Following the trial between Esso and more than 100 licensees, earlier this year (see Forecourt Trader, August issue), many of those involved are finding it hard to come to terms with the lack of resolution in the judgement.
PRA director Ray Holloway is no exception. “One of the things this court case was meant to resolve was that by getting people together in a group, they would avoid the anguish of having to go through so many individual court appearances,” he says.
“Unfortunately, the truth is that although that’s happened, nothing will be resolved until there is an individual court hearing. It hasn’t achieved what it set out to do. I think maybe none of the parties in the case – the judge, the oil company and indeed the group – was able to bring focus to the different issues in sufficient detail to allow a decision to be made. The one thing you want out of a court case – whether you win or not – is clarity. I find it hard to remember any court hearing that was as unclear as this one.
“The other thing is that a court case ought to finalise matters. Everyone thought that’s what this would be. In real terms it’s just an intermediary step.”
THE LESSONS LEARNED
Holloway believes the overall lesson has to be that retailers should only get involved in contracts that are prepared well enough to protect their interests, so that court action is never a requirement.
“You have to believe in the integrity of both parties in the contract. Unfortunately, in too many cases the largest party has the least integrity. That’s the salutary lesson here,” he stresses.
“Esso could have resolved most of the issues involved, and that would have stopped a court hearing. But because the company is so litigious the alternative means of resolving the issue is never really addressed.
“The other lesson is to do with might – is a group any more likely to be successful than an individual? I think we’ve learned in this case that it is not. The lesson is only in the clarity. The court decided on group litigation. English law dictates that if one company wishes to bring a number of actions for the same reasons against individuals, it should offer the opportunity for that to occur in one hearing. Individuals can all apply to the same court to have the same case heard as a group action but, as we now know, it doesn’t necessarily mean their individual circumstances will actually be addressed.”
In fact, Holloway now believes that the obvious, and most successful, way for an individual business to pursue justice is to take an individual action.
“The English legal system works against individuals. When you hear all this talk about it being time to update legal systems in the UK, this court case is a particular reason to support that.
“Might can afford, right cannot. That’s the simple truth. It doesn’t matter how right you believe you are, if you believe you’ve been wronged in a contract you do not necessarily resolve it in a court of law.”
Holloway stresses that the more care taken before investing in a partnership where you don’t own the property, the better. This is because you could be relying on the spirit of the agreement in future years to be upheld by a large international company – and the case of the Esso licensees shows you cannot rely on that.
OIL COMPANY CONTRACTS
So, have any lessons been learned about oil company contracts?
“No,” says Holloway. “The comparable circumstances in today’s market are present in the supply terms of the dealer fuel contract.
“Because the ability to manage the margin is often not sufficiently transparent, both parties can have a different understanding of the contract requirements.
“I think the fuel contract has potential for disputes to occur later. The real reason for that is that the fuel contracts provided by an oil company are imposed terms of contract – they’re not negotiated.
“When considering a contract, retailers have a choice. One choice may be to just not get involved. Many people are blinded by the opportunity without considering the consequences.
“People need to understand that integrity doesn’t come in an image, it comes in practice. I also think the suppliers in the fuel market now have lived off their past reputation for too long and retailers should see their relationship with a supplier for what it is – a new experience for a very limited period of time. Treat the contract like a stranger.”
“In the distant past you could rely on the integrity of an oil supplier to negotiate an outcome to a dispute,” says Holloway. “There are lots of reasons for that – value of relationship, not wanting to court bad publicity etc – but the major oil companies today are so dominant in the market that retailers actually don’t have a choice. That therefore places quite a different balance on the contract that’s offered. People will often accept imperfect terms – in fact, I doubt if most people read the contract terms, not even after all the recent experience. But I would stress that if you take legal advice, listen and heed it. Most people pay for legal advice and ignore it.”
Holloway believes the type of contract mainly used today for a company-owned site operator is so one-sided in favour of the oil company that no individual would have a successful outcome in a dispute in court if it were about the terms in the contract.
“The terms are in favour of the real estate owner, not the business operator. Some people feel comfortable with that and can live with the reality of it. But it’s only those individuals who don’t understand, and run into uncomfortable circumstances that have an unsuccessful outcome,” he says. “Also, a large proportion of today’s operators on company-owned sites are not of a complaining culture.
“The licence agreement basically gave a guaranteed period of occupation – be it only three years. And in that time you could build a business. Today’s retailer contracts really cover one to three months, so the relationship is unlikely to ever lead to being a long-term one. Therefore, the degree of financial dispute will always be on a smaller scale than we have seen in recent examples.”
A repeat of the Tiger Token case is deemed unlikely, due to changes in technology and administration, and the fact costs for promotions are paid upfront.
“The problem with any promotion occurs when tokens are not redeemed within a pre-determined date,” says Holloway. “But the charge-back opportunity has disappeared with the points systems today. In other words, the place of issue is not relevant. Customers collect points that are paid for by the retailer. Then they’re pooled together and spent, but they’re not then costed back to the retailer at a later date. That’s the basic difference and, as you can see now, that was the flaw in the Tiger Token promotion – although it wasn’t just Tiger Tokens – other brands had the same approach. The uniqueness of Tiger Tokens was that the promotion lasted for 10 years.”
Holloway has two viewpoints on whether there are likely to be
any further challenges on oil companies in the future.
“If people genuinely believe they’ve been wronged, they should be prepared to challenge.
I think many problems that arise in the industry are because not sufficient people have challenged the oil companies in the past. It doesn’t mean the oil companies have always been right – quite the opposite. I do believe people should challenge. But I would like to think that people have learnt the lesson that they don’t just get involved in an agreement because they like the
appearance of the corporate image. They should get involved in a business
relationship because they like the contract. If they stick to that principle, they would probably have fewer problems.”