This, at first sight, would seem to justify the promise "not to compete" relied on by the appellants.
9 The appellants did not know, and had no means of knowing, whether Telxon ever executed the TSP Agreement. In Court, Telxon denied that it had done so. However, to some extent, Telxon acted as if it had, conducting itself in a manner which would seem to be explicable only on the basis that they had.
10 In mid-1999 a Mr Simon Barnier was a sales executive employed by Telxon. He reported to a Mr John Harriott, the Director of Sales and Marketing, and Mr Harriott reported to a Mr Brian Lang, the Managing Director.
11 Before Mr Dereu executed his copy of the TSP Agreement, Mr Barnier said to him: "I've spoken to Brian Lang. We are prepared to offer you a reseller agreement in relation to the David Jones account." On 29 July 1999 Mr Barnier sent an email to Mr Dereu headed "David Jones Partner Pricing" attaching the price schedule for David Jones (i.e. the prices which Telxon recommended the appellants should sell to David Jones). From this time onwards, for some little time, the appellants were in the position they wanted: they bought the goods direct from Telxon and sold them at a higher price to David Jones, and Telxon did not deal directly with David Jones. And, from about September 1999, Mr Dereu started receiving regular emails from Telxon addressed to "Dear Telxon Solution Partner".
12 Between August 1999 and February 2000, things hotted up a little. In this period, the appellants procured sales of Telxon products and services to a number of David Jones sites, including their stores in Chadstone, Southland and Harbourtown. In order to procure these sales Mr Dereu would attend the prospective David Jones site, hold discussions with David Jones personnel as to their requirements and propose a system representing a total solution for the relevant site. The appellants would then purchase, supply, install, configure and test the equipment and software making up the system. For each of the sales, Telxon provided to Mr Dereu information as to the availability and pricing of Telxon products to enable the appellants to negotiate their contracts with David Jones. For each of their sales, Telxon sold the products to the appellants at their discount rates set out in Mr Barnier's email of 11 August 1999.
13 And there was much other evidence besides this.
14 If one took account of the above material, and nothing else, there would, in my opinion, be a powerful case to support the appellants' propositions. One would either infer that Telxon had in fact executed the TSP Agreement, or had agreed to be bound by its provisions, or at least were estopped from maintaining that its terms were not operative.
15 However, there seems to me at least one powerful factor which, even on its own, negatives all these possibilities. According to the TSP Agreement itself, it was to be signed "in conjunction with" a "Telxon Reseller Agreement Package (Terms and Conditions)". It is a common ground that none of the appellants even executed such a package. In an affidavit Mr Lang swore: "At the time a partner entered into a Telxon Solution Partner Agreement, Telxon required that it simultaneously entered into a Telxon Reseller Agreement Package." He was not cross-examined on this. At the hearing before us, I enquired of Mr Simpkins QC, learned senior counsel for the appellants, whether there was any evidence to the effect that this requirement was ever dispensed with or waived, and he replied in the negative. Therefore, on the appellants' own admissions, a document vital to a TSP agreement was never executed by either party. This would alone be fatal to the appellants' case, but it is doubly so if one reads the Package, which makes it quite clear that even when a TSP Agreement is operative, Telxon retains the right to deal directly with the clients of its "partner".
16 In my view the appeal should be dismissed with costs.
17 HANDLEY JA: The appellant company (DEM) sued Telxon for damages for breach of contract and breach of s 52 of the Trade Practices Act 1974. Telxon cross-claimed for the price of goods sold and delivered and joined Mr and Mrs Dereu, the second and third appellants, as cross-defendants claiming under their guarantee of DEM's debts. The proceedings were heard by Gamble ADCJ who gave judgment on 9 November 2002 dismissing the action and giving judgment on the cross-claim against DEM and its guarantors.
18 The appellants appeal against the dismissal of DEM's action. There is no independent appeal against the judgments on the cross-claim.
19 DEM relied on a contract in Telxon's standard form of Telxon Solution Partner Agreement (TSP Agreement) which it signed on 4 August 1999. Its case was that Telxon entered into this contract by signing the original and by its performance. The trial judge held that the TSP Agreement never came into force. DEM's case on the TSP Agreement was fairly open on the pleadings, and there could be no suggestion that Telxon was taken by surprise.
20 DEM's case was that on 15 July 1999 Mr Barnier, a sales executive employed by Telxon, sent Mr Dereu an e-mail with a blank copy of the TSP Agreement. On 28 July Mr Dereu returned the signed agreement by e-mail with some of the blanks filled in. On 2 August Mr Barnier sent another e-mail to Mr Dereu asking him to sign an original copy of the TSP Agreement. The e-mail continued "this will then be signed by Brian Lang/John Harriett and sent back to you. We need this complete to finalise the partnership agreement". Mr Dereu went to Telxon's offices on 4 August and signed a copy of the TSP Agreement in Mr Barnier's presence.
21 The trial judge held that Mr Barnier had no authority to negotiate with Mr Dereu on behalf of Telxon but there was ample evidence to the contrary. Mr Barnier had been asked by the managing director Mr Lang to undertake these negotiations. He had no authority to sign the agreement as he made clear in his e-mail of 2 August but this does not establish any lack of authority to undertake the preliminary steps.
22 Mr Barnier gave the executed copy of the TSP Agreement to Mr Harriett. It was not produced by Telxon at the trial and it did not call Mr Harriett or explain his absence. The statement of claim filed during 2000 alleged that the TSP Agreement had been entered into in or about August 1999. The defence filed on 30 July 2001 expressly admitted this allegation but an amended defence filed on 8 May 2002 denied it. The belated denial appears to be a lawyer's point which did not reflect the understanding of the businessmen involved.
23 Telxon's list of discovered documents dated 18 February 2002 included among the documents which Telxon formerly had in its possession "original of the Telxon Solution Provider Agreement dated 4 August 1999" (2/415). Thus the list of documents, which was filed when the making of the agreement was admitted on the pleadings, contained a further admission about the agreement which was never formally withdrawn.
24 DEM relied on Telxon's failure to produce the signed TSP Agreement. Its non-production was said to support an inference against Telxon in accordance with the principles in Allen v Tobias (1958) 98 CLR 367, 375 where the court quoted with approval from The Ophelia [1916] 2 AC 206, 229-30:
"if anyone by a deliberate act destroys a document which, according to what its contents may have been, would have told strongly either for him or against him, the strongest possible presumption arises that if it had been produced it would have told against him; and even if the document is destroyed by his own act, but under circumstances in which the intention to destroy evidence may fairly be considered rebutted, still he has to suffer. He is in the position that he is without the corroboration which might have been expected in his case."
25 Mr Barnier told Mr Dereu that he would have the TSP Agreement signed by Mr Harriett on behalf of Telxon. The document was not produced and since its non-production was not explained the inference is that it had been deliberately destroyed. Mr Harriett, Telxon's director of sales and marketing, was not called and his absence attracts the principles in Jones v Dunkel (1959) 101 CLR 298.
26 The judge rejected this part of DEM's case because, as she said, the forms of the TSP Agreement in evidence did not include "the blank form as e-mailed to Mr Dereu or the form held by Mr Harriett". She continued "both parties are therefore unable to produce a reliable copy of the document. In these circumstances it would be inappropriate to draw the inferences the plaintiffs suggests". This reasoning cannot be supported. The blank form could not be produced because Mr Dereu had filled in some of the blanks and signed it before e-mailing it back to Mr Barnier. Its absence was fully explained and was a matter of no consequence. It could be reconstructed by ignoring the material inserted in the document e-mailed back to Mr Barnier.
27 DEM could not produce the document which, inferentially, was given to Mr Harriett. Only Telxon could ever have done this but her Honour seemed to think that its failure to produce that document in some way made it "inappropriate to draw the inferences the plaintiff suggests". This is the opposite of the correct position because it is those very failures on Telxon's part which make it appropriate for the court to draw inferences against it.
28 Two other reasons were given by the trial judge for rejecting DEM's case on this issue. The first was the Mr Lang, Telxon's managing director, instructed Mr Barnier not to enter into any arrangement with Mr Dereu or his company. Mr Simpkins SC who appeared for the appellants said that there was no such evidence from Mr Lang and Mr M D Young, who appeared for Telxon, did not seek to support this finding. The second reason, which her Honour described as "equally compelling" was that all this evidence was internal to Telxon, and its acceptance of the TSP Agreement was never notified to DEM. There was no express acceptance by Telxon of DEM's offer made by delivery of the signed TSP Agreement. However there was ample evidence that Telxon acted for some months towards DEM as if it was a Telxon Solution Partner. This could only have been the case if the TSP Agreement was then in force.
29 Mr Barnier told his successor, Mr Woods, in late August that Mr Dereu was a partner through the partnership agreement and that Telxon would be supplying it equipment for resale to David Jones (black 198). Mr Woods sent e-mails to Mr Dereu (blue 1/5) on 1 October and 6 December 1999 referring to him as a Telxon Solution Partner (1/46, 49). In January 2000 he wrote enclosing a Telxon sales manual update, advising that "25% partner discounts" would apply to certain new items and listing in a table the current Telxon Solution Partner discounts (1/59A).
30 In September and October 1999 and February 2000 Telxon supplied equipment to DEM at substantial discounts. An e-mail of 29 July from Mr Barnier to Mr Dereu (1/19) was headed "David Jones Partner pricing". The figures were amended by a letter from Mr Barnier of 11 August (1/40).
31 Although Telxon did not formally accept the offer made by DEM when the signed TSP Agreement was left with Mr Barnier, it accept it informally by its conduct in the succeeding months which treated it as a Telxon Solution Partner. The legal principles are well established: Brogden v Metropolitan Railway Co (1877) 2 App Cas 666, 682, 693; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 CA.
32 Telxon also relied on the absence of a signed Telxon Reseller Agreement Package (TRAP Agreement). A statement on the cover sheet of the TSP Agreement said "to be signed in conjunction with the Telxon Reseller Agreement Package (Terms & Conditions)". However Telxon made no attempt to have DEM sign such an agreement.
33 Following a meeting with Mr Lang and Mr Harriett in mid July 1999 Mr Barnier spoke to Mr Dereu and told him that Telxon was prepared to offer DEM a Reseller Agreement but it would have to sign a TSP Agreement. Mr Dereu asked for the document and a copy was sent by e-mail on 15 July without any TRAP Agreement. Mr Dereu was later told that he would have to sign an original copy of the TSP Agreement and he did so in the presence of Mr Barnier on 4 August. He was never given a copy of the TRAP Agreement and was never asked to sign such an agreement before or after 4 August. Indeed Mr Barnier in his e-mail of 2 August stated that Telxon required an original copy of the TSP Agreement to be signed "to finalise the partnership agreement". Mr Barnier was called in DEM's case but was not asked anything in cross-examination about the TRAP document, and it was not suggested to him that he had made a mistake in not getting a copy of it signed by Mr Dereu.
34 Whatever the general practice of Telxon may have been in requiring dealers to sign a TRAP Agreement it dispensed with any such requirement in this case. The absence of a signed TRAP Agreement did not prevent the TSP Agreement becoming a binding contract.
35 There were a number of gaps in the TSP Agreement left with Mr Barnier. Some of these related to information sought by the document which was not provided. The absence of this information does not mean that the contract was incomplete. Mr Barnier did not ask for this information when he was given the document or at any later time. The request for information which was not supplied was effectively waived.
36 The important gaps in the document related to the absence of an agreed discount rate and the absence of an agreed business plan. The agreement as a whole (1/24-36) was on Telxon stationery, and appeared to be in its standard form adopted on 11 February 1999. The copy retained by DEM contained a body of typed information which must have come from it. While some pages had no additions or alterations (1/26), others had been retyped to incorporate multiple references to DEM and information obtained from it (27-9), while on other pages information had been inserted in spaces provided (30, 32). It is evident from the copy e-mailed to Telxon on 28 July (1/99-113) that Mr Dereu had partly filled in the form e-mailed by Telxon on 15 July. It is also apparent that the material added by Mr Dereu was used in preparing the agreement which he signed on 4 August.
37 Giles JA has dealt with the provisions in the document signed by Mr Dereu in his judgment [paras 76-91]. I am in general agreement with his Honour's analysis but, with respect, I do not agree with his conclusion in [para 86] on the effect of the provision dealing with Current Key Accounts.
38 The various gaps in the document where Mr Dereu did not provide the information that the document called for, apart from the absence of any figure in cl 3.1 for the discount that DEM would receive, are, in my judgment, of no importance. The gaps were evident in the document Mr Dereu sent back to Mr Barnier by e-mail on 28 July (1/99 & foll). Mr Barnier was not troubled by these gaps and when he responded on 2 August asking Mr Dereu to sign an original copy of the agreement he said nothing about them. Mr Barnier did not mention this matter when Mr Dereu signed the agreement on 4 August and nothing was said thereafter. These obvious gaps did not prevent Telxon admitting the existence of a TSP Agreement in its original defence and its list of documents.
39 Clause 3.1 provides:
" Pricing
Telxon will grant D.E.M Compagnie a % discount from the current published price book. This price book is subject to change, hence please refer to the alliance manager for accurate and authorised pricing. This discount level is to be reviewed in 6 months from date of signing."
40 The rate of discount was not filled in but the parties contemplated that some discount would be offered. Failure to agree on a figure does not mean that the TSP Agreement was void for uncertainty. The implication that a reasonable discount was to be allowed completed the contract. The relevant principles are well settled. In Hillas & Co Ltd v Arcos Ltd [1932] All ER 494 HL Lord Wright said at 503-4, 507:
"It is … the duty of the Court to construe such documents fairly and broadly, without being too astute or subtle in finding defects … [This] does not mean that the Court is to make a contract for the parties, or to go outside the words they have used, except insofar as there are appropriate implications of law as, for instance, the implication of what is just and reasonable to be ascertained by the Court as matter of machinery where the contractual intention is clear but the contract is silent on some detail. …
When the learned Lord Justice speaks of essential terms not being precisely determined, ie, by express terms of the contract, he is, I venture with respect to think, wrong in deducing as a matter of law that they must, therefore, be determined by a subsequent contract; he is ignoring … the legal implication in contracts of what is reasonable, which runs throughout the whole of modern English law in relation to business contracts … It is unnecessary … to multiply illustrations of this principle, which goes far beyond matters of price."
41 See also Cavallari v Premier Refrigeration Co Pty Ltd (1952) 85 CLR 20, 25-6, 27-8. The court's approach to the task of fixing reasonable remuneration where the contract is silent is applicable. The process was explained in Way v Latilla [1937] 3 All ER 759 HL 766 by Lord Wright:
"… the amount to which the appellant is entitled is left at large, and the court must do the best it can to arrive at a figure which seems to it fair and reasonable to both parties, on all the facts of the case. One aspect of the facts to be considered is found in the communings of the parties while the business was going on. Evidence of this nature is admissible to show what the parties had in mind, however indeterminately, with regard to the basis of remuneration. On those facts, the court may be able to infer, or attribute to the parties, an intention that a certain basis of payment should apply."
42 These parties dealt amicably with each other, presumably for mutual profit, between August 1999 and February 2000 and these dealings provide all the material a court would need to fix a reasonable rate of discount. I conclude therefore that the TSP Agreement was an enforceable contract. However many of its provisions were so vague as to be little more than laudatory representations and sales talk but these were severable. I see no reason why their presence should invalidate those parts of the agreement which were certain and intended on their face to create legal relations.
43 I come now to the critical provision on which the appellants relied, that dealing with DEM's Current Key Accounts. It provided, under the heading Telxon Reseller Business Plan in cl 4:
" Current Key Accounts
One of the key objectives of the TSP program is to provide a source of additional revenue stream into our partner's key accounts. To assist in this process and to ensure we do not compete in the strategic accounts, please list your top key accounts."
44 There was a table below headed on the left "Current Key Accounts" and on the right "Supplied Solution". "David Jones" appeared in the left hand column and "RF", standing for radio frequency, in the right.
45 This language has to be read in conjunction with other statements in the document which form part of the relevant background and context. Clause 1, headed "TSP Overview" included the following:
"The TSP program is based on one to one business relationship with our partners, where we underpin our relationship with high regard to the values of honesty, integrity and professionalism. Our objective is to protect our partners in joint business engagements and to eliminate or mitigate partner conflict."
46 Clause 3.1 and 3.3 under the heading "Obligations" provided:
1. D.E.M. Compagnie and Telxon will work together in external marketing efforts …
…
3. D.E.M. Compagnie and Telxon will jointly develop and execute sales and marketing plans ." (emphasis supplied)
47 Telxon contended that the critical provision was only a representation of its present intention and imposed no contractual obligation. I am unable to accept this. Clause 3.3 provided that the companies "will jointly develop and execute sales and marketing plans". Clause 4, headed "Telxon Reseller Business Plan" did not refer in terms to sales or marketing plans, the expression found in cl 3.3, but cl 4 was such a plan.
48 The opening sentence of the critical provision reads "One of the key objectives of the TSP program is to provide a source of additional revenue stream into our partner's key accounts". This was in the nature of a recital and not promissory. However it was an agreed statement of "the genesis" and "the aim, object or commercial purpose" of what followed, to borrow some of the language of Sir Anthony Mason in Codelfa Construction Pty Ltd v State Rail Authority (1982) 149 CLR 337, 350, 351. The opening sentence is relevant when construing what follows.
49 The statement, already quoted from cl 1, that Telxon's objective "is to protect our partners in joint business engagements and to eliminate or mitigate conflict," in the nature of a recital and not promissory, is relevant when construing the critical statement "to ensure we do not compete in the strategic accounts".
50 The parties contemplated that marketing activities undertaken by DEM with David Jones would involve the sale of Telxon's equipment. This is what happened until February 2000 when Telxon withheld realistic quotes from DEM and dealt directly with David Jones.
51 Until then marketing Telxon's products to David Jones was a "joint business engagement". The only way that Telxon could eliminate or mitigate partner conflict in such a situation was "to ensure" that it did "not compete".
52 I therefore approach the critical provision with a strong predisposition in favour of a construction which would give it an effective operation for the benefit and protection of a Telxon partner.
53 If the provision is construed as nothing more than a representation of Telxon's then present intention it will have no practical effect. The protection it appears to confer on a Telxon partner will be completely illusory. In this context the statement by Steyn LJ in First Energy (UK) Ltd v Hungarian International Bank Ltd [1993] 2 Lloyd's Rep 194 CA, 196 is relevant:
"A theme that runs through our law of contract is that the reasonable expectations of honest men must be protected. It is not a rule or principle of law. It is the objective which has been and still is the principal moulding force of our law of contract. … If the prima facie solution to a problem runs counter to the reasonable expectations of honest men, this criterion sometimes requires a rigorous re-examination of the problem to ascertain whether the law does indeed compel demonstrable unfairness."
54 A construction of the critical provision which treated it as illusory would defeat the purpose identified by Steyn LJ. Moreover in Hillas & Co Ltd v Arcos Ltd [1932] All ER 494 HL, 499 Lord Tomlin said:
"… the problem for a court of construction must always be so to balance matters that, without violation of essential principle, the dealings of men may as far as possible be treated as effective, and that the law may not incur the reproach of being the destroyer of bargains."
55 Courts have to determine whether oral statements during negotiations have contractual force as terms of the contract or as oral collateral warranties. The relevant principles are those stated by Gibbs CJ in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 61:
"A representation made in the course of negotiations which result in a binding agreement may be a warranty … in one of two ways: it may become a term of the agreement itself, or it may be a separate collateral contract … In either case the question whether the representation creates a binding contractual obligation depends on the intention of the parties. In J J Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435, 442 and Ross v Allis-Chalmers Australia Pty Ltd (1980) 55 ALJR 8, 10-11, it was said that a statement will constitute a collateral warranty only if it was 'promissory and not merely representational', and it is equally true that a statement which is 'merely representational' …. will not form part of the main contract. If the parties did not intend that there should be contractual liability in respect of the accuracy of the representation, it will not create contractual obligations. [A party cannot] rely on his secret thoughts to escape liability, if his representations were reasonably considered by the persons to whom they were made as intended to be contractual promises, and if those persons intended to accept them as such. The intention of the parties is to be ascertained objectively … In other words, as Lord Denning said in Oscar Chess Ltd v Williams [1957] 1 WLR 370, 375: '… If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice'."
56 This was a dissenting judgment on the present point but the majority did not disagree with this statement of principle.
57 Where the oral statement was in the form of representation as to past or existing facts proof of contractual intent will not be easy. The same difficultly does not arise if the statement was promissory in form and related to the future conduct of the promisor. In the present case the critical phrase "to ensure we do not compete in these strategic accounts" was promissory in form and was linked with Telxon's request in the document that DEM list its top key accounts. The natural construction is "if you do this we will do that".
58 In my judgment the critical provision was sufficiently certain and had contractual force. Any residual doubts should be resolved in favour of DEM by construing the document against Telxon which proffered it. This would accord with the principle of construction embodied in the Latin maxim "contra proferentum". Giles JA finds that "the relevant words conveyed an intention on Telxon's part to avoid competing with DEM in relation to David Jones". I agree with respect but think that the other matters I have referred to require the further, very small step of finding that the words were also promissory.
59 The critical provision construed as contractual conferred real protection on DEM and would not be ineffective or uncommercial. The TSP Agreement did not provide expressly for its duration or termination. It could therefore be determined on reasonable notice given at any time: Martin-Baker Aircraft Co Ltd v Canadian Flight Equipment Ltd [1955] 2 QB 556. The agreement was not terminable instantly at will. Termination pursuant to notice would not affect accrued rights, and the length of notice required depends on the facts when the notice is given. Above at 581. Telxon could not compete with DEM during the period of notice, and the notice would have to be long enough to give DEM a reasonable opportunity to bring current negotiations to a successful conclusion. Telxon did not give notice of termination at any stage.
60 I would therefore hold that in February 2000 when Telxon began to deal directly with David Jones it committed a breach or breaches of that part of cl 4 which imposed on it a contractual obligation not to compete with DEM in that strategic account.
61 The claim in estoppel which the trial judge wrongly refused to allow to be added by amendment, in the result added nothing to the claim in contract that had been pleaded, and need not be further considered.
62 I agree with Giles JA that the appellants failed to prove any damage flowing from Telxon's breach of s 52 of the Trade Practices Act when read with s 51A(2).
63 Telxon pleaded repudiatory breaches by DEM of alleged express and implied terms in the contract and breaches of fiduciary duty, and its termination of the contract. The trial judge did not decide these matters but they were raised by Telxon's notice of contention. It is clear that DEM was not in a fiduciary relation with Telxon: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41. Substantial evidence was led in support of this part of Telxon's case which it had not relied on in and after February 2000 to justify its conduct in dealing directly with David Jones. However Mr Young submitted that this did not matter and cited in support Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359. That case establishes that termination of a contract for breach can be supported by evidence of breaches which were not relied upon by the terminating party at the time and of which it was not then aware. The fatal difficulty with this submission is that Telxon did not purport to terminate the contract for breach.
64 In my judgment therefore the appellants have proved a breach of contract by Telxon and the appeal should succeed. The trial judge did not assess the damages for Telxon's breach of contract because she held that there was no contract. Although the parties addressed the issue of damages in their written submissions the Court intimated that if it found that there had been a breach of contract by Telxon the issue of damages would be remitted to the District Court (T 13/11/03 p116). I would therefore propose the following orders: