Re William Mcphillips and Valerie Mcphillips v Ampol Petroleum (Victoria) Pty Ltd [1990] FCA 46 (23 February 1990)

FEDERAL COURT OF AUSTRALIA

Re: WILLIAM McPHILLIPS and VALERIE McPHILLIPS
And: AMPOL PETROLEUM (VICTORIA) PTY LTD
No. V G256 of 1989
FED No. 53
Trade Practices - Petroleum Retail Marketing

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Woodward J.(1)

CATCHWORDS

Trade Practices - petroleum retail marketing - franchise agreement of service station - alleged false representations as to likelihood of renewal - whether representations made and relied upon - whether any reasonable grounds for making representations - whether notice of intention not to renew complied with Petroleum Retail Marketing Franchise Act - whether breach of warranty or equitable estoppel established - whether damages a sufficient remedy.

Petroleum Retail Marketing - meaning of 'renewal' - whether franchise agreement 'renewed' after holding over - whether aggregate of terms of franchise agreements should include holding over period.

Trade Practices Act 1974 ss 51A, 52, 87

Petroleum Retail Marketing Franchise Act 1980 ss 3, 13, 17B

R T and M I Abela Pty Ltd v Esso Australia Ltd (Hill J, unreported, 5 September 1989) followed

HEARING

MELBOURNE
23:2:1990

Counsel for the Applicants: J R Dixon

Solicitors for the Applicants: M J Gilbert & Co

Counsel for the Respondent: C M Maxwell

Solicitors for the Respondent: Blake Dawson Waldron

ORDER

1. It be declared that:

(a) the respondent has contravened s 52 of

the Trade Practices Act 1974 and the applicants are accordingly entitled to damages to be assessed, and

(b) the respondent has contravened

sub-section 13(2) of the Petroleum Retail Marketing Franchise Act 1980 and so, pursuant to sub-section 13(10) of that Act, the terms of the applicants' franchise agreements with the respondent do not expire until 31 March 1990.

2. The further hearing of this application proceed before another judge of the Court and, to that end, a directions hearing be fixed for 2 March 1990.

3. The respondent pay the applicants' costs of the application to this date.

4. The cross-claim be dismissed with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

This is a claim for relief under ss 52, 53 and 53A of the Trade Practices Act 1974 and under the Petroleum Retail Marketing Franchise Act 1980 ('The Franchise Act'). Breaches of warranty, negligence and equitable estoppel are also alleged. The claim relates to a service station business situated on the corner of Scott and Robinson Streets, Dandenong. The respondent has cross-claimed for possession of the premises and mesne profits. It is agreed between the parties that any questions as to the amount of damages which the applicants should receive, if otherwise succesful, should be determined later.

2. Immediately before 15 May 1987 the respondent ('Ampol') was the owner, or at least entitled to possession, of the subject premises. On or about 15 May 1987 Ampol entered into -

(a) a franchise licence agreement,
(b) a franchise supply agreement, and
(c) a trade mark licence agreement ('the franchise

agreements') with Jareda Nominees Pty Ltd ('Jareda') with respect to the subject premises.

3. By a deed dated 10 August 1987 between Jareda as assignor, the applicants ('the McPhillips') as assignees and the respondent, Jareda assigned to the applicants, with the consent of the respondent, its rights and obligations under the franchise agreements.

4. It was a term of each of the franchise agreements that it was effective for a period of two years, five months and eighteen days, commencing on 1 April 1987 and expiring on 18 September 1989. This is a date of some significance, as a number of service station franchises were due to expire on this date in accordance with certain provisions of the Franchise Act.

5. There is a question to be considered as to the true duration of these 1987 agreements having regard to the provisions of the Franchise Act. However it is convenient to deal first with the facts relevant to the other claims. These are the events that took place from just before the signing of the deed of assignment, up to the McPhillips' application in writing to Ampol for the renewal of the franchise agreements, and Ampol's refusal to grant fresh agreements and its demand that the McPhillips deliver up possession of the premises to it on or before 18 September 1989. Some of the events occurring after that demand will also need to be considered.

6. Mr McPhillips had previously worked as a mechanic at General Motors for 15 years. He told me, and I have no reason to doubt his word, that he only had one day off in that time. He obviously wanted to branch out on his own account and buy a business which, with hard work, would be profitable. Accordingly he and his wife were looking for a service station which had a substantial workshop business. As he said in evidence, they saw the petrol sales in such a business as being only the cream on the cake.

7. I place significance on the fact that the McPhillips looked first at an Esso service station which they liked, but the proprietor told them frankly that he could give them no guarantee about the renewal of the lease from Esso when it expired, and so they did not proceed with the purchase.

8. In the case of the subject premises, Mr Oliver, who had been running the business for Jareda, his family company, told the McPhillips they would have no trouble getting successive three-year renewals for the franchise for a total of at least nine years. In the light of this assurance the McPhillips made tentative plans to arrange finance of $60,000, which was the asking price of the business, and which included a provision of $25,000 for goodwill. The McPhillips were able to raise some $10,000 from their respective superannuation policies and the balance was to be borrowed from a bank, on the security of their home, if the bank approved the details of the loan proposal.

9. Mr Oliver gave Mr McPhillips an Ampol form to fill out, applying for the transfer of the franchise. The McPhillips filled out the detailed form and signed it in anticipation that the deal would proceed. It was at this point, about mid-July 1987, that they had their first meeting with a representative of Ampol.

10. It is alleged by the applicants in paragraph 6 of their amended statement of claim that, in negotiations before the execution of the Deed of Assignment, Ampol represented and warranted that -

"(a) upon the expiry of the franchise
agreements on 18 September 1989 the
Respondent would renew the franchise
agreements with the Applicants;
(b) the Respondent had previously considered
selling the site and relocating the
service station, but having seen
Dandenong Council development plans for
the ensuing nine years, had determined to
retain the site;
(c) the assignor had allowed it to run right
down and if the Applicants were willing
to put up with hardship for the first one
to two years, they would make a lot of
money in the future as it had a lot of
potential."

11. These alleged representations were oral, constituted by conversations between Mr R Moffat on behalf of the respondent and the McPhillips.

12. A meeting between these parties undoubtedly took place at the McPhillips home at some time about mid-July 1987. Mr McPhillips said in evidence that,

"(Mr Moffat) told me that I would have
that time (approximately two years and three
months) plus another three by three. You
know, that is three three-year terms, right.
I said, 'Its not on there'. He said 'Its just
a formality, and that's all it is'. That is
what he said to me.....and then he also said
'You can have it for 21 years if you want it'.
I specifically asked that because we were
concerned, because we had already been told in
the Esso one that they could not guarantee the
lease".

Later he said,

"Ray Moffat had even told me that, that
it had been run down. He told me in my home,
and it proved it when the people came in to
tell me that thank God it was under new
management .... and Ray Moffat told me it
would be hard for the first one and half years
.... I expected to lose money in the first 12
months anyway. I expected that because he
told me that. He is Ampol's representative
and, you know, you have to suit him, to do
what he says, and I believed everything that
he told me, everything."

And later still,

"He said he had seen the council plans
for the next nine or something odd years, 10
years, and he said that the 'tax office' was
going up, there is quite a few large car parks
and all the extensions and everything around
there. He said, 'It would be a gold-mine for
you and your wife'. That is the exact words
he said."

13. Mrs McPhillips was also present at this meeting and her evidence of the conversation that took place generally confirmed that of her husband. Among other evidence she gave was the following,

"Dealing with the conversation with Mr
Moffat, he has deposed that he made no
reference to any period of 21 years that you
would have the lease for?...He did. He was
joking at the time. He said you can even have
it for 50 but naturally at your age you would
not do it. He was laughing and joking at the
time, but it was definitely said.
He has said that he did not tell you that
the business was run down and in fact he has
said his opinion was that it was operating
satisfactorily?...Yes, I have read that and
that is a laugh because he did tell us that it
was run down. In fact Mr Oliver had told us
before we had seen Mr Moffat that it had been
run down and that he had had a manager in that
had helped it run down and we spoke to Mr
Moffat about that on the day he was there. So
he knew about that and he was very
uncomplimentary to Mr Oliver so I do not know
where his stories are coming from.
You do not think that it is Mr Oliver's
statement about the business being run down
that you remember rather than Mr Moffat's?...
No, I remember Mr Moffat. It was so important
to me, Mr Moffat's conversation, and I had
spoken to him and I would have trusted him
with my life. I could not believe his
affidavit when I read it."

14. On the other hand Mr Moffat's recollection of this meeting is somewhat vague, perhaps understandably, since he no doubt had other similar conversations in the same general period.

15. Counsel for the respondent, while leading Mr Moffat's evidence, put to him,

"You said in your affidavit, that you and
Mr McPhillips discussed the duration of the
franchise agreements and you said that you
specifically told Mr McPhillips that all he
would obtain was an assignment of the existing
franchise held by Jareda Nominees Pty Ltd and
you specifically told him that if his
application were approved he would get no more
and no less than that. Are you able to say
whether you recall specifically stating these
matters?"
Mr Moffat replied, "No, I am not".

16. He was then asked, "So to that extent do you wish to qualify what you put in that paragraph?" He replied, "Well I cannot be specific about it because I cannot recall." The questioning continued,

"What was your understanding at that time
about the prospect of renewal of this
franchise?.... I had no idea as to whether it
was going to continue or not. I was not in a
position to know. I did know that there was
something in the air that was going to happen
in September, 1989 but I just do not know,
because I was not told what it was or what it
was going to be."

17. It is further alleged by the McPhillips that the respondent represented to their banker on or about 17 June 1987 that it was a formality that upon their expiry on 18 September 1989 the franchise agreements would be renewed.

18. The representation was said to be oral, constituted by a telephone conversation on or about the date alleged between Mr N Jury on behalf of Ampol and David Clark, manager of the Moorabbin Central Branch of the State Bank.

19. Although he swore to such a conversation in his affidavit, Mr Clark admitted in cross-examination that he could not recall the actual words used in the phone conversation with Mr Jury. He had only a faint recollection that he rang and spoke to Mr Jury, and that he was left with "a favourable impression that there would not be any problems" about the "lease agreement .... being extended".

20. Mr Jury's evidence was just as unsatisfactory as Mr Clark's. He said that he had many conversations with bank managers similar to the one alleged, and he had no recollection of that particular one. He said that he would not have given any assurance of renewal beyond September 1989, but could not explain how he had recommended the approval of the assignment to the McPhillips in a company document which showed 31 March 1990 as the expiry date of the licence.

21. I accept that, as Mr McPhillips said in his affidavit and oral evidence, he was told by Mr Clark that he had checked with Ampol and received reassurance about renewal of the licence. I think it inherently likely that such a check would have been made and that some reassurance must have been given, although I can make no finding about the form that it took.

22. The conclusion I have reached on this point is not inconsistent with the only documentary evidence which could be found in the bank records. It is a written record of an interview with Mr McPhillips by David Jamieson, who was a relieving manager at the relevant branch. The note was dated 17 June 1987 and read,

"Purchase service station lease 9 years
.... provided figures etc. ok."

23. Also, the fact that the bank granted Mr McPhillips a loan for the business on 23 July 1987 - made up of a term advance of $45,000 and an overdraft of $5,000 - is, in itself, some evidence that the bank had received a favourable answer to the question which, I accept, was asked, as to whether the business would operate for a reasonable period of time.

24. Even before any representations had been made by Mr Moffat to the McPhillips or by Mr Jury to Mr Clark, the McPhillips had paid a deposit of $2,000 to Mr Oliver, of Jareda, as a down payment for the proposed assignment of the franchise.

25. This assignment required the official approval of Ampol, and the loan had to be approved by the bank, so various forms and other documents had to be completed by the respective parties. This took some time. When all parties were satisfied, the applicants executed the deed of assignment, completed their agreement with Jareda and took possession of the premises. This execution of the deed took place on 10 August 1987 at the service station.

26. After going into possession, Mr & Mrs McPhillips encountered many day-to-day problems while learning and running the business; they particularly had trouble with the pumps and the hoist. They also had various other concerns with the appearance of the site.

27. Late in 1987 Mr Moffat visited the site with Mr M Kevin and Mr N Jury. This visit gave some concern to the Ampol representatives as they felt the site was untidy and dirty and that the performance of the applicants in this area was not of an acceptable standard.

28. Mr Moffat said in evidence that, at one stage during the inspection, he was standing with Mr McPhillips. Mr Kevin and Mr Jury were standing a short way off, and he heard Mr Kevin say to Mr Jury that on the first available opportunity Ampol should sell the site. He said, "I have no doubt that Mr McPhillips heard that comment." Mr Jury recalled the comment, but could not say if Mr McPhillips was within earshot.

29. Mr McPhillips was asked "Did you hear Mr Kevin say to Mr Jury that Ampol should sell?" His answer was "No".

30. The next incident of some note took place on 1 June 1988 during a visit to the service station by Mr G Smith and Mr B McComas. Mr Smith was the retail sales manager for Eastern Victoria and Mr McComas had replaced Mr Moffat as the area representative for Ampol.

31. Mr Smith claims that on this day he "advised dealer that at end of franchise '89 would result in sale of property". A diary note in these terms was exhibited to Mr Smith's affidavit. Mr McPhillips however denies this allegation. He said in evidence that,

"They were only there for about five
minutes at the place and they complained that
it was dirty, old motors laying around
everywhere from jobs the previous day, and
virtually that was all".

Later on in evidence he said that Mr Smith said to him during that visit "You have to get your litres up because you never know what happens." He did not understand what Mr Smith meant by this remark.

32. Other points noted by Mr Smith in his diary at the same time included:

"- Site cleaner than previously noted by
retail manager
- Dealer very mechanically orientated
- 700 series pumps in poor shape
- Very low volume - Good mechanical
business"

33. This last entry would tend to confirm the likelihood of something being said about getting litres up. Doing the best I can with this conflicting evidence, I think it probable that Mr Smith gave some warning of the possibility that the property would be sold when the franchise expired in September 1989, but in order to keep the McPhillips working hard and not losing heart, he qualified his statement by suggesting that better performance could stave off the closure. The resulting ambivalent statement apparently made no great impression on Mr McPhillips.

34. In October 1988, Mr E Thompson became the Ampol area representative responsible for the McPhillips' site, among a number of others. In evidence Mr Thompson said,

"I was sympathetic towards their case
because I could see that they were in a site
that did not have a future.... When I was
appointed to the territory, one of the first
instructions I got was that site - we would
not re-enter a new lease, come September
1989..... Well, the site had not been
maintained as a prime Ampol service station,
therefore working conditions I considered were
reasonably awkward. For instance, the pumps
were a major problem. We had a problem in
April with a pipeline rupturing. While we had
that fixed, of course, I could see that
initially 1989 was the cut off point of Bill
and Val."

35. This decision not to renew was formally conveyed in a letter sent from Ampol to the McPhillips dated 22 November 1988. The letter read,

"We confirm that, at the expiration of
your current Franchise Agreements on 18
September, 1989, we do not intend to enter
into new Franchise Agreements with you for a
further term.
Accordingly you are required to vacate
the marketing premises referred to in the
Licence Agreement on or prior to 18 September
1989."

36. The McPhillips reaction to this letter is best described by direct reference to sections of the transcript, which are set out below. First, Mr McPhillips, in cross-examination:

"It was, after all, a letter telling you that
at the expiration of your current franchise
agreement there was no intention to enter into
new agreements and that you would be required
to vacate. Would you like to have a look at
the letter to confirm what it said?...No, I
have read it.
.....
Had you previously been been told that you
were going to have to vacate in September
1989?...No.
.....
You do say, do not you, that Mr Moffat had
told you beforehand, before you took an
assignment of these agreements, that you could
extend the term virtually as long as you
wanted to?...Yes.
.....
I take it then that his letter must have come
as a very rude shock to you?...Yes, it did.
But from what you told us just a moment ago,
when you saw Mr Thompson at an Ampol dinner in
December, what you were concerned to complain
about was the pumps?...Yes.
As I understood your evidence, as I heard your
evidence before, you made no other reference
to the letter you had received except, "I
suppose they won't fix the pumps because they
want me out?"; is that right? Is that all you
said about it?...It was leading up to that
thing, yes.
But it is correct, is not it, that the concern
you say you raised was a concern about the
pumps?...Yes.
......
HIS HONOUR: What is being put to you is that
that sounds as if you were accepting at that
time the fact that you would have to go?...No.
You are being asked to say whether that is
true or not?...Yes. It is a catch-22
situation really. It is sort of like, you
know, my livelihood is in that. That is what
I am saying. I would say no. My livelihood
is in that place and I expected to have it for
the duration of the time.
The real question, Mr McPhillips, is this: if
as you say you had been promised before you
went into the place that there would be no
problem about an extension when the time came,
why did you not complain, write to the company
or go and see a solicitor or something as soon
as you got the letter?...The way Graham
Thompson spoke to me, as if it would be
handled within the company.
But that is as a result of your discussion at
the party?...Yes.
But before you ever get to that the question
arises why did you not do something the day
you got the letter, which as you say came as
such a shock to you? You did not go and see a
solicitor at that stage?...No.
You did not ring anyone in the company and
say, "What's all this about? I have been
promised that I can have an extension"?...No.
But you took the opportunity a few weeks later
to talk to Thompson?...Yes.
And you understood from what he said to you
later, after he had talked to other people,
that things would probably be all right; is
that what you are telling me?...That is what I
understood, yes.
MR MAXWELL: Even whan you spoke to Mr
Thompson you did not make a song and dance,
did you, about the letter you had received?
You did not jump up and down and say, "This is
terrible and I have been lied to and that is
not what you told me last year." You did not
say anything like that, did you?...I did not
jump up and down. I just asked him, you know,
"What's the story? What happens to me?" He
said, "Well you will be adequately
compensated."
When did he say that?...Later on this year
after the discussions.
Let us take it one step at a time. We are
talking about December at the moment;....
What you said in you evidence earlier was, "If
I could get my money back I would be quite
happy. I would go by the end of the month?"
...Yes.
That was an offer to leave early, as I
understand it?...Yes, because I did not think
they were going to do anything with the pumps.
HIS HONOUR: What did you mean when you said
if you could get your money back; what money
were you talking about?...All the money I had
put into the place to buy it, additional
equipment and everthing like that."

Secondly, Mrs McPhillips, also in cross-examination:

"Out of this state of uncertainty the letter
of 22 November arrived, did it not?...Yes.
.....
Why did not you or your husband take any
action to register a protest about that?...I
had spoken to the legal rep, not the legal
rep, the VACC rep that came around to the
service station. I had spoken to him on a
couple of occasions before Mr Craven came
around.
.....
I am talking about the period after you have
received the letter in November?...Yes.
And I am asking you why you did not make any
protest after you received the letter?...Well
we did shortly after.
.....
Well your husband gave evidence this morning
that when Mr Thompson rang him after the
November letter to invite him to the Christmas
party he accepted the invitation and he made
no reference to the November letter; you heard
that evidence, did you not?...Yes.
You would agree with me that that was an
opportunity upon which he might have
registered a complaint about the letter?...
That is why we went to the party because I did
not want to go and that was the only reason we
went and agreed to go.
.....
MR MAXWELL: But at some stage in the evening
you and your husband made a point of speaking
to him, did you not?...Yes.
And the complaint you made a point of
registering was the complaint about the
pumps?...Bill did. I spoke to him about other
things.
HIS HONOUR: What did you speak to him
about?...I spoke to him about the lease and
what was going to happen to us and we told him
that we had been having a hard time coming up
to the Christmas period with the pumps and
they were a real concern at the time and we
spoke to him about all that and he said that
he would look in and see what he could get
done for us. I said the equipment had been so
bad at one time that we were not making the
money and I was putting more into it and I
told him if they were not renewing the lease I
was not going to put any more money into it
and I wanted to know where we stood. He said
he would look into it and that was when he
rang back in January.
.....
So this (representations Ampol had made about
renewal of the franchise) was not specifically
discussed at the dinner?...Not specifically.
It was just one of the points. But I had
discussed it with him a few times and he even
asked me one time if I would be prepared to
write down the facts because he and Mr Smith
were not there at the time and they did not
know what went on."

Mr Thompson's evidence-in-chief of the discussion that took place at the Ampol Christmas party was as follows:-

"Now, evidence has been given about what
happened at the Christmas party. Were you at
the table with the McPhillips or not?...Well,
I was host. I was drifting around. There
were maybe 20 or so tables involved and I was
looking after each and every one, so I was not
at a particular table.
Mrs McPhillips has given evidence .... about a
conversation with you in which she discussed
with you the future of their tenure of the
site and that this was separate from Mr
McPhillips speaking to you about the pumps.
Do you have any recollection of any such
separate conversation with her?... No, I do
not recall that conversation.
How many conversations did you have with the
McPhillips's on that night? When I say
conversations, apart from greeting them at the
door, conversations which related to matters
affecting the site?...Well again, I only
recall the one conversation and that was
concerning the pumps.
And were they together when you spoke to them?
...Yes.
And who did most of the talking?...Bill.
Now, Mrs McPhillips has said in evidence that
the question of promises made to them was not
specifically raised at the Christmas party
because she had had a previous conversaton
with you about that and you therefore were
aware of it. Do you recall any such
conversation with her prior to the Christmas
party when she had raised that matter?...No.

Mr Thompson was then asked by counsel when Mr McPhillips had first said anything to him about the alleged representations.

37. He replied,

"In regard to Bill mentioning the fact that he
had been promised an extended tenure, I
believe it was about January that he first
mentioned that particular matter to me.
And what time do you first recall hearing Mr
Moffat's name mentioned in relation to the
promise of renewal?...It was not mentioned at
that stage. Bill at first suggested to me
that people from Ampol had indicated to him
that he would have extended tenure, but he did
not mention Mr Moffat's name at that stage,
and I did not ask. And it would have been
later on in the year that the names of Mr
Moffat and Jury were mentioned.... From recall
it would have been about May."

38. From the beginning of the year through to June, the McPhillips say, they continued to press Mr Thompson for some answers as to their position, and the question of compensation was in fact discussed in late May or early June. Mr Thompson conceded that they spoke to him on the subject on four to six occasions during that period. Mr McPhillips was apparently requesting either a further term or compensation. Mr Thompson said that he continually told the McPhillips that there would be no renewal of the franchise and denied, in cross-examination, that he said the McPhillips would be adequately compensated -

"I deny saying anything like that. Bill knew
that I had neither the authority nor the
position to offer that compensation".

39. I accept Mr Thompson's evidence that he gave no assurance of compensation. However it is clear that he had sympathy with the McPhillips, and the question of compensation was discussed a number of times. I believe that Mr Thompson would have said, and did say, that he would do his best for them and would make representations on their behalf. Ampol was generally willing to compensate owners, for the expense of removal in September 1989, by returning to them one month's rent. The company would also provide independent advice "in identifying future business opportunities". Mr Thompson may have hoped to improve on these offers in the case of the McPhillips.

40. During these discussions from January to June with Mr Thompson, Mr McPhillips was also consulting his Solicitor, Mr Giliberto. 1 February 1989 was the date of his first consultation. In the course of cross-examination, Mr McPhillips agreed that on this occasion he gave Mr Giliberto a copy of the original franchise agreement and the assignment of the franchise. He told Mr Giliberto that he had recently been advised that Ampol intended to sell the property in September 1989 and that he would not receive any compensation. He also told Mr Giliberto that he did not have the right to a renewal of the lease and mentioned that he had spoken to Mr Thompson at the Ampol Christmas party "about him saying we would be adequately compensated". Mr McPhillips also said he believed that he said something to Mr Giliberto about the statements by Mr Moffat.

41. From Mr Giliberto's evidence it seems that there was no written record of any alleged representations by Mr Moffat or Jury to be found in correspondence to or from the McPhillips, Ampol and Mr Giliberto, or in file notes, until well after June 1989. However Mr Giliberto informed the Court that the representations were mentioned to him by Mr McPhillips from the outset of their discussions.

"The misrepresentations were repeated to me
quite a number of times from the initial
stages both at the office and at the service
station where I would fill up with petrol, get
my car serviced, sir.... I simply put in the
back of my mind that there were
misrepresentations made by a number of people
and I did not make any notes of exactly what
was said or the names of those people, sir.
Later on, once the matter became more pressing
in relation to these representations then I
did ask Mr McPhillips to identify who was
Moffat, who was Clark, who was Jury et cetera."

42. On 1 June 1989 Mr Giliberto sent a letter to Ampol stating that he was acting on behalf of the McPhillips and raising a number of pertinent matters, including direct allegations of misrepresentations made to the McPhillips and their bankers.

43. Ampol replied to this letter on 26 June, stating that it would not be renewing the franchise agreements or granting fresh agreements and denying any assurances to the contrary by its representatives.

44. Meanwhile, on 2 June 1989 Mr McPhillips, acting on Mr Giliberto's advice, sent an application in writing requesting renewal of his franchise. The response to this was a general letter from Ampol to all dealers concerning franchise arrangements after 18 September 1989.

45. Before this, the McPhillips had also been in contact with the Victorian Automobile Chamber of Commerce ('VACC'), representatives of which were speaking to a number of franchisees affected by the 18 September 1989 expiry date.

46. One of those representatives of the VACC helped Mr McPhillips complete a questionnaire entitled "CONFIDENTIAL NON-RENEWALS DETAILS" on 2 March 1989. One of the answers on this form clearly states that the McPhillips were told by the area representative that they would be compensated.

47. Another interesting item of evidence was a valuation of the property done by L J Hooker at the request of Ampol. This was dated 19 June 1989. Some of the statements made in the valuation report suggest the possibility of extended tenure; for example:

"The property is currently occupied under
a franchise arrangement to September 1989 and
we understand further terms may be available
to the occupant".
"FRANCHISE DETAILS
We understand the subject property is occupied
on the following terms:
......
Term - three years plus two three year
options.
......
Rent Reviews - next review is due
September 1989 at which time an option to
renew the occupancy becomes due".

48. None of the witnesses representing Ampol could explain where L J Hooker gleaned this information. It certainly suggests a degree of confusion within the Ampol administration which could easily have led to misrepresentations being innocently made to the McPhillips.

49. These events finally culminated in a meeting that took place on 14 August 1989, between Mr Smith, Mr Thompson, Mr McPhillips and Mr Giliberto. The outcome of this meeting was that Ampol was still insisting on vacant possession, and so the McPhillips said they would begin proceedings to seek compensation.

50. When Ampol discontinued supplies of petrol from 19 September 1989 the McPhillips sought an interlocutory injunction from this Court. It was then agreed that certain undertakings should be exchanged to preserve the existing situation, and the interlocutory hearing should be treated as the trial of action.

51. Having considered all the disputed questions of fact before me, I have come to the conclusion that the applicants' claim under s 52 of the Trade Practices Act must succeed, but that they have not made out the breach of warranty alleged. It is not necessary to consider any alleged breaches of ss 53 or 53A of the Trade Practices Act.

52. Having seen and heard the applicants give their evidence, I am satisfied that they have told me the substantial truth about the representations allegedly made to them by Mr Moffat. I think that he believed at the time that the applicants would have no trouble getting an extension of their franchise after the initial term was completed. He would have been used to seeing such extensions and he had no clear idea in his mind of any general scheme for licences to terminate in September 1989.

53. On the other hand, I believe he spoke in general terms of their having nothing to worry about. Whatever he said was not sufficiently specific to be given contractual effect, even if the Court were satisfied that such a commitment was within the scope of his ostensible authority - which I do not believe it was.

54. I think the non-contractual nature of the representations is underlined by the way the McPhillips reacted when told that the term of their franchise would not be extended. Had they believed they had a firm arrangement to extend the franchise for an identifiable term, I believe they would have protested quite vigorously and seen a solicitor if their protests had been rejected. As it was, their failure to protest immediately about the misrepresentations is somewhat puzzling, but having observed Mr and Mrs McPhillips in the witness box, I can understand their inaction. I think they are ordinary hard-working people, unused to significant business dealings, who were disappointed when someone's word proved to be unreliable, but who took the view that, in dealing with a big company, there was not much they could do about it, other than appeal for a fair deal. It probably did not occur to them, since the statements made had not been in writing and had been expressed in general terms, that they had any legal redress.

55. I accept Mr Giliberto's evidence that the misrepresentations were reported to him by the McPhillips at an early stage of their solicitor-client relationship; but he did not pay particular attention to them, because he was conscious of special rights given by the Franchise Act and was anxious to explore the possibilities of such a statutory remedy.

56. For the reasons that I have given, I am satisfied that Mr Moffat did, no doubt innocently, mislead the McPhillips about their security of tenure of the franchise. I think he gave them to understand that they would be able to stay in the business for a considerable time - probably as long as they wished to, and that they acted on his assurances, without feeling that they had been given any contractual rights beyond those set out in writing.

57. I believe that they acted on those assurances, confirmed as they were through their bank manager, in deciding to go ahead with the contract they had tentatively entered upon. I am quite certain that, if Mr Moffat had told them that the franchise would be terminated after two years and three months, or that it was unlikely to be extended, or even that he had no idea whether it would be extended or not, they would have withdrawn from their provisional commitment and demanded the return of their deposit from Mr Oliver, who seems to have already misled them - although I can make no clear finding on that issue since he was not called to give evidence.

58. After being put off the Esso service station by the honest answers of that vendor, I am satisfied the McPhillips would not have taken on an equally doubtful (or perhaps more doubtful) venture if they had not been misled by the respondent's employees.

59. For the reasons given, I believe the applicants have made out their allegation in paragraph 6(a) of their statement of claim, referred to earlier in these reasons, that the respondent, through its servants Moffat and Jury, represented that it would renew the franchise agreements with the applicants when they expired in September 1989.

60. I believe that the representations set out in the paragraphs lettered (b) and (c) in paragraph 6, above, were also made by Mr Moffat, in terms at least similar to those alleged. However these only served to reinforce the vital representation referred to in paragraph (a) and I need not deal with them further, apart from saying that the allegations have a distinct ring of truth.

61. All these representations were, in my view, made carelessly and without reasonable grounds, within the meaning of s 51A of the Trade Practices Act, since the respondent had already determined to sell (or, in its unattractive usage, 'disinvest') the premises. Only the timing of the sale remained to be decided. A memorandum dated 26 November 1986 referred to the premises as having been "listed for disinvestment some time ago". It went on to say "... at that stage we made the decision to wait ..... it would seem timely for us to re-assess the situation". A firm decision to sell was made early in 1988.

62. For the same reasons given above about the absence of any contractual warranty in the present case, I find that the applicants have not made out a case in equitable estoppel. Apart from the absence of anything which could properly be called unconscionable conduct, there was no sufficiently clear promise made for equity to step in and enforce it. The statements made were representations, and nothing more; see Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387. I believe the respondent was entitled to refuse to renew the franchise agreements, subject only to the provisions of the Franchise Act, which I shall shortly consider, and any rights the respondents might have to have the term of the agreements extended pursuant to s 87 of the Trade Practices Act.

63. In my view, damages as for deceit are an appropriate and adequate remedy in the present case and, in the exercise of my discretion, I decline to order under s 87 that the term of the franchise agreements be extended so as to enable the applicant to remain in possession. I think it is generally undesirable to order parties who have fallen out to remain in a contractual relationship. It is not difficult to imagine problems arising over such questions as maintenance of the premises and levels of rent.

64. Further, to refuse to allow the respondent to sell its property might cause it unintended and excessive damage. And there is no evidence before me to show that there would be any great benefit to the applicants in extending their franchise for what would have to be an arbitrary period.

65. The damages to which the applicants are entitled are those occasioned by their entering into the contract, not damages for lost expectations. The basic question to be answered would seem to be - how much have the applicants lost, on balance, from their actions in purchasing and running the business? See Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1 at 12. But the precise questions to be asked will be a matter for argument and decision in a later hearing if the matter cannot be settled by negotiation. I shall order that the amount of damages, if it has to be litigated, be determined by another judge of this court.

66. I turn now to the last matter I have to decide, that arising under the Franchise Act. This was raised late in the hearing by way of amendment to the statement of claim. Counsel for the respondent was given leave to reply by way of written submission, which was received by the Court with a covering letter dated 4 December 1989.

67. That submission conveniently sets out the relevant legislation and undisputed facts as follows:

"1. The Petroleum Retail Marketing Franchise
Act 1980 (Cth.) ("the Act") came into
force on 19 September 1980. There has
been one amending act, the Petroleum
Retail Marketing Franchise Amendment Act
1984 ("the Amendment Act").
2. The relevant sequence of franchise
agreements relating to the Dandenong site
between 1979 and 1989, including
assignments, is as follows:
(i) 24 April 1979: service station
licence agreement and dealer supply
agreement (both in writing) and
trade mark agreement (partly oral
and partly to be implied from the
use, with Ampol's consent, of Ampol
trade marks), between Nolan and
Ampol, effective for a period of 21
months from 1 March 1979 ("the 1979
agreements"). The term fixed by the
1979 agreements expired on 30
November 1980. Clause 4(b) of the
licence agreement provided for the
licensee to remain in occupation
after the expiration of the term
with the consent of Ampol, as a
licensee from fortnight to fortnight
subject to the terms of the licence
agreement.
(ii) 9 June 1981: franchise licence
agreement, franchise supply
agreement and trade mark licence
agreement between Nolan and Ampol,
each effective for a period of 3
years from 1 April 1981 ("the 1981
agreements").
(iii) 13 October 1982: assignment by
Nolan to Darby of the 1981
agreements.
(iv) 10 May 1984: franchise licence
agreement, franchise supply
agreement and trademark licence
agreement between Darby and Ampol,
each effective for a period of 3
years from 1 April 1984.
(v) 17 July 1985: assignment Darby to
Jareda Nominees Pty. Ltd. (David
Oliver).
(vi) 15 May 1987: franchise licence
agreement, franchise supply
agreement and trade mark licence
agreement between Jareda and Ampol,
each effective for a period of 2
years, 5 months and 18 days
commencing on 1 April 1987 and
expiring on 18 September 1989 ("the
1987 agreements").
(vii) 10 August 1987: assignment Jareda
to McPhillips.
3. The question at issue is the duration of
the 1987 agreements. Duration is
governed by s.13 of the Act.
Sub-sections 13(2) and 13(4) (not amended
by the Amendment Act) relevantly provide:
"(2)...the term of -
(a) .....
(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)....
(4)...where -
(a) a corporation enters, as
franchisor, into a franchise
agreement by way of renewal; and
(b) the term of the original
agreement amounts, or the terms of
the original agreement and of any
previous renewal amount in the
aggregate, to a period of more than
six years and less than nine years,
the term of the agreement so entered into
shall be a period that is not less than
the difference between the period
referred to in paragraph (b) and nine
years."
4. It is common ground that the 1987
agreements were entered into by way of
renewal. It is therefore necessary to
determine for the purposes of s.13(4) the
term of the original agreement and the
term of any previous renewal."

(Note. The reference to paragraph 13(2)(b) in paragraph 3 above has been added for the sake of completeness.)

68. There are two issues to be considered in the present case. The first is whether there can be a 'renewal' of a franchise within the meaning of the Act, after one term has expired and there has been a holding over for some months, pursuant to the conditions of the earlier franchise agreement, before a fresh agreement is executed.

69. The second question is whether such a period of holding over, even if it does not break the chain of renewals, can be counted as part of aggregate terms amounting to "a period of more than six years and less than nine years" within the meaning of sub-section 13(4), above. See also s 17B(4).

70. As to the first question, I have no doubt that a lease, licence or franchise can properly be said to be 'renewed' in spite of the fact that there has been a holding over between two terms - at least so long as that holding over is in accordance with the conditions attaching to the first term. This is, I believe, confirmed in the case of the subject legislation by a consideration of the scheme and purpose of the legislation and, in particular, the wording of sub-sections 3(2) and 3(4) of the Act. They are in the following terms:

"(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.
(3) ......
(4) For the purposes of this Act, where, at
the expiration of a franchise agreement, the
franchisee and the franchisor ...... enter
into a new franchise agreement concerning the
same subject matter, the new agreement shall
be taken to be a renewal of the earlier
agreement notwithstanding that the provisions
of the new agreement may differ from those of
the earlier agreement."

71. I believe that a franchise agreement has not reached its 'expiration' within the meaning of sub-section 3(4) until the completion of any holding over period provided for by that agreement; its conditions are still in operation and even though its initial term has expired, the agreement itself has not.

72. I am strengthened in the view I have taken by the decision of Hill J in R T and M I Abela Pty Ltd v Esso Australia Ltd (unreported, 5 September 1989), although his Honour reaches his conclusion on the point by a slightly different route.

73. The other question I find more difficult; but again I am disposed to follow the decision of Hill J. in the same case, where he said,

"Without regard to authority, it seems to me
that the Act requires the term of a franchise
agreement to be calculated at the time the
franchise agreement is entered into or
renewed, as the case may be and not by
reference to what actually happens to
occupation under it."

74. His Honour then goes on to consider a number of authorities and draw attention to s 3(13) of the Act which reads,

"Unless the contrary intention appears,
references in this Act to the term of an
agreement do not include references to any
period of extension of the agreement by
holding over or otherwise."

75. In my view there is a consistency in the Act in its use of the phrase 'term of the agreement' as meaning the fixed period provided for by the franchise agreement, without regard to any holding over provision. I can see no contrary indication in sub-section 13(4) and so I believe the terms to be aggregated for present purposes are:

(i) 3 years from 1 April 1981,
(ii) 3 " " 1 April 1984,
(iii) 2 years, 5 months and 18 days from 1 April
1987.

76. Since these do not add up to 9 years, the respondent did not bring itself within sub-section 13(4) and so was in breach of sub-section 13(2).

77. Sub-section 13(10) of the Act provides,

"(10) Where a corporation purports to
enter into a franchise agreement in
contravention of a sub-section of this section
......the franchise agreement is not thereby
invalidated, but the term of the agreement is -
(a).....
(b).....the term, or the minimum term, as
the case may be, provided by the
sub-section contravened."

78. Thus, by operation of the Act, the terms of the current franchise agreements become three years, expiring on 31 March 1990.

79. The aggregated terms of the relevant franchise agreements, with that amendment, total 9 years and so, pursuant to s 17B(4) of the Act, ss 17 and 17A of the Act no longer apply and the applicants are not entitled to any further renewal of the franchise agreements after 31 March.

80. Until that time is reached, the applicants are under no obligation to deliver up the premises to the respondent, and so the cross-claim is dismissed with costs.

81. The respondent must also pay the applicants' costs of the application to this date.

82. I shall therefore declare that:

(a) the respondent has contravened s 52 of the

Trade Practices Act 1974 and the applicants are entitled to damages; and

(b) the respondent has contravened sub-section

13(2) of the Petroleum Retail Marketing Franchise Act 1980 and so, pursuant to sub-section 13(10) of that Act, the terms of the applicants' franchise agreements with the respondent do not expire until 31 March 1990.

83. I shall order that the further hearing of this application proceed before another judge of the Court and, to that end, a directions hearing be fixed for 2 March 1990.