Sternbeck v Marshall Bros. Investments Pty. Ltd.
[1996] QDC 92
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- Sternbeck v Marshall Bros. Investments Pty. Ltd.[1996] QDC 92
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Sternbeck v Marshall Bros. Investments Pty. Ltd.[1996] QDC 92
Sternbeck v Marshall Bros. Investments Pty. Ltd.[1996] QDC 92
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Plaint No. 3229 of 1995 |
BETWEEN:
ERNEST RAY STERNBECK | Plaintiff |
AND:
MARSHALL BROS. INVESTMENTS PTY. LTD. | Defendant |
AND:
NEVILLE GEORGE RAE MARSHALL | Second Defendant |
REASONS FOR JUDGMENT - ROBIN Q.C., D.C.J.
Delivered the 29th day of March 1996
Catchwords: | Trade Practices – misleading and deceptive conduct – lessor's representation to lessee that further term of 10 years would be granted to facilitate sale of service station business conducted on premises – lessee's contention of agreement for further term fails – representation found not to be contractual, but misleading and deceptive nonetheless – lessee relied on representation – lost opportunity of selling business to subtenant – damages for infringement of s. 52 of Trade Practices Act assessed on tort basis – damages on basis that lessee had obtained higher sale price from a purchaser denied – a longer lease at the anticipated rent refused – Trade Practices Act ss 51A, 52, 82, 87 considered. Trade Practices – third line forcing – illegality of term in lease of service station requiring lessee to purchase only Mobil products – lessor granted rebate on each litre of Mobil products sold to lessee pursuant to agreement with Mobil's distributor in territory – whether lessee entitled to damages – allowed half of rebate received – Trade Practices Act s. 47. Trade Practices – “services” held to include lessee's interest under a lease – Trade Practices Act S. 4 |
Counsel: | C. Francis for Plaintiff |
M. Stewart for Defendants | |
Solicitors: | Roy Gordon & Gordon for Plaintiff |
Clark & Kann for Defendants | |
Hearing Date(s) | 04, 05, 06, 11/03/96 |
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Plaint No. 3229 of 1995 |
BETWEEN:
ERNEST RAY STERNBECK | Plaintiff |
AND:
MARSHALL BROS. INVESTMENTS PTY. LTD. | Defendant |
AND:
NEVILLE GEORGE RAE MARSHALL | Second Defendant |
REASONS FOR JUDGMENT - ROBIN Q.C., D.C.J.
Delivered the 29th day of March 1996
When the action commenced, Mr. Sternbeck and his wife were the plaintiffs. She passed away about the middle of last year. The couple's entitlements, whatever they may be, arise out of a written lease of land at Nanango which may be in registrable form, but is not registered, in which they are described as holding “as joint tenants”. Mrs. Sternbeck's entitlements have passed to her husband by survivorship.
A service station is constructed on the land, of which the first defendant is registered proprietor and lessor. The term of the lease commenced on 1st July 1992 and terminated on 30th June 1995. The tenant's option for a further term of three years had to be exercised sometime during the last half of calendar 1994. The option has not been exercised, but the plaintiff claims specific performance of an oral agreement he alleges with the first defendant for renewal of the lease for a further term of 10 years, alternatively specific performance of the three year option. Damages are claimed further or alternatively to specific performance and against the first defendant company also the following relief:
- “5.a declaration that the First Defendant's conduct in having clause 8.17 incorporated in the lease and the First Defendant's giving effect to clause 8.17 contravenes subsections 47(6) and (7) of the Trade Practices Act, 1974;
- 6.recovery as money had and received to the use of the Plaintiffs, or in the alternative, moneys held on a constructive trust for the Plaintiffs, the sum of TWENTY-SIX THOUSAND AND FIFTY-TWO DOLLARS AND SIX CENTS ($26,052.06) received by the First Defendant by way of commission for causing the Plaintiffs, by clause 8.17 of the lease, to sell Mobil Oil Australia Limited's products from the leased premises;
- 7.an order under section 87 of the Trade Practices Act, 1974 requiring the Defendant to grant a lease of the premises to the Plaintiffs on such terms as may be just;”
The second defendant is a director of the company who is sought to be made liable in the alternative for damages for breach of warranty of authority, he having represented the first defendant in relevant respects as its agent. Damages are claimed against both defendants for misleading and deceptive conduct contrary to s. 52 of the Trade Practices Act 1974.
It is common ground that developments subsequent to the pleading have increased the amount referred to in paragraph 6 to $30,633.94 (Exhibit 29).
The plaintiff is a gentleman nearing retirement age who acquired the service station business about April 1991 from people called Perkins, who operated it as a Caltex outlet. The Perkins were paid $3,000. By dint of hard work and long hours, Mr. Sternbeck increased the litreage of petrol sold by some 250% by June 1992. Earlier in the year the site adopted Mobil livery, which involved considerable expenditure by Mobil Oil Australia Limited. Along the way, the first defendant had expended some thousands of dollars as well, in painting and supplying the site with access to a second street frontage, for example.
The change to Mobil proved beneficial. Mr. Sternbeck increased the volume of sales by another 20% or so after 30 June 1992. The first defendant began to receive a “kickback”, as Mr. Sternbeck called it, of 1 cent a litre for the first 40,000 litres of fuel sold each month and .6 cents for each litre in excess of 40,000. The payments aggregate the sum of about $30,633.94 mentioned above. They were paid to the first defendant, pursuant to the Fuel Rebate Agreement (Exhibit 27) by Maranoa Petroleum Service Pty. Ltd., the authorised distributor of Mobil Oil Australia Limited.
The lease document provides in Clause 8.17:
“Mobil Oil Products
The Lessee shall not sell or offer for sale any oil or petroleum products other than those of Mobil Oil Australia Ltd. or its successors or assigns and shall purchase exclusively from Mobil Oil Australia Ltd. all petroleum products which may be required for sale on the Demised Premises so long as Mobil Oil Australia Ltd. shall be ready to supply the same and, whether directly or indirectly, shall not buy, receive, sell, dispose of or permit to be bought, received, sold or disposed of on account of the Lessee on or about the Demised Premises petroleum products not actually purchased by the Lessee from Mobil Oil Australia Ltd. unless Mobil Oil Australia Ltd. shall neglect or refuse to supply any goods required by the Lessee for some cause other than legislative restrictions or default by the Lessee in the payment for goods already supplied to the Lessee in which case the Lessee shall be at liberty to supply itself from other sources with sufficient goods but only until Mobil Oil Australia Ltd. shall resume the supply of such goods.”
Mr. Stewart, for the defendants, submitted the inclusion of this provision really was a mistake, because the plaintiff was always going to purchase from Maranoa and not Mobil. In my opinion, this observation is not to the point at all. I can see no distinction between purchases from the one and purchases from the other. Recital E of the Team Pak Agreement (Exhibit 5C) specifically proposes that Maranoa, being a distributor appointed by Mobil to sell Mobil petroleum products to dealers within a Territory in which the Site is located, will sell petroleum products to the Sternbecks and they will purchase them from Maranoa for resale at the Site. The first defendant's commercial interest in having the Sternbecks purchase Mobil products exclusively is obvious.
By 1993, Mr. Sternbeck had fulfilled his aim (which I am satisfied he had made known to the defendants) to build up the business so that he could sell it at considerable profit to himself and his wife. Thanks to the efforts of Mrs. Erkens trading as Nanango Real Estate, on 1st March 1995, a contract was signed under which they sold the business to Mr. and Mrs. Murray for $86,000, plus stock at valuation. A 10% deposit was paid. The Murrays were undoubtedly both willing and able to purchase. When the transaction fell through, it was not long before they outlaid substantially greater sums to purchase the Ampol Service Station in Nanango, which involved acquisition of a freehold site. Their contract with Mr. and Mrs. Sternbeck was expressly made subject to their “obtaining from the owner of the property a registered lease on terms conditions acceptable to the purchaser by the date for completion (1 June 1995)”. This provision defeated the contract.
I accept Mr. Murray's evidence that what he required was a three year lease, with an option for a further term of three years, so that $86,000 purchased at least six years' enjoyment of the site, subject to payment of rent. From the evidence at the trial, it appears that the first defendant never clearly stated its requirements, as to rent in particular. The plaintiff's base rent was $15,134.39 per annum, subject to review on July 1st each year, when an adjustment in terms of “half CPI” could be required. The increases were so modest that the first defendant, perhaps bearing in mind the considerable benefit Maranoa's fuel rebate represented to it, did not call for them. The evidence is not clear about this, but I suppose I may infer that, at least for the first three years, the Murrays would have expected (if they were to be satisfied) a rental roughly similar to the Sternbecks'. The first defendant, on the other hand, was insistent upon a “higher and fairer” rent, to quote its director. One figure which I find was quoted, although not in the form of an offer capable of acceptance, was for an increase of $200 per week. This figure was mentioned in the context of it having become notorious to the parties that litigation was pending or threatened to test the validity of a rebate agreement supposedly negotiated in respect of the BP Service Station in Nanango. The first defendant was apprehensive it could not continue to rely on the rebate, and was understandably determined to preserve its return from the property by increasing the rent accordingly. No one could fairly criticise the first defendant or its directors for that. However, I found it surprising that the attitude was taken that if the rebate continued to be available, it would not be passed on to the lessee/operator of the site, in mitigation of the substantially increased rent to be demanded, but, rather, retained by the first defendant. If this (admittedly uncertain) benefit were retained, the first defendant's return was going to be “higher” by a great margin.
Although the second defendant, Mr. Rae Marshall, and his son, Mr. Bill Marshall (a co-director of the first defendant) indicated in evidence it had been contemplated that Mr. Sternbeck might be offered a further three year term from 1st July 1995 at something like the rent he had been paying (if not the same rent), in recognition of the possibility he had overlooked exercising the option, I am satisfied that what was presented to the plaintiff and the Murrays was the offer of a new three year term to the Sternbecks and a further three years following that (without any further option) to the Murrays, the rent in both cases to be at the “higher and fairer” level. Mr. Murray had discussions on the telephone with the second defendant and in person with both Marshalls, but took the line that he wished to “go through Mr. Sternbeck”. The first defendant was insistent on dealing separately with the Sternbecks on the one hand and the Murrays on the other.
Having heard all of the evidence, I am satisfied that the Marshalls were astounded at the price the Murrays were paying and resentful that Mr. Sternbeck stood to get so much, while the first defendant, as owner of the site, got nothing. To this extent, I think that Mr. Francis, for the plaintiff, was right in characterising the first defendant's directors as motivated by greed. Perhaps there was envy, too. I have already said I think it was an understandable concern that the value of the threatened fuel rebate should be preserved in some way. It may also have been a proper concern that if the Murrays paid $86,000, they might be in difficulty meeting their rent obligations. The business seems to me a struggling one. Over the three financial years to 30th June 1995, the Sternbecks, according to the accounts in evidence, made only $600 per week or so, which barely represents wages for Mr. Sternbeck. The first defendant seems to have made no enquiries whatever to ascertain whether the Murrays, notwithstanding their perceived profligacy, might nevertheless be able to pay the rent.
How is it said the defendants are in the wrong? The plaintiff pleads:
“In or about January 1994, the Second Defendant agreed orally with the First Plaintiff to renew the lease for a further term of ten (10) years (“The agreement’).”
The defendants twice sought particulars of the alleged oral agreement, firstly, as to its terms and in particular:
- (i)The precise words used to make the offer;
- (ii)The offerer;
- (iii)Where the offerer was when the offer was made;
- (iv)The precise words used to accept the offer;
- (v)The offeree;
- (vi)Where the offeree was when the offer was made.
The response was:
“Prior to the agreement referred to in paragraph 11, the second defendant, on behalf of the first defendant, had told the firstnamed plaintiff that the second defendant would give a longer lease to a buyer from the plaintiffs than the plaintiffs had from the first defendant. In January 1994, the male plaintiff telephoned the second defendant at Tin Can Bay from the demised premises, and said to him “Look - I am with the agent. You said before that I could have a further ten years. Does that still stand? The second defendant said, 'Yes”.
That information was given on 21 June 1995 and led to a request for particulars of the “prior” conversation. The further particulars were quickly forthcoming, on 10 July 1995:
- “(a)The conversation took place in or about November 1993.
- (b)The conversation took place at the service station.
- (c)Our client said to your client 'I am listing the service station with the agent but the lease has only four and a half years to go, will I be able to offer a longer lease to a purchaser? and your client said 'Yes we will extend the lease for 10 years if required.”
Mr Sternbeck's evidence in chief was:
“About ′93 Rae Marshall came to the station, I think it was something to do with the motel next door or the RSL with a drain or something, and we were talking out on the apron and I said to Rae - he said to me, actually, “You have got the station running, haven't you?” I said, “Yeah, but it doesn't happen for nothing, Rae. It is a lot of hard work.” He said to me, “You will get your reward when you sell it.”, and I said, “Fair enough.”, you know.
Was there any mention about leases at that stage?-- I said to Rae that I will eventually sell it and I will need extra leasing because there won't be enough left for anyone to buy and he said, no worries, we will give you extra lease when you are ready.
By that time you had actually listed the service station for sale?-- No, I hadn't listed it at that point. Around about November '93, from what I recall, I contacted Jane Erkens at Nanango Real Estate - asked her to get Jane to call down and----
For the purpose of listing it - for the purpose of listing the business?-- Yes.
.....
Including the three year option?-- Yes. So, I - Jane came down and, anyway, she said, “Well, what lease have you got?” and I told here and she said - I said, “But Rae said he would give more lease if I required it when I sell the place.”, and she said “Well, ring him and find out because my sister-in-law's coming - my sister and brother-in-law's coming to have a look at it and they might buy it.” So, I rang Rae and I said to him, you know----
First of all you rang him from the service station, did you?-- Yes, I rang him from the service station and------
What number did you ring? I rang the Tin Can Bay number.
Is that where he lives, is it?-- That's right. He lives in Tin Can Bay.
Did you speak to him?-- I spoke to Rae and - let's get this straight.
As best you can, Mr Sternbeck?-- Yes. I rang Rae and I said to him, “Rae, I'm thinking of moving the station onto the market and you said you would give me a longer lease. What sort of lease can I expect?” Quite flippantly he said, “You can have 10 years, Ray. You can have 10 years.”, and I spoke to him a little more, hung up and then I turned to Jane. I said, “Well, there you are, we can have 10 years if you want it.”, and that's what it was.”
Mr Rae Marshall denies those conversations. It is his word against Mr Sternbeck's. This is not so in respect of the next conversation which occurred on 1 March 1995 and was the immediate prelude to the signing of the contract brought about by Mrs Erkens. The plaintiff's evidence was:
“I rang Rae at Tin Can Bay.
Who was present when you rang?-- Who was present? There was Jane, there was Col Murray, myself. That's it, yes. So I rang Bill - Bill Marshall - Rae Marshall at Tin Can Bay. “How are you going Rae?” and “Everything's okay.”, and I said, “Look, we spoke before about this selling the servo and I have a buyer here now. You said that you give me a 10 year lease if necessary. Would you like to speak to the gentleman, Col Murray, and have a talk to him?” He said, “No worries.” Anyway, I passed Col Murray onto the phone.
Can I just stop you before you go into Mr Murray's conversation? During your conversation with Rae Marshall on the telephone did he ever deny that he would be granting you the 10 year lease?-- No way. No way.
All right. So you handed the telephone over to Mr Murray?-- Yes, and Col Murray spoke to Rae on the phone and he - he mentioned 10 years, et cetera. You know, it was a one-sided conversation from my - where I was.
You could only hear Mr Murray?-- That's right, and then he gave the phone back to me and I spoke to Rae again and he said, “Well, we will get his address when we come over. We will come over on the 10th” - yes, “We will come over on the 10th. We will come over on the 10th and we'll see this man for you.”
The second defendant denies that there was any reference to ten years in that conversation (indeed at any time whatever prior to its being mentioned in the plaint), but the plaintiff is supported by Mr. Murray and Mrs. Erkens in his assertions. I accept the evidence the three of them gave, which is broadly consistent. I am not dissuaded from doing so by the admitted fact that Sternbeck failed to mention the 10 years he says he was promised to a number of people who would have been interested to be told; he did tell Mrs Erkens.
I ought to notice here that at page 21 Mr. Sternbeck, asked to recall other conversations with the second defendant, mentioned one in 1994 when in the context of no purchaser having been found, the second defendant allegedly said, “Well, you know, we can keep the rent as it is. It will have to go up to half CPI.” and he said “Well, that's fair enough.” Having regard to the plaintiff's conduct of his case, I feel unable to relate this to discussions regarding any additional term of the lease. Mr. Sternbeck, indeed, was under the misapprehension that at some time during the Sternbecks' original three year term there had been a “half CPI” increase. At page 27 Mr. Sternbeck improved somewhat on what he had said, there attributing to Mr. Marshall:
“When you sell the place the new people will have to pay the half CPI rental increase”.
Even so, I am not prepared to treat this as grafted on to any statement that there might have been about a further ten year term, given the plaintiff's failure to reply on it in his pleadings and particulars.
The plaintiff's case may have shifted and improved somewhat (a possible contributing factor when the particulars were being given being Mr. Sternbeck's distress in his bereavement). Mr. Francis' submission to me that what matters is the evidence given at trial, and not the preceding pleading and particulars given is hardly a satisfactory explanation. While I am unwilling to set too much store by this last piece of evidence in the circumstances, I feel quite confident that the second defendant did at least once prior to the expiry of the period within which the option might be exercised state to Mr. Sternbeck that the premises would be available to him or the purchaser of the business for further lease, and that he volunteered 10 years. I am quite unimpressed by the defendants' attempts to reconstruct events on the basis of aids such as the second defendant's meticulously kept motor vehicle log to demonstrate that conversations on the apron of the service station could not have happened at the time nominated by Mr. Sternbeck. The log is nothing like a complete record of the second defendant's doings, recording only business related trips: the second defendant had family residing in Nanango and appears to have visited them quite frequently, so that he was occasionally in Nanango not on business.
The conclusion I've just expressed gets the plaintiff only so far. I am unable to regard what I have found the second defendant said as constituting any contract or agreement. There was certainly no balancing agreement or promise on the plaintiff's part. The second defendant may perhaps have been agreeing or promising to reach an agreement. I think he was assuring Mr. Sternbeck that there would be no difficulties in his or his purchaser's securing long term occupation of the site. I think he meant no more than that when saying something along the lines: “You can have ten years if you want it”. To my mind this says nothing about what the price of that occupation ought to be. It flies in the face of reason to imagine the second defendant tying up the property for ten years or anything like it at a rent which would never increase faster than half the inflation rate. I accept the second defendant's evidence that the first defendant had never leased out any property for a longer term than three years with a three year option and that variations from three year terms were rare, and always by way of the term being shorter. Given what the second defendant has said of the equities various members of the family had in the company, I would think, if it matters, that he had no authority to bind the first defendant's property for ten years, at least without securing a market rental and regular reviews. I think it would be very useful to someone in Mr Sternbeck's position to have the kind of assurance he was thus given. I am unable to see any basis on which he could take from such an assurance that once the term of the option which he had expired, the first defendant was not to have market rent.
Other objections to the proposition that there was anything in the nature of an agreement for a ten year lease were mentioned at trial, such as the lack of a commencement date. I am inclined to think that that particular difficulty could be overcome, if only by deciding the commencement date was to be nominated by Mr. Sternbeck, but so as to ensure continuous occupation of the site by a lessee. A similar difficulty was surmounted in South Coast Oils (Old and NSW) Pty Ltd v Look Enterprises Pty Ltd (1988) 1 Qd.R. 680, although the primary judge and the Full Court differed as to the commencement date the parties should be found to have agreed on.
I think I ought to say at this point that the defendants have run the case on the basis that the second defendant did not on behalf of the first defendant make the “agreement” alleged. There has been no plea, as there might well have been, of the Statute of Frauds, nor any plea, as there might well have been, of lack of consideration for the alleged promise. Those are favourable matters from the defendants' point of view, in my opinion. They fail on the important factual issue as to whether Mr. Rae Marshall said anything regarding further leasing for ten years. I am troubled by Mr. Rae Marshall's “passing the baton” to his son when problems arose. He had been the one to conduct dealings with Mr. Sternbeck and it is perhaps indicative of embarrassment on his part that he brought Mr. Bill Marshall in to face with Mr Sternbeck once there was difficulty. All this is by the by, given that for reasons set out above, I cannot regard what the second defendant said as amounting to a promise on behalf of the first defendant, although I accept that Mr. Sternbeck so regarded it and that, in this, he acted both honestly and reasonably. This has implications for the claim based on s. 52 of the Trade Practices Act. It makes it just that Mr. Sternbeck be relieved from the ordinary consequences of not having formally exercised the option for a further three years from 1st July 1995. It was always common ground that the Sternbecks or their purchasers would be operating the service station in that period.
Mr Francis' response to the undoubted lack of consideration given by the Sternbecks for the second defendant's alleged promise was that it was a case of a promise for an act as in the celebrated case of Carlill v The Carbolic Smoke Ball Company (1892) 2 QB 484, affirmed (1893) 1 QB 256; he preferred to rely on the less evocatively titled Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424. The first paragraph of the headnote indicates the problems which defeated Australian Woollen Mills Pty Ltd and which defeat the plaintiff here on this aspect of the case:
“In the case of contracts which are commonly said to be constituted by the acceptance of an offer of a promise for an act, it is necessary, in order that such a contract may be established, that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act, and that the act was really done in a consideration of a potential promise inherent in the statement or announcement.”
I was referred to Veivers v Cordingly (1989) 2 Qd.R. 278 as an example of a plaintiff showing what was required. Even assuming the Sternbecks acted intending to accept the first defendant's supposed offer when they looked for and then found a purchaser, I find it impossible to regard the first defendant's promise as “really offered in consideration for the doing of the act.”
Mr Francis relied on Musumeci v Winadell Pty Ltd (1995) Aust. Contract Reports 90-050 and cases cited in the judgment as showing that a “practical benefit” flowing to the offeree or the avoidance of a detriment suffice as consideration. There, the landlord was spared the disruption of his tenant walking out when miffed by his admitting a fearsome competitor to other shops in his shopping centre, and accordingly was held bound by an offer to reduce the rent by a third after the competitor moved in. I do not detect on the facts of the present case any corresponding benefit or avoidance of detriment to the first defendant. The evidence does not suggest there would have been any difficulty in obtaining a new lessee.
It may be the case that questions of consideration are immaterial, given that the defendants have not pleaded them. Mr Stewart has, however, argued consideration is still required in Australia, citing Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107. He has certainly submitted that there was no intention for his clients to create legal relations.
I am grateful for Mr Francis' supplementary written submissions in support of his argument that “this was a commercial transaction and it is presumed that the parties had the necessary intention ... (to create legal relations)”. I was referred to Halsbury's Laws of England (4th) vol. 9 paras. 300-308, particularly paragraph 302, the equivalent of which in Halsbury's Laws of Australia vol. 6 110-940 is:
“The law recognises a rebuttable presumption of fact that in commercial agreements the parties intend their agreement to be attended by legal consequences and the onus of establishing that a commercial agreement was not to create legal relations rests on the party so contending.
Only in unusual circumstances will the presumption be rebutted.”
Mr Francis has supplied me with a copy of Megaw J's decision, Edwards v. Skyways Ltd (1964) 1 WLR 349, in the course of which the Judge said (at 355) the onus is a heavy one. His Lordship went on to say (apropos Mr Francis' next point) “. . .that the test of intention to create or not to create legal relations is ‘objective’: I am not sure that I know what that means in this context.” Mr Francis is right that the second defendant at no stage said he had no such intention - a contention which would have come ill from him, perhaps, given his denial that he made the relevant statements. It was next submitted that consideration should not be given as to whether or not the terms of the “offer made by Rae Marshall” were commercially beneficial to the first defendant. In my opinion it is entirely appropriate to take into account glaringly obvious features of the parties' commercial situations, particularly, in this context, the first defendant's. In my opinion what a presumably rational business person intends by things that are said or done may properly be assessed by reference to fundamental interests. It is easily seen that tying up a rental property for as long as ten years without any possibility of the return keeping up with inflation would be an amazing course to adopt. I apprehend that Brooking J in Gra-ham Australia Pty Ltd v. Corporate West Management Pty Ltd (1990) 1 ACSR 682 took a similar approach: see pp. 687-88.
It is not terribly difficult to find cases since Edwards v. Skyways Ltd in which the presumption mentioned in Halsbury has been excluded. In England there is the Court of Appeal decision, Kleinwort Benson Ltd v. Malaysia Mining Corporation Berhad (1989) 1 WLR 379, a strong case in which Edwards v. Skyways was distinguished and the primary Judge's view overruled. The headnote sufficiently sums up the decision:
“The defendants, a public limited company incorporated in Malaysia, formed a wholly owned subsidiary which was incorporated in England to operate as a ring dealing member of the London Metal Exchange. In granting an acceptance credit/multi-currency cash loan facility to the subsidiary for its trading, the plaintiffs, who were merchant bankers, relied on a “comfort letter” by which the defendants asserted that “it is our policy to ensure that the business of [the subsidiary] is at all times in a position to meet its liabilities to” the plaintiffs. The facility was increased from $5 million to $10 million when the defendants furnished a second comfort letter in substantially identical terms. The subsidiary having gone into liquidation, the defendants, refused to pay sums outstanding under the facility arrangements, contending that the statement in the comfort letter had not been intended to impose any binding legal obligation. The judge gave judgment for the plaintiffs on their claim against the defendants for breach of contract.
On the defendants' appeal:--
Held, allowing the appeal, that the defendants' assertion that it was their policy to ensure that the subsidiary was able to meet its liabilities was, in its terms and context as well as on the evidence, a statement of present fact and not a promise as to future conduct; that no promise as to future conduct could be implied; and that, accordingly, the terms of the comfort letter had no contractual effect.
Per curiam. The concept of a comfort letter was known by both sides at least to extend to or include a document under which the defendants would give comfort to the plaintiffs by assuming, not a legal liability to ensure repayment of the liabilities of their subsidiary, but a moral responsibility only.
Decision of Hirst J. [1988] 1 W.L.R. 799 reversed.”
Similar disappointment befell the plaintiff bank in Commonwealth Bank of Australia v. T.L.I. Management Pty Ltd (1990) VR 510 in respect of a similar letter of comfort. Tadgell J said at 516:
“The plaintiff must show, to adopt a phrase used by the High Court in J.J. Savage & Sons Pty.Ltd. v. Blakney (1970) 119 C.L.R. 435, at p. 442, that the words used in the letter of comfort were ‘promissory and not merely representational’.”
Gra-ham Australia is also instructive, and probably closer to the present situation in that the advantage of a clear written expression of the alleged contractual promise was not available. An investment fund manager was alleged to have undertaken in a telephone call a personal liability to purchase units from a nervous member at a fixed price (prevailing some weeks before) on a rapidly falling market as the October 1987 stock-market crash was getting under way. His Honour, who was acutely conscious of the dissatisfaction his reaching a different conclusion from Beach J in another matter involving substantially similar facts would create, said at 688, in a passage which describes in some ways the difficulty I face:
“The disjointed paraphrase of what was said between Graham and Miss Paul in the two telephone conversations makes their reconstruction difficult, but so far as one can ascertain the words used those words do not point towards an intention to make a contract to buy and sell units, as opposed to having the option exercised under the deed. Of course parties can use any words they choose to make an agreement, expressing themselves quite informally, provided that their intention sufficiently appears, but the language used here does not, on the short and imperfect account which I have, seem to have been the language of a contract making. The allegation in the particulars under para 10 of the statement of claim is that Miss Paul “advised Graham that unitholders in the Fund filing requests for repurchase on that day would be paid a repurchase price of $1.715 per unit, being the valuation of the units as at 30 September 1987”. Even the allegation, as opposed to the evidence, is not one which suggests the making of a contract.”
Another case which may be seen as an example of rebuttal of the presumption relied on by the plaintiff is Cook v. Saroukos (1989) 97 FLR 33. The relevant facts and some pertinent references to authority appear from what Angel J said at 37-38:
“The first defendant was pressing the plaintiff for arrears of rent. Discussion ensued covering the sale by the plaintiff to the first defendant, of the chattels later listed in Ex P 4. The first defendant was an experienced builder. He was shown round the premises by the plaintiff, and selected items of plant he considered would be useful in any furniture manufacturing business he might operate, either personally or via one of his companies. The plaintiff arranged for P 4 to be prepared and both parties signed it. Terms were agreed. The first defendant agreed to pay $12,500 for the listed items. The plaintiff expected payment of $10,000 after a deduction of $2,500.
At that time the plant was in good order and condition and properly maintained. I reject the first defendant's evidence that the selected items of plant were run down and in some instances inappropriate, in others too small, for his purposes. At about the time P 4 was signed, the first defendant informed the plaintiff that he wished to consult his solicitor and have a formal agreement drawn. Before seeing the solicitor, the plaintiff and the first defendant attended upon AGC Ltd and CBFC Ltd to effect an assignment of leases which Janco Furniture Manufacturers Pty Ltd had in respect of some other items of plant. After the assignment of those leases the parties attended upon the first defendant's solicitor.
I think the plaintiff's memory is probably defective here and that the parties attended the solicitor on two occasions. It doesn't matter much. The solicitor prepared a draft agreement for sale from the plaintiff to the second defendant (Ex P 7) and I accept the plaintiff's evidence that this was the first he knew that it was proposed that the second defendant would be the purchaser. Knowing that the plaintiff intended to go overseas, though not knowing when, and having secured an assignment of some of the manufacturing equipment, and knowing the poor financial circumstances of the plaintiff and his company and their inability to continue with the business the first defendant reneged and said to the plaintiff in the presence of the first defendant's solicitor, ‘I'll only pay you half’, or words to that effect. The first defendant's solicitor was not called to corroborate the first defendant's version of these events.
Leaving aside, for the moment, itemisation and ownership of the goods in question, I am bound to say the plaintiff's case for goods sold must be dismissed. As Lord Greene MR said in Eccles v Bryant and Pollock [1948] 1 Ch 93 at 104:
‘Parties become bound by contract when, and in the manner in which, they intend and contemplate becoming bound. That is a question of the facts of each case. . .’
As Higgins J said in Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 650:
‘The law knows no gradations in the contractual relation. It knows nothing of virtual agreements, or honourable understandings. Even if the defendants were shown to have disappointed the legitimate expectations of the plaintiffs for some unworthy reason - to have meanly backed out of almost completed negotiations - the action must fail. There is no contract unless the two parties mutually consented to be bound, one to the other by one agreement. Moreover - though it ought to be superfluous to say it - it is one thing for two parties to settle what are to be the terms of an agreement, if it should be made; and quite another thing to make the agreement. I have found, in my experience, that the two processes are frequently confounded; and, if I may judge from some of the cases to which I have been referred by Mr Starke, the confusion has not always been avoided even in the courts.’
Here, although the parties agreed terms, I do not think the parties agreed to be bound contractually. I think the plaintiff's claim against each defendant in contract must be dismissed. There being no intention to be bound, it is unnecessary to consider the respective positions of the defendants: H J Lyons & Sando Ltd v Houlson [1963] SASR 29. I should add that no claim in the nature of an estoppel or the making good of non-contractual and non-fraudulent representations was argued. Waltons Stores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387 was not pressed in aid of the plaintiff.”
Mr Francis is not guilty of that omission. Perhaps I should notice that in Kleinwort Benson it had been noted (at 386) that no claim in “misrepresentation” or “negligent misrepresentation” had been advanced by the bank.
Quite apart from the defendants' intention, any promissory aspect in what the second defendant said is strictly limited to questions of duration of lease. Whatever else may have been implied to create a certain and otherwise enforceable “agreement”, nothing can be implied, in my view, to the effect that the unusually favourable provisions for fixing the rent which Mr Sternbeck had would apply to any further term. In a supplementary submission dated 18 March 1996 Mr Stewart has referred to Bettison v Insurance Corporation of British Columbia (1988) 22 B.C.L.R. (2d) 130. The headnote is :
“The plaintiff was rendered quadriplegic in a motor vehicle accident in September 1986. He retained lawyer B to commence an action for damages. C., an independent adjuster appointed by the defendant insurer, wrote to B advising that he was authorised to negotiate a settlement of the plaintiffs claim. B and C, failed to reach a settlement. In a chance encounter between B and A, a solicitor employed by the insurer in an administrative capacity, A offered $900,000 to settle the claim. The next day B wrote to A accepting this offer. When the insurer took the position that no offer had been made, the plaintiff brought an action to enforce the settlement.
Held - Action dismissed.
From the outset B ought to have been of two minds about whether A's words were truly an offer. In the normal and usual course of business, an offer of settlement in such a serious case is not made by someone in A's position with no previous dealings in the matter in a 60-second conversation resulting from a chance encounter in an elevator. In all the circumstances B could not reasonably take A's words, without further inquiry, as a contractual offer.”
I may say I accept what was said at page 136 of Southin J's reasons regarding the test of intention to contract being assessed objectively.
So far as Waltons Stores is concerned, Mr Francis' argument was that the five conditions which Brennan J enumerated at 428-29 as necessary to establish an equitable estoppel had been made out. Without deciding whether others of the conditions have or have not been made out, my view is that that numbered 5, namely that “the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled” has not been made out. Of course, the plaintiff is worse off if deprived of the Murrays' $86,000 than if he received the sum. This involves a disappointed hope, rather than the loss of something Mr Sternbeck was entitled to get or retain. In Waltons Stores, the plaintiff had demolished one building and forty percent completed a new one in the reasonable expectation that the defendant would honour leasing arrangements defined with the greatest precision and accompanied by advice that execution and exchange of documentation was effectively a formality.
I found Mr Stewart's submissions on Waltons Stores useful. He draws attention to Mason CJ and Wilson J's statements that:
“Generally speaking, a plaintiff cannot enforce a voluntary promise because the promisee may reasonably be expected to appreciate that, to render it binding, it must form part of a binding contract.” (p. 403)
and:
“As failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required.” (p. 406)
I have difficulty in finding that “something more” here. Mr Stewart has pointed to a number of features of the case to which he says differentiate it from Waltons Stores. There is Mr Sternbeck's curious description of the second defendant's statement as made “flippantly” - which suggests that Mr Sternbeck himself was surprised at it. In context, and as explained by Mr Sternbeck, the description does not preclude his having taken the statement seriously. I agree with Mr Stewart that a relevant factor is what he called “the vague nature of the promise”, something which is fatal to the plaintiff's contractual claim. The absence of any discussion of what the rental would be troubles me in a way it did not trouble Mr Sternbeck, who readily made an assumption favourable to himself. His case would have been stronger had he done anything to verify that assumption with the second defendant. The substantial delay between the making of the first defendant's alleged promise (some time in December 1993) and the alleged incurring of detriment, more than a year later, with little or no relevant contact between the parties at all in the interim, is important. Mr Stewart submitted there was no detriment to the plaintiff in making the contract with the Murrays, which spared him any obligation to supply them with an acceptable lease, but, rather, provided for the contract to come to an end if the Murrays were not satisfied. Mr Stewart also reminded me that a successful plaintiff under the Waltons Stores doctrine obtains the minimum equity to do justice, which means to overcome the detriment. He quoted Brennan J at 427:
“The object of the principle can be seen to be the avoidance of that detriment and the satisfaction of the equity calls for the enforcement of a promise only as a means of avoiding the detriment and only to the extent necessary to achieve that object. So regarded, equitable estoppel does not elevate non-contractual promises to the level of contractual promises and the doctrine of consideration is not blown away by a side-wind.”
In this case, I agree with Mr Stewart there should be no question of the plaintiff obtaining a lease for ten years in the circumstances, unless, of course, he submitted to pay market rent, at least for the later years. The evidence shows that the Murrays would have been content to settle with six years available.
The plaintiff's claim based on s. 52 of the Trade Practices Act is entitled to succeed. I accept the submission that not until 10 March 1995 or thereabouts (that is after the plaintiff's contract with the Murrays) did the defendants disabuse the plaintiff of the belief which he had (and which they certainly knew he had on 1 March 1995) that a further lease would be made available to Mr Sternbeck or his purchaser. When put to the test, the first defendant's attitude was to insist on dealing with the plaintiff and the Murrays separately, and to insist upon what Mr Francis called “an exorbitant rental of $1875 per month which far exceeded what the existing lease called for”. The view may well be taken on the evidence that the first defendant's demands were for a greater sum, one in excess of $2000 per month, if the increase was $200 per week, which I find was mentioned. To this amount, the first defendant hoped to add the Mobil or Maranoa rebate, as noted above.
My view is that the plaintiff was entitled to the benefit of his own 3-year option, with the applicable rent the original base rent increased by half C.P.I. on annual reviews. Thereafter, there is no basis on which the plaintiff was entitled to enjoy the same advantage. The rent from that point would depend on market factors and/or what the first defendant and its putative lessee were prepared to agree to. The evidence provides no assistance whatever by way of identifying what the market rent or a “fair” rent independently assessed might be. I do not accept the defendants' assessment, which I think is greatly affected by their desire to get as much as they could of Mr Murray's largesse and perhaps, too, to exploit the plaintiff's difficulty flowing from not having exercised his option. I have already expressed my view as to what the rent has to be for the option period. Thereafter, I can see no possible objection to the first defendant “catching up” to enjoy all C.P.I. increases (including those foregone in the past) and perhaps further increases to take account of factors to do with the site and the state of petrol retailing in Nanango. It is possible that the first defendant's demands were reasonable, but no attempt has been made to justify them, and I will not find they were reasonable. Indeed, the evidence of the Marshalls goes far to show they would have been content with less than they demanded. They so managed matters that every appearance given to Mr Sternbeck and the Murrays was that any right to occupy the service station site after 1 July 1995 would only be made available “at an exorbitant rental” from the outset.
Mr Sternbeck's “net operating profit” (all he had to live on) was going to be reduced from something less than $500 per week (year to 30 June 1995) to something less than $300 per week. Mr Sternbeck was faced with demands and given no invitation or encouragement to present counter-proposals. At the very least he had been led to think, ever since 1993, (and I think it was confirmed over the telephone in January 1994) that an extended period of occupation of the site as a lessee, continuous with what he already enjoyed, would be made available on reasonable terms. Nothing of that character ever was made available. The first defendant's conduct (through the second defendant) was misleading and deceptive. It was clearly engaged in trade or commerce. I think it is right to say the first defendant had no intention to grant a ten-year lease; it has adduced no evidence to show that it had reasonable grounds for suggesting (by the second defendant) that it did. Section 51A of the Trade Practices Act throws upon the first defendant the onus of establishing that it had reasonable grounds. It has not done so. In truth, the second defendant's evidence alleging reasons why he would not have made the representation supplies proof that it was made without reasonable grounds.
If the first defendant is liable under the Trade Practices Act, so is the second defendant, as its director and agent: s. 75B. The plaintiff has plainly suffered from the breach. I have not the slightest difficulty in finding that he was lulled by what Mr Rae Marshall said bearing upon the security of the site into refraining from exercising his option. He now is without the security of a term acknowledged by the first defendant.
As Mr Francis submits, the Court may award specific performance under s. 87. It is not possible to determine the conditions it would be just to apply to the period after 1 July 1998 which, in my view, precludes specific performance in respect of that period. As to the earlier three years, there is little attraction in a three-year term for the plaintiff. Mr Francis seemed somewhat equivocal in his response to my enquiry whether Mr Sternbeck, if successful in the action, preferred specific performance or damages, indicating (reasonably I suppose) that it would depend on what his client stood to get under either head. I think I ought to give both sides an opportunity to make submissions as to appropriate orders when these reasons have been made available to them. It may even be that some compromise or common ground emerges. For the moment, I think I ought to assess damages.
Although acknowledging that the assessment of damages is ordinarily on a “tort” basis (Gates v. City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 14-15) Mr Francis submits that damages assessed on a contract basis are available in the alternative. His written submissions include the following:
“On that basis it is submitted that as the representations in this case are promissory in nature, the measure of damages should be contractual. Alternatively, the measure of damages is wider than merely in tort and includes losses which are the immediate result of the conduct and also to consequential losses if sufficiently direct (Frith v. Gold Coast Mineral Springs Pty Ltd (1983) 65 F.L.R. 213, 232). Furthermore once the Court finds that damage has occurred, it must do its best to quantify the loss even if it involves a degree of speculation and guesswork (Enzed Holdings Ltd v. Wynthea (1984) 57 A.L.R. 167, 182). In the present case the loss suffered by the Plaintiff is the loss of a potential sale to Mr Richardson for $70,000.00 to $80,000.00. Further in the alternative, the Plaintiff's loss will be in the form of lost profits in not having a ten year lease, or alternatively a secure three years lease (by virtue of the exercise of the option). At the moment the Plaintiff is merely “holding over” and has no security of tenure. The lost profits can be projected from his financial figures and are set forth in paragraph 20A of the Further Amended Plaint (Exhibit 21).”
(Those lost profits, if they are “lost” in the event, would appear to be of the order of $500 per week, although Mr Sternbeck would have his time free, able to be devoted to profitable activity - perhaps a theoretical prospect only).
Mr Richardson was a mechanic who for a couple of years sub-let a workshop in the premises. He was interested in purchasing, the evidence shows that he could or would have paid no more than the sums mentioned, which would have included stock, either for a term ending 30 June 1998 (which was all he knew of) or for a longer term. He was interested in acquiring the business so that his income could be expanded beyond what his own physical work produced. He was a potential purchaser. In my opinion, Mr Sternbeck forewent the opportunity to deal with Mr Richardson or others which he would doubtless have pursued, had not Mr Rae Marshall misled him in 1993 into thinking there was no need to seek a buyer quickly, while there remained a worthwhile period of occupancy at a known rent.
Plaintiff's Claim Under Trade Practices Act s. 47
Sub-sections (6) and (7) of s. 47 deal with what has been called “third line forcing”. Sub-section (6) reads:
“A corporation also engages in the practice of exclusive dealing if the corporation -
- (a)supplies, or offers to supply, goods or services;
- (b)supplies, or offers to supply, goods or services at a particular price; or
- (c)gives or allows, or offers to give or allow, a discount, allowance, rebate or credit in relation to the supply or proposed supply of goods or services by the corporation,
- on the condition that the person to whom the corporation supplies or offers or proposes to supply the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will acquire goods or services of a particular kind or description directly or indirectly from another person.”
Clause 8.17 of the lease is set out above. If the lease can be regarded as involving the supply of services by the first defendant company, the plaintiff's claim that a breach of this provision has been established seems unanswerable. It is unnecessary to go on to consider sub-s. (7) which provides there is exclusive dealing if a corporation refuses to supply services, etc. for the reason that some person will not agree to third line forcing. There is no evidence of such refusal in any case.
Mr Stewart submitted that what Mr Sternbeck and his wife obtained under the lease was an interest in land, which could not be described as either “goods” or “services”. He claimed support from certain doubts expressed by Franki J in ABC Centres Pty Ltd v Kilstream Pty Ltd (1979) 25 ALR 549, 551. His Honour said he would proceed upon the basis, but without deciding, that the word “services” in s. 47(4) includes rights in relation to, and interests in real property.
“Services” in the Trade Practices Act means whatever the legislature says it means. Section 4(1) has this definition:
“‘Services' includes any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce, and without limiting the generality of the foregoing, includes the rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred under -
- (a)a contract for or in relation to -
- (i)the performance of work (including work of a professional nature), whether with or without the supply of goods;
- (ii)the provision of, or of the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction; or
- (iii)the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction;
- (b)a contract of insurance;
- (c)a contract between a banker and a customer of the banker entered into in the course of the carrying on by the banker of the business of banking; or
- (d)any contract for or in relation to the lending of moneys, but does not include rights or benefits being the supply of goods or the performance of work under a contract of service”
In my opinion, although one must feel that the natural meaning of “services” is being strained somewhat, this broad definition brings in rights obtained by a lessee of service station premises under a lease. It is unnecessary to go beyond the first three lines. Reference also should be made to s. 4H of the Trade Practices Act:
- “(a)a reference to a contract shall be construed as including a reference to a lease of, or a licence in respect of, land or a building or part of a building and shall be so construed notwithstanding the express references in this Act to such leases or licences;
- (b)a reference to making or entering into a contract, in relation to such a lease or licence, shall be read as a reference to granting or taking the lease or licence; and
- (c)a reference to a party to a contract, in relation to such a lease or licence, shall be read as including a reference to any person bound by, or entitled to the benefit of, any provision contained in the lease or licence.”
The helpful annotations in Mr Miller's work include a reference to the decision in Henderson v Pioneer Homes Pty Ltd (No. 3) (1980) 43 FLR 276 which decided that the advertisement of house and land packages together with finance for the purchaser came within the definition of “services”. Franki J. (Northrop J agreeing) at 289 seems to have reached that view independently of the finance aspect; Smithers J at 279 said:
“Certainly the rights in the land which were the subject of the proposed transaction were a service within the definition of ‘services' in s. 4.”
If this view were not correct, in my view the plaintiff would be permitted to amend if necessary to rely on s. 47(8) which specifically deals with leases. Inclusion in the lease of clause 8.17 clearly breaches subsection (8).
As s. 47 forms part of Part IV of the Trade Practices Act, s. 82 authorizes the Court to award damages to the plaintiff if he has suffered loss or damage by reason of the contravention.
In my opinion it is a reasonable inference from the circumstances that the company which paid the fuel rebate to the first defendant would have been willing to allow benefits of equal value to others such as the plaintiff and his wife, if the first defendant had not taken the rebate. The mere breach by the first defendant of s. 47 of the Trade Practices Act does not mean that the plaintiff is entitled to appropriate the reward which the first defendant acquired through the breach. Mr Francis argued that his client had a restitutionary claim to the full amount of the rebates, claiming unjust enrichment of the first defendant and/or that the rebate was a secret commission. Goff & Jones, The Law of Restitution (3rd) 654 was cited. The written submissions went on:
- “58.Similarly it is arguable that as clause 8.17 of the lease contravened s. 47 TPA and as the rebate moneys were payable as a result of that clause being enforced, the Plaintiff should be entitled to recover the moneys paid under the illegal contract particularly where such clause is rendered illegal in order to protect persons such as the Plaintiff.
- .Goff & Jones, op. cit. at p. 408
- 59.Furthermore, such rebate payments benefits can be recoverable as they were made under duress or compulsion. Duress in this sense includes economic and commercial duress. A payment is made under duress or compulsion where there is a belief, on reasonable grounds, that non-payment will result in serious consequences such as interference with property rights or with the carrying on of a business. Here, the non-observance of clause 8.17 would certainly have resulted in such serious consequences as the determination of the lease and the Team Pak Agreement.
- .Goff & Jones, op, cit. at pp. 203-206, 222-240.
- .Esso Petroleum Resources Ltd v. Gas and Fuel Corp. of Victoria [1993] 2 V.R. 99.
- 60.Now payments made under a mistake of law are recoverable. Moneys paid under a mistake of law refers to payments to a person not legally entitled to receive them. The rebates are such payments as they were paid by the Plaintiffs in the mistaken belief that clause 8.17 of the lease was legally enforceable.
- .David Securities Pty Ltd v Commonwealth Bank of Australia [1992] 175 C.L.R. 353.”
The bases seemed to me increasingly fanciful. There is no foundation for them in the evidence. Mr Stewart's submission says that any restitutionary claim ought to fail:
“Unjust enrichment claim
The cornerstone of a claim to money on this basis is that it would be unconscionable for the defendant to retain it.
Given the undisputed evidence that:
- .it was the plaintiff who instigated the change to Mobil;
- .the plaintiff changed to Mobil fully conscious that the first defendant would receive the rebate from Maranoa Petroleum Service Pty Ltd;
- .the plaintiff benefitted substantially from the refurbishment consequent upon the change to Mobil;
- .the absence of any connection between the offending clause in the lease and the first defendant's entitlement to receive the rebate (see: the terms of the rebate agreement, exhibit 27 and the reseller agreement, exhibit 5(a));
- .the plaintiffs had by the reseller agreement bound themselves to obtain all of their product from Maranoa Petroleum Service Pty Ltd; the absence of any suggestion that the plaintiffs could have taken the benefit of the rebate in any way and the likelihood that the plaintiff resisted rent increases by referring to the increase in rebate that the first defendant enjoyed it is submitted that there is no basis for any finding that it would be unconscionable for the first defendant to retain the money.”
In my opinion the connection which Mr Stewart contends is absent is in truth very much present. In my opinion it can be suggested and is a reasonable inference that the value of the rebate or part thereof would have been made available to the Sternbecks had it not gone to the first defendant. Whether it is unconscionable for the first defendant to retain the money depends on all the circumstances.
I notice here a further submission, based on Rivers v Bondi Junction-Waverley RSL Sub-Branch Ltd (1986) 5 NSWLR 362 that the declaration sought by the plaintiff should be refused as futile or lacking utility, while Mr Sternbeck does not suggest he wishes to change from Mobil as the supplier. The authority mentioned concerned a declaration sought to establish that certain technical breaches of meeting rules had occurred, which would have led nowhere. The declaration Mr Sternbeck seeks is in a different category entirely.
Mr Stewart's submissions persuade me that the restitutionary claim ought not to be allowed. I do not get to the stage where it becomes necessary to allow it because in my view a claim to damages under s. 82 against the first defendant for breach of s. 47 of the Trade Practices Act is open. It is necessary that the plaintiff show he is a person who has suffered a loss or damage by conduct in contravention of s. 47. If he does that he may recover the amount of that loss or damage by action. In my opinion it is clear that there is such damage, because of the Sternbecks' lost chance of obtaining lower prices for fuel from Maranoa. It is unnecessary to go further, but more indirectly, there may be damage suffered in that Mr Sternbeck's work in building up the business and enhancing the value of the rebate led to the first defendant's coming to consider it had some kind of vested right to a higher return for itself from the property. In another aspect, the first defendant has, in my view, tried to arrogate to itself a share of the goodwill built up by Mr Sternbeck. If he had been allowed to enjoy the fruits of what he built up there would be less (or perhaps no good) reason for requiring the first defendant to disgorge or account by paying damages for its receipts of the fuel rebate. I invited submissions to the effect that in adjudicating upon the s. 47(6) claim I was not entitled to look at the wider picture, but should examine the circumstances of the rebate only. No such submissions came.
I do not think it can be said that the full amount of the rebate would necessarily have been available to the Sternbecks. I propose to allow damages in the amount of half of the $30,633.94 fuel rebate payments shown in Exhibit 29.
(Although no limitations point was argued, I am concerned that the first months' payments, from January 1992, may not be recoverable. The plaint was issued on 20 March 1995. There have no doubt been and/or will continue to be payments subsequent to the last in the exhibit, which was for January 1996. The later payments will balance out those that may have come too early.)
Assessment of damages for the defendants' breach of s. 52 of the Trade Practices Act is a difficult task. It is clear that the plaintiff is entitled to such damages, having suffered loss from his reliance on Mr Rae Marshall's assurance regarding a further term. I do not accept Mr Francis' submission that the damages ought to be on a contractual basis, or any kind of basis which would contemplate the assurance coming true. The Murrays' completion of their contract to purchase the business was by no means certain, although their financial ability to complete was, in my view. They would not have completed on the basis of paying the full price mentioned in the contract unless assured of a further six years' occupation. Even with that available, there is real doubt whether the lease arrangements would have been suitable or satisfactory to them had any counterpart of clause 8.17 of the Sternbeck lease, tying them to Mobil fuel been included. The defence evidence (but not Mr Murray's which did not touch on the point) suggested that the Murrays intended to recoup their outlay by selling cheap or discount fuel, which I would infer would require freedom to choose the cheapest supplier, which might well not be Mobil.
I consider the damages have to be assessed on the “tort” basis, which places a successful plaintiff in the position that would have been enjoyed had the misleading conduct against s. 52 not occurred. In that event, I find that Mr Sternbeck would have sold for what he could get, and as quickly as possible, while he still had an appreciable term of years to transfer, even if not six. It is possible on the evidence to identify Mr Richardson as a purchaser. He was seriously interested in early 1994 (transcript p. 157) - at one point he agreed the month was January; the proposition he entertained was one offering him four and a half years occupancy (p. 159); he had the benefit of the Sternbecks' financial statements being available to him and his own accountant's advice, not to mention his own daily observations of the business in operation. Mr Sternbeck did not tell him that a ten year term might be available. The number of years available, was not a significant factor, because Mr Richardson had established that the most he could pay, however many years available, was $70,000 to $80,000. Mr Sternbeck was after considerably more, so any purchase by Mr Richardson was not pursued. He said (and I accept) that he would have been “ecstatic” if he could have bought for $70,000. He may well have gone a few thousand dollars higher. In what he said, stock taken over had to be included. I think I am entitled to rely on the plaintiff's accounts, Exhibits 8, 9 and 10 as indicating the stock levels of the business. They show the following figures for “closing stock”:
30 June 1992 | $9,392 |
30 June 1993 | $15,187 |
30 June 1994 | $25,000 |
30 June 1995 | $18,030 |
I think there would have been little difficulty in running down stock to a certain extent to facilitate a purchase by Mr Richardson. I consider it a conservative approach to regard him as willing and able to pay $55,000 for goodwill on the basis of about 4½ years' occupation in January 1994. That figure is not greatly out of line compared with the Murrays' $86,000 for six years, although it was on the low side, and it is easy to understand why Mr Sternbeck, holding the belief Mr Rae Marshall and the first defendant had led him to, was uninterested. For purposes of assessing damages, however, I may say that the worst position Mr Sternbeck would have found himself in had the misleading conduct not been engaged in was being the recipient of $55,000 in cash (forgetting stock), having divested himself of the service station business in Nanango. That would have been about two years ago. It seems to me that for the last two years he would have had the benefit of the use of the whole of Mr Richardson's $70,000, or more.
Instead, he has an uncertain and precarious occupancy, not at all conducive to making the most of the business. He has nothing at all (except stock) that he could sell to anyone. Towards whatever he would have made of the $55,000 (or $70,000), he is about to receive $15,000 or so by reference to the fuel rebate. I am unable to see that he is entitled to the full value of both. Common factors operate in the two assessments.
Although it may be heresy to consider the appropriateness of damages in terms of what it is fair for defendants to have to pay, it may be noted that, on their own evidence if the first defendant is restored to possession and control of the service station site, the first defendant is getting a valuable property into its hands which otherwise would have been committed for $15,134.40 or thereabouts per annum. Mr Bill Marshall was eventually worn down by Mr Francis into conceding that he might have claimed an increase of $200 per week from Mr Sternbeck (pages 279, 281). At page 280 Mr Bill Marshall referred to the advice of two different accountants who “seemed to think that you could possibly ask up to $2,000 a month plus the rebate”, although one of them, Mr Archdall (who also was the plaintiff's accountant) “suggested that about $1,800 wouldn't be too bad a rent”. The defendants have been coy about the precise level of the “higher and fairer” rent they had in mind. I still have no clear idea of it. At page 236, when asked about the $200 per week suggestion, Mr Rae Marshall said “I think I quoted an increase in the rent when we put a proposition to Mr Sternbeck of $1,875 a month in lieu of $1,300 and something a month”. Mr Sternbeck's rent seems not quite to have got to $1,300.”
On the Marshall's own figures, the first defendant is something like $10,000 per annum better off with Mr Sternbeck out of the picture. As for the rebate matter, in light of the multi-million dollar fines reportedly imposed on bigger players in the oil industry for transgression of the Trade Practices Act, the first defendant is hardly entitled to expect to get off scot-free with a blatant infringement of section 47; all that is happening is that it is required to account for half of its ill-gotten reward. Presumably none of this would have surfaced had the defendants been more accommodating when the Murrays came into the picture.
I shall withhold giving judgment until the parties have had an opportunity to consider these reasons and make submissions. It may be that Mr Sternbeck wishes to press for specific performance of the option. I shall hear the parties about it, if he does. I envisage at the moment that after some reasonable time to organize things he will vacate the premises (having paid an appropriate sum for his occupation in the meantime). If that occurs, it appears the outcome of the action will be judgment for the plaintiff against the first defendant for $69,000 ($14,000 of which is interest) and against the second defendant (who was not sought to be made liable for the s. 47 aspects, for $53,683 ($69,000 less $15,317). The plaintiff's total recovery (excluding interest on the judgment) is not to exceed $69,000. I have not heard submissions regarding interest, but am willing to.
(Nothing need be said regarding the claim against Mr Rae Marshall for breach of warranty of authority, given the plaintiff's limited success in establishing that promissory statements were made by him. Nor is it necessary to comment upon, though I make reference to a somewhat similar case of Dinyarrak Investments Pty Ltd v Amoco Australia Ltd (1982) 45 ALR 214, mentioned by Mr Francis. Section 52 has been invoked by lessees of service station premises on other occasions, before (George MacGregor Auto Service Pty Ltd v Caltex Oil (Australia) Pty Ltd (1980) 57 FLR 458) and since (R.G. Steedman v Golden Fleece Petroleum Limited (1986) ATPR 40-660). Mr Sternbeck's case is still not to be the last.)