United Petroleum Pty Ltd v Istanikzai

This dispute arose out of a larger conflict involving United Petroleum's franchise network and the rollout of Pie Face products into service-station sites. The Federal Court matter was not the first or only battleground. By the time the stay applications were argued, there were already two Federal Court proceedings on foot and a later representative proceeding in the Supreme Court of Victoria.

The two Federal Court cases were narrower than the representative proceeding. They focused on what United said happened after the franchise relationships ended, including access to a site email account, use of alleged confidential information, statements to other franchisees, statements in media coverage, and statements to a political adviser's office. The later Supreme Court case was broader and attacked the operation of the network itself, especially the Pie Face rollout, stock allocation and wastage practices.

The practical question for Anderson J was not who would ultimately win the franchise war. It was whether the earlier Federal Court cases should be put on hold until the later representative proceeding was decided.

United Petroleum and United Petroleum Pty Ltd as trustee for the United Petroleum Unit Trust were the applicants in the Federal Court proceedings. The respondents were former franchisees or related parties connected with two Victorian sites.

In the Istanikzai proceeding, FNH United Pty Ltd had entered into a franchise agreement for the Cranbourne South site in April 2020, with Mr Istanikzai as guarantor. The agreement was terminated in February 2021. United alleged that after termination Mr Istanikzai accessed the site email account in April and July 2021, used a list of store email addresses that United said was confidential, and sent a July 2021 email to various recipients including other United franchisees in Victoria. United said the email included statements that none of its franchisees and commission agents could afford to pay award wages under United's business model and that most were hardly covering daily costs.

United also alleged that statements said to have been made to Mr Daniel White, a former adviser to the Hon. Anthony Byrne MP, were misleading or deceptive and formed part of an injurious falsehood claim. The pleaded causes of action included breach of an implied contractual term, breach of confidentiality under the agreement and in equity, trespass to goods, misleading or deceptive conduct and injurious falsehood. Mr Istanikzai and FNH denied those allegations and said, among other things, that the statements were not made in trade or commerce, were genuinely held opinions, and that United had not articulated loss.

In the Bhatti proceeding, Mr Patel and Mr Bhatti had entered into a franchise agreement in May 2018 for the Wallan site as trustees for the JJ Unit Trust, and were also guarantors. That agreement was terminated in January 2021. United alleged that an ABC article and broadcast published in June 2021 included allegations by former franchisees against United, and that Mr Patel and Mr Bhatti were filmed making statements about the financial viability of their franchise after Pie Face was installed. United also alleged that the broadcast showed pages of the Wallan franchise agreement and a document called a wastage audit report for September 2020.

United said those acts involved disclosure of confidential information and that statements made in the ABC material and in a July 2021 email to Mr White were misleading or deceptive and injurious falsehoods. Mr Patel and Mr Bhatti denied that the franchise agreement and wastage report were confidential in the way alleged, denied meaningful disclosure through the broadcast, denied that the statements were made in trade or commerce, and denied loss.

The representative proceeding was commenced in the Supreme Court of Victoria on 21 October 2022. The lead plaintiffs were FNH, Mr Istanikzai, Mr Patel and Mr Bhatti. The defendants were United Petroleum and one of its directors, Mr Avi Silver. The group members were defined broadly to include people who, between 19 October 2016 and 20 October 2022, were or became franchisees in the United network under a standard form franchise agreement, as well as guarantors of franchisee obligations.

The factual allegations in that proceeding were much wider than the Federal Court claims. They included allegations that the Pie Face franchise acquired by the United group was effectively a failed franchise when acquired, that Pie Face was installed into sites without franchisee consent, that franchisees incurred higher costs because of Pie Face, that stock was allocated to franchisees that they did not order or need, that United obtained supplier rebates connected with that stock, and that unsold stock became wastage for which franchisees were not reimbursed.

The legal claims summarised in the judgment included alleged breaches of the Franchising Code, the Oil Code, express and implied contractual terms, misleading or deceptive conduct about the profitability and demand for Pie Face and the nature of franchise obligations, and unconscionable conduct in requiring franchisees to acquire stock in a way that allegedly shifted risk and benefited United at franchisees' expense.

That broader proceeding gave the former franchisees a basis to argue that the Federal Court matters should be stayed. Their position was effectively that the larger and later case should go first.

The legal issue was whether the Federal Court should exercise its power to stay the two Federal Court proceedings pending the determination of the later representative proceeding in the Supreme Court of Victoria. The judgment records that the relevant principles were not in dispute.

The court said it had broad power to order a stay under section 23 of the Federal Court of Australia Act 1976 and rule 1.32 of the Federal Court Rules 2011. But the authorities also make clear that a stay is a serious step because a plaintiff is ordinarily entitled to have its action tried in the ordinary course. The burden is on the party seeking the stay to show that it is just and convenient to interfere with that ordinary right.

The principles collected by the court included a range of practical factors: which proceeding was commenced first, whether one proceeding might materially affect the other, the public interest, the undesirability of two courts dealing with common facts at the same time, witness convenience, whether work already done might be wasted, how advanced each proceeding was, the risk of multiplicity of proceedings, the risk of inconsistent findings, and the efficiency and cost implications of duplication. The court also referred to the overarching purpose in section 37M of the Federal Court of Australia Act, which points toward efficient and cost-effective case management.

Importantly, the authorities cited by the court also warn against indefinite postponement. A party with a legitimate and genuinely arguable claim is ordinarily entitled to have it heard as soon as the court can conveniently arrange.

The outcome is clear from the orders and catchwords. Anderson J dismissed both interlocutory applications for a stay and ordered the respondents to pay the applicants' costs of those applications. The catchwords also state that the interests of justice militated against granting a stay.

That means the Federal Court was not persuaded to pause the earlier proceedings in favour of the later representative proceeding. United's two Federal Court cases were allowed to continue.

What cannot be stated too strongly is that the available reasons cut off during the court's consideration section, beginning with overlap of issues. So while the legal framework and the result are clear, the full detail of how the judge weighed each overlap, prejudice and efficiency argument is not fully available here. The safest reading is that the respondents did not satisfy the court that justice was better served by delaying the Federal Court matters, despite the existence of the broader Supreme Court proceeding.

It is also important not to overread the result. The dismissal of the stay applications does not mean the representative proceeding lacked merit. It means only that, at this procedural stage, the Federal Court did not consider it appropriate to halt the earlier cases.

For franchisors, this case shows how a dispute can fragment into several fronts at once. A disagreement about site economics or network practices can quickly become a fight about post-termination conduct, access to systems, confidentiality, media engagement and representative litigation. Once that happens, your risk is not only about the underlying contract or code issues. It is also about process, timing, cost and consistency across multiple forums.

For franchisees and former franchisees, the case shows that joining or leading a broader representative proceeding does not necessarily stop an existing individual case. If you want a stay, you need more than a general argument that the later case is bigger or more important. You need to show why waiting would materially assist justice, reduce duplication in a meaningful way, and justify delaying the other side's ordinary right to proceed.

For both sides, documents and conduct matter. The pleaded allegations here involved site email access, recipient lists, franchise agreements, wastage reports, broadcast footage and statements to third parties. Businesses should think carefully about who controls site systems after termination, what information is genuinely confidential, how operational reports are handled, and what staff, franchisees or former franchisees say publicly when a dispute is live.

Finally, this case is a reminder to separate procedural wins from merits wins. A refusal to stay proceedings can be commercially significant because it affects cost, pressure and timing, but it does not resolve the underlying allegations. Businesses should avoid treating a procedural ruling as a final vindication of their broader position.

These issues were all live in the pleaded disputes described in the judgment. Even where the final merits are unresolved, they show the kinds of operational details that can become central once a franchise relationship breaks down.

The judgment is dated 2 March 2023. The two Federal Court proceedings had been commenced in September and November 2021. The representative proceeding in the Supreme Court of Victoria was commenced on 21 October 2022. The orders made on 2 March 2023 dismissed the stay applications and awarded costs against the respondents on those applications.

The public explanation on this page is limited to what can safely be drawn from the available reasons, especially because the consideration section is incomplete in the available text.