~~ S( N © Practice and Procedure - claim under Petroleum Retail Marketing Franchise Act 1980 - application to strike out paragraph of defence - alleqation in statement of claim of failure to renew franchise agreement in breach of s.17 of the Act - defence under s.13(6) of the Act raised by respondent - proper construction thereof Petroleum Retail Marketing Franchise Act 1980 ss.3, 13, 17 SAGITTARIAN ENTERPRISES PTY. LTD. and RAYMOND ARTHUR WOOLLETT and KAYE LORRAINE WOOLLETT Ve AMPOL LIMITED No. WA G9 of 1986 TOOHEY J. PERTH 13 NOVEMBER 1986 wwe ve aoe aw oe some So pe ot pee IN THE FEDERAL COURT OP AUSTRALTA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION fe ie] s a7] i) wo) fa) rth re Xe] ou Li BETWEEN: SAGITTARIAN ENTERPRISES PTY. LTD. First Applicant and RAYMOND ARTHUR WOOLLETT and KAYE LORRAINE WOOLLETT Second Applicants and AMPOL LIMITED Respondent MINUTE OF ORDER JUDGE MAKING ORDER: TOOHEY J. DATE OF ORDER: 13 November 1986 WHERE MADE: Perth THE COURT ORDERS THAT: 1. The applicants' motion filed 9 October 1986 is dismissed. 2. There be liberty to apply as to the costs of the motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. al eT Nese e t eae tte ee ae eaepncre to eet Lil THE FED: Ee 1 T1 ue m r a a qtWel oa) hs + jot Oi 1] = rl us AY tT ea) at ia i A RaLIn , OLSTRICT REGISTRY GENERAL DIVISION BETWEEN: SAGITTARIAN ENTERPRISES PTY. LTD. First Applicant and RAYMOND ARTHUR WOOLLETT and KAYE LORRAINE WOOLLETT Second Applicants and AMPOL LIMITED Respondent CORAM: TOOHEY J. 13 November 1986 REASONS FOR JUNGMENT This motion to strike out part of the respondent's defence raises a question as to the proper construction of a provision of the Petroleum Retail Marketing Franchise Act 1980 ("the Act"). In their statement of claim the applicants plead three agreements made between the first applicant and the respondent on 29 July 1981, collectively described as "the Franchise Agreement". There was a licence agreement agranting the first applicant a license to occupy service station premises for a period of three vears beginning 1 September 1981 for the purpose of conducting a Ot itietiees tied 5) commercial service station using the cespenaent s products. There otS & supply arreement whereby the tesrondent agreed to supply Fuei and wroducts tao che farst aporicant ducing the period of three vears tust mentioned. And there was a trade mark aqreement whereby the resvondent granted to the tirst applicant a right to enjov the bener1t of the respondent s trade marks, trade name symbols and logos relating to 1ts products, again for the period of three vears just mentioned. There 15 an issue between the parties as to whether these agreements were made with the first applicant or the first named second applicant but nothing turns on that for the purpose of this motion. It ais common qround that the Franchise Agreement constituted by the three particular agreements referred to was a "franchise aareement" within sub-s.3(1) of the Act. The applicants complain that the respondent did not disclose the fact that the service station premises the subject of the franchise agreement were held by the respondent under a lease which was due to expire on 31 August 1984, that is at the end of the period of three vears mentioned 1n each of the agreements. Failure to disclose 1s denied by the respondent. The applicants allege that in 1984 the respondent failed or refused to renew the franchise aqreement in breach of sub-s.17(1) of the Act (statement of claim para.8) and that as a result the first applicant was obliged to vacate the service station premises on 30 August 1984 and thereby lost the whole of its business and custom (statement of claim para.9). a In 1ts detence the responcenct pleads that its Lease expired on 2 Septemper 1984, with the result that it was unable to renew the franchise agreement thereafter. It denies that it failed or refused to renew the franchise agreement and in para.5 of its defence makes the plea which is the subject of this motion. In that plea the respondent "(c) savs that. by virtue of the provisions of sub-section 15(6) of the Act, it could not, in any event, as lessee of the premises under a lease expiring on 2 September 1984, aqrant to the first applicant, whether by wav of renewal or otherwise, a franchise aqreement having a term extending bevond 31 August 1984". Section 13 of the Act is concerned with the duration of franchise agreements. Sub-section (1) prohibits a franchisor from entering into a franchise agreement, the term of which does not comply with the requirements of the section. By sub-s.(2), the term of a franchise agreement (save as otherwise provided in the section) shall be not less than three years. It is necessary to set out sub-s.(6) in full: " (6) Where - ta) a corporation proposes to enter, as franchisor, into a franchise agreement; (b) the marketing premises to which the proposed agreement relates are held by that corporation or a related corporation as lessee under a lease in respect of which the lessor is not a corporation related to the lessee; and (c) the term of the proposed agreement would, but for this sub-section, be required by teltenalielt ade etamtaied eon Ye. - on oye 4. sub-section (2). (3) or (4) to extend beyond the expiration of the term of the lease, the term of the proposed agreement shall be a period expiring immediately before the expiration of the term of the lease." Section 17 deals with the renewal of franchise agreements and, put broadly, provides that a franchisor may not fail or refuse to renew a franchise agreement except on one or more of the grounds there specified. The respondent does not rely upon any of the grounds in that section. The section does not itself spell out the term of any renewal. In the applicants' submission, sub-s.13(6) can have no application to the present case and any defence purporting to rely upon the provision should be struck out. In support of that submission, the applicants point to the inaredients of the sub-section viz.: (a) a corporation proposing to enter, as franchisor, into a franchise agreement (b) marketing premises to which the proposed agreement relates being held by the corporation as lessee and {c) a situation in which the term of the proposed agreement would, but for the sub-section, be required by sub-ss.(2), (3) or (4) to extend bevond the expiration of the term of the lease. un Tne applicants alse draw attention to the concludina sub-s.15), in particulac the reference to "the proposed agreement'. They say that the sub-section 1s not concerned with renewals. Sub-section (2) deals with franchise aareements entered unto by wav of renewal. And sub-ss.(3)} and (4) are concerned with aqreements actually entered into bv a franchisor. They say that sub-s.(6) can applv oniy where. but for the sub-section. there would be a Franchise agreement for a period of three vears pursuant to sub-ss.(2), (3) ov (4), in which case the period of the agreement mav be lessened. The provision cannot apply where the period of the franchise aareement is reduced to nothing. The respondent answers in this way. There was a franchise agreement for a three year term expiring on 31 August 1984. By reason of sub-s.17(1) of the Act, the respondent was, prima facie, required to renew the agreement. Any renewal was, again prima facie, required to be for a term of not less than three vears i.e. a term expiring no earlier than 31 August 1987. See sub-s.13(2). The respondent's lease expired on 2 September 1984. Had the respondent entered into a franchise agreement by way of renewal, that aqreement would by virtue of sub-s.13(6) have expired immediately before the expiration of the term of the lease on 2 September 1984. It would have expired on 1 September i.e, one day later than the original term. As a result the applicants can have suffered no loss or damage by reason of the respondent's failure to renew the franchise agreement and they have no right to compensation under s.22 of the Act. Vi oaee yresecy ve retort Vee ae meter eR rere a ee 6. I do not accept the applicants' construction of sub-s.13(6), for these reasons. References in the Act to a franchise agreement are to such an agreement, whether by way of renewal or otherwise, unless the contrary intention appears - sub-s.3(2). Thus sub-s.13(2) deals expressly with a franchise agreement entered into otherwise than by way of renewal and then with one entered into by way of renewal. Sub-section 13(4) refers expressly and only to a franchise agreement by way of renewal. In my view sub-s.13(6) is concerned with anv situation in which a franchise agreement is proposed, whether by way of renewal or otherwise. The sub-section then ensures that in a situation where earlier sub-sections would appear to extend the term of an agreement (including renewal) beyond the franchisor's lease, the proposed agreement will not extend beyond that term. Sub-section (7) then picks up the situation in which the franchisor acquires the reversion of the premises or otherwise continues to hold the premises as lessee by holding over or otherwise. In that case the franchisor can no longer take advantage of the limitation in sub-s.(6). Thus if, as the respondent pleads, its lease expired on 2 September 1984 and the franchise agreement expired on 31 August 1984, sub-s.(6) operated to extend a renewed franchise aqreement, but only until 1 September 1984. Whether there was a refusal by the respondent to renew the franchise aqreement for that period of one dav and, if so, whether the applicants suffered anv consequential loss are matters to be dealt with on the hearing of the substantive application. Paraqraph 5(c) of the defence is vonue Po oe pre ree ve eer oe ha rte et 7. open to attack in its reference to 31 August 1984 rather than 1 September. That is a matter that can and should be cured by amendment; it does not justify striking out the sub-paragraph. Counsel for the applicant suagested that. in the liqht of the respondent's argument, para.5(c) really went to the question of compensation or damages and could not provide an answer to para.8 of the statement of claim. In the end the plea may well prove more important on the former issue; but it is not irrelevant to the latter. The motion is dismissed. IT shall hear from counsel on the question of costs. I certify that this and the preceding six pages are a true copy of the reasons for judgment herein of his Honour Mr. Justice Toohey. Jf bX ——— Associate Dated: 13 November 1986 sew ter repens eee veres,