Cavacuitti & Anor v XTMCA Ltd

HEARING DATES: 04/08/2002; 04/09/2002; 04/10/2002; 04/11/2002; 04/12/2002 DATE OF JUDGMENT: 06/05/2002

APPLICANTS Mr J S Van Aalst of counsel SOLICITORS Gates Moffitt

LEGAL REPRESENTATIVES: RESPONDENT SOLICITORS Mr C Barton Freehills

INDUSTRIAL RELATIONS OF NEW SOUTH WALES IN COURT SESSION CORAM: MARKS J Wednesday 5 June 2002 Matter No IRC 666 of 1999 ANTHONY ANDREW CAVACUITTI & ANOR v XTMCA LTD (TOYOTA MOTOR CORPORATION AUSTRALIA LTD).

Application under s106 of the Industrial Relations Act 1996

1 In these proceedings the first applicant Anthony Andrew Cavacuitti and the second applicant Berridale Investments Pty Ltd seek certain relief against the respondent Toyota Motor Corporation Australia Ltd ("Toyota") under s 106 of the Industrial Relations Act 1996 ("the Act"). Sections 105 and 106 are in the following terms: 105 Definitions In this Part: contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. unfair contract means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument.

106 Power of the Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case.

2 The applicants seek to have declared void ab initio an arrangement which they had with Toyota. The case as opened by Mr Van Aalst of counsel who appeared for the applicants differed from that which appeared in the summons to some extent and what follows is based on his opening address. The applicants allege that in about February 1998 they embarked upon a course of action together with Toyota which was designed to lead up to and be consummated by the grant of a Toyota dealership to the applicants at a location centred in Cooma, Southern New South Wales. Toyota prepared a report intended to reflect the capital which Mr Cavacuitti would be required to inject through the second applicant to make the dealership feasible. It was said that Toyota represented in that document that the applicants needed to invest about $500,000 on a site from which to carry on the dealership operation. Toyota, as part of this course of conduct took steps to assist the applicants in obtaining a motor vehicle dealer's licence and to register a business name "Monaro Toyota". Toyota took steps to assist the applicants in obtaining finance to enable them to acquire vehicles for sale through the dealership. The parties looked at a number of potential sites in Cooma from which the dealership could be conducted. It was the obligation of the applicants to secure the site but this had to meet the approval of Toyota as being an appropriate site from which to carry on the dealership. Toyota prepared several sets of documentation intended to represent the terms and conditions upon which the dealership would be conducted. There were difficulties in obtaining an appropriate site and Toyota assisted the applicants in endeavouring to obtain council approval for at least one of the sites. As an interim measure the applicants secured a short-term lease of a property in Cooma in July 1998 which was due to expire on 31 December 1998. The applicants, however, did not obtain a site which was acceptable to Toyota which would cost no more than the $500,000 figure which had been set as being an appropriate amount for investment and which would, in the view of the applicants, allow a reasonable return on their investment. There were disputes concerning the successive sets of documentation prepared by Toyota, and as to whether they represented an understanding earlier reached between the parties as to the contents of that documentation. In December 1998 the applicants decided to withdraw from the arrangement that they said they had with Toyota because, according to correspondence entered into at that stage, they were unhappy with new draft documentation prepared by Toyota which was said to be unrepresentative of the basis upon which negotiations had been conducted previously. It was said that the latest documentation had changed the arrangement significantly and that Toyota had "pulled the rug" from underneath the applicants. This was alleged to be unfair and the applicants sought orders to the effect that the arrangement be declared void and that compensation be paid for losses which had been suffered in reliance upon the conduct and representations made by Toyota. It was said that the second applicant had sustained a loss of $103,772, that the first applicant had lost salary in the order of $57,000 which he could otherwise have earned, that the second applicant was precluded from earning anticipated profits over the next three years totalling $240,000 and that other assets had been lost. The total claims were approximately $600,000.

3 In order to deal with the claims made by the applicants and the defence of those claims maintained by Toyota it is necessary to examine the evidence given in the proceedings in some greater detail.

4 The first applicant and his wife are the directors of the second applicant. In late 1987 he held property interests in the Cooma/Monaro area. He was then employed as the Managing Director of Johnston Controls Australia Pty Ltd a position which he had held since October 1985. Previously he had been managing director and had held senior executive positions in a number of other companies. Mr Cavacuitti said that he had always intended to retire to the Cooma/Monaro area when he had turned 60. In December 1997 he saw an advertisement in the Sydney Morning Herald entitled "Business Opportunity - Toyota Dealership - Southern New South Wales". The advertisement invited expressions of interest. Mr Cavacuitti made contact with Toyota and in January 1998 he completed a Dealership Application form. He then had the first of a number of telephone conversations with Mr Bernie Smith, the respondent's Dealer Development Manager. He was told that the dealership was in Cooma, that Toyota was dissatisfied with the performance of the present dealer, a Mr McGee and that it was anxious to appoint a new dealer. Mr Cavacuitti was also told that Toyota was unhappy with the location of the current dealership and that it would be necessary to relocate the new dealership to an area closer to the Cooma CBD. In answer to an inquiry Mr Smith told Mr Cavacuitti that he was unable to give him detailed financial data concerning the operations of the existing dealer. However Mr Cavacuitti was supplied with a document entitled Cooma Capitalisation Report as well as a Primary Marketing Area information pack which contained a number of statistics about the Cooma/Monaro area.

5 Because Mr Cavacuitti relied upon the Cooma Capitalisation Report as the basis for his budget and as the basis upon which he proceeded to take steps to secure the dealership it is necessary to describe the contents of that document. Mr Cavacuitti was given the document on 18 March 1998, at a meeting with Mr Smith and Mr John Whalley who was then the Dealer Business Planning Manager, Eastern Region of Toyota reporting directly to Mr Smith. Both Mr Smith and Mr Whalley had been involved in the preparation of the Report.

6 Toyota divided its New South Wales area into six zones including a Southern Rural zone within which Cooma was situated. There were 18 to 20 dealers within that zone. From information provided by the Roads and Traffic Authority Toyota was able to ascertain that its market share of new vehicle sales in the Southern Rural zone in a ten months period to October 1987 was 18.6 percent. From the same source it knew that about 420 new vehicles had been sold in that zone in a ten months period which was projected to 505 vehicles on an annualised basis. Applying Toyota's average market share in that zone to projected sales resulted in projected annual sales out of the Cooma dealership of 94 new vehicles. This assumed that the Cooma dealership would be performing in general terms in the same way as other Toyota dealerships within the Southern Rural zone. Based on projected vehicle sales of 94 per annum Toyota was also able to project average gross margins on new vehicle sales as well as projected income which might be earned by a dealer from selling finance and insurance products to new car buyers. Based on the experience of its dealers, Toyota was also able to project the number of used vehicles that the dealership might sell as well as the gross margins to be derived from the sale of those vehicles, including commission earned from selling finance and insurance products to used car buyers. Income would also be generated from the carrying out of service on vehicles and the sale of spare parts, which Toyota was able to estimate based on sales volumes of dealers who had a relatively low volume of sales each year. Finally, the report projected income from a subsidy which is paid to Toyota dealers of about four percent of the list price of new vehicles.

7 Based on this approach the Capitalisation Report estimated a total dealership income of $720,901 per annum, which Toyota personnel, and in particular Messrs Smith and Whalley thought would be achievable at a well run Cooma dealership established in suitable premises, although the evidence varied as to the lead time which would be necessary before sales volumes would attain those referred to in the Report.

8 Based on its own experience, Toyota estimated that there would be total annual expenses of the order of $640,000. Included in expenses was an item for "rent/mortgage interest". This was calculated by reference to an estimated property cost of $500,000 and holding costs of ten percent per annum.

9 The estimated net income from the business was $81,000.

10 The Report estimated that a person who acquired the dealership would require total fixed and operating investment capital of the order of $735,000 including an amount of $500,000 for the cost of land and buildings.

11 The Report was based, as I have said, on projected sales of 94 new vehicles each year. This should be contrasted with the sales achieved by Mr McGee, the existing dealer. For the first ten months in 1997 that dealership had sold 36 new vehicles. Total new vehicle sales for 1996 and 1995 were 42 and 52 respectively. In order for a new dealer to achieve the estimated income set out in the Capitalisation Report it was obvious that it would be necessary to substantially increase the number of new vehicle sales achieved by the then existing dealer.

12 Henceforth Mr Cavacuitti proceeded on the basis that the Capitalisation Report which had been made available to him set out in realistic terms the profitability of the dealership and what was capable of being achieved by way of sales. Whilst the evidence given in the proceedings by Messrs Whalley and Smith emphasised that the document was intended to be used solely for the purpose of ascertaining the amount of capital which Mr Cavacuitti would need to inject into the business, neither dissented from the proposition that, to the best of their ability, the Report was a realistic one.

13 Mr Cavacuitti knew that the Report was based on averages, that the figures were indicative of what might be achieved and that he had to make up his own mind about the viability of the business. He concluded that it could be made viable. Overarching all of this, of course, as understood by Mr Cavacuitti and by Toyota was the necessity to operate the dealership business out of suitable premises, that is premises which were attractive to customers, suitable for the purpose of running a dealership including servicing vehicles and appropriately located. Toyota at all times insisted that it be situated in or close to the Cooma CBD.

14 There were many ongoing discussions between Mr Cavacuitti and Toyota representatives including Messrs Smith and Whalley and Mr Grant McNaughton who replaced Mr Smith in May 1998. Included within these discussions Mr Cavacuitti mentioned the feasibility of setting up a Toyota satellite service in Jindabyne and the possibility of selling items such as boats and outboard motors as well as undertaking repairs of small engines. There is no contention that these matters were generally discussed. Mr Cavacuitti stated that he also mentioned the possible sale of camping equipment, four wheel drive accessories and clothing as part of the dealership. There is some contention as to whether these items were mentioned.

15 There was a conversation between Mr Smith and Mr Cavacuitti in March 1998 during which Mr Cavacuitti alleges that he was told by Mr Smith that he had been selected as the Cooma dealer and that this would be confirmed in writing in a couple of weeks. Mr Smith denies having this conversation. He said that he informed Mr Cavacuitti on about 4 or 5 April 1998 that he had been selected as the preferred applicant, that is that Toyota would negotiate exclusively with him aimed at having him appointed as the Cooma Toyota dealer.

16 The position was clarified by a letter from Mr Smith to Mr Cavacuitti dated 6 April 1998 which in all probability was given to Mr Cavacuitti at a meeting on 17 April 1998. That letter referred to his application to become an authorised Toyota dealer at Cooma "which is presently under consideration". The letter was provided to enable Mr Cavacuitti to make finance applications "as an indication that your application may be approved" subject to a number of conditions. Relevantly those were that "the balance of Toyota's requirements being satisfied" and the acceptance of certain special conditions which were annexed to the letter.

17 Mr Cavacuitti signed that letter by way of agreement to these conditions. He said that he signed the letter because he had been told by Mr Smith that he had been appointed the dealer for Cooma, he had had full financial details and the special conditions which he saw reflected what he had been told. He said that he did not read the letter itself at that stage but read it later. The only material that he read was the attached special conditions. He had gone through those conditions very quickly with Mr Smith. He did not read the standard form of agreement which was attached to the letter because he did not think that it was necessary to read it in detail at that stage. He saw that the letter said that his application was under consideration but did not take issue with that fact because he had been told that he was appointed and that his dealership would start on 1 June 1998.

18 This evidence of Mr Cavacuitti conflicted with that of Mr Smith. Mr Smith said that when he handed the letter of intent and attachments to Mr Cavacuitti he explained in general terms the nature of the documentation. He specifically told Mr Cavacuitti that there was no necessity to acknowledge the letter of intent and the various terms and conditions at that stage and that Mr Cavacuitti ought to obtain advice about them.

19 It is not necessary that I determine which of these conflicting versions is correct, in view of the conclusion which I have reached as to the disposal of these proceedings. However I observe that there were a number of occasions when there was conflict between evidence given by Mr Cavacuitti and evidence given by both Mr Smith and Mr Whalley as to the details of conversations and as to when they occurred. Overall I prefer in terms of accuracy the evidence of Messrs Smith and Whalley, except for one important aspect which relates to a matter of detail concerning some architectural plans. I shall refer to this matter later in these reasons for judgment.

20 One of the reasons why this particular area of controversy in the evidence does not need to be resolved is that, as Mr Cavacuitti agreed during the course of his cross-examination, he had had broad based business experience and had been engaged in business at a senior management level for 22 years. In addition he had a high level of financial acumen. This was not a case of a naïve, untrained person proposing to enter into a relationship with a sophisticated business organisation. Indeed, Mr Cavacuitti expressed confidence in his ability to deal with all aspects of the dealership.

21 I return now to the special conditions which accompanied the letter of intention of 6 April 1998. These included the following: 1. The dealer agreed to accept and abide by two Toyota dealer agreements in standard form together with ancillary documentation. 2 The dealer was required to produce evidence of the approval of a finance facility which extended to what was termed an "automatic release floor plan facility". 3 The dealer was required to hold an authorised motor vehicle dealer licence. 4 The dealer agreed to provide to Toyota copies of all contracts of sale of real estate, agreements for lease and all other property related agreements relevant to the conduct of the dealership. 5 The dealer agreed to obtain the prior written approval of Toyota to any site redevelopment, acquisition of additional property, any significant renovation or refurbishment and any change of use of existing Toyota facilities. 6 The dealer "agrees to relocate the business to new premises in Central Cooma within eighteen months of commencing as a Toyota dealer. The design, layout and location of these premises will be finalised after consultation between the dealer and (Toyota) and Regional Management". 7 The dealer acknowledges that recent Toyota sales performance in the Cooma PMA has been unacceptable, and undertakes to achieve and maintain not less than zone average Dealer Earned Share within twelve months." (This is a reference to the percentage share of the market enjoyed by Toyota as referred to when considering the Capitalisation Report, namely 18.6 percent).

22 There are other special conditions, the provisions of which are not presently relevant.

23 As at the date that Mr Smith and Mr Cavacuitti met in Cooma on 17 April 1998, it was obvious that the principal task of both parties was to secure a site from which the dealership (which both sides assumed and intended would be formally granted to the applicants) could be conducted. Both parties assumed that in the short term, that is for a period of up to eighteen months Mr Cavacuitti would be able to negotiate to lease the premises from which the dealership was currently being operated by Mr McGee although Toyota thought that they were unsuitable in the long term.

24 On the same day Mr Cavacuitti and Mr Smith met a local real estate agent and visited approximately sixteen sites in the Cooma area for evaluation as to their suitability for the new dealership.

25 Three sites were identified as having potential. They were to be evaluated by Mr Cavacuitti.

26 In the meantime there was agreement that Mr Cavacuitti would endeavour to negotiate a lease of the McGee premises. Mr Cavacuitti said that the McGee premises were unsuitable because the site was too far from the centre of town and at 1300 square metres was too small. The building was said to be dilapidated and required significant remodelling, was on the wrong side of the road and had poor visibility and was land-locked. Mr Smith denied that he so described the McGee site. It was his evidence that he said to Mr Cavacuitti that the site was unsuitable because it was not in the Cooma CBD and was run-down. He denied mentioning the other matters to Mr Cavacuitti.

27 Mr Cavacuitti endeavoured to negotiate a lease from Mr McGee. Mr McGee said initially that he wanted to sell the premises and was not interested in leasing them out. Subsequently he changed his mind and agreed to lease them to Mr Cavacuitti but disclosed that he wanted a lump sum payment of $120,000 for goodwill. This was, understandably, not acceptable to Mr Cavacuitti.

28 By about June 1998 the parties had agreed that a site formerly conducted as a Shell Service Station at 48-52 Sharp Street would be a suitable site from which to conduct the dealership. The cost was more expensive than originally anticipated by Mr Cavacuitti but nevertheless he determined to pursue its acquisition. Concept plans were drawn up by an architect retained by Toyota, Mr Avramidis. Mr Cavacuitti retained his own architect to draw up plans for submission to council, based on the concept plans. Those plans which were admitted into evidence in the proceedings showed an area set aside for "ski hire" and a small engine workshop together with a separate showroom office. It was the evidence of Mr Cavacuitti that he had always intended to conduct other businesses as well as the dealership because the anticipated income from the dealership would never represent a sufficient return on capital. He said that he specifically discussed businesses such as a ski hire business with Messrs Smith and Whalley. Whilst there is a concession on the part of the Toyota personnel that some businesses were discussed including a small engine repair facility and the sale of outboard motors, they denied any mention of a ski hire facility. Messrs Smith and Whalley also denied having seen the plans drawn up by Mr Cavacuitti's architect which contained reference to a ski hire area. However there was admitted into evidence a facsimile transmission from Mr Cavacuitti to Mr Avramidis copied to Mr Whalley dated 30 September 1998. This communication referred to costs savings, presumably in connection with the plans originally submitted to council for the ex-Shell site. The facsimile transmission concluded that there had been deleted from the new proposal "the rear showroom and ski-hire additions." This facsimile transmission was an exhibit to an affidavit sworn by Mr Whalley. I am satisfied that, at the least, Mr Whalley held documentation from Mr Cavacuitti indicating that there was mention on plans prepared in connection with the ex-Shell site of the conduct of a ski hire business from that site.

29 Mr Cavacuitti said, and I accept, that he agreed to enter into a short term lease for six months from the 1st July 1998 of premises situated at Polo Flats to use as a workshop and as a spare parts facility on the basis that he would secure the ex-Shell Service Station site and would be able to develop it so that the dealership could be operated from that site. It was intended that new cars could be sold from that site as part of a staged development.

30 As it transpired the ex-Shell site was said by Cooma Shire Council to be in a flood prone area and conditions imposed by that council in connection with its development created a total acquisition and development cost considerably in excess of the original $500,000 budget for this item.

31 The applicant commenced trading under the business name Monaro Toyota which had been registered with the consent of Toyota at the Polo Flats site in September 1998. He serviced motor vehicles and sold spare parts from those premises. The spare parts included Toyota parts which were acquired indirectly from Canberra Motors, a Toyota dealership. The servicing undertaken from that site included the servicing of Toyota vehicles under new car warranty.

32 Once it became clear in September 1998 that the ex-Shell Service Station site could not be utilised, Mr Cavacuitti located, in consultation with Toyota representatives, a site owned by Cooma Motor Engineers (the CME site) from which a Nissan and Hyundai franchise had been conducted. However the owner wanted to sell the Hyundai franchise with the site. Toyota would not agree that the site was suitable for more than one franchise being conducted from it and in any event the acquisition price exceeded the budgeted amount of $500,000.

33 By 4 November 1998 Mr Cavacuitti had not secured any site which was suitable both to him and Toyota from which the dealership could be conducted. On that day at a meeting between him, Mr Whalley and Mr McNaughton who had by then replaced Mr Smith, Mr Cavacuitti was given another set of documents. They consisted, among other things, of standard Toyota dealer agreements covering commercial and non-commercial products. There were some special conditions included which made reference to an area, the amount of which was undesignated, "to adequately display new vehicles". Mr Cavacuitti said this was the first occasion on which the concept of a minimum designated display area had been raised by Toyota. The form of agreement referred to the business being conducted from premises at 33 Holland Street Cooma being the Polo Flats site. Mr Cavacuitti complained to Mr Whalley and Mr McNaughton that the agreement was site specific. He had already decided against the CME site because of the overall cost. He complained that if he signed the agreement and if he did not proceed with the CME site Toyota could terminate the dealership agreement.

34 Mr McNaughton was not called to give evidence in the proceedings and both parties agreed that the failure to call him could not be attributed to any lack of willingness on the part of either party to make Mr McNaughton available to give evidence. However Mr Whalley said that he was present when Mr McNaughton had a conversation with Mr Cavacuitti concerning his complaints about the change in the special conditions which Mr Cavacuitti said had been made in the documentation given to him on 4 November 1998. Mr McNaughton was said to have explained that most of the clauses in the special conditions were standard to Toyota documentation. In terms of the minimum designated area Mr McNaughton said that this reflected the fact that Toyota expected there to be a dedicated area for the Toyota dealership. In terms of the site specific reference to the CME site, Mr McNaughton said that "if that does not work out, I will put in the Polo Flats site as a temporary location whilst you find an appropriate site." There was an explanation given as to the other special conditions contained in the documentation.

35 At that stage it was the position of Toyota personnel that the CME site was an acceptable site from which the dealership could be conducted, although it was suitable for the sale of only one brand, namely Toyota, and was not suitable for a multi-dealership site. Mr Cavacuitti was of the opinion that the purchase price exceeded the budget as set out in the capitalisation report and on which he relied and was not prepared to acquire the site.

36 In his affidavit Mr Cavacuitti said that "I had up until this stage been confident in my dealings with Toyota however when the draft Dealership Agreement was presented to me which was different from the one that I had already signed I decided not to deal verbally with any member of Toyota but rather try to have them commit in writing. As such from this point onwards I did not have any significant telephone conversations with any member of Toyota and attempted to resolve the matter by writing."

37 There then followed a series of correspondence between the parties. On 7 November 1998 Mr Cavacuitti wrote to Mr McNaughton complaining that the special conditions in the draft documentation did not accord with the special conditions contained within the letter of 6 April 1998 which he had agreed to accept on 17 April 1998. He also complained about the designation of certain individuals by Toyota to perform certain functions within the dealership. He asked that the documents be redrafted "in strict accordance with the original intent and understanding between us." The letter concluded by stating "until this matter is finalised we cannot proceed any further and negotiations regarding the Cooma Motor Engineers premises are unable to be continued, these factors may jeopardise the whole venture and cause us considerable damage."

38 Mr McNaughton responded by letter dated 9 November 1998. He asked Mr Cavacuitti to highlight the special conditions which were of concern to him. In terms of the designated positions he said that he did not anticipate any problems and that the agreement would be reissued to reflect changes which Mr Cavacuitti wished to make to his key personnel.

39 Mr Cavacuitti responded by facsimile transmission to Mr Whalley dated 12 November 1998 which commenced by reference to a discussion the previous day. That communication stated that he had relied totally on representations made by Toyota in proceeding with the venture, particularly due to his total inexperience in the motor industry. The communication went on to discuss a number of matters including negotiations for the CME site, the fact that it was Mr Cavacuitti's understanding that he would always be allowed to pursue other commercial activities from the dealership premises and that Toyota had made "unilateral changes from the previously held agreements". The communication concluded, "the critical issue at present is finding suitable premises acceptable to both parties. Our temporary lease on 33 Holland Street runs out at the end of December, which doesn't allow us much time to find an alternative location. Neither of us believes that these premises will satisfy our mutual needs. Correct us if we are wrong in this assumption? What do you propose we do about this crucial matter?"

40 Mr Cavacuitti forwarded a facsimile transmission to Mr McNaughton on 13 November 1998. This was in response to the earlier transmission of 9 November. He declined to provide details of the changes made in the documentation until his "lawyers and financial advisors have assessed these agreements in their totality." He commented in general terms about the late inclusion and the possibility of loss of rights including the necessity to absorb additional costs not originally foreseen. In particular there was a reference to "the extent of reciprocity afforded us under some of the processes described", the requirement to employ a named person whose remuneration had previously been paid for by Toyota, and restrictions which would preclude a number of other commercial activities including other franchises, a marine and boating franchise, small engine sales and repairs, hydraulic hose and fittings franchise, motorcycle franchise, sale of used non-Toyota vehicles, repair and servicing of non-Toyota vehicles and AG Machinery franchise." There was reference to additional costs associated with certain special conditions and he asked "can we jointly reword the business plan numbers to reflect the financial impact of the proposed changes." There was a reference to one particular clause which was said to appear extremely onerous.

41 A facsimile transmission of 18 November 1998 from Mr Cavacuitti to Mr Whalley asked for news about an Elders site, and requested details concerning signage, credit for workshop manuals and like matters. There was also a reference to the CME site with a comment that the owners were apparently trying to sell the businesses being conducted on that site on a walk-in walk-out basis, Mr Cavacuitti not being interested in such an acquisition.

42 By letter dated 18 November 1998 Mr McNaughton forwarded another two copies of the Dealer Agreement including special conditions, together with other documentation. The letter referred to the fact that the special conditions within the Dealer Agreements were "as agreed". It requested that the documentation be signed and returned by 4 December 1998.

43 A facsimile transmission dated 29 November 1998 from Mr Cavacuitti to Messrs McNaughton and Whalley said that the Dealer Agreements had been forwarded by express post to lawyers for review and asked "what is Toyoto's position regarding the considerable start-up expenses we have already incurred from April?"

44 On the same day Mr Cavacuitti forwarded another facsimile transmission in which he referred to the fact that he had presented demonstration vehicles at an event in Cooma and referred to a number of "major concerns", with respect to premises and "variations to 17 April 1998 agreement."

45 That communication concluded by referring to the fact that out of seventeen potential sites evaluated only two were acceptable to Toyota namely the ex-Shell Service Station site and the CME site both of which required an investment in excess of the $500,000 referred to in the original capitalisation report. This was in the context of a twelve month limitation imposed on the existing temporary location. The communication concluded "we certainly cannot achieve the results Toyota expects from us where we are and under the terms you are now imposing we could see us losing the franchise if we cannot find suitable premises acceptable to yourselves. This introduces an excessive risk and burden on ourselves which was not portrayed in the original representations."

46 A reply from Mr McNaughton dated 24 November 1998 asked that the completed documentation be forwarded as soon as possible. In connection with start-up expenses it recommended amortisation over a three year period.

47 On the same day Mr Cavacuitti forwarded a facsimile transmission to Messrs McNaughton and Whalley saying that he had received legal advice to refrain from discussions regarding the documentation until assessed by his lawyers. Mr McNaughton responded on 26 November expressing concern "by what appears to be a sudden deterioration in our relationship. I am unsure as to what has caused this and can only assume that your decision to halt any further communication must arise from concerns you have in regard to your Dealer Agreement or the disclosure documents….if you do have any concerns I believe the best way of resolving them is through discussions." The communication sought to schedule a meeting and referred to the fact that Mr McNaughton's several telephone calls to Mr Cavacuitti had not been returned.

48 On the same day solicitors acting for Mr Cavacuitti wrote to Mr McNaughton stating that in the opinion of those solicitors the terms set out in the letter of 6 April accepted by Mr Cavacuitti on 17 April "constitute a binding agreement between the parties" and that, in effect, Toyota was precluded from changing those conditions. The letter sought that Toyota honour the terms of that original agreement.

49 On 30 November 1998 Mr Cavacuitti forwarded a facsimile transmission to Messrs McNaughton and Whalley stating that the CME site was still available at a sale price of about $620,000. He suggested that Toyota acquire the premises and lease them back to him for three years at a rental of $50,000 per year.

50 On 1 December 1998 Mr Cavacuitti forwarded a facsimile transmission to Mr Whalley. It complained that Canberra Toyota were targeting local customers aggressively, that an organisation named Capricorn was offering genuine Toyota spare parts at dealer prices in the Cooma region, that there would be difficulty in achieving certain sales, and reinforcing advice received from lawyers that he should refrain from verbal discussions until certain advice had been received.

51 By letter dated 4 December 1998 Toyota responded to Mr Cavacuitti's solicitors stating that that Company had an agreement with Mr Cavacuitti "on the terms and conditions as contained in the agreement provided by Toyota to your client during November 1998." The letter said that failure to execute the agreement would be taken as a repudiation and Toyota would "engage a new dealer for the dealership", and would take other action based on wrongful repudiation.

52 That letter was accompanied by a "Without Prejudice" letter stating that Toyota did not wish to force Mr Cavacuitti into running the dealership and concluded "if your client has reservations about proceeding with the agreement, we invite you, or your client, to advise us on a without prejudice basis so that a mutually beneficial resolution of the matter might be achieved." There followed further correspondence which culminated in a letter from Mr Cavacuitti's solicitors to Toyota dated 14 December 1998. That letter referred to "consultation with counsel". It maintained the existence of an agreement in the terms and conditions of the letter of 6 April 1998 including the annexed Special Conditions, repeated that the insistence upon execution of a different Dealership Agreement in November was an attempt at repudiation and signalled intention to commence proceedings under s 106 of the Act in this Court. Furthermore it advised that Mr Cavacuitti would cease trading on Friday 18 December 1998. It invited discussions and offered to accept the sum of $160,000 by way of compensation for moneys expended by Mr Cavacuitti based upon the representations allegedly made by Toyota and the contract of 6 April 1998.

53 There are two further pieces of evidence which are relevant. The letter from Mr Cavacuitti to Messrs McNaughton and Whalley of 20 November 1998 stated that only two potential sites were acceptable to Toyota namely the ex-Shell Service Station site and the CME site. In fact, as at that date Mr Whalley was of the opinion that because no other site was available the McGee site would have provided an alternative option at that point of time. This is despite the fact that Mr Cavacuitti had been told on a number of occasions that the McGee site was not regarded by Toyota as being suitable. This had last occurred in at least August 1998. Mr Cavacuitti was not informed that the McGee site was worth exploring in terms of an alternative location for the dealership.

54 It will be remembered that the documentation issued by Toyota in April 1998 required, as a special condition, that the dealer undertake to achieve and maintain the expected level of sales within 12 months. Presumably this was within 12 months of commencing the dealership. Mr Cavacuitti said in evidence that he understood that Mr Whalley had advised him that he had to achieve 94 unit sales within the first year of operation. Mr Whalley said that he had told Mr Cavacuitti that sales at those levels could be achieved within a reasonable time, although he did not specify the time. Mr Whalley said that he had in mind a period of two to three years. Mr Whalley also said in evidence that there would be less likelihood of those targets being achieved from the Polo Flats site. It seems to me on the basis of this evidence that Toyota might arguably have sought to impose as an essential contractual term a requirement to achieve a nominated sales figure at the end of a 12 months period knowing that, in all probability, some part of that period would have been spent trading from the Polo Flats site, albeit as a temporary measure.

Was there an arrangement? 55 Mr Van Aalst of counsel who appeared for the applicants eschewed any reliance by his clients on a contract in the formal sense as underpinning the jurisdictional requirements of s 106. Mr Van Aalst submitted that there was an arrangement between the parties which consisted of a mutual understanding evidenced by a course of conduct undertaken jointly between them with the intention that a formal dealership would be granted when certain designated conditions had been fulfilled. Importantly, one of these conditions was the selection of a site by the applicants which met with the approval of Toyota. The course of conduct included not only attempts made to find a suitable site but matters such as the obtaining of a dealer licence, the establishment of a finance facility and the like. Incidental to this course of conduct was the undertaking of work by or on behalf of the applicants including the arrangements made for the servicing of vehicles under Toyota new car warranty and the promotion of Toyota products.

56 The respondent who appeared through its solicitor Mr Barton conceded that an arrangement existed between the parties along the lines to which I have referred.

Jurisdiction 57 It is a requirement of s 106 that the arrangement must be one "whereby a person performs work in any industry". The respondent submitted that this requirement was not fulfilled. It was said that work carried out by or on behalf of the respondents including the operation of a service and parts business at Polo Flats, the purchase of Toyota spare parts from Toyota Canberra and the hiring of staff for the carrying out of the service and parts business were not carried out pursuant to the arrangement nor were they required or requested to be done by the respondent.

58 I reject this submission. The arrangement which I have described which is constituted by the course of conduct referred to was one which evolved over a period of time. That is, the course of conduct between the parties which required them to cooperate with a view to consummating their respective intentions in the execution of a formal dealership agreement and the creation of a formal dealership necessarily accommodated changing circumstances. One of these circumstances was the inability to locate an appropriate site quickly and the fact that the applicants established a service and parts business at the Polo Flats site and became involved in the promotion of Toyota products. It matters not, in my opinion, that these activities were instituted by the applicants, and that Toyota did not require them to undertake these activities by way of any formal obligation. This is not surprising given that the basis of the applicants' claim was an arrangement as opposed to a formal contract. Once the applicants had determined to embark upon these activities, Toyota acquiesced in them doing so and actively assisted the applicants in carrying out these activities. This is sufficient to accommodate those activities within the arrangement between the parties. They are, in my opinion, activities whereby work was performed by persons in an industry so that it may be said that this was an arrangement which satisfied this jurisdictional requirement.

Was there relevant unfairness? 59 In the course of oral submissions, supplemented by written submissions in reply, Mr Van Aalst identified a number of ways in which it was asserted that unfairness arose with respect to the arrangement between the parties. To some extent the assertions of unfairness differ from those contained within the summons and opening submissions made on behalf of the applicant. What follows reflects the position as outlined by Mr Van Aalst and as described within the respondent's submissions.

60 Before dealing with the specific allegations of unfairness I should make some general observations about the processes by which and the principles utilised for the determination of whether the requisite unfairness exists. A convenient starting point is contained within the joint judgment of Fisher CJ and Hungerford J in the Full Court of the Industrial Court of New South Wales in Baker v National Distribution Services Ltd (1993) 50 IR 254. At 271 their Honours said: "The test of unfairness within the meaning of s 88F of the Industrial Arbitration Act, and hence s 275 of the present Act, has received much attention by the Court and by the previous Industrial Commission over very many years, but, in our review of the cases, the approach stated by Sheldon J in Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 over 26 years ago has endured; his Honour commented (at 374) that unfairness of a contract or arrangement was to be determined according to "the common sense approach characteristic of the ordinary juryman ….It is a plain matter of morals not law." His Honour cautioned, however, (at 374,375) that the section's "massive power makes it imperative that it should be exercised with proper restraint … it should not permit itself to become a refuge for those who are merely disgruntled with a bargain entered into on even terms. … the discretion should be exercised to protect victims of wrong dealing not to prescribe anodynes." Those words by his Honour echoed what had been said earlier by Beattie J in Agius v Arrow Freightways Pty Ltd [1965] AR (NSW) 77 at 89 that it was a matter of deciding "in each particular case by the application of the tribunal's common sense and sense of justice whether a particular transaction is unfair, harsh and unconscionable". The nature of the unfairness attracted by s 88F was considered later by the Industrial Commission in Court Session (Perrignon and Dey JJ, Cahill J dissenting) in A & M Thompson Pty Ltd v Total Australia Limited [1980] 2 NSWLR 1 at 13 as follows: "It has been said that fairness is determined by the commonsense approach of a juryman and that it is a moral and not a legal issue ( Davies' case). Whether this be so or not, it does seem that in distinguishing between what is fair and what is not fair the Judge must apply standards which appear to him to provide a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement. In doing so he would always have to bear in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement." (at 271-2).

61 In determining whether there is an unfair arrangement for the purpose of proceedings brought under s 106 and especially taking into account subs (2), the Court is required to exercise a value judgment reflecting contemporary community values derived from the commonsense approach characteristic of the ordinary, reasonable, hypothetical "standard" member of the community. The value judgment must obviously take into account the totality of the circumstances of the relationship between the parties and the totality of the interests of each of the parties.

(a) The difference in special conditions between the April 1998 and November 1998 documentation.

62 The applicant had complained that the November 1998 documentation differed from the April 1998 documentation, and it was submitted that this created relevant unfairness in the context of the overall arrangement, and especially in terms of the impact which the changed documentation had on the circumstances of the applicants.

63 Associated with this allegation of unfairness were two other allegations, with which it is convenient to deal at the same time. These are:

(b) The respondent required the applicants to execute the dealership agreement in the form presented in November 1998.

(c) The applicants were required by the documentation to operate the proposed dealership from the Polo Flats site which was unsuitable for the dealership.

64 There are a number of observations which need to be made about these allegations. I have previously set out the gravamen of the communications between Mr Cavacuitti and Toyota representatives following the presentation of the first set of documentation by Toyota in November 1998. Mr Cavacuitti had complained that the documentation was site specific. Mr McNaughton had told him that the Polo Flats site could be inserted as a temporary location whilst he found an appropriate site. Mr Cavacuitti complained about a number of matters contained within the earlier November 1998 documentation and Mr McNaughton changed the documentation contained within the second draft. Whilst Mr Cavacuitti complained that certain essential details had been changed when comparing the November 1998 documentation with the April 1998 documentation he declined to specify these matters save for the imposition of additional costs not originally foreseen, the requirement to employ a named person and pay for his remuneration, the inability to carry out other activities from the site and the fact that the documentation was site specific.

65 There is no doubt that the letter from Mr McNaughton dated 24 November 1998 asked that the completed documentation be returned "as soon as possible". However on 26 November 1998 Mr McNaughton specifically asked that Mr Cavacuitti discuss any concerns that he had with the documentation as the best way of resolving any dispute. Mr McNaughton sought a meeting at that stage and referred to the telephone calls to Mr Cavacuitti which had not been returned. As at that date there is, in my opinion, no indication from Toyota that it was inextricably and immovably wedded to the documentation which had been forwarded to Mr Cavacuitti.

66 The subsequent communication was between Mr Cavacuitti's then solicitors and Toyota which focused attention on whether there was a binding agreement between the parties as evidenced by the April 1998 documentation or an agreement made in November 1998. The assertions made by the solicitors for Mr Cavacuitti on the one hand and the Toyota organisation on the other made reference to their respective rights which accrued as a result of an assertion of a binding contract and, it seems to me, deflected attention from any ongoing commitment to negotiations or discussions. The "without prejudice" letter from Toyota dated 4 December 1998 held out the prospect of negotiations in connection with the abandonment of the venture, and these do not appear to have been pursued on behalf of or by Mr Cavacuitti.

67 In terms of the progression of the negotiations and communications surrounding the documentation, the matter appears to have been left with the Toyota letter of 26 November 1998 seeking discussions as a means of resolving disputation about documents. Certainly there is no evidence that Mr Cavacuitti accepted any such suggestion.

68 Mr Cavacuitti gave evidence in the course of the proceedings as to the matters which concerned him about the November 1998 documentation when compared with the April 1998 documentation. He conceded during the course of his evidence that most of the matters about which he referred were either contained within the April 1998 documentation specifically or by reference or were not of sufficient significance to attract any assertion of unfairness on the part of Toyota.

69 There are two particular special conditions contained within the later November 1998 version of the Dealer Agreement to which reference should be made. These are the following special conditions: "26 The Dealer agrees to achieve Passenger and Commercial Earn Share ratio of the lower of State or Zone average and to maintain this level as a minimum for the duration of this Agreement. The Dealer acknowledges that attainment of this performance related Special Condition is critical to the continuance of the Dealer Agreement" (and Toyota reserved the right to give notice of termination of the Agreement if the condition was not achieved). "28 The Dealer acknowledges that the present site at Polo Flats is a temporary site and is inadequate to represent Toyota in the Cooma PMA. The Dealer agrees to relocate the Dealership to a new site within 12 months of signing this Agreement. The new site must be located in the Cooma township, be approved by Toyota prior to lease or purchase and must have a minimum of 1,300 sq metres for sales, parts and service departments."

70 The first of these special conditions is similar to that contained within the April 1998 documentation, which I have summarised earlier in para 21. The second is also similar to a provision contained within the April 1998 documentation (referred to also in para 21) save that the relocation is required within 12 months rather than 18 months.

71 It was submitted on behalf of the applicants that the combined effect of these two provisions created unfairness. It was submitted that in reality the return on investment foreshadowed within the Capitalisation Report could not be achieved whilst operating from the Polo Flats site. In addition, the inability to achieve sales at a level required by Special Condition 26 and to relocate the dealership to its new site within 12 months created a situation where the applicants would have been at risk of having the dealership terminated and thereby having lost the capital investment and the opportunity to earn income.

72 The evidence overall is to the effect that neither the applicants nor the Toyota representatives involved in the negotiations thought that the Polo Flats site was an appropriate one and all persons involved were concerned about the ability to achieve the sales targets set by Toyota whilst operating from that site.

73 Arguably, if Toyota had sought to compel the applicants to enter into an agreement on those terms, this would create a potential for financial difficulties for the applicants. However, Special Condition 26 is in similar terms to the April 1998 documentation and Mr Cavacuitti expressed no concern about signing documentation containing that provision and made no complaint about unfairness with respect to it. The situation with respect to the Polo Flats site is a little different in that Special Condition 28 provides for relocation in 12 months whereas the relocation period provided for in the April 1998 was 18 months. However, I do not understand the communications between the parties which took place during November 1998 to have been conducted on the basis that Toyota was insisting that the applicants sign the documentation in its then current form without the ability to enter into further discussions and negotiations concerning the provisions in issue. Certainly the applicants do not appear to have responded to the facsimile transmission forwarded by Mr McNaughton on 26 November 1998 requesting a meeting to discuss any concerns that Mr Cavacuitti might still have. The response appears to have been in the form of a demand made by the applicants' then solicitors that Toyota be bound by a binding agreement alleged to have been made in April 1998.

74 These specific allegations of unfairness have to be considered in the context of all of the circumstances surrounding the creation of the arrangement and the fact that the arrangement contemplated an evolving process leading up to the selection of an appropriate site, the fulfilling of the other conditions contemplated and the entering into of the dealership documentation. Included within these circumstances are the following matters which should, in my opinion be taken into account: 1. Mr Cavacuitti represented himself as being an experienced businessman possessing a high level of financial acumen with many years of business experience. 2. In the course of evidence Mr Cavacuitti said that if the November 1998 documentation had been identical with the April 1998 documentation he would have signed it notwithstanding that he had not at the time located a site suitable both to himself and Toyota from which to permanently conduct the dealership. He would have undertaken the risk involved. He would have done this knowing that it would have been difficult to trade out of the Polo Flats site. 3. As and from April 1998 Mr Cavacuitti was aware that Toyota required that the site selected be a minimum of 2,500 sq metres, close to existing dealers in the Cooma CBD, near other motor dealerships with a good street frontage, level land, comfortable offices and a good sales environment. 4. Mr Cavacuitti said in evidence that he had "a reasonable idea of the Cooma-Monaro market". 5. In the course of his discussions with Mr Smith on 17 April 1998 Mr Cavacuitti did not raise with him the fact that his interest in pursuing the dealership with Toyota was contingent or dependent upon him being able to conduct other business activities from the site. 6. The arrangement fell apart ostensibly because of the terms and conditions of the documentation and not because of Mr Cavacuitti's inability to obtain a suitable site within the price range which he had fixed by reference to the capitalisation report. 7. No complaint was made by the applicants that Toyota had misrepresented in any way the availability of a site within the Cooma-Monaro area which fulfilled its requirements and the applicants were entirely "at risk" in terms of their decision to participate in the arrangement and to carry out the activities which were necessary to be undertaken in fulfilment of the arrangement.

75 Having regard to all of these circumstances and having regard specifically to the particular matters raised by the applicants as justifying a finding of unfairness, I am unable to conclude that the applicants have established any unfair conduct on the part of Toyota with respect to the arrangement, nor am I able to characterise the arrangement as being unfair for the purposes of s 106 of the Act. The circumstances are more akin to the applicants being "merely disgruntled with a bargain entered into on even terms" (per Sheldon J as quoted earlier in par 60).

(d) The respondent failed to give proper consideration to the McGee site in October and November 1998 as a site from which to operate the Toyota Dealership.

76 It had originally been foreshadowed by all parties that the applicants would lease the McGee premises temporarily whilst the applicants searched for more suitable premises. The McGee site was said by Toyota to be unsuitable because it was multi-tiered, it needed access for disabled people and it needed considerable moneys to be spent on it to make it suitable. The prospect of leasing the site on a temporary basis fell through when Mr McGee sought the payment of goodwill associated with it.

77 There was introduced into evidence an advertisement placed in the Express newspaper on 10 September 1998 which offered the McGee premises for sale by tender. Mr Cavacuitti forwarded a copy of that advertisement to Mr Whalley by facsimile transmission, presumably some little time after it was published. Tenders were to close by 16 October 1998. Mr Cavacuitti wanted to keep Mr Whalley informed that the building was offered for sale by tender. He had previously considered it as a possible acquisition and had a valuation carried out in August 1998 which showed a value of $300,000. This was well within his budget.

78 In mid-October Mr Cavacuitti had a conversation with Messrs Whalley and McNaughton about the McGee site and asked whether he should tender to purchase it. He said he was told by Mr Whalley that the property was not acceptable to Toyota. He did not raise the prospect of acquiring the McGee premises further with anybody from Toyota and he thought that it would be sold during the tender process. In his evidence given on 10 April 2002 Mr Cavacuitti said that the McGee property had not then sold.

79 I should interpolate that a facsimile transmission from Mr Cavacuitti addressed to certain officers of the Cooma- Monaro Shire Council, (copies of which were sent inter alia to Mr Whalley) dated 16 September 1998 stated explicitly that the McGee premises had been evaluated in the previous April and that there was no intention "now or in the future, of making any offer to purchase these premises since they do not satisfy our requirements." Presumably, subsequent events and failure to acquire other premises caused Mr Cavacuitti to consider changing his mind.

80 Mr Whalley was cross-examined about the McGee site. He said that there was no problem with its size or its position but that there were limitations because it was a tiered site, it needed renovation and it would have to comply with the current Council building code. There was a risk that the cost of renovations and enhancement "may become prohibitive". Mr Whalley was aware that the McGee site had been offered for sale by tender but he did not mention it further to Mr Cavacuitti because by October the CME site had become available and that was considered a much more appropriate site.

81 Mr Whalley gave evidence that Mr Cavacuitti raised the McGee site during the course of a meeting on 16 October 1998,and that Mr Cavacuitti was told that it was unsuitable as a "long term representation". However as at 26 November the CME site had been discarded as a suitable site. At that stage Mr Whalley conceded that the McGee site was "an option" as a suitable site. He did not advise Mr Cavacuitti of this position because Mr Cavacuitti had not raised the McGee site with Toyota after the discussion which had occurred in October. Reference to the McGee site was not considered by Mr Whalley because as at 26 November "there were other issues that we were trying to communicate with Mr Cavacuitti to get the agreement signed." Mr Whalley also said that as at 26 November the negotiations with Mr Cavacuitti were being conducted solely by Mr McNaughton and that he was effectively "out of the scene" at that stage.

82 Given that there had been a high level of cooperation between the applicants and Toyota with respect to the location of a suitable site, it is arguable that the failure of Toyota to advise Mr Cavacuitti that the McGee site was acceptable to it notwithstanding the difficulties earlier expressed, once the CME site had been discarded created a certain degree of unfairness. This is because Mr Cavacuitti had previously been advised that the McGee site was not going to be approved by Toyota.

83 The explanation given by Mr Whalley was that by 26 November 1998 events had overtaken any further discussions with respect to an appropriate site. It will be remembered at that stage that Mr McNaughton had suggested to Mr Cavacuitti that they meet and discuss outstanding issues concerning the contents of the documents and solicitors then acting for Mr Cavacuitti were asserting that the April documentation constituted a binding agreement between the parties.

84 Although the stance taken by Mr Cavacuitti at that stage was ostensibly motivated by his concern about the changes made by Toyota to the documentation, it is clear from his discussions with representatives of Toyota and from the correspondence to which I have earlier referred that the inability to locate a suitable site was a factor. For example in his facsimile transmission of 30 November 1998 to Messrs McNaughton and Whalley Mr Cavacuitti asked Toyota to consider purchasing the CME site and lease the premises back for three years at $50,000 per year rental. The facsimile concluded "Do you think this potential solution feasible? Failing this what do you propose?" There appears to have been no response to that suggestion, no doubt because the correspondence with the solicitors then acting for Mr Cavacuitti deflected attention away from this issue. Nevertheless, Toyota, at least in the personage of Mr Whalley, had concluded at that stage that the McGee site would have been acceptable to it and this was never communicated to Mr Cavacuitti. It is possible that if this fact had been communicated to Mr Cavacuitti at that stage that he may have taken a different approach. On the other hand, given the insistence of the solicitors acting for Mr Cavacuitti that Toyota ought to be held to the strict terms and conditions of the documentation created in April 1998, it is not possible to do more than speculate about what Mr Cavacuitti's response may have been if it had been made known that the McGee site then met with Toyota's approval.

85 It might be argued that if Toyota had communicated earlier about its willingness to consider the McGee site with Mr Cavacuitti, that matters may not have come to a head so early. However, it is clear from the facsimile transmission forwarded by Mr Cavacuitti of 30 November that even at that stage he was continuing to pursue the CME site.

86 It is difficult to define the stage at which it would have been unfair for Toyota to have declined to have suggested that the McGee site was potentially suitable. Perhaps, Toyota should, in fairness, have communicated the suitability of the McGee site as a fallback position if the CME site could not be procured on a basis jointly acceptable to the parties.

87 The respondent countered by submitting that it was the responsibility of the applicants to locate suitable premises and that the applicants had not raised it with the respondent as a suitable site. Furthermore, there was no evidence that Mr Cavacuitti had ever made an offer for the McGee premises or as to what would have been a price acceptable to the vendor. There was no evidence as to the likely cost of improvements and as to the cost of carrying out any work required by the Council in order to obtain consent to the use of the premises.

88 In written submissions the respondent asserted that the effect of the evidence given by Mr Whalley was that Toyota rejected the McGee site as being suitable for a permanent location and in addition there were other more suitable sites

89 I should deal firstly with the state of the evidence concerning the site. I am satisfied that in April 1998 and early October 1998 the applicant was advised by representatives of Toyota that the McGee site was unsuitable. I am satisfied that it was reasonable for him to proceed on that basis. I am also satisfied that the applicant made Mr Whalley aware that the McGee site was available, in a sense that it was on the market. Furthermore it was the evidence of Mr Whalley that the McGee site "would have been an option" for consideration if no other suitable site was available and given the urgency as at late October 1998 to locate a site once it became clear that the CME site was no longer under consideration.

90 On balance, I conclude that it was unfair conduct in all the circumstances for Toyota representatives not to have advised Mr Cavacuitti that the McGee site could have been considered by him as a location suitable for submission to Toyota once it became clear that the CME site was no longer under consideration. In coming to this conclusion I take into account that both parties were engaged in a common pursuit of the location of a suitable site from which the dealership should be conducted, albeit that the ultimate responsibility for finding that site rested on the applicants. Toyota representatives had actively assisted the applicants in investigating suitable sites and, in addition, Toyota had to approve the ultimate site. It was in the joint interests of both parties that the site be the most suitable that could be found because it was in both their interests that the dealership should ultimately be successful.

91 However, a finding of unfairness is but one element of the power of this Court to make orders under s 106. The finding of unfairness is a pre-condition to the exercise of the discretion to declare the contract or arrangement wholly or partly void or varying it. More importantly any power to order the payment of money under subs (5) must be exercised "in connection with" any contract which has been declared void or varied and the amount of the money must be that which is considered "just in the circumstances of the case."

92 Even though there may have been unfair conduct on the part of the respondent in the manner which I have described it is then necessary to determine whether the arrangement between the parties should be varied or declared wholly or partly void. As the respondent pointed out in its submissions, there is simply no evidence concerning the price at which the owner of the premises would have been prepared to sell them to the applicants, and there is no evidence concerning the conditions which might be imposed by Cooma-Monaro Shire Council in connection with any application to use the premises as a Toyota dealership. Nor is there any evidence about the cost involved in bringing the premises up to a standard which would have been acceptable both to Toyota and the applicants as being appropriate for the conduct of the dealership.

93 In a letter of 18 September 1998 addressed to the Mayor of Cooma-Monaro Shire Council Mr Cavacuitti set out seven requirements for any property which was to be used for the dealership. He prepared a table which he annexed to that letter and rated each of 17 sites by reference to each of the seven requirements. The table assigned a rating of zero to five with respect to each of these requirements. The rating assigned to the former Shell Service Station site was 25 out of a possible 35. According to the table this site rated by far and away as the most favourable and appropriate site. Two sites attracted a total rating of three each. Three others attracted a rating of five only. One of these was the McGee site. It rated three for being on the Monaro Highway, two in terms of overall land and building cost being within budget and zero for site area, closeness to other dealers, walking distance to the CBD, competitive location advantage and practicality/feasibility. There is no evidence as to whether this rating reflected Mr Cavacuitti's own personal views or whether the rating was coloured by assessments conveyed to him by Toyota personnel. In any event, the McGee site rated within the bottom five of the 17 sites assessed.

94 If the arrangement were to be avoided by reason of the unfair conduct which I have described, there would, in my opinion, need to be some evidence either direct or inferential that the disclosure to Mr Cavacuitti of the changed attitude of Toyota to the McGee site would have had or was likely to have had some impact upon the consummation of the arrangement and the conversion of the arrangement into the dealership agreement. There is no evidence which, in my opinion, would satisfy these requirements. The applicants did not introduce any such evidence into the proceedings, nor did they seek to adjourn the proceedings to allow any such evidence to be called or, indeed, to have the proceedings reopened in any other way for that purpose. The same considerations apply, albeit perhaps in a different way, to the variation of the arrangement. Again, if the applicants had sought to vary the arrangement so as to introduce by way of example some form of intermediate step to allow exploration of the feasibility and availability of the McGee site, some evidence would need to be adduced in support of such a contention. Again, no such evidence is available nor have the applicants sought to have any such evidence adduced by way of adjournment or reopening of their case. I am unable to conclude that there is a basis upon which this Court could comfortably and appropriately make any order by way of avoidance or variation referable to this area of unfairness.

95 This conclusion is reinforced by the fact that the ostensible reason given by the applicants when effectively foreclosing further negotiations was dissatisfaction with changes made to the documentation and an assertion that a binding agreement had been made in April 1998. Neither of those factors have, for reasons which I have already given, persuaded me that any findings of unfairness should be made. However the prominence of these two factors as motivating the conduct of the applicants detracts from the significance of the unfair conduct of the respondent in connection with the McGee site and detracts therefore from the exercise of any discretion in favour of the applicants either by way of variation or avoidance of the arrangement.

96 For all of these reasons I have concluded that although it is appropriate to make a finding of unfairness in connection with the arrangement in the manner indicated, it is not appropriate to make any consequential orders by way of avoidance or variation and therefore not permissible to make any orders by way of monetary compensation.

97 Arguably, the applicants have succeeded in some part with respect to their claim, although overall have not been successful in obtaining relief. For these reasons I shall reserve costs.

98 CONCLUSION AND ORDERS 1. I find that the arrangement between the applicants and the respondent is unfair by reason of the conduct of the respondent in failing to advise the applicants that the McGee site was an option for use as the location for the dealership after it became clear that the CME site could not be considered by the applicants. 2. Otherwise, the proceedings are dismissed. 3. Costs are reserved. I grant liberty to apply with respect to costs. __________________

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