Ca) A "ys "os "AOD i) CATCHWORDS Petroleum Retail Marketing Franchise Act 1980 - franchise agreement - refusal to renew - negotiations by franchisor for an agreement to sell interest - in good faith - in normal course of business - interest - s.17(8) notice in writing of decision - term of agreement deemed to be extended - term sought to be further extended by reliance on s.17(4) - whether any extensions cumulative. Petroleum Retail Marketing Franchise Act 1980 s.3, s.17. CHARLIE SERHAN & GEORGETTE SERHAN v. AMPOL PETROLEUM LIMITED No. NSW G187 of 1984 McGREGOR J. SYDNEY 9 January 1985. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION No. NSW G187 of 1984 wee ew BETWEEN CHARLIE SERHAN & GEORGETTE SERHAN Applicants AND AMPOL PETROLEUM LIMITED Respondent McGregor J. Date: 9 January 1985 REASONS FOR JUDGMENT CHARLIE SERHAN AND GEORGETTE SERHAN tapplicants) have, as tranchisees. ina Franchise Agreement dated 16 June 1981 but which commenced on 1 June 1981 and was expressed to expire on 31 May 1984, carried on at 321 Gardeners Road, Rosebery, New South Wales, (the premises) a service station and motor fuel vending business. Those premises are owned. and the motor fuel supplied to the applicants, by AMPOL PETROLEUM LIMITED (respondent). The events preceding this litigation are to be considered against the background that the respondent regularly appraised its property, at least in New South Wales, with the object of maximising return on investment thereon. After reappraisal, a list of sites considered suitable for disinvestment (a word [ understand to include a sale of the premises and dispossession of the franchise) was drawn up. Decisions in that regard were made in the light of the respondent's overall marketing strategy. It was often necessary to sell petrol outlets (of which the premises was one) because e.g. of declining démand for petroleum in the area; or to open a service station in anarea of gqrowing demand. An economic decision might be made to disinvest the site in order to release capital to finance. up-grade and perhaps acquire other sites elsewhere. The list of properties selected ror disinvestment were forwarded to what 13 called the Appropriations Committee of the respondent which met regularly to conzider matters of capital expenditure. A submission might be given to the Managing Director for his confirmation for the disposal of any site. A decision to sell may be carried out by way of public auction or private sale. If the former, it was necessary to set a reserve or minimum price. A real estate agent was employed to advertise and facilitate the sale. L.J. Hooker Limited (Hooker) had been in the past chosen for this task. The premises the subject of the current proceedings, was one of 35 sites in New South Wales in respect of which it was proposed that the process of disinvestment should take place. Before the decision was finally taken in respect of the premises a notice was sent on 22 March 1984 to the applicants expressed to be pursuant to s.17(2)(b) of the Petroleum Retail Marketing Franchise Act, 1980 (the Franchise Act) that the respondent intended to offer its interests in the premises for sale at public auction on 26 April 1984 at the auction room of Hooker. As at 26 March 1984, a valuation report of Duncan Properties Pty. Limited valued the property at $815,000. On 30 March 1984. a further valuation by Dyson Austen & Co. Pty. Limited valued the property at $230,000. On or after 11 April 1984, Mr. Alexander, a Director of Hooker who was . primarily responsible for the auction of the premises expressed the opinion "that we might achieve $650,000". In a meeting on 16 April 1984, the Appropriations committee considered a proposal to offer the premises for sale at auction on the date mentioned above with a reserve price of §275.000. The current book value of the property was recorded as 3224,816 and its written down value as $206,608. The proposal was recommended by Dr. Slackburn whose appointment, at the relevant time, was described as Executive Assistant. Retail. At the meeting it was resolved that sale by auction of the premises be recommended to the Managing Director, Mr. Harris, at a reserve price of $250,000. This figure was later changed to $275,000. After 16 April 1984, advertisements were inserted in newspapers, one of which was seen by a Mr. Winterton, a Director of Winterton constructions Pty. Limited, a building contractor. He was currently considering a development project and therefore was extremely interested in the premises. On or about 19 April 1984, Mr. Harris, approved the recommendation for the gale of the property by auction with a reserve price of $275,000. At the instruction of Mr. Colgate whose appointment was Services Manager of the respondent the actual reserve eventually fixed at the auction was $650,000. On 26 April 1984, the auction was held. No offers reached the reserve price of $650,000, the highest being $349,500 by a Mr. ,William Winterton for William Winterton Construction Pty. Gimited. This was not accepted but immediately after the auction Mr. Alexander, Mr. Cochran (Service Manager with the N.5.W. Branch of the Respondent) and Mr. Winterton adjourned toa conference room near the auction room where Mr. Winterton was told that the instructions were to get a much higher price. Mr. Winterton said that he had a limit to go to but was keen to purchase and would jlike to discuss the matter further. Mr. Cochran said he would see what Head Office had to say and get back to him. By agreement the matter was to be left in abeyance pending further instructions. There was further contact with Winterton. A notice dated 27 April 1984 purporting to he pursuant to sub-section 17(8) of the Franchise Act wags on that date served on the applicant, Charlie Serhan. at the premises. Omitting formal parts this document is worded as follows - "RE: SERVICE STATION FRANCHISE LICENCE AGREEMENT DATED 16TH JUNE, 1981. PREMISES: AMPOL SERVICE STATION, 321 GARDENERS ROAD, ROSEBERY Pursuant to sub-section 17(8) of the Petroleum Retail Marketing Franchise Act, 1980, ("the Act") notice 1s hereby given that Ampol Limited (hereinafter called "Ampol") as Franchisor under the above Service Station Franchise Licence Agreement ("hereinafter called "the Agreement") has decided not to renew the Agreement after it expires on 3lst May, 1984 on the ground that it has, within the meaning of sub-section 17(1)(c) of the Act, in good faith and in the normal course of business entered into negotiations for an Agreement (other than an Agreement containing a provision having the effect of prohibiting the use of the site for the retail sale of motor fuel) to sell its interest in the site to a person other than an associate of Ampol. PARTICULARS . Offers have been received from William Winterton Constructions Pty. Limited of 148 Foveaux Street, Surrey Hills (hereinafter called "Winterton Constructions") to purchase the above site with vacant possession tor re-development. FACTS RELATING TO GROUND FOR DECISION NOT TO RENEW AGREEMENT. 1. The site was put to auction on Ampol''s behalf by L.Jd. Hooker Limited on April 26, 1984 being an auction of which you had received at least 30 days' notice in accordance with sub-section 17(2)(b) of the Act. 2. The site was not sold at auction but afterwards negotiations were commenced with Winterton Constructions which was the highest bidder. These negotiations are continuing. 3. The basis of the proposed Contract with Winterton Constructions 1s the Agreement for Sale which was the basis for the auction. Having regard to the interests of Winterton Constructions you are requested to keep the abovementioned information confidential. Because Ampol is negotiating with the highest bidder at an auction it is not obliged to offer the site for sale to you before entering into a Contract for Sale provided the price is not lower than the amount of the highest bid. However, if negotiations are concluded by Ampol with any other purchaser the site will be offered for sale to you on the same terms as would apply to that other purchaser prior to entering into formal Contracts as is provided by sub-section 17(2)(a) of the Act. You are advised that by virtue of sub-section 17(9) of the Act, the term of the Agreement is deemed to be extended so that it will expire at the end of the ninetieth day after your receipt of this notice. Furthermore. Ampol hereby gives notice that if Contracts for Sale have not been entered into prior to the expiration of the ninety day period, it intends, pursuant to sub-section 17(4) of the Act, to extend the term of the Agreement for a further- six (6) months or until the date u9pon which Contracts for Sale are entered into whichever first occurs. Yours faithfully, \SIGNED) T.G. MALSH, Secretary" In a letter dated 25 May 1984, from the applicants' solicitors to the respondent referring to the document dated 27 April 1984, it was noted that the Franchise Agreement was due to expire on 31 May 1984: and it was stated that the "terms of your letter are not sufficient to require the consequences stipulated"; and that "you are required to renew the Franchise Agreement....". A letter dated and received 28 May 1984 was sent by respondent to the Solicitors for the applicants which. omitting formal parts, read - "Service Station Franchise Licence Agreement Dated 16 June 1981 Premises: Ampol Service Station, 321 Gardeners Road, Roseberry We refer to your letter of 25th May 1984. Our letter dated April 27. 1984 to your clients constituted a valid notice for the purposes of Sub-section 17(8) of the Petroleum Retail Marketing Franchise Act 1980 ("the Act"). As a consequence of service of that notice on your clients the expiry date of your clients Franchise Agreements is 26 July 1984 by virtue of the application of sub-section 17(9) of the Act. It ts anticipated that formal contracts for the sale of this site will shortly be exchanged with the person who made the highest bid at the recent auction of the property. For the purposes of Sub-section 17(4) of the Act but without conceding that it has any obligation to do so Ampol agrees to extend the term of your clients franchise agreements for a further period from 27 July 1984 until 26 January 1985 or the date when formal contracts for the zale of the site are entered into whichever occurs first. If. as we anticipate, formal contracts3 for the sale of the site have been entered into prior to 26 July 1984 then the franchise agreements will terminate on 26 July 1984. In the circumstances we are not required to renew your clients' franchise agreements as you contend and we will oppose any Court proceedings that your clients institute. (sqd.) T.G. WALSH Secretary" I note that no submission has been made that the Solicitors did not have any authority to receive this document or did not receive it on behalf of the applicants. On 31 May 1984 a further letter was sent by the respondent to the applicants which, omitting formal parts, read - "RE: FRANCHISE SUPPLY AGREEMENT DATED 16TH JUNE, 1981. PREMISES: AMPOL SERVICE STATION. 321 GARDENERS ROAD, ROSEBERY We refer to our Notice under sub-section 17(8) of the Petroleum Retail Marketing Franchise Act 1980 ("the Act") dated April 27. 1984 and served upon you on that day. As you are aware, William Winterton Constructions Pty. Limited have offered to purchase the above site. As you are aware. a consequence of our Notice dated 27 April, 1984, is that the term of your Agreement is deemed to be extended by virtue of Sub-section 17(9) of the Act so that it will expire at the end of the ninetieth day after your receipt of the Notice. As the Notices were served on April 27. 1984, this means that the term of your Agreement- expires on 26 July, 1984. For the purposes of Sub-section 17(4) of the Act, but without conceding that we have any obligation to do so, we now advise our agreement to extend the term of your Franchise Agreement for a further period from 27 July 1984 until 26 January, 1985 or the date when formal Contracts for Sale of the site are entered into whichever occurs first. If. as we anticipate. formal Contracts for the site have been entered into prior to July 26, 1984 then tne Franchise Agreement will terminate on July 26, 1984, (sgd.) T.G. WALSH Secretary" The evidence does not disclose that any reply was received to these last two letters. It seems that in June 1984 Winterton failed to respond to an invitation to offer a sum higher than $376,000 for the premises; and Gordon Taylor & Sons Pty. Limited (Taylor) made an offer unconditionally for that amount which the respondent is prepared to accept. Taylor has indicated that unless contracts are exchanged in the near future, it would be "pulling out". By letter of 20 September 1984, the respondent, referring to its proposal to sell the premises to Taylor, offered to sell to the applicants on the same terms except as mentioned. There has been no acceptance of this. The relief which the applicants seek is in substance set out in their application dated 14 June 1984 as follows - "1. Order that the Respondent comply with the provisions of the Petroleum Retail Marketing Franchise Act, 1980 and renew the franchise agreement with the Applicants in respect of the business of retail sale of motor fuel and business conducted by the Applicants at 321 Gardners Road. Roseberry in conformity with the Petroleum Retail Marketing Franchise Act, 1980. 2. Order that the Respondent prepare and execute all documents and take all other steps necessary to renew the said franchise agreement with the Applicants in respect of the said business and premises in accordance with the Petroleum Retail Marketing Franchise Act. 1980 within 30 days of the date of this order. 3.. 4, 5S..." There is a cross claim filed on behalf of the respondent including an application for declaratory relief as follows - "il. Upon the expiration of the period of six months commencing on 27 July 1984, namely 26 January 1985, the term of the Service Station Franchise Licence Agreement will expire; 1d. 3. seee" An examination of the provisions of the Franchise Act, including ss. 3, 16, 17, is necessary to decide the issues arising in this matter - 3.(1l)...- "franchise agreement" means an agreement containing"- (a) provisions, whether express or implied, under or by virtue of which a corporation (in this Act referred to as the "franchisor" ) authorizes, permits or requires a person, being another party to the agreement (in this- Act referred to as the "franchisee"), to use, in connection with the retail sale of motor fuel by that person at the premises to which the agreement relates, a mark identifying, commonly associated with. or controlled by, that corporation or a related corporation; (b) provisions, whether express or implied, under or by virtue of which a 'corporation (in this Act referred to as the "franchisor") grants a right to, or otherwise authorizes or permits, a person, being another party to the agreement (in this Act referred to as the "franchisee"), to possess, occupy or use the premises' to which the agreement relates in connection with the retail sale of motor fuel by that person at those premises; or (c) provisions, whether express or implied, under or by virtue of which - (1) 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 ll. (11) a person (in this Act referred to as the "franchisee") agrees with a corporation (in this Act referred to as the "franchigor") 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; (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 ef the following respects: (a) an amount payable by the franchisee under the new agreement is greater or less than the amount that was payable by the franchisee under the corresponding provision of the first-mentioned agreement: (b) the term of the new agreement is longer or shorter than the term of the first-mentioned agreement; (c) a provision of the new agreement (other than a provision relating to an amount payable by the franchisee or the term of the agreement) differs, with the consent of the franchisee, from the corresponding provision of the first-mentioned agreement; (d) a provision of the new agreement differs from the corresponding provision of the first-mentioned agreement and the difference - 12. results solely from the operation of a provision of this Act or is designed to make the new agreement conform with a provision of this Act. Termination of franchise agreements 16.(1) A franchisor may terminate the franchise agreement in accordance with the succeding provisions of this section, but not otherwise. Renewal of franchise agreements 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: (a), (b)... (c) din the case of a franchise agreement containing provisions of the kind referred to in paragraph (b) of rhe definition of "franchise agreement" in s':b-section 3(1), the franchisor has, in good faith and in the normal course of business - (1) 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 (i1) 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 gale of motor fuel) to gell its interest in 'the marketing premises toa _ person other than an associate of the franchisor. (2) A franchisor shall not enter into an agreement to gsell its interest in the marketing premises to a person other than the franchisee unless - 13. (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 (b) the agreement was entered into in the following manner, namely, the franchisor offered the interest for sale at a public auction of which at least 30 day's notice in writing was served on the franchisee, and the franchisor - (1) sold the interest at the auction toa person other than an associate of the franchisor; or (11) sold the interest by private treaty after the auction, to the person (not being an associate of the franchisor) who made the highest bid at the auction, for a price not lower than the amount of that bid and on other terms substantially the same as the terms on which the interest was 30 offered. (3).... (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 cr a kind referred to in that paragraph, the franchisor may, 1n lieu of renewing the franchise agreement, extend the term ef 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. (5S) If, at the expiration of the period referred to in paragraph (4)(b), no agreement of a kind referred to in paragraph (1)(c) has' been entered into, paragraph (1)(c) ceases to be a ground for failure or refusal to renew the franchise agreement. (6), (7), eaee 14. (8) If a franchisor decides not to renew the franchise agreement, it shall serve on the franchisee, not 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 perioid of 90 days before the expiration of the franchise agreement, the term of the agreement shall be deemed to be extended s0 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 thac it 13s just and equitable, having regard to all the circumstances, for the agreement and any related agreement or agreements not to be renewed. (11).... (12) Where the court makes an order under sub-section (10), it may make - (a) orders determining any amount, or the manner of calculating any amount, to be payable by the franchisee under the franchise agreement as to be renewed; (b) orders determining any other provisions of the agreement as to be renewed; and (c) such ancillary or consequential orders as it thinks fit, including orders directing the preparation and executin of documents. 15. (13), (14), (15), (16)....." Senior counsel for the applicants accepted that the pergon William Winterton was not an associate of the respondent. Counsel pointed out that the onus lay upon the establish grounds specified in the s.17(8) notice the efficacy which had been challenged in the letter dated 25 May 1984 which reference has already been made. The claim of the applicants is set out in a Statement Claim dated 14 June 1984 thus - "4, At all material times there was in force between the parties a franchise agreement within the meaning of the Petroleum Retail Marketing Franchise Act, 1980; which franchise agreement commenced on lst June, 1981, and was stated to expire on 3lst May, 1984. The Applicants continue to occupy the premises and to operate thereon the said business pursuant to the franchise agreement with the Respondent. On or about 27th April, 1984, the Respondent purported to give notice pursuant to sub-section 17(9) of the Petroleum Retail Marketing Franchise Act, 1980 that the term of the franchise agreement is deemed to be extended so that it would expire at the end of the 90th day and after receipt of the said notice. By the said notice, the Respondent further gave notice that if contracts for sale had not been entered into prior to the expiration of the 90 day period, it intends pursuant to section 17(4) of the Petroleum Retail Marketing Franchise Act, 1980 to extend the terms of the agreement for a further 6 months or until the date upon which contracts for respondent to of to of 16. sale are entered into, whichever first occurs. 8. On or about the 25th day of May, 1984, the Applicant challenged the efficacy of the said notice. 9. The applicants charge, and the fact is, that the notice given on or about 27th April, 1984 was ineffective to determine the relationship between the parties andthe Respondent is bound to renew the franchise agreement." The facts set out in paragraphs 1-B are not in dispute. The parties have agreed upon a statement of issues as follows - 17. "Ll. Whether the negotiations with William Winterton were in good faith. 2. Whether the negotiations were in the normal course of business. 3. Whether the contract itself intended to be entered into prohibited, or had the effect of prohibiting, the use of the marketing premises for the sale of motor fuel, that is petroleum. 4, Whether Ampol Limited purported to sell its interest. 5. Whether the notice given on the 27th April, 1984, was a notice sufficient for the purposes of The Petroleum Retail Marketing Franchise Act, 1980." An issue, not requiring a consideration of additional facts, was raised by the respondent in a cross claim seeking declaratory relief, inter alia, that - "L. Upon the expiration of the period of six months commencing on 27 July 1984, namely 26 January 1985, the term of the Service Station Franchise Licence Agreement will expire;" 2. 3.00" 18. The issues 1 to 5 may now be considered separately. The first of these is as follows - l. Whether the negotiations with William Winterton were in good faith. The words "in good faith are, of course, taken from 8.17(1)(c). In the context of this case the presence or absence of good faith is to be examined in connection with 3.17(1)(c)(it) and is to be considered in relation to the actions of the respondent (franchisor). No doubt if there were discovered some indication of bad faith by a proposed purchase during the course of such negotiations there might emerge material suggesting bad faith by the franchisor; or a lack of good faith. The expression itself has been referred to in many authorities to which counsel have referred. I add a reference to Mogridge v. Clapp (1892) 3 Ch. 382 and The Dictionary of English Law (Jowitt) at p.870 where the expression "Good faith" is referred to thus - "A thing is deemed to be done in good faith if it is done honestly, whether or not it is done negligently." and ag to (part of) the way to which it is referred in Black's Law Dictionary Fifth ed. at p.624 is - "Commercial Law. Honesty in fact in the conduct or transaction concerned. In the case of a merchant, honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade." The circumstances here were that the respondent wished to carry out a process of "disinvestment" which included, in the 19. circumstances, gale of the relevant property because it was not sufficiently advantageous to it to retain it; and because, further, the funds it might receive by sale could be used elsewhere to advantage, e.g. in upgrading a Sungas service station at Kingsford. Mr. Donoghue (Group General Manager, Marketing, of the respondent) agreed that the auction had been arranged "in advance" (i.e. of a decision that there would be sale of the property) to ensure that respondent would not be- required to give applicants a further franchise agreement. The executives of the respondent went about this process of disinvestment attempting to pay due regard to the requirements of the Franchise Act. They did, of course, owe a duty to their shareholders to manage its assets to the best commercial advantage commensurate with observation of the law. Their conduct in so doing, so far as I can see. evinced no dishonesty, deception nor trickery. No suggestions to that effect were made in cross examination. I do not accept that any evidence shows that the respondent by its executives were guilty of a "fraud on the power" or were acting for some private purpose which the Franchise Act does not permit. In fact. the Act contemplated there may be a sale of premises in good faith and in the normal course of business. Mr. Winterton or his company were similarly motivated to make a good commercial deal. He was not cross examined to suggest that there was any collusion or hidden purpose. Nothing suggests that Taylor is inspired by anything but ordinary commercial advantage. The argument for the applicants here is rather to put the respondent to proof of an 20. issue in respect of which it carried the onus than itself to advance some material which could showa lack of good faith. Counsel expressly disavowed any claim that any witness has spoken untruthfully. In my opinion there is nothing to suggest bad faith or lack of good faith in the negotiations in this matter. On the evidence before me I am of the view that all concerned acted in good faith. I answer the first question "Yes". 2. Whether the negotations were in the normal course of business. There is evidence inthe form of a list of some 21 properties sold by Ampol since July 1977. Senior counsel for the applicants points out that the list showed that (except in two instances) the amount realised on sale was in excess of the amount for which the sites were valued: whereas in the present case the amount for which the negotiations with first of all Winterton and, later, Taylor, was in respect of the first instance in the vicinity of $400,000. Later the negotiations were for a sale at less than that amount, i.e. in respect of Taylor. This, he says is in contrast to real value as shown in the valuation report of the premises on 26 March 1984 by Duncan Properties Pty. Limited for the sum of $815,000. Senior counsel for the applicants submitted, inter alia, that having regard to the reserve fixed, attempting to make a sale at $400,000 "bespeaks bad faith" and was only consistent with a "fraud on the power"; or "a purpose foreign to the statute"; that the respondent was and is prepared to sell at undervalue. There were, as I have mentioned, other valuations, e.g. by Dyson Austen & Co. 2i. Pty. Limited dated 30 March 1984 for $230,000 and the valuation by Hooker in April 1984 wherein the market value was said to be $275,000. About 11 April 1984 Mr. Alexander, a Director of Hooker who was primarily responsible for auctioning respondent's property for some 5 years, expressed the opinion that "we could achieve $650,000". Counsel, referring to the reserve price of $650,000 and negotiations at less than $400,000, said that therefore there was a sale at under value, and one thereby . inconsistent with previous sales of its premises by the respondent. Such a sale, he said, could not be said to be in the normal course of business. As he put it, "people do not sell at a loss". It 18 apparent that in connection with the disposal of this site, there were widely differing views as to its value, no doubt a not uncommon situation, even if the extent of the difference was greater here than one might have expected. In the circumstances, the figure at which the negotiations have taken place was not one as to give rise to any suspicion, nor is it beyond experience of such matters that the figure at which negotiations proceeded was less than the figure of $650,000. A reserve is not necessarily a figure which represents the seller's view of the proper price that should be realised. The proposition advanced by counsel for the applicants that this was to have been or is to be a sale at a loss could not be sustained. I observe that a sale compared to book and written down value would be a sale at a profit. 22. On the evidence before me the negotiations were for the sale of property held by the respondent. Such sales are common Place in everyday business and have been shown to be a common part of the activities of the respondent in its endeavour to employ its assets to the best advantage. In my opinion, the evidence supports) that the decision to sell, and the negotiations, were in the normal course of business. I would answer the second question in the affirmative. 3. Whether the contract itself intended to be entered into prohibited, or had the effect of prohibiting, the use of the marketing premises for the sale of motor fuel, i.e. petroleum. - In this regard senior counsel for the applicants points to the exclusion in the projected so calisd "auction contract" of fuel pumps, flood light, compressor and identification sign. I understand this aspect of the contract to have been suqgested by Mr. Kelly. By way of rejoinder, senior counsel for the respondent pointed out that the tanks which would be an integral part of installation required for any use of premises in the future asa service station were, if a sale took place, to remain. However, there is nothing which has emerged in the evidence as to negotiations, the advertisements ("ex service station") the auction contract itself or the negotiation with Winterton or Taylor in respect of any contract to be entered into which, in my view, could be said to have the effect of prohibiting the use of the premises for the sale of motor fuel. The purchaser, pursuant to such a contract, would be at liberty - 3ee 23. to do what he pleased with it, subject to compliance, of course, with Local Government and other restrictive requirements of the law. In my opinion the third question should be answered "No". 4. Whether Ampol purported to sell its interest. This is a reference to s.17(1)(c)(il) of the Franchise Act. It 13 common ground that the franchise agreement between the parties is one which comes within the definition of. that phrase in s.3(1) of the Act. It was expressed to expire on 31 May 1984. The respondent could not fail or refuse to renew it except on the grounds set out in s.17. One such ground is in sub-para.(c)(ii) that the franchisor with the qualifications mentioned) entered into neqotiations for an agreement to sell its "interest" in the "marketing premises", i.e. as defined in s.3(1). If it is necessary to say 30, the "inclusive" definition of "franchise agreement" or "marketing premises" do not indicate that the franchisor must be the owner or have an estate in land on which are the premises. The word "interest" is broader in its scope, Furthermore, the franchise agreement gives the licensee (applicants) the right to enter upon and have access to and use the premises, though not with exclusive possession. The right is subject to the licensor's (respondent) continued entitlement at all times to enter upon the premises for any reasonable purpose connected with the licencsees' (applicants) operation of the 24. service station. The franchise agreement specially provides that the rights granted by it are by way of licence only, that the licensee shall not be entitled to exclusive possession of the "said lands or the licenced buildings" and that the agreement is not to be construed as a lease nor conferring a tenancy. But applicants' counsel referred to Radaich v. Smith (1959) 101 C.L.R. 209 (Radaich). In my opinion, on its facts, the present case is distinguishable from Radaich. There, the members of the . Court were' able to find from the agreement before it that the so called licensee had exclusive possession of the relevant premises. See per McTiernan, Taylor, Menzies and Windeyer JJ. at pp.215, 220, 224 and 225 respectively. I am unable to make such a finding from the subject Franchise License Agreement, or to find that it was otherwise than what, on its face, it purports to be, i.e. a license agreement. The applicants have not chosen to give any evidence throwing any light on the matter. I have expressed this view out of deference to the submissions of seniuor counsel for the applicants; though, if I understood hin, he did say finally that it did not matter for the purpose of this case whether the relevant agreement was a lease or a license. All the evidence here proves beyond dispute that the respondent was and is endeavouring to sell its "interest in the marketing premises", 3.17(1l)(c)(i1). This is so whether one regards "interest" as meaning a right or advantage generally, or an estate or a reversion. Iam of the view that "interest" is not used in this legislation in any narrow sense. =reee 25. I do not want to be understood as accepting that what the respondent had, following termination of the license, was a "right of reversion". The "interest" which the respondent has and is endeavouring to sell is its ownership, the fee simple of the premises, though made up by various parcels of land. No useful purpose is, I suggest, served by endeavouring further to refine "interest" by describing it as e.g. a reversion (even if it were correct to do so) or by any other term. I find that the respondent was and is negotiating to sell that interest; and if it is appropriate to ask whether it purported to sell that (though I have some difficulty "with "purported") the answer to issue 4 is "Yes". 5. Whether the notice given on the 27th April, 1984, was a notice sufficient for the purposes of the Petroleum Retail Marketing Franchise Act, 1980. The applicants' submissions inthis regard have been reduced to writing. They will remain with the file. I do not restate then. Arguments of senior counsel for the respondent included, in effect, that issue 5 raised only an enquiry as to the sufficiency of the notice - a matter of its form only. He said that assuming the notice was in conformity with 3.17(8) the term of the franchise agreement was extended so that the expiry date, 31 May 1984, would be extended by a period of 90 days after receipt of the notice by the applicants, to 26 July 1984. Then 26. he said that by the letter of 28 May 1984 (to which I have referred as the 3.17(4) notice) that already extended term was further extended for a period of 6 months so that the expiry date would then become 26 January 1985. In this regard he submitted that the letter of 27 April 1984 met the requirements of 3.17(8) because it did set out full particulars of the ground including a Statement of the facts relating to that ground, being that provided by 3.17(1)(c)(1i). No question, he contended, was raised in issue 5 ag to the availability of facts which might be thought necessary to support the ground; but only whether the notice was - "sufficient for the purpose of...." the Franchise Act. The notice, he said, precisely set out information as to the ground, i.e. that the respondent in good faith and in the normal course of business, had entered into negotiations of the kind referred to in s.17(1)(c) (14); that the site had deen submitted to auction (of which the applicants had been notified on 22 March 1984) but not sold; that the highest bidder at the auction whose name and address was supplied wished to purchase with vacant possession and for redevelopment. It was indicated, in effect, in the notice that any agreement for sale would be by the Auction Contract. Other information was included. Reference in argument was made to Hudson v. _B.P. Australia Limited (25 September 1984, unreported), per Fox J. With respect, I would pay great attention to anything his Honour said, even extemporaneously. However, any notice pursuant to this legislation would need to be considered in the context of 27. the facts of the particular transaction. I note that the notice in the case cited misnamed the company said to be negotiating to purchase the property. His Honour apparently treated this as bearing upon the validity of the notice. (Validity of a notice might be a different consideration from its sufficiency. However, I do not understand that any issues were agreed upon in that case). He considered this misnomer was "an insuperable difficulty in the way of the franchisor". There is no such difficulty, in the instant case where the name, address of the proposed purchaser and how the negotiations commenced are set out. His Honour, in the case cited, was further of the opinion that the notice before him should have contained more than a simple statement that "negotiations for sale were being carried on". The s.17(8) notice in evidence before me did more than make such a "simple statement"; and had been preceded by advice to the applicants of the time and place of the auction. Other difficulties to which Fox J. referred in his Reasons do not exist in the present case. Submissions on behalf of the applicants included that the applicant must establish the ground referred to in the notice; and if the negotiations do not ripen into contract, the applicants get the advantage of the statutory condition in 3.17(5). I do not accept that these arguments are available or relevant to a consideration of issue 5 ag presently worded though, as it happens, the evidence establishes that the respondent had entered into negotiations of the kind mentioned in s.17(1)¢(ce) (11). 28. The second submission was that full particulars had not been provided. In my opinion the particulars in the 3.17(8) notice, and which I have quoted earlier from the submission of counsel for the respondent, were a reasonable response to the requirements of that section. The third submission included that the 3.17(8) notice, as I have referred to the document dated 27 April 1984, is to be construed as, inter alia, founded on the substantive ground in 8.17(1)(c)(1L) and 3.17(4). I do not accept this proposition. I consider the third submission as to issue 5 is, having regard to the wording of issues, not available to the applicants, though it may be considered in the claim for declaration. Fox J., in the case lastly cited, and referring to 3.17(8) said - "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." Assuming this to be a test to apply to a 3.17(8) notice, then that which is before me did give such a full opportunity. In my opinion, the notice was an adequate compliance with 3.17(8). I answer issue 5 "Yes". The respondent, in its cross claim, seeks a declaration that - 29. Issue arising on the Cross-claim "1. Upon the expiration of the period of six months commencing on 27 July 1984, t.e. 26 January 1985, the term of the Service Station Franchise agreement will expire. Both parties have requested that I should deal with this application for declaratory relief. No suggestion has been made nor, in my view, could it have been made, that this Court has no relevant power to enable it so to do. Arguments for the respondent, the moving party in the cross claim include that - - by the s.17(8) Notice the term of the Franchise Agreement was, on 27 April 1984, deemed to be extended so that it expired on 27 July 1984 (i.e. 90 days after the receipt of the Notice by the franchisee) (applicants). by relying on 3.17(4) (i.e. as set out in the letter of 28 May 1984) the already extended term was by the respondent (franchisor), on that date, further extended from 27 July 1984 to 26 January 1985, being the date marking the expiration of the period of 6 months commencing on the date (i.e. 27 July 1984) on which but for this sub-section the Franchise Agreement would expire. So counsel contended that the separate acts, the 3.17(8) Notice and the extension purported to have been made relying upon 3.17(4), operated cumulatively. 30. Already I have decided that the 3.17(8) Notice was sufficient in form for the relevant purposes. It is not disputed that it was served within the appropriate time span referred to in that sub-section. Applicants' counsel pointed to the differing wording of 3.17(4) and 3.17(9); 3.17(9) producing only a "deemed" extension. So he said that the s.17(9) extension 1s one for the purposes of 3.17(8): not of the kind referred to in 3.17(4). I have had some difficulty with the wording of the letter of 28 May 1984 in that it states that respondent "agrees to extend the term" rather than in terms of the sub-section using words extending the term. A similar form was used in the letter dated 31 May 1984 to the applicants; vet no evidence suggests there was agreement between the parties. However, no argument was addressed to me by applicants' counsel that the wording rendered by the notice ineffective. My view, anyway, is that reliance on 3.17(4) having been forecasted in the last paragraph of the 3s.17(8) Notice, the clear indication from the reference there and in the letters of 28 May and 31 May 1984, is that by those letters 3.17(4) was being invoked. Accordingly, I accept that the letter of 28 May 1984 was in a form appropriate to indicate that respondent was extending the term, though I note that in 3.17(4) there is no provision for a notice. 31. If the submission on behalf of the respondent is correct, the action on 28 May 1984 extending the term was taken - "before the expiration of.....Franchise Agreement" On one reading, all that need happen may be that before the expiration of the Franchise Agreement, there shall have been entered into certain negotiations as referred to in s.17(4); and then at some unspecified time, the act by franchisor to extend the term takes place. It is not said explicitly the act extending must be taken before that time. However the better view is that the negotiations and the act which extends should take place before the expiration. The more difficult problem arises from the use of "deemed" in s.17(9) and the words which tollow. The word "deemed" is said to be "overworked" - (51 A.L.J. 229). There is abundant references to it in decided cases some of which are collected in Words and Phrases Legally Defined Vol. 2 p.27 and Stroud's Judicial Dictionary Fourth Ed. Vol. 4 p.716. See also Hunter Douglas Australia Pty. Ltd. v. Perma Blinds (1969-1970) 122 C.L.R. 49. Sections 17(8) and 17(9) must be read with s.17(1) which envisages that there may not be valid failure or refusal to renew except on the grounds it sets out. It is mandatory that, if there is to be a valid refusal to renew, an appropriate notice will be served. Section 17(9) will then operate to allow the 32. franchisee a period of 90 days, for whatever purpose (perhaps to enable it to investigate validity of the ground; or to make whatever arrangements are necessary for closing its operation). During this period, there is a notional extension of the term in the Franchise Agreement up to the date determined by adding 90 days to the date of receipt of the s.17(8) notice. As I understood the argument for the respondent, 3.17(9) should be read (in this area of the debate) in two steps i.e. - the receipt of the Notice will produce an automatic or deemed extension of the term of the franchise agreement, so that the franchise agreement then will expire on the date so calculated. Without then considering how the new date has come into being, the Franchise Agreement is to be treated as one with an expiry date of 26 July 1984. $.17(4) will then operate to enable the franchisor to extend this enlarged term. Ido not agree that 3.17(9) and s.17(4) are to be read together. The wording of 3.17(4) supports that the extension of the term to which it refers is that of the (original) franchise agreement itself, not of that agreement already artificially extended. Thus if the act by the franchisor to extend was performed by it "before the expiration of the franchise agreement" the term will be extended by 6 months; any 33. earlier "deemed" extension for a shorter period will be overtaken, subsumed or included within the longer period. In reality, both subsections have been invoked by the respondent upon the same basis, i.e. the decision not to renew by reason of the negotiations to sell. It would be a strange result, I suggest, if there could be two extensions arising out of the one state of affairs. In my opinion s.17(8) and 3.17(4) have separate not cumulative operation. The period of six months is, in my view, the maximum extension; whereafter if no agreement has been entered into the ground in s.17(1)(c)(ii) for refusal of renewal, ceases to be a ground for failure or refusal to renew. Section 17(5) is to be given effect. A period of 6 months extension where neqotiations for an agreément to sell are relied on is a maximum, after which the negotiations will not any longer be available to hold up renewal. Sentor counsel for the respondent placed reliance on the words in sub-s.17(4)(b) - ",...but for this subsection...." He has attributed a signifiance to them which, in my view they do not have. In my opinion, after the 3.17(8) notice, operating on the franchise agreement, produced a deemed extension of its term for 90 days, the effect of 3.17(4), also operating on the original agreement, extended the term until a period of 6 months 34. commencing on the date which - so far as s.17(4) was concerned - the agreement would expire. That expiry date was 31 May 1984 and it was to that date that 6 months must be added. I donot accept that s.17(4) and s.17(9) can have a cumulative operation. In the circumstances of this case the latest expiry date of the relevant agreement could not be beyond 6 months after 31 May 1984 i.e. 30 November 1984, unless, of course, by agreement in that regard. I have not attempted to set out all the arguments of counsel. I refuse the declaration sought by the respondent. Hayes Nena ro. 22 ate Ll eeny ef Fy tl thy ee ia K . Aa + ~+ nota ak ny. i" < uu, 7 Ps a c a ' ' rome Berea ef pb ote ( Beg Pr. , ul/ - I he re Assce:3z2