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| heavy residual oil suitable only for the manufacture of bitumen. To this was added a percentage of petrol so as to make this oil sufficiently fluid to be handled by tanker. This contract was successively assigned to Caltex Oceanic Limited and on 23 August 1950 to Caltex (UK) Limited. A few months after operations commenced in 1948, it became obvious that on the basis of producing and selling bitumen only serious losses would be incurred which, if continued, would have resulted in the Company being a complete failure. Consequently, arrangements were made with the California Texas Oil Company Limited to supply a synthetic crude which, as well as containing the heavy residual oil for the production of bitumen, also contained diesel oil and fuel oil. This type of synthetic crude oil came into use in April 1949. On 18 September 1950 Caltex (UK) Limited, to which Company the agreement had been assigned, gave notice of termination of supply of the new type of crude. If other arrangements had not been made Bitumen and Oil Refineries (Australia) Limited would again have been reverted to the impossible position of being dependent on the production and sale of bitumen. A long-term contract has been entered into with the Anglo-Iranian Oil Company Limited, on favourable terms, for the supply of whole crude oil and the provision of tankers. Whole crude is crude oil straight from the well and not previously partly processed as is synthetic crude oil. Deliveries under this contract are to commence in February, 1951. Caltex (UK) Limited applied to the Equity Court for an injunction to restrain the Company from entering into this contract, but abandoned its application on the day set down for hearing of the case. |
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| Meanwhile, several things were happening behind the scenes. Firstly, there was a dispute over the definition of crude oil under the original agreement with Caltex. The bulk bitumen market was not as buoyant or as profitable as had been anticipated so that, while there was strong local demand, potential customers did not have the receiving tanks necessary for bulk bitumen and still wanted to be supplied in 44-gallon drums. Griffin, as the new managing director, became interested in the oil market generally and how it was structured. Thumbing through the oil publications of the day he discovered that the synthetic crude oil being sold into Australia was actually a waste product and, had there not been a market for it outside America, would have simply been dumped. What really troubled Griffin, however, was the revelation that Bitumen and Oil Refineries was being charged the same amount for this inferior synthetic crude as for whole crude oil, a far superior product. Secondly, Caltex was vehemently opposed to Bitumen and Oil Refineries' proposed installation of a platformer - a catalytic reformer - that produced petrol from the heavier end of the synthetic crude oil supplied by Caltex. Caltex was trying to minimise the amount of petrol Bitumen and Oil Refineries could make, as it was obliged under the agreement to take it back. Caltex did not want this additional petrol because its own refinery at Kurnell was coming on line. The platformer could also upgrade some of the whole crude oil into motor and aviation fuels. Both these disputes came to a head just before the 1950 Annual General Meeting and it became apparent that there would be a contested election of directors. Caltex's plan was to oust Griffin and appoint an Australian of their choice to the board; this Australian director and three nominees would give them support from four out of seven directors and total control of the Board. They put forward Telford Simpson, the senior partner of Minter, Simpson and Company, Bitumen and Oil Refineries' solicitors at the time. Griffin approached solicitors Murphy and Moloney for independent legal advice on the original agreement with Caltex. Harry Morrissey asked Gerry Wells, a partner with the firm, to examine the legal document. It became clear that there was a flaw in the drafting of the supply agreement. It called for Bitumen and Oil Refineries to buy the whole of its oil supply from Caltex, but 'oil' was defined very narrowly. If Bitumen and Oil Refineries did not need 'oil' under the contract's definition, it was free to buy its crude oil supply from whoever it chose. Griffin could buy genuine whole crude oil on the open market rather than accepting the inferior synthetic crude that Caltex was supplying. To present Bitumen and Oil Refineries' case, Wells asked Ted Webb, the refinery manager, to separate and bottle the components of Caltex's synthetic crude as well as the components of genuine whole crude. The synthetic crude was presented in two bottles, one of which contained bitumen and the other petrol. However, when the whole crude oil was broken down, it separated into about thirty bottles of the product's different components. The problem with the quality of the synthetic crude oil became obvious. Wells said, 'If you looked at two bottles against thirty bottles you would see you were talking about apples and pears - the synthetic crude oil and the whole crude oil were entirely different products'. Bitumen and Oil Refineries' answer to Caltex's claims was simple: if it wanted bitumen and petrol it would buy it from Caltex, but if it wanted whole crude oil it was free to buy it on the open market. When Caltex heard of this development, they intensified their campaign to get Griffin off the board and assume control of the company. At the time, defying Caltex appeared a formidable task. The company already had 40 per cent of the voting power in one hand which meant total control. Bitumen and Oil Refineries was one of the first Australian companies to have a one-share, one-vote system rather than operate on a sliding scale. The company's Articles of Association also contained an oddity whereby debentures issued to secure loans could have voting rights. Gerry Wells identified this as a way of neutralising Caltex's votes, but it was crucial that a debenture issue should be made for genuine reasons. |
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| Tom Murray, who succeeded David Craig as chairman of Bitumen and Oil Refineries, was also a director of the City Mutual Life Assurance Society Limited. He could see that if City Mutual financed the loan for the platformer, this could have significant benefits to Bitumen and Oil Refineries. Under the loan agreement the City Mutual would require one vote per pound of debenture money. The platformer cost about 400,000 pounds, which happened to equal 40 per cent of the voting power of Bitumen and Oil Refineries. City Mutual's vote would exactly balance that of Caltex. There were two shareholder meetings - an Annual General Meeting and a Requisitioned Meeting - designed to give Caltex dominance of the Board and replace Griffin as a director and chief executive. The final, crucial meeting was held in the Assembly Hall in Margaret Street, Sydney, and almost every public shareholder turned up. It was a very dramatic occasion, with the meeting lasting nearly all day. At the end a proxy battle took place because the City Mutual's votes nullified the Caltex vote. Wells recalls, 'And a proxy battle it was; there was an enormous flurry of paper; votes were bought and people got money for them and then changed their proxy. It was quite an exciting time.' The Australian shareholders ultimately succeeded; Caltex was defeated. |
 Proxy forms from Bitumen and Oil Refineries, 1949. |
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| Having legally established that the company was not under obligation to buy crude oil solely from Caltex, Griffin entered into a long-term contract to buy whole crude oil from the Anglo-Iranian Oil Company, now better known as BP. In 1951, Caltex UK applied to the Equity Court for an injunction to restrain Bitumen and Oil Refineries from entering into this contract. Wells recalls, 'The case was never heard. They abandoned the application on the day set down for the hearing.' A somewhat ironic twist to these events was that a year later, in 1951, the Annual General Meeting had to be adjourned for lack of a quorum; the Caltex proxy failed to reach the meeting in time. |
The administration office at Matraville (1954 annual report). | ||||||||||
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