FEDERAL COURT OF AUSTRALIA

AA Shi Pty Ltd v Avbar Pty Ltd (No 5) [2010] FCA 971

THE COURT DECLARES THAT:

The termination of the agreements, pleaded at paragraphs 14, 16, 18 and 20 of the Defence and Cross-Claim of Avbar Pty Ltd and Nir Investments Pty Ltd filed 17 June 2010 (“the operation agreements”), was valid and effective.

AND THE COURT ORDERS THAT:

1.                  AA Shi Pty Ltd pay Avbar Pty Ltd and Nir Investments Pty Ltd the sum of $221,409 in respect of licence fees payable under the operation agreements as well as interest in the sum of $6,363.

2.                  AA Shi Pty Ltd pay Avbar Pty Ltd and Nir Investments Pty Ltd the sum of $7,375 in respect of money retained by AA Shi Pty Ltd from the sale of motor fuel as well as interest in the sum of $212.

3.                  AA Shi Pty Ltd pay the costs of Avbar Pty Ltd and Nir Investments Pty Ltd of and incidental to the cross-claim, such costs to be taxed if not otherwise agreed.

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

Summary

1                     In AA Shi Pty Ltd v Avbar Pty Ltd (No 4) [2010] FCA 878 I dismissed a notice of motion of the applicant/cross-respondent to these proceedings, AA Shi Pty Ltd (“AA Shi”), filed pursuant to O 4 r 14(2) of the Federal Court Rules and seeking the leave of the Court to allow it to carry on proceedings otherwise than by a solicitor. Following delivery of that judgment, and in light of the failure of AA Shi to appear at the trial of the substantive proceeding, I dismissed the application of AA Shi.

2                     In relation to the cross-claim of the respondents/cross-claimants, I considered that O 32 r 2(1)(d) was enlivened, and it was appropriate for the Court to proceed with the trial generally. Notwithstanding that the only submissions made in respect of the cross-claim were those of the respondents/cross-claimants, the Court is required in such circumstances to assess the merits of the claim. To that extent the respondents/cross-claimants are required to satisfy the Court, on the balance of probabilities, that the issues they are required to prove are indeed established.

3                     In view of the nature of the cross-claim and the history of the matter, the relevant issues for consideration are:

·                    whether the licence arrangements meet the statutory definition of Fuel Re-selling Agreement in s 5 of the Trade Practices (Industry Codes – Oilcode) Regulations 2006 (Cth) (“the Oilcode”);

·                    whether the respondents/cross-claimants were entitled to terminate the relevant agreements;

·                    whether AA Shi failed to pay the relevant licence fees;

·                    whether AA Shi improperly retained money from the sale of fuel.

4                     On the material before me, I take the view that the licence arrangements did not meet the statutory definition of Fuel Re-selling Agreement in s 5 of the Oilcode. I also consider that the respondents/cross-claimants were entitled to terminate the relevant agreements, that AA Shi failed to pay relevant licence fees and otherwise improperly retained money from the sale of fuel, and that the respondents/cross-claimants are entitled to interest from the date of termination of the operation agreements with AA Shi.

5                     I now turn to my reasons.

Background

6                     The notice of motion filed by AA Shi seeking the leave of the Court to allow it to carry on the proceeding otherwise than by a solicitor was listed to return on the first day of the trial of the substantive proceeding, namely 16 August 2010. Following my order of 17 August 2010 dismissing the notice of motion, there was no appearance by AA Shi in respect of the substantive proceeding.

7                     Order 32 r 2 of the Federal Court Rules provides:

(1)        If, when a proceeding is called on for trial, any party is absent, the Court may:

(a)        order that the trial be not had unless the proceeding is again set down for trial, or unless such other steps are taken as the Court may direct;

(b)        adjourn the trial;

(c)        if the party absent is an applicant or cross claimant dismiss the action or the cross claim; or

(d)        proceed with the trial generally or so far as concerns any claim for relief in the proceeding.

(2)        Where the Court proceeds with a trial in the absence of a party, and at or at the conclusion of the trial an order is made, the Court may set aside or vary the order, and may give directions for the further conduct of the proceeding.

(3)        Subrule (2) does not enable the Court to vary the verdict, finding or assessment of a jury at a trial except with the consent of each interested party present at the trial.

8                     The respondents/cross-claimants submitted that, in light of the absence of AA Shi from the trial, O 32 r 2(1)(c) was engaged in respect of the substantive proceeding, and the claims against them should be dismissed.

9                     I agreed that O 32 r 2 (1)(c) was engaged in respect of the claims of AA Shi pursuant to the application filed 13 April 2010. Following delivery of judgment in AA Shi [2010] FCA 878 I ordered, in summary, that pursuant to O 32 r 2(1)(c) the application be dismissed, all interlocutory restraints on the respondents/cross-claimants be discharged, and AA Shi pay the costs of the respondents/cross-claimants including all reserved costs in respect of the application. I made these orders in circumstances where:

·                    AA Shi and its sole director and shareholder, Mr David Yahalom, clearly knew that the trial in the substantive proceeding would commence on 16 August 2010.

·                    AA Shi was not represented by solicitors as required by the Federal Court Rules and I dismissed its notice of motion seeking an order that the Court grant leave for it to carry on the proceeding otherwise than by a solicitor.

·                    No further orders were sought by Mr Yahalom, in any capacity, for an adjournment of the proceedings or to arrange for AA Shi to retain solicitors.

·                    The respondents/cross-claimants were subject to interlocutory injunctive orders in circumstances where AA Shi had not appeared at the substantive proceedings, and no submissions had been made in support of continuing those restraints.

·                    Material in the affidavit of Mr Nir Avrahami sworn 10 August 2010 and filed in Court on 17 August 2010 supported an inference drawn by the Court that the businesses, carried on through the stores at the service stations of which the respondents/cross-claimants were lessees, were being run down by AA Shi, and that continuing injunctive restraints would harm the respondents/cross-claimants.

·                    Order 32 r 2(1)(c) does not require the trial judge, confronted with the non-appearance of an applicant, to embark upon any investigation of the merits of the absent applicant’s claim (Pham v University of Queensland [2002] FCA 203 per Drummond J at [26], followed in NAET of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCAFC 304 at [4]); and

·                    In order to avoid doubt as to whether, pursuant to the terms of Orders 1 and 2 of 6 May 2010 (AA Shi Pty Ltd v Avbar Pty Ltd (No 3) [2010] FCA 440) the interlocutory injunctions against the respondents/cross-claimants were discharged by the commencement of the trial on 16 August 2010 or a specific order to that effect was necessary, I ordered that the interlocutory injunctions in place against the respondents/cross-claimants be discharged.

Cross-claim

10                  The respondents/cross-claimants also pressed their cross-claim. In this cross-claim, filed 17 June 2010, they sought:

(a)               a declaration that the termination of the operation agreements by the respondents/cross-claimants (as defined in para 21 of the Defence) was valid and effective;

(b)               orders for payments of:

                                                  (i)                   $221,409 (licence fees payable under the operation agreements); and

                                                 (ii)                   $7,375 (money retained by AA Shi from the sale of motor fuel at the operated stations);

(c)               interest on the sums referred to at (b); and

(d)               costs of and incidental to the cross-claim.

Relevant principles

11                  In a situation where the respondent is absent when the proceeding is called on for trial, the Court may elect to proceed under O 32 r 2(1)(d) and proceed with the trial generally or so far as concerns any claim for relief in the proceeding. On 17 August 2010, notwithstanding the absence of AA Shi, I considered that it was appropriate to proceed with the trial so far as concerned the cross-claim, in light of the appearance of the respondents/cross-claimants, the presence of evidence before the Court both from previous hearings and tendered on that date, and submissions made by the respondents/cross-claimants.

12                  In such circumstances:

·                    Because the Court is proceeding with the trial generally, the Court must investigate the merits of the matter: Applicant A184 of 2003 v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 210 ALR 543 at [89].

·                    The respondents/cross-claimants must prove their case on the balance of probabilities in the usual way: TVBO Production v Australia Sky Net Pty Ltd [2009] FCA 1132 at [15].

·                    The Court should restrict the relief to that claimed in the pleadings: Stone v. Smith (1887) 35 ChD 188; Kingdon v. Kirk (1888) 37 ChD 141; Barker v. Furlong (1891) 2 Ch 172 at 178-179.

·                    The Court may allow evidence to be tendered on behalf of the party which is present: Scoway Pty Ltd v Faxon Pty Ltd [2004] FCA 249 at [7]-[9].

13                  The respondents/cross-claimants also submitted that the Court was entitled to disregard any positive defences that were raised by AA Shi, and that, in terms of those matters upon which the respondents/cross-claimants bear the onus, the Court is entitled to assume their correctness. The respondents/cross-claimants relied on the decision of the Privy Council in Rediffusion (Hong Kong) Ltd v Attorney-General of Hong Kong [1970] AC 1136 at 1159 as authority for this proposition. While the issues under consideration in Rediffusion [1970] AC 1136 were such that it is questionable whether that decision is actually authority for the proposition submitted by the respondents/cross-claimants, nonetheless in my view that proposition is sound. Accordingly, in the absence of:

·                    the appearance by AA Shi at the trial;

·                    submissions advanced by that party to dispute the case of the respondents/cross-claimants; or

·                    material put into evidence by the absent party;

I consider that the Court is entitled to assume the correctness of the facts claimed by the respondents/cross-claimants in their submissions, and to accept evidence tendered by the respondents/cross-claimants in support of those submissions.

The case of the respondents/cross-claimants

14                  In summary, the case of the respondents/cross-claimants in support of the cross-claim was as follows.

15                  First, AA Shi and the respondents/cross-claimants were parties to both management agreements and operation agreements. All agreements were oral. In summary, the management agreements provided for AA Shi to perform certain tasks in relation to the management of the operation of certain service station sites. The operation agreements provided for the operation by AA Shi of four service stations, namely in Yamanto, Hatton Vale and Deception Bay in Queensland and North Melbourne in Victoria. The operation agreements specifically granted AA Shi a licence to use service station sites, to operate service station businesses (including convenience stores) on its own behalf, and to sell motor fuel on behalf of the respondents/cross-claimants. AA Shi paid the respondents/cross-claimants a licence fee in respect of the use of these sites.

16                  Second, the Oilcode has no application in respect of the licence arrangements between the applicant and the respondents/cross-claimants. The reason for this is that, in summary, the operation agreements do not meet the statutory definition of “Fuel Re-selling Agreement” in s 5 of the Oilcode.

17                  Third, the right to terminate can be implied into an oral agreement in respect of breach of a condition or a sufficiently serious breach of an intermediate term by the other party (see for example Carter JW, Peden E, Tolhurst GJ, Contract Law in Australia (5th ed, LexisNexis Butterworths 2007) pp 675-676).

18                  Fourth, the evidence supports the following findings by the Court:

1.                  that the money generated from the sale of fuel at the service stations belonged to the respondents/cross-claimants, and was not to be dealt with without their authority.

2.                  that the payment of the licence fee by AA Shi was the price for continuing to operate the convenience store from the respondents’ premises; and

3.                  that the nature of the independent fuel retail business was utterly dependent on following closely, in amount and in time, the prices set by competitors.

19                  Fifth, it followed from this state of affairs that AA Shi was contractually obliged to the respondents/cross-claimants in three critical respects, failure of any of which would, to AA Shi’s knowledge, cause the respondents/cross-claimants serious detriment:

1.                  to carry out checks of competitors’ prices.

2.                  to report the results of those checks to the respondents/cross-claimants.

3.                  to accept and enact the instructions of the respondents/cross-claimants as to the price to be set at the operated stations, effectively, immediately.

20                  It follows that each of these obligations was a term of the operation agreement, breach of which would entitle the respondents/cross-claimants to terminate.

21                  Sixth, even if the operation agreements were fuel re-selling agreements and so caught by the Oilcode, the respondents’ termination of the agreements was effective if the breaches on which the respondents/cross-claimants relied to terminate engaged one or more of ss 36(1)(g), (h) or (i).

22                  Seventh, the failure of AA Shi to pay licence fees in the sum of $221,409, and the retention by AA Shi of money from the sale of fuel in the amount of $7,375, were supported by the evidence of Ms Avrahami and the material contained in the respondents’ Statement of Facts, Issues and Contentions.

Relevant evidence

23                  While the interlocutory injunctive relief was granted on the basis of extensive submissions and evidence before the Court tendered during previous hearings, the cross-claim was not the subject of specific submissions or evidence before the Court until the hearing of 17 August 2010. An important reason for this was that on 18 June 2010 I directed that all evidence in the substantive proceeding was to be oral. Accordingly, at the hearing on 17 August 2010 Mr Dunning SC called Mrs Fay Avrahami as a witness and through Mrs Avrahami tendered a document entitled “Tender Bundle”. This document contains a large number of business records relating to the operation of the four service stations. I have already observed that evidence of the party prosecuting the claim can be admitted notwithstanding the absence of the respondent to the claim at the relevant proceedings: Scoway [2004] FCA 249.

24                  I note also that evidence in affidavit form had previously been tendered in the proceedings, and is also available as the basis for decision in this case. In particular I note:

·                    the affidavit of Lily Avrahami sworn 23 April 2010;

·                    the affidavit of Michael Israel sworn 23 April 2010;

·                    the affidavit of Nir Avrahami sworn 23 April 2010.

25                  I now turn to the issues requiring determination in respect of the cross-claim of the respondents/cross-claimants.

1.  Did the licence arrangements created by the operation agreements meet the statutory definition of Fuel Re-selling Agreement in section 5 of the Oilcode?

26                  Section 5 in the Schedule to the Oilcode provides a detailed definition of “fuel re-selling agreement” as follows:

5          Meaning of fuel re-selling agreement

(1)        A fuel re-selling agreement is an agreement:

(a)        that takes the form, in whole or part, of any of the following:

(i)         a written agreement;

(ii)        an oral agreement;

(iii)       an implied agreement; and

(b)        in which a person (the supplier) grants to another person (the retailer):

(i)         the right to carry on the business of offering, supplying or distributing motor fuel in Australia under a system or marketing plan substantially determined, controlled or suggested by the supplier or an associate of the supplier; or

(ii)        consent to be a transferee in relation to a fuel re-selling agreement; and

(c)        under which the operation of the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol:

(i)         owned, used or licensed by the supplier or an associate of the supplier; or

(ii)        specified by the supplier or an associate of the supplier; and

(d)        under which, before starting business or continuing the business, the retailer must pay or agree to pay to the supplier or an associate of the supplier an amount including, for example:

(i)         an initial capital investment fee; or

(ii)        a payment for goods or services; or

(iii)       a fee based on a percentage of gross or net income whether or not called a royalty or agreement service fee; or

(iv)       a training fee or training school fee;

but excluding:

(v)        payment for motor fuel at or below the usual wholesale price; or

(vi)       payment for the usual wholesale price of motor fuel taken on consignment; or

(vii)      payment of market value for purchase or lease of real property, fixtures, equipment or supplies needed to start business or to continue business under the fuel re-selling agreement.

Note     To meet the requirements of subparagraph (1)(b)(i), a supplier must have a substantial on going role in the retailer’s operations, in addition to being responsible for branding and supplying fuel. For example:

(a)        a traditional franchise or commission agency arrangement would meet the requirements of the subparagraph because of the supplier’s substantial on going role in the operations; but

(b)        a ‘supply only’ or ‘supply and branding only’ agreement with an owner dealer would not meet the requirements of the subparagraph.

(2)        For subsection (1), the following are taken to be fuel re-selling agreements:

(a)        the transfer, renewal or extension of a fuel re-selling agreement;

(b)        an agency arrangement to which the requirements of paragraphs (1)(a), (b) and (c) apply;

(c)        an interest in a fuel re-selling agreement.

(3)        However, any of the following does not in itself constitute a fuel re-selling agreement:

(a)        an employer and employee relationship;

(b)        a partnership relationship;

(c)        a landlord and tenant relationship;

(d)        a mortgagor and mortgagee relationship;

(e)        a lender and borrower relationship;

(f)        a fuel agreement related to a retail site that is not owned or leased by the supplier;

(g)        the relationship between the members of a cooperative that is registered, incorporated or formed under any of the following laws…

…

(4)        A fuel reselling agreement may apply to 1 or more retail sites.

27                  The respondents/cross-claimants submit that the operation agreements between themselves and AA Shi were not fuel re-selling agreements within the meaning of the Oilcode because they did not meet the requirements of s 5(1)(d) of the Schedule. In particular, the respondents/cross-claimants point to the pleadings to substantiate this submission.

28                  As between the parties it was common ground that the operation agreements were oral. A review of the terms of the Defence and Cross-claim filed by the respondents/cross-claimants on 17 June 2010, and the Reply filed by AA Shi on 13 July 2010, indicates that an agreement entered between the relevant parties in respect of a service station site at Logan Road, Underwood in Queensland in or about May 2002 was the template for the operation agreements between the parties. It was also common ground that, pursuant to the operation agreements, AA Shi operated and managed service stations at Yamanto, Hatton Vale, North Melbourne and Deception Bay. In respect of those agreements the following summarised aspects appeared materially uncontentious:

·                    AA Shi would have a licence to use the service station site to operate a service station business, including a convenience store and the sale of motor fuel.

·                    for the licence to operate the service station site AA Shi would pay the respondents/cross-claimants a fee each month calculated at a certain percentage of the monthly convenience store sales exclusive of GST (the respondents/cross-claimants submitted that the relevant percentage was 10%).

·                    AA Shi would sell the respondents’ motor fuel at the service station at prices and on terms and conditions specified by the respondents/cross-claimants, including making adjustments to the price of the motor fuel as directed by the respondents/cross-claimants.

·                    AA Shi would, at least three times per day, check the price of motor fuel offered by competitors to the service station and report those prices to the respondents/cross-claimants to enable them to compete and protect their interest in the market.

·                    AA Shi was entitled to retain all proceeds derived from the convenience store sales.

·                    AA Shi was obliged to remit all proceeds from motor fuel sales to the respondents/cross-claimants daily, while retaining the portion of the day’s takings which related to the convenience store sales in its own account.

·                    AA Shi was obliged to report in writing, as required from time to time by the respondents/cross-claimants, as to the day’s trading information.

·                    the motor fuel sold at the service station remained the respondents’ property.

·                    the respondents/cross-claimants paid AA Shi a fee for selling the motor fuel on the respondents’ behalf.

29                  The respondents/cross-claimants contended that AA Shi was prohibited from using any money derived from the sale of motor fuel at the service station without the express consent of the respondents/cross-claimants, however AA Shi denied this on the basis that it would deduct the cost of any repairs or maintenance required to the service station from the fuel takings and notify the respondents/cross-claimants of any such payments in the daily reports.

30                  The respondents/cross-claimants contended that the agreements between AA Shi and the respondents/cross-claimants do not meet s 5(1)(d) of the Oilcode which requires the agreements to include provisions:

(d)        under which, before starting business or continuing the business, the retailer must pay or agree to pay to the supplier or an associate of the supplier an amount including, for example:

(i)         an initial capital investment fee; or

(ii)        a payment for goods or services; or

(iii)       a fee based on a percentage of gross or net income whether or not called a royalty or agreement service fee; or

(iv)       a training fee or training school fee;

but excluding:

(v)        payment for motor fuel at or below the usual wholesale price; or

(vi)       payment for the usual wholesale price of motor fuel taken on consignment; or

(vii)      payment of market value for purchase or lease of real property, fixtures, equipment or supplies needed to start business or to continue business under the fuel re selling agreement.

Note     To meet the requirements of subparagraph (1)(b)(i), a supplier must have a substantial on going role in the retailer’s operations, in addition to being responsible for branding and supplying fuel. For example:

(a)        a traditional franchise or commission agency arrangement would meet the requirements of the subparagraph because of the supplier’s substantial on going role in the operations; but

(b)        a ‘supply only’ or ‘supply and branding only’ agreement with an owner dealer would not meet the requirements of the subparagraph.

31                  In particular, the respondents/cross-claimants contend in summary that:

·                    The agreements contemplated that the respondents/cross-claimants would make a particular site available to AA Shi, which, whilst the respondents/cross-claimants would have extensive access, would be left as a site to be run on a daily basis by AA Shi. The payment arrangements were that the respondents/cross-claimants would pay $5,500 including GST for AA Shi providing the service of having fuel pumped and complying with their directions in relation to the sale of fuel. For its licence to occupy and use the site and conduct its convenience store business, AA Shi would pay a fee of 10% of its sales, exclusive of GST.

·                    Such payment arrangements do not fit comfortably within the description of the payment to continue the business contemplated by subs 5(1)(d)(i)-(iv) illustrated in the Oilcode.

·                    In any event the licence arrangement between the parties in relation to the sites is expressly excluded from the Oilcode by operation of s 5(1)(d)(vii). In this case AA Shi is paying a fee, calculated on the turnover of its convenience store, not petrol turnover, for the opportunity to operate its business from the site. The payment it makes is in respect of that entitlement to occupation. In relation to fuel it is simply paid a flat fee for pumping fuel of the respondents/cross-claimants according to their directions.

·                    While the arrangement between the parties did provide for extensive access by the respondents/cross-claimants, that did not prevent the arrangement being a “lease” of the site for the purpose of s 5(1)(d)(vii) of the Oilcode.

32                  On the facts before the Court the fee of 10% of its sales paid by AA Shi appeared potentially to be “a fee based on a percentage of gross or net income” for the purposes of s 5(1)(d)(iii) of the Oilcode. However in the absence of a case substantiating that the moneys paid referable to the operation of the convenience store (as distinct from fuel sales) constituted a fee contemplated by s 5(1)(d)(iii), I am satisfied on the balance of probabilities that the agreements between AA Shi and the respondents/cross-claimants were not subject to the Oilcode. I also accept the submission of the respondents/cross-claimants that arrangements between the parties supported the existence of a lease within the meaning of s 5(1)(d)(vii), thus excluding those arrangements from the operation of the Oilcode by operation of that section.

2.  Right to terminate agreements

33                  Further, I accept the submission of the respondents/cross-claimants that the oral agreements between the parties incorporated contractual obligations on the part of AA Shi to:

·                    carry out checks of competitors’ prices;

·                    report the results of those checks to the respondents/cross-claimants; and

·                    accept and enact the instructions of the respondents/cross-claimants as to the price to be set at the operated stations, effectively, immediately.

34                  The material before me supports such a finding on the balance of probabilities.

35                  I also accept the contentions of the respondents/cross-claimants that, on the facts of this case, these obligations were terms of the contract, breach of which would entitle the respondents/cross-claimants to immediately terminate the contract.

36                  Finally, I am satisfied on the balance of probabilities that, even if the operation agreements were fuel re-selling agreements and so caught by the Oilcode, the termination of the agreements was effective because, on the facts, the conduct of AA Shi constituted breaches of the relevant agreements within the meaning of one or more of ss 36(1)(g), (h) or (i) of the Oilcode. Section 36(1) of the Oilcode provides:

36        Termination by supplier -- special circumstances

(1)        A supplier is not required to comply with section 35 if the retailer:

(a)        no longer holds a licence that the retailer must hold to carry on the fuel re selling business; or

(b)        becomes bankrupt, insolvent under administration or an externally administered body corporate; or

(c)        voluntarily abandons the fuel re selling business; or

(d)        is convicted of a serious offence; or

(e)        operates the fuel re selling business, or an associated business conducted on the premises, in a way that is fraudulent or that endangers public health, safety or the environment; or

(f)        agrees to the termination of the fuel re selling agreement; or

(g)        breaches the fuel re selling agreement, otherwise than by behaviour described in paragraphs (a) to (f), at least 3 times; or

(h)        is likely, by continued occupation of the site to which the fuel re selling agreement relates, to cause substantial damage to the business, property or reputation of the supplier; or

(i)         for a commission agency -- fails to bank the supplier's money under the commission agency agreement.

37                  I take this view because, on the material before the Court, it appears that:

·                    sections 36(1)(g) and (h) were engaged because:

o                  on three occasions AA Shi retained proceeds from fuel sales without permission;

o                  on more than three occasions AA Shi failed to check competitors’ prices as obliged by the operation agreements;

o                  on more than three occasions AA Shi failed to report competitors’ prices to the respondents/cross-claimants as obliged by the operation agreements;

o                  on more than three occasions AA Shi failed to make adjustments to the price of motor fuel sold at each of the operated stations; and

o                  for the purposes of s 36(1)(h) – I am satisfied that the continued occupation of the relevant service station sites by AA Shi was likely to cause substantial damage to the business of the respondents/cross-claimant; and

·                    section 36(1)(i) was engaged because AA Shi failed on a number of occasions to bank money of the respondents/cross-claimants under the operation agreements.

38                  It follows that the respondents/cross-claimants are entitled to the declarations they seek in the cross-claim.

3.  Failure by AA Shi to pay licence fees

39                  I am satisfied on the balance of probabilities, taking into account the evidence before the Court and in particular the evidence of Mrs Lily Avrahami, that AA Shi has failed to pay the respondents/cross-claimants licence fees in the sum of $221,409.

40                  It follows that the respondents/cross-claimants are entitled to judgment in this sum.

4.  The claim for payment of money retained from fuel sales

41                  I am satisfied on the balance of probabilities, taking into account the evidence before the Court and in particular the evidence of Mrs Lily Avrahami, that AA Shi has improperly retained money from the sale of fuel in the amount of $7,375.

42                  It follows that the respondents/cross-claimants are entitled to judgment in this sum.

Interest

43                  Finally the respondents/cross-claimants claim interest in respect of the judgment amounts at the rate 8.5% (4% above the Reserve Bank of Australia cash rate) from the date of termination of the operation agreements. In the respondents’ outline of submissions filed 17 August 2010, the interest calculations are based on a 143 day period between 26 March 2010 and 16 August 2010. The following problems are evident in this calculation:

·                    The rate 8.5%, while not specified, appears to be based on the RBA cash rate 4.5% for the period 1 July 2010 to 31 December 2010, whereas the relevant time was spread across the periods 1 January 2010 to 30 June 2010 and 1 July 2010 to 31 December 2010.

·                    The 143 days used to calculate the interest were based on the period between 26 March 2010 and 16 August 2010, whereas the correct period was 12 April 2010 (being the date of termination of the operation agreements) and 3 September 2010 (being the date of judgment).

44                  Section 51A of the Federal Court of Australia Act 1976 (Cth) provides that interest up to judgment is to be determined for the whole or any part of the period between the date when the cause of action arose and the date of judgment. Further, it provides that such a determination is at the discretion of the Court.

45                  Since 5 July 2010, Federal Court of Australia Practice Note CM16 has provided guidance in the Court’s exercise of its discretion pursuant to calculating interest up to judgment. Accordingly, in the periods from 1 January to 30 June and 1 July to 31 December in any year, the interest is to be based on the rate that is 4% above the cash rate last published by the Reserve bank of Australia before that period commenced.

46                  In these circumstances it follows that the correct interest in respect of the judgment amounts are to be calculated on the following basis:

·                    7% (4% above the Reserve Bank of Australia cash rate last published before the period 1 January 2010 to 30 June 2010 commenced) for the period between 12 April 2010 and 30 June 2010, being 79 days.

·                    7.75% (4% above the Reserve Bank of Australia cash rate last published before the period 1 July 2010 to 31 December 2010 commenced) for the period between 1 July 2010 and 3 September 2010, being 64 days.

47                  Based on these calculations I am satisfied that the respondents/cross-claimants are entitled to interest in the amount of $6,363 (being the interest payable on the licence fees) and $212 (being the interest payable on the sale of motor fuel).

Associate:

Dated:         3 September 2010