Analysis
69Mr Gleeson did not dispute that the " two stage " construction of cl 5 of the Dealership Agreements had not been put to the primary Judge. Mr Smith, although drawing attention to this omission, did not contend that CSG was precluded from raising the issue of construction on the appeal. His approach was rather to dispute CSG's contention that cl 5, on its proper construction, prevented FXA from determining the Target Quotas unless it had first offered CSG the opportunity to join in a review.
70CSG's submission is difficult to reconcile with the language of cl 5. The first sentence of cl 5 provides that the Target Quota is subject to review by FXA and CSG on an annual basis " as determined by [FXA] ". This suggests that whether or not there is to be an annual review of Target Quotas in which both FXA and CSG participate is a matter for FXA to determine.
71I accept that if the first sentence of cl 5 is read in isolation, a possible (although less likely) interpretation of the concluding words is that FXA is to determine the form of the joint review, as distinct from deciding whether a joint review of the Target Quota is to take place at all. However, the next sentence says that " [i]n the event that the parties do not review the quota or cannot agree upon a new target quota within a reasonable time (as determined by [FXA]) ", FXA is to determine the Target Quota. The second sentence of cl 5 does not merely contemplate that a joint review may not produce agreement as to the Target Quota for the current year. The sentence expressly contemplates and makes provision for the case where the parties do not review the Target Quota. In that situation, FXA is to determine the Target Quota.
72In my opinion, cl 5 does not require FXA to provide CSG with the opportunity to participate in a joint review of the Target Quota before FXA can determine the Target Quota for a particular calendar year. Clause 5 leaves the decision as to the process for determination in FXA's hands. If FXA decides to make a determination itself, cl 5 requires it to have reference to the average increase over the previous three years or, if there is no such average, to ten per cent. CSG did not suggest that a determination to maintain 2009 Target Quotas at 2008 levels, if made by FXA, was not effective because FXA chose not to increase the Target Quota.
73I should add that even if cl 5 can be read as contemplating what Mr Gleeson described as a " two stage " process, it does not necessarily follow that a failure by FXA to invite CSG to participate in a joint review would lead to the invalidity of a unilateral determination by FXA of the Target Quotas. This is particularly so when the determination (assuming it was made) does not increase the Target Quota from the previous year and there is nothing to indicate that CSG objected to the unilateral determination. An objective bystander would not readily construe a clause in a Dealership Agreement as if it were legislation conferring power on a decision-maker subject to judicial review. However, the point was not argued and need not be decided.
74While I do not accept CSG's two stage construction of cl 5, I think that Mr Gleeson was correct in his submission that in order for FXA to " determine " the Target Quota for the purposes of cl 5, it had to communicate its decision to CSG. As Mr Gleeson pointed out, a failure by CSG to meet the Target Quota for any twelve month period provided a ground for FXA to terminate the Dealership Agreement for cause (cl 29.1.5.1). Such a termination has serious consequences for CSG (cl 30). The parties could hardly have contemplated that FXA would be entitled to terminate the Dealership Agreement by reason of CSG's failure to meet a Target Quota of which it had never been informed.
75Mr Gleeson accepted that FXA could notify CSG of the Target Quota informally, including by a verbal communication. Thus, while a determination of the Target Quota for the purposes of cl 5 involved communication of FXA's decision, cl 5 does not require any particular form of communication.
76If Mr Slater's evidence (or lack of it) is put to one side, the primary Judge's finding that FXA determined the Target Quotas for 2009 at the 2008 levels is amply supported by the evidence. The four documents on which his Honour specifically relied point strongly towards FXA having made such a determination and having communicated it to CSG.
77Contrary to Mr Gleeson's submission, the spreadsheet attached to the email of 26 March 2010 cannot be dismissed as a non-contemporaneous document of little or no probative value. It is a business record of FXA which recorded as an historical fact that the Target Quotas for Brisbane and Maroochydore were as FXA claimed. Other records of FXA were to the same effect. The 2010 document to which I have already referred (at [48] above) recorded the Target Quotas for 2009 as $9.4 million for Brisbane and $1.4 million for Maroochydore. An FXA document exhibited to Mr Slater's affidavit, apparently prepared in March 2010, recorded the same " Target " for each of Brisbane and Maroochydore.
78The letters of 30 April 2010 from Mr Slater to Mr Mackenzie explicitly asserted that the Target Quotas for Brisbane and Maroochydore for the 12 month period ending December 2009 were, respectively, $9.4 million and $1.4 million. Mr Mackenzie's reply, sent with the benefit of legal advice, not only did not dispute the assertions but implicitly accepted that the " 2009 schedule 3 targets " had been set in accordance with cl 5 and that CSG was aware of them. It is difficult to understand why, if Mr Mackenzie and his legal advisers were in any doubt as to whether 2009 Target Quotas had been validly determined and communicated, the reply did not say so. The reply constitutes cogent evidence that FXA had set the 2009 Target Quotas at 2008 levels and communicated its decision to CSG.
79There is evidence, not specifically referred to by the primary Judge, which strongly suggests that discussions were held between FXA and CSG relating to the Target Quotas and CSG's difficulties in meeting the targets for certain Territories including Brisbane and Maroochydore. Mr Slater sent an email to Mr Ward of CSG dated 28 May 2009. The email, which was headed " CSG Review ", requested a meeting to discuss performance concerns " around CSG dealerships - Brisbane in particular ". Mr Kugenthiran of FXA gave evidence the meeting with Mr Ward took place in Brisbane on 24 June 2009. According to Mr Kugenthiran's unchallenged evidence, he told Mr Ward that CSG " had an obligation to deliver on our plan and the target ". Mr Ward responded by saying he was prepared to take a friendly bet that by the end of the year CSG would be in the top three in the country.
80The inference to be drawn from this evidence is that by 24 June 2009, CSG had been informed by FXA of the 2009 Target Quotas that had been set for Brisbane and Maroochydore. Whether the information was actually conveyed for the first time at the meeting of 24 June 2009 or earlier in the year is not clear. What is clearly to be inferred is that CSG's representatives were told of the Target Quotas.
81I have so far put to one side the significance of Mr Slater not giving any evidence as to the process that led to FXA determining that the Target Quotas for 2009 should remain unchanged from 2008, nor as to whether the determination was communicated to CSG. Mr Gleeson relied on the observations in the joint judgment of the majority of the High Court in Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; 276 ALR 375 (Heydon, Crennan and Bell JJ). Their Honours stated (at 393-394 [63]) the relevant principle as follows:
"The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn. These principles have been extended from instances where a witness has not been called at all to instances where a witness has been called but not questioned on particular topics. Where counsel for a party has refrained from asking a witness whom that party has called particular questions on an issue, the court will be less likely to draw inferences favourable to that party from other evidence in relation to that issue." [Citations omitted.]
82It will be seen that an unexplained failure to call a witness or to ask questions of a witness on a contested issue " may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case ". This statement reflects the established principle that in a civil trial by judge alone, Jones v Dunkel licences but does not compel the drawing of inferences when a witness is not called or is not asked about matters in dispute: Howell v Macquarie University [2008] NSWCA 26, at [97]-[98] per Campbell JA (with whom Spigelman CJ and Bell JA agreed).
83The primary Judge cannot legitimately be criticised for not adverting to the principle stated in Kuhl v Zurich. I accept that, although Kuhl v Zurich was not decided until after the primary judgement was handed down, there was existing authority to the same effect: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389, at 418-419, per Handley JA. However, the principle was not drawn to his Honour's attention and, as Mr Gleeson accepted, his Honour was not invited to conclude that Mr Slater's evidence would not have been helpful to FXA.
84Mr Gleeson nonetheless submitted that this Court should take the principle into account in determining whether the primary Judge's finding on Target Quotas was correct. There are two reasons, however, why I do not think that, in the circumstances of this case, an inference should be drawn that Mr Slater's evidence would not have assisted FXA's case.
85First, Mr Slater was not entirely silent on the question of the Target Quotas for 2009. He said in his affidavit that CSG's targets for 2009 were the same as in 2008. That assertion was admitted only as evidence of his understanding. While his understanding was not probative of the proposition that the 2009 Target Quotas had been determined at 2008 levels in accordance with cl 5, it at least indicated that he did not affirmatively believe that the Target Quotas had never been so determined. Moreover, by exhibiting to his affidavit documents recording the 2009 Target Quotas he provided a basis for his understanding.
86Secondly, and more importantly, when the totality of the evidence is considered it comfortably supports a finding, on the balance of probabilities, that FXA determined that the Target Quotas for 2009 should be unchanged from 2008 and that FXA duly communicated that determination to CSG on or prior to 24 June 2009. Even if an inference could be drawn that Mr Slater's evidence was not helpful to FXA, that inference would not outweigh the substantial documentary evidence supporting the finding made by the primary Judge. Accordingly, CSG's challenge to the finding that FXA determined the Target Quotas for 2009 at the same levels as 2008 must be rejected.
87Mr Gleeson did not press a ground in CSG's draft notice of appeal that CSG had in any event complied with the 2009 Target Quotas. It follows that the primary Judge was correct to conclude that CSG breached cl 3.1.2 of the Dealership Agreements and that FXA was entitled to terminate each Dealership Agreement by reason of CSG's breach of an essential Term of the Agreement.