Jucgement No. & b _— |S erseecae CATCHWORDS ESTOPPEL - claim under statute - provision against contracting out - whether precludes reliance. on estoppel - claim that court given jurisdiction by estoppel. STATUTE - implication in. Petroleum Retail Marketing Franchise Act, 1980 ss.3(1), 3(2), 7, 13, 14, 15, 17, 17A, 17B Beckford Nominees Pty. Ltd. v. The Shell Company of Australia Limited QLD Gi30 of 1986 PINCUS J. BRISBANE 1 OCTOBER 1986 IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) GENERAL DIVISION ) BETWEEN: BECKFORD NOMINEES PLY. LTD. Applicant AND: THE SHELL COMPANY OF AUSTRALIA LIMITED Respondent MINUTES OF ORDER JUDGE MAKING ORDER: PINCUS J. 1 OCTOBER 1986 DATE OF ORDER: WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay the respondent's costs of and incidental to the proceedings, to be taxed. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. QLD G130 of 1986 IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G130 of 1986 GENERAL DIVISION ) BETWEEN: BECKFORD NOMINEES PIY. LTD. Applicant AND: THE SHELL COMPANY OF AUSTRALIA LIMITED Respondent PINCUS J. 1 OCTOBER 1986 REASONS FOR JUDGMENT This is an application by the former lessee of a service station for an order having the effect of extending its lease, which expired on 19 September 1986. The main basis of the application 1s that the respondent lessor promised to extend the lease or, to put 1t a little lower, gave the applicant to understand that it would do so. It 1s common ground that the lease in question isa "franchise agreement" within the definition in s.3(1) of the Petroleum Retail Marketing Franchise Act 1980, and that the lessor is a "franchisor" within the meaning of the Act. Section 17 of the Act, subject to certain other provisions, makes it unlawful for a franchisor to fail or refuse to renew a franchise agreement, except in certain circumstances which it is not necessary to set out here; for it is also common ground that, unless the operation 2. of the Act has been affected by the dealings between the parties, there is no right to renewal under s.17 and ss.17A and 17B which relate to it. That point needs some explanation. Subsections (2) and (3) of s.13 are as follows: "(2) Subject to sub-section (6), the term of - (a) a franchise agreement entered into otherwise than by way of renewal, where the franchisee has produced to the franchisor, before entering into the agreement, evidence reasonably sufficient to show that he is a person with prescribed experience; or (b) a franchise agreement entered into by way of renewal, other than an agreement referred to in sub-section (4), shall be not less than 3 years. (3) The term of a franchise agreement, other than an agreement referred to 1n paragraph (2)(a) or an agreement entered into by way of renewal, shall be one year or less, or 3 years or more." The expression "person with prescribed experience" in subs.(2) 1s defined in subs.(12) of $.13 in Such away as admittedly to exclude the applicant. In consequence, there was no requirement in the Act that the lease here in question (which was entered into otherwise than by way of renewal) be for a term of not less than three years. It was, on the contrary, a franchise agreement within s.13(3), one which was for one year or less. Section 14 is as follows: "Where an agreement to which sub-section 13(3) applies is entered into for a term not exceeding wv one year, sections 11, 11A, 12, 16, 17, 17A, 17B, 19 and 19A do not apply in relation to that agreement." The sections made inapplicable by 5.14 include those dealing with the right of renewal (ss.17, 17A and 17B). Since the agreement was one to which subs.13(3) applied, and was entered into for a term of one year, then s.14 excluded the applicant from the benefits of the statutory right of renewal. It was, however, the case ultimately put forward on behalf of the applicant, although not that initially put forward, that statements made orally by and documents issuing from agents of the respondent operated by way of estoppel to preclude reliance upon s.14. There are legal difficulties about the argument, discussed below, but it is first necessary to deal with the facts, in some detail. In August 1985 the applicant, by its agent Martin Van Houtum, negotiated with the respondent to take a lease of the site in question, which was then being operated by people called Cassis. The result of those negotiations was, 1t 1s admitted, the execution of the lease referred to above, under which the applicant had possession of the site from 20 September 1985 to 19 September 1986. There is no consensus, however, as to what was said in the course of those negotiations about a renewal. To put the matter generally, I am satisfied that some assurance was given to the applicant about a renewal and that the applicant would never have agreed, as it did, to pay a substantial sum for the goodwill to the previous operator in the absence of such an 4. assurance; precisely what the assurance was, however, is hard to determine. The case was tried on affidavits filed by each side, a procedure which, as it seemed to me, substantially shortened the hearing. In his first affidavit, Van Houtum said that he was advised by Miss Smith, the agent of the respondent who negotiated with him, that he would be offered a renewal of the lease for nine years, provided that on 31 August 1986 he paid a premium of $45,000. That account of events made no reference to breaches on the part of the applicant which might prevent a renewal, a subject which was undoubtedly discussed. In a further affidavit, Van Houtum said that Miss Smith said the respondent could not fail to renew the lease unless the applicant broke the law and that all the applicant's rights, including the right of renewal, were written down in the Act - i.e. the Act referred to above. Van Houtum was cross-examined on these affidavits and appeared to me to admit that he knew at the outset that he dad not have the necessary experience for the purposes of the Act. He also said that Miss Smith told him that as a ""non-prescribed dealer" the first year would be provisional and that if there were no breaches of the Act, a renewal would be offered. Van Houtum admitted that Miss Smith told him that he would have no statutory right to renew under the Act, but also told me, inconsistently with the evidence just mentioned, that he thought from what Miss Smith told him that the Act gave him a right of renewal. Miss Smith has an altogether different recollection of these events from that of Van Houtum, but I incline to the view that the latter's memory of them is more reliable. I find that Van Houtum was told that the applicant would be granted a renewal, but I am not satisfied that Miss Smith said that the Act gave the applicant a right of renewal. The latter statement would, as I find, have been contrary to Miss Smith's understanding of the operation of the Act, and tI am confident that she would not deliberately have misled Van Houtum on that subject. It is not clear precisely in what terms the assurance of renewal was given, but I find it was, in substance, in terms of the last sentence of the letter Exhibit "MH9" dated 3 September 1985; "In the period of this one year lease, providing that no serious breaches of Lease or Act Conditions have occurred, on 21st September, 1985, Shell Company intend to offer a nine year full lease term to yourself." That wording is inconsistent with the notion put forward on behalf of the respondent that all that was said was that the respondent might, if it chose, grant a renewal. Van Houtum commenced work in the service station with the previous operator in the first week of September 1985. On 6 September 1985, the respondent wrote to the applicant recording that the parties had agreed to payment of a lease premium of $45,000 to be made by 31 August 1986, "provided a lease renewal is offered to you from 20 September 1986". In my view, the proviso . was inserted because of the possibility that such a breach as mentioned in the letter of 3 September would prevent renewal. In the afternoon of Friday, 19 September 1986, the applicant paid the previous operator what was due under its contract for goodwill, stock and equipment. After that, Miss Smith came to the site and gave Van Houtum copies of the lease and of a statement, Exhibit "MH1", which was supplied pursuant to the obligations of the respondent under s.15 of the Act. It said, among other things, that the rights of the franchisee in relation to renewal of the agreement are set out in s.17 of the Act; as mentioned above, the respondent's case 1s that s.17 has nothing to do with the matter, as s.14 makes it inapplicable. The effect of the respondent's having given the applicant the s.15 statement is dealt with below. The applicant took possession of and operated the service station, without having any further contact with the respondent which requires mention, until 8 August 1986. On that day, Van Houtum met one Llora, a representative of the respondent, who told him that the respondent was "happy to offer the applicant a renewed lease provided that I paid the premium §45,000". The applicant declined to pay the premium. On 18 August, one Trotter, on behalf of the respondent, said it was then prepared to offer a renewed lease on payment of $21,200 premium, in lieu of $45,000; Van Houtum said he was not happy with the lower figure. On 27 August, Llora wrote to Van Houtum giving further details of the offer of a renewal at $21,200; the letter said that the sum had to be paid by 30 September 1986, which was a month after the agreed last date for payment of the §45,000. . The latter date was allowed to pass without payment of any sum. On 2 September 1986, solicitors for the applicant, and the respondent, each wrote a letter bearing that date. The letters crossed. The former said that solicitors acted on behair of the applicant and also on behalf of "the Shell Dealer Group (an affiliated division of the Motor Trades Association of Queensland)". It is not clear what their retainer for this group had to do with the matter. The solicitors' letter said, without explaining why, that the respondent had no authority to demand a premium in respect of the renewal and required that a lease for a period of nine years commencing on 20 September 1986 be delivered, failing which the applicant would "exercise its rights under the provisions of s.17A(7) of the Act." This is a puzzling document. It is true that the applicant's case, as advanced before me, has been that the applicant has a right to renew under the Act, but that is said to arise from the operation of the doctrine of estoppel by reason of the dealings between the parties - a subject matter not mentioned, or even hinted at, in the letter. The omission appears to have been deliberate; two days later, the solicitors delivered the applicant's statement of claim in these proceedings alleging that there was a current franchise agreement in existence subject to the provisions of the Act and again making no mention of the dealings between the parties or of estoppel. It is possible that the letter of 2 September 1986 was written under the misapprehension that the Act gave the applicant a right to a renewal - i.e. as if s.14 of the Act did not exist. The respondent's letter of the same date (2 September 1986) withdrew the offer of 27 August 1986 and by letter of 8 September 1986 the respondent demanded that the applicant give up possession on19 September 1986 in accordance with the lease, which, of course, contains no provision for renewal; hence these proceedings. The applicant has remained in possession in pursuance of an interlocutory undertaking given by the respondent, pending the determination of the case. Estoppel Paragraph 8A of the amended statement of claim filed on 17 September 1986 sets out that the respondent is estopped from relying on the provisions of s.14 of the Act. Counsel for the respondent say that there is no legal possibility of an estoppel, by reasons of the provisions of s.7, which are dealt with below. But, ignoring that difficulty, still there is no logical path to the conclusion that the applicant was, or is entitled, to a premium-free renewal, as demanded in its solicitors' letter of 2 September. If the conversations and correspondence between the parties created or affected legal rights by estoppel, those rights cannot have been more favourable to the applicant than Van 9. Houtum's understanding of them. In Thompson v. Palmer (1933) 49 C.L.R. 507 at p.547 Dixon J. said: "The object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment." Here, the assumption said to have been adopted by the applicant was that he would be allowed another eight years. If the assumption was adopted in such circumstances as to make it unjust for the respondent to depart from it, still it cannot be right that the respondent's legal position 1s worse than that assumed. The respondent never told Van Houtum that the applicant could have the renewal for nothing; he entered into possession on the basis that he would get a renewal for $45,000. As he found out more about the service station business, he formed the idea that Miss Smith had given him a wrong impression about the premium, in that he was led to believe it was a standard requirement; in fact, thought Van Houtum, lessees in his position did not ordinarily have to pay a premium, or did not ordinarily have to pay so much. The applicant did not, however, plead or argue any case based on an assertion that Van Houtum was misled on that point. The best position to which success on the estoppel pleaded could lead the applicant to is entitlement to a renewal at $45,000, but he was offered that informally and refused it. He was then offered a renewal at $21,200 and indicated he would not pay the lesser sum. success on estoppel could not entitle the applicant toa further offer of renewal at a premium of $45,000 and, indeed, the 10. pleading does not seek that. It says that the respondent cannot rely upon s.14, quoted above. There might be some scope for argument on that point if I were satisfied that the respondent gave Van Houtum to understand the applicant would be treated as having a right of renewal under the Act; but I am not so satisfied. In its form as delivered on 17 September 1986, the estoppel plea was based upon delivery of the s.15 statement, Exhibit "MHL". It was said that the applicant acted to its detriment upon the representation of the respondent that ss.17, 17A and 178 applied to the applicant by paying the outgoing operator, entering into the lease and expending moneys on getting up and running the business. The facts are, however, that the applicant was already committed before the s.15 statement was delivered; 1t had executed the lease and paid for the business. It is true that moneys were expended in running the business after delivery of the s.15 statement, but they would have been expended whether or not the applicant received it. By way of an amendment at the hearing, the applicant relied in addition onan estoppel based upon the respondent's letter of 3 September 1985, referred to above, saying that provided there were no serious breaches "the Shell Company intend to offer a nine year full lease term to yourself". But that letter cannot lead the applicant to success on the s.14 point. The respondent could have made good the assurance contained in the letter without conceding that the applicant had any right of renewal under the Act. 11. For the reasons just explained, there appears to be no factual foundation for the alleged estoppel. Different considerations would have arisen had the respondent refused to carry out its promise to renew the lease for a premium of $45,000, but it did not so refuse; it was not a dispute on that point which led to the present litigation, but rather, I think, a mistaken ! idea, reflected in the letter of 2 September 1986, that the Act itself entitled the applicant to a renewal. Although doubtful of the necessity of doing so, I have decided that I should state my views on a legal question which was argued, referred to above; that is whether the contracting out provision, s.7, makes it impossible for the applicant to succeed as to the pleaded estoppel. Subsections (1) and (2) of s.7 are as follows: "(1) This Act applies notwithstanding any agreement tne to the contrary and, in particular, but without limiting the generality of the foregoing, a provision in any agreement is 1 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. (2) Nothing in this Act shall be taken to affect the operation of an agreement to the extent that the agreement is capable of operating consistently with this Act." There is nothing explicit in the Act about exclusion of its provisions by estoppel. There is, however, authority in the English Court of Appeal for the proposition that, if on the proper construction of a statute, protective provisions cannot be ousted 12. by agreement, the same result cannot be achieved by estoppel: Keen v. Holland £1984] 1 W.L.R. 251 at p.261. It had heen held by the House of Lords some years earlier, in Johnson v. Moreton £19801 A.C. 37, that provisions of the English Agricultural Holdings Act 1948, designed to protect certain tenants, could not be excluded by agreement, although the Act did not say so in so many words. Partly, it seems, on the basis of the theory that the more good English land produced the better (see p.68), the House of Lords read the statute as not permitting contracting out on the relevant point. In the Court of Appeal case, Keen v. Holland, there was argued to be an estoppel against the same provisions by convention, but the Court said the provisions in question could not be got around by that means either. Questions of this sort are, as Johnson v. Moreton illustrates, often approached fairly broadly by looking at the policy underlying the statute in question and whether the provision is one intended for the protection of the public, ora section of it; another example is Barilla v. James £1964] 81 W.N. (Pt. 1)(N.S.W.) 457. That approach does not avail the respondent here; 1t is difficult to think of any policy of protection of a class of the community, or other public interest, which would justify refusing to give effect to an agreement excluding the operation of s.14 of the Act. If it suited the parties to deal with each other on the basis that a s.13(3) franchise agreement, for one year or less, should be treated as not caught by the exclusory provision (s.14), what public interest could be infringed by so doing? 13. However, approaching the matter as one purely of construction of the Act, there does not appear to be any satisfying answer to the respondent's contention. Subsections (1) and (2) of s.7, read together, prevent all contracting out of the Act's provisions, and that prevention catches contracting out which would not seem to offend the policy of the Act equally with contracting out which would so offend. It would seem to be clear that an express agreement between the applicant and the respondent that ss.17, 17A and 17B of the Act should apply to their franchise agreement, notwithstanding s.14, would have been void as purporting to exclude the operation of s.14. I do not read s.7 as saying anything explicitly about estoppel, but it is necessarily implicit in that provision that the same result cannot be achieved by an estoppel. The members of the House of Lords in Johnson v. Moreton appeared to have been disinclined to base their conciusion on an implication, but there may be a growing tendency openly to make necessary implications in statutes, just as in contracts; for a recent example, see the decision of the Privy Council in Collector of Land Revenue South West District Penang v. Kam Gin Paik £1986] 1W.L.R. 412. It would be absurd to suppose that the legislature meant to allow the exclusion by estoppel of provisions which cannot be excluded by express agreement. This conclusion gains support from the principle mentioned inJ. & F. Stone Lighting and Radio Ltd. v. Levitt £19471 A.C. 209 at p.216, that estoppel cannot give a court jurisdiction which a statute says it is not to have. Here, s.14 denies this Court jurisdiction to make any order of the kind set out in s.17A and what is so denied cannot, in my opinion, be given: by estoppel. 14. I therefore conclude, asa matter of law, that no estoppel could prevent the respondent from relying upon the provisions of s.14, even if a case of estoppel were otherwise made out - as in my opinion it has not been. Other Matters Counsel for the respondent, led by Mr. Cooper Q.C., raised other legal questions which have turned out to be of lesser importance, and I do not propose to deal with then. It is necessary to make only three further observations. The first 1s that, in my view, the case as fought went somewhat beyond that pleaded by the applicant. As Mr. Cooper Q.C. pointed out, even in its final amended version, the statement of claim relied upon documents only for an estoppel, whereas the evidence and argument relied also upon the discussions referred to above. Had I been otherwise in favour of the applicant's case, the lack of reference in the applicant's pleading to the conversations relied on would not, in my view, have been a substantial obstacle in its path. The applicant also raised the legal question of the effect of the definition of "agreement" in s.3(1) of the Act, read with s.3(2) which says, among other things, that a reference to an agreement is to be read as including a reference to a proposed agreement. It followed, as I understood the argument, that even if the parties here had really made no agreement, but merely proposed to make one, their rights must be dealt with as if their 15. proposal had actually produced an agreement. While conceding that in other circumstances a Court might have to resolve this legislative conundrum, I think there appears to be no occasion to attempt todo so here. That is so because there never was a proposal between the parties to agree to treat the applicant's rights as unaffected by s.14 - i.e. to treat the applicant as having a statutory right of renewal. As I have explained above, the applicant gave evidence to that effect, but I have rejected it. Lastly, it should be mentioned that the applicant relied in the alternative upon the doctrine of Ramsden v. Dyson [18661] L.R. 1H.~L. 129, and on the notion that the respondent acted dishonestly in standing by while the applicant spent money in the belief that he would get a renewal of his lease under the Act. In truth, the respondent's state of mind was quite otherwise: it thought the applicant would accept a renewal on payment to the respondent of $45,000, the sum agreed, and it was prepared to satisfy the applicant's expectation, In the result, the application must be dismissed with costs. fu TH a (5) N 2S 1 certify tha: this an preceding peoes era a nuece he reasons for Judgment heram of His Honour Mr Justice Pincus Kyonns Asso€iate Dated | Oetpbeer IN_THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY } QLD G130 of 1986 GENERAL DIVISTON ) BETWEEN: BECKFORD NOMINEES PTY. LTD. Applicant AND: THE SHELL COMPANY OF AUSTRALIA LIMITED Respondent CORRIGENDA Amendment to the Reasons for Judgment of Pincus J. delivered 1 October 1986: - Page i2, line 8, substitute "food" for "good"; - Page 15, paragraph 2, line 5 should read "belief that it would get a renewal of its lease ... Juliet Lyons Associate to Mr. Justice Pincus 2 October 1986 | ie