement (clause 1.1(20)).
237.Pursuant to clause 3.1, United was to make available the Carwash Equipment to the licensee for use in the operation of the carwash and provision of the Supplementary Services. Pursuant to clause 3.2 the Licensee must maintain the Carwash Equipment as specified in writing from time to time by United.
238.The Carwash Equipment was defined as the equipment prescribed and supplied by United to assist the Licensee to operate a carwash and provide the Supplementary Services as more particularly described in the Agreement or the Franchise Operations Manual (clause 1.1(5)).
239.Pursuant to clause 4.1:
The Licensee is entirely responsible for the provision of the Supplementary Services including providing all relevant business systems, staff and other resources. The Licensee acknowledges that the carwash and the Supplementary Services are not part of the System as defined in the Franchise Agreement and United has no obligation to support or assist the Licensee in relation to the establishment or operation of the car wash or the provision of the Supplementary Services.

240.Pursuant to clause 4.2(4) the Licensee was to immediately notify United of any damage or defect to fixtures, fittings, equipment or fit out in the Designated Area and allow United full access “to rectify the damage or defect.”
241.Pursuant to clause 5.1 in consideration for the Licensee providing the Supplementary Services, United was to pay the Licensee the Supplementary Services Commission specified in item 7(2) of Schedule 1. This amount was specified as 10% of Gross Revenue payable quarterly.
242.“Gross Revenue” is defined in clause 1.1(12) as the aggregate of prices charged or chargeable by the Licensee and all other income and remuneration received or receivable by the Licensee in connection with the provision of the Supplementary Services (including the proceeds of any insurance policy and income from any suppliers, but excluding sales credits).
243.Clause 9 further contained detailed reporting obligations. Pursuant to clause 9.1, the Licensee was obliged each day to provide to United details of all sales of Supplementary Services for the previous day in accordance with the requirements set out in the Franchise Operations Manual. It was also required to maintain true accounting records in accordance with the Manual “to enable verification of any detail or transaction” relating to the Supplementary Services.

Removal of minimum fuel commission
296.The complaint made in closing was that of “removing the Minimum Fuel Commission when Gold Fuels was attempting to sell the business.”[50]
[50] Closing Submissions of the defendants, dated 15 March 2016 at paragraph 160(b)(i).
297.The evidence in relation to this matter was that Mr Nijhawan sought to ascertain whether United would agree to the sale of his business to a new owner and, if yes, on what terms in August 2013.
298.By email of 18 December 2013 he was advised that United would offer any new incoming Franchisee a new Franchise Agreement which would have no minimum fuel guarantee though an adjusted CPL rate.
299.However, in May 2014, United indicated that it was prepared to offer any new purchaser a Minimum Fuel Commission of $8,300.00 and to take over the EFTPOS terminal provided Gold Fuels stated using the safe provided at $28.57 per day. The new purchaser was also to be provided with a new 12 year term.
300.Gold Fuels did not challenge the legalities of this approach[51] but, rather the “unconscionability” of it.
[51] This appeared appropriate given it was “at the option of the Franchisor” whether a new Franchise Agreement was to be on the terms of the current agreement (27.2(f)): see also (27.4(f)).
301.The initial removal of the Minimum Fuel Commission might be considered somewhat firm. However, this was considerably ameliorated by the May 2014 position given the new purchaser was to gain the benefit of a full 12 year term with refurbished premises and a (only slightly reduced) minimum commission.
302.Moreover, the complaint of Mr Nijhawan appeared to be more about the fact that he did not have answers for his “buyers” given United had failed to give him details of the new contract. However, as is evident from the above, he was provided with this information by May 2014.
303.There was also no objective evidence that any so called “buyer” was put off by reason of the removal of the Minimum Fuel Commission. As indicated already, there was no objective evidence of the existence of any buyer at all, nor was one called.
304.Although therefore the handling of the Minimum Fuel Commission may have been initially robust, the ultimate position was fair and reasonable and certainly did not involve any “serious misconduct.” I am also unable to determine that it had any real consequence.
Termination
305.The complaint here was that the termination was unconscionable given United “could have used the bank guarantee or taken a lien over Gold Fuels” stocks and in circumstances where there was a dispute over the charges.”[52]
[52] Closing Submissions of the defendants, dated 15 March 2016 at paragraph 160(b)(ii).
306.The issue of termination has been dealt with above. As found already, United was entitled to terminate when it did. Moreover, as is apparent from the extensive chronology above, United did not terminate the instant a breach was apparent but rather waited until there was effectively no choice but to terminate.
307.There was conflicting evidence about whether United offered to cash the guarantee. Mr Pratico said it did not. However, although the evidence of Mr Nijhawan about the bank guarantee cited already was incoherent, his ultimate position appeared to be that Mr Pratico offered to cash the guarantee but that he did not want this done because he would have had to top up the bank guarantee and the problem was “the dispute” with AGL. He therefore asked him to “hold on” until he returned from overseas.
308.It therefore appeared that Mr Nijhawan did not want the guarantee cashed. Rather, as is evident from the detailed chronology already set out, he was not prepared to pay the AGL bills. In his own words Mr Nijhawan says “I didn’t want to pay a higher amount being asked by AGL because that would be construed as my acceptance and I couldn’t afford to pay that big money for ten years, the rest of my lease term….”
309.United was entitled to terminate the Agreement for reasons already given. I am further satisfied that it acted for legitimate commercial purposes in doing so. No unconscionability was involved.
Third line pricing
310.The complaint here was that United required Gold Fuels “to purchase barbeque gas at above market prices.”
311.During the period of the Franchise Agreement Gold Fuels was required to, and did, purchase Direct Gas barbeque gas through United at $25.00 - $28.00 per 8.5 kg bottle. This despite the fact that Mr Nijhawan obtained a separate quote from Direct Gas at $18.00 per bottle.
312.In response, United justified its conduct on the basis of a statutory authorisation under s 93(1) of the Competition and Consumer Act 2010 (Cth). The obligation to purchase only from “Preferred Suppliers” was also provided for in the Agreement (clause 23.1(b); 23.3(b)) (and highlighted by his lawyers at page 6 of their advice).
313.However, Gold Fuels claims that when it obtained the s 93 Notice United stated to the Australian Competition and Consumer Commission (“ACCC”) in a letter dated 8 November 2010, inter alia, that “the proposed conduct will also assist to drive prices down for franchisees…”
314.Given the result with the barbeque gas (prices were 47% higher), Gold Fuels claimed that the notice was obtained on a false premise and was liable to be set aside.[53]
[53] Closing Submissions of the defendants, dated 15 March 2016 at paragraph 171.
315.However, in obtaining the authorisation, the terms of the letter of 8 November 2010 described the proposed conduct as follows:
The conduct involves United Petroleum Franchise Pty Ltd requiring under its franchise agreements that franchisees agree to purchase a designated range of goods and services from a list of approved suppliers specified by United Petroleum Franchise Pty Ltd from time to time.

316.This was consistent with, the terms of the authorisation dated 8 December 2010 from the ACCC which stated that:
“Under the notified arrangements United…. Propose to require current and future franchisees to acquire a designated range of goods and services from a list of approved suppliers specified by United Petroleum from time to time…”

317.It therefore appears that the authorisation was obtained in respect of a range of products, not just barbeque gas, such that I am unable determine whether there was or was not a total benefit in the light of the total bundle of supplies (even if it were otherwise appropriate to do so).
318.There is no evidence of unconscionability in such circumstances.
Threats to fine/breach out
319.The only matter pleaded in this respect was the conversation between Mr Nijhawan and Mr Palmer of 16 August 2013.[54]
[54] See Amended Defence and Counterclaim of the defendants, dated 1 March 2016 at paragraphs 101(h)(i)- (ii).
320.The evidence of Mr Nijhawan in relation to this meeting was that it occurred a day after refurbishment concluded and a week before re-opening. Mr Nijhawan said he had been telling managers that they should delay re-opening the store.
321.Mr Palmer requested a meeting which meeting then occurred on site. Mr Nijhawan’s version of this meeting was as follows:
He [Cavan] told me it was going to be very quick and he said, "I've learnt that - my managers have told me that you've got issues with them all the time and I want to warn you that you need to shut up and listen to the managers otherwise - if you want to continue to work here otherwise you'll be gone, I'll breach you out of business." I said, "Cavan, if I don't commit a breach how you can breach me out of business?" He said, "If we want to do it, we know – if United wants to do it, then we know how to do it." That's what he told me.

322.Mr Palmer was not called to contest this account. Therefore, I will accept that something to this effect was said. I further accept that it was inappropriate and delivered in a context where Mr Palmer appears to have lost patience with Mr Nijhawan.
323.However, any such statements must also be considered in a particular context wherein there was extensive evidence that Mr Nijhawan was not listening to helpful advice and was in fact resistant to advice. In particular, Mr Walker gave evidence that Mr Nijhawan did not implement his advice, suggestions or strategies and that this was discussed or raised “quite frequently.” Mr Rabe gave similar direct evidence, as did Mr Pratico.
324.The reality was also that no Breach Notice was sent until 14 months later notwithstanding there were clearly earlier opportunities to serve a Breach Notice given the longstanding failure to pay electricity accounts.
325.I am therefore not satisfied that some one-off gruff remarks amount to unconscionability, particularly when considered in the context of a long standing relationship wherein extensive efforts had been made to assist Gold Fuels.
Taking possession without issuing a Breach Notice.
326.I have accepted, above, that the taking of possession occurred in circumstances where a separate Termination Notice was not delivered. However, given Gold Fuels were in default and United was entitled to terminate, I am unable to be satisfied that there was any “moral obloquy” associated with these actions.
327.In terms of chattels, clause 33.4 provided that, upon termination, United was entitled to take possession and control of the site and to operate the store.[55] It has subsequently accounted for the stock properly belonging to Gold Fuels and it was not suggested that this stock was required elsewhere in the interim.
[55] The provisions concerning procedures to purchase stock at clause 33.5 only apply where this is an expiration of the Agreement rather than a termination.
328.No unconscionability is demonstrated.
Training
329.It was next alleged that there was inadequate training. However, although there were clauses in the contract dealing with training, no specific allegation was pursued that there was a breach of these clauses with a consequent loss.[56]
[56] A previous allegation was a “total failure of consideration” in respect of training in the Amended Defence and Counterclaim of the defendants, dated 1 March 2016 at paragraph 96, was not pursued as an issue at trial.
330.Instead, in submission Gold Fuels complained that “shadowing” the Point Cook operator was not “training;” that there was no training on night procedures (which according to Ms Stewart meant training was “inadequate”); and that the training was not adequately planned in the absence of a training manual.
331.Even if these complaints were established they do not amount to unconscionability within the authorities above.
332.In any event, the evidence was that Mr Nijhawan and his family received approximately 3 weeks of organised training. This included one week’s training at head office in relation to business planning and merchandising, and a period of 2 weeks at a commission agent run site at Point Cook.
333.In this context I am satisfied that “shadowing” a commission agent operator “on the job” is capable of amounting to training. Moreover, that the training was adequately planned consistent with the documentation and Ms Stewart’s evidence.
334.In terms of night training, the evidence of Ms Stewart was that “if” someone did not receive adequate nightshift training their training would be inadequate but that the standard procedure was that the franchisee would attend all shifts run by the service station. If the franchisee decided not to attend other shifts then that was their choice. Gold Fuels also did not point to any evidence in court (oral or documentary) wherein Mr Nijhawan complained of a lack of opportunity for night time training and/or any request by him that such an issue be addressed.
335.There was also extensive ongoing training after the Franchise Agreement commenced. Thus:
·    Mr Walker visited Gold Fuels a couple of days a week for the first six months to support Mr Nijhawan and provide him with guidance. This included spending time around inventory management, cash management and staff management;
·    Mr Desa also said he had “more discussions with you as compared to any of the other 23 Franchisees and will continue to do so as required to help bring about improvements in the business.”
·    Mr Hopes provided car wash training and attended the site on a weekly basis; he maintained that he provided “ongoing” training which he carried out himself.
·    Mr Rabe also gave evidence that he visited the site to impart knowledge to the Franchisee, to assist him in gaining better sales and better profitability within the site.

336.The complaint about training is not substantiated.
Deliberate undermining of goodwill
337.This has been dealt with already in relation to the Minimum Fuel Commission.
Requiring payment of electricity
338.As indicated already, United was entitled to require such payment under the Agreement.
Requiring payment of car wash Gross Revenue and withholding of commission
339.United was entitled to require payment of gross car wash revenue for reasons already given.
340.In relation to the withholding of commission, it is not in dispute that United withheld car wash commission revenue from Gold Fuels because of the deficit found during the audit process. Thus, United claimed that the money collected for the carwash was understated by the amount of $10,452.00 between July 2014 and October 2014 and thereby that the sum of $4,592.59 owing in commissions should be deducted from this understatement amount.[57]
[57] Letter of 9 December 2014 from Andrew McLean, General Counsel, United Petroleum Pty Ltd to Ram Nijhawan, Exhibit N.3 (CB 2551-2552).
341.Gold Fuels alleges that United “wrongfully withheld car wash commission” from Gold Fuels.[58] Further, that United did not put to Mr Nijhawan in cross examination how United determined that car wash revenue was in effect “stolen” by Mr Nijhawan.[59] Finally, that Gold Fuels is owed the car wash commission withheld.
[58] Amended Defence and Counterclaim of the defendants, dated 1 March 2016 at paragraph 101(c)(ix).
[59] Closing Submissions of the defendants, dated 15 March 2016 at paragraph 155.
342.These points might be dealt with briefly. Firstly, given I have already determined that there was a deficit in commission paid, United was entitled to offset these monies under clause 17.5 of the Franchise Agreement. Next, no allegation of theft was made or sustained. Finally, I accept that the amount of commission should be taken into account in quantum.[60]
[60] Quantum Claim of the plaintiff provided to Court on 11 March 2016 (“Plaintiff’s Quantum Claim”) credits $9110.27 in respect of carwash commissions owed to Gold Fuels.
343.No unconscionability is established.
Wrongful termination/Breach of Oilcode
344.These matters have been dealt with above.
Defects
345.In the result, the only Defects relied upon were the manual carwash; fuel pumps; air conditioning, concrete, and security cameras
346.However, before turning to particular evidence pertaining to each, as already outlined, Mr Nijhawan had the opportunity to, and did, inspect the site. He further claimed to have “no problems” with the site.
347.The reality was that the site was in an average to poor condition as reflected in the detailed condition report prepared by Mr Walker on 23 November 2011.
348.It is also important to remember that Gold Fuels was advised up front that the site was to be on an “as is” basis with no guaranteed refurbishment. This was also highlighted in the legal advice received.[61] Moreover, the Franchise Agreement included a term that commencement of the business under that Agreement was conclusive evidence that no representation had been made as to the condition or state of repair of the site which was “accepted” by Gold Fuels (clause 7).
[61] Letter dated 15 November 2011 (sent by way of email) from Wisewould Mahony Lawyer to Mr Nijhawan page 10, Exhibit D.13 (CB 1737 – 1759).
349.In fact, the only actual contractual obligation which United undertook was to be responsible for “repair and maintenance “of certain items specified in the “Repair and Maintenance Matrix” (clause 16.11(b)).
350.Turning then to some of the particular matters, Mr Nijhawan gave evidence of various issues with the car wash including water leaks; worn brushes; and soap not dispensing. However he conceded that technicians were called and came “most of the time.”
351.In reality, the main complaint in closing was that the 3 manual carwash bays were shut from July 2012 to late August 2013. However, for reasons given already, no breach of agreement occurred by reason of this shut down.
352.In terms of the other issues, Mr Nijhawan also accepted that in terms of fuel pumps not working he would ring the contractor who would also come “most of the time.”
353.The under performance of the air-conditioning was consistent with the general state of the site while the concrete issue should have been obvious from his original inspection. The complaint about the security cameras appeared to be the positioning of the cameras (in not capturing registration numbers on “drive-offs”) which should also have been obvious on initial inspection.
354.Mr Nijhawan’s overall summary was that “something that was extremely urgent that was done, something that did not interrupt the business was ignored for long, long time, and some issues were ignored until refurbishment.” Further that “hazards” were attended to “quickly.”
355.Gold Fuels complained about the frequency of the issues arising. However, this was consistent with what one might expect given the general state of the site and certainly falls well short of demonstrating some “moral obloquy” on the part of United.
Failure to negotiate terms
356.Gold Fuels claimed that Mr Nijhawan obtained legal advice and “attempted to negotiate the terms of the Franchise Agreement.” However, no attempt was made to identify which particular terms of significance were sought to be varied by Gold Fuels. The ultimate advice of Wisewould was also that there were more substantive commercial matters that should be clarified, including that Mr Nijhawan should obtain independent accounting and business advice and prepare cash flow projections to ensure the business was financially viable (which he did not do).[62]
[62] Letter dated 15 November 2011 (sent by way of email) from Wisewould Mahony Lawyer to Mr Nijhawan pages 22-23, Exhibit D.13 (CB 1737 – 1759).
357.Moreover, although the standardised franchise agreements were ultimately signed, United was prepared to, and did, negotiate on the price which was paid by Gold Fuels (thus the price was initially given as $415,000.00 plus GST in the letter of 26 August 2011).
358.No unconscionabiliy is sustained in terms of the negotiations leading up to signing.
Terms and conditions unfair
359.Gold Fuels made complaint that a number of terms were “unfair” particularly citing clauses wherein United had unilateral rights to amend or vary (clauses 6.2, 6.12, 17.3(b), 19.2); that there was no right of compensation if there was no renewal of the lease (clause 6.7); and of United’s rights to receive rebates.
360.However, it was not shown that any unconscionable advantage was taken of these particular clauses in the context of this case. There was also no suggestion that United exerted any pressure on Gold Fuels to sign the Agreements in the form he signed. To the contrary, he was given time after the provision of the initial deposit to withdraw, and was also provided with a cooling off period even after the signing of the Agreements.

361.There is no unconscionability on this basis.
Failure to act in good faith
362.This matter was already dealt with above.
Summary
363.Many of the matters pursued appeared to be little more than attempts to impose obligations beyond and above those provided for in the contracts.
364.Any instance of impatience must be also considered against the course of the arrangement considered overall. In particular, in the context of the extensive training and assistance provided; the provision of an expensive refurbishment; and in circumstances where termination was only chosen as a last resort.
365.Any actions of United must also be considered in the light of the risks Gold Fuels itself had undertaken in purchasing this business on an old site with unimpressive sales figures and in circumstances where it had the benefit of extensive legal advice and appropriately qualified personnel.
366.Considering then the matters above, both individually and cumulatively, I am not satisfied that United engaged in unconscionable conduct involving “moral obloquy” or “moral taint.”[63] Nor am I satisfied that the conduct of United was clearly “unfair or unreasonable.”
[63] DPN Solutions Pty Ltd v Tridant Pty Ltd [2014] VSC 511 [101].
367.If there was unconscionability there would also be a further issue as to what loss, if any, would be established. As is apparent from the Statement of Issues,[64] a significant part of the amount claimed in respect of this conduct was the return for the payments made up front (for franchise fee, goodwill, and purchase of stock). However, many of the complaints related to conduct which occurred post entry into the Agreement in circumstances where there is no suggestion of any conduct vitiating the Agreement itself (which was entered into freely and with legal advice).
[64] Defendant’s Statement of Issues dated 2 March 2016 paragraph 4.
368.A court could not properly award the sums paid up front in such circumstances under s 236 of the ACL. Thus the making of such (initial) payments could not be caused “because of” conduct which only occurred later (post entry into the contract).
369.There was also no medical evidence adduced to support any vexation and anxiety damages even if they could be seen to be attributable to acts of United.
370.However, given my findings above it is unnecessary to consider this matter further.

Quantum

371.United provided a detailed quantum claim document in closing which disclosed the basis for the calculation of $66,194.91 outstanding on the loan and which took into account various amounts in favour of Gold Fuels.
372.In the event that the plaintiff was successful, there were only 3 matters in dispute:[65]
[65] As reflected in a document entitled “Agreement/disputes on the issue of quantum” provided to Court on 11 March 2016; an earlier dispute regarding the amount of car wash commission payable at $9110.27 was ultimately agreed (TS 1112).
·    the appropriate amount, if any, which should be taken into account in respect of a “conversion of chattels” claim;
·    whether an amount of $10,452 should be debited in respect of carwash revenue (Exhibit C claim); and
·    whether an amount of $12,834.03 should be debited in respect of a dishonoured fuel payment.

Conversion claim
373.Gold Fuels ultimately sought an amount of $75,730.27 in respect of its conversion claim. However, in the result, the only issue between the parties was a question of quantum since United accepted that it should account for the value of goods which belonged to Gold Fuels immediately prior to termination.
374.In terms of quantum, the claim falls into 4 categories: for stock valued at $58,828.47; for cash from safe at $4,706.80; for an alleged amount of cash at office of $11,500.00; and $695.00 for miscellaneous items (a lamination machine; stationary, spill kit and first aid kit).
375.In terms of the stock, United had already taken this into account by crediting it from the loan allegedly owing net of various expenses which came to an agreed amount of $57,422.60.[66]
[66] Quantum Claim of the plaintiff provided to Court on 11 March 2016.
376.The same is true of the cash from the safe at $4,706.80 which was credited from the outstanding loan.[67]
[67] Quantum Claim of the plaintiff provided to Court on 11 March 2016.
377.The evidence in relation to the miscellaneous items was less than satisfactory and will be disallowed. Thus, Mr Nijhawan claimed to have just put an “approximate value” for these small items.
378.The main matter in contention remaining was the alleged sum of $11,500.00 said to be “cash from office.”
379.The evidence of Mr Nijhawan in relation to this matter was that at the time he was going overseas to try to source money (immediately prior to termination) his wife came forward with money she had been collecting for “renovations” saying he should take it if it would help. He further claimed that he counted it, rounded it off, and put it in a box and locked it in his office. Further that the money he counted was $11,500.00: “I remember very well, there is no doubt about it.” He further said he put it “inside the office, under the microwave, there was a cardboard box and there was a small box in which I locked the money and taped it-put the money in and taped it up.” The evidence of Mrs Nijhawan was that a couple of days before her husband went away she handed him around $11,000.00 which she had collected over a 4 year period for a kitchen renovation. She did not know precisely where he put it but claimed he said he would keep the money “in the office.”
380.I am unable to accept the evidence of the Nijhawans on this matter which was inherently implausible. Thus, the suggestion that one would “lock” a cardboard box was not credible. Given the dire state of the business at the time which Mr Nijhawan fully appreciated it is also implausible that he would not use any such spare cash immediately to cover the debts (such as the electricity).
381.There was also no objective evidence to support the existence of this sum of money. Moreover, the evidence of various United witnesses was that no such sum was found. Finally, notwithstanding the fact that Mr Nijhawan readily committed complaints to writing there appeared to be no correspondence from him which identified that this particular sum of money had been left on the site.
382.Taken with my general reservations as to their credit, I am simply unable to be satisfied, on the balance of probabilities, that there was a sum of $11,500.00 “cash from office” as alleged.
383.It follows that no further order is appropriate in relation to the conversion claim; the value of stock having already been taken into account.
Withholding of carwash revenue
384.The issue of the withholding of the $10,452.00 in carwash revenue has been dealt with above. It is correctly included in the plaintiff’s claim.
Dishonoured fuel payment
385.In terms of the dishonoured fuel payment, United relied on certain evidence of Mr Abeynaike who produced a printout from an ANZ account in the name of United which showed that an amount of $12,834.03 had been “dishonoured” on 24 February 2015. United asserted that this was related to a direct debit for a fuel payment which had been dishonoured.
386.Gold Fuels challenged this claim on the basis that there was no evidence of the value of the fuel and no documentary evidence apart from a bank slip. Thus, under cross examination Mr Abeynaike was asked whether there were systems in place to record what fuel had actually been sold in relation to this direct debit. He explained that the site operators had to input how much fuel they had sold on a daily basis and that this is what would be used by United the following day to take the money out of the bank accounts (by direct debit). He admitted however that he did not have a copy of the documents with him nor were they tendered into evidence.
387.In such circumstances I am unable to be satisfied that the simple bank statement that an amount was “dishonoured” is sufficient absent evidence of the amount of fuel sold.
388.The amount of $12,834.03 is therefore disallowed.
389.The result is that the plaintiff is entitled to judgment in the amount of $53,360.88 ($66,194.91 - $12,834.03).

Conclusion

390.In the light of these reasons, the appropriate orders are:
· There be judgment for the plaintiff in the amount of $53,360.88 against the defendants; and
· The Counterclaim is dismissed.

391.I will hear from the parties on the question of costs.

SCHEDULE OF PARTIES

BETWEEN UNITED PETROLEUM FRANCHISE PTY LTD (ACN 127 764 989)	Plaintiff
-and-
GOLD FUELS PTY LTD AS TRUSTEE OF THE NIJHAWAN FAMILY TRUST (ACN 153 627 484)	First Defendant
-and-
DINESH NIJHAWAN	Second Defendant
-and-
KIRTI NIJHAWAN	Third Defendant
-and-
RAM NIJHAWAN	Fourth Defendant
AND BETWEEN
GOLD FUELS PTY LTD AS TRUSTEE OF THE NIJAWAN FAMILY TRUST (ACN 153 627 484)	First Plaintiff by Counterclaim
-and-
KIRTI NIJHAWAN	Second Plaintiff by Counterclaim
-and-
RAM NIJHAWAN	Third Plaintiff by Counterclaim
-and-
UNITED PETROLEUM FRANCHISE PTY LTD (ACN 127 764 989)	First Defendant by Counterclaim
-and- UNITED PETROLEUM PTY LTD (ACN 085 779 255)	Second Defendant by Counterclaim

[2016] VCC 292

29 April 2016