FEDERAL COURT OF AUSTRALIA

Hinterland Marine Pty Ltd v Maritime Global Pty Ltd [2010] FCA 683

THE COURT ORDERS THAT:

1.                  The separate question namely, “Is the contract referred to in paragraph 4 of the statement of claim as “dealership agreement” a franchise agreement in terms of the Franchising Code of Conduct (Cth) in the Schedule to the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) made pursuant to the Trade Practices Act 1974 (Cth)?” be answered, “Yes”.

2.                  Costs of and incidental to the determination of the separate question are reserved.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

“When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean -- neither more nor less.”

“The question is,” said Alice, “whether you can make words mean so many different things.” “The question is,” said Humpty Dumpty, "which is to be master - - that's all.”

Lewis Carroll, Through the Looking Glass, Chapter 6.

1                                             The corporate respondent, Marine Global Pty Ltd (Marine Global) is engaged in the development, manufacture, distribution and sale of marine craft and associated products. It trades under a well known business name “Haines Hunter”. The other respondent, Mr Haber, is a director of Marine Global. The applicant, Hinterland Marine Pty Ltd (Hinterland Marine) is one of Marine Global’s dealers.

2                                             A dispute exists between Hinterland Marine and Marine Global. At the heart of that dispute is a question as to whether the Franchising Code of Conduct (Cth) (Franchising Code) in the Schedule to the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) (Franchising Regulations) made pursuant to the Trade Practices Act 1974 (Cth) applies to the dealership agreement which governs their business relationship. The answer to that question turns ultimately on whether, on the true construction of the definition of “motor vehicle” in s 3 of the Franchising Code, that definition applies to the marine craft which Marine Global supplies to Hinterland Marine. That definition has truly Delphic qualities. Having become acquainted with it for the purposes of this case I can well understand how reasonable men of commerce might reasonably differ as to its meaning and application.

3                                             At the request of the parties, I made an order pursuant to O 29 r 2 of the Federal Court Rules that the question as to whether the contract referred to in para 4 of the statement of claim as “dealership agreement” is a franchise agreement in terms of the Franchising Code be determined as a separate question.

4                                             The ordering of the determination of a separate question can be fraught with a risk not of truncating the length of a proceeding but rather of elongating it beyond what would occur if all questions were left to be determined at trial. Especially that is so where the determination of the separate question, one way or the other, will not completely resolve a proceeding. In this case, so I was assured, resolution of the separate question one way would resolve the matter and the other way substantially so. A narrow factual dispute may remain in the latter case but, as to this, the parties further assured me that it was very likely this could be informally resolved once the separate question was determined. There was therefore something of a calculated risk in agreeing to the course proposed but, especially now having had the benefit of candid and able submissions by counsel for the respective parties on the hearing of the separate question, I believe that it is appropriate to proceed to determine that question.

5                                             The dealership agreement in question is an agreement in writing made on 16 October 2008 between Marine Global and Hinterland Marine. By way of “Background”, the agreement recites the nature of the business, already set out by me above, in which Marine Global is engaged. It further recites and the fact is that Hinterland Marine is engaged in the retail sale of marine craft and associated products from retail premises. The agreement does not give any definitional precision to the nature of the marine craft to be supplied to Hinterland Marine as a Haines Hunter dealer by Global Marine. A clue though is offered by the definition of “Hull Price” in cl 1, which is defined to be “the price of Hulls for Haines Hunter craft supplied by Haines Hunter to dealers being the price of craft excluding any options or accessories”. It is not necessary, for the purpose of resolving the separate question, further to detail the contents of the dealership agreement.

6                                             For the purposes of the determination of the separate question and apart from admissions on the pleadings a number of facts were agreed between the parties. Global Marine admitted that the craft supplied by it pursuant to the dealership agreement were designed to use an outboard motor as their principal means of propulsion. It further admitted that such craft were equipped with various fixtures and fittings including a steering wheel and metal cabling. It was common ground that the craft were not supplied with any form of motor or other device to allow propulsion; rather, the supply, type and fitting of a device to allow propulsion was left to the discretion of the dealer, in this case Hinterland Marine. The marine craft with these qualities were what Marine Global termed its “hulls”. Other facts were sought, belatedly, to be introduced by affidavits filed by the respective parties but those which I have just recited and others I mention below are all that I regard relevant to the resolution of the separate question.

7                                             Section 4(2) of the Franchising Code provides that, a motor vehicle dealership agreement is “taken to be” a franchise agreement for the purposes of that code. Put another way, even if an agreement does not meet the cumulative requirements set out in s 4(1) of the Franchising Code, if, nonetheless, it is a “motor vehicle dealership agreement” as defined, it is a franchise agreement to which the code applies.

8                                             The following definitions in s 3 of the Franchising Code are pertinent:

motor vehicle dealership means a business of buying, selling, exchanging or leasing motor vehicles that is conducted by a person other than a person who is only involved as a credit provider, or provider of other financial services, in the purchase, sale, exchange or lease.

motor vehicle means a vehicle that uses, or is designed to use, volatile spirit, gas, oil, electricity or any other power (except human or animal power) as the principal means of propulsion, but does not include a vehicle used, or designed to be used, on a railway or tramway.

Examples of motor vehicles

1          motor car

2          motor cycle

3          motorcycle

4          tractor

5          motorised farm machinery

6          motorised construction machinery

7          aircraft

8          motor boat

“Motor vehicle dealership agreement” is not itself a defined term but it is plain enough that it is an agreement pursuant to which a motor vehicle dealership, as defined, is conducted.

9                                             It was uncontroversial that Hinterland Marine was not, in terms of the definition of “motor vehicle dealership”, only involved in its business as a credit provider or provider of financial services.

10                                          Uninstructed by the definition in the Franchising Code, there are, as a matter of initial. linguistic reaction, counterintuitive qualities about the notion that a small boat, be it one supplied with an engine or, as here, without but designed to take the same could ever be a “motor vehicle”; hence the recollection of the passage from Lewis Carroll’s Through the Looking Glass which introduces these reasons for judgement. This “Humpty Dumpty” style of drafting is not in Federal law unique to the definition of “motor vehicle” in the Franchising Code. For the purposes of the Quarantine Act 1908 (Cth), “vessel” is defined by s 5 in the following way:

vessel means:

(a)        a ship, boat or other description of vessel used in navigation by sea; or

(b)        an aircraft; or

(c)        an air cushion vehicle; or

(d)        an off-shore industry mobile unit (being an overseas installation) that is bound for, or is at, a port;

and includes a part of any of the above.

Absent this definition, one would not, I suggest, regard an aircraft or even perhaps a hovercraft or mobile oil drilling rig as a “vessel” as a matter of ordinary English.

11                                          The starting point must be the text of the definition of “motor vehicle” having regard to the context in which that defined term appears and the general purpose and policy of the provision concerned: see Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69].

12                                          As with the use of the word “vessel” in the Quarantine Act, what is apparent about the word “vehicle” in the definition of “motor vehicle” in the Franchising Code is that it is being used at a very general level of abstraction. The word is capable of such a meaning. The meanings given for “vehicle” in the Macquarie Dictionary (p 1888) include “means of transport” and “means of conveyance”. That it was being used in this way was common ground in the submissions made by the parties.

13                                          Accepting this shared premise, Global Marine then pointed to the way in which what followed in the definition limited the initial generality of “vehicle” and asked rhetorically and, I thought, somewhat incredulously, “How could this possibly apply to the hulls which we supply to our dealers?” This submission was developed by reference to the notes which appeared under the definition. Each of these, it was submitted, referred to an item which was a complete unit already fitted with a motor. This was not affected by the presence of the alternative “designed to use” in the definition proper because, so it was submitted, that alternative had to be read in conjunction with the what followed it, volatile spirit, gas, oil, electricity or any other power (except human or animal power).What followed were various inputs to a motor. Thus, so the submission went, all that “designed to use” captured were those “vehicles” already fitted with a motor but which had not yet been used, either because the input had not yet been supplied or, if supplied, the motor had not yet been used.

14                                          Some support for the construction put forward by Global Marine is offered by the way in which “motor boat” is understood in Australian idiom. The Macquarie Dictionary (p 1118) defines it to be “a boat propelled by its own mechanical power”.

15                                          Hinterland Marine’s submission also drew attention to the alternative “designed to use” in the definition. Its submission though gave that alternative a wider operation than that put forward by Marine Global. To produce and supply a boat which had a steering wheel, cabling and, as also seemed uncontroversial, an engine well and which was designed to use an outboard motor as its principal means of propulsion was, it was submitted, to produce and supply a boat which is “designed to use, volatile spirit, gas, oil, electricity or any other power (except human or animal power) as the principal means of propulsion)”.

16                                          Attention was directed in Hinterland Marine’s submissions to s 15AD of the Acts Interpretation Act 1901 (Cth). That section provides:

15AD  Examples

Where an Act includes an example of the operation of a provision:

(a)        the example shall not be taken to be exhaustive; and

(b)        if the example is inconsistent with the provision, the provision prevails.

17                                          Having regard to s 15AD and to the examples which appear in the note under the definition of “motor vehicle” in the Franchising Code, it was submitted that, even if these suggested that a motor had to be integral to the vehicle, that was not exhaustive of the reach of the provision and, further, that this would be inconsistent with the reach of the provision. It was further put that the term “motor boat” was apt to capture what Global Marine supplied to it because these boats were “designed for and intended to be used by way of motor propulsion”. They were “ultimately powered by a motor”.

18                                          Reference was made on behalf of Hinterland Marine to the ejusdem generis rule of statutory construction – general matters are constrained by specific matters. A good explanation of the operation of that rule is to be found in Pearce and Geddes, Statutory Interpretation in Australia (5^th ed, Butterworths, 2001), p104 at [4.19]:

[4.19]   A drafter may well not wish to spell out at length all the kinds of things or types of conduct to which an Act may apply. He or she may rest on the assumption that, having indicated the main specific matters or conduct within a broad category to which it is to apply, any general words will be read down to embrace only things or conduct falling within that category. So in specifying the animals that may be carried on a ferry, the drafter may refer to ‘horses, cows, sheep and other animals’. It would be regarded as an improper reading of the Act if it were suggested that a tiger fell within the words ‘other animals’. This is the classic example of the ejusdem generis rule – the general words are limited to apply only to animals of the same kind as those specifically mentioned. It is another way of saying that words derive meaning from the context in which they appear.

Contrast the position, however, if, in an Act to prohibit fights between animals, the prohibition applies to ‘bears, pigs, bulls, dogs, cocks, quail and other animals’. The drafter here is obviously anxious to prohibit all such contests and ‘other animals’ is included to avoid listing the whole of the animal kingdom. Again, context indicates this to be the case but also the animals specifically mentioned do not fall within any particular category. The very name of the rule indicates the necessity to establish a genus before it can be applied and the courts have made it clear that this will be their first inquiry. …

19                                          Identifying a genus within the definition of motor vehicle as a necessary first step for the application of the ejusdem generis rule of construction is no easy task. The words “volatile spirit, gas, oil, electricity or any other power (except human or animal power)”, if the exception is ignored, refer not to the actual means of propulsion, i.e. to the engine, but rather to the input to that means of propulsion. Yet that impression is challenged by the exceptions, “human or animal power”, each of which refers not to an input but rather to the very object that produces the power. Internal consistency is introduced and a genus found if the composite is regarded as an endeavour to cover all types of power. The exceptions to “other power” then make sense. A bicycle, for example, uses power as a means of propulsion, the power supplied by its human rider to its pedals. But for the exception, a bicycle would fall within the definition of “motor vehicle” for it is a vehicle which uses or is designed to use “other power” as its principal means of propulsion.

20                                          Even allowing for this, the definition must be read as a whole. In so doing the “animal power” exception provokes these thoughts. A dray, sulky, carriage or wagon might each readily be regarded as a vehicle which uses or is designed to use “animal power”. Yet, even if supplied with reins or traces, none can be propelled unless an animal (or, exceptionally in the case of certain State funerals, naval ratings) takes up the traces. Given that designed to use is one element of a definition, the presence of the animal power exception suggests that the “vehicle” with which the definition is concerned need not have an integral means of propulsion. It is enough if it is designed to have that. The same argument can be made in relation to human power with respect to a bicycle or a rickshaw. It is not a large step from this to regard a boat deliberately designed to take an outboard motor, to be steered from a steering position, not a tiller attached to the outboard motor and supplied with the requisite cables to the end of being steered from the steering position as not relevantly distinguishable from the landward dray, sulky, carriage or wagon examples which I have given. That is so even if one might not, absent the fitting of the outboard motor, describe it as a “motor boat” because at that stage it lacks its own means of propulsion.

21                                          Approaching the construction of the definition in the way discussed in the preceding paragraph would not mean that every boat fell within it. It is possible, for example, to fit an outboard motor to some types of dinghy, canoe or kayak but the principal means of propulsion for which such craft are designed is human power via an oar or paddle. Further, one would not, as a matter of language, describe such boats as “motor boats” even if they were fitted with an outboard motor.

22                                          Regard to the history of the Franchising Code does not lead to any definitive conclusion as to which of the constructions promoted by the parties is to be preferred. As made in 1998 s 4(2) of the code, as now, deemed a motor vehicle dealership agreement to be a “franchise agreement”. The Franchising Code did not then include any definition of “motor vehicle dealership” or “motor vehicle”. These definitions were inserted in 1999 by the Trade Practices (Industry Codes – Franchising) Amendment Regulations 1999 (No. 1) (Cth)(SR 1999, No 188).

23                                          No explanatory memorandum was circulated in conjunction with the regulatory amendments in 1999. Regard to secondary materials discloses that, as originally made, the express provision in s 4(2) in respect of motor vehicle dealerships was responsive to a recommendation made in the report of the House of Representatives Standing Committee on Industry, Science and Resources entitled, Finding a Balance – Towards Fair Trading in Australia (Parliamentary Paper 83/97, tabled 26 May 1997). That report is popularly known as the “Reid Committee Report” as the chairman of the committee concerned when the report was finalised was The Hon Bruce Reid MP.

24                                          As originally made, it would have been a very moot point indeed as to whether the deeming effected by s 4(2) of the Franchising Code extended to motor boats, with or without an integral engine, aircraft or even, notwithstanding reference to the same in the Reid Report, self-propelled farm machinery dealerships. It can be stated with confidence that the 1999 amendments which inserted the definitions of present interest expanded the reach of s 4(2) but the question remains, was the definition extended as far as Hinterland Marine contends?

25                                          Reflecting on the purpose of the definitions in the s 4(2) context in which they appear is not of much assistance. Obviously enough, the Governor General in Council, in making s 4(2) and then expanding its reach, made a value judgement, as a matter of policy, that it was desirable in the public interest that the parties to certain types of dealership agreements have the benefit and burden of being subjected to the requirements of the Franchising Code by virtue of their governing agreements being taken to be franchise agreements even if they would not otherwise meet the requirements of s 4(1) of that code. There is nothing inherent in marine craft having the admitted design features of those supplied by Global Marine to Hinterland Marine under the dealership agreement which would suggest, one way or the other, any special need for the subjection of a dealership in them to the Franchising Code. After all, the examples given under the definition of “motor vehicle” are themselves an eclectic mix.

26                                          In the end what I find determinative are the exceptions to the composite class which ends with “or other power”, read in conjunction with the alternative “is designed to use”. That it was felt necessary to exclude human and animal power does tell in favour of construing the definition such that “vehicle” need not have an integral means of power, as opposed to a designed facility for the connection of the same as the principal means of propulsion. If those vehicles, as is the case with the craft supplied under the dealership agreement in question, are designed with that facility then they fall within the definition. “Designed to use” is well capable of embracing these craft. Just to regard the “designed to use” alternative as extending only to an unfuelled or unused vehicle with an integral motor not only defies the presence of the exceptions I have mentioned but also denies, for no good reason than it doesn’t suit Global Marine, the breadth of the phrase “designed to use”. A vehicle with an integral motor, petrol, diesel, electrical or otherwise is, even when unfuelled, one which “uses” those inputs.

27                                          Such a construction of the definition of “motor vehicle” does not render the examples inconsistent with the definition. Each example fits within the definition so construed. It is just that, as s 15AD acknowledges to be a possibility, the examples are not exhaustive of the meaning of the definition.

28                                          It necessarily follows from the agreed nature of the business of Hinterland Marine that the agreement is one in respect of a “motor vehicle dealership”, as defined.

29                                          For these reasons, the answer to the separate question is that the contract referred to in para 4 of the statement of claim as “dealership agreement” is a franchise agreement in terms of the Franchising Code.

Associate:

Dated:         30 June 2010