Is there a serious question to be tried?
7 The very short background to this urgent application is that notwithstanding a long business relationship between W Hoy and Avis Australia, in particular, dating from about 1996, pursuant to the 2016 agreements with it, the related prospective respondents gave 30 days' notice terminating the agreements pursuant to the cl 8 termination provisions in the agreements, without reason or explanation.
8 W Hoy contends that each of the agreements is, as was a predecessor 1996 agreement with Avis Australia, a franchise agreement for the purposes of the Franchising Code of Conduct contained in Sch 1 to the Competition and Consumer (Industry Codes - Franchising) Regulation 2014 (Cth). As a result, W Hoy contends, on the facts and circumstances surrounding the termination notice, the purported termination by the prospective respondents of the two agreements on 4 October 2017 was ineffectual. Those facts and circumstances are set out in his affidavit, including the reliance he alleges he placed on the 2016 agreements.
9 While, by cl 8 the agreements provide for either party to terminate the agreement on 30 days' notice, W Hoy first contends that the provisions of the Code alter the general law that might otherwise govern the private contractual rights of the parties arising under the agreements.
10 In particular, W Hoy contends as follows:
(1) The 1996 Avis agreement and the 2016 Budget agreement are franchise agreements as defined by cl 5 of the Code.
(2) The agreements satisfy each of the elements of the definition of a franchise agreement in the Code.
(3) The prospective respondents have engaged in conduct that breaches the following Code provisions:
(a) Clause 6 - Obligation to act in good faith;
(b) Clauses 8, 9, 10 and 11 - Disclosure requirements;
(c) Clause 28 - Termination of agreement where no breach by Franchisee; and
(d) Clauses 34, 35 and 36 - Dispute resolution procedures.
11 W Hoy contends, secondly, that by the same conduct the prospective respondents have contravened s 21 of The Australian Consumer Law (ACL) contained in Sch 2 to the Competition and Consumer Act 2010 (Cth) (CCA) in that it constitutes unconscionable conduct.
12 Thirdly, W Hoy contends that the prospective respondents have breached implied contractual terms of good faith, reasonableness and fair dealing.
13 It also mentions equitable principles of unconscionable conduct and unjust enrichment as a basis for relief.
14 At the hearing before me it was primarily upon the alleged breaches of the Code and s 21 of the ACL that W Hoy relied in seeking the grants of interlocutory injunctions.
15 If the 1 July 2016 agreements are franchise agreements such that the Code applies to them, then the following obligation to act in good faith would arise under cl 6(1) of the Code:
Each party to a franchise agreement must act towards another party with good faith, within the meaning of the unwritten law from time to time, in respect of any matter arising under or in relation to:
(a) the agreement; and
(b) this code.
This is the obligation to act in good faith.
Civil penalty: 300 penalty units.
16 Clause 6(3) further provides that:
Without limiting the matters to which a court may have regard for the purpose of determining whether a party to a franchise agreement has contravened subclause (1), the court may have regard to:
(a) whether the party acted honestly and not arbitrarily; and
(b) whether the party cooperated to achieve the purposes of the agreement.
17 It should be noted that cl 6(6) is relevant to an understanding of a party's obligation to act in good faith, in that it provides:
To avoid doubt, the obligation to act in good faith does not prevent a party to a franchise agreement, or a person who proposes to become such a party, from acting in his, her or its legitimate commercial interests.
18 As noted, W Hoy at a trial would also allege breach of the disclosure document provisions of the Code, set out in cll 8, 9, 10 and 11. At the hearing of the interlocutory injunction application, however, those provisions were not the subject of any particular submissions.
19 Clause 28 of the Code, however, was identified in the course of argument as pertinent in that it is one of the provisions in Pt 3, Div 5 of the Code dealing with termination of franchise agreements. Clause 28 provides:
28 Termination - no breach by franchisee
(1) This clause applies if:
(a) a franchisor terminates a franchise agreement:
(i) in accordance with the agreement; and
(ii) before it expires; and
(iii) without the consent of the franchisee; and
(b) the franchisee has not breached the agreement.
(2) For subparagraph (1)(a)(iii), a condition of a franchise agreement that a franchisor can terminate the franchise agreement without the consent of the franchisee is not taken to be consent.
(3) Before terminating the franchise agreement, the franchisor must give reasonable written notice of the proposed termination, and reasons for it, to the franchisee.
Civil penalty: 300 penalty units.
(4) Part 4 (resolving disputes) applies in relation to a dispute arising from termination under this clause.
20 For reasons explained further below, I doubt that cl 28 has any relevance to the present agreements as neither contains an expiration date and are only capable of being determined on the 30 day notice provision referred to above.
21 To put the matter shortly, until a notice of termination under the agreements is given, the agreements have no expiry date and so there cannot, logically, be a termination of the franchise agreement by a franchisor "before it expires".
22 However, if the agreements are franchise agreements, then the provisions for resolving disputes set out in Pt 4 of the Code and, in particular, in cll 34, 35 and 36 would appear to be applicable in the circumstances that have arisen in this case. I do not presently need to set out the terms of those clauses. It is sufficient to note that they exist.
23 The substantive question is whether it is arguable, and if so, how serious the issue to be tried is, that the 2016 agreements fall within the definition of a "franchise agreement" in cl 5 of the Code. In this regard, it is appropriate to set out in full the meaning of franchise agreement provided by cl 5:
(1) A franchise agreement is an agreement:
(a) that takes the form, in whole or part, of any of the following:
(i) a written agreement;
(ii) an oral agreement;
(iii) an implied agreement; and
(b) in which a person (the franchisor) grants to another person (the franchisee) the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor or an associate of the franchisor; and
(c) under which the operation of the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol:
(i) owned, used or licensed by the franchisor or an associate of the franchisor; or
(ii) specified by the franchisor or an associate of the franchisor; and
(d) under which, before starting or continuing the business, the franchisee must pay or agree to pay to the franchisor or an associate of the franchisor an amount including, for example:
(i) an initial capital investment fee; or
(ii) a payment for goods or services; or
(iii) a fee based on a percentage of gross or net income whether or not called a royalty or franchise service fee; or
(iv) a training fee or training school fee;
but excluding:
(v) payment for goods and services supplied on a genuine wholesale basis; or
(vi) repayment by the franchisee of a loan from the franchisor or an associate of the franchisor; or
(vii) payment for goods taken on consignment and supplied on a genuine wholesale basis; or
(viii) payment of market value for purchase or lease of real property, fixtures, equipment or supplies needed to start business or to continue business under the franchise agreement.
(2) For subclause (1), each of the following is taken to be a franchise agreement:
(a) the transfer or renewal of a franchise agreement;
(b) the extension of the term or the scope of a franchise agreement;
(c) a motor vehicle dealership agreement.
(3) However, any of the following does not in itself constitute a franchise agreement:
(a) an employer and employee relationship;
(b) a partnership relationship;
(c) a landlord and tenant relationship;
(d) a mortgagor and mortgagee relationship;
(e) a lender and borrower relationship;
(f) the relationship between the members of a cooperative that is registered, incorporated or formed under any of the following laws:
(i) the Corporations Act 2001;
(ii) the Co‑operatives Act 1992 (NSW);
(iii) the Co‑operatives Act 1996 (Vic.);
(iv) the Cooperatives Act 1997 (Qld);
(v) the Co‑operatives Act 2009 (WA);
(vi) the Co‑operatives Act 1997 (SA);
(vii) the Cooperatives Act 1999 (Tas.);
(viii) the Cooperatives Act 2002 (ACT);
(ix) the Co‑operatives Act 1997 (NT).
24 The prospective respondents contend that, while it may be conceded that the arguments of W Hoy that the agreements may be considered franchise agreements are not hopeless, there is not a serious issue to be tried; or in any event, when the availability of damages as a remedy and the balance of convenience are taken into account, this is not an appropriate case in which interlocutory relief should go.
25 So far as para (a) of the cl 5 franchise agreement definition is concerned, (i) is satisfied in that there is a "written agreement" in the case of the two agreements.
26 So far as para (b) is concerned, the question is whether the prospective respondents have granted to W Hoy "the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by [the prospective respondents] …". In that regard, the prospective respondents contend that the agreements are plainly agency agreement under which Avis Australia and Budget Australia is the principal in each case and W Hoy an agent, and so, as a matter of law, it cannot be said that W Hoy has been granted the "right to carry on the business" of offering, supplying or distributing hire vehicles and related services in Australia. That belongs to the prospective respondents.
27 In my view, it is apparent that, even though an agent, W Hoy is nonetheless entitled under the agreement to conduct its own business of renting cars as an agent and it is arguable this also involves the business of offering, supplying or distributing goods (hire vehicles) and related services in Australia. The distinction suggested on behalf of the prospective respondents may ultimately prove to be a good one, but I do not think that it is a proposition that excludes the arguability of the proposition put on behalf of W Hoy.
28 For a similar reason, I do not think it can be said that the "business" to which para (c) refers cannot be the business actually carried out by W Hoy (whether as agent or otherwise) and plainly it is the business the operation of which substantially or materially is associated with the prospective respondents' trademark, advertising and commercial symbols, and so (i) and (ii) appear to be otherwise satisfied.
29 The critical question over which the parties are primarily in dispute is whether para (d) can be said to be satisfied in the circumstances of this case. The prospective respondents contend that the agreements are simply agency agreements and are to be distinguished from franchise agreements. To say that, of course, is simply to assert a conclusion in the face of a statutory definition as to what a franchise agreement is. Form may not be permitted to triumph over substance.
30 W Hoy contends that the agreements involve W Hoy being obliged to pay or agreeing to pay to the prospective respondents "an amount", the amount in question arising under the following clauses of the agreements:
(1) Clause 4(k) of the agreements - indemnify and hold harmless Avis Australia against any and all demands, losses, penalties, fines, damages, judgments and costs.
(2) 2016 Avis and Budget Agreements: Clause 4(p) maintains at its expense the rental counter in a clean and neat manner so as to contribute to the goodwill of the Avis Australia and Budget name.
(3) 1996 Avis Agreement: Clause 4(p) - the location which shall be clean and neat so as to contribute to the goodwill of the Avis Australia name.
(4) Clause 4(q) of the agreements - "...the business carried on at or from the Location ...shall indemnify and hold Avis/Budget harmless from any liability, fines or other penalties resulting from Operator's non-compliance ...".
(5) Clause 5(d) of the agreements:
Without prejudice to cl 5(c), operator shall be responsible for and Avis Australia, at its option, may deduct from any commission payment under cl 5(a) the following amounts:
(a) The total loss of revenue to Avis Australia, or $500, whichever is the higher as a result of conversion of a vehicle due to operator's failure to follow customer qualification procedures specified or described in the operations material.
(b) The total amount of repairs to a vehicle in an accident due to operator's failure to follow established customer qualification procedures specified or described in the operations material and collection or recovery cannot be made from the responsible third party;
(c) $100 per hire, or operator's average revenue per hire, whichever is higher, on missing hires (defined as any of the operator's rental agreements not received or accounted for by Avis Australia); and
(d) $0.50 per kilometre on all missing kilometres (defined as any kilometres which are not recorded on an authorised non-revenue ticket).
31 As W Hoy notes in these submissions, para (d) of the Code enables a relevant agreement to be treated as a franchise agreement where, under the agreement, "before starting or continuing the business" the franchisee "must pay or agree to pay" to the franchisor "an amount", including the various examples given.
32 The prospective respondents contend that none of the clauses relevantly identifies the payment of "an amount" of the type contemplated by para (d), in the examples given or at all. The prospective respondents submit that:
(1) Clause 4(k) is an indemnity against loss arising from W Hoy's breach, neglect or default and so forth. If there is no breach, neglect or default there is no requirement to indemnify.
(2) Clause 4(p) is an obligation to maintain the rental counter. It does not require any payment from W Hoy to Avis Australia .
(3) Clause 4(p) of the 1996 agreement is irrelevant (which I note in passing must be right).
(4) Clause 4(q) is another form of indemnity from liabilities arising from W Hoy's failure to comply with government regulations. Again, if there is no failing there is no indemnity.
(5) Clause 5(d) is in the form of compensation for various failings of W Hoy to comply with its obligations under the agreement. Again, if there is no failing there is no requirement to pay.
(6) The requirement to pay for telephone calls is a partial reimbursement in the case of local/national calls and a full reimbursement (at cost) of international calls. There is no mark-up. It is market rates.
(7) The requirement to pay vehicle cleaning costs is at less than the cost of providing those services.
(8) Payment for uniforms is at W Hoy's cost. There is no requirement for W Hoy to pay Avis Australia.
(9) The requirement to pay for damage to vehicles is, again, a requirement to pay for damage W Hoy causes to Avis Australia.
33 There is relatively little authority on the proper construction of the expression "an amount" as used in para (d). This has led W Hoy to refer the Court to some textual analysis by Giles S, Franchising Law and Practice (LexisNexis) (Vol 1) 30, 370 where the author observes:
The term 'an amount' is quite broad. Obviously even $1 would constitute 'an amount', and arguably an indemnity clause where a franchisee is obliged to pay a franchisor damages in certain circumstances could constitute such 'an amount'. Although it is not clear precisely how a court will interpret this requirement, it does seem clear that Parliament intended that this would be a very low threshold test. (Emphasis added)
34 W Hoy also emphasises that payment of fees may be made by various forms of valuable consideration, as recognised by the Franchising Policy Council, Review of the Franchising Code of Conduct: Report of the Franchising Policy Council (Secretariat, Office of Small Business, Canberra, 31 May 2000) p 27.
35 It is not necessary for me finally to determine the question whether an indemnity clause of any sort or a particular indemnity clause of the type used in this case, constitutes a relevant example of an agreement to pay or agree to pay an amount. It might be observed, however, that the examples given in (i) to (iv) of para (d), suggest, as the prospective respondents submit, that the payments should be identifiable as payments in connection with the operation of a separate, standalone "franchise" business by the "franchisee". Some support for this view may be found in the exclusions of what a franchise agreement is, that follow para (d)(iv).
36 The excluded transactions include (v) and (vii), being certain payments for goods or goods and services "supplied on a genuine wholesale basis".
37 The excluded payments in (vi) and (viii) also contemplate that where an arm's length payment for value is made, then it will not be a relevant amount.
38 What may be said to flow from the concept of "an amount", in all these circumstances, is that the amount paid constitutes some element of profit in the hands of the other party, over and above cost price.
39 In all of these circumstances, I am inclined to think, at this preliminary stage, that the submissions made on behalf of the prospective respondents concerning the nature of these agreements, which on their face do appear to be true agency agreements, relevantly inform the nature of the indemnity and other payment obligations to which the agreements relate. None of them, including the payment for the cleaning of rental vehicles - especially in the circumstances described in the affidavit of Mr Evans, to which I need not, at this point, make any further reference - strongly suggests that the payments or indemnities are simply intended to enable the prospective respondents to recover the actual expenditure they have incurred (the cost price) without any relevant element of "profit". To use the language, perhaps imprecisely, of the exclusions, the payments or indemnity are for services supplied on a "genuine wholesale basis".
40 As I say, I need not make any final judgment on the amount question, but I do presently consider that the contention that the 2016 agreements are agreements under which W Hoy must pay or has agreed to pay a relevant "an amount" is not strong. To use the language of counsel for the prospective respondents in oral submissions, the proposition may not be hopeless, but it is not strong.
41 I should, at this point, also deal with an argument put on behalf of the prospective respondents that, even if there is a serious question to be tried, that the agreements are franchise agreements for the purposes of the Code, there has been no arguable breach of the Code.
42 First, I will deal with the question mentioned in passing above, concerning the application of cl 28 of the Code.
43 I have indicated that I accept the submission made on behalf of the prospective respondents that it has no application to these agreements.
44 As noted, I accept that cl 28 applies to franchise agreements that have a stated term - that is to say, a fixed term. These agreements do not have a fixed term, they expire on the face of it, without cause on notice, as provided for in cl 8(a).
45 It follows that the other provisions in cl 28 have no relevance to this case and there would be and can be no relevant breach of them.
46 In short, these agreements, to use their commercial descriptions, are "ever-green" in that they may be terminated on an agreed period of notice but otherwise continue indefinitely.
47 The prospective respondents further contend, however, that even if cl 28 did apply, they have, in the circumstances of this case, effectively provided more than five months - not 30 days - notice. This is because - and it is not a matter in contention - since the initial 30 days' notice of termination was given, the parties by agreement have extended the period while they engaged in discussions to explore the resolution of the dispute.
48 I am not sure, at least at this preliminary stage, that the five months' notice argument works. The simple fact is only 30 days' notice was given. It has been the cause of the disputation and the subsequent discussions between the parties. I think, on balance, at this preliminary stage, it might be said that the five months' hiatus in these legal proceedings being commenced since the original notice was given, may be something of a distraction or a legal irrelevancy. Be that as it may, I would not consider, at this point, that the fact that five months have elapsed since the initial 30 days' notice was given, means that the original 30 days' notice was not arguably unreasonable.
49 The further argument put is that the 30 day period is not reasonable in any event. The prospective respondents say that it is reasonable evidenced by the fact it has been in place for many years under the earlier Avis contracts, since 1996 and 1998, and so should not be considered unreasonable.
50 I would not, at this stage, form a final judgement that 30 days' notice of the termination of an agreement, of an agency character, is reasonable. It may be.
51 I have also adverted to the good faith obligation in cl 6 of the Code. The question of good faith or unconscionable conduct has been raised in the written submissions of W Hoy in various contexts, including cl 6 of the Code, s 21 of the ACL and by way of general law implied contractual terms and equitable terms. Most attention orally was given to the breach of s 21 of the ACL.
52 As noted above, cl 6 imposes on each party to a franchise agreement an obligation to "act towards another party with good faith, within the meaning of the unwritten law from time to time, in respect of any matter arising under or in relation to" the agreements. The "unwritten law" is a reference to the general law, including equity. It arguably draws in the question of unconscionable conduct. If there is no general doctrine of "good faith" in contracts under the unwritten law, then cl 6(1) may not mean much.
53 Put perhaps simplistically, W Hoy contends that, in circumstances where it had a long relationship with Avis Australia, and a relationship since 2016 with the related entity Budget Australia, where W Hoy to the express knowledge of the prospective respondents has earned a productive income in the vicinity of $450,000-$520,000 gross per annum in recent financial years, to terminate the agreement on 30 days' notice, without reason or explanation bespeaks an unconscionable, bad faith or arbitrary confiscation of its right to continue the business and the "goodwill" of its businesses.
54 The argument is perhaps more explicitly developed in the written submissions (with emphasis included) made by W Hoy in respect of s 21 and s 22 of the ACL, upon which it expressly relies:
Section 21 of Schedule 2 of the Competition and Consumer Act 2014, Australian Consumer Law (ACL) states that:
(1) A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of goods or services to a person (other than a listed public company); or
(b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company);
(c) engage in conduct that is, in all the circumstances, unconscionable.
Section 22 of the ACL sets out the matters that the Court may have regard to for the purpose of section 21 of the ACL, including:
(a) the relative strengths of the bargaining positions of the supplier and the customer: and (emphasis added)
(b) if there is a contract between the supplier and the customer for the supply of the goods or services:
(i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and
(ii) the terms and conditions of the contract; and
(iii) the conduct of the supplier of the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and
(iv) any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and (emphasis added).
(c) the extent to which the supplier and the customer acted in good faith.
55 W Hoy accepts the contestability of conclusions as to when commercial conduct is unconscionable, referring to Paciocco v Australia and New Zealand Banking Group Limited (2015) 236 FCR 199; [2015] FCAFC 50 and Australian Competition and Consumer Commission v Woolworths Limited [2016] FCA 1472. W Hoy accepts that an evaluation of business behaviour as to whether it warrants the characterisation of unconscionable, in the light of the values and norms recognised by the statute is what is required.
56 As far as implied contractual terms are concerned, at this point, a broad submission is made on behalf of W Hoy that the agreements include implied terms to act in good faith and to exercise contractual powers reasonably, referring to Burger King Corporation v Hungry Jack's Pty Limited (2001) 69 NSWLR 558; [2001] NSWCA 187 at [152].
57 So far as the reasonableness of the relevant conduct is concerned, W Hoy also relies on the precedent authority of A & M Thompson Pty Ltd and Others v Total Australia Ltd [1980] 2 NSWLR 1; [1980] AR (NSW) 399.
58 W Hoy submits that:
61. In A & M Thompson Pty Ltd v Total Australia Ltd [1980] 2 NSWLR 1; [1980] AR (NSW) 399, the parties were in an unequal bargaining position and the franchisee had been presented with a standard form contract on a 'take it or leave it' basis with no room to bargain. Total exercised its contractual right to terminate the franchise without compensation on 30 days' notice, not because of any default by the franchisee, but because the site was to be developed as a self-service outlet operated by Total.
62. The applicants had worked long hours and had gradually built up a profitable operation. They had been led to understand that the arrangement would continue as long as the site operated profitably. In an action under s 88F of the Industrial Arbitration Act 1940 (NSW) (now Pt 9 Ch 2 of the Industrial Relations Act 1996 (NSW), Watson J, in the Industrial Commission, ordered that no less than 6 months' notice in writing be given of termination and awarded an amount representing the efforts of the applicants in increasing the goodwill from which the respondent benefited. The orders were upheld by the Commission in Court Session.
63. On appeal, the Commission ordered that the Thompsons had an option for a licence for 12 months from the date of the decision and that Total pay a portion of goodwill to the Thompsons as per Perrignton J at (1).
64. The Commission concluded that the Thompsons should be paid one third of the accepted figure for goodwill at (106).
59 The prospective respondents contend that the articulation of W Hoy's good faith and unreasonableness arguments fails to indicate any relevant breach of any law.
60 The prospective respondents say that apart from identifying some of the relevant matters referred to in s 22(2) of the ACL, W Hoy's submissions do not articulate the normative standard that it contends has been offended. Nor do W Hoy's submissions identify the conduct that is contended to involve a departure from such standard.
61 The prospective respondents also say that, by way of example, the mere existence of an inequality in bargaining power and/or an unwillingness to negotiate terms are not indicative of a departure from any normative standard that meets the description "unconscionable": see Paciocco v Australia and New Zealand Banking Group Limited (2016) 258 CLR 525 at 618-620; [2016] HCA 28.
62 They also say that, if it is asserted that the prospective respondents have taken unconscientious advantage of an inequality in bargaining power, that assertion requires the identification of a term disadvantageous to W Hoy and advantageous to Avis Australia or Budget Australia that it might be considered was extracted by virtue of an inequality of bargaining power. The right to terminate on 30 days' notice does not meet the description of such a term. Further, the prospective respondents were not aware of the financial circumstances of W Hoy or its directors, shareholders and those dependent on them to which Mr Hoy refers in his affidavit.
63 In particular, the prospective respondents submit:
44. First, it is not a provision that is one-sided. W Hoy also has the right to terminate on 30 days' notice. In other words, should it suit W Hoy's commercial interests, it had the right to bring the agency agreements to an end. Such a provision is mutually beneficial and mutually disadvantageous to the parties.
45. Second, the right to terminate on notice without cause is a reasonable (and necessary) provision of a contract with no fixed term. In the absence of an express term, the law would imply a term permitting either party to terminate on reasonable notice. Here, the parties have agreed, in effect, that 30 days is a reasonable period.
46. Third, the 30 day notice provision was a feature of the contractual relationship between W Hoy and Avis Australia from the outset. It was not a provision that was inserted into a subsequent agreement on a 'take-it-or-leave-it' basis. Also, it is a typical provision for an agency agreement of this character.
47. Fourth, W Hoy was offered a second agency agreement for Budget in 2016. W Hoy had not been Budget Australia's agent for arranging Budget rental agreements before 2016. It was to W Hoy's advantage to increase its commission revenue on the terms that Budget Australia offered such an agency agreement. Thus, the arrangement viewed as a whole was advantageous to W Hoy.
48. Likewise, demonstration of departure from normative standards requires more than a mere assertion of a failure to act in good faith. The usual content of the obligation of good faith is an obligation to act honestly and with fidelity to the bargain. It does not require the interests of a contracting party to be subordinated to those of the other. It is good faith and fair dealing between the parties by reference to the bargain and its terms: e.g., Paciocco v Australian and New Zealand Banking Group Ltd [2015] FCFCA 50; (2015) 236 FCR 199 at 273 [288]-[289]. A party does not fail to act in good faith by acting to promote its own 'legitimate interests'. Principles of good faith do not block the use of terms that actually appear in the contract: Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558 at 570 [171]-[172].
64 The prospective respondents submit that they terminated the agency agreements in accordance with an express provision of the agreements that permitted them to do so without fault. Moreover, the decision to terminate was not arbitrary or capricious. It was made in the promotion of Avis Australia's and Budget Australia's legitimate commercial interests, as Mr Evans explains in his affidavit. They say there is no foundation for the assertion that the termination of the agency agreements lacked "good faith".
65 Likewise, the prospective respondents contend that W Hoy's submission that termination in accordance with the provisions of the agreements results in "unjust enrichment" and, thereby lacks good faith, has not foundation in law or fact.
66 They add that the Avis and Budget rental businesses belong to Avis Australia and Budget Australia, not W Hoy. If and to the extent the business at Perth airport was increased it was to the mutual advantage of W Hoy and Avis Australia and Budget Australia. The revenue from rentals increased for Avis Australia and Budget Australia and the commissions that W Hoy earned increased in proportion.
67 The prospective respondents also submit that termination has not deprived W Hoy of the value of any goodwill in the Avis and Budget businesses. The goodwill belongs to Avis Australia and Budget Australia, not W Hoy. The circumstances of this case and statutory provisions are therefore entirely different to those under consideration in A & M Thompson.
68 The prospective respondents therefore say that W Hoy has not identified any conduct that could be described as failing to meet the norms of society
69 I might say at this point that so far as the question of goodwill is concerned, in oral submissions counsel for the prospective respondents did not deny that, even as an agent under an agency agreement, W Hoy may have developed some goodwill in its own business, as distinct from the business that the prospective respondents own and operate, through their agent.
70 I should add that to the extent that W Hoy produced in evidence an accountant's letter to put a valuation on "goodwill", I take little notice of the actual figures included. The assumptions upon which that piece of advice was made are not disclosed. It may be assumed that the accountant was led to understand that there was some security of tenure in the operation of the W Hoy business. The real difficulty, whether or not the Code applies, is that the question of tenure is quite uncertain. A person who might wish to purchase the "business" of W Hoy could also be faced with the terms of cl 10 of the agreements, which preclude transfer of the business. A separate agreement and understanding would necessarily need to be made by the vendor of the business, the purchaser of the W Hoy business, and the prospective respondents. Commercial arrangements could be made but it would, on the face of it, require the commercial cooperation of the prospective respondents.
71 In more direct terms, however, the prospective respondents submit that the termination of the agreement, whether one is approaching this in terms of good faith or reasonableness of the exercise of the power of termination, must take into account the entitlement of the party to exercise a contractual right in the promotion of its legitimate commercial interests. It says this was recognised in the Burger King case referred to above, as well as in the Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, and as noted in cl 6(6) of the Code.
72 They say the termination is explained in the affidavit of Mr Evans, in pursuance of those interests. They desire both to operate their business more efficiently at the Perth International Airport, by having their own employees operate the outlets and also to reduce the amounts paid to an agent, whereby they estimate they would stand to increase their annual profits by about $250,000 per annum.
73 Thus, the prospective respondents submit that, even if it could be argued that a right to terminate for no reason is conditioned by an implied obligation to the effect that the contract will be terminated in good faith and on reasonable grounds, such an obligation does not require the terminating party to subordinate its own commercial interests to those of the other party.
74 In my view, at this preliminary stage, while it might be said that the unconscionable, good faith and reasonableness questions, whether arising under the Code, under the ACL, or under the general law, are not, having regard to the particular factual circumstances of this case, unarguable, they are, as a matter of law and fact, not strong.
75 This then leads to the questions of whether damages provide an adequate remedy and as to where the balance of convenience lies in this case.