IN THE FEDERAL COURT OF AUSTRALIA SYDNEY REGIS'TRY No. G33 of 1982 Ne eed GENERAL DIVISION GEORGE CHRONOPOULOS and DANNY CHRONOPOULOS Applicants AND: CALTEX OIL (AUSTRALIA) PTY. LIMITED Respondent CORRIGENDA FOX J. Amendment to be made as follows to his Honour's Reasons for Judgment of 21 December 1982. There has been an error in pagination. Page 13 should be read as page 12 and the subsequent pages should be re-numbered accordingly. I.H. PHILIP ASSOCIATE TO FOX J. 23 December 1982 CATCHWORDS Trade - Petroleum Retail Marketing Franchise Act - Increase in Rent by Lessor - Reliance by Lessee on Policy and Provisions of Act - Original lease before Act commenced - Not effective at law - Estoppel - Walsh v. Lonsdale - Whether new Agreement. Conveyancing Act 1919 - sections 7(1), 23C(1)(a), 23B(1) 23B(3). Petroleum Retail Marketing Franchise Act 1980 - sections 3(1), 3(2), 6(2), 6(6), 7(1), 9(1), 13, 16, 16(2)(3), 17, 17(1)(b), 17(12). Real Property Act 1900 GEORGE CHRONOPOULOS and DANNY CHRONOPOULOS v. CALTEX OIL (AUSTRALIA) PTY. LIMITED No. G33 of 1982 Fox J. 21 December 1982 Sydney. IN TI FEDERAL COURT OF AUSTRALIA SYDNEY REGISTRY No. G33 of 1982 wee we GENERAL DIVISION x GEORGE CHRONOPOULOS and DANNY CHRONOPOULOS Applicants AND - CALTEX OIL (AUSTRALIA) PTY. LIMITED Respondent ORDER JUDGE: Fox J. DATE OF ORDER: 21 December 1982 WHERE MADE Sydney THE COURT ORDERS THAT 1. Application dismissed. 2, Cross-claim stood over with liberty to either party to restore on fourteen days' notice to the other. 3. Applicants to pay respondent's costSof application 4. Liberty to apply. IN THE FEDERAL COURT OF AUSTRALIA SYDNEY REGISTRY No. G33 of 1982 GENERAL DIVISION GEORGE CHRONOPOULOS and DANNY CHRONOPOULOS Applicants AND: CALTEX OIL (AUSTRALIA) PTY. LIMITED Respondent REASONS FOR JUDGMENT FOX J. This is an application made by the operators of a motor vehicle service station, in reliance principally upon the Petroleum Retail Marketing Franchise Act 1980 ("the Franchise Act"). The respondent ('"'Caltex") is the owner of the premises upon which the business is carried on, and supplies fuel to the applicants. The subject land is registered under the Real Property Act 1900, as amended. By deed of lease dated 2 May 1980 the respondent granted to Messrs. R.J. McDonald and R.A.S. McDonald a lease of the premises for a term of three years commencing on 1 May 1980. The eee ee A RN rs STS ee Er em bo deed was not registered under the Real Property Act. Clause 1 of the lease is as follows: "The Lessee shall pay to the Lessor rental of Thirteen Thousand Four Hundred & Twenty Eight Dollars ($13428.00) per annum payable by equal monthly instalments in advance on the tirst day of each month during the term, the first such payment (or, the apportioned part thereof) to be made on the First Day of May 1980 PROVIDED HOWEVER that the Lessor shall have the right to review upon or after each anniversary of the commencement date the amount of the annual rental payable hereunder and shall be entitled to increase or decrease the annual rental to such amount as the Lessor shall, in its discretion, think fit and, subject to the following further proviso, commencing on the first day of the month after notification of the new rental is served on the Lessee, the Lessee shall pay to the Lessor, by equal monthly instalments thereof as aforesaid, the annual rental notified by the Lessor which shall be the rental reserved hereunder until further reviewed as provided in this clause PROVIDED THAT such notification shall be served on the Lessee at least twenty-one (21) days prior to the said first day of the month on which the new rental commences and the Lessee , shall have the right to give to the Lessor at any time, prior to such commencement three (3) months' written notice of termination of this Lease and in the event of the Lessee giving such notice to the Lessor, the rental payable by the Lessee hereunder until the termination of this Lease at the expiration of the said three (3) months' notice shall be the rental payable immediately prior to the review." A Reseller Supply Contract between Caltex and the McDonalds was entered into on 1 May 1980. While the original document provided for a term of three years, a counterpart refers to eight years, but nothing turns on this difference. Clause 10 1s as follows: "NO ASSIGNMENT The Buyer shall not assign this Agreement or any of its rights or obligations here- under or attempt or purport so to do without the prior written consent of Caltex." On 17 November 1980 a letter was sent by the Messrs. McDonald to Caltex in the following terms "I wish to notify you that I have been offered $35,000 plus 1/ take over all stock, plant and equipment ; and 2/ take over leases on cash register and water pressure machine, to assign my lease to: Messrs. George & Danny Chronopoulos of 4 Wentworth Ave., Glenfield 2617 Your approval is requested as soon as possible." By letter dated 28 November 1980, Caltex replied: "Re Service Station Revesby 82376 We acknowledge receipt of your letter of November 17th concerning the request to assign your lease of the above service station to Messrs G. & D. Chronopoulos. It 1s not our intention to match the offer made to you by Messrs. Chronapoulos (sic). Before your request can be processed Messrs. Chronopoulos would have to fulfil our requirements relative to their financial capacity to operate the service station. We feel that it is most lmportant that you advise Messrs. Chronopoulos that our future plans for this service station involve conversion of 1t into a "C" Store which would negate the use of the lube bays for the minor service work as allowed now under the existing service station permit. Upon receipt of the relevant financial information requested from Messrs. Chronopoulos we will advise you of our decision on the assignment." On 2 December 1980 standard forms headed "Caltex Dealer Application Form" were completed by the present applicants and submitted to Caltex. Approval was evidenced by a document headed "Final Approval Sheet" which was apparently signed by the approving officer of Caltex on 9 December 1980. The request approved was stated as "Assignment of lease to above by present lessees R. & R. McDonald, effective 1/1/81 (subject to final approval by Caltex)". Goodwill and stock was purchased by the applicants. On 28 December 1980 the only document capable of being regarded as an assignment was executed. "The Deed of Lease dated 2-5-1980 between Caltex Oil Australia Pty Limited as lessor and R & R McDonald as lessees drawn for period from 1-5-80 to 30-4-83 at a rental za Be a te eg A STO TY . leo Oe ae Tee oe of $13,428-00 per annum is hereby assigned to G & D Chronopoulos of 4 Wentworth Avenue Glenfield." The witness to the signatures, a Mr. Mitchell, is and was an officer of Caltex, and was at the time acting in that capacity. The applicants entered, paid rent in accordance with the lease (at the rate of $13,425 per annum) and, so far as appears, performed the other obligations of the lease. By "notice of rent review'' dated 2 September 1981 Caltex notified the applicants that it required them to pay rental for the premises in the sum of $21,999.00 per annum from 1 October 1981. A similar notice was not sent to the Messrs. McDonald. The principal purposes of the Franchise Act are to give security of tenure to retail operators of service stations, and a protection against price discrimination by corporations supplying motor fuel to them. The Act, in s.3(1), introduces a definition of a "franchise agreement": "'franchise agreement' means an agreement containing - (a) provisions, whether express or implied, under or by virtue of which a corpo- ration (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 a related corporation; (b) provisions, whether express or implied, under or by virtue of which a corpo- vation (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 agree~ ment relates in connection with the -- retail sale of motor fuel by that person at those premises; or (ec) provisions, whether express or implied, under or by virtue of which - (i) a corporation (in this Act referred to as the 'franchisor') is 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 (ii) 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;" "Agreemenl" is also defined: "'agreement' means any agreement, arrangement or understanding - (a) whether formal or informal or partly formal and partly informal; (b) whether written or oral or partly written and partly oral; and (c) whether or not having legal or equitable force and whether or not based on legal or equitable rights;" Sub-section (2) of s.3 goes further: "(2) Except so far as the contrary inten- tion 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." A "franchisee" is defined in s.3(1) to mean: "a party to a franchise agreement, being the person referred to as the franchisee in paragraph (a) or (b) or sub-paragraph (c) (i) or (ii), as the case may be, of the definition of 'franchise agreement''." The original lease to the Messrs. McDonald was entered into before the date on which the Act came into eel, TS a TELL re ee Set eee ee ee ~— oR ST ES a SS en SE tec Fk tS ane ty er ee en a ee ee Se ee ee eet force, which was 19 September 1980. Sub-sections (2) and (6) of s.6 regulate the extent of the retrospective operation of the Act: rise that void that "(2) Subject to sub-section (1), the provisions of sections 10, 17 and 20, sub-sections 22(1), (2) and (5), sections 23, 24, 25, 26 and 27 and, to the extent necessary for the application of those provisions by virtue of this sub~section, this Part, extend to a franchise agreement in effect immediately before the commence- ment of this Act. (6) Subject to sub-sections (2), (3) and (4), this Act does not apply in relation to a franchise agreement that was entered into before the commencement of this Act." It was the claim for increased rent which gave to the present proceedings. The applicants submit the part of cl. 1 under which it was given is at common law, as being uncertain or, alternatively, it is not an effective part of the covenant, because 1t merely constituted an agreement to make an agreement. In my view, these submissions fail. The words in question give of rise to questions of construction, as do all forms words to a greater or lesser extent, but they can be construed and are then capable of sensible application to the facts. The courts lean against finding me ee ee ee ee ee ree Se ee ~. os Te are ee TT oe difficulties and obscurities, particularly in the language of commercial documents. The fact that the lessor is given a discretion to raise (or lower) the rent does not mean that the clause is void, or unenforceable. The amount of rent payable at any time will be known in advance. In principle the clause follows provisions which have been in common use for some time. The remaining submission relies upon the application of the Franchise Act. There is an issue as to whether the Act applies at all, it being submitted on behalf of the respondent that the definition of "franchisee" in s.3 of that Act is not satisfied. Alternatively, the respondent submits that only certain sections of the Act apply, because the relevant agree- ment, being the lease, was entered into before the commencement of the Act (see s.6(6)). Originally the applicants relied upon s.9(1) of the Act, which deals with impossible and unreasonably onerous terms, but that approach was abandoned shortly before the hearing. _It was one of the sections, so it is argued for the respondent, that was excluded from operation in this case by s.6(6). 10. Although I will say something more concerning these arguments, I can by-pass them, because in my view if the applicants were franchisees and all of the Act applied, it would not have any direct or immediate effect on the liability to pay the increased rent. The applicants rely upon the general policy of the Act, stated to be one of securing tenure to franchisees, and submit that a power in the lessor to raise the rent as much as it pleases, leaving the lessees (franchisees) only the option to terminate the lease by giving three months' notice (the increased rental not to be payable for the intervening period) is contrary to that policy. There are several answers to this submission. The policy of the Act cannot for the purposes in mind be stated or applied in such general terms. The Act makes it plain that termination is possible in certain events, and that security of tenure is not an absolute, The relevant consideration is whether the policy of the Act is plainly opposed to rental increases not agreed to by the lessees. In fact, the Act contains no proscription at all of rental charges. Section 7(1) is relied upon. It is in the following terms: "(1) This Act applies notwithstanding any agreement to the contrary and, in particular, but without limiting the generality of the foregoing, a provision in any agreement is void to the extent that it purports to exclude, limit or modify, or is otherwise inconsistent with, the operation of a provision of this Act or any right or remedy based on or arising out of a provision of this Act." 11. The relevant part of cl. 1 does not offend against s.7, unless, conceivably, s.9 is relied upon. Reliance upon that section having been disclaimed, 1t . does not seem to me that it can nevertheless be applied through s.7. Whether s.9 applies would involve a consideration of factual considerations which have not been explored before me. It cannot simply be said that the clause of the lease offends against s.7 because it might be applied so as to offend. Section 13 was referred to. It prescribes the terms of leases granted after the commencement of the Act, and of renewals of leases, including those in effect immediately before that date. What cl. 1 of the lease relevantly does is to give the lessees a right to terminate if they are not prepared to accept a rent increase intended by the lessor. I appreciate fully that the applicants say that this can be a grim option for them, and that the power to increase rent can be used to force them out. It would not be an answer to their arguments, if otherwise sound, to say that they agreed to the clause, possibly with full knowledge of it. Nor would it be an answer that there may be commercial restraints which would impede unreasonable use of the power. The fact is, however, that s.13 does not tell against the clause being in the form it is. The term oat 13. to which s.13 refers is the term of the lease (or franchise agreement). Termination by the lessor is completely regulated by s.16. It is unnecessary to decide in this case whether, if some power in the lease were used by a lessor to bring about a termination, it would offend against s.16, for no such allegation is made. Section 16 1tself was directly relied upon by the applicants. That section, as I have said, governs termination by a lessor. The argument is that, assuming the lessor wished to terminate, and gave notice in accordance with the section, and the termination was opposed by the lessees and brought to court, the termination could not be upheld unless the court was satisfied that in all the circumstances that result was just and equitable. It is then said that a court would not find termination based upon the ground of non-payment of the increased rent (see s.16(2)(j)) was just and equitable. It is added that s.16(2)(j), which deals with breaches of condition by franchisees, would not be satisfied where the rent payable is unreasonable, but no such qualification can be made. There are a number of objections to the first-mentioned argument. In the first place, s.16 comes to be applied when the circum- stances giving rise to its application have occurred, co mee ee 14, and one cannot say at this stage what view of the situation will then be taken. What is relevant in considering what 1s just and equitable will not be confined to the increased rent. Even 1f s.16 were to be regarded as a sure buluark against eviction, it says nothing about the accrued liability for rent. In my opinion, the section does not avail the applicants in the present case. Section 17 lengthens tenure by requiring renewal, unless a notice of non-renewal is given by the franchisor and grounds are made out, which are, for the most part, those set out in s.16, as providing grounds for termination. Section 17 does not have any direct bearing on the present case, although, when and if the question of renewal does come about, the court, if appealed to, might have power to review the rental ' position (see s.17(1)(b), s.17(12)). In this connection, I am not sure whether there is a common understanding of when the lease under which the applicants hold expires. The applicants' case in my opinion fails. The respondent seeks judgment for the rent due (at common law) at the increased rate and declarations appropriate to that situation. No separate argument has fn ee TE Re EET a Te ee one re ee 15. been addressed to me on behalf of Lhe applicants as to why, 1f thezr own case is not successful, there should not be judgment for the amount claimed by the respondent. The matter has, however, a strange twist, because of the way the arguments were put relative to the question whether the Franchise Act applies. It was submitted on behalf of the applicants that at, or shortly after, the time the assignment document was executed, a new agreement, being a franchise agreement constituted by a lease, came into being. This was after the date of commencement of the Act (19 September 1980). Hence, it 1s said, all the provisions of the Act applied. The respondent, on the other hand, being anxious to limit the operation of the Act (as I have already noted it also submitted under another argument that no part of! the Act applied) argued that the assignment was operative at law, or should be so treated, thus continuing the original lease, which pre-dated the commencement of the Act. Alternatively, 11 was argued that if the asSignment was operative 1n equity only, the assignee could compel a legal assignment, and therefore, by analogy with Walsh v. Lonsdale ((1882) 21 Ch.D. 9), should be treated in a court where equity and law are administered concurrently, as a legal assignee. IF, however, those arguments for the respondent were not accepted, the present applicants would not be liable for the rent by virtue of privity of estate or of contract. Action would only lie against the assignors. 16. In my view, the assignment, not being by deed, was not valid at law. It 1s submitted that a deed is not necessary. Certainly writing 1s (Conveyancing Act 1919, as amended, s.23C(1)(a)). At common law a deed was necessary for the assignment of a lease. Section 23B(1) of the Conveyancing Act states "no assurance of land shall be valid to pass an interest in law unless made by deed". Sub-section (3) states 'This section dees not apply to land under the provisions of the Real Property Act 1900". Section 7(1) provides that, unless the context or subject-matter indicates or requires, "land under the provisions of the Real Property Act 1900, or any equivalent expression, means estates registered under that Act". It is difficult to see why,' as a matter of statutory construction, s.23B(1) should not apply where the particular interest or estate in land is not registered under the Real Property Act. "Land" is widely defined 1n s.7(1), as is "assurance", which includes a "conveyance". It does not seem permissible, or even sensible, to construe "land" in s.23B(3) as confined to the fee simple in land. Commentators have taken the view that a deed is necessary (see Tebbutt, 34 A.L.J. 353, Vrisakis, 35 A.L.J. 353, Lang, Leases and Tenants in New South Wales, at pp.221-222). It is established that a surrender (otherwise than by operation of law) of a lease not registered under the Real Property Act, although of land 17. under that Act, must be by deed (Zorbas v. McNamara (1962) S.R.(N.S.W.), Lang op. cit. at p.222). For relevant purposes there seems no proper or logical basis for a distinction between a surrender and an assignment. The respondent relies, in the alternative, on an estoppel which would preclude the applicants from denying that there was an assignment at law. Rodenburst Estates Ltd. v. W.H. Barros Ltd. ((1936) 2 All E.R. 3) was relied on. There are several cases which show that an estoppel can arise in somewhat similar circumstances (see Woodfali's Law of Landlord and Tenant, 28th ed. (1979) paras. 1-0026, 1-0031). In the present case there is, I think, the absence of an unequivocal representation, or of any reliance on one, and there is the fact that Caltex, through its officer, knew of the assignment document when it was executed; he was present representing Caltex. The principles to be applied are those stated by Scott L.J. in Rodenburst Estates (supra. at p.12). Interestingly, although an estoppel en pais is relied upon, the implication of a fresh agreement, on the same facts, 1s strongly refuted. There 1s then reliance upon the doctrine of Walsh v. Lonsdale (supra.)}. Counsel did not cite any authority 1n support of his submission that that ee 18. doctrine could be applied so as to convert what was taken to be an equitable assignment into a legal one. In my view the contention is unsound. Walsh v. Lonsdale was applied in a situation where there was a specifically enforceable promise to grant a legal lease, and was applied as between the parties thereto, so that the promisee could be treated as if he was lessee at law. These elements are lacking in the present case. If the intention were that there be an assignment effective at law, the present applicants would probably have a right to specific performance and on that footing they would be regarded as having a subsisting equitable anterest in the tenancy. There would be no privity between the applicants and the respondent. Equitable doctrine may well operate as between assignors and assignees so as to overcome the lack of formality, but that doctrine does not apply in relation to third parties (here, the lessor). The parties used writing without a deed to carry out what they had intended, or, conceivably, as an incident in carrying out their purpose. Assuming that there was an equitable assignment, it would run counter to fundamental principle, and the distinction drawn by the Conveyancing Act, to treat it as a legal assignment. The Franchise Act itself, in s.11, quite explicitly recognises a distinction between a legal assignment and other assignments, not effective at law > . dhe QO poe g Ags & (0) Hy a Seng", meme) ® 2 gage | 2 29uG fy a ae bege < & Saae < 8 Boe 3g et »y YW eed Wa peeg sere 3 Hd8e OB a ht ne 19. I am satisfied therefore, that there was no legal assignment, that the applicants are nol estopped from denying that there was one, and that Walsh v. Lonsdale does not assisl the respondent. If an agreement existed upon which a claim at law for rent could be based, 11 would be one implied in fact from the dealings of the parties, inter se, at and aiter the time of the assignment. It us the applicants' case that such an agreement did arise. The respondent, whose claim for rent it 1s, strongly contends that there was no such agreement. Both arguments were put on the applicants' case, as relative to the relief sought against liability to pay. To give judgment for rent in favour of the respondent on the basis of a [fresh agreement would be to do so in the face of its submission, and I do not think I should do so, or that I should proceed to consider this matter further. The alternative to a fresh agreement would be that the applicants remained equitable assignees, in which case privity of estate and of contract would be lacking. The cross-ciaim should be stood over so that the respondent may determine its course of action with regard thereto It may be restored by either party on fourteen days' notice to the other. The applicants should pay the costs of the respondent of the application. I give liberty to apply. — - sect ott sree re ee eee eee