Goodlen Pty Limited v BP Australia Pty Limited [2004] FCAFC 331 (22 December 2004)

STATUTES - Interpretation - The Petroleum Retail Marketing Franchise Act (Cth) ("the Act") - Purported termination of multi-site franchise agreements by notices served by franchisor upon franchisee under s 16 of the Act - Sufficiency of notices - Whether it was "just and equitable" for the notices to terminate the franchise agreements - Applicable principles - Adequacy of notice and the consequences of inadequacy - Failure to provide full particulars of a ground of termination will infect entire notice - statutory intention - purpose of a s 16 notice - to arm franchisee with sufficient information to make informed decision about course of action - meaning of "notice in writing" - meaning of "setting out" - meaning of "full particulars" - meaning of "including a statement of the facts relating to each ground" - Act intended to operate in a practical way - Act intended to balance the rights and interests of franchisor and franchisee - Act intended to afford measure of protection to franchisees - Notices when read as a whole not complying with the Act - Notices not conveying sufficient notice as required by the Act - Franchisor's "election" to renew an agreement not precluding statutory right to terminate by valid notice - Appeal allowed.

Petroleum Retail Marketing Franchise Act 1980 s 16
Occupational Health and Safety Act 2000 (NSW)
Conveyancing and Law of Property Act 1881 (UK) s 14
Conveyancing Act 1919 (NSW) s 129

Hudson v BP Australia Ltd [1984] FCA 313 discussed
Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 referred to
Caltex Oil (Aust) Pty Ltd v Best [1990] HCA 53; (1990) 170 CLR 516 cited
Scurr v Brisbane City Council (No 5) [1973] HCA 39; (1973) 133 CLR 242 cited
Anjac Pty Ltd v Caltex Oil (Aust) Pty Ltd (1985) 9 FCR 553 cited
Pannell v City of London Brewery Company [1900] 1 Ch 496 discussed
Fox v Jolly discussed
Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634 distinguished

GOODLEN PTY LIMITED v BP AUSTRALIA PTY LIMITED
N 1240 OF 2004

MOORE, TAMBERLIN AND ALLSOP JJ
22 DECEMBER 2004
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1240 OF 2004

BETWEEN:	GOODLEN PTY LIMITED APPELLANT
AND:	BP AUSTRALIA PTY LIMITED RESPONDENT
JUDGES:	MOORE, TAMBERLIN AND ALLSOP JJ
DATE OF ORDER:	22 DECEMBER 2004
WHERE MADE:	SYDNEY

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1240 OF 2004

BETWEEN:	GOODLEN PTY LIMITED APPELLANT
AND:	BP AUSTRALIA PTY LIMITED RESPONDENT

JUDGES:	MOORE, TAMBERLIN AND ALLSOP JJ
DATE:	22 DECEMBER 2004
PLACE:	SYDNEY

1 This is an appeal from a judgment of a Judge of the Supreme Court of New South Wales, declaring that two Multi-Site Franchise ("MSF") agreements between the respondent, BP Australia Pty Limited ("BP") and the appellant, Goodlen Pty Limited ("Goodlen") had been validly terminated pursuant to s 16 of the Petroleum Retail Marketing Franchise Act 1980 (Cth) ("the Act"), by two notices given to Goodlen by BP on 9 January 2004 and 11 March 2004.

2 The appeal is brought on several grounds. Several concern the form of the notices of termination. It is alleged the notices were ineffective because they did not set out full particulars stating the facts relating to each of the grounds on which the termination was based, as required by s 16(3) of the Act.

3 Goodlen also contends that his Honour erred in the exercise of his discretion to find the termination was just and equitable because he failed to take account of a number of matters. They included evidence as to the adverse financial impact of termination on Goodlen, the fact that most of the matters relied on to support the termination occurred prior to the renewal of the MSF agreement in 1998, and the measures taken by Goodlen after it received a notice of breach of condition dated 7 February 2003.

4 A further basis is that his Honour erred in interpreting a BP’s MSF Site Operations Manual as imposing mandatory requirements, with which failure to comply would constitute a breach of contract.

5 Goodlen also contends that his Honour erred in finding that the relevant MSF did not impose requirements in relation to cash in transit to banks.

6 BP as franchisor entered into a MSF agreement ("the Agreement") with Goodlen in relation to eight BP Service Stations in 1998. On 31 January 2002, BP issued a notice of breach of a condition of the Agreement regarding breach of food hygiene requirements at a Cabramatta site run by Goodlen. A second notice of breach of condition regarding food hygiene at BP Cabramatta was served on Goodlen on 7 February 2003. Thereafter, BP offered to renew the Agreement with proposed variations. Because of problems relating to the preparation of food at Cabramatta, BP decided to take the Cabramatta site back, and provided a site at Campbelltown in substitution. This was accepted by Goodlen on 31 July 2003, with the renewal to commence on 15 October 2003 ("the Renewed Agreement").

7 BP served Goodlen with a notice of breach of condition of the Renewed Agreement in relation to breach of a requirement as to the delivery of cash in transit to banks on 24 November 2003. Subsequently, on 9 January 2004, the first notice of termination relevant to this proceeding was served on Goodlen. It specified the effective date of the termination of the Renewed Agreement as 8 February 2004.

8 A summons was then filed by Goodlen in the Supreme Court of New South Wales on 4 February 2004, pursuant to s 16(4) of the Act, seeking a declaration that the notice of termination had no effect. The next day Goodlen filed a Statement of Claim.

9 On 11 March 2004, a notice of termination of the Renewed Agreement was served on Goodlen, which specified the effective date of termination as 13 April 2004. On the same date, another notice of termination of the Agreement as extended by operation of a Letter of Offer executed by Goodlen on 31 July 2003, was served on Goodlen. It also specified the effective date of termination as 13 April 2004.

10 BP filed a Defence to Goodlen’s Statement of Claim on 12 March 2004. On 3 August 2004 the judgment of the primary Judge, which is the subject of this appeal, was given. On 16 August 2004, orders were entered declaring that the first notice of 9 January 2004 and the third notice of 11 March 2004 had validly terminated the Agreement as renewed or extended, together with orders as to costs. The matter was referred to the Master for assessment of damages in relation to the undertakings given to damages by Goodlen on 6 February 2004, as a condition of obtaining interlocutory relief.

11 In order to resolve this appeal it is not necessary to consider the terms of the notices separately because they are relevantly similar for present purposes. These reasons will specifically address the terms of the Notice of Termination of Contract dated 9 January 2004 ("the Notice"). The substance of the reasoning applies to each of the notices.

12 It is not necessary to set out the Notice and its annexures in full. We refer below to the salient parts of the Notice for the purpose of resolving this appeal.

13 The Notice is addressed to "The Directors" of Goodlen. It refers to the original Agreement. There is a formal notice that BP will terminate the Agreement on 8 February 2004 on the basis that, inter alia, Goodlen’s ongoing conduct is exposing its employees and the public to risk of serious harm, and it includes the words "particularly for reasons set out below" (emphasis added). The Notice then sets out the grounds for termination referred to in ss 16(2)(h), (c) and (j) of the Act, which are relevantly referred to in pars 1, 2 and 3 in the following terms:

14 It is common ground that the Notice sets out the grounds in s 16 of the Act that are sought to be relied on by BP.

15 After the statement of the first ground referred to above, which relates to health and safety grounds for termination contained in ss 16(2)(h) and (j) of the Act, there are detailed paragraphs under subheadings which read as follows:

16 Beneath sub-par 1.1 quoted above there is a heading "Particulars", which contains five further sub-pars (a), (b), (c), (d) and (e), which read:

17 These five particulars are attended by twenty-five sub-pars numbered with Roman numerals. Under Particular (a) there are nine sub-pars, the first of which reads:

These eight sub-pars are followed by a reference to an annexure marked "B", which is described as a summary of health and safety issues identified in the Site Operation Reports.

After the eighth sub par there is a reference to an annexure marked "C" which is said to be a summary of the health and safety issues identified during the reinspection.

20 No further annexures are referred to under particulars (d) and (e), neither of which contain any sub-pars.

21 In relation to par 1.2, the only "Particulars" given are that "BP repeats the particulars to paragraph 1.1 above".

22 Under par 1.3 concerning cash in transit there are three "Particulars", the first of which reads:

24 Par 1.5 entitled "Preparation and Sale of Food" is followed by five "Particulars". Sub-par (e) states that "BP repeats the particulars to paragraph 1.1 above and in particular (but not limited to) those parts of BP’s Quality Convenience and Safe Site Standards Audit Review reports and the Site Operations Review reports dealing with the sale and preparation of food and the maintenance of temperature logs". There are over 200 matters referred to in Annexures "A", "B" and "C", which set out the summaries of HSSE alert comments, extracts from Site Operation Review Reports, and issues identified during reinspection.

25 In relation to the second ground referred to above, which relates to the ground for termination under s 16(2)(c) of the Act for acts and omissions that constitute an offence punishable by a fine of $500 or more, par 2.1 refers to breaches of the Occupational Health and Safety Act 2000 (NSW) ("OH&S Act") under the heading "Particulars" that "BP repeats and relies on the conduct referred to in paragraphs 1.1 to 1.5 above." The other two particulars under par 2.1, (sub-pars (b) and (c)) are quotations of provisions of the OH&S Act.

26 Par 2.2 refers to breaches of the Food Act 1989 (NSW), the Food Regulations 2001 (NSW) and the Australia New Zealand and Food Standards Code. Particular 2.2(a) refers to conduct described in par 1.5. There are then references in 2.2(b)-(f) to a series of sections in the relevant Act, Regulations and Code.

27 In relation to the third ground referred to above, which refers to the ground for termination under s 16(2)(j) of the Act for breaches of the franchise agreement, the only particulars given are in sub-par 3.9 to the effect that "BP repeats and relies upon the conduct referred to in paragraphs 1.1 to 1.5 above."

28 There are then allegations in pars 4, 5 and 6 of the Notice, regarding the effect of the breaches of the Agreement by Goodlen that have been identified in the preceding paragraphs. These are generalised allegations that the repeated breaches of the Agreement show an intention not to be bound and that Goodlen’s ongoing conduct is exposing employees and the public to risk of serious harm. It is further stated that Goodlen’s ongoing conduct exposes BP and its officers and managers to potential and serious liability under the OH&S Act and a series of particulars are given, the first of which is a repetition and reliance on conduct referred to in pars 1.1 to 1.5 of the Notice.

29 These paragraphs are followed by a statement of BP’s election to terminate the Agreement as from 8 February 2004, and an assertion that BP’s termination is just and equitable.

30 In relation to the adequacy of the notices the primary judge referred to the statement of Fox J in Hudson v BP Australia Ltd [1984] FCA 313 ("Hudson v BP"), to the effect that the principal purpose of a s 16 notice is to give the recipient a full opportunity to investigate and test what is asserted and to decide their course of action accordingly. His Honour considered that a notice must be expressed with sufficient particularity. He accepted, after referring to some authority, that the notice must set out sufficient particulars of the ground relied on, including a statement of the facts relating to each ground, to enable the franchisee to give due consideration to the question of whether they should apply to a court for an order declaring the notice to have had no effect under s 16(4). It is common ground that these statements correctly set out the approach to be taken when considering the validity of a s 16 notice. His Honour considered that the notice satisfied this test, whereas Goodlen contends that the notices did not comply and were therefore invalid.

31 After referring to the terms of the Notice, the primary judge rejected a submission by Goodlen that the Notice failed to provide the required level of specificity because it referred to other documents and did not "set out" the matters contained in those other documents. He considered there was nothing in the Act which prevented reference to other documents, and that there was no requirement that the documents to which reference is made must be annexed to the Notice. His Honour considered that the requirements of the Act in the appropriate case would be satisfied by reference to documents already in the possession of the franchisee. He noted that Goodlen had the "additional advantage" of the annexures to the first notice of termination which identified facts relating to the grounds by summarising the documents to which reference was made. He also noted that these facts also related to other grounds as conclusions arising from those facts. He considered that the Notice gave Goodlen a sufficient statement of the grounds and of the facts relating to the grounds to enable it to make an informed decision as to whether to apply to the Court under s 16(4). His Honour did not consider that the Managing Director of Goodlen, Edy Wongso, and his brother Iwan, who was also a director, were in doubt as to the allegations contained in the Notice. He noted there a suggestion by the Managing Director that he may not have received some of the emails and that he may not have kept emails, but his Honour considered that, even if that were so, the nature of the complaint in the Notice was sufficiently summarised in the Notice. His Honour found (and this is not disputed) that BP does not have to prove each ground for termination in order to be entitled to terminate. It is sufficient if the franchisor establishes any ground for termination specified in the notice that falls within the list of grounds specified in s 16(2).

32 His Honour then proceeded to consider whether the grounds had been made out and whether it was just and equitable that the Agreement should be terminated. His Honour made the following findings of fact. He accepted that circumstances and events having regard to the renewal could only be relied on under s 16(2)(j) where they occurred after the date of the Renewed Agreement, which was effective from October 2003. However, in relation to the other grounds in ss 16(2)(c) and (h), his Honour considered that reliance could be placed on matters which occurred prior to the renewal. His Honour considered that the proof of events specified in the notices was overwhelming, and he noted that Goodlen did not seek to assert that they had not taken place, but rather sought to explain the occurrences, with a view to the Court being satisfied that termination of the renewed franchise agreements or the statutory holding over with respect to the service station known as the "BP Express" at Warwick Farm, would not be just and equitable in accordance with the requirements of s 16(6)(b) of the Act.

33 His Honour found that computer records showed that in the period June to September 2001, Goodlen was providing cash in transit services to only four of the eight sites operated by it, and that it was not suggested that any other cash in transit companies had been retained by Goodlen. These arrangements were established in May 2001 before the dispatch of the revised security section of the MSF Operations Manual. His Honour referred to the evidence. He noted that the effect of making out the ground of termination would be that in failing to implement BP’s cash in transit policy, Goodlen operated its premises in a manner likely to cause injury to persons or property, and that this would have serious implications for Goodlen. His Honour considered the consequences were sufficiently serious to warrant the requirement of satisfaction of the standard of persuasion required by the decision in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-362. His Honour stated that he held the "reasonable satisfaction" that Goodlen had deliberately failed to implement BP’s cash in transit policy, with the result that it operated its premises in a manner likely to cause injury to persons or property. His Honour was satisfied that the termination of the Agreement was just and equitable having regard to all the circumstances. His Honour noted that Goodlen’s Managing Director’s determination not to implement the cash in transit policy because it was too expensive and to have the site managers deliver cash to the bank or for it to be picked up at another service station instead, was an important factor in reaching that conclusion.

34 His Honour was satisfied that Goodlen had failed to carry out the staff training required by BP, to ensure that personal protection equipment was available to members of staff, to ensure that temperature measurements were taken and temperature logs recorded as required, and to comply with standards relating to the preparation and sale of food products, as particularised in the notices. His Honour rejected explanations by Mr Iwan Wongso as to reasons for Goodlen’s failure to comply with BP’s requirements. Generally, his Honour did not accept the evidence of Mr Wongso, and found that Mr Wongso had failed to carry out the duties of training required by BP, and to discharge Goodlen’s obligations under the OH&S Act and Regulations.

35 In conclusion, his Honour found that the evidence established the grounds relating to ss 16(2)(c) and (h) set forth in par 1 and 2 of the notices. In relation to the third ground, which refers to s 16(2)(j), his Honour found that some of the events relied on had occurred during the currency of the Renewed Agreement, with the consequence that this ground was established. His Honour found that by reason of the repetition of site infractions, the indifference of Goodlen to the pattern of repetition, the lack of understanding by staff of the significance of health and safety issues, and the lack of control and supervision, it was just and equitable that the Renewed Agreement should be terminated, and that the original Agreement, held over with respect to BP Express Warwick Farm, should be terminated.

36 At the forefront of the Goodlen’s case was that the Notice did not comply with s 16 of the Act and was ineffective to terminate the Agreement. This submission raises three issues. The first is what is required by the Act to terminate the Agreement, the second is whether, in fact, those requirements were met, and the third (although it is linked to the first) is what flows from a failure to meet those requirements.

37 This issue was dealt with by the learned primary judge in the following passage from [49] and [50] of his reasons:

38 With respect to the primary judge, the reasoning in the second paragraph does not directly relate to the issue raised in the first. Whether or not full particulars of a ground or grounds have been set out in the notice is a different and anterior question to whether a ground has been made out.

39 In our view, a failure to provide full particulars of a ground (or grounds) will infect the entire notice. Such a notice will be ineffective to terminate a franchise agreement, even if a franchisor can and does establish, in proceedings under s 16(4), that one of several grounds was fully particularised and otherwise is made out.

40 Several features of the Act should be noted. Section 13(2) provides (subject to certain qualifications) that a franchise agreement with a franchisee of prescribed experience, and any renewal of the agreement, shall not be for less than three years. Section 13(4) contemplates franchises (founded on initial agreement and renewal) of 9 years in duration. (See also ss 17B(4) and (5).) A franchisor can exercise statutory rights to terminate or refuse to renew a franchise agreement only on circumscribed bases. After 9 years, the statutory limitations on the franchisor's capacity to refuse to renew cease to operate. The broad intention of the principal provisions of the Act is to give enhanced security of tenure to franchisees deriving significantly from the provisions regulating the duration, renewal and termination of franchise agreements: Caltex Oil (Aust) Pty Ltd v Best [1990] HCA 53; (1990) 170 CLR 516, 526-27.

41 In order to terminate a franchise agreement, the franchisor must comply with s 16. That section provides:

(1) A franchisor may terminate the franchise agreement in accordance with the succeeding provisions of this section, but not otherwise.

(2) A franchisor shall not terminate the franchise agreement except on one or more of the following grounds:

(a) the franchisee is unable, by reason of physical or mental incapacity, to control the operation of the marketing premises;

(b) the franchisee makes a fraudulent misrepresentation in connection with the operation of the marketing premises;

(c) the franchisee performs an act, omits to perform an act, or makes a statement, where the act or omission, or the making of the statement:

(i) constitutes an offence punishable by imprisonment or, in the case of a franchisee being a body corporate, by a fine of $500 or more; and

(ii) in the case of a franchisee being a natural person, tends to show that he is dishonest or is otherwise not of good character;

(d) in connection with the operation of the marketing premises, the franchisee performs an act, omits to perform an act, or makes a statement (other than an act, omission or statement referred to in paragraph (c)), where the act or omission, or the making of the statement, constitutes a serious contravention of a provision of any law;

(e) the franchisee misrepresents the octane rating of, or wilfully adulterates, motor fuel supplied to him under the franchise agreement;

(f) without the consent of the franchisor, the franchisee wilfully passes off motor fuel supplied to him by a person other than the franchisor or a related corporation as being motor fuel supplied to him by the franchisor or a related corporation;

(g) the franchisee fails to operate the marketing premises (otherwise than by reason of an industrial dispute or an interruption, reduction or cessation of the supply of motor fuel or the compliance by the franchisee with an emergency law as defined by subsection 10(7) or with a direction or order made under such a law):

(h) the franchisee operates the marketing premises in a manner likely to cause injury to persons or property;

(j) the franchisee otherwise commits a breach of a provision of the franchise agreement;

(ja) the whole or a substantial part of the marketing premises is, or is to be, acquired by, or by a public authority of, the Commonwealth, a State or the Northern Territory under a law relating to the compulsory acquisition of land;

(jb) the sale of motor fuel at the marketing premises is prohibited by or under a law relating to the use of land;

(k) the whole or a substantial part of the marketing premises is destroyed, or is damaged to such an extent as to render the operation of the premises impracticable, except where the franchisor or a related corporation is responsible for the destruction or damage.

(3) The termination of a franchise agreement by the franchisor shall be effected by the franchisor serving on the franchisee notice in writing:

(a) informing the franchisee that the agreement is to be terminated on a specified date, being a date that, subject to subsection (8), is not earlier than 30 days after the day on which the notice is served; and

(b) setting out full particulars of the ground or grounds, including a statement of the facts relating to each ground, upon which the termination is based.

(4) Where a franchisor serves notice on the franchisee under subsection (3) terminating the agreement, the franchisee may apply to a court for an order declaring the notice to have had, or to have, no effect.

(5) Where an application is made under subsection (4), the Court may, by order, either:

(a) declare the notice referred to in that subsection to have had, or to have, no effect; or

(b) declare that notice to have terminated, or to terminate, the agreement on the date specified in the notice or on such later date as is specified in the order;

and may, in either case, make such ancillary or consequential orders as it thinks fit, including orders directing the preparation and execution of documents.

(6) In any proceedings under subsection (4), the court shall not declare the notice referred to in that subsection to have terminated, or to terminate, the franchise agreement unless:

(a) a ground specified in the notice is established by the franchisor to the satisfaction of the court; and

(b) the court is satisfied that the termination of the agreement and any related agreement or agreements is just and equitable, having regard to all the circumstances.

(7) Without limiting the generality of paragraph (6)(b), the circumstances referred to in that paragraph include the conduct of the franchisor and the franchisee after the time when the franchisor became aware of the existence of the circumstances, or the occurrence of the event, constituting the ground referred to in paragraph (6)(a).

(8) A court may permit a franchisor to serve a notice under subsection (3) specifying a date for the termination of the franchise agreement that is earlier than 30 days after the day on which the notice is served, if the court is satisfied that it is desirable to do so by reason that the continued possession, occupation, use or operation of the marketing premises in question by the franchisee is likely to cause substantial damage to the business, property or reputation of the franchisor.

(9) This section does not prohibit a franchisor from terminating the franchise agreement with the consent in writing of the franchisee given at any time after the commencement of the agreement.

42 Several features of this section are important for present purposes. The first is that by giving notice in accordance with the section, the franchisor terminates the franchise agreement: s 16(1), though the termination will not take effect until the date specified in conformity with s 16(3)(a). The second is that a franchisor is not able to terminate the franchise agreement other than as provided by the section: s 16(1). The third is that when terminating the agreement, the franchisor must comply with the notice provisions in s 16(3)(b). That is, the franchisor must serve notice in writing setting out full particulars of the ground or grounds, including a statement of the facts relating to each ground, upon which the termination is based.

43 In the context of the Act, the evident purpose of the notice in writing contemplated by s 16(3) is to arm the franchisee with sufficient information to enable the franchisee to make an informed decision as to what course should be followed in the face of a purported termination by the franchisor. In Hudson v BP Fox J said about the purpose of a cognate provision (at 6):

44 This identifies, correctly in our opinion, the evident statutory purpose of notice in writing under s 16(3)(b). After receiving a notice purporting to be under s 16(3)(a) a franchisee can do one of two things. It can accept the notice or contest the notice or its effect by proceedings under s 16(4). In order to make that assessment the franchisee must deal with the notice as framed by the franchisor. The franchisee cannot ignore one ground. It must examine each ground the franchisor is asserting in order to assess whether it is sufficient to found a lawful termination.

45 A notice under s 16(3) must contain a number of features. Analysed, they are:

(i) Notice in writing: "Notice in writing" is clearly a document. It is to be served. In it there is to be a "setting out" of certain things.

(ii) Set out: The phrase "setting out" imports a requirement that in the notice there be words which state or explain the full particulars.

(iii) Full particulars of the ground or grounds: The phrase "full particulars" was plainly adopted to serve a particular purpose in aid of the more general purpose the notice serves. The phrase should not be treated as importing notions or principles arising in other areas of the law such as the content of pleadings. Rather, it must be given a meaning consistent with the language used having regard to the statutory context in which it appears. As a matter of English usage, depending on its context, "full" particulars could mean "perfectly complete" or "sufficient" or "amply sufficient" particulars: see Shorter Oxford English Dictionary 2nd ed. 1986 Vol 1 p 815 and the Compact Oxford English Dictionary 2nd ed. 1991 pp 642-643. In this context, and conformably with the purposes of the Act and of a notice under s 16(3), "full particulars" means amply sufficient particulars for the notice to fulfil the purpose contemplated for it by the section. Once the meaning of the phrase is ascertained, no purpose is served by adding a verbal gloss to that meaning, as appeared to be the effect of some of the argument which was directed to the "proper test" involved in the phrase "full particulars". To do so will distract attention from the words used by the legislature. Whether, in any particular case, particulars are "full" involves an evaluation. The task is to look at the document in question in the particular circumstances of the case and make a judgment whether the particulars including the statement of facts relating to the ground or grounds relied on are amply sufficient for the statutory purpose of the notice: cf Stephen J in Scurr v Brisbane City Council (No 5) [1973] HCA 39; (1973) 133 CLR 242 at 254 and Jackson J in Anjac Pty Ltd v Caltex Oil (Aust) Pty Ltd (1985) 9 FCR 553, at 555.

46 The submission of Goodlen was that unless the entire notice satisfied s 16(3)(b), it was not open to a franchisor to establish and rely on, for the purposes of s 16(6)(a), at least one ground which was particularised in a way conformable with s 16(3)(b).

47 The submission of BP was that if a franchisor was able to establish one ground or indeed one set of particulars of one ground in respect of which there could be said to be "full particulars" a declaration of effective termination could be made, even if other grounds in the notice had not been adequately particularised. In support of this contention, BP made reference to the judgment of Buckley J in Pannell v City of London Brewery Company [1900] 1 Ch 496, and to the decision of the Privy Council in Fox v Jolly [1994] UKHL 2; [1916] 1 AC 1. Both cases concerned s 14 of the Conveyancing and Law of Property Act 1881 (UK), which provided that a right of re-entry or forfeiture under a lease for breach of a covenant or condition was not enforceable in certain circumstances. Relevantly, the right was not enforceable unless the lessor served on the lessee a notice specifying the particular breach requiring the lessee to make compensation and, if capable of remedy, requiring the lessee to remedy the breach. In Pannell, notice was given by the lessor alleging breaches of a covenant to repair and paint the premises. Buckley J was satisfied there had been no breach of the covenant to paint. Apparently on the assumption that breaches of other covenants might be demonstrated (though his Lordship ultimately concluded there were no breaches of the covenant to repair) Buckley J discussed whether the notice was effective given that one of the alleged breaches (breach of the covenant to paint) could not be made out. His Lordship concluded (at 500):

One factor identified by his Lordship to support this conclusion was the inconvenience of a lessor having to serve three notices in relation to three breaches (to protect against an allegation of a particular breach not being made out).

48 In Fox v Jolly, the Privy Council approved of the approach in Pannell. A notice was given by a lessor in relation to six properties. A schedule to the notice detailed defects requiring repair both external and internal to the buildings (without distinguishing between them). The schedule concluded with a direction:

49 One issue raised by the appellant (who was the tenant) was that the notice was rendered invalid by reason of the generality of the concluding words quoted above. Of this contention, Lord Buckmaster said (at 12):

His Lordship then reviewed several authorities concluding with Pannell and said:

50 Lord Atkinson's approach was similar, rejecting (at 17) the contention that the landlord's action of giving notice would fail if "notice of each and every breach be not given with sufficient particularity to satisfy the statute". His Lordship went on to say (at 18):

The other members of the Privy Council agreed, for broadly similar reasons, that the appeal should be dismissed.

51 Counsel for BP submitted that this reasoning is apt to apply in a case such as the present. He postulated a situation where a franchisor served a notice alleging 10 grounds and 9 were fully particularised and could be proved, but one was inadequately particularised. It was unlikely, it was submitted, that the legislature intended that in such a situation the notice would be ineffective to terminate the franchise agreement or, by implication, a court would be precluded from declaring it was effective. The example can be tested this way. If the franchisee knew and accepted that one, some, or all of the nine grounds were soundly based, then an informed decision could be made either to accept the termination or contest the notice on the basis that it was not just and equitable to terminate the agreement.

52 However, if the franchisee was confident (perhaps mistakenly) that none of the nine particularised grounds was soundly based, then the franchisee would be uncertain. The franchisee would be in the position of not knowing whether to contest the notice on the basis that the tenth ground might not be made out or on the basis that it could not be relied on because no particulars had been provided conformable with s 16(3)(b). Moreover, the franchisee would not know the strength (or perhaps even the nature) of the case alleged by the franchisor (in the tenth ground). It would be necessary for the franchisee to know its strength and the cogency of any available defence in order to make an assessment whether any case he or she might mount on the just and equitable ground would persuade the Court to declare the notice ineffective (on the assumption that the tenth but unparticularised ground would be established by the franchisor). This example illustrates how the absence of full particulars of all grounds set out in a notice can result in a franchisee not being fully informed even if, in other circumstances, the notice might sufficiently inform the franchisee to enable the franchisee to respond. Satisfaction of s 16(3)(b) cannot be measured in hindsight having regard to the response of the franchisees. The provision imposes an obligation on the franchisor at the time the written notice is served. It is improbable that the provision is intended to result in a fully informed franchisee in some situations but not others. For those reasons, it is unlikely that the legislature intended that a franchisor could set out several grounds and, in relation to some but not all of them, provide particulars conformable with s 16(3)(b).

53 Section 16(3) of the Act and provisions in conveyancing legislation such as s 129 of the Conveyancing Act 1919 (NSW) share a broadly similar statutory purpose of informing the recipient of an asserted state of affairs. But the content of the obligation each imposes must be assessed having regard to the statutory context in which the provision exists. It cannot be assumed that the obligation imposed by conveyancing legislation can be treated, uncritically, as the obligation created in other legislation serving a different purpose.

54 The language of s 16 points fairly clearly to the need for a franchisor to particularise all grounds in the way identified in s 16(3)(b) for any written notice setting out the grounds to be effective. As already noted, s 16(1) mandates that a franchise agreement can only be terminated in accordance with s 16. Whilst the matter was not fully debated, we doubt whether the franchisor is entitled to issue multiple notices, one for each section of the particulars or one for each ground. Whilst it only arises from implication, s 16(3)(b) appears to require the franchisor to set out in a written notice all the grounds relied on to terminate the franchise agreement. We do not see the section as providing for a series of written notices, all being sent at the one time, each concerning one ground, or one particularisation of one ground. The notice sent under s 16(3) actually terminates the franchise agreement (although at a later date and subject to the franchisee's right to make application under s 16(4)). It is unlikely that the legislature intended that a franchisor could terminate the agreement more than once, or that termination be judged by a series of cascading notices.

55 If the written notice must set out all grounds relied on by the franchisor, then s 16(3)(b) requires that the franchisor must provide full particulars including a statement of the facts "relating to each ground". Thus the franchisor is obliged to set out full (that is amply sufficient) particulars of each ground. It follows that the franchisor must particularise all grounds. That is not to say, of course, a franchisor must demonstrate in any subsequent proceedings brought under s 16(4), that each ground can be established. Fairly clearly s 16(6)(a) requires, as a minimum, that the franchisor establish one ground. However the existence of this more limited obligation does not, either expressly or by implication, create a correspondingly limited obligation under s 16(3)(b) to provide full particulars in relation to one or some, but not all, of the grounds set out in the notice.

56 Plainly, the legislature did not intend that a franchisor would confront near insurmountable obstacles in terminating a franchise agreement. The Act is no doubt intended to operate in a practical and not pedantic way having regard to the commercial environment in which both franchisors and franchisees operate and is intended provide a balance between the rights and interests of the franchisor and the franchisee. That said, the Act is intended to afford a measure of protection to franchisees. This was common ground in this appeal. However these objectives can be reconciled if a franchisor exercises care in identifying the grounds of termination and sets about providing particulars, both detailed and comprehensive, of the grounds in a way which will be readily understood by the franchisee. The franchisor has the ability to draft the notice to reflect all that it wishes to say based on its knowledge. The assertion of the present right to terminate assumes a known basis for so doing. What is required in the notice is full particulars of that known basis. The Act does not require the franchisor to provide something more than particulars. It is true, as already noted, that the franchisor must provide particulars which include a statement of the facts relating to each ground. However this does not necessarily require the franchisor to set out each and every fact relied upon. Nor does it mean that the facts to be proven to establish the grounds cannot deviate in the slightest from the facts as expressed in the notice. However, it does require there to be particulars, including a statement of the relevant facts, that are full (amply sufficient) for the purpose of the notice. The question in each case is whether this has been done.

57 The question is whether the Notice failed to comply with the requirements of the section. We now turn to a consideration of the principal matter relied on by Goodlen, namely whether the notices of termination were invalid on the ground that they did not comply with the requirements of s 16 of the Act, having regard to the principles and reasoning set out in the preceding section of these reasons. As noted, the substance of our reasoning with respect to the Notice of 9 January 2004 applies to all three notices.

58 In relation to par 1.1 of the Notice, it is clear that this ground is that set out in s 16(2)(h) of the Act. However, the first par 1.1 uses the expression "including but not limited to". These words in their natural meaning convey that there is an intended reservation of one or more additional unspecified issues which may be relied on by BP, and that those matters are not restricted to those set out. This language invites a request for information as to the nature, extent, and timing of the additional matters. The fact that such a request may be made and answered will not "cure" any deficiency in the Notice. Rather, the fact that such a request is necessary to ascertain these other particulars emphasises the deficiency in the Notice. It is not essential to set out the documentary or oral evidence to be invoked, but it is necessary to set out in a fulsome way the nature of the matters sought to be raised from the evidence.

59 In sub-par 1.1(a) there is a further reservation expressed by the words "in particular but not limited to the HSSE Alerts" which are those specified in the following nine sub-pars. The questions raised are: what other documents or alerts will be relied on? What do they say? This is a further instance where the particulars are sought to be left open so to enable BP to rely on unspecified matters outside the nine alerts summarised in Annexure A. If one turns to the HSSE Alerts referred to in relation to each of the sites there are references to a large number of specific matters. The difficulty pointed to by Goodlen, is that these particulars are framed to allow BP to rely on matters and events which are not specified in the HSSE Alerts and until they are specified Goodlen cannot decide on an appropriate course of action. There is considerable force in the submission because until the matter is stated it is not possible to decide whether to dispute it by way of an application to the Court.

60 In each of sub-pars 1.1(b) and (c) there are eight reports mentioned, and assuming that Goodlen kept copies of these reports, the particulars are inadequate because, although a large number of events are referred to, they are subject to the reservation in the principal narrative paragraph under par 1.1 of a right to rely on other matters.

61 In addition, in sub-par 1.1(d) the expression "in particular but not limited to" is invoked again in relation to the specific health and safety issues raised by BP over a six-month period in its Quarterly Performance Reviews. There is no specification in the Notice of any particular matters in relation to this qualification. Again, a reasonable reader could construe the paragraph as reserving a right to rely on other matters by reason of the reference to the qualifying phrase.

62 In sub-par 1.1(e), which is a reference to BP "also relying" on a mass of material and reference is made to all correspondence, emails and communications provided to Goodlen since 1998 concerning occupational health and safety. There is no specification of any such particular events, matters or circumstances, or identification of any specific matter in what must be a large amount of documentation.

63 BP submits that sub-par (e) is in substance a statement relating to the ground upon which the termination is based or, alternatively, is a reference to a clarification of the fact that there have been communications concerning the matters specified earlier, so that it should not be considered as raising additional matters on which BP intended to rely outside those specified earlier in par 1.1. On its face, it is said, this paragraph does not purport to raise any fresh particulars but is only referential to generalised supporting documentation.

64 The difficulty with this approach is that the words "also relies" under the heading "Particulars" in par 1.1, on their natural and ordinary meaning, leave open a reasonable construction that somewhere contained in the mass of communications over the five-year period are some matters on which BP relies to terminate the Agreement, or which will be a particular upon which reliance is placed to make out the first ground. The word "also" indicates the notion of additional, and the word "relies" denotes a basis for acting, a ground, or a reason for taking a course of action.

65 A statement that BP "relies upon all the correspondence", on its natural meaning, indicates that unspecified material in the communications will be used in some unspecified way to support this ground of termination. This leaves the recipient in a state of uncertainty as to what is being alleged.

66 When sub-pars 1.1(a) to (e) are considered cumulatively, the above reservations and uncertainties are compounded in such a way and to such an extent as to amount to a failure to give the recipient a full opportunity to know what is asserted so that an informed decision can be made as to whether to apply to the Court. Accordingly, in relation to the particulars of the first ground given in 1.1, it is our view that they do not satisfy s 16(3).

67 These deficiencies in par 1.1. are incorporated into par 1.2 concerning the health and safety of customers by the wholesale and unqualified incorporation of all the particulars in par 1.1 as furnishing the particulars under par 1.2. This incorporation in terms is not simply limited to customers but introduces all matters in par 1.1, and in particular the limitations, reservations, and difficulties inherent in par 1.1.

68 In relation to pars 1.3 and 1.4, notwithstanding the submissions of Goodlen that these paragraphs relate to some events that occurred before the renewal on 15 October 2003, and that they do not assert particular matters, we consider these particulars are not, taken alone, in breach of s 16(3). We note that his Honour found that these two matters were made out.

69 In relation to par 1.5, concerning the preparation and sale of food, the particulars are again infected by the repetition in sub-par 1.5(e) of all particulars in par 1.1, and this is compounded by the further use of the expansive expression "in particular but not limited to" in that sub-par itself.

70 In relation to the second ground, which concerns alleged acts or omissions constituting criminal offences, the particulars in sub-par 2.1(a) suffer from the defect that they are framed to incorporate all the conduct referred to in pars 1.1 to 1.5. Moreover, in relation to sub-par 2.1(b) there is a reference to sections of the Act without giving any further related information or making any specific allegation as to how it is, or in what respects, the Act was breached by the mass of facts and events concerned in the documentation referred to in sub-pars 1.1 (a), (b), (c), (d) and (e), and pars 1.3, 1.4 and 1.5. The charges are simply not formulated.

71 Sub-pars 2.2(a) and 2.2(b) suffer from similar deficiencies as sub-par 2.1(a), and because criminal offences are alleged the need for precision is important in respect of this ground.

73 The position is similar in relation to the third ground concerning contraventions of the Agreement. More precisely, the material under the heading "Particulars" under par 3.9 simply repeats the conduct referred to in pars 1.1 to 1.5. As we read sub-par 3.9(a), it is the only "particular" given in relation to the preceding pars 3.1 to 3.9, and simply repeats pars 1.1 to 1.5, which we have held to be deficient. Some of the broader allegations in relation to the third ground are difficult to comprehend. For example, par 3.4 refers to allowing acts or things which may conflict with BP’s directions.

74 In considering whether the Notice complies with the requirements of s 16 it is necessary to bear in mind the lengthy relationship of the parties and the extensive communications between them referred to in the Notice. Goodlen was on notice, by reason of the numerous documents referred to in the Notice, of a large number of matters complained of by BP over the period. However, one major defect in the Notices, in our view, is that they do not formulate and express those grounds in such a way as to give full particulars together with an adequate statement of the facts referred to in each ground, in such terms as would enable the recipient to know which particulars and facts are being relied on to terminate the Agreement. As discussed earlier in relation to the applicable principles, we consider that even if it could be said that some of the particulars and statement of facts are sufficient when read in isolation, the Notice, when fairly and reasonably read as a whole, does not comply with the Act and does not convey sufficient notice as required by the Act, in the circumstances of this case.

75 A number of other grounds were raised. It is not strictly necessary, having regard to the conclusion we have reached in relation to the Notice, to deal with these matters. However, we have considered the grounds and we are not persuaded that his Honour fell into error in relation to any of the additional matters raised on the appeal, for the reasons which we briefly indicate below.

76 His Honour held that BP was entitled to rely on events that preceded the renewal as establishing the statutory grounds of termination referred to in the Act in s 16(1)(c) and (h), even though it could not rely on such preceding events as breaches of the Renewed Agreement in order to establish the statutory ground of termination based on breach of agreement in s 16(2)(j).

77 Goodlen contends that this conclusion was erroneous because BP was fully aware of the existence of circumstances or the occurrence of events of a kind referred to in the three sub-sections relied on before renewal. In the light of that knowledge BP was aware of facts giving it an entitlement under the Act to refuse to renew the earlier franchise agreement yet it "elected" to renew. This "election" is said to preclude BP from relying on any of those preceding events as a basis for terminating each of the agreements held by his Honour to have been validly terminated and reliance is placed on the decision in Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634 at 646.

78 In the present case in respect of grounds other than s 16(2)(j), the grounds for termination concern specific statutory rights which do not necessarily form part of the contract which has been renewed. Moreover, the statutory context in which the rights are conferred is different from the contractual circumstances in Sargent. The Act has a specific purpose and is designed to protect franchisees. Renewal under s 17 is mandatory unless certain specific matters are established. Moreover, it is not apparent on the evidence that BP knew of Goodlen’s consistent failure to comply with BP policy. Some of the breaches had been concealed from BP in respect of matters prior to renewal of the Agreement. In addition, there were continuing breaches both before and after renewal and therefore the election argument does not advance the case propounded by Goodlen, since a breach after renewal could provide a basis for determination. Accordingly, as counsel for BP submits, this ground adds nothing to the case of Goodlen.

79 The renewal of a contract which has been breached to the knowledge of the party against whom the breach has occurred may waive the pre-existing contractual breaches provided the other requirements are satisfied. However, this does not prevent reliance on pre-existing breaches of the statutory grounds. In addition, the position is not sufficiently clear as to the knowledge or inconsistency of the rights to ground a finding of election.

80 This conclusion does not of course preclude BP from relying on the circumstance of renewal in the light of earlier breaches. Such matters can be taken into account when having regard to all the circumstances in relation to the just and equitable requirement in s 16(6)(b).

81 The primary judge found that it was just and equitable that the Agreement be terminated in all the circumstances. A finding of "just and equitable" involves an exercise of a wide discretion ranging over a large number of considerations.

82 Goodlen’s submission is that his Honour failed to take into account uncontradicted evidence as to the seriously adverse financial impact of termination of the Agreement on Goodlen, its shareholders, directors and employees.

83 The short answer to this submission is that his Honour, at [112], noted that a finding that BP has made out the necessary grounds would have serious implications for Goodlen. Indeed, his Honour considered that in the light of this consideration in making a finding the standard of persuasion should be that discussed in Briginshaw. His Honour accepted that this higher level of satisfaction was appropriate. There was unchallenged evidence before his Honour as to the effect that the termination of the Renewed Agreement would have on Goodlen and associated parties. The hearing before his Honour was expedited in circumstances where an interlocutory injunction had been granted against BP on the basis of evidence of the financial detriment which Goodlen would suffer if relief was denied. There are extensive references in the submissions for the primary judge as to the adverse financial consequences and these were accepted by BP in submissions. Having regard to these matters we are not persuaded that his Honour failed to have regard to the serious adverse impact of termination of the Agreement.

84 The second matter which it is said that his Honour failed to take into account is the circumstances that "most" of the matters relied on to support termination had to the knowledge of Goodlen occurred before the renewal of the previous Agreement. In our view, this submission has not been made out. It is apparent from the material in the appeal papers that the importance to be attached, if any, to events preceding the renewal was clearly in issue. The material indicates that the primary judge’s first approach was that matters occurring before the renewal were only relevant to the just and equitable issue. The findings of fact which were made refer to the period of the breaches, failures and events relied on, and findings were made which related to periods both before and after the renewal.

85 The next matter relied on under this ground of appeal is that Goodlen took certain action when breaches came to its attention in 2003, and also in relation to the relinquishment of Cabramatta. The latter site was not a service station which Goodlen operated under the relevant agreement.

86 The actions taken by Goodlen included dismissal of the site manager and the operations manager. These actions should be considered in the light of the way his Honour dealt with the breaches at Cabramatta. His Honour had regard to the continuing pattern of repetition, the lack of understanding of staff of the significance of the health and safety issues, and the lack of control of supervision. In forming this view his Honour clearly had regard to events before and after February 2003. The important consideration is that the conduct continued both before and after February 2003, and the pattern was established in the context of these events having taken place. The measures taken by BP were inadequate to prevent later breaches.

87 The evidence as to the solicitor’s advice referred to in Ground 5(b) does not, either alone or taken cumulatively, warrant any interference with his Honour’s finding as to the just and equitable ground. There was clear evidence before the primary Judge that the reason Mr Wongso did not implement the cash in transit policy was that he had taken the commercial decision that it was too expensive to implement. It was open to his Honour to form the view that, having regard to the nature, extent and duration of the breaches of the cash in transit policy since 2001 and the cross-examination of Mr Wongso, the advice of the solicitor was of no significance. This is especially so in view of the importance clearly attached by BP and communicated to Mr Wongso as to the need to comply with that policy. The advice alleged is to the effect that there was no compulsion under the operations manual to use a cash in transit company to transport the cash takings. However, the continuing failure was clearly not in accordance with clearly stated BP policy. The policy was that staff should not deliver money to the bank. Evidence is referred to by BP that Mr Wongso knew that it was safer for his employees not to take cash to the bank but to use a cash in transit organisation.

88 For the above reasons we do not think that any of the matters raised in the grounds of appeal 4, 5 and 6 of the amended Notice of Appeal disclose any error of principle or law on the part of his Honour.

89 Having decided that the notices were ineffective, the orders of the Court are that the appeal is allowed, the orders made by the primary Judge are set aside, the respondent is to pay the costs of the appellant on the appeal and of the hearing before the primary Judge. The Court will declare that each of the notices of termination given by BP to Goodlen and dated respectively 9 January 2004, 11 March 2004 and 11 March 2004 has had and has no effect.

I certify that the preceding eighty-nine (89) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Moore, Tamberlin and Allsop.

Counsel for the Appellant:	T E F Hughes QC with G M McGrath

Solicitor for the Appellant:	Stojanovic Solicitors

Counsel for the Respondent:	R M Smith SC with M A Jones

Solicitor for the Respondent:	Corrs Chambers Westgarth

Date of Hearing:	4, 5 November 2004

Date of Judgment:	22 December 2004

Federal Court of Australia - Full Court Decisions

Goodlen Pty Limited v BP Australia Pty Limited [2004] FCAFC 331 (22 December 2004)