Petroleum Retail Marketing Franchise Act 1980

Petroleum Retail Marketing Franchise Amendment Act 1984

Regent Oil Co. Ltd. v J.A. Gregory (Hatch End) Ltd. (1966) Ch 402

Kumar v Dunning [1987] EWCA Civ 1; (1987) 2 All ER 801

P. & A. Swift Investments v Combined English Stores Group Plc [1988] UKHL 3; (1988) 2 All ER 885

Magic Australia Pty. Ltd. v Caltex Oil (Australia) Pty. Ltd. (1988) 84 ALR 483

Associated Minerals Pty. Ltd. v N.S.W. Rutile Mining Co. Pty. Ltd. (1961) 35 ALJR 296

J. & M. O'Brien Enterprises Pty. Ltd. v Shell Company of Australia [1982] FCA 245; (1982) 45 ALR 81

Burdekin v Commissioner of Stamp Duties (1961) 61 SR (NSW) 514

Sid Marz Services Pty. Ltd. v Caltex Oil (Australia) Pty. Ltd. (1988) ATPR 46-031

the Respondent (Cross-Appellant): and M.O. Tubbs, Esq.

instructed by Messrs.

Stojanovic & David.

1. The appeal be allowed and the cross-appeal be dismissed.

2. Order 1 of the orders made 7 September 1989 be varied by substituting for the answer to the separate question the answer that the respondent is not entitled from 19 September 1989 to any renewal of the 1987 agreement.

3. Order 2 of the orders made 7 September 1989 be set aside.

4. The respondent should pay the costs of the appellant both on appeal and at first instance.

Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

This appeal and cross-appeal are brought, by leave, from orders of a Judge of this Court (Hill J.) whereby his Honour, pursuant to Order 29 of the Rules of Court, answered a question separately from any other question arising in the proceedings. The question presented issues as to the proper construction of the Petroleum Retail Marketing Franchise Act 1980 ("the Act"), particularly in the form in which that statute stood in the period between its commencement on 19 September 1980 and the coming into force on 1 January 1985 of the principal provisions of the Petroleum Retail Marketing Franchise Amendment Act 1984. We will identify the Act in its original form as "the 1980 Act", and as amended in 1984 as "the 1984 Act". As Hill J. said, and as the respondent emphasised on the hearing of the appeal, it has been stressed in a number of authorities that one of the purposes of the 1980 Act was to give "security of tenure" to franchisees. But that does not afford any decisive guidance in the determination of the issues with which this appeal is concerned.

2. The question dealt with under Order 29 was in the following terms:

"Whether, on the true construction of the

several instruments itemised in the

attached schedule, and of the relevant

provisions of the Petroleum Retail

Marketing Franchise Act 1980, and upon

the assumption that (the respondent) has

committed no breaches of the 1987

agreement disentitling it to remain in

possession of the service station, (the

respondent) is entitled from 19 September

1989 to any, and if so, what renewal of

the 1987 agreement? It being noted that

there was no notice to renew the 1981

agreement and that J.A. & B.L. Langley

Pty. Limited held over under the terms of

the 1981 franchise agreement between 26

March 1984 and 31 October 1984 there being

a waiver in respect of part of the rent."

The answer by Hill J. to this question was that the respondent was entitled from 19 September 1989 to a renewal until 31 October 1990 of the agreement dated 12 October 1987. Hill J. also made a declaration that, upon the assumption that the respondent had committed no breaches of the franchise agreement dated 13 October 1987, the respondent was entitled to a renewal of that franchise agreement from 20 September 1989 to 31 October 1990.

3. By Notice of Termination and Notice to Quit dated 14 February 1989, the appellant purported to terminate the 1987 Agreement on the ground of several breaches by the respondent. The respondent commenced proceedings in this Court for a declaration that the Notice was invalid, and the appellant cross-claimed for a declaration as to the validity of the Notice and for possession of the premises. The parties sought the decision of the Court on the question in respect of which this appeal is brought, on the footing that, should it be decided that the appellant was under no obligation to renew the franchise agreement beyond 19 September 1989, then it would be unnecessary further to pursue the issues arising under the Notice of Termination.

4. As is apparent from the foregoing, the proceedings concern the application of the statute to a number of documents spanning a period of some years. It is necessary first to outline the nature of those documents.

5. By lease dated 27 March 1979 ("the 1979 Lease") the appellant demised to J.A. & B.L. Langley Pty. Limited ("Langley") the premises at 919 Victoria Road, West Ryde (a Sydney suburb) from which Langley conducted a service station business involving the sale by retail of motor fuel. The 1979 lease was expressed to be for a term of three years from 27 March 1979.

6. By further agreement also expressed to have been made on 27 March 1979 ("the 1979 Supply Agreement") the appellant and Langley agreed the terms upon which the appellant would supply petroleum products to Langley for the period of three years commencing 27 March 1979. The 1979 Supply Agreement was connected with the 1979 Lease, in the sense that clause 7 of the 1979 Supply Agreement provided that it should forthwith terminate upon Langley ceasing to occupy or losing the right to occupy the premises at 919 Victoria Road, West Ryde.

7. The 1980 Act came into force, as we have said, on 19 September 1980. On the hearing of the appeal, it was accepted by both parties that upon the commencement of the 1980 legislation, the 1979 Lease and the 1979 Supply Agreement together became a "franchise agreement" to which the legislation applied. We will refer to the "1979 agreements", but as will become apparent from the definition of "agreement" in sub-s. 3 (1), there was but one agreement within the meaning of the 1980 Act.

8. On 26 March 1981, that is to say whilst the term of the 1979 Lease was still current, the appellant (identified therein as "Esso") and Langley entered into a further agreement, styled "Service Station Lease and Franchise Agreement" ("the 1981 Agreement"), of the premises at 919 Victoria Road, West Ryde. The term of the lease contained in the document was expressed to be three years commencing from 26 March 1981. Clause 15 was in the following terms:

"As from the date of commencement of this

Lease any prior Lease and Supply

Agreement between the parties hereto in

relation to the premises are hereby

cancelled, but such cancellation shall

not affect Esso's right to recover moneys

already owing under any such Supply

Agreement or prior Lease."

Quite apart from any question of whether, as a result of the execution of the 1981 Agreement the 1979 Lease was surrendered by operation of law, the appellant submitted that both the 1979 agreements were brought to an end by the consensual arrangement of the parties reflected in clause 15.

9. The 1981 Agreement also dealt with what would be the position as to holding over upon expiry of the term. Sub-clause 4 (d) was a covenant as follows:

"If the Lessee holds the premises with

the express or implied permission of Esso

after the expiration or sooner

determination of the term hereby granted

the Lessee shall be deemed to hold the

premises as tenant from month to month

and shall hold the premises subject to

all the covenants and conditions therein

contained so far as the same shall be

applicable to a monthly tenancy and the

tenancy so constituted may be determined

by one month's notice to quit by either

party which may be given so as to expire

at any time . . ."

The balance of the sub-clause provided a mechanism for an increase in the monthly rent. The term of the lease contained in the 1981 Agreement expired on 26 March 1984. However, from that date until 31 October 1984, Langley held over on the terms of the 1981 Agreement. There was a waiver by the appellant of its rights as to rental increase contained in the holding over provision of the 1981 Agreement.

10. On 17 October 1984, the appellant and Langley entered into a further service station lease and franchise agreement which provided for Langley to hold the subject premises as tenant for a term of three years commencing on 1 November 1984 ("the 1984 Agreement").

11. The next document is one styled "Deed of Assignment of Service Station Lease and Franchise Agreement" which is dated 25 July 1985. The parties are Langley (defined as "the Vendor"), Mr. and Mrs. Abela (defined as "the Purchaser"), who are the principals of the respondent, and the appellant (defined as "Esso"). In this document ("the Assignment Deed") it is recited that Esso leased to the Vendor the service station premises at 919 Victoria Road, West Ryde by the 1984 Agreement, and that Esso has agreed to consent to the assignment of that lease subject to the execution of the Assignment Deed by the Vendor and the Purchaser. The whole of the interest of the Vendor under the 1984 Agreement is assigned to the Purchaser, with effect from 25 July 1985, for the residue of the unexpired term of the 1984 Agreement. Clause 6 of the Assignment Deed is in the following terms:

"6. The Purchaser acknowledges that it has been

informed by Esso prior to the execution of

this Deed of Assignment that Esso's retail

marketing policies are constantly under

review by it and any decision as to the

retention and availability for lease of the

premises from Esso beyond the term of the

Lease will be determined by Esso in

accordance with marketing conditions and

regulations which may apply at that time

. . ."

The effect of the assignment was that for the purposes of, inter alia, ss. 13, 17, 17A and 17B of the 1984 Act, the 1984 Agreement as subsisting after the assignment was not to be taken, by reason of the assignment, to be a new agreement: sub-s. 11 (12).

12. It is also recited in the Assignment Deed that there is attached to it a copy of the Disclosure Statement which had been provided to Langley by Esso in connection with the 1984 Agreement. This document was expressed as a disclosure statement pursuant to s. 15 of the Act. The date of the disclosure was stated as 12 October 1984, and the proposed date of commencement of the lease thereunder was stated as 1 November 1984. On page 4, under the heading "RIGHTS OF LESSEE RELATING TO RENEWAL OF THE LEASE" there appeared the following:

"The term of the Lease is for the period

stated on page 1 only. If the lease is

for three years the Lessee has the right

to renew for two additional three year

terms, subject to his compliance with the

requirements of the Act."

There was a reference also to s. 13 of the Act. On page 1, opposite the words "LEASE TERM", there appeared "3 year(s), thence monthly subject to Lessee's right of renewal, if any, under the Act".

13. By Deed of Assignment dated 2 June 1987, the parties to which were Mr. and Mrs. Abela, the appellant and the respondent, Mr. and Mrs. Abela assigned to the respondent the whole of their interests under the 1984 Agreement with effect from 2 June 1987. It was recited in the Deed of Assignment that Esso had agreed to consent to this assignment subject to the execution of the deed by Mr. and Mrs. Abela and by the respondent. Sub-section 11 (12) of the 1984 Act again operated so as to prevent the 1984 agreement being taken by reason of the assignment to be a new agreement.

14. Finally, by a document styled "Service Station Lease and Franchise Agreement" bearing the date 12 October 1987, ("the 1987 Agreement") the appellant leased the subject premises to the respondent for a term commencing on 1 November 1987, and terminating on 19 September 1989, that is to say nine years after the coming into force of the 1980 Act. On 25 August 1987, the appellant had written to the respondent a letter whereby the appellant offered to renew the agreement on terms, inter alia, that it would be for a period from the date of expiry of the 1984 Agreement until 19 September 1989. The letter included the following:

"As the Premises have been occupied under

a franchise agreement with Esso since the

date on which the Act came into operation,

namely 19 September, 1980, you are entitled

to a renewal of your agreement for a further

term expiring on 19 September, 1989."

15. It is necessary now to turn to some of the provisions of the 1980 Act. In sub-s. 3 (1), the term "agreement" is defined as meaning 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. A "franchise agreement" was defined in the same provision as meaning an agreement containing certain characteristics which, it is not disputed, were possessed by the documents in question in these proceedings. Sub-sections 3 (2) and 3 (4) provided as follows, with emphasis supplied:

"3. (2) Except so far as the contrary

intention appears, a reference in

this Act to an agreement shall be

read as including a reference to a

proposed agreement, an agreement as

requested or proposed to be renewed,

or a terminated or expired agreement

and, in relation to such an

agreement, a reference in this Act to

a party to the agreement shall be

read as a reference to a person who

would be a party to the agreement if

the agreement were in effect.

. . .

(4) A reference in this Act to renewal,

in relation to a franchise agreement,

shall be read as a reference to

entering into a new franchise

agreement, where the provisions of

the new agreement are the same as

those of the first-mentioned

agreement or do not differ

substantially from the provisions of

the first-mentioned agreement except

in any one or more of the following

respects . . ."

It is not necessary to set out the four sub-paragraphs which listed these following respects.

16. So far as is material, s. 13 provided as follows:

"13.(1) A corporation shall not enter as

franchisor, into a franchise agreement

the term of which does not comply with

the requirements of this section.

(2) Subject to sub-section (6) hereof,

the term of -

(a) a franchise agreement entered

into otherwise than by way of

renewal, where the franchisee

has produced to the

franchisor, before entering

into the agreement, evidence

reasonably sufficient to show

that he is a person with

prescribed experience; or

(b) a franchise agreement entered

into by way of renewal, other

than an agreement referred to

in sub-section (4),

shall not be less than 3 years.

(3) The term of a franchise agreement,

other than an agreement referred to

in paragraph (2) (a) or an agreement

entered into by way of renewal, shall

be one year or less, or 3 years or more.

(4) Subject to sub-sections (5) and (6), where -

(a) a corporation enters, as

franchisor, into a franchise

agreement by way of renewal;

and

(b) the term of the original

agreement amounts, or the

terms of the original

agreement and of any previous

renewal amount in the

aggregate, to a period of more

than 5 years and less than 9 years,

the term of the agreement so entered

into shall be a period which is not

less than the difference between the

period referred to in paragraph (b)

and 9 years.

. . .

(10) Where a corporation purports to enter

into a franchise agreement in

contravention of a sub-section of

this section, the franchise agreement

is not thereby invalidated, but the

term of the agreement is -

(a) in case of a contravention of

sub-section (3) -

(i) if the marketing

premises are held by

that corporation or a

related corporation as

lessee under a lease in

respect of which the

lessor is not a

corporation related to

the lessee and the term

of the lease will expire

less than 3 years after

the commencement of the

agreement - a period

expiring immediately

before the expiration of

the term of the lease;

or

(ii) if sub-paragraph (a) (i)

does not apply - 3

years; or

(b) in any other case - the term,

or the minimum term, as the

case may be, provided by the

sub-section contravened.

. . ."

Sub-section 16 (1) provided that a franchisor might terminate the franchise agreement in accordance with the other provisions of that section but not otherwise, and sub-s. (2) provided that a franchisor should not terminate the franchise agreement except on one or more of the grounds which are set forth in the ten paragraphs which followed. They dealt with such matters as the rendering of the franchisee, by reason of physical or mental incapacity, unable to control the operation of the marketing premises, the wilful adulteration of motor fuel supplied under the franchise agreement, the making of fraudulent misrepresentations in connection with the operation of the marketing premises, and the breach by the franchisee of a condition of the franchise agreement. Sub-section 16 (9) provided:

"16.(9) This section does not prohibit a

franchisor from terminating the

franchise agreement with the consent

in writing of the franchisee given at

any time after the commencement of

the agreement."

This provision may be compared with sub-s.7(2) which provided that nothing in the statute should be taken to affect the operation of an agreement "to the extent that the agreement is capable of operating consistently with this Act".

17. Finally, sub-s. 17 (1) stated that a franchisor should not fail or refuse to renew a franchise agreement except on one or more of the grounds there listed. Sub-sections 17 (7), (15) and (16) should be set out in full:

"17.(7) Notwithstanding anything in the

preceding provisions of this section,

where -

(a) a franchisor, by notice in

writing served on the

franchisee not later than 30

days before the expiration of

the franchise agreement,

offers to renew the agreement;

and

(b) after that notice is served,

the franchisee fails to serve

on the franchisor before -

(i) if that notice is served

earlier than 120 days

before the expiration of

the agreement - the

ninetieth day before the

expiration of the

agreement; or

(ii) in any other case - the

expiration of 30 days

after the receipt of the

notice by the franchisee,

a notice in writing accepting

the offer of renewal,

the franchisor is not required to

renew the agreement.

. . .

(15) Where -

(a) a franchise agreement

has, whether before or

after the commencement of

this Act, been entered

into otherwise than by

way of renewal;

(b) this section has applied

in relation to a renewal,

or 2 or more consecutive

renewals, of the

franchise agreement; and

(c) the term of the renewal

or the terms of the

renewals, together with -

(i) if the franchise

agreement was

entered into before

the commencement of

this Act - so much

(if any) of the term

of that agreement as

occurred after the

commencement of this

Act; or

(ii) in any other case -

the term of the

franchise agreement,

amount in the aggregate

to not less than 9 years,

this section does not require

the franchisor to renew the

franchise agreement but, if

the franchisor renews the

franchise agreement, this

section has effect as if that

renewal were a franchise

agreement entered into otherwise

than by way of renewal.

(16) This section does not apply in

relation to a franchise agreement the

term of which is 9 years or more."

18. As we have indicated, the learned primary Judge held that the respondent was entitled from 19 September 1989 to a renewal of the 1987 Agreement until 13 October 1990, upon the assumption that the respondent had committed no breaches of the 1987 Agreement. Upon the appeal, the appellant contends that the respondent was not entitled to any renewal of the 1987 Agreement upon its expiry on 19 September 1989. On its cross-appeal the respondent contends that it is entitled to a renewal for a term ending 31 October 1993.

19. Upon the appeal, there was no dispute that the 1979 Lease and 1979 Supply Agreement, the 1981 Agreement, the 1984 Agreement and the 1987 Agreement were franchise agreements within the meaning of the Act. In particular, it was accepted that the 1980 Act applied to the 1979 agreements, so that the balance of the term of those agreements might be taken into account in computing the entitlement under the legislation of a franchisee to renewal. The dispute on the appeal essentially concerns the question of the extent to which under the legislation each of the 1981 Agreement, the 1984 Agreement and the 1987 Agreement was a renewal of the franchise agreement constituted by the documents which preceded it.

20. Any entitlement of the respondent after 1 January 1985 to renewal of its franchise agreement flows from s. 17B of the 1984 Act, though that provision in terms refers back to the provisions of the 1980 Act. In particular, sub-ss. (4) and (6) of s. 17B of the 1984 Act are as follows:

"17B.(4) Where -

(a) a franchise agreement (in this

sub-section referred to as the

'original agreement') has been

entered into otherwise than by

way of renewal;

(b) the provisions of section 17

of this Act as in force before

1 January 1985, or of sections

17 and 17A of this Act as in

force on and after that date,

or both, have applied in

relation to a renewal, or 2 or

more consecutive renewals, of

the original agreement; and

(c) the term or terms of the

agreement as so renewed,

together with the term of the

original agreement, amount in

the aggregate to 9 years or more,

sections 17 and 17A of this Act as in

force on and after that date do not

apply in relation to the renewal of

the agreement when the term of the

agreement next expires, but, if the

franchisor voluntarily renews the

agreement, those sections and this

section (subject to section 6) apply

again as if the agreement as so

voluntarily renewed were entered into

otherwise than by way of renewal.

. . .

(6) For the purposes of this section, a

reference to the term of an agreement

includes a reference to any part of

the term that occurred at a time when

this Act did not apply in relation to

the agreement, other than a time

before 19 September 1980."

21. The appellant submits that when the 1984 Agreement expired by effluxion of time on 31 October 1987, the combined total of so much of the term of the 1979 agreements as could be taken into account for the purposes of applying sub-s. 17B (4) of the 1984 Act, together with the terms of subsequent renewals, was made up as follows:

(a) 19 September 1980 - 25 March 1981

(i.e. 6 months and 6 days)

(b) 26 March 1981 - 31 October 1984

(i.e. 3 years 7 months and 5 days)

(c) 1 November 1984 - 31 October 1987

(i.e. 3 years)

The total of the computable original term together with renewals up to 31 October 1987 was 7 years 1 month and 11 days, with the result that the respondent was entitled as at 31 October 1987 to a further 1 year 10 months and 19 days, a period which expired on 19 September 1989. This was the term fixed by the 1987 agreement. Therefore, the appellant submits, the terms of the agreement as renewed in 1981, 1984 and 1987 together with the allowable portion of the term of the 1979 agreements, having amounted in the aggregate to 9 years, the respondent was not, within the meaning of sub-s. 17B (4) of the 1984 Act, entitled to any further renewal for a term after 19 September 1989. The appellant might voluntarily renew the agreement with the consequences spelt out in sub-s. 17B (4), but the appellant was not willing to proceed in this way.

22. In our view, the submissions for the appellant should be accepted. We turn to explain why this is so.

23. Clause 15 of the 1981 Agreement has been set out earlier in these reasons. In terms, it stated that as from the commencement of the 1981 Agreement, the 1979 agreements were "hereby cancelled". There was, at first instance, some discussion of the principles in the law of leases whereby the grant of a second lease during the term of the first lease may bring about a surrender of the first lease by operation of law. But, in our view, the effect of clause 15 of the 1981 Agreement was to bring about a consensual termination of the unexpired periods of the 1979 agreements, without any recourse to principles which operate in the absence of any express statement of intention of the parties. There was a bilateral discharge of the 1979 agreements, which brought them to an end or "terminated" them.

24. It also should be borne in mind that whilst the 1979 agreements indubitably included a lease of the subject premises, the totality of those agreements included covenants by the franchisee, some of which might not have "touched and concerned" the land within the meaning of traditional doctrine in the law of leases. The point is suggested by the inclusion in the definition of "franchise agreement" in sub-s. 3 (1) of the 1980 Act, of provisions, express or implied, dealing with use of a mark in connection with the retail sale of motor fuel by the franchisee at the premises; cf. Regent Oil Co. Ltd. v J.A. Gregory (Hatch End) Ltd. (1966) Ch 402 at 431-432, 434, 436-437; Kumar v Dunning [1987] EWCA Civ 1; (1987) 2 All ER 801; P. & A. Swift Investments v Combined English Stores Group Plc [1988] UKHL 3; (1988) 2 All ER 885. Further, the Act is concerned, in terms, not with leases, but with franchise agreements. The term "agreement" is so defined in sub-s. 3 (1) as to mean any agreement, arrangement or understanding. Thus, some care is called for against too readily carrying over into a consideration of the operation of the statute, doctrines and concepts flowing from the law of landlord and tenant.

25. Clause 15 of the 1981 agreement operated consistently with the legislative regime imposed by the 1980 Act. As we have indicated, s. 16 permitted a franchisor to terminate a franchise agreement only in accordance with the provisions of that section, but sub-s. 16 (9) meant that there was no prohibition upon a franchisor terminating a franchise agreement with the consent in writing of the franchisee given at any time after the commencement of the franchise agreement; see Magic Australia Pty. Ltd. v Caltex Oil (Australia) Pty. Ltd. (1988) 84 ALR 483 at 487. In our view, clause 15 of the 1981 Agreement is to be construed as a consensual termination of the kind contemplated by sub-s. 16 (9) of the 1980 Act. Nothing turns upon the use of the expression "cancel" in clause 15 rather than "terminate".

26. The 1981 Agreement contained provisions which did not differ substantially from those of the 1979 agreement, within the meaning of sub-s. 3 (4) of the 1980 Act. That would indicate that the 1981 Agreement was to be regarded as a renewal of the 1979 agreements for the purposes of s. 17 of the 1980 Act. But, at first instance, it was submitted by the respondent that one could not, in terms of the legislation, speak of renewal of a franchise agreement where that franchise agreement had been terminated before it had run its course. Hill J. held that the grant of a new lease, in circumstances such as occurred in 1981, immediately upon the termination of a previous lease, is not to be seen as a renewal of that lease, and that nothing in sub-s. 3 (4) required that conclusion. His Honour's attention was concentrated upon the concept of a "lease". He said:

"Consistent with what I would understand

to be the legislative purpose of the 1980

Act there then becomes in a case such as

the present no requirement to count the

whole term of a lease (notwithstanding

that the lease has been surrendered) as

part of the nine year statutory period.

Rather, once the lease is a lease which

has been terminated it does not count at

all in the nine year period and the grant

of a new franchise agreement will set in

train a new nine year period."

It was for this reason that his Honour held that the 1981 Agreement was entered into otherwise than by way of renewal of the 1979 agreements, with the result that time should not be computed from 19 September 1980. The appellant appeals against this holding.

27. It appears that his Honour's attention was not directed to sub-s.3(2) of the 1980 Act which, in our view, requires that a reference to "renewal" in relation to a franchise agreement be read as including a reference to a "terminated or expired agreement". The term "terminated" is, given the scheme of s.16 (including the reference in sub-s. 16 (9) to consensual termination), to be construed as encompassing a franchise agreement brought to an end before its expiry by effluxion of time, and by a consensual termination, as happened here.

28. The respondent referred to Associated Minerals Pty. Ltd. v N.S.W. Rutile Mining Co. Pty. Ltd. (1961) 35 ALJR 296 at 298, as indicating that in ordinary usage, the word "renewal" used in relation to a lease, identifies a lease which is granted during and which follows immediately upon, the term of a lease which has expired by effluxion of time. But the 1980 Act, as is indicated by sub-ss. 3 (2) and (4), is so drawn that a franchise agreement may be a renewal of a franchise agreement which preceded it and came to an end before the renewal was granted.

29. In our view, the 1981 Agreement operated, within the meaning of the legislation, as a renewal of the 1979 agreements. The appellant should succeed on this branch of the case.

Was the giving of a notice under sub-s. 17 (7) of the 1980 Act a condition precedent to an effective renewal of the 1981 Agreement?

30. The respondent took the point on its cross-appeal that the 1984 Agreement was not a renewal of the 1981 Agreement, because the franchisor had not observed what was described as the condition precedent laid down in sub-s. 17 (7) of the 1980 Act.

31. Sub-section 17 (1) of the 1980 Act provided that a franchisor was not to fail or refuse to renew a franchise agreement except on one of the grounds specified in that sub-section. It was not stated that the franchisor and franchisee might agree to renewal of a franchise agreement only by following any procedure laid down in the section. This impression is strengthened if one has regard to the terms of sub-s. 17 (7), which we have set out earlier in these reasons.

32. The effect of sub-s. 17 (7) was that a franchisor might not be required or compelled to renew the franchise agreement if the franchisor had taken the steps indicated as necessary on its part and the franchisee had failed to take the step indicated on its part. There was nothing in these provisions to exclude from characterisation as a renewal for the purposes of the legislation, steps taken consensually by the franchisor and franchisee. Hill J. concluded that the giving by a franchisor of a notice under sub-s.17(7) of the 1980 Act was not a condition precedent to there being an effective renewal by a consensual arrangement between franchisor and franchisee. With respect, we agree. The respondent's cross-appeal fails.

33. It is true that sub-s.17(15) was a central provision of the 1980 legislative scheme. It operated upon one or more consecutive renewals of the franchise agreement and did not oblige the franchisor to renew so as to produce an aggregate of more than 9 years. The sub-section spoke of s.17 having "applied in relation to a renewal, or 2 or more consecutive renewals . . .". In our view, the section still will have "applied" in the case where it obliged the franchisor to renew a franchise agreement, but in the events that happened the franchisor was not forced to do so because the parties between them agreed upon a renewal which accorded with that which might have been compelled. What was excluded by the words in question were renewals of franchise agreements, which renewals took place before the commencement of the 1980 Act; the term of any such renewal played no part in the computation of the aggregate of 9 years because s. 17 had not applied in relation to it.

34. Hill J. held that, whilst the term of the 1981 Agreement expired on 25 March 1984, the holding over provisions contained in the 1981 Agreement did not intervene to prevent the 1984 Agreement being a renewal of the 1981 Agreement. His Honour said:

"Nevertheless the wording of s.13 of the

1980 Act does rather imply that the

concept of the term of an agreement on

the one hand and the concept of the time

when the agreement would expire on the

other are both the same. However, it

seems to me that whether it can be said

that the franchise agreement expired when

its term came to an end or whether it

continued in existence during the holding

over period notwithstanding that its term

had come to an end, I think that where

there has been a franchise agreement

which has expired and no new franchise

agreement has been entered into either

with the franchisee or any other person,

a subsequent franchise agreement entered

into with the franchisee is properly to

be seen as a renewal of the franchise

agreement, notwithstanding that the term

of the franchise agreement had expired

and irrespective of the holding over period."

We would, with respect, approach the question somewhat differently.

35. It followed from sub-s. 13 (2) of the 1980 Act that the term of the 1981 Agreement should not be less than three years. That was the case in the sense that what in the 1981 Agreement was described as "the demise" was for a term of three years commencing on 26 March 1981, and the agreement between the parties as to the sale and purchase of petroleum products was described in clause 6 as operating "during the term of this Lease". It is true also that the 1980 Act dealt with the situation where there was a franchise agreement, but the "marketing premises" (as defined in sub-s.3(1)) were held under a lease, the parties to which were not the franchisor and the franchisee; see, for example, sub-s. 13 (6), para. 13 (10) (a).

36. Nevertheless, it is, in our view, wrong to approach the construction of the expression "term" used in the legislation in relation to a franchise agreement as if it bore the technical meaning of that expression in the law of leases. That approach does appear to have coloured the construction given the legislation by Fox J. in J. & M. O'Brien Enterprises Pty. Ltd. v Shell Company of Australia [1982] FCA 245; (1982) 45 ALR 81 at 93. It also influenced the approach taken by Hill J. in the present case, where his Honour referred to what was said by Sugerman J. in Burdekin v Commissioner of Stamp Duties (1961) 61 SR (NSW) 514 at 518 as to the expression "term" meaning in relation to a lease of real property, "a fixed or definite period"; that is, a period with a certain time of determination.

37. Hill J. went on to hold that, without regard to authority, the 1980 Act required the term of a franchise agreement to be calculated at the time the franchise agreement was entered into or renewed, and not by reference to what actually happened in occupation under the franchise agreement. His Honour referred to the provisions of s. 13, which we have set out earlier in these reasons. But to say, for example, that the term of a franchise agreement "shall not be less than three years", (as did sub-s. 13 (2)), does not mean that the franchise agreement may not be more than three years, nor that the extent to which the franchise agreement lasts beyond three years must be fixed at the time of the commencement of the franchise agreement.

38. Sub-section 13 (4) dealt with duration of renewed franchise agreements. It posed, in para. (b), the question whether the term of the original agreement and any previous renewal amounted in the aggregate "to a period" of more than 6 years and less than 9 years. There is no difficulty in answering that question by looking to what in fact has already happened, where, for example, there has been a holding over for some period which goes into the computation of the aggregate.

39. His Honour referred to sub-s. 17 (7) of the 1980 Act which, as we have indicated, required, as a condition precedent of the franchisor not being required to renew an agreement, the service on the franchisee of a notice in writing of the franchisor not later than thirty days "before the expiration of the franchise agreement". His Honour said that unless the term of the agreement was fixed at the outset, it might be impossible, particularly if the holding over period were on a weekly basis, to identify that period which was thirty days before the expiration of the franchise agreement. However, in our view, in such a case the exigencies of the legislation would be met by the franchisor resolving not to let the holding over continue for more than a further five weeks, and then giving the thirty day notice containing the offer to renew the franchise agreement.

40. We adopt what was said on this subject by Wilcox J. in Sid Marz Services Pty. Ltd. v Caltex Oil (Australia) Pty. Ltd. (1988) ATPR 46-031 at p 53,099, in a passage upon which the appellant relied. One of the issues before the Court was whether notice by a franchisor of a decision not to renew given during a holding over period was a valid notice for the purposes of sub-s. 17A (5) of the 1984 Act. The point of construction involved was similar to that presented by sub-s. 17 (7) of the 1980 Act. Wilcox J. said:

"It is argued on behalf of the applicant

that the result of this requirement is

that the notice should have been served

before 28 February 1987, when the term of

the lease expired.

I am unable to accept that submission.

The Petroleum Retail Marketing Franchise

Act makes a distinction, in a number of

places, between the term of a lease and

the operation of an agreement. I think

that the requirement of subsec. 17A (5)

is directed, not to the expiration of the

original leasehold term, but to the date

when the agreement itself would expire.

Where there is a holding-over clause, the

agreement may continue to operate,

perhaps for a considerable time, after

the expiration of the term. It cannot be

said that the agreement has expired until

the date when the holding-over clause

ceases to have effect. In this case the

holding-over clause, as is common ground,

continued to have effect until 30

September 1987. Consequently, subsec.

17A (5) required that notice be served

before that date. This was done."

41. It appears that J. & M. O'Brien Enterprises Pty. Ltd. v Shell Company of Australia (supra) had not been cited to his Honour. But, in any event, for the reasons given above, we would prefer the reasoning expressed by his Honour in the passage we have cited. We should add that we do not read what was said by Burchett J. in Magic Australia Pty. Ltd. v Caltex Oil (Australia) Pty. Ltd. (supra at 484-485) as finally accepting the contrary position.

42. The "holding over" period from 26 March 1984 to 31 October 1984 is to be treated as part of the term of the 1981 Agreement for the purposes of the legislation, and the 1981 Agreement is to be treated as having expired on 31 October 1984. The 1984 Agreement was a renewal of the 1981 Agreement because it was a new franchise agreement whose provisions did not differ substantially from those of the expired 1981 Agreement. The 1984 Agreement was for a term of three years, and whilst it too had a holding over clause (sub-clause 4 (d)) it was replaced on its expiry by the 1987 Agreement which had been executed on 12 October 1987 with effect from 1 November 1987 until 19 September 1989. At the time of entering into the 1987 Agreement, the Act had been amended by the 1984 Act. The question, therefore, was whether the term of the 1987 Agreement complied with s. 17B of the 1984 Act. It follows from what we have said that the provisions of the 1984 Act did not apply in relation to renewal of the franchise agreement when the term of the 1987 Agreement expired on 19 September 1989, because, in the events that had happened since 19 September 1980, the terms of the franchise agreement amounted in the aggregate to 9 years, within the meaning of sub-s. 17B (4).

43. In the result, the appellant has succeeded on the appeal and the respondent has failed on the cross-appeal. The appeal should be allowed and the cross-appeal should be dismissed. The respondent should pay the costs of the appellant both on appeal and at first instance. The orders appealed from should be varied by substituting for the answer to the separate question, the answer that the respondent is not entitled from 19 September 1989 to any renewal of the 1987 Agreement. If the question is answered in this way, that removes the need for the making of any declaration.