JUDGMENT No. soc Samal ont, IN THE FEDERAL COURT OF AUSTRALTA NEW SOUTH WALES DISTRICT REGISTRY No. G266 of 1984 wee ww GENERAL DIVISION BETWEEN : RAYMOND JAMES HUDSON and BARRY FREDERICK KURTZ Applicants AND: B.P. AUSTRALIA LIMITED Respondent '?] Oo Esl FOX J. DATE: 25 September 1984 (EX TEMPORE) REASONS FOR JUDGMENT FOX J. I. am hearing an application for interlocutory relief which is based upon the requirements of s.17 of the Petroleum Retail Marketing Franchise Act 1980 ("the Act"). It is agreed by the parties that if I take the view that a notice purporting to have been given under that section is invalid, I may make an order for final relief. The facts can be stated briefly. The applicants conduct a service station in Ultimo, Sydney. The respondent owns the land on which the business is conducted, and supplies petroleum products to the applicants. The applicants held a lease of the land from the respondent for a term of three years which expired on 31 July 1984. The respondent had been considering the sale of the land for some time. By letter dated 28 June 1984 it gave notice to the applicants that it did not intend to renew the lease. The letter is the notice to which I have referred earlier and it was as follows (omitting formal parts): "Re: Premises at 478-492 Wattle St., Ultimo" Please take notice that our Company has decided not to renew your Lease (franchise agreement) of the abovementioned service station on the ground that our Company has entered into negotiations for an agreement to sell its interest in those marketing premises toa person not being an associate of our Company. The facts relating to the ground upon which the decision not to renew your franchise agreement are that on 26th June, 1984 our Company entered into negotiations with Mons Grove Developers Pty. Ltd. to sell the property and such negotiations are proceeding. In these circumstances if the term of your franchise agreement shall expire before the end of the ninetieth day after the receipt by you of this notice then subsection (9) of section 17 of the Petroleum retail Csicl Marketing Franchise Act 1980 provides that the term of your franchise agreement shall be deemed to be extended until the end of that ninetieth day. This notice also serves as a notice fixing the expiry date of your Lease for the purposes of sub-clause 5S(viii) of that document. Please note that if and when the terms of the Contract for Sale are settled upon you will be offered BP's interest in the marketing premises in accordance with Section 17(2)(a) of the Petroleum Retail Marketing Franchise Act, 1980." The general purpose and operation of the Act has been dealt with in decisions of this Court (7.M. O'Brien Enterprises Pty. Ltd. v. Shell Co. of Australia (1982) 45 A.L.R. 81; Chronopolous v. Caltex Oil Australia Pty. Limited (1982) 45 A.L.R. 481; Richards v. Golden Fleece (1983) 49 A.L.R. 337). Section 17 relates to "renewal of franchise agreements". It is common ground that the lease was a "franchise agreement"; the applicants being franchisees for the purposes of the Act and the respondent a franchisor. I set out relevant parts of the section: "17.¢1) Subject to this section, a franchisor shall not fail or refuse to renew the franchise agreement except on one or more of the following grounds: (c) in the case of a franchise agreement containing provisions of the kind referred to in paragraph (b) of the definition of 'franchise agreement' in sub-section 3(1), the franchisor has, in good faith and in the normal course of business (i) entered into an agreement, or negotiations for an agreement, to grant a lease of the marketing premises to a person other than an associate of the franchisor for a use other than the retail sale of motor fuel; or (ii) entered into an agreement,. or negotiations for an agreement, (other than an agreement containing a provision having the effect of prohibiting the use of the marketing premises for the retail sale of motor fuel) to sell its interest in the marketing premises to a person other than an associate of the franchisor. (2) A franchisor shall not enter into an agreement to sell its interest in the marketing premises to a- person other than the franchisee unless - (a) before entering into the agreement, the franchisor has offered the interest for sale to the franchisee on terms that were no less favourable to the franchisee than the terms of the agreement with that person; or (4) Where, before the expiration of a franchise agreement, the franchisor has, in the manner described in paragraph (1)(c), entered into negotiations for an agreement of a kind referred to in that paragraph, the franchisor may, in lieu of renewing the franchise agreement, extend the term of the franchise agreement until - (a) an agreement of that kind is entered into; or (b) the expiration of the period of 6 months commencing on the date on which, but for this sub-section, the franchise agreement would expire, whichever first occurs, or until such earlier time as is agreed upon between the franchisee and the franchisor. (8) If a franchisor decides not to renew the franchise agreement, it shall serve on the franchisee, mot later than 30 days before the expiration of the agreement, notice in writing of its decision, setting out full particulars of the ground or grounds, including a statement of the facts relating to each ground, upon which the decision is based. (9) If notice is served on a franchisee under sub-section (8) after the commencement of the period of 90 days before the expiration of the franchise agreement, the term of the agreement shall be deemed to be extended so that it expires at the end of the ninetieth day after receipt of the notice by the franchisee. (10) Subject to this section, a court shall, on the application of a franchisee, make an order directing the franchisor to renew the franchise agreement unless - (a) the franchisor has served on the franchisee a notice in accordance with sub-section (8); (b) a ground specified in the notice is established by the franchisor to the satisfaction of the court; and (c) except where a ground so established is a ground referred to in paragraph (1)(c), the court is satisfied that it is just and equitable, having regard to alli the circumstances, for the agreement and any related agreement or agreements not to be renewed." The question is whether the letter of 28 June was a sufficient notice for the purposes of sub-s. (8). ft is common ground that the reference in its opening lines is to para. (c)(ii) of s.,17(1), and for the present purposes the sufficiency of the notice is to be tested by reference to the language there used. The first, and I think insuperable difficulty in the way of the franchisor is that the name used in the letter as the company with which negotiations were taking place is wrong. The respondent's officers thought that was the name of a company represented by the individuals with whom it was having discussions, but in fact there was no company of that name. There was a company called Monsgrove Pty. Limited, but the difference, especially from the point of view of a recipient of the notice, was not unimportant. The variance cannot be regarded "as simply a misdescription of the name of an existing company recognisable as being without any reasonable doubt, the one intended. Sub-section (8) has fairly strict requirements with regard to the notices to which it refers. The notice has to set out "full particulars" of the ground relied on "including a statement of facts relating to each ground". The purpose or principal purpose is, as it seems to me, to give the recipient a full opportunity to investigate and test what is asserted, and to decide its course of action accordingly. What exactly is required will of course depend upon the circumstances, including the particular ground relied upon. The naming of a non-existent company would mean that the franchisees would not be able to test the assertion that negotiations were being carried on, or to approach the possible purchasers concerning their own position. In relation to these matters, they should not be left to speculate. The applicants attack the notice on further grounds. The submission is that it should have contained more than a simple statement that negotiations for sale were being carried on, and the name of the other party. I agree with this submission, Sub-section (8) emphasises the need for full information. A requirement of sub-para. (c)(ii) is that the other party should not be "an associate of the franchisor". It is also necessary that the entering into "negotiations for an agreement" should be "in good faith and in the normal course of business". In my view the statement of facts which is required should at least be sufficiently indicative of compliance with these requirements. The franchisees were in possession and carrying on business on the premises. They might well have been concerned about their future, and as to the possible operation of sub-ss. (2), (4) and (9). The stage which negotiations had reached might also have been important to them. The notice was defective in regard to these matters. A further observation can be made. The language of the sub-paragraph, having in mind in particular the words in parenthesis, suggests that negotiations should have reached a stage where the terms of a particular agreement are in contemplation, or at least where there isa common understanding that it will not contain a provision of the nature referred to in the sub-paragraph. In sub-ss. (4) and (5) reference is made to agreements of the "kind" referred to in para. (c) of sub-s. (1). The last-mentioned provision would therefore seem not to be satisfied by negotiations the terms of which are entirely at large; the negotiations must relate to something more specific. I therefore declare that the letter of 28 June 1984 is not a sufficient notice for the purposes of s.17(8), and I direct the respondent to renew the lease in accordance with the provisions of the Act. I order the respondent to pay the applicant's costs of this application. I give liberty to the applicants to take out formal orders accordingly, but otherwise stand the matter over with liberty to either party to apply on three days' notice to the other for the purpose of any matter arising under s.17(12) of the Act. the GEVEM fz) ) e copy of the T certify that this and »- eding pages are a tru sone for Judgment herein of his Honour wale "gustice Mee | Associate woe eee ne