FEDERAL COURT OF AUSTRALIA

 

Caltex Petroleum Pty Limited v Flomad Pty Limited [2003] FCA 648

TRADE AND COMMERCE - Franchise – Petroleum Retail Marketing Franchise Act 1980 (Cth) - whether valid notice of termination pursuant to s16(3) of the Petroleum Retail Marketing Franchise Act 1980 (Cth) – whether termination just and equitable in all the circumstances – termination pursuant to s16(2)(j) of the Petroleum Retail Marketing Franchise Act 1980 (Cth) for breach of franchise agreement

CONTRACT - Breach of franchise agreement due to failure to pay rent pursuant to lease in franchise agreement – failure to pay debts pursuant to franchise agreement - failure to carry out obligations under the franchise agreement – whether franchisee (respondent) purchased “foreign fuel” - purchase of fuel from another source other than the franchisor (applicant) - possession of the service station premises following termination of franchise agreement – claim for debt due under the franchise agreement based on certificate of debt – whether damages for purchase of “foreign fuel” – whether franchisor lost the opportunity to sell its products from the service station

TAXES AND DUTIES - Excise – application of s160 of the Excise Act 1901 (Cth) to alterations in the duty collected - right to deduct from the price of the goods the difference caused by an alteration to the duty collected - whether there was an alteration to the duty collected – whether alteration occurred after agreement was made for the sale and delivery of goods

EQUITY – Restitution – money had and received - mistaken payment – partial failure of consideration – unjust enrichment - amount paid by retail franchisee to franchisor in respect of excise duty on goods supplied – whether price of goods and amount of excise separate components of consideration – whether components severable

TRADE PRACTICES – Misleading and deceptive conduct – Trade Practices Act 1974 (Cth) s52 – whether misleading representations made regarding the amount of excise duty paid by franchisor – whether misleading representations made regarding shrinkage of fuel - whether misleading representations made regarding the consistent temperature of fuel - whether misleading representations made regarding quantity of fuel able to be sold by the franchisee

CONTRACT – contract for the sale of the service station premises – whether contract between applicant and respondent - whether offer to sell the premises – whether meeting of minds in relation to the for sale – claim for specific performance

CONTRACT – Breach of implied term contract – whether loss suffered due to the supply of “hot fuel” – whether fuel decreased in temperature and volume after delivery to franchisee – whether less fuel able to be sold by franchisee due to shrinkage of fuel - whether contractual obligation in franchise agreement to ensure the same quantity of fuel supplied to the franchisee able to be sold

Excise Tariff Act 1921 (Cth) s5

Excise Act 1901 (Cth) ss 54, 61C, 160

Petroleum Retail Marketing Franchise Act 1980 (Cth) ss 16(2)(j), 16(3), 16(6)

Instruments Act 1958 (Vic) s126

 

 

Crespin & son v Colac Co-operative Farmers Ltd. (1916) 21 CLR 205, cited

Roxborough v Rothmans of Pall Mall Australia Limited (2001) 208 CLR 516, distinguished

Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1998) 79 ALR 83, applied

Caltex Oil (Australia) v Best (1990) 170 CLR 516, distinguished

Foran v Wight (1989) 168 CLR 385, applied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CALTEX PETROLEUM PTY LIMITED v FLOMAD PTY LIMITED

V844 OF 2001

 

MARSHALL J

26 JUNE 2003

MELBOURNE

 

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V844 OF 2001

 

BETWEEN:	CALTEX PETROLEUM PTY LIMITED APPLICANT
AND:	FLOMAD PTY LIMITED RESPONDENT
JUDGE:	MARSHALL J
DATE OF ORDER:	26 JUNE 2003
WHERE MADE:	MELBOURNE

 

THE COURT ORDERS THAT:

 

1.      It is declared that the dealer agreement subsisting between the applicant and the respondent as at 14 August 2001 was terminated with effect from 5 pm on that day in consequence of the service by the applicant of a notice of termination of the dealer agreement on the respondent on or about 10 July 2001.

2.      Within 21 days of the date of this order the respondent give possession of the land at 582-586 South Road, Moorabbin in the State of Victoria (“the land”) to the applicant.

3.      On or before 1 July 2003 the respondent pay the applicant $178,108.15 (being the amount of $41,614.65 for which the respondent was indebted to the applicant as at the filing of its application, together with $136,493.50 on account of the respondent’s uncompensated use and occupation of the land from 1 August 2001 to 1 July 2003).

4.      The respondent pay the applicant damages in the amount of $337,280.69 with $15,256.88 accruing per calendar month until the respondent gives possession of the land to the applicant.

5.      The application otherwise be dismissed.

6.      The respondent pay the applicant interest on the sums referred to at paragraphs 3 and 4 of this order from 14 August 2001 until the date of this order at the rate prescribed from time to time by the Penalty Interest Rates Act 1989 (Vic).

7.      The cross claim be dismissed.

8.      The respondent pays the applicant’s costs of the proceeding, including reserved costs, to be taxed in default of agreement.

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V844 OF 2001

 

BETWEEN:	CALTEX PETROLEUM PTY LIMITED APPLICANT
AND:	FLOMAD PTY LIMITED RESPONDENT

 

JUDGE:	MARSHALL J
DATE:	26 JUNE 2003
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

Introduction

1                     The Applicant (“Caltex”) is the franchisor of the retail service station situated at 582 – 586 South Road Moorabbin, Victoria, (on the corner of Chesterville and South Roads) (“the site”). Caltex is also the registered proprietor of the land and all improvements at the site.

2                     Caltex is a subsidiary of Caltex Australia Petroleum Pty Ltd (“CAPPL”), which is a manufacturer and supplier of oil, petroleum and diesel fuel products.

3                     The Respondent, Flomad Pty Ltd (“Flomad”), held the franchise for the site and   conducted the business pursuant to a franchise agreement with Caltex. The last franchise agreement actually signed by Mr Taleb, on behalf of Flomad, was an agreement dated 20 April 1995. A new franchise agreement, in much the same form as the 20 April 1995 agreement was sent to Mr Taleb on 8 July 1999, however, this agreement was not signed by Mr Taleb.

4                     As will become apparent from the background facts, any differences between the two franchise agreements do not bear upon any findings in this proceeding and it is therefore unnecessary to determine which agreement applies in this matter.  For the purposes of these reasons for judgment, Flomad will be considered to have conducted the business under a valid franchise agreement (“the Dealer Agreement”).

5                     The issues raised for determination in this matter are:

·        whether Flomad is entitled to reimbursement in relation to the payment of excise duty;

·        whether Flomad suffered loss due to the shrinkage of fuel;

·        whether Caltex had a duty of care to prevent loss to Flomad caused by the shrinkage of fuel,

·        whether Caltex made misleading representations in relation to the payment of excise and the shrinkage of fuel;

·        whether the parties entered into a contract of sale for the site;

·        whether termination of the Dealer Agreement was valid;

·        whether Caltex is entitled to possession of the site; and

·        Caltex’s entitlement to payment of debts and damages.

6                     The principal director of Flomad, Mr Taleb, has operated the retail service station (“the business”) from the site since November 1991, after initially being assigned the franchise for the site and later renewing the franchise agreement.

7                     On 10 July 2001, Caltex served Flomad with a notice pursuant to the Petroleum Retail Marketing Franchise Act 1980 (Cth) (“the Franchise Act”) terminating Flomad’s franchise and taking possession of the site, effective from 14 August 2001. Caltex gave notice after serving on Flomad five separate notices identifying breaches of the Dealer Agreement.

8                     On 16 August 2001, Caltex commenced this proceeding seeking, inter alia, an order for possession of the site, payment for outstanding rent and other fees, damages and mesne profits.

9                     Flomad refused to give up possession of the site and denied the debts claimed by Caltex. Flomad subsequently filed and served a Defence and Counter Claim dated 10 October 2001, which was later amended on three occasions.  Flomad sought, inter alia, relief under s16(4) of the Franchise Act and an order for specific performance of a contract for sale of the site.  Flomad’s cross claim against Caltex also sought the recovery of losses resulting from Caltex selling it ‘hot fuel’ and over-charging it for excise paid on fuel.

10                  Flomad currently occupies the site pursuant to an order of the Court made on 4 September 2001.

The Dealer Agreement

11                  Under the Dealer Agreement, Caltex agreed to lease the site for the purpose of enabling Flomad to carry on a service station business.  Flomad was required to pay rental in monthly instalments in advance of the first day of each month, without any deduction, and also pay franchise fees representing payment for authority to use the site and for support and advertising.

12                  Should a franchisee consider that the rent specified for any year in the three-year period was higher than what was considered to be market rental for the site, the franchisee could give notice to Caltex stating what it considered to be the true market rental. If Caltex and the franchisee did not agree on rent within 14 days from notice being given, the franchisee could refer the matter for determination by an approved valuer.

13                  The prices payable by the franchisee for Caltex petroleum products were the “ruling list prices” set by Caltex from time to time. Clause 25 of the Dealer Agreement required the franchisee to pay Caltex cash on delivery for all fuel supplied.  Clause 27 of the Dealer Agreement provided that the franchisee could give written notice to Caltex in respect of any shortage in the quantity of fuel purchased.

14                  Clause 54 of the Dealer Agreement entitled Caltex to withhold and retain any moneys it owed to the franchisee for the purpose of reducing any moneys owed to it by the franchisee. Clause 58 established that the franchisee’s obligation to pay all sums required under the agreement were absolute and unconditional and were not subject to any reduction, set off, defence, counter-claim or recoupment’s due, or alleged to be due, to the franchisee, or by reason of any past, present or future claims the franchisee had against Caltex.

15                  The power to terminate the agreement was contained in cl 49 of the Dealer Agreement, however, the clause was subject to s16 of the Franchise Act. There are a number or reasons for which Caltex could terminate the agreement by notice in writing, including a breach of a provision of the agreement. The clause provided that on termination Caltex could re-enter and re-possess the site and expel the franchisee.

The Franchise Act

16                  The Franchise Act provides certain basic protections, including tenure for service station franchisees and, except in limited circumstances, a prohibition on petroleum companies discriminating between franchisees in regard to the price of fuel.

17                  According to the second reading speech in respect of the Bill that led to the Act, the intention of the Franchise Act is to ensure that the operation of the industry takes place on an equitable basis.  The Franchise Act provides rights for franchisees to bring actions for compensation, to challenge a purported termination or to prevent a contravention.

18                  At the time the Franchise Act commenced there were concerns in the community regarding discrimination between franchisees during times of supply shortage. Consequently, s10 was included to require the franchisor to supply the franchisee with his or her reasonable requirements of fuel, provided the franchisee complied with the terms of the agreement as to payment.

19                  Under s7 of the Franchise Act, a provision of a franchise agreement is void to the extent that it purports to exclude, limit or modify, or is otherwise inconsistent with, the operation of a provision of the Franchise Act.

20                  The Franchise Act provides that the minimum term of an agreement is to be three years, unless the franchisee breaches a condition of the franchise agreement or otherwise falls within a ground for termination under the Franchise Act. In most circumstances the franchisee is entitled to renew the franchise agreement up to a total period of not less than nine years.

21                  Section 16 of the Franchise Act sets out the grounds upon which a franchisor can terminate the franchise agreement. Section 16(3) requires the franchisor to effect the termination by serving a notice in writing specifying the termination date, which is not to be earlier than 30 days after the day the notice is served.

22                  Under s16, the franchisee is entitled to apply to a court for an order declaring the notice to have no effect.   The court shall not declare that the notice is effective in terminating the agreement unless a ground specified in the notice is established by the franchisor, to the satisfaction of the court, and 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.

Background

23                  The previous holder of the franchise for the site assigned an agreement for the franchise to Mr Taleb on 1 November 1991.  That agreement had 4 months remaining of its three-year term. On 31 March 1992, Mr Taleb renewed the agreement for another three-year term. Under the agreement the site was leased for the duration of that agreement.

24                  The next franchise agreement negotiated by Mr Taleb in March – April 1995 was agreed between the parties to be considered as Mr Taleb’s first franchise agreement.  Pursuant to tenure requirements in the Franchise Act giving franchisees two options to renew the first three-year agreement, Mr Taleb expected tenure until 2004.

25                  In May 1995, Caltex Oil (Australia) Pty Ltd merged with Ampol Limited and became Australian Petroleum Pty Ltd. That company later changed its name to CAPPL.

26                  Following the merger, CAPPL implemented a divestment program to sell a number of retail service stations to franchisees running the stations or, if necessary, an alternative purchaser. The site had been placed on the divestment list for possible sale.  Late in 1996, employees of Caltex discussed with Mr Taleb the possible divestment and price of the site. 

27                  In April 1996, Raine & Horne performed a valuation and gave the site a market value of $1.3 million.

28                  Discussions with Mr Taleb regarding what he would be prepared to pay for the site resulted in Caltex confirming, on 30 July 1997, that it was not prepared to sell the site for Mr Taleb’s asking price of $750,000.

29                  Mr Taleb was again approached regarding the sale of the site and on 23 December 1997, Mr Taleb met with Mr Stuart Spencer, Retail Manager for Victoria, at the Caltex offices in St Kilda Road.  Mr Taleb and Mr Spencer discussed the price and other terms and conditions, such as the supply agreement and indemnity for contamination. Mr Spencer said that Mr Taleb should continue discussions regarding the sale with Mr Brian Moore, National Property Divestment Manager.

30                  In January 1998, directions were given to obtain a contamination report and perform necessary remediation to prepare the site for sale. In March 1998, Otek Australia Pty Ltd provided an environmental site assessment report and began remediation works. In July 1998, Connolly Environmental prepared a groundwater investigation report. Connolly Environmental wrote to both the Environmental Protection Authority (“the EPA”) and Kingston City Council (the relevant local municipal authority) to inform them of their assessment and the potential for any off-site contamination impact associated with operating a service station at the site.

31                  On 10 February 1998, Mr Taleb was notified that his franchise agreement was due to expire on 31 March 1998. As, at that time, negotiations for the sale of the property were in progress, Caltex was prepared to extend the first term to 30 June 1998; provided the expiry of the second term remained 31 March 2001. The site rental during the extension period was to remain at $6,864 per month. Mr Taleb signed and returned a duplicate of the letter setting out this proposal.  A new franchise agreement was not entered into on 30 June 1998 as agreed.

32                  Although a draft contract of sale was prepared, Mr Taleb had concerns about contamination at the site. Mr Taleb’s solicitors wrote to the solicitors for Caltex on 24 December 1998, informing them that whilst the indemnity clause (relieving Caltex of any responsibility for contamination in the future) remained in the contract, Mr Taleb would purchase the site for no more than $395,000.  Caltex indicated that it was not prepared to sell the site for this amount.

33                  Mr Taleb attempted to maintain a dialogue during 1999 with Mr Spencer and Ms Snez Filipovic, Caltex’s Business Manager in respect of the site at that time, regarding the options of either selling the site to him or buying out his franchise. Mr Spencer informed Mr Taleb on 30 April 1999 that Caltex did not accept the terms upon which Mr Taleb wanted to purchase the site or, alternatively, be bought out by Caltex.

34                  Mr Taleb told Caltex representatives that he now lacked certainty of tenure and that consequently the mechanic at the site workshop was moving his business. As this would leave Mr Taleb out of pocket for the rent of the workshop, Mr Taleb claimed that the rent for the site was no longer affordable and that he wanted it reviewed. Caltex representatives said that Caltex was not responsible for the leasing of the workshop.

35                  During early 1999 Mr Taleb began raising various maintenance concerns he had with the site and demanding action from Caltex.  Mr Taleb demanded that Caltex give him a response regarding his claims for legal costs and other losses resulting from previous sale negotiations and the impact of remediation works on the site.

36                  Frustrated with his relationship with Caltex, Mr Taleb said that he would cancel his direct debit authority to Caltex until the concerns he had raised were addressed. Mr Taleb said that he would pay for fuel by company cheque. On 4 May 1999, Mr Taleb removed his authorisation for all direct debits to Caltex.

37                  By email on 7 May 1999, Ms Filipovic attempted to answer all Mr Taleb’s concerns and complaints and said that Caltex would welcome a re-submission of an offer to purchase the site.  Mr Taleb told Ms Filipovic that she still had not addressed all his concerns.

38                  On 14 May 1999, Caltex informed Mr Taleb that as direct debit authority had been removed, he must pay for fuel by cash or with a bank cheque.  Mr Taleb subsequently reinstated direct debit for fuel only, at some time prior to 21 July 2000.

39                  On 27 May 1999, Mr Taleb informed Caltex that he would pay $2,500 instead of $6,800 for rent on the basis he should not pay rent for the workshop, which was now empty (estimated to be $2,800), and would deduct a carwash maintenance payment of $1,500.

40                  Caltex wrote to Mr Taleb on 4 June 1999 agreeing to another environmental assessment at the site for the purpose of further negotiations for a sale of the site.  Negotiations for a sale failed soon after.

41                  On 8 July 1999, Ms Filipovic sent Mr Taleb a franchise agreement for the second term of the franchise, saying it would be on the same terms as the first term. Caltex claimed the franchise agreement had begun on 1 July 1998, but had not been documented. On 18 August 1999, Ms Filipovic again wrote to Mr Taleb requesting Mr Taleb sign the franchise agreement to formalise the second term. On 9 September 1999, Mr Taleb indicated his acceptance of the second term, but as he did not accept the level of rental, he did not sign the agreement.

42                  Mr Taleb stopped paying rent in June 1999. On 26 August 1999, Caltex demanded Mr Taleb pay arrears and insisted that he not deduct the carwash maintenance payment or his estimated loss on rental for the workshop from the site rental.

43                  In October 1999, Mr Stephen Boysen was appointed by Caltex as the new Business Manager for the site. When the issue of rent arrears was raised by Mr Boysen in November 1999, Mr Taleb claimed that it was he, not Caltex, who was out of pocket, due to unpaid carwash maintenance rebates, the cost of repairing the carwash and losses from “previous dealings” with Caltex.

44                  When Mr Boysen met with Mr Taleb on 15 December 1999 Mr Taleb raised the issue of the site rental and said he had not previously been given a chance to have his base rental reviewed as part of the negotiation for the second term of the franchise.  Mr Boysen made an offer to Mr Taleb to reduce the base rental, effective from 1 December 1999, to $5,200 and to paint and repair the site, provided Mr Taleb reinstate the direct debit, maintain the carwash at his own expense and clear all arrears in rental from July 1999 to November 1999. Mr Taleb did not formally confirm his agreement with the proposal.

45                  On 12 January 2000, Mr Boysen again met with Mr Taleb and reduced the rental offer to $4,500 per month and agreed to backdate it to 1 June 1999, provided Mr Taleb reinstated direct debit, signed the second franchise agreement, paid the advertising and support levy as well as the balance of outstanding rental. Mr Boysen removed the requirement that Mr Taleb maintain the carwash at his own expense.  Mr Taleb responded that he would pay rent arrears as soon as he saw work being performed on general maintenance of the site.

46                  Mr Taleb paid rental arrears on 31 January 2000, but did not pay the franchise levy of $2,859, sign the second franchise agreement or reinstate direct debit. 

47                  Mr Taleb continued to complain about the time it took to have maintenance work performed at the site, especially repairs to the carwash. In March 2000, Caltex again requested payment of arrears, now including $27,792 for fuel. However, by email dated 4 March 2000, Mr Taleb requested that he first be paid costs for maintenance of the carwash and losses for the period it was not in operation.  He also declared that the arrangement for the reduced rental of $4,500 should be backdated to 1 July 1998 rather than 1 June 1999. Mr Taleb said he would only pay any moneys he owed once he received what he considered he was owed by Caltex. 

48                  In March 2000, Mr Taleb informed Mr Boysen that he was interested in re-entering negotiations with Caltex for the sale of the site. Mr Boysen arranged a meeting between Mr Taleb and Mr Mark Aponas, a Retail Sales Manager employed by Caltex, to discuss the sale of the site and the ongoing issues regarding the site.

49                  Following discussions at the meeting Mr Aponas sent a letter dated 11 April 2000 to Mr Taleb setting out terms of a proposal for the sale of the site.

50                  Mr Taleb called Mr Aponas on 13 April 2000 offering to meet Mr Aponas to finalise the discussion of the sale. Mr Taleb emailed Mr Aponas on 26 April 2000 to arrange the meeting and confirm what had been discussed during the telephone conversation. Mr Taleb stated that the price discussed at the meeting was $700,000, not $810,000 and that he would not indemnify Caltex in respect of contamination at the site until the issues causing contamination were agreed upon, that he wanted “avoided cost” of 1.5cpl for premium unleaded petrol (“PULP”) and that Caltex give a release in the sale contract regarding the underground tank.

51                  Mr Aponas responded confirming that the price was $810,000 and that avoided cost of 1.5cpl was not to be given for PULP. Mr Aponas suggested that the other items raised by Mr Taleb should be discussed and resolved at a face to face meeting which could be arranged by Mr Boysen.

52                  On 12 April 2000, Mr Boysen sent an email to Mr Taleb requesting performance of the agreement for the settlement of debts, which he believed was reached with Mr Taleb on 12 January 2000.  Mr Taleb again responded that he wanted his money paid first.

53                  On 29 April 2000, Mr Boysen arranged for credits to be made to Flomad’s trading account for the carwash maintenance of $1,500 per month.  Mr Taleb subsequently made payment of $15,000, leaving $4,908.06 owing on his trading account.

54                  Mr Boysen arranged a meeting between Mr Taleb, Mr Jim Meynink, National Retail Manager, and other Caltex representatives in Sydney on 25 May 2000.  What occurred at the meeting is the subject of extensive discussion later in the reasons for judgment.

55                  Mr Taleb sent an email to Mr Boysen on 28 May 2000 setting out his understanding of what occurred at the meeting, based on notes taken by Mr Boysen at the meeting. Mr Boysen forwarded Mr Taleb’s email on to other Caltex representatives when he returned from leave on 1 June 2000. Ms Hamizon Batson, Divestment Sales Manager of Caltex at the time, asked Mr Boysen whether the email meant they were going ahead with the sale.  Ms Batson also pointed out that title searches would take two weeks. She requested the details of Mr Taleb’s solicitors and the sale price.

56                  Mr Taleb emailed Mr Boysen again on 1 June 2000 to point out that work regarding contamination had not commenced and that he had not been sent a draft contract or confirmation of what had been agreed to at the meeting.

57                  Ms Batson contacted Caltex’s solicitors, Allen Allen & Hemsley (“Allens”) on 2 June 2000 requesting them to prepare a draft contract of sale for the site and stated in the letter that the sale was subject to title searches and board approval.  A copy of the contract of sale was sent to Flomad’s solicitors, Mahonys, on 13 June 2000.

58                  On 20 June 2000, Allens sent the Vendor’s Statement to Mahonys and requested that the Contract of Sale be executed in duplicate and returned, together with the Vendor’s Statement and deposit of $81,000. On 26 June 2000, Mahonys responded with amendments to the contract and requested that Allens confirm agreement to the amendments “in order that, subject to our client requiring any further amendments, the contract can be executed as soon as possible”.

59                   Mr Boysen told Mr Taleb on 28 June 2000 that Caltex could not take receipt of the deposit until Tony Blevins, Chief Executive Officer, signed off on the divestment proposal.

60                  Connolly Environmental provided the ground water investigation report for the site to Caltex on 30 June 2000. In July 2000, Flomad commissioned HLA Envirosciences to undertake a ground water investigation to report independently on contamination levels.  Flomad received the report on 26 July 2000.

61                  On 21 July 2000, Mr Taleb was asked to pay his outstanding rental, which Caltex could not automatically withdraw from Flomad’s trading account, as direct debit authority had only been given for payment of fuel.

62                  On 5 August 2000, Mr Taleb realised that despite restricting his direct debit authority, Caltex had made direct debits from his trading account for rental. In response, Mr Taleb terminated all direct debit authority, including payment for fuel, and subtracted the amount withdrawn by Caltex for rental from the cost of his next fuel delivery.  Mr Taleb told Caltex to allocate the money from the “unauthorised” withdrawal to the cost of the fuel delivery, and provided a cheque for the balance.

63                  On 28 August 2000, Simon Caples, an environmental consultant to Caltex, met with Mr Taleb at the site to resolve the contamination issues. Mr Taleb claimed that Mr Caples agreed to an amendment to the contract of sale to ensure necessary remediation was performed to satisfy the EPA.  Mr Caples denied he made such a representation.

64                  On 12 September 2000, Mr Boysen sent Mr Taleb a letter of demand for money owing to Caltex. Mr Taleb met with Caltex representatives to discuss the issue and said that his losses, as a result of Caltex’s delay in fulfilling the agreement to sell the site and modify the contract of sale on account of contamination issues, were more than the rent for the site. Mr Taleb proposed paying $1,500 per month to cover rent and all other fees under the Dealer Agreement.

65                  Caltex eventually decided that Mr Taleb did not want to accept liability for contamination at the site (which, according to environmental reports, was at a level that was suitable for use as a service station) and therefore was not going to accept the indemnity clause in the contract. On this basis, Mr Taleb was informed at the beginning of November 2000 that Caltex was withdrawing the property from sale.

66                  On 4 December 2000, Mr Taleb sent an email to Ms Melissa Lambrianew, the new Business Manager appointed by Caltex in relation to the site, and Mr Graeme Bulner, Caltex’s Environmental Health and Safety Engineer, following up a claim he had made regarding fuel loss. Mr Taleb believed the loss was due either from leaking tanks or shrinkage, as a result of the fuel delivered by Caltex being hotter than the site’s ground temperature.

67                  Caltex responded on 11 January 2001 that the statistical analysis of the product inventory records from the site showed the losses were consistent with the volatile nature of petroleum products and that consequently further investigation was not warranted.

68                  Following a request from the EPA, Connolly Environmental performed a further ground water investigation to establish the level of any contamination off-site. Connolly Environmental provided a report to Caltex on 5 January 2000.

69                  A letter of demand for monies due and payable to Caltex was hand delivered to Mr Taleb on 4 April 2001, requiring payment within 7 days. Caltex also requested that Mr Taleb provide details of all the claims he has against Caltex.

70                  On 4 April 2001, Mr Taleb provided Caltex with a summary of events since 1997. Mr Peter Moran, Franchise Support Manager, replied to Mr Taleb by email on 9 April 2001, saying he was unable to assist in resolving his issues.

71                  On 11 April 2001, Caltex hand delivered another letter of demand for outstanding debts. This letter was given to Mr Taleb’s wife.  The letter stated that failure to make payment in 7 days would result in Caltex terminating the Dealer Agreement. On the same day Caltex set a policy of placing Flomad on “hard cash” terms, requiring that no delivery of fuel be made to the site unless it was paid for by bank cheque.

72                  Ms Lambrianew sent an email to Mr Taleb on 19 April 2001 explaining that Caltex would not accept a personal business cheque, or make direct debit withdrawals from Flomad’s account, for fuel deliveries because Mr Taleb had failed to pay amounts owing to Caltex, had threatened to withdraw his direct debit authority and had dishonoured a payment for fuel delivered on 8 February 2001.

73                  Mr Taleb refused to pay for fuel by bank cheque and began obtaining “foreign fuel”. Mr Taleb put signs on his petrol bowsers notifying customers that the fuel was not Caltex fuel as Flomad was “having problems with Caltex”.

74                  On 5 June 2001, Caltex gave Mr Taleb a breach notice, setting out details of Flomad’s breach of the Dealer Agreement. On 25 June 2001 and 4 July 2001, further breach notices were sent to Flomad’s then solicitors Tan & Tan.  Tan & Tan were sent a Notice of Termination of the Dealer Agreement, dated 10 July 2001, giving Flomad 30 days notice. The notice set out particulars of seven breaches of the Dealer Agreement.  After termination became effective in August 2001, Mr Taleb refused to give up possession of the site.

Excise

75                  Section 5 of the Excise Tariff Act 1921 (Cth) imposes duties of excise on certain goods.  Those goods include unleaded petrol, leaded replacement petrol, PULP and diesel sold and delivered to Flomad by Caltex pursuant to the Dealer Agreement.

76                  Under the Excise Act 1901 (Cth), excise duty must be paid at the rate in force at the time the excisable goods are delivered into home consumption or when payment for the fuel is made, whichever is the earlier. Under s54 of the Excise Act, excise duty is payable by the licensed manufacturer or owner of goods who enters them for home consumption.

77                  Under s61C of the Excise Act, the Commissioner of Taxation may give permission to a person to pay excise on goods even though the goods have not been delivered into home consumption.  The permission ameliorates the logistic difficulty for suppliers to make an entry for each delivery of petroleum into home consumption.

78                  There were in evidence permissions given to CAPPL by the Australian Tax Office (“the ATO”) pursuant to s61C, dated 10 November 1999 and 23 August 2000 (“the s61C permission”). The s61C permission reveals that CAPPL, not Caltex, was authorised and deemed to be delivering fuel into home consumption.  Risk and title to the fuel only passed to Caltex immediately before Caltex delivered the fuel to Flomad, when the underground tanks were being filled at the site.

79                  The s61C permission held by CAPPL has a specific condition that requires excise for fuel deemed delivered for home consumption to be calculated on the volume of the petroleum at 15 degrees Celsius.  The specific condition provides:

“(a)     The quantity of petroleum products for the purpose of excise duty shall be established in the following manner:

(i)                 Delivery by Meter. When delivery is effected through bulk filling meters duty will be assessed according to the quantity measured on the totaliser of the meter for each delivery corrected to 15 degrees Celsius.

(ii)               Other Deliveries. In all other cases the dutiable quantity will be determined by physical measurement of the contents of any delivery medium containing the goods prior to any delivery within the Accounting Week, such quantity being converted to its notional volumetric equivalent at a temperature of 15 degrees Celsius.”

80                  Excise on fuel is paid by reference to its volume. Excise duty is required to be paid on fuel at a set temperature because fuel contracts and expands with temperature change. As a rough estimate, fuel varies in volume by 1% for every change of 8 degrees Celsius.  If there was no set temperature, the amount of excise payable would vary with the temperature of the fuel, and the imposition of excise duty would be arbitrary and potentially capricious. By calculating excise on the basis of the volume of fuel at 15 degrees Celsius, the imposition of excise is consistent.

81                  CAPPL calculates the amount of excise payable by taking the temperature of the fuel as it is drawn from storage tanks at the Caltex terminal through gantry flow meters into road transport tankers. The volume of the fuel at this temperature is called the “ambient volume”.  A calculation establishes what volume the fuel would be if the temperature of the fuel was 15 degrees, rather than its actual temperature. This is called the ‘corrected volume’.  Excise is paid on the corrected volume of fuel.

82                  Caltex remits excise duty on a national basis, calculated on the gross volume of fuel sold by it at 15 degrees Celsius.  During the period of Flomad’s franchise, Caltex sold fuel to Flomad at a unit price per litre at ambient volume, and not at the corrected volume upon which CAPPL paid excise. 

83                  Flomad contended that it paid more to Caltex for excise than CAPPL paid to the ATO. It argued that the actual temperature of the fuel sold to it was, on average, greater than 15 degrees and therefore the ambient volume in total, greater than the corrected volume. Accordingly, excise calculated at 15 degrees Celsius would be less than excise that was calculated at the ambient volume. 

84                  The quantity identified on Flomad’s tax invoice was the ambient volume of the fuel, not the corrected volume.  Flomad said it was overcharged for excise as the component for excise was calculated by multiplying the excise rate by the ambient volume of the fuel, even though CAPPL paid excise on the corrected volume of the fuel.

Section 160 of the Excise Act

85                  Pursuant to s160 of the Excise Act, Flomad contended that it had a right to deduct from the price it paid for fuel the difference between excise paid by CAPPL and the amount charged by Caltex for excise. Section 160 provides:

“If after any agreement is made for the sale or delivery of excisable goods duty paid, any alteration takes place in the duty collected affecting such goods before they are entered for home consumption then in the absence of express written provision to the contrary the agreement shall be altered as follows:

(a)       In the event of the alteration being a new or increased duty the seller after payment of the new or increased duty may add the difference caused by the alteration to the agreed price.

(b)               In the event of the alteration being the abolition or reduction of duty the purchaser may deduct the difference caused by the alteration from the agreed price.

(c)               Any refund or payment of increased duty resulting from the alteration not being finally adopted shall be allowed between the parties as the case may require.” (emphasis provided)

86                  Flomad relied on s160(b), as it sought a deduction of the amount it paid in consideration for excise duty.  

87                  In applying the section to its claim, Flomad contended that “Caltex” was required to pay excise duties calculated on the ambient volume, pursuant to the legislation, and that the adjustment of the excise to a corrected volume, pursuant to the permission under s61C, took place before the delivery of the fuel.  Therefore, so the argument ran, the agreement should have been altered to deduct the difference so the discounted excise was passed on to Flomad.

88                  Caltex contended that s160 could not possibly apply because the company selling the fuel was not the same company that paid excise on the fuel.  Arguably, this also raised a difficulty for Flomad in establishing that it was purchasing “excisable goods duty paid”.  I see no need to accept or reject these contentions regarding Caltex entities, for reasons which will become apparent.

89                  I accept that Crespin & son v Colac Co-operative Farmers Ltd. (1916) 21 CLR 205 is authority for the proposition that, absent express written provision to the contrary, s160 should be read into every agreement for the sale and delivery of goods where the vendor is to pay and bear the duty in respect of goods. Also, I accept it is not necessary for the agreement to expressly provide that the vendor will pay duty, but that it is enough for this to be implied by other statements. However, the circumstances of this proceeding are outside the circumstances contemplated by s160.

90                  Section 160 appears to be concerned with changes in the rate of excise duty occurring from time to time, rather than the actual amounts of duty paid.  Counsel for Flomad stressed that s160 applies to changes in “duty collected”, and is not isolated to changes to the rate of duty.  However, it is not necessary to decide whether s160 applies only to changes in the rates of duty, because the alteration in the duty collected from CAPPL by the ATO, contended by Flomad, did not occur. 

91                  Whilst CAPPL held the s61C permission, excise was only ever required to be paid according to the corrected volume of the fuel. During the relevant period there was no obligation on CAPPL to pay excise duty on the ambient volume of fuel.

92                  Flomad contended that there were two separate requirements for the payment of excise duty.  As original owner of the goods, CAPPL became liable to pay excise on the goods under the legislation and then the requirement pursuant to the s61C permission “kicked in” after the agreement for sale and delivery.  I do not accept the contention that duty paid pursuant to the s61C permission constituted a separate requirement.  The obligation to pay excise duty pursuant to both the legislation and the s61C permission was fulfilled by CAPPL at the same time.

93                  Further, there was no actual change in the volume of the fuel for the purpose of paying excise under the s61C permission. All that occurred was that a calculation, which assumed a particular temperature, was performed to establish the amount of excise payable.

94                  Even if I am incorrect in finding that a change in the duty collected by the ATO did not occur, the change did not occur at the time required by s160, that is, “after” the agreement was made for the sale and delivery of fuel to Flomad. 

95                  The parties agreed that the agreement “for the sale or delivery of excisable goods duty paid” was the agreement between Caltex and Flomad made from time to time following an order by Flomad for a delivery of fuel through Caltex’s booking agency in Sydney at the “ruling list prices”.   Assuming there was an alteration to the duty to be collected, such alteration occurred when the permission was given to CAPPL by the ATO pursuant to s61C.  The special condition in that permission applied to all future agreements for the sale and delivery of petroleum.  Although, that alteration occurred before the fuel was entered for home consumption, it did not occur after the agreement was made for the sale or delivery, as required by s160.

Restitution

96                  In the alternative to its statutory claim, Flomad contended that Roxborough v Rothmans of Pall Mall Australia Limited (2001) 208 CLR 516supports its claim for reimbursement of an overcharged component for excise duty, based on restitution.  Flomad’s claim for restitution is based on failure of consideration, overpayment by mistake and unjust enrichment, as the amount paid by Flomad for excise was calculated on an ambient volume of fuel, rather than the actual amount of excise paid by CAPPL to the ATO.

97                  In Roxborough, part of the case was based on the principles of monies had and received, where consideration has failed.  In this proceeding there was no complete failure of consideration because excise was payable.  The excise component cannot be characterised as a failure of consideration simply because the amount payable for excise by CAPPL was a different to the amount contributed by Flomad.  Nor can it be characterised as a partial failure of consideration because, as demonstrated below, excise could not be considered to be a distinct and severable component of the contract of sale.

98                  The circumstances in Roxborough can be distinguished from the circumstances in this proceeding as there was not a failure of a severable part of the consideration for which the total amounts shown on the invoices were paid; see Roxborough at 527.

99                  In Roxborough the invoice for tobacco products identified the price of the goods as a subtotal separate from the licence fee (which was imposed by reference to the value of the tobacco sold). The circumstances under which the licence fee was made payable in Roxborough facilitated severance of part of the total amount paid for cigarettes and recovery of the licence fee component. 

100               The tax invoice given to Flomad by Caltex for a particular quantity of fuel specified:

·                    a base price,

·                    the State subsidy,

·                    the freight charge, and

·                    GST.

The amounts totalled a unit price.

101               Although several components were identified, the invoice gave no indication of the component of the unit price that constituted payment for excise.  Therefore, on looking at the tax invoice, excise was not severable from the price as it was absorbed into the base price.

102               Although Caltex’s internal documentation revealed that the unit price included an excise component, I am satisfied that Caltex set the unit price for fuel on the basis of its desired profit margin and that excise was merely one of the costs it considered when building the price for fuel. Clause 24 of the Dealer Agreement states:

“The prices payable by the Dealer for Caltex petroleum products delivered hereunder shall be the ruling list prices charged or chargeable by Caltex from time to time to service station resellers for such petroleum products in effect on the date of delivery for the locality of the premises.”

103               Clause 24 indicates that Caltex arbitrarily set the ruling list price and components such as excise were used arbitrarily by Caltex to meet its costs. There was no unjust enrichment as Caltex was entitled to be reimbursed for the administrative cost of paying excise on top of the actual excise payment to the ATO.  Mr Raleigh, Caltex’s National Pricing Manager, said in his evidence that if the amount to cover excise in the base price was changed so it was calculated using the corrected volume, the base price would simply be increased to maintain a “neutral profit position”.

104               Although Flomad contended that it was aware the price of fuel contained a component for excise, it is difficult to find a basis upon which I can be satisfied that Flomad had made an overpayment by mistake.  No evidence showing that excise had been raised in dealings between Caltex and Flomad was provided.  Flomad paid the “ruling list prices” set by Caltex from time to time, and knowing that cost, charged it as the cost base to its customers.

105               I consider that Flomad has no claim in restitution.

Misleading Representation

106               Flomad contended that Caltex represented, by inference from its letter dated 11 January 2001 (“11 January letter”), and other conduct before and after that date, that the Flomad paid the same amount for excise, as a component of the price of fuel, as was paid by CAPPL to the ATO.

107               The 11 January letter responded to Mr Taleb’s queries regarding fuel loss.  The letter reads as follows:

“Dear Jason

RE:                  Fuel Loss Claim

Premises:        Caltex Moorabbin

                        Cnr South and Chesterville Rds

                        Moorabbin

We refer to your queries on fuel losses at the above Premises. As you are aware, Graeme Bulner from Caltex EH&S department forwarded your daily product inventory records from the Premises to Leighton O’brien, an independent contractor, to be analysed. The statistical inventory analysis, which has been carried out on your data, is a widely accepted method of fuel management control. It is also accepted by the Victorian EPA as a method of fuel inventory management.

You have been provided with the results of statistical analysis on the data from Leighton O’brien and Graeme Bulner has discussed these results with you. As per your request, we wish to document our discussions as follows.

The following is a summary of the findings from Leighton O’brien:

Leaded tank:

The leaded tank has fallen just over the loss investigation trigger for only two of the eight month (March and July) of the data analysed.  The losses in the other months are well below the investigation trigger. A loss investigation is not likely to find any issues given the months in question are not consecutive.

Unleaded tank:

The losses for the first three months are on the high side of normal but the rest are normal. Given the current trends are normal, no action is warranted.

Pulp tank:

The pulp tank shows a 5% dipstick calibration error. After correcting the calibration, the results are good and the losses minimal.

Diesel tank:

The diesel tank is reporting good results with low losses.

As a result of the above investigation, the only action recommended by Leighton O’brien is to have the Pulp dipstick calibrated. A contractor will attend the Premises in the near future to rectify this dipstick error.

The tanks and pipe-work at the site was (sic) tested in 1998 and the integrity of the system confirmed. A re-test of the tanks and pipe-work is not warranted due to the results of Leighton O’brien’s investigation. In addition Caltex loading (delivery) meter systems and the on site pumps (dispensing) comply with the calibration requirements of the controlling Authority (Weights and Measures).

Caltex’s policy on fuel loss is to firstly analyse inventory data and take action as necessary. Caltex will only compensate the site operator where there has been losses due to faulty equipment above the losses consistent with the volatile nature of the petroleum products. The results from the analysis carried out by Leighton O’brien, on the data you have provided from the Premises, indicate that the losses are consistent with the volatile nature if the petroleum products and therefore further investigation is not required at this time.

Caltex recommends that inventory data generated in future at the site should be analysed to monitor the site as a routine monitoring process.

Should you have any queries on the above, Caltex EH&S department will be able to assist you.

Yours Faithfully

Caltex Australia Petroleum Pty Ltd

Melissa Lambrianew

Business Manager”

108               In my opinion, an inference that Flomad paid the same amount for excise as was paid by CAPPL to the ATO cannot be drawn from the letter.  There is no reference in the 11 January letter to the payment of excise on fuel by Caltex or CAPPL, or any statement that Flomad paid a component for excise. 

109               It was submitted that Caltex had failed to inform Flomad about the s61C permissions and that excise duty was based on the volume of fuel at 15 degrees Celsius.  Flomad failed to establish the basis under which Caltex should have disclosed arrangements for paying excise duty to Flomad. Flomad had never asked Caltex about these arrangements. Also, as Caltex set the ruling list price for fuel and CAPPL paid the excise duty on the fuel, excise duty was not an issue that arose for negotiation between Caltex and Flomad. 

110               Further, as pointed out by Caltex in its final submissions, for silence to constitute misleading and deceptive conduct there must be a duty to disclose; see Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1998) 79 ALR 83 at 95.  Flomad did not establish a basis upon which Caltex had a duty to disclose in the 11 January letter, or at all, details regarding CAPPL’s payments of excise or the fact that fuel shrinks when it cools in temperature.

111               Flomad failed to identify any other instance or conduct in which Caltex made a representation regarding the amount of excise paid to the ATO or the amount Caltex passed on to Flomad for the cost of excise duty.

112               The claim that there was a misleading representation regarding the amount Flomad paid in relation to Caltex’s excise obligations is rejected.

Hot Fuel

113               Flomad contended it had suffered loss due to Caltex delivering fuel to it at a temperature higher than the outside temperature or the ground temperature surrounding Flomad’s underground tanks.  As a result, fuel held in Flomad’s tanks shrunk in volume as it cooled, before being pumped through the bowsers. 

114               To ensure the supply of fuel, Flomad was required to order a delivery of fuel one or two days in advance through Caltex’s Sydney booking agency.  As road transport tankers were loaded with fuel at the Caltex terminal, the volume of fuel would be measured as it was drawn from the storage tanks through gantry flow meters.

115               The statements recording the volume and temperature of the fuel going into the tanker, known as “Omega statements”, also recorded the corrected volume. As discussed above, corrected volume is the volume of fuel if the temperature of the fuel was assumed to be 15 degrees Celsius. 

116               Caltex invoiced Flomad for the ambient volume of the fuel, being the volume of the fuel at its actual temperature when loaded into road transport tankers. 

117               Once at the site, the road transport tanker would pump the fuel into the underground tanks, adding to any fuel that was already in the tanks.  The volume of the fuel going into the underground tank was not recorded.

118               No evidence was provided concerning the length of time the fuel would remain in an underground tank.  However Mr White, Calibration Engineer/Metrology Technician, gave evidence that it could be a day, or sometimes up to five days.  It would, of course, depend on the demand for the particular type of fuel at its then price.

119               The volume of fuel being pumped from the underground tanks into consumer’s cars was also measured through the petrol bowsers; however, neither Flomad nor Caltex have records of these volumes.

120               Flomad contended that, due to shrinkage, the volume of fuel sold by it was less than the volume sold to it by Caltex.

121               Flomad claimed Caltex:

·                    had a contractual obligation or duty of care to prevent Flomad’s loss, and/or

·                    made misleading representations regarding volume of fuel sold and delivered.

122               However, as counsel for Flomad acknowledged, its claims rely on the contention that the fuel was “hot” when it was loaded into tankers and considerably cooler by the time consumers came to pump it into their fuel tanks.  Flomad has not been able to prove this contention in this proceeding.

123               In rejecting the contention that fuel changed volume to any significant degree before being sold to customers, Caltex relied upon the findings of the CSRIO Volume-Temperature Profile Study, 17 December 1995 (“the CSIRO report”). The CSIRO report was prepared for the Australian Institute of Petroleum and focused on the temperature and volume of petrol delivered to, and sold from, service stations throughout Australia. Flomad disputed the statistical significance of the CSIRO findings, and their relevance to Flomad’s particular circumstances.  There is no need to express an opinion on the veracity of the CSRIO report for reasons that will become apparent.

124               To prove its contention on the hot fuel issue, Flomad initially relied upon 20 Omega statements recording the temperature of the fuel when it was loaded at the Caltex terminal and the minimum and maximum outside temperatures recorded by the Bureau of Meteorology at various locations in the relevant period.  A table, “Schedule A”, was prepared setting out various measurements extrapolated from the Omega statements including a “Net Hot Fuel Difference (Excluding GST)”.  In final submissions Flomad did not rely on Schedule A in relation to its hot fuel claim as the analysis used to derive a loss due to shrinkage was based on an assumption that the fuel was sold by Flomad at 15 degrees Celsius.

125               Flomad also did not rely upon the summary of 159 Omega statements prepared by Mr Geoffrey Sincock, Chartered Accountant, despite making reference to it.  The summary showed that over a 9 month period, between 14 August 2000 and 16 May 2001, the average temperature of the fuel loaded at the terminal for delivery to Flomad was as follows:

·                    Leaded - 18.4 degrees Celsius

·                    Unleaded  – 20.15 degrees Celsius

·                    PULP – 17.13 degrees Celsius

·                    Diesel – 24.18 degrees Celsius

Although Flomad was able to point to an average temperature of fuel at loading, it was not able to provide evidence that the temperature of the fuel was always, or even more often than not, cooler when sold to consumers by Flomad.  Records kept by Caltex only recorded the temperature of fuel at loading, not at the point of sale to motorists. As a result, this evidence was not relied upon, as it was incapable, in itself, in proving that the fuel was delivered hotter than the temperature at which it was sold to customers.

126               Caltex engaged Professor David Trim to provide a report on the effect of temperature on the volume of liquid fuel. Professor Trim arranged for tests to be carried out by Intertek Testing Services (Australia) Pty Ltd.  Data obtained by Intertek for the purpose of Professor Trim’s expert evidence showed that although the various fuels in Flomad’s underground tanks did not tend to cool to any great degree, if at all, diesel fuel cooled by 6.3 degrees Celsius over 3 days whilst stored in the underground tank.

127               This one diesel fuel recording, however, is not sufficient evidence to find that Caltex systematically delivered “hot” fuel to Flomad and the fuel was consistently cooler when sold to customers by Flomad.

128               To establish it had suffered loss on account of hot fuel, Flomad ultimately relied upon the assertion that the 11 January letter was evidence that retail services stations could suffer a volume loss of up to 0.5%, without compensation from Caltex. The letter stated that the analysis performed indicated that the fuel losses recorded were consistent with the volatile nature of petroleum products, and consequently did not trigger the criteria for an investigation. Flomad contended it should be reimbursed for the 0.5% loss for which it believed Caltex had consistently taken the benefit.

129               In the final submissions, counsel for Flomad said:

“So we don’t have any expert analysis and we don’t have enough data, but we do have the evaporative and handling allowance of 0.5 per cent and we do have evidence that the discount is made available to big customers and…

…we would ask your Honour to draw the inference that the appropriate allowance for hot fuel in our case is 0.5 per cent.”

 

130               I do not accept the conclusion that the reference to the 0.5% evaporative or handling allowance, otherwise known as the bulk stock variance, in the 11 January letter is proof of Flomad’s loss.

131               Counsel for Flomad contended that a loss of fuel could best be established by measuring the volume of fuel that went into Flomad’s underground tanks and the volume that came out through the bowsers.  However, Flomad failed to provide any evidence that the quantity of fuel sold by it was significantly less than the volume of fuel sold to it by Caltex.  Flomad was in the best position to provide this information.

132               I am not satisfied, to any sufficient level of probability, that Caltex delivered hot fuel and that there was consequently fuel shrinkage resulting in loss to Flomad.

Contractual Claim

133               Flomad claimed that, in breach of an implied contractual obligation to it, Caltex received moneys from it for petrol Caltex had not supplied.  Flomad accordingly contended that it suffered loss and damage. The provisions which Flomad alleged imposed implied contractual obligations are cl 23.1 and cl 23.4 of the Dealer Agreement, which provide:

“23.1   Subject to the provisions hereof Caltex shall sell and deliver or arrange for delivery to the Dealer and the Dealer shall buy from Caltex for sale at the Premises such quantities of Caltex petroleum products as are necessary to satisfy customer demand for such products at the Premises during the continuance of this Agreement PROVIDED HOWEVER the Dealer will (save as may herein be provided) purchase from Caltex and Caltex shall sell to the Dealer the Dealer’s total requirements of motor fuels for resale at the Premises.…

“23.4   The Dealer shall on request by Caltex inform Caltex of the quantities of motor fuels sold, dispensed or distributed from the premises during each month during the continuance of this Agreement and Caltex shall be entitled from time to time and on reasonable notice to inspect and take extracts from the records at the Premises or kept by the Dealer which disclose the quantities of motor fuels sold, dispensed or distributed from the Premises and to allow representatives of Caltex to take meter readings from the motor fuels dispensing pumps installed at the Premises and to measure the levels of motor fuels in storage tanks located on the Premises. The Dealer will not act nor permit any act which hinders or obstructs Caltex from making any inspections, taking extracts, reading meters and measuring levels as aforesaid.”

134               These clauses do not create any implied contractual obligation on Caltex to ensure the same quantity of fuel supplied to Flomad by Caltex is the same as that sold by Flomad to its customers. The clauses should be read in the context of an obligation on Flomad to purchase fuel from Caltex.

135               Clause 23.1 deals with the supply of fuel to Flomad and not the sale of fuel to customers. Fuel is supplied in response to a request from Flomad to meet demand, and Caltex is not burdened with any responsibility in relation to the on-sale of fuel to consumers. The clause does not incorporate a warranty or “duty of care” in relation to the volume of goods sold. Clause 23.4 gives Caltex a right to inspect the site and take readings from fuel storage tanks.

136               It cannot be inferred that these clauses create a warranty as to the quantity of fuel held and sold.

137               This conclusion is reinforced when the clauses are read in context of the Dealer Agreement as a whole. Clause 27, entitled “Claims”, describes succinctly the process under which Caltex will accept responsibility for a franchisee’s loss in relation to petroleum products.  Clause 27 provides:

“Notice of any claim in respect of any shortage in quantity shall be given by the Dealer to Caltex in writing within seven (7) days after receipt from Caltex of the petroleum products in respect of which such claim is made. The giving of such notice shall be a condition precedent to any such claim and if such notice is not given as aforesaid Caltex shall not be liable in respect of any shortage in quantity.”

138               The responsibility to identify any losses after delivery lies with the franchisee. The franchisee is required to notify Caltex as soon as possible in order to establish a valid claim.  The Dealer Agreement does not make provision for Caltex’s obligations once it receives a claim under cl 27.

139               Further, Caltex is not responsible for any petroleum product after delivery to the franchisee.  Clause 28 provides:

“Property and risk in petroleum products delivered by bulk tanker wagon shall vest in the Dealer as such products pass from the said bulk tanker wagon into the unloading connection at the premises.”

140               Clause 63 provides that the Dealer Agreement contains the entire terms of the agreement between the parties and that prior negotiations, commitments, representations and undertakings are expressly negated.

141               Even if I were to assume Flomad suffered loss due to the shrinkage of fuel, I do not consider that clauses 23.1 or 23.4 establish an obligation on Caltex to prevent loss to Flomad in relation to fuel provided.

Misleading Representation

142               In the alternative, Flomad contended that Caltex made the following misleading representations:

·        Fuel was loaded at a temperature the same as outside temperatures,

·        Fuel was loaded at the same temperature Flomad would sell it,

·        The quantity of fuel sold and delivered by Caltex would be equal to the quantity of fuel sold and delivered,

·        Fuel losses claimed by Mr Taleb were due to evaporation, not shrinkage.

143               Flomad submitted that the conduct of Caltex was misleading and deceptive and/or was likely to mislead or deceive.  However, no evidence was provided to show that Caltex possessed any more knowledge than Flomad regarding the difference between the temperature of fuel at the point of sale and the temperature at loading at the Caltex terminal.

144               I do not accept that any misleading representations regarding hot fuel can be found in the Dealer Agreement. Claims for losses are dealt with under cl 27 of the Dealer Agreement. For the reasons given in [134] to [140], cl 23.1 and cl 23.4 cannot be considered to be misleading representations regarding Flomad’s ability to sell the same quantity of fuel as that supplied to it by Caltex.

145               Flomad contended that the 11 January letter represented a failure on Caltex’s part to inform Flomad of the comparatively high temperature of fuel at loading.  Flomad said that this omission was an implied representation that the fuel was loaded at a similar temperature to the temperature that Flomad would sell the fuel. That is not a satisfactory basis for reaching a conclusion that Mr Taleb was misled regarding the possible shrinkage of fuel.

146               Although there was some evidence that the temperature of the fuel loaded into tankers at the terminal was sometimes higher than the outside temperatures recorded by the Bureau of Meteorology on the days the fuel was loaded, that is not evidence that Caltex officers knew the temperature of fuel when sold, or represented that fuel was loaded at a temperature which was the same as the outside temperature.

147               Also, as previously noted, for silence to constitute misleading and deceptive conduct there must be a duty to disclose; see Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1998) 79 ALR 83 at 95.  I find no basis upon which Caltex had a duty to disclose information about the loading temperatures of the fuel.  It would not have assisted Flomad to be informed of the temperature at which fuel was loaded, as the temperature of the fuel at the point of sale remained unknown.  Mr Taleb admitted that he had been aware that the volume of fuel changed when it changed in temperature.

148               The 11 January letter stated that the statistical analysis performed by Caltex revealed losses consistent with the volatile nature of petroleum products.  Caltex said there was no need to assess the cause of the losses or whether further investigation was required, as the losses were not considered to be significant.  Flomad contended that the 11 January letter was misleading as it represented that losses were due to the volatile nature of petroleum products, and therefore due to evaporation. Flomad argued that the letter implied that there was no foundation to Mr Taleb’s concern that Flomad’s fuel had shrunk due to cooling. The 11 January 2001 letter does not dispute the claim made by Mr Taleb that loss was caused by shrinkage.  It does not follow that the evaporative and handling or bulk stock variance allowance confines all fuel loss to evaporation. Rather the allowance reflects an acceptance in the industry that petroleum is not only volatile, but also prone to some loss during its delivery. Although the term volatile can refer to evaporative qualities, it can be used to describe something that is fickle or difficult to control.

149               Even if I were to assume Flomad suffered loss due to the shrinkage of fuel, the claim that Caltex made misleading representations regarding the consistent temperature and volume of fuel is rejected for the foregoing reasons.

Specific Performance

150               On 28 March 2000, Mr Aponas and Mr Boysen met with Mr Taleb at the site. The purpose of the meeting was to discuss various unresolved issues between Caltex and Mr Taleb and the potential sale of the site. It was agreed that Mr Aponas would put a formal proposal in writing to Mr Taleb.

151               On 11 April 2000, Mr Aponas wrote to Mr Taleb (“11 April letter”). Given the significance of the letter to this proceeding I propose to set out the letter in full. The letter was addressed to Mr Jason Taleb at the site. It read as follows:

“Dear Jason

Subject:           Caltex Moorabbin

Thankyou for your time on Tuesday 28^th March 2000, when we discussed the history and relevant issues of Caltex Moorabbin.

From the meeting and subsequent discussions with various Caltex personnel I confirm the following:

1.      Caltex is responsible for any contamination caused during our ownership. Caltex will, under the terms of the sale contract, agree to provide you with a report from an independent environmental expert engaged by Caltex, certifying an opinion that the property is not contaminated beyond the level suitable for ongoing service station use. Where remediation work is required prior to the issue of the certificate to achieve that suitable level, Caltex will at it’s cost arrange for that work to be undertaken prior to completion of the sale.

2.      Caltex to sell the Moorabbin location to you for a price of $810,000 (excluding LPG/Vitalgas installation – lines, tanks and dispensing equipment. Additional exclusions being the Caltex image and dispensing pumps.

      The sale will include a release of responsibility of the underground tank under the Salesroom area.

      Any agreement to sell you the property would be subject to your agreement to enter into a deed releasing and indemnifying Caltex from any and all claims, past, present & future in relation to the property as may exist at the date of completion of any such sale.

2.      The sale of the location will be conditional upon the signing of a standard 5 year supply year agreement with an avoided cost of 1.50cpl for unleaded and leaded petrols only. Normal M.A.P. assistance will apply. The cost of freight on petroleum products will be charged and will be payable by you.

3.      Provision of adequate security acceptable to Caltex will form part of the supply agreement.

The sale of the location is subject to Caltex management approval and this will be sought upon your acceptance of the above terms and conditions.

I trust this meets with your approval and would request that you sign the attached copy and return it to your Business Manager, Mr Steve Boysen. When this is received Steve will forward a draft supply agreement for your perusal.

Yours faithfully,

MARK APONAS

RETAIL SALES MANAGER

CC:     Steve Boysen

            Harry Osman

I accept the above terms and conditions

……………………………………

Jason Taleb

Caltex Moorabbin”

152               Mr Taleb did not sign the letter. He gave evidence that he was not happy with the 11 April letter when he first read it. He said that he did not sign it because it “needed a lot of clarification”. Mr Taleb said that any agreement with Caltex had to be put in writing, cleared by him and then cleared by his lawyers.

153               Notwithstanding Mr Taleb’s view that the 11 April letter required clarification he gave evidence that he accepted all the points raised in the 11 April letter in a meeting held with Caltex officers on 25 May 2000 (“the 25 May meeting”). Counsel for Flomad submitted in their written outline of submissions on the issue of specific performance as follows:

“On 25 May 2000, Flomad, by its director Jason Taleb, in the presence of “Caltex management” accepted the offer contained in letter dated 11 April 2000 which offer was thus “approved” by “Caltex management”. That letter and the draft contract sent on 13 June 2000 by Caltex’s solicitors constitute a “sufficient memorandum” within the meaning of s126 of the Instruments Act 1958.”

154               Flomad’s contention is that the written offer of 11 April 2000 contained all the terms of a proposed contract between it and Caltex, and that the written offer was orally accepted on 25 May 2000.

155               Caltex contended that the 11 April letter did not contain all the terms of the alleged contract, but rather was used as the basis for further negotiation. Caltex’s position is that there were unresolved issues remaining after 25 May 2000 such that it cannot be said that there was a concluded agreement at the meeting.

156               Caltex raised other issues concerning the meaning of the 11 April letter, which it is not presently necessary to deal with. An issue of central importance in this proceeding is, in light of the 11 April letter, what was agreed upon at the 25 May meeting. It is to that issue that I now turn.

157               The 25 May meeting took place at Caltex’s head office in Sydney. It was attended by the following people:

·        Mr Taleb

·        Mr Meynink (Caltex’s National Retail Manager)

·        Mr Boysen

·        Mr Caples (an environmental consultant to Caltex)

·        Ms Batson (who at the material time was the Divestment Sales Manager of Caltex)

158               Each of the individuals present at the meeting gave evidence of what occurred at the meeting.

Mr Boysen

159               Mr Boysen gave evidence that he met briefly with Mr Meynink before the meeting commenced. He said that he was in attendance for the entirety of the meeting, which took three quarters of an hour. He said that Mr Caples and Ms Batson were present for the duration of the meeting, apart from when Mr Caples left briefly to collect a document. Mr Boysen took notes of the discussions during the meeting. Mr Boysen said that people at the meeting were speaking quickly and that some of the terms in the notes were his own shorthand. He said that he did not review the notes later but gave a copy of them to Mr Taleb.

160               Mr Boysen said that he was aware of the 11 April letter. So much is unsurprising given that Mr Aponas sent him a copy. He said that in the 5 minute briefing of Mr Meynink before the meeting he mentioned the 11 April letter.

161               Mr Boysen denied that Mr Taleb accepted the terms of the 11 April letter at the 25 May meeting, stating that Mr Taleb continued to raise issues such as contamination, whether there was a tank under the salesroom and the indemnity clause that Caltex required to be in any written contract for the sale of the site.

162               On the topic of contamination, Mr Boysen gave evidence that Mr Caples referred to the contamination at the site as being at an acceptable level for a service station. Mr Boysen said it was agreed that there be a further environmental site assessment. Mr Boysen also gave evidence that Mr Taleb claimed there were problems with a previous environmental assessment. Mr Boysen said that there was discussion about what would be done to carry out a further assessment and also to see if there was a tank underground “in a certain place” (meaning under the salesroom).

163               Mr Boysen said that the Caltex representatives agreed to arrange for a contract of sale to be drafted while in the meantime other issues were on the table.

164               Mr Boysen recalled Ms Batson discussing Caltex’s requirement for an indemnity clause to be in the contract and discussions concerning a “line in the sand” on responsibility for contamination.  Mr Boysen said that Ms Batson required it to be a term of any contract for sale that the purchaser indemnified Caltex against claims with respect to future contamination. According to Mr Boysen no agreement was reached on this point.

165               Mr Boysen referred to the passage in his notes under the heading “obligations”. He said “obligations” was his word, as distinct from a word actually used at the meeting. However, the three items under that heading referred to matters which Caltex representatives agreed to do, that is, prepare a draft contract, provide further environmental testing and certify that there was no tank under the salesroom.

166               Mr Boysen said that Mr Taleb referred to many claims he had against Caltex arising out of past issues and that Mr Taleb agreed to quantify them within 24 hours. The reference to 24 hours is consistent with the sequence of Mr Boysen’s notes in the context of Mr Meynink making a comment on those claims.

167               Mr Boysen gave evidence that it was his understanding on 25 May 2000 that for any sale to take place “a proposition had to be raised and signed off by management”. He was unsure whether that issue was raised on 25 May but said that it had previously been raised with Mr Taleb.

168               Mr Boysen denied that a concluded agreement was reached at the 25 May meeting. He said that further discussions were required to reach agreement on the indemnity clause in the contract and the price of PULP, and that management had to approve the sale. Further, the outcome depended on the result of additional well testing. Mr Boysen refuted the suggestion, put to him in cross-examination, that his evidence that no concluded agreement was reached was a concoction.

Mr Meynink

169               Mr Meynink’s recollection of the meeting was not as sharp as that of Mr Boysen. Mr Meynink said the meeting’s purpose was to discuss “issues” Mr Taleb had regarding the site. Mr Meynink did not recall the 11 April letter being mentioned at the 25 May meeting. Mr Meynink denied that Mr Taleb said he was prepared to accept Caltex’s terms for a sale of the site. He recalled that Mr Boysen took notes and that the majority of the meeting was about environmental issues. Mr Meynink said that he was happy to listen to the issues and make a recommendation about the sale, if necessary, but that the divestment of the site required approval at a higher level than his level of authority in Caltex. He gave evidence to the effect that the terms of his delegation of authority did not encompass the power to commit Caltex to sell the site.

170               Mr Meynink said that as far as he was concerned there were no obligations or commitments entered into and that he had no authority to make obligations or give commitments about the site. He admitted that the sale of the site was discussed and that there was discussion about a contract, a dealer agreement and a discount price for fuel. It was clear that $810,000 was the agreed price for the land itself.

171               Mr Meynink believes that he would have said, at the 25 May meeting, that the sale was subject to board approval. He could not precisely recall whether he did so. He said that he had a clear recollection of Ms Batson saying that the indemnity clause in the contract was not negotiable. He said that Mr Taleb made no specific response on that issue.

172               Although Mr Meynink was not challenged on his evidence, in that it was not put to him that his version of events at the meeting was a concoction, I was later invited to accept that he was untruthful in giving that evidence. I reject that invitation. Mr Meynink’s memory of the meeting was not as good as that of Mr Boysen, but I do not consider that he was untruthful in giving his evidence.

Ms Batson

173               Ms Batson said that Mr Meynink invited her to the 25 May meeting. She said that she was unaware that Mr Aponas had written the 11 April letter to Mr Taleb.  Ms Batson said that when she arrived at the meeting with Mr Caples the other participants were already present. She said that she left before the end of the meeting. She considered that she was at the meeting for about 10 minutes but later said that she was not sure about that.

174               Ms Batson gave evidence that she said that the indemnity clause was non-negotiable. She said that after discussions regarding the sale of the site to Mr Taleb for the agreed price she commented that she would prepare a contract but the indemnity clause in favour of Caltex would be in the contract.

175               Ms Batson said the sale price of $810,000 was discussed, as was an arrangement for a discount for unleaded petrol and leaded petrol. She said that there was no agreement to prepare a draft contract within 24 hours and that no date was specified to perform that task.

Mr Caples

176               Mr Caples was asked to attend the meeting by a Mr Moore, a former divestment property manager with Caltex. He said that he entered the meeting with Ms Batson when Messrs Meynink, Taleb and Boysen were already in attendance. He said that he left before the others, once the environmental issues were dealt with. Mr Caples said that the 11 April letter was not discussed in his presence. He said that some of the topics raised in the letter were discussed but the letter itself was not discussed. Mr Caples said that the main topic of discussion was contamination. According to Mr Caples, discussion occurred on further testing at the site, including a remark that if the contamination levels were high the sale would not proceed. If the further testing showed a reasonable level of contamination consistent with on-going use as a service station then the sale would proceed. He said that further testing was required to satisfy Mr Taleb’s concerns.

177               Mr Caples said he had a clear recollection of the 25 May meeting but could not recall “every word” uttered. He said that he came away from the meeting with specific instructions to carry out works designed to address issues raised by Mr Taleb at the meeting.

178               Mr Caples recalled in his affidavit evidence, which constituted his evidence in chief, that Ms Batson remarked at the meeting that the contract of sale would include the standard clause that the purchaser would indemnify Caltex for any contamination on the site from the sale date. Mr Caples said that Mr Taleb gave no specific response to that remark.

Mr Taleb

179               Mr Taleb gave evidence that he recalled the 25 May meeting “very vividly” although conceding elsewhere in his evidence that he had a poor memory. Mr Taleb said that when he arrived at Caltex’s head office Mr Boysen took him into the boardroom where Mr Meynink was present. He said that 5 to 10 minutes later Mr Caples and Ms Batson entered the room.

180               Mr Taleb said that nothing of substance happened at the meeting until Mr Caples and Ms Batson arrived. He said that he asked for the meeting to be taped, but when Mr Meynink refused this request, it was agreed Mr Boysen would take notes. Mr Taleb said that he trusted Mr Boysen and was happy for him to take notes of the meeting. He said that there was no written agenda but that he had one “in my head”.

181               Mr Taleb said that he started with the issue of contamination, which for him was “a burning topic”. He said that there was discussion on this topic for most of the meeting, some 20 to 25 minutes out of a meeting of about one hour’s duration.

182               Mr Taleb, contrary to the evidence of the Caltex witnesses present at the meeting, claimed that he said:

“I will indemnify Caltex of any further contamination that may happen on the site from the time I actively take the site on.”

Mr Taleb said that it was agreed that Caltex would be responsible for contamination during the period when it owned the site, spanning about 45 years. He said the sale price of $810,000 was then agreed and a discount of 1.5 cents per litre on unleaded and leaded petrols was agreed. He said that all issues were addressed, everything was agreed upon and that he had no further problems. He said that he asked that the transaction be completed by 30 June 2000, to avoid any GST implications.

183               Mr Taleb said Mr Meynink asked him “if we do a draft contract would you actually sign?”. He stated that he agreed “provided it has the same details we’ve got right now – absolutely”. He claimed that Mr Meynink undertook to prepare a draft contract in 24 hours. No such version of events was put to Ms Meynink in his cross-examination.

184               Mr Taleb gave further evidence on the topic of a draft contract being provided by saying that Ms Batson said a draft could be provided in 24 hours. He said that he asked Mr Meynink, who looked at Ms Batson, whereupon Ms Batson said, “We’ve got everything. We know who he is”. That account, was never put to Ms Batson or Mr Meynink in cross-examination of them by counsel for Flomad.

185               Mr Taleb said that he raised a monetary claim he had against Caltex for losses he had suffered but which he had been unable to precisely quantify. He said that Mr Meynink said he would look at any claims Mr Taleb particularised.

186               Mr Taleb said that in his “opening” at the meeting he mentioned Mr Aponas and said that Mr Aponas’ letter did not address all his concerns. He said that he mentioned the 11 April letter and that “all the points that were handled in the meeting were from that letter”. Under later cross-examination, Mr Taleb said that he didn’t refer to the 11 April letter “as the letter of 11 April” but that he “would have spoken of Mr Aponas”. In response to the next question Mr Taleb said that he did refer to the 11 April letter. Mr Taleb said that the notes of the meeting show that every point discussed was raised in almost the same sequence as in the 11 April letter. That evidence is obviously incorrect as certain issues that were raised in the meeting and referred to in Mr Boysen’s notes, for example, the monetary claims of Mr Taleb against Caltex for past losses were not mentioned in the 11 April letter.

187               Mr Taleb accepted that Caltex had to respond on a discount price for PULP.Under re-examination, Mr Taleb said that PULP was not a critical issue and described the issue as to whether a discount would apply to PULP under the mooted 5 year supply agreement as “a matter outstanding from 25 May”.

188               Under cross-examination, Mr Taleb said that when he received the 11 April letter he did not accept its terms, but said “when I got to Sydney there was an acceptance of it”. Mr Taleb said that he had not accepted the terms and conditions of the 11 April letter at any time before 25 May but said “on 25 May I accepted everything”. He was unable to say, however, that he had reached agreement on the terms of a supply agreement, a draft copy of which he was to be provided with after the 25 May meeting.

189               Mr Taleb admitted that there was no discussion at the 25 May meeting about the provision of adequate security acceptable to Caltex as part of a supply agreement; but he said he was prepared to give such security.

190               He said that he had no problem giving Caltex an indemnity with respect to further contamination provided that Caltex made sure the site could be operated as a service station, with an environmental report to that effect. He admitted that he did not exchange contracts with Caltex for the sale of the site, but said “we absolutely had an agreement”.

191               Mr Taleb conceded that at the 25 May meeting he did not agree to purchase the site without knowing the result of the environmental testing which was to be conducted.

192               Mr Taleb agreed, under cross-examination, that if the contamination question were satisfactorily answered he would enter into a contract, which would “trigger” him to settle. He gave evidence to the effect that he first had to be satisfied about the contamination issue.

193               Mr Taleb effectively agreed that he did not accept, at the 25 May meeting, that the soil was not contaminated beyond a level fit for a service station.

194               Mr Taleb said that at the end of the meeting he asked Mr Boysen for a copy of his notes. He said that 10 minutes later Mr Boysen gave him a copy saying that, “you have no idea what I’ve gone through actually to get these for you”. He said that Mr Boysen told him that Mr Meynink “was not going to honour part of it”.  Mr Boysen and Mr Meynink were not cross-examined by counsel for Flomad on the circumstances in which Mr Taleb received this copy of the notes of the meeting.

195               Mr Taleb described Mr Boysen’s notes at first when asked in re-examination as “not a very accurate summary of what happened in the meeting”. He next said that the details were “fairly accurate” but that “some details” were “not written in a proper context”.  Mr Taleb then said “it’s fairly almost 100% accurate”. After giving that evidence, he then said that they were “not too accurate minutes in total”. After claiming that he misunderstood the previous questions he finally said that the notes were “not very accurate” but “do say 99% of what happened” and that some words were “out of context”. Mr Taleb had no recollection of what he told his lawyers about the accuracy of the notes.

Evidentiary Conclusions

196               Mr Boysen’s notes traverse a wide range of topics including:

·        contamination issues, including environmental reports;

·        whether there was a tank under the salesroom;

·        the drafting of a contract;

·        money claims by Mr Taleb against Caltex;

·        vital gas (in relation to which Mr Taleb had a separate dispute);

·        $810,000 sale price;

·        intention by Mr Taleb to buy the site;

·        agreement on a 5 year supply agreement with a need to agree on PULP discount.

197               It is not necessary to make precise findings of fact on every aspect of the 25 May meeting. The critical issue to determine is whether there was an acceptance by Mr Taleb of the offer contained in the 11 April letter, assuming that the letter was capable of being characterised as an offer (as to which see [208]).

198               It appears to be consistent with the evidence of all participants that agreement was reached on the following matters:

·          Caltex would arrange for the conduct of further environmental testing at the site to ensure that the site was suitable for continued use as a petrol station;

·          the proposed purchase price would be $810,000;

·          the purchase was dependant on the result of the testing to satisfy Mr Taleb’s concerns;

·          there was a need for a further agreement on the discount price for PULP.

199               The witness who impressed me as having the best recollection of the 25 May meeting was Mr Boysen. Mr Caples and Ms Batson attended for specific purposes and said they were not present for the whole meeting. Mr Meynink was unaware of the background issues before a short pre-meeting briefing by Mr Boysen.

200               As he took notes of the meeting, Mr Boysen would also have been particularly attentive at the meeting. Further, not being in the current employ of Caltex, Mr Boysen is a disinterested observer in the outcome of this litigation. Additionally, Mr Boysen impressed me when giving his evidence as a witness of the truth who did not seek to embellish his evidence.

201               I accept the following matters raised in the evidence of Mr Boysen:

·          prior to the meeting he held a short briefing of a few minutes with Mr Meynink before Mr Taleb entered the meeting room;

·          he was present for the entire meeting which took three quarters of an hour or thereabouts;

·          he took notes of the meeting but did not review them later;

·          Mr Taleb did not accept all the terms of the 11 April letter at the meeting;

·          Mr Taleb wanted further testing done to ensure that the contamination was at an acceptable level for a service station site;

·          Mr Taleb was to table his historical money claims against Caltex within 24 hours;

·          a draft contract of sale was to be prepared but no distinct time frame was mentioned for its preparation;

·          there was no concluded agreement because there had to be further discussions on unresolved issues, including:

-    additional environmental testing

-    checking whether there was a tank under the salesroom

-    Mr Taleb’s agreement to indemnify Caltex from contamination related claims in accordance with the standard indemnity clause insisted upon by Ms Batson

-    the price of PULP.

202               I do not accept the following aspects of Mr Taleb’s evidence:

·          that he said that he would indemnify Caltex from any further contamination that may happen on the site from the time he would take the site on.  All Caltex witnesses said, and I accept, that Mr Taleb made “no specific response” to Ms Batson’s insistence that the contract contain the standard indemnity clause.

·          that he said he had no problems with an indemnity clause “as long as Caltex did all their work” so that the site was clean enough to operate as a petrol station.

·          that all issues (raised in the 11 April letter) were addressed, everything was agreed on and he had no further problems. This evidence is inconsistent with his admission under cross-examination that he didn’t agree that he had to purchase the site without knowing the result of the further testing and that contamination issues had to be addressed and answered satisfactorily before he would enter into a contract. Also there was, as Mr Taleb admitted, need for a further agreement on PULP. He described this as a matter “outstanding” from the meeting.

·           that a draft contract would be provided in 24 hours. The position of this aspect of the discussion, as recorded in Mr Boysen's notes, supports the evidence of other witnesses that the 24 hours related to the time for Mr Taleb to submit his money claims.

·          that Ms Batson said “we've got everything. We know who he is”. So much was not put to Ms Batson or any other Caltex witness who was at the meeting. I do not accept that Ms Batson said anything of the kind.

·          that Mr Boysen told him that he had no idea what Mr Boysen had gone though to get the notes copied for him or that Mr Boysen said that Mr Meynink would not honour part of it. No such allegations were put to Mr Boysen or Mr Meynink and I do not believe that they were made.

203               I generally consider Mr Taleb to be an unreliable witness who was prepared to embellish certain matters if he considered that doing so would assist his case. He also occasionally contradicted himself as is evident from a review of his evidence about the accuracy of Mr Boysen's notes at [195] above.

204               Taking the issues as numbered in the 11 April letter, and applying the discussion at the 25 May meeting to those issues, the following observations can be made:

·          the paragraph numbered 1 is a statement by Caltex of its intention concerning contamination. There was nothing in the meeting to indicate that Mr Taleb was unhappy with that paragraph.

·          the paragraph first numbered 2 dealt with the sale price (which was agreed at the meeting), and a tank under the salesroom (which was to be the subject of a certificate, a relatively minor matter). However, the last item in that numbered paragraph related to the indemnity clause in the contract, upon which I have found that there was no agreement at the meeting.

·          the second paragraph numbered 2 was not agreed to in the sense that Mr Taleb was pushing for the discount to apply to PULP as well as to “unleaded and leaded petrols.”

·          there was no discussion at the meeting about the third numbered paragraph in the letter. Mr Taleb admitted that the provision of adequate security acceptable by Caltex as forming part of a supply agreement was not dealt with at the meeting.

·          at the foot of the first page of the letter, Caltex required the sale to be subject to management approval. I accept the evidence of Mr Meynink that he did not give approval to the sale at the meeting. I also accept that he had no authority to do so. The current delegation he had, at the time, did not permit him to agree to a sale at the price proposed for the site.

205               Caltex provided a document entitled “Delegation of Authority” setting out the level of authority delegated to managers based on the type of decision and various level of quantum. The document indicates that a Retail Manager, such as Mr Meynink, has a delegation limit of a book value of $375,000 for the sale, mortgage or disposition of capital assets.  Mr Meynink did not have the authority to give approval for the sale of the site, given its agreed sale price of $810,000.

206               Flomad asserted that on 25 May 2000, it accepted the offer contained in the 11 April letter through Mr Taleb. That allegation is not made out. It is incorrect as a matter of fact. No contract was formed on 25 May 2000 for the sale of the freehold of the site from Caltex to Flomad. It is unnecessary therefore to consider the implications for this proceeding of the provisions of s126 of the Instruments Act 1958 (Vic).

207               It is also beyond doubt that on 25 May 2000, Caltex did not enter into any enforceable obligation, or an obligation of any kind, to enter into a formal contract for the sale of the site. A draft contract was to be prepared for Mr Taleb's consideration, but there was no concluded agreement at the meeting as issues concerning the indemnity clause, contamination, the supply agreement and PULP petrol were still unresolved as at 25 May 2000.

208               In any event, I accept the submission of counsel for Caltex that the 11 April letter did not offer to conclude an agreement in its terms. Approval of Caltex management was a condition of any sale proceeding (which was made clear in the 11 April letter), as was the agreement to an indemnity clause.

209               At no stage prior to the filing of his cross claim in this proceeding did Mr Taleb allege that he had a concluded agreement for the sale of the site as a result of the 25 May meeting. That fact reinforces my view that I should reject his evidence that an agreement was concluded in Sydney on that day.

210               As I consider that there was no concluded agreement, it is unnecessary for me, and in my view a waste of scarce judicial resources, to consider whether Flomad was, as at the date of its cross claim (September 2001) and is now, willing and able to complete the alleged contract. It is even less necessary or appropriate to consider whether, in the event that there was a concluded contract, specific performance or damages in lieu of specific performance should be ordered.

211               Flomad’s cross claim will be dismissed insofar as it deals with the topic of “specific performance”.

Caltex’s claims

212               By its further amended application Caltex sought inter alia the following relief:

·        a declaration that dealer agreements entered into in 1995 and allegedly in 1999 had terminated (ultimately a declaration was sought that the Dealer Agreement subsisting between the parties as at 14 August 2001 was terminated with effect from 5 pm on that day, in consequence of the service by Caltex on Flomad of a notice of termination on or about 10 July 2001);

·        possession of the site (land) known as Corner South and Chesterville Roads, Moorabbin (582-586 South Road, Moorabbin);

·        judgment for outstanding rent, fees and other charges payable under the dealer agreements

·        mesne profits

213               In the final orders sought by Caltex in its written submissions the following monetary orders were claimed:

·        Flomad pay Caltex $166,239.15, consisting of:

-         $41,614.65 being the amount for which Flomad was indebted to Caltex at the commencement of the proceeding;

-         $124,625.50, representing Flomad’s uncompensated use and occupation of the Moorabbin premises from 1 August 2001 to 1 April 2002 (with $5,934.50 per calendar month until judgment).

Please note that the figure of $124,625.65 is based on a calculation of 21 months rather than the 20 months between 1 August 2001 and 1 April 2002. Therefore the correct figure is $118,690.00 for Flomad’s uncompensated use and occupation of the Moorabbin premises.

·        Flomad pay Caltex damages in the amount of $337,280.69 (on account of foreign fuel sales) with $15,256.88 accruing per month hereafter for so long as Flomad remains in occupation of the site.

·        Flomad pay Caltex interest on the sums claimed in the two preceding paragraphs, from the date of the commencement of the proceeding and hereafter at the rate prescribed by the Penalty Interest Rates Act 1989 (Vic).

·        Flomad pay Caltex its costs of the proceeding, including all reserved costs.

Indebtedness pursuant to the dealer agreements

214               In their final submissions, counsel for Flomad accepted that there was prima facie evidence of the indebtedness claimed in Caltex’s notice of termination of the agreement.

215               Caltex tendered a certificate of debt, the contents of which were not ultimately disputed by Flomad. The certificate showed that:

·        $41,674.34 was owing as at 11 April 2001

·        $44,480.78 was owing as at 10 July 2001

·        $50,549.15 was owing as at 16 August 2001; and

·        $52,171.87 owing as at 11 March 2003, (excluding mesne profits and damages payable from the sale of petroleum products other than Caltex products).

216               Counsel for Flomad contended that the only matters which it may rely on to rebut the prima facie evidence of the existence of the debt referred to in the certificate were:

·        Flomad’s claim to set off under the Excise Act 1901 (Cth) (a claim which is unable to be sustained for reasons identified earlier in these reasons), and

·        Flomad’s claim for rental credits, which counsel conceded was a point which “doesn’t go very far”.

217               Counsel’s observation about the rental credit issue not going very far was astute. There was an agreement between Caltex and Flomad for reduced rental, but only for three months. Mr Taleb wanted the rent reductions to go back to July 1998, but Caltex never agreed to do so. In the absence of mutual agreement to further rent reductions it cannot be said that the certificate overstates the debt which Flomad owes to Caltex.

218               It is therefore unnecessary to consider Flomad’s submission that Caltex had waived the clause in the Dealer Agreement preventing set-offs against debts owing under the agreement.

219               It is common ground that there was a dealer agreement subsisting between the parties on 10 July 2001, on which day Caltex served a notice of termination of the agreement.

220               In terminating the Dealer Agreement, Caltex relied on cl 49.1 (xvi) of the agreement, which allows for termination if a dealer “otherwise commits a breach of a provision of this Agreement”. The provision of such a ground for termination is made in s16(2)(j) of the Franchise Act.

221               Caltex relied on the following breaches of the subsisting Dealer Agreement. They were:

·        Flomad’s failure to pay the sum of $41,674.34 due to Caltex on 11 April 2001;

·        Flomad’s failure to pay rent for the site for June 2001, July 2001 and August 2001;

·        Flomad’s placement of signs on petrol bowsers revealing that it was selling fuel sourced from outside Caltex;

·        Flomad’s representation to customers that it would not accept “star cards” for fuel purchased because of a dispute with Caltex;

·        Flomad’s sale of “foreign fuel” since at least 16 April 2001;

·        Flomad’s continued sale of “foreign fuel” between 13 June 2001 and 14 August 2001.

222               It is unnecessary to deal with all breaches, as Flomad was in breach of the Dealer Agreement on 10 July 2001, and remained in breach on 14 August 2001, on account of its failure to pay to Caltex the arrears it owed, stemming from the $41,674.34 debt payable as at 11 April 2001.

223               In my opinion cl 49.1 of the Dealer Agreement operated, in this case, consistently with the Franchise Act (see s7(2) thereof). Compare Caltex Oil (Australia) v Best (1990) 170 CLR 516. Any alleged wrongdoing by Caltex, such as insisting on payment for fuel by bank cheque (assuming it to be a wrong doing, without deciding), cannot alter the fact that Flomad was in breach of the agreement by failing to pay Caltex the sums it owed Caltex, see Foran v Wight (1989) 168 CLR 385 at 401 to 402.

224               Caltex remained entitled to terminate the Dealer Agreement on the basis alone of the failure of Flomad to pay $44,480.78 as at 10 July 2001. A valid notice of termination was served on that day. It cannot be just and equitable in the circumstances to refuse to declare that the Dealer Agreement has been terminated; see s16(6) of the Franchise Act. Additionally, it is clear that for the Dealer Agreement to subsist would be pointless, as there has been a complete breakdown in trust between the parties and no viable commercial relationship between them can be revived.  The evidence was redolent with Mr Taleb’s lack of trust of Caltex. Caltex is unlikely to trust Mr Taleb given he admitted to telling “white lies” to Caltex employees about his financial affairs and commercial dealings.

225               There has been no valid basis advanced as to why Flomad should remain in possession of the site. Flomad has made no attempt to pay the arrears it owes Caltex. Instead it fastened on a right to set off based on claims which it could not substantiate i.e. hot fuel and excise claims. It put Caltex to proof on its debts. It unnecessarily elongated the proceeding. To reward behaviour of that sort, in the teeth of a demand for enforcement of the Dealer Agreement, would make the regime provided by the Franchise Acteither a dead letter or a laughing stock.

226               I consider that Caltex is entitled to possession of its land and I will order accordingly. I also consider that it is entitled to payment of the debt Flomad owes to it, as set out at [215] above. Additionally, it is entitled to a declaration that the Dealer Agreement, subsisting as at 14 August 2001, has been terminated. Interest and costs orders should follow as a consequence. I now turn to the question whether Flomad should pay damages to Caltex on account of foreign fuel sales.

227               Flomad challenged whether the Dealer Agreement prevented it from selling foreign fuel “absolutely” given it was allegedly forced into the position of doing so, because Caltex would not supply fuel unless it was paid for by bank cheque.  Flomad also contended that by receiving bank cheques in the past, Caltex had waived its right to enforce the Dealer Agreement in respect of payments for fuel.  I reject this contention on the basis that cl 62 of the Dealer Agreement specifically provides that:

“The right of either party to require strict performance or observance by the other of any obligations under this Agreement shall not be affected by any former waiver, forbearance or course of dealing.”

228               Consequently, it cannot be said, consistently with the Dealer Agreement, that Flomad was forced into the position of obtaining foreign fuel and still comply with the agreement.  Ms Lambrianew of Caltex gave Mr Taleb reasons why Caltex required fuel to be paid for by bank cheque.  Therefore, I consider that Flomad breached the Dealer Agreement by obtaining foreign fuel in such a way as to render it liable to pay damages to Caltex in respect of that breach.

229               The sum of $337,280.69 referred to at [213] above arises from the evidence of a Mr Sincock in relation to the quantity of damages Flomad should pay Caltex on account of foreign fuel sales. Mr Sincock is a chartered accountant who was engaged by Caltex to prepare a report of the quantum of the loss suffered by it for loss of profit from the sale of petrol and diesel fuels from the site from 11 April 2001 to 11 March 2003, and ensuing losses from 11 March 2003.

230               Mr Sincock was cross-examined on the basis that he had calculated gross profit and not net profit. However, Mr Sincock observed that given “the huge size and volumes that Caltex infrastructure requires” any reduction as against gross profit margin would be negligible.

231               In other words Caltex achieved no saving in not supplying the site over the period in question. Mr Sincock was not challenged on that evidence. I see no basis to disagree with Mr Sincock’s assessment.

232               Further, unless there be any doubt, Caltex’s claim for mesne profits (based on the differential between rent payable under the Dealer Agreement and interim rent of $750 per month paid by Flomad under an interlocutory order of the Court) was not seriously disputed. It was also not the subject of contrary evidence.

Final Orders

233               Having regard to the foregoing, I will order as follows:

1.      It is declared that the dealer agreement subsisting between the applicant and the respondent as at 14 August 2001 was terminated with effect from 5 pm on that day in consequence of the service by the applicant of a notice of termination of the dealer agreement on the respondent on or about 10 July 2001.

2.      Within 21 days of the date of this order the respondent give possession of the land at 582-586 South Road, Moorabbin in the State of Victoria (“the land”) to the applicant.

3.      On or before 1 July 2003 the respondent pay the applicant $178,108.15 (being the amount of $41,614.65 for which the respondent was indebted to the applicant as at the filing of its application, together with $136,493.50 on account of the respondent’s uncompensated use and occupation of the land from 1 August 2001 to 1 July 2003).

4.      The respondent pay the applicant damages in the amount of $337,280.69 with $15,256.88 accruing per calendar month until the respondent gives possession of the land to the applicant.

5.      The application otherwise be dismissed.

6.      The respondent pay the applicant interest on the sums referred to at paragraphs 3 and 4 of this order from 14 August 2001 until the date of this order at the rate prescribed from time to time by the Penalty Interest Rates Act 1989 (Vic).

7.      The cross claim be dismissed.

8.      The respondent pays the applicant’s costs of the proceeding, including reserved costs, to be taxed in default of agreement.

I certify that the preceding two hundred and thirty three (233) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall.

Associate:

Dated:              26 June 2003

Counsel for the Applicant:	Mr R Garratt QC with Mr P Corbett
Solicitor for the Applicant:	Hall & Wilcox
Counsel for the Respondent:	Mr G Bigmore QC with Mr B Guzzo
Solicitor for the Respondent:	Lim & Associates
Date of Hearing:	11, 12, 13, 14, 17, 18, 19, 20, 24, 25, 26 and 31 March; 1 and 2 April 2003
Date of Judgment:	26 June 2003