Mobil Oil Australia Ltd v Brian Brindle

There be liberty to apply on the question of interest on

The respondent pay applicants' costs of the action.

Note: Settlement and entry of orders is dealt with in

WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION

No. WAG 102 of 1986 BETWEEN: GULL PETROLEUM (W.A.) PTY LTD First Applicant and RAMILO NOMINEES PTY LTD Second Applicant and SINBADS NIGHTCLUB PTY LTD Respondent CORAM: FRENCH J. 30 JULY 1987 REASONS FOR JUDGMENT

Ginger's Roadhouse is the name of a service station and

cafe located on the Great Northern Highway at Upper Swan.

It bears the livery and logo of Gull Petroleum (W.A.)

It has been operated as a Gull Service Station for more than 8 years. The land on which it stands is owned by Ramilo Nominees Pty Ltd ("Ramilo"), a company closely associated with

In November 1984 Ramilo leased the site to a new tenant,

At the same time Gull agreed orally to supply Sinbads

with petroleum products and to licence it to use the Gull logo on

The question whether the Supply Agreement embodied an

It is however common ground that these arrangements

amounted to a franchise agreement under the Petroleum Retail

Marketing Franchise Act 1980 ("the Franchise Act").

The parties have fallen out because, since April 1985, the overwhelming preponderance of motor fuel sold through the site

Gull has purported to terminate the franchise agreement and claims a declaration that it is at an end and damages for

breach of contract. Ramilo seeks possession under the lease.

Sinbads has cross-claimed for a declaration that the notices terminating the franchise agreement and the lease have had

The foregoing gives a broad overview of the case but as

will be seen below, the detail is considerably more convoluted.

Gull commenced business in Western Australia in 1976 as

In the 10 years that have followed, the number of service stations selling its products has grown to 35, 30 of which

The company uses three tankexs which each year deliver

some 50 million litres of motor fuel to its various outlets.

Gull service stations have a red, white and blue colour

The company's petroleum pxoducts are marketed undex the

A logo comprising a red ellipse containing the word "Gull" and a stylised silhouette of a bird in blue on a white field is used in association with the sale, supply, distribution

and marketing of the products in Western Australia.

It 1s not disputed that Gull has acquired a substantial reputation and goodwill, that the logo is well known in the State

and that it has become distinctive of Gull products.

The pxemises comprising Ginger's Roadhouse were leased

by Gull until 8 years ago when they were acquired by Ramilo.

They purchased all their petroleum product requixements

Towards the latter part of 1984 the xoadhouse ranked in

the top two ox three Gull outlets in terms of fuel sales.

In spite of this, and for reasons which are not material

for present puxposes, the Lambexts fell upon hard financial times.

Brunet required finance in order to effect the purchase and through a fixm called Citizen Finance, was put in touch with

two potential investors, William Sheehy and Lindsay Lee, the

As a xesult of Brunet's appkoach, Sheehy and Lee decided that Sinbads would purchase the business and that they would

They entered into a written agreement with Brunet dated

Undex that agreement Brunet would ultimately control the business by acquiring all the issued shares in Sinbads. For that he was to pay to Sheehy and Lee the sum of $140,000.00 in 13 weekly instalments of $400.00 commencing 16 November 1984, and

The shares were not to be transferred until payment in

"The roadhouse known as Gingex's Roadhouse (Gull) at Great Noxthern Highway, Upper Swan is to be operated by Joseph Peter Brunet with the company guaranteeing payment of fuel account and xent and rates and other terms of the lease with Gull Petroleum. Any violation of any clause or xequirement with Gull Petroleum will also cause immediate cancellation of this agreement and forfeiture of all funds paid to date."

By xeference to this document and the minutes of a meeting of Sinbads' dixectoxs held on 16 Octobex 1984, it seems

that what Sheehy and Lee contemplated was that Brunet would xun

the business, pay all the overheads and retain the profits, subject to his obligation to make instalment payments of the

Sinbads was to acquixe the business from the Lamberts for a puxchase price of $70,000.00. In addition there was a further sum of $20,000.00 which may have been for stock. Of the puxchase price 1t seems $30,000.00 was to be paid by Brunet dixect to Gull on 9 November and the sum of $40,000.00 to be paid by

The agreement with Brunet came aftex discussions between

Sheehy, Lee and Mr Michael Green, a dixector of Gull.

Green had been approached by the Lambexts towards the end of October 1984. They told him of their wish to sell the business and to use the proceeds of sale to pay out theix fuel debt to Gull. Gxeen asked to meet the prospective puxchasers. As

a xesult he had two meetings with Sheehy and Lee on 2 and 9

At these meetings they discussed the texms upon which Gull would deal with Sinbads if it were to buy the business from

It can be inferred from Green's status as a dixector of Ram1ilo and the nature of the association of that company with Gull that he represented both Gull and Ramilo at these discussions. Sheehy and Lee did not become aware of the separate existence of

Ramilo until Sinbads executed the lease of the premises.

The lease agreement executed by Ramilo and Sinbads was for a texm of 3 yeaxs commencing 9 Novembex 1984 at an annual

petroleum products to Sinbads on request. Sinbads however denies

that it agreed to purchase all of 1ts requirements from Gull.

It was also not in dispute that Gull would grant a licence to Sinbads to use 1ts logo or mark in relation to the sale of Gull products from the sexvice station during the term of the

Gull pleads an express oral agreement to that effect, while Sinbads says the grant is to be implied from the fact that the premises were let as a Gull sexvice station and by virtue of the prohibition in the lease against any intexfexence with the

properly be regarded as one ox two ox three sepaxate agreements

On balance the bettek view probably is that Sinbads entered into one agreement with Gull and anothex with Ramilo. So fax as the supply and licence agreements axe concexned, I consider it makes no difference in this case whether they be xegaxded as

On balance, the bettex view is that the paxties appxoached the mattex as one txKansaction yielding one tripartite

On the question of fuel purchases, Green clearly xemembered saying to Sheehy that Sinbads would have to agree to

buy petroleum products from Gull. In his affidavit evidence he

"I xemembex saying to Sheehy words to the effect that "you" (meaning Sinbads) will buy Gull petxoleum and Gull will supply into the site (meaning the sexvice station). You will operate the site as a Gull site. I xecall that Sheehy and Lee both agreed to that. They said "yes we agree" ox words to that effect."

Sheehy recalled lengthy discussions about the pxoposed

by Green that all of the fuel was to be purchased from

and Lee had discussed with Green delivery and payment

conceded that they expected that Brunet would acquire

denial of any discussion of puxchase requirements with Green.

Both xegaxded the question of fuel purchases as one for

Brunet. Lee conceded that he thought Brunet should buy his fuel

His evidence on this point seemed to tread a fine line.

It is illustxated by the following exchange in cross examination:-

"MR ARCHER: Did you know in February of 1985 that it was a xequixement of Gull that Mx Brunet buy his fuel - all his fuel from Gull? --- Well, we probably got advice that they were - I think we did get advice that he was not buying fuel from Gull and we became most upset because we thought he pxrobably should be buying fuel

In that letter it was said that Brunet had failed to perform

cextain covenants on his paxt undex the agreement of 15 November.

He was then refexxed to a letter, in substance a default

sent by Sheehy and himself to Brunet on 2 Febxruaxy 1985.

sale of products other than Gull through Gull pumps and bowsexs."

"You knew in February of 1985 when you wrote that letter that 1t was a xequixement of Gull that Mr Brunet buy all his fuel from Gull, did not you? --- Well it looks like it; that is the way it is woxded, but I would like to say that, you know, we wanted him to buy all the fuel from Gull, but only because we felt part of the Gull family, but we had no legal document. The only legal document we had was a lease, nothing else.

Regaxdless of the familial connection or othexwise, ox the pxesence ox absence of documents, you knew at the time you signed that letter that it was a requirement of Gull that Mr Brunet buy all his fuel from Gull Petroleum. Now, that is xight, is not 1t? --- Alxight;

And it was paxt of the agreement between you and Mx Sheehy of the one part, and Mx Brunet of the other paxt, xeached in Novembex 1984 that Mr Brunet would puxchase all his fuel fxom Gull was not it? --- Well we instructed him to do 1t; yes, from ourselves."

Nevertheless later in cross examination Lee denied ever

having discussed with Green a xequixement to puxchase all fuel

The default letter to Brunet does not in texrms xefex to any breach of a covenant to puxkchase only from Gull. The "requixements of Gull" referred to in the letter are identified, namely to pay cash for all fuel and not to sell pxoducts other

As to the lease agreement between Ramilo and Sinbads there 1S nothing in that which refers to any requixement to

They essentially maintained theix position and denied

any express discussion of a fuel purchase requixement with Green.

All three witnesses stxuck me on this point as witnesses

The difficulty of fact finding in such a case is exacerbated by the lapse of just ovex 2 years since the

I think it quite possible that nothing was' said expressly about a xequixrement for the puxchase of petroleum products fxrom Gull. But if nothing was said, then 1t was the

unspoken assumption on all sides that Sinbads would acquixe its

Green was not cross examined upon his vexsion of the

conversations with Sheehy and Lee in so far as they related to

His evidence is unchallenged except by the conflicting

At para.14 of his affidavit, he xemembexed the conversation quite cleaxly because Guli's interests in having a lessee operate the site was to make sure that it operated as an

Sheehy and Lee, according to Green, sought assuxances

that they would be able to get weekend supplies of fuel from Gull.

His testimony in this respect, which was on affidavit,

It is consistent with a desire on the paxt of Sheehy and Lee to ensure that, given Gull as their sole soukce of supply,

thexe would be no difficulties in that supply on weekends.

contemplate that he would be buying his fuel fxom Gull.

prepared to guaxantee fuel accounts for puxchases from sources of

In the event, I am of the view on the balance of probabilities, that it was an express texm of the agkeement or

agxeements that Sinbads would obtain all of its supplies fxom

In its defence Sinbads xaised the allegation that the parties agreed that pending his acquisition of the contxol of Sinbads, Brunet was to be pexmitted to operate the sexvice station on his own account, would xeceive supply of petroleum pxoducts fxom Gull and would be pexsonally liable to Gull for payment.

Accoxding to Green thexe was some discussion at his

meetings with Sheehy and Lee as to whether cheques would be

He was told that Brunet would manage the sexvice station

but that he could not sign cheques for the company.

In this regard he adopted the same position in relation to the acceptance of cheques from eithex Brunet or Sinbads. That 1s to say a bill of sale would be xrequixed ovex the assets of the

business in order to secure payment of the fuel accounts.

If Green was told, as 1t seems he was, that Brunet would be writing cheques on his own account, then it is difficult to see

how he could not have infexxed that Brunet would be running the

On the acquisition of the business from the Lambexts Brunet paid $30,000.00 to Gull, presumably in paxt satisfaction of

Aftex Brunet began to operate the sexvice station on 9 Novembex 1984, Gull accepted cheques dxawn by him, and I infer, on

Nevextheless I do not consider that Bxrunet's xole and the possible existence of a dixect contractual relationship

between him and Gull on an interim basis is critical to the

In the end the case 1s concerned with the contractual

It is however impoxtant to appreciate the approach to the1x company's contkactual obligations taken by Sheehy and Lee in

In his evidence in chief, Sheehy described Brunet as the

operator and xunnex of the xoadhouse. Sinbads was no more than an

"He oxganised the whole venture, actually found the

site, found the sale and we just financed it, and as a security Sinbads held the lease and we seen that as our

Brunet operated the sexvice station from 9 Novembex 1984

until Apxil ox May 1985 when he agreed to vacate the premises.

In December 1984 payment was stopped in xespect of three

It was probably late in January 1985 that Sheehy and Lee were told of Gull's dissatisfaction with the operation of the

On 2 February 1985 they wrote to Brunet alleging that he was in default of his agreement of 15 November 1984 and

i. Failure to pay instalments of the purchase price for the Sinbads' shaxes which had fallen due.

2. Failure to comply with Gull's requirements including cash payments for fuel supplied.

The lettex also complained that Brunet had been selling

products other than Gull fuel through Gull pumps and bowsers.

On 8 February Green sent a letter to Sinbads setting out

2. The failure to make full payment of the purchase price for the acquisition of the business from the Lambexts.

3. The puxchase of fuel supplies fxom sources other than Gull.

He demanded immediate rectification of these problems,

"you will recall that while negotiating the Lease we spoke of offering you the option of renewing the Lease for a further three (3) year period. This was conditional upon the business being operated in what we considered a satisfactory manner. In view of the manner in which the business 1s presently being operated, we hereby advise that this option of renewal of the lease has been revoked."

Sheehy, Lee and Sinbads commenced proceedings in the

Supreme Court against Brunet claiming, inter alia, possession of

In or about May 1985, in circumstances which were never

made clear, Brunet vacated the premises and Sheehy and Lee sold their shares in Sinbads to a company called Thorley Holdings Pty Ltd, one of whose directors was a Paul Miovetis, then the State

Prior to 30 May 1985 Miovetis became involved in Ginger's Roadhouse through an unspecified connection with a company known as Saki Corporation, which he claimed had some

The nature of that interest 1s obscure, but 1t appears that Brunet had been negotiating with Saki with a view to getting

out of his financial difficulties. Miovetis claimed to have lent Brunet money, but whether this was in his personal capacity or

During December 1984 and January 1985 he occasionally

The history of shareholding arrangements in Sinbads after the disposal of Sheehy and Lee's shares on 30 May 1985 is, as explained by Miovetis, well nigh unintelligible. As a witness

The share register of the company does not record any

The minutes show no record of any deliberations relating

to the sale of shares to Miovetis or associated interests prior to

A minute of a meeting of directors held on 30 June 1985 and signed by Miovetis records the resignation of Messrs. Lee and Sheehy and the appointment of himself and one Angelo Kasarkis as

"Resolved that the company be purchased by Paul Miovetis and Angelo Kasarkis with the arrangement of a bill of sale to William Sheehy and Lindsay Lee.

Resolved that trading operations be carried out via Thorley Holdings Pty Ltd trading as Ginger's Fuel

A further minute dated 1 July 1985 records the resignation of Angelo Kasarkis and the appointment of a Richard

A minute of 6 February 1986 records the tabling of a

transfer of five shares from Thorley Holdings Pty Ltd to Richard

Paul Diamond and a transfer of one share from the company to Linda

The minute also noted the "transfer" of the business name "Ginger's Fuel Supplies" from Thorley Holdings Pty Ltd to

examination he owned no shares in Sinbads after 6 February 1986

He resiled from this position when it was put to him

that he had to be a shareholder in order to be a director of the

Ultimately he produced two undated transfers to him of

the six shares in Sinbads. The transfers were signed by Richard

A draft annual return for 1985 showed Miovetis holding one share and Kasarkis holding five. The draft return for 1986

Regardless of the rather aimless paper shuffling in relation to the Sinbads shares, it 18 apparent that from 30 May

1985 until trial effective control of the company was exercised by

The terms on which he or Thorley Holdings Pty Ltd acquired the shares from Sheehy and Lee do not emerge with any

Sheehy gave evidence that he and Lee sold the shares in

Sinbads to Thorley Holdings and that the sale was "organised" by

Sheehy and Lee however retained a bill of sale over the stock and plant of the business as security for the repayment of

what Sheehy described as "the balance of the loan".

It seems, although it was not explained, that this was a reference to moneys advanced by Sheehy and Lee to Sinbads in

connection with the original purchase of the business from the

As already noted, by a minute dated 1 July 1985 there is recorded a resolution of the directors of Sinbads to appoint N.

Burgess as "manageress of Ginger''s on contract until 1987".

In or about June 1985 Mrs Noeleen Burgess heard from a friend that Ginger's Roadhouse had closed down. She approached Miovetis about the possibility of taking over the catering side of the business. Although her evidence does not indicate when this approach was made, it appears likely, as Miovetis says, that 1t

was in June 1985, Brunet having vacated the premises on 30 May.

Mrs Burgess told the Court that Miovetis was not interested in letting her operate the restaurant component alone. He wanted her to take over the running of the whole business. Miovetis on the other hand, said that their initial arrangement was that she would take over the catering side in conjunction with

Whatever the true position initially, it is clear that by the end of June Mrs Burgess was running the entire roadhouse

At that time she entered into an agreement with Sinbads the terms of which were recorded in a Deed of Covenant. An

unexecuted, unsigned and undated copy of the Deed was tendered in

evidence without objection. According to Miovetis a deed in the

On the face of the agreement Mrs Burgess was appointed by the company to manage the business of Ginger's Roadhouse from 21 June 1985 until the date of termination of the lease and in any

event for a term not exceeding 8 November 1987, the expiry day of

The deed contained a number of covenants to conduct the

It also provided for her to take over and assume liability for and pay for all stock, plant and equipment purchases and all expenses, costs and outgoings of any description incurred in the running and maintaining of the business as and from 21 June

She promised to pay to Sinbads the sum of $20,000.00 by 16 instalments of $1,000.00 per week beginning on 18 July 1985 and

An additional payment of $300.00 per week was to be made to Sinbads each week commencing on 18 July 1985 and thereafter

She was to be entitled to retain as "wages" the balance of the turnover of the business after deducting the expenses and

Sinbads or any other party were not to be her responsibility.

Mrs Burgess was to manage the business but take such directions from Sinbads, its servants or agents as might be

There was a confidentiality clause which provided:-

"9, This Deed shall be treated by both parties as strictly confidential and the neither Deed nor its contents shall not be disclosed by either party except to her her or its legal advisors or accountants and no cop1es thereof shall be taken." (sic)

Since the institution of these proceedings Mrs Burgess

and her husband have arranged to acquire the shares in Sinbads.

By 1ts amended statement of claim Gull alleges that

during the period 19 April 1985 to 20 October 1986, Sinbads has

sold petroleum products other than Gull petroleum products from

During the period, it 1s alleged, the only purchase of Gull petroleum products was 7,000 litres of distillate on 18 March

Mrs Burgess said in her affidavit evidence that she did not consider petroleum products from Gull as they were too

She also contended that Gull refused to deliver after 5

The fuel tanks on site, she said, hold 73,000 and 79,000

litres respectively and are sold out on the weekend.

Thus she argued it was not possible to use Gull petroleum for weekend sales as the service station would run out

As to the fuel storage capacity on site, it appears Mrs

Mr Green in his affidavit evidence pointed out that the storage capacity was in fact 2 super tanks of 14,000 and 10,000 litres respectively, 1 unleaded tank of 4,500 litres capacity and 3 diesel tanks two of 9,000 litres capacity and 1 of 18,000

He also said that from his own knowledge and inquiries made of the directors and employees of Gull, there had at no time been any request from Mrs Burgess for the delivery of fuel to the service station. Gull, he said, was at all times ready, willing

and able to supply petroleum products to the site in accordance

His evidence as to that agreement was that he had told Sheehy and Lee of the need to monitor their supplies and place orders so they would have sufficient to meet their needs. He had told them, he said, that if required they could have emergency supplies from Gull, However the storage at the service station was such that if they were to take a large delivery on a Friday,

they should have sufficient supplies for a weekend.

He also had said to Sheehy and Lee that Gull would normally require 48 hours notice of any delivery and fuel would usually only be delivered Monday to Friday but that if emergency supplies were required, Gull would deliver as soon as possible and

Records of purchases of petroleum products from suppliers other than Gull were produced under subpoena and

Schedules setting out the dates, quantities and prices of purchases of super motor spirit and distillate respectively

were prepared by Gull's solicitors and tendered without objection.

The schedules disclosed the following figures for total

1. Super Motor Spirit 1/7/84 - 30/6/85 151,205 1/7/85 -30/6/86 1,110,047 1/7/86 - 31/12/86 585,475
2. Distillate 1/7/84 - 30/6/85 42,975

Obviously the figures given cover about three and a half months in 1984 when the Lamberts were operating the business. However it is clear enough that there has been a continuing and almost complete reliance upon suppliers other than Gull for the

The amended statement of claim in para.12 alleges that in the course of selling petroleum products other than Gull from

the service station, Sinbads have falsely represented them to be

Gull pleads reliance upon the continuing display of uts

marks and livery on the premises to the exclusion of any others.

Neil Douglas Rae, a director of Gull, gave evidence that he attended at Ginger's Roadhouse with another director, Fred Rae,

on 6 May 1985. At that time Gull had not delivered any fuel to

He spoke to the pump attendant who told him that it was

The pumps themselves he said, displayed Gull signs.

His evidence in this respect was not challenged in cross

It 1s the case of course that at 6 May 1985 it was still

Mr Rae also said that on a number of occasions over the period February to October 1986 he had spoken to Mrs Burgess when she came into the Gull office to pay the rent and told her that she should stop passing off non Gull petroleum as Gull petrol. He

had also told her that she should not be selling other than Gull

Frederick William Rae, chairman of the Gull board of directors, gave evidence of having visited the site on at least 5

The visits he made were over the period from mid 1985

through to his photographic visit in November 1986,

Mr Rae was unable to be precise about the number of visits he had made to the site in 1986. He said however that the last occasion on which he saw Gull signs displayed on the bowsers

was May 1986 and that it had been shown on them prior to that

On his last visit in November 1986, there was a small notice affixed to the right of the meter on each of the pumps and

He conceded in cross examination that before that time', °

he had not been on the lookout for disclaimer signs.

In his affidavit evidence Green said that since the

execution of the lease agreement in 1984, he had visited the site

Up until a visit that he made on 15 or 16 September 1986, the Gull colours and mark were displayed on the building and

However, on the September visit he saw that the word "Gull" had been removed from the pumps and a handwritten sign

"This is BP fuel being sold through the pumps not Gull fuel."

Mr Green recollected that the Gull sign had been removed from each of the bowsers but could not recall when he had first

noticed that fact. In particular he was unable to recall whether

Mrs Burgess said that immediately she took over the

business she had removed from the bowsers plastic inserts bearing

the word "Gull". Her husband had attached cardboard signs to the

bottoms of the bowsers stating that the petrol was not Gull

petroleum. These signs had not lasted long as they became wet and

Some time in the winter of 1985 they were replaced with

4" x 2" signs stating "This 1s not Gull petroleum".

She had had 30 of these signs printed and at the time of

trial had used about 10 as some of them had curled up with heat

In the latter part of 1986 Mrs Burgess changed over the signs which read "This is BP Petroleum". But following a

complaint from BP she reverted to the earlier text from the middle

Although she said that warning signs had been in place since June 1985 she was unable to say of her own knowledge what

She had been injured in an accident which confined her to a wheelchair for the bulk of that period, during which she was

Evidence was also given by Garth Glenfield Squires, who

has lived opposite the roadhouse for some 7 to 8 years.

He has during that time frequently purchased fuel at the

During 1986 he went there two or three times a week.

He said that from the time Mrs Burgess took over he

observed signs on the bowsers stating "This is not Gull petrol."

According to Squires the signs took different forms at different times. There were cardboard signs, felt pen writings on

the glass face of the bowsers and the 4" x 2" notices.

I accept Mrs Burgess' evidence that in June or July 1985 her husband affixed cardboard signs to the bottoms of the bowsers

undicating that the petrol being sold was not Gull petrol.

I find also that after a short time, the cardboard signs

were found to be unsatisfactory as they became wet and

I accept that in the winter of 1985 she purchased a

number of 4" x 2" notices bearing the legend "This 1s not Guill

petroleum", and that she affixed them to the bowser faces adjacent

However these notices tended to detach from time to time

I am inclined to accept her evidence that she removed Gull signs from the bowsers not long after commencing to operate

It does not conflict with Green's evidence as he cannot remember when it was that the Gull signs were removed. Had they remained as Mr Fred Rae said, until as late as May 1986, I would

have expected him to have had some recall in that regard.

Her evidence is plainly in conflict with that of Mr Fred Rae on this issue, but there was a degree of hesitancy about his

It is possible that there were periods during the time that Mrs Burgess was away from the premises when the disclaimer

Ultimately, I do not think that the disclaimer notices

They were small in comparison with the size of the bowser face to which they were attached. The pole sign and Livery

of the roadhouse identified it as a Gull service station.

It is likely, in my opinion, that a significant proportion of the travelling public would not have registered the ' disclaimer notices and would have believed that what they were

The lease between Ramilo and Sinbads contained a number

"3(b)That the Lessee will duly and punctually pay and

discharge all excess water and all lighting heating

Lessee's business conducted therein and will as and

when so requested by the Lessor produce receipts therefor to the Lessor.

3(c) To keep the said demised premises and all appurtenances thereto in good and_= substantial repair and condition (damage by fire storm and tempest excepted) and paint in a proper and workmanlike manner and with two coats of first class quality paint, the quality and the colours to be approved by the Lessor, all such parts of the demised premises as may be required by the Lessor

' provided that the Lessee shall not be required by

part thereof more than once in any three year period.

3(o0) To insure and keep insured throughout the said term the contents of the demised premises against loss by burglary and to produce receipts for payment of the premiums to the Lessor as and whenever

Further there was a default provision 3(r) which in the

"3(r)That in case Lhe rent hereby reserved or any part thereof shall at any time be in arrears' for fourteen (14) days after becoming due although no legal or formal demand shall have been made for payment thereof or in case of any breach of the covenants conditions or stipulations by the Lessee expressed or implied herein ... THEN and in any such cases if the Lessor shall give to the Lessee notice in writing specifying the default or defaults and requiring the same to be rectified within the time therein stipulated from the date of delivery of that notice and 1f the default 1s not rectified within that time this lease and the term hereby granted shall at the option of the Lessor cease determine and be absolutely void and the Lessor may thereupon without notice re-enter upon occupy and resume possession of the demised premises but without releasing the Lessee from liability for rent accrued up to such determination or for damages for breach of covenant."

It appears from the evidence that a notice of termination was served on Sinbads on 8 March 1985 but no reliance was placed on this in the pleadings and it is unnecessary to

On 5 July 1985, Ramilo sent to Sinbads a notice in the

"Ramilo Nominees Pty Ltd of Suite 7, 10 Canning Highway, South Perth (hereinafter referred to as "the Lessor") HEREBY GIVES YOU NOTICE under the provisions of a Lease dated the 28th day of November 1984 entered into by the Lessor with you ("the Lease") by which were leased and demised to you the premises described in the Schedule below ("the demised premises") that:-

l. Pursuant to clause 3(b) of the Lease you are required within two (2) business days of receiving this letter to produce to the Lessor up to date receipts evidencing due and punctual payment and discharge of all excess water and all lighting, heating, telephone and other operating charges payable in connection with the demised premises and the business conducted thereon.

2. Pursuant to clause 3(c) of the Lease you are required within thirty (30) days of receiving this letter to paint all such parts of the demised premises as are already painted in a proper and workmanlike manner and with 2 coats of first class

quality paint, the quality and the colours to be approved by the Lessor before hand.

3. Pursuant to clause 3(0) of the Lease you are required, within two (2) business days of receiving this letter to produce to the Lessor receipts for payment of the premiums for insurance of the

contents of the demised premises against loss by burglary.

This Notice is served upon you without prejudice to the Lessor''s contention that the previous Notice of

Termination served on you on the 8th day of March 1985 was effective to terminate the Lease."

It will immediately be seen that this was not a notice

No default could arise until there had been a failure to

By a letter dated 11 July 1985 the solicitor for Sinbads informed Ramilo that his client was in the process of collecting up all receipts as set out under items 3(b) and 3{0) of the lease

As to the painting it was contended that the lease did

not permit the lessor to nominate when it should occur.

In my opinion however, it was assumed by, and implicit in clause 3(c) that the lessor could require painting to be

carried out within a reasonable time of demand being made.

painting was not done until 20 November 1986, some 16 months

For nearly 15 months following its notice of 5 July 1985

Ramilo did not take any further action on the lease.

On 3 September 1986 Gull sent a notice of termination of

On 19 September Ramilo sent a Notice of Default under the lease, the defaults alleged being Sinbads, failure to comply

with the requirements of the notice of 5 July 1985.

Under that Notice of Default Sinbads was given 30 days to comply with the requirements of the earlier notice by painting

In the event of failure to comply, the Notice provided

",..then the said Lease and the term thereby granted will at the option of the Lessor cease determine and be absolutely void on and from the 19th day of October, 1986 and the Lessor may thereupon without notice re~enter upon, occupy and resume possession of the demised premises but without releasing you from liability for rent accrued up to such determination or for damages for breach of covenant."

The notice was said to have been served without prejudice to the lessor's accrued right pursuant to notices under

the terms of the lease previously sent to the lessee.

Ramilo took no steps to exercise the option to determine the lease prior to the institution of these proceedings on 20

Indeed the statement of claim alleges at para.2l that it made demand for possession of the premises as early as 22

September 1986 being nearly a month before the expiry of the time

limited for Sinbads to comply with the notice of 19 September.

The demand appears to have been based upon the issue of

a Notice of Termination of the franchise agreement by Gull.

In the event the application by which these proceedings were instituted included a claim for a declaration that Ramilo was entitled to vacant possession of the premises from 15 October or

In my opinion the issue of the application seeking that relief sufficiently evidences an election by Ramilo to terminate the lease by reason of the breaches alleged, which breaches I find

In relation to the notices of 5 July 1985 and 19 September 1986, it was pleaded in the defence that Sinbads' solicitor''s letter of 11 July 1985 constituted a tender of receipts and an indication of that company's willingness to repaint the station. In my opinion the letter did not amount to a production of the receipts in compliance with the requirement of the lease. Nor did an expression of willingness to paint the

premises constitute compliance with the lessee's covenant in that

Although the point was not clearly pleaded, 1t seems to have been Sinbads' case that the lessor was required to specify

the colours in which the premises were to be painted before any

In my opinion, the lease imposed no such condition on

the lessee's obligation. Rather it created an obligation on the

part of the lessee to obtain the lessor's approval of the quality

I do not consider that this constitutes any defence to

the allegation that Sinbads failed to comply with clause 3(c).

The defence also pleaded that clause 3(c} as implemented by the applicants was void and of no effect as directly contravening or designed to evade the provisions of sub-s.(5) of

s.4 of the Petroleum Retailers Rights and Liabilities Act 1982

(WA). This plea was and remains, shrouded in mystery.

It was further alleged in the defence Lhat the notices

of 5 July and 19 September were ineffective for want of compliance

with the requirements of the Franchise Act. No submissions were

(xi) Notice of Termination of the Franchise Agreement

alleges that by a Notice dated 3 September served by post on

Sinbads it gave notice of termination of the franchise agreement

effective from 15 October 1986, such notice being given pursuant

"TAKE NOTICE that Gull Petroleum (WA) Pty Ltd of Suite 7, 10 Canning Highway, South Perth ("the Franchisor") hereby gives Sinbads Nightclub Pty Ltd ("the Franchisee") notice of termination of the Franchise Agreement between the Franchisee and the Franchisor in respect of the premises known as Ginger's Roadhouse located in Great Northern Highway, Upper Swan in the State of Western Australia ("the premises") in accordance with Section 16 of the Petroleum Retail Marketing Franchise Act 1980 ("the Act") on the grounds

1. The Franchisee has committed a breach of the Franchise Agreement 'contrary to Section 16(2)(j) of the Act in that the Franchisee has failed to comply with the terms of a Notice of Default served on the

Franchisee on 21 August 1986 which Notice is annexed hereto and sets out the full particulars of such breach.

2. The Franchisee has wilfully passed off motor fuel supplied to it by parties other than the Franchisor

as being motor fuel supplied to him by the Franchisor contrary to Section 16(2)(f£) of the Act

in that during the period 1 January 1986 to 31 August 1986 and previously the Franchisee has failed to purchase any Super Motor Fuel from the Franchisor but has continued to sell Super Motor Fuel from the premises which display the Franchisor's banner and mark exclusively.

AND FURTHER TAKE NOTICE that as from 15 October 1986 the

Franchisor will without notice re-enter upon, occupy and resume possession of the premises."

The notice of 21 August 1986, an undated copy of which was tendered by consent, was in fact a notice of default to Sinbads from Ramilo demanding payment of $1,400.00 rent and $2,025.54 by way of unpaid rates and requiring that such payment

There is nothing to suggest that the rent was not ultimately paid but 1t appears that the late payment was relied upon by Gull as a breach of the franchise agreement grounding the

In paragraph 9 of the defence it was pleaded that this notice, like those issued under the lease, was defective for want

In particular it was said that the notice purported to

Presumably this contention was based upon an alleged non-compliance with sub-s.16(3) of the Franchise Act for failure

On the face of it however, the notice does not operate as an immediate termination and does give more than 30 days notice

Counsel for Sinbads also declined to make = any submissions on this issue in his final address, notwithstanding an

(xii) Factual Matters Relevant to the "Just and Equitable" Ground

By 1ts cross claim Sinbads contends that in the event the Court finds it to have breached the lease or franchise agreement, or to have committed any serious contravention of any law, then the termination of its right to occupy the service station 1s not just and equitable. In this plea it relies upon the provisions of sub-s.16(6)(b) of the Franchise Act which require the court not to declare a notice of termination under that Act to have terminated a franchise agreement unless it is satisfied that the termination 1s just and equitable having regard to all the

A number of matters are relied upon in support of this

First it is said, that Sinbads has developed the service

station into a prosperous and thriving business by the substantial

exertion of Mr and Mrs Burgess and some expenditure of the funds.

There is little doubt that since Mrs Burgess took on the running of Ginger's Roadhouse she has put a great deal of time and

effort into 1t. She was working, she said, 15 hours a day and 7

In her first month her takings were $38,000.00 and as at

Pebruary 1987 when she gave her evidence, she was taking

midnight to 1 am every day of the week since she took over.

Mr Green conceded that the standard of service at the roadhouse had improved markedly since her arrival and there had

been an improvement in the appearance of the premises.

Whether the business could be described as "prosperous and thriving" in the terms of the defence may be debatable. There can in my opinion, be little doubt that 1t has increased in value

It is also quite clear from the evidence that Sinbads have in effect abdicated responsibility for the business to Mrs Burgess and that the company as controlled by Mr Miovetis has extracted from Mrs Burgess what it can get, with little or no

Mrs Burgess of course cannot complain that she was not warned of the dangers of an association with Miovetis. All of the Gull principals cautioned her in emphatic terms against dealing

Insofar as it relates to the efforts of Mrs Burgess, I find that the first factual assertion referred to in the cross claim is substantially made out. The question for consideration below will be whether the interests and conduct of Mrs Burgess as distinct from those of Sinbads, can play any part in the "just and

equitable" defence to termination of the agreement.

The cross claim further contends that the loss to Sinbads if it be deprived of the right to operate the service

station will far outweigh any loss to Gull and Ramilo.

In my opinion it 1s more likely on the evidence that the burden of any loss will fall on Mrs Burgess rather than on Sinbads which has, as already indicated, distanced itself from the operation of the service station premises and effectively

When weighing respective losses under this head, it is relevant to take into account the continuing determination on the

part of Mrs Burgess to purchase fuel from outlets other than Gull.

The cross claim further contends that Sinbads have acquired petroleum products from sources other than Gull and sold them through the service station without differentiation to the

knowledge of Gull and without objection on 1ts part.

While it is true that there was a long period of inactivity on the part of Gull between July 1985 and September 1986 in relation to the conduct of Ginger's Roadhouse, I do not consider that there is any evidence that the company did not object to the sale of non Gull fuel. This inactivity rather reflected a sense of frustration at Gull's inability to make any

headway with respect to the problem of the roadhouse.

Mr Neill Rae of Gull said in his affidavit sworn 20 October 1986, that for at least 6 months prior to that date he had told Mrs Burgess that she should stop passing off non Gull petrol as Gull petrol. He had also told her that she should not be

There was, in my opinion, on the evidence no acquiescence on the part of Gull that would affect the question whether it would be just and equitable to give effect to the

It is further pleaded in the cross claim that Gull has

been willing to supply petrol to the roadhouse only at prices

exceeding those of competing distributors of similar products.

This 1s evidently correct and explains Mrs Burgess' commitment to

In my opinion however, unless the pricing of Gull products were for some perverse reason, so oppressively high as to be calculated to drive its dealer out of business, the pricing has

The alleged reluctance and refusal of Gull to deliver petrol for weekend supplies which is also pleaded under this

heading in the cross claim, is not sustained on the evidence.

It is further contended that Gull has from time to time insisted upon payments for petroleum products in cash at places

other than Gull's premises or at the service station.

Whatever the true position here, this contention is in my opinion, irrelevant to justice and equity as between these

Finally it is contended 1n support of this aspect of the cross claim, that by written notice in the form of its solicitor's letter of 11 November 1986 to Gull's solicitors, Sinbads has

invoked s.7 of the Petroleum Retailers Rights and Liabilities Act

1982 with effect from 7 days after the giving of the notice.

Sinbads has, it 1s said, thereby intimated that 1t proposed to use the service station facilities for the storage and sale of motor fuel from sources other than Gull. Such notice was given. In my opinion however, this belated resort to the provisions of the State Act counts for little in the determination

By way of defence to the cross claim and in opposition to the "just and equitable" defence, the applicants rely upon various circumstances which I will deal with insofar as they raise

1. The conduct of Sinbads in selling non Gull products.

That conduct is plainly established on the evidence.

2. The conduct of Sinbads in falsely representing that petroleum products sold were Gull products.

As to this allegation there is evidence from Mr Neil Rae that prior to Mrs Burgess commencing to operate the business in June 1985, non Gull products were sold as Gull petroleum.

After she commenced there were warning signs in place from time to time which in my opinion were at times inadequate to alert members of the public that they were buying non Gull petroleun.

Insofar as any public interest question is relevant here, I find that there was not relevant difference contended for or shown between the composition of the Gull and non Gull product.

3. The conduct of Sinbads in using the Gull mark in connection with the sale of non Gull products

suggesting that the products sold had the sponsorship or approval of Gull.

In my opinion this allegation is partly subsumed in that set out in paragraph 2. There is a separate point that persons who became aware of the fact that they were buying non Gull products might assume they were being sold with the approval of Gull. This point is somewhat weakened by the fact that State legislation (The Petroleum Retailers

alia, for the sale of foreign products by a franchisee with or without the approval of the franchisee.

Sinbads' failure to comply with Ramilo's notice of default under the lease.

The fa1lure by Sinbads to order its petroleum products from Gull despite the fact that Gull was ready, willing and able to supply those products.

The fact that the consideration paid by Sinbads for the goodwill of the business was not substantial.

Sinbads and Brunet together paid a total of $90,000.00 for the business initially, some $20,000.00 of which represented stock. It is not clear what component of this represented goodwill.

The fact that Sinbads had made no substantial investment in developing the service station.

Beyond its initial investment the company has made no significant investment an developing' the station. On the other hand Mrs Burgess has made what I would regard as a substantial investment in time, effort and money in bualding up the station.

The fact that Sinbads have, in breach of the lease, made structural alterations to the premises.

The fact that Sinbads has in breach of the lease licenced, declared a trust, parted with possession, transferred, assigned or sub-let the lease or the service station premises to one Joseph Peter Brunet without the prior written consent of the second

It 1s truc that Sinbads did not have the consent of Ramilo to effect its arrangements with Brunet. However 1t is apparent that the principals of Gull and Ramilo were aware of Brunet's presence on the site, the fact that he was operating the business and drawing cheques on his own account to pay for the petrol. Whilst no defence of waiver is raised, those considerations are relevant to the weight of this factor in the just and equitable defence.

The fact that Sinbads has on several occasions made payment by cheque for petroleum products delivered to the service station by Gull which cheques have

As to this, it appears that the cheques in question were all drawn by Brunet dealing directly with Gull.

The fact that Sinbads has failed to paint the service station premises despite repeated and continuous demands and requests by Ramilo that 1t do so.

As has already been seen, the painting of the premises was eventually completed by Mrs Burgess on 20 November 1986.

The fact that in breach of the lease Sinbads has licensed, declared a trust, parted with possession, transferred, assigned or sub-let the lease or the service station premises to Noeleen Jane Burgess without the prior written consent of Ramulo.

It is clear that such an arrangement does exist between Sinbads and Mrs Burgess and has existed

Before turning to the determination of the rights and

"""agreement" means any agreement, arrangement or understanding -

whether formal or informal or partly formal and partly informal;

whether written or oral or partly written and partly oral; and

whether or not having legal or equitable force and whether or not based on legal or equitable rights;

"franchise agreement" means an agreement containing -

provisions, whether express or implied, under or by virtue of which a corporation (in this Act referred to as the ""franchisor") authorizes, permits or requires a person, being another party to the agreement (in this Act referred to as the "franchisee"), to use, in connection with the retail sale of motor fuel by that person at the premises to which the agreement relates, a mark identifying, commonly associated with, or controlled by, that corporation or ae related corporation;

provisions, whether express or implied, under or by virtue of which a corporation (in this Act referred to as the "franchisor") grants a right to, or otherwise authorizes or permits, a person, being another party to the agreement (in this Act referred to as the "franchisee") to possess, occupy or use the premises to which the agreement relates in connection with the retail sale of motor fuel by that person at those premises; or

provisions, whether express or implied, under or by virtue of which -

(i) a corporation (in this Act referred to as the "franchisor" ) 1s accustomed, entitled or required to supply motor fuel to a person, being another party to the agreement (in this Act referred to as the "franchisee"), for

retail sale by that person at the premises to which the agreement relates; or

(11) a person (in this Act referred to as the "franchisee") agrees with a corporation (in this Act referred to as the "franchisor") to acquire motor fuel from another person (whether a party to the agreement or not) for

retail sale by the first-mentioned person at the premises to which the agreement relates;

"mark" includes a symbol, design, colour, device, brand, heading, label, ticket, name, signature, word, letter or numeral, or any combination of the foregoing;"

The application of the Act is set out in s.6 which in

"6 (1) This Act does not apply in relation to a franchise agreement unless the agreement -

(a) contains provisions of the kinds referred to in paragraphs (a) and (b), and of the kind referred to in sub-paragraph (c) (1) or (ii), of the definition of "franchise agreement" in sub-section 3(1); or

(b) is one of 2 or more franchise agreements that together contain provisions of the kinds referred to in paragraphs (a) and (b), and of the kind referred to in sub-paragraph (c) (i) or (11), of that definition, where - -

(1) the franchisees in relation to those agreements are the same person or = are connected with each other;

(1i) the franchisors in relation to those agreements are the same corporation or are related to each other; and

(iii) those agreements relate to the same marketing premises."

franchise agreements and in the material parts provides:-

51. "Se "16(1) A franchisor may terminate the tranchise

agreement in accordance with the succeeding provisions of this section, but not otherwise.

(2) A franchisor shall not terminate the franchise agreement except on one or more of the following grounds:

(b) the franchisee makes a fraudulent misrepresentation in connection with the operation of the marketing premises;

franchisee wilfully passes off motor fuel supplied to him by a person other than the franchisor or a

related corporation as being motor fuel supplied to him by the franchisor or a related corporation;

(Jj) the franchisee otherwise commits a breach of a provision of the franchise agreement.

(3) The termination of a franchise agreement by the franchisor shall be effected by the franchisor serving on the franchisee notice in writing -

(a) informing the franchisee that the agreement is to be terminated on a specified date, being a date that, subject to sub-section (8), is not earlier than 30 days after the day on which the notice is served; and

(b) setting out full particulars of the ground or grounds, including a statement of the facts relating to each ground, upon which the termination

(4) Where a franchisor serves notice on the franchisee under sub-section (3) terminating the agreement, the franchisee may apply to a court for an order declaring the notice to have had, or to have, no

(5) Where an application is made under sub-section (4) the Court may, by order, either -

(a) declare the notice referred to in that sub-section to have had, or to have, no effect; or

terminate, the agreement on the date specified in the notice or on such later date as is specified in the order,

consequential orders as it thinks fit, including orders directing the preparation and execution of documents.

court shall not declare the notice referred to in that sub-section to have terminated, or to terminate, the franchise agreement unless -

a ground specified in the notice is established by the franchisor to the satisfaction of the court; and

the court 1s satisfied that the termination of the agreement and any related agreement or agreements 1s just and equitable, having regard to all the circumstances.

(6)(b), the circumstances referred to in that paragraph include the conduct of the franchisor and the franchisee after the time when the franchisor became aware of the existence of the circumstances, or the occurrence of the event, constituting the ground referred to in paragraph (6)(a).

The rights of franchisees under franchise agreements are

"4(1) A tenant of a site may, subject to this section,

contractual relationship between a landlord and his tenant or agreement to the contrary (whether the

agreement was made between the landlord and tenant or either of them or made between any other persons) use any underground storage at or dispensing equipment on the site for the storage or dispensing of motor fuel which he is lawfully able to purchase from a person other than his primary supplier for the purpose of resale at the site.

(2) A tenant shall not exercise the power conferred by subsection (1) until 7 days after he has given notice in writing of his intention so to do to his landlord and to his primary supplier (if any).

(3) Where a tenant exercises his right « jer subsection (1) he shall ensure that -

(a) so far as 1S practicable he has motor fuel of ach kind and grade that he is obliged to purchase from his primary Supplier available for sale at the site;

(i) he purchases motor fuel from one supplier, other than his primary supplier, he purchases at least as much motor fuel of each kind or grade from his primary supplier as_ he purchases from that other supplier;

(ii) he purchases motor fuel from more than one supplier, other than his primary supplier, he purchases at least as much motor fuel of each kind or grade from his primary supplier as the total amount of motor fuel of each kind or grade as he purchases from those other suppliers;

(c) any dispensing equipment on the site that is used to dispense motor fuel other than motor fuel supplied by the primary supplier does not display thename or business name of the primary supplier or any colours of distinguishing symbol or motif 1dentifying commonly associated with, or controlled by the primary supplier;

(d) a permanent register is maintained containing the prescribed particulars of any purchase of motor fuel;

(e) forthwith on the receipt of any motor fuel, there be entered in the register maintained for the purposes of paragraph (d) of this subsection the prescribed particulars of such receipt;

(£) the Commissioner or an authorised officer is allowed to inspect and take extracts from the register maintained by a tenant for the purposes of paragraph (d) of this subsection;

(g) so far as is practicable any underground storage that he uses pursuant to that power does not contain any motor fuel that has been supplied to

(h) so far as 1S practicable any underground storage that he uses pursuant to that power does not

(1) that all dispensing equipment on the site is fitted with sealed volume totalizers' which record the total amount of fuel dispensed py the equipment.

(4) Subsection (3)(b) does not apply in any six month period where the primary supplier |has been unable to supply the reasonable requirements cf the tenant.

(a} requires a tenant to display jhe name or business name of the primary supplier or any colour or distinguishing symbol or mdif identifying or commonly associated with orj controlled by the primary supplier on all items of dispensing equipment;

(b) restricts the rights of the teltant (sic) to use or maintain or paint dispensing «guipment operated in accordance with this Act; or

(c) permits the landlord or primey supplier to paint or aff£1x signs, symbols or mitifs to or write on dispensing equipment being oprated by the tenant

the term or provision is to the extent that it restricts or modifies or purports to res, wrict or modify the exercise of the tenant's rights unler this Act void and

(6) Where a tenant exerciies his right under subsection (1) the tenant shal display on = any dispensing equipment used to jispense motor fuel purchased from a person other thai the primary supplier a notice that conforms to the regulations.

(7) Any person who fails tc make an entry ina register as required by this act/or who makes a false

entry in or in any other manner falsifies a register referred to in subsection (3) is guilty of an offence against this Act."

It 1S common ground that the agreements between Gull,

Ramilo and Sinbads constitute a franchise agreement to which the

The applicants support that characterisation in the

The licence agreement so called falls into the category of Franchise Agreement defined in paragraph (a) of the definition

The lease agreement with Ramilo falls into the category

The supply agreement answers the description set out in

Counsel submitted that the effect of the definition in section 3 and the provisions of sub-s.6(1) were such that the

agreements together amounted to a franchise agreement to which the

Having regard to the distinct role of Ramilo in relation to the lease, I have reservations about the proposition that the agreements between Gull and Sinbads on the one hand and Ramilo and Sinbads on the other, can be welded together into a single

This reservation is reinforced by the specific provision in sub-s.6(1)(b) for the case of two or more franchise

It is however clear that whether the arrangements be regarded as one or two franchise agreements, Gull and Ramilo moved

as one in relation to it or them as the case may be.

In the event that the lease agreement is treated separately, then the Act will only apply to it if Ramilo and Guill

are related to each other within the meaning of s.4.

No point was taken on this 1ssue and I consider that in the circumstances I should accept the common assumption on which

Whether there was one agreement or two, does not in the

end in this case appear to have any practical consequences.

And if it be the case that the common assumption of the

parties 15 wrong and there 1s no franchise agreement to which the

Act applies, it means that the case would have to be dealt with on the basis that the respondent did not enjoy the protection

conferred upon its tenure of the premises by the Franchise Act.

That alternative is reflected in some of the relief sought in respect of the supply licence and lease agreements

On the basis that there was a franchise agreement in

"A declaration that any franchise agreement between the First and Second Applicants and the Respondent in respect of the premises known as Ginger's Roadhouse terminated on 15 October 1986 pursuant to the Petroleum Retail Marketing Franchise Act."

The jurisdiction of the Court to entertain such a claim

As Wilcox J. said in Mobil Oil Australia Ltd v Brian

"It is a notable feature of the Act that, with one exception it does not in express terms confer any power upon the Court to grant relief to franchisors. The reason no doubt is that the constitutional foundation of the legislation is the power granted by the Commonwealth Parliament under s.51(xx) of the Constitution to make laws with respect to trading and financial corporations. The purpose of the legislation is to regulate the conduct of such corporations in relation to franchise agreements which they enter as franchisors. Legislation conferring upon the Court a power in the absence of any application by the franchisee to declare that a

franchisor has validly terminated an agreement and to make consequential orders such as for the possession of land would extend beyond that purpose and arguably beyond the relevant constitutional power."

While I express no opinion on the limits of the corporation's power in this area, I respectfully adopt what His

The one exception that he noted was the case in which the franchisee brings an application for an order that the notice of termination in question was of no effect. In such a case

sub-s.16(5) enables the franchisor to seek a declaration that the

notice has terminated the agreement from some specified date.

Here the franchisor has commenced the proceedings. However the franchisee's cross claim seeks a declaration under

sub-s.16(4) that the notice terminating the franchise agreement

Because of the cross claim in my opinion, the Court has jurisdiction directly from sub-s.16(5) to entertain the

If that be wrong, 1t may in any event do so in the way

indicated by Wilcox J. in the Mobil case namely as an exercise of

the associated jurisdiction under s.32 of the Federal Court of

Australia Act and the powers conferred by ss.22 and 23 of that

attack has been made on the validity of the notice of termination.

The question for the Court then, 1s whether or not in

(a) A ground specified in the notice 1s established by the franchisor to the satisfaction of the Court.

(b) The Court is satisfied that the termination of the agreement and any related agreement or agreements

1s just and equitable having regard to all the circumstances.

The grounds relied upon in the notice of termination

1. The default in payment of rent and rates due under the lease as set out in the notice of 21 August

2. Wilful passing off of motor fuel supplied by non Gull sources as Gull motor fuel.

3. The failure from 1 January 1986 to 31 August 1986 to purchase any super motor fuel from Gull.

Grounds 1 and 2 come under the ground for termination

They are in my opinion both made out, although I regard the late payment of rent and rates as a comparatively minor

As to the allegation of wilful passing off, 1t 18 difficult to attribute wilfulness to a corporation which has so completely distanced itself from responsibility for the operation

Prior to the advent of Mrs Burgess there is uncontradicted evidence from Neil Rae that fuel not supplied by

Gull was being sold as Gull fuel. At the relevant time Brunet was

Sinbads at that time was still controlled by Sheehey and

I am not satisfied on the evidence that Brunet's conduct

can be attributed to Sinbad's in this regard, or that Sheehey and Lee acquiesced in it. In the circumstances, I am not satisfied

Having found the other two grounds made out, 1t remains to decide whether the termination of the franchise agreement is

In this regard the onus rests upon the applicants.-

Richards v Golden Fleece Petroleum Pty Ltd (1983) 49 ALR 337 at 346.

Some of the circumstances invoked by Sinbads relate to the position of Mrs Burgess. It is plain that her interests will

be directly affected by the termination of the agreement.

The question is whether the interests of third parties

may be taken into account in deciding whether termination 1s just

In approaching that question it is appropriate to have

As Toohey J. observed in Richards, echoing Fox J. in J.

& M. O'Brien Enterprises Pty Ltd v Shell Company of Australia

(1982) 45 ALR 81, the Act aims at giving security of tenure to

"The legislation seeks to put franchisees in the position of independent operators protecting them against termination of their agreements and giving them rights of renewal of those agreements."

In my opinion, the policy of the Act is concerned with

Circumstances affecting the continuance of that relationship are primarily relevant in deciding whether

In this case I do not consider it necessary to decide whether the policy of the Act and the proper construction of sub-s.16(6)(b) would ever allow consideration of the position of

For even allowing for a consideration of Mrs Burgess' situation which attracts considerable sympathy it is in my

opinion, just and equitable that the agreement be terminated.

In coming to that conclusion I take into account the various circumstances relied upon by the parties and which I have

The circumstance to which I afford the greatest weight in this case is the abdication by Sinbads of its responsibilities under the franchise agreement reflected in its arrangements first

These arrangements themselves appear to have been in breach of the lease with Ramilo and are expressly invoked by the applicants under that head as relevant circumstances for the

There has also been a near complete and continuing frustration of Gull's legitimate purpose in entering into its

agreement with Sinbads, namely the sale of Gull products through

In my opinion there has been a significant break down in the relationship between Gull and Ramilo on the one hand and Sinbads on the other. That break down is largely 1f not entirely, attributable to Sinbads' failure, through successive con.-ollers,

In the circumstances I am prepared to make a declaration that the franchise agreement between the applicants and the respondent in respect of the premises known as Ginger's Roadhouse

terminated on 15 October 1986 pursuant to the Petroleum Retail

In relation to the lease agreement this I take to have been effectively terminated by the notice of 3 September as part

If I am wrong as to the effect of that notice on the continuance of the lease, then I would hold that it was terminated

by the notice of 19 September with effect from 19 October 1986.

In the circumstances I consider 1t will be sufficient to

Make an order for delivery of vacant possession of the premises.

I note that a plea for relief against forfeiture was raised in the cross claim. However having regard to my findings

on the just and equitable ground, I see no basis upon which such

Counsel for Gull submitted that an appropriate measure of its loss arising from the breach of the purchase condition was the volume of non Gull petroleum products sold in each year of the agreement through Ginger's Roadhouse multiplied, for each product,

by the average profit earned on sales of that product by Gull in

This it was said, was a conservative estimate of the loss suffered as it did not have regard to the fact that profit Margins would increase with volumes sold due to fixed elements in

Evidence as to the net profit per litre for the periods 1 July 1984 to 30 June 1985, 1 July 1985 to 30 June 1986 and 1 July 1986 to 31 December 1986, was given by Richard Zbigniew Karwack1i, a certified public accountant who has done accounting

Mr Karwacki presented schedules showing his calculations

of the net profit per litre for the various products based on

His means of calculation was first to take out a gross

sales figure for the period in question. From that he deducted

This yielded a gross profit figure. From that was subtracted service station running costs and variable administrative expenses to yield a net profit figure. This was divided by the total volume in litres of petroleum products

(super petrol, unleaded petrol and distillate) to yield a net

The evidence was not challenged in cross examination except to make the point that the figure so calculated did not necessarily reflect the profit that would have been earned on

sales of petroleum products to a particular outlet.

That would depend it was conceded, on factors peculiar

to the outlet and the price at which the fuel was being supplied

Mr Karwacki accepted that the figure he produced was

Differences in the average price from one period to the next probably reflected the negotiation by Gull of a better buying

Counsel for Sinbads pursued in his final address the

Accepting the obvious difficulty of relating a profit per litre to a particular outlet in the hypothetical case that it had purchased from Gull, I accept that the average profit per litre is a reasonable and reasonably conservative basis for

Counsel for Gull submitted a schedule based on Karwacki's unchallenged evidence and the accounts which he had produced which showed the loss calculated in this way for the periods mentioned. The net profit per litre for each of the periods was 0.663 cents, 1.568 cents and 2.078 cents

Super 151,205 litres Distillate 42,975 litres Standard 1,700 litres

Super 1,110,047 litres Distillate 257,825 litres Standard 16,605 litres

Super 585,475 litres Distillate 141,710 litres Standard 27,250 litres

The loss to Gull thus calculated to 31 December 1986

These proceedings were instituted on 20 October 1986. Whether or not I can assess damages to 31 December 1986 depends

upon whether the cause of action in contract is a continuing one.

"Where damages are assessed in respect of a continuing cause of action they shall be assessed down to the time

The question whether there is a continuing cause of action was not agitated between the parties. The meaning of that

term in the context of 0.36 r.58 of the Rules of the Supreme Court

in England was considered by the Court of Appeal in Hole v Chard

Union (1894) 1 Ch.293 at 295. There Lindley LJ said:-

"What is a continuing cause of action? Speaking accurately, there is no such thing; but what is called a continuing cause of action is a cause of action which arises from the repetition of acts or omissions of the same kind as that for which the action was brought. [In

my opinion that is a continuing cause of action within the meaning of the rule."

"It is contended by the appellants that when the act on which an action 1S brought 1s established the cause of action can have reference to that one act and to no other. In my opinion, that 1s not necessarily so. If once a cause of action arises, and the acts complained of are continuously repeated, the cause of action continues and goes on de die in diem."

That case involved an action for nuisance arising out of the pollution by the defendants of a stream running through the

In my opinion and applying these principles in the present case, the continued refusal to purchase fuel from Gull and the purchase from other sources gave rise to a continuing cause of

It was contended by counsel for Sinbads that the applicants had failed to take reasonable steps to mitigate their loss. This submission was based upon the proposition that the applicants were well aware of the breach of contract from an early stage and that they had not taken reasonable steps to "bring that

In my view however the failure of the applicants to take

legal proceedings in respect of the continuing breach of the

contract at some earlier time absent any defence of waiver,

variation of contract or estoppel, cannot give rise to an argument

learned authors of McGregor on Damages 14th Edition at para.218

"Nor 1t seems, need a plaintiff take steps to mitigate loss, even after the defendant's performance of the contract which he has repudiated falls due, by accepting

the repudiation and suing for damages. He may instead, where he can do so without the defendant's assistance, perform his side of the contract and claim in debt for the contract price. Even if this involves incurring expense in the performance of the contract which, in face of the defendant's repudiation, is rendered useless, the plaintiff is not required to minimise the loss by accepting the repudiation and suing' for

In the circumstances, I assess the damages payable by

Having regard to the findings on breach of contract arising from the sale of non Gull fuel, it 1s unnecessary for me to address the question of the action in passing off for no

separate or additional damages are claimed by the applicants in

As counsel for the applicants said in closing, they will

be happy with possession of the premises and damages for breach of

In relation to the cause of action based on s.52 of the

Trade Practices Act 1974, it seems likely that there was a

contravention of that provision prior to Mrs Burgess becoming involved in the running of the business and even after that time having regard to the inadequacy of the disclaimer signs that she relied upon to inform the public that what they were purchasing

That conduct is, I think, attributable to Sinbads by virtue of sub-s.84(2) of the Trade Practices Act 1974 as it stood

That finding is however academic in this case as no separate damages are claimed arising out of the s.52 contravention

and at best it would support a claim for injunctive relief.

Injunctive relief is not necessary having regard to the declaration of termination of the franchise agreement and the

I will hear from the parties as to the precise form of

, Pla A aa 71. ' I certify that the preceding ' seventy (70) pages are a true copy : of the Reasons for Judgment herein of His Honour Mr Justice French. Associate: "Denevabn Wot Date: 3O Tah) IAR7 & J : Counsel: ; - for the Applicants: Mr S. Archer instructed by Robinson Cox »for the Respondent: Mr S. Daley i

u Date of Hearing: 10, 11, 12 and 13 February 1987 Date of Judgment: 30 July 1987 ta 1 :7 | te BE = \ fe i Kaa { | | "s