Fuji Xerox Finance Limited v CSG Limited & Ors

Background Facts 12The plaintiff Fuji Xerox Finance Limited (FXF) is a related entity of Fuji Xerox Australia Pty Ltd (FXA). 13FXA is an importer and supplier of Fuji Xerox or Xerox branded printers or copying hardware and related software. It markets and sells such equipment through a network of dealers in Australia which are authorised by FXA under dealership agreements to sell, and in some instances, to provide maintenance services in respect of equipment within various territories as defined. 14Since 1984 one or more of the defendants have operated as FXA dealers in various territories namely Toowoomba, Cairns, Brisbane, Maroochydore and Darwin. The first defendant CSG (which acronym I will use for all defendants) was appointed an FXA dealer in respect of Brisbane pursuant to a dealer agreement dated 6 March 2007. That agreement was terminated by FXA on 24 August 2010. 15As part of its business, FXA offered customers through CSG a variety of ways by which to obtain the use of equipment, including by outright sale or by leasing of such equipment from finance companies. FXF is one such financier. 16The rental of equipment by a customer typically involved the following transactions: (a) CSG would purchase the equipment from FXA; (b) CSG would then sell the equipment to FXF (or another finance company, typically Capital Finance); (c) Where FXF was financier it rented the equipment to the customer under a Docu/mation Agreement (which was either between FXF and the customer) or in some versions of the Docu/mation Agreements between FXF, CSG and the customer; (d) At the same time the customer entered into a full service and maintenance agreement with CSG (FSMA). 17The Docu/mation agreement provided for CSG to invoice and collect from the customer a monthly amount which included a component for rent and service and maintenance (the amount was not separately split up for the customer or otherwise identified). The amount charged was based on the number of copies made by a customer or the machine in any given month. This was subject to what was called a minimum monthly impression amount, regardless of the number of impressions made. 18From the amount received by CSG, a portion of the monies are, and always have been remitted by CSG to FXF as monthly rent. These amounts were subject to a monthly invoice issued by FXF to CSG. 19Where a customer exceeded the minimum number of impressions per month they were billed by CSG for such excess impressions (called "overs"). It seems that CSG has, up to the termination of the relevant agreement, always dealt with the overs as part of its own revenue. CSG exercised a discretion from time to time to use the overs or a portion of them for the purposes of providing incentives to customers who wished to upgrade their equipment. 20It would be typical for CSG to have offered upgrade or churn opportunities to customers prior to the expiration of a Docu/mation agreement. This would ensure continuity of the relationship between customer and dealer (and FXF/FXA), and maintain an income stream rather than a customer upgrading (or churning) to a competitor. 21The process adopted at the time of an upgrade or churn was that CSG would request a payout figure from FXF. A figure would, it is alleged, promptly be provided. In due course FXF would be paid out by payment of that amount. In such an event the amount was calculated pursuant to the Docu/mation agreement. The contractual regime required the calculation of a figure based on a formula (giving a net present value). The formula it is alleged did not take into account any overs which had been collected by CSG. 22Where finance was requested by CSG from FXF, or CSG was arranging an upgrade, CSG would communicate with FXF through the provision of a "deal sheet". The deal sheet it appears made no provision for CSG to provide any information to FXF about any overs that had been collected at the time that an upgrade was occurring. It is common ground that during the life of the relevant agreements FXF never sought any information or accounting from CSG in relation to the quantum of overs received by CSG from its customers during the life of the equipments agreements. 23There were three versions of the Docu/mation agreements used by FXF during the relevant period. The third version of the Docu/mation agreement was a co-branded agreement which was in use by about May 2009, and was distinguished from its predecessors by the fact that it took the form, not of a bilateral agreement between FXF and the customer, but of a trilateral agreement between the parties, which were FXF, the relevant dealer and the customer. This was a document negotiated by a Mr Doherty for FXF and a Ms Clark for the defendants. 24As has been already observed, the precise allocation for each Docu/mation agreement of the charges as between rental and maintenance fees does not appear to have been communicated to the customer. It was however one of the many details recorded in the deal sheets submitted by CSG to FXF as a part of a given lease proposal. 25When lease proposals were submitted by CSG, FXF would then make a decision as to whether or not it would enter into a Docu/mation agreement with a prospective customer. The deal sheets included within these proposals would set out details concerning the amount funded by FXF in relation to the equipment and what is termed a "finance rate" which is expressed as a dollar amount per $1,000 funded. 26The minimum amount of rental per billing period was derived by multiplying the amount funded by the finance rate. The amount funded would then be multiplied by the finance rate and divided by 1,000, which would provide the stated monthly rental amount. This was the rental portion of the minimum amount per billing period. 27In addition each deal sheet recorded the term of the proposed Docu/mation agreement. 28FXF therefore provided finance to a customer in the amount of the total finance value of the equipment. This then obliged the customer to pay over the term of the Docu/mation agreement an amount calculated by multiplying the stated rental by the number of billing periods contemplated by the terms of the proposed agreement. 29The Docu/mation agreements also provided for what was termed a "maximum copy volume", which was derived by multiplying the minimum impression volume for each billing period (for black and white and well as colour impressions) by the number of billing periods in the specified "minimum agreement term". 30In broad terms there were a number of possible scenarios in relation to the actual term of any of these agreements. It was certainly theoretically possible (although this perhaps did not happen very often) that the agreement would run its full term. Alternatively a customer might be churned into new equipment prior to the expiration of the term of the agreement. This would involve the customer entering into a new agreement for a new piece of equipment financed in precisely the same way. This could occur with or without the customer reaching the maximum copy volumes or upon reaching the minimum agreed terms. 31If, following the repayment in full of the financing arrangements, the customer continued to lease the relevant equipment without seeking an upgrade, or it merely terminated the Docu/mation agreement, the agreement entered what is referred to as the "inertia period". In this period the customer continued paying "click" charges as contemplated by the Docu/mation agreement. The customer would also continue most likely to have a service arrangement with CSG. CSG, if it was the dealer which had facilitated the transaction between FXF and the customer, was entitled during the inertia period to purchase the equipment for the price of one dollar.

The Provisions of the DFA 32On 18 February 2009 FXF and CSG entered into the DFA which was expressed to commence on 1 April 2008. 33Prior to the entry into the DFA the previous arrangement by which FXF provided finance was contained in a document entitled Xerox Dealer Copy Agreement - Conditions for Payment in Arrears. Under that agreement CSG was clearly entitled to the overs. The agreement relevantly provided: Whilst the dealer will retain the excess finance component of any documation agreement for excess copies, Fuji Xerox must immediately receive the lease payout where the customer has cancelled an agreement. 34The DFA was negotiated over a period of 9 months (from at least April 2008 to January 2009). 35Clause 1 of the DFA relevantly provides: This document is an agreement between us, CSG and the Dealers. It sets out the terms on which, among other things, the Dealers and CSG may refer Lease Proposals to us that may result in us agreeing to enter into a Lease Contract with a Customer. 36The expression "Lease Proposal" is defined in Schedule 1 to the DFA to mean "a proposal from CSG or the Dealer to us that we enter into a Lease Contract with a Customer, completed and submitted in accordance with clause 4 in the form", of the various standard FXF customer agreements, including what was styled as a "Fuji Xerox finance Docu/mation Agreement". 37"Lease Contract" was in turn defined to mean a "lease proposal accepted by us under which we agreed to rent Equipment to a person for use solely or predominantly for business purposes". 38Pursuant to clause 3(1) of the DFA, FXF engaged CSG to perform what was termed the "Services" in their respective territories. Services is a defined term in Schedule 1 to mean: 1.Introducing customers to FXF; 2.Preparing or facilitating the preparation of lease proposals on behalf of FXF and submitting them to FXF; 3.Providing information about customers and their lease proposals; 4.Such other services as FXF, CSG and a dealer may agree from time to time; and 5.Doing such things are reasonably incidental to 1 to 4 above. 39Clause 3.2(a) provided as follows: CSG and its dealers acknowledge and agree that: they are acting as our agent but only in preparing or facilitating the preparation of lease proposals on our behalf and submitting them to us; except as expressly provided for in this agreement they are an independent contractor, acting as a principal. 40This litigation is principally concerned with two key provisions of the DFA. The first is clause 3(4) which is in the following terms: Where CSG or Dealers receive money under or in connection with any lease proposal or as a result of performing the Services (other than payments made to them by us in accordance with this agreement) that party holds all such moneys on trust for us. We acknowledge and agree that where CSG or the dealer are the appointed service and maintenance provider under a Cost per Impression Lease Contract 41The second is item 9(5), which is in the following terms: Cost per Impression Lease Contracts: CSG and the Dealer will collect all finance amounts under any Cost per Impression Lease Contract as our agents and hold all such amounts on trust for us. The Dealer will pay us the Rentals monthly in arrears on the 28th day of each month and subject to receipt of an invoice from us. This paragraph 5 applies even when CSG or the Dealer has not been paid by the customer, however, where arrears exceed 90 days and CSG/the Dealer has not caused or contributed to that failure, CSG and the Dealer will not have to pay us for arrears accrued after that date, and we may take action against the customer to recover outstanding monies. CSG and the Dealers will keep us informed of all credit issues with customers. The maximum amount of Rental charges that we may be required to refund to CSG and the Dealers in the event of a bad debt arising from a Cost per Impression Lease Contract is in the aggregate 3 months. 42"Rental" is defined to mean, the "periodic rental on the face of the Lease Contract or presented to Fuji Xerox Finance on a worksheet backing up a Cost per Impression Agreement proposal". 43There is a separate definition of "Rentals" which means "the payments owing to Fuji Xerox Finance inclusive of any residual values as either stated in the contract or as in the case for Cost per Impression contracts, the hardware portion of payments as presented to Fuji Xerox Finance on inception of the contract". 44"Cost per Impression Agreement" is defined to mean, "...any lease contract that has a rental and maintenance component imbedded in the base charge payable periodically by the customer. Cost per Impression contracts are billed by the Dealer to the customer inclusive of these components. Cost per Impression Agreements include Docu/mation, Fixed Term Rental, Docu/mation Plus, DocuRent and any such form as approved in writing by us". 45I observe that there is no definition of the term "finance amounts" in item 9(5).

The Issues 46The principal issue in these proceedings is whether CSG holds any monies paid by FXF's customers to CSG pursuant to contracts under which they leased or continued to lease copying and printing equipment on trust for FXF. FXF's position is that the matter begins and ends with the proper construction of the express provisions of the DFA (principally clause 3(4) and item 9(5)). 47FXF asserts that the parties had previously proceeded upon the basis that any overs held by CSG were available to be deployed by them in the course of their business as dealers of Fuji Xerox or Xerox branded products. This was for the purpose of offering incentives to existing customers to upgrade their equipment to new devices leased by FXF. To the extent that CSG had applied overs in this manner, FXF makes no claim for the recovery of those monies. 48By 21 January 2011 CSG had ceased to be a dealer of the relevant branded products in several territories throughout Australia, and FXF requests that any overs held as at that date be transferred to it. To the extent that CSG has in the period following 21 January 2011 applied or dispersed the overs, it is asserted by FXF that this would be a breach of trust. 49CSG agrees clause 3(4) and item 9(5) are the key provisions but contend that on a proper construction of the DFA, and those provisions in particular, no such trust in relation to overs can be discerned. If the construction issue is decided against CSG the question is then on the evidence whether the rectification of the DFA should occur. CSG asserts that the common intention of the parties in negotiating and drafting the DFA was that overs were not to be held on trust for FXF and the DFA should (to the extent necessary) be rectified accordingly. Questions concerning estoppel and implied terms also potentially arise.

Construction of Contracts - General Principles 50For the purpose of deciding whether a contract has been entered or what construction it bears, the common intention that the court seeks to ascertain is what is called "the objective intention" of the parties. That is, the intention that a reasonable person with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances, would conclude that the parties had, concerning the subject matter of the alleged contract. The court may also take into account, in deciding whether a contract has been entered, and if so, what are its terms, the "purpose and object of the transaction". But the purpose and object of the transaction is itself ascertained objectively - it is ascertained by considering what a reasonable observer in the situation of the parties would conclude was the purpose and object of the transaction: Ryledar Pty Ltd v Euphoric Pty Ltd [2007] 69 NSWLR 603 at 655 - 656 [262] - [265], per Campbell JA. Allen v Carbone (1975) 132 CLR 528; Taylor v Johnson (1983) 151 CLR 422; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd [1988] 8 NSWLR 540; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Byrnes v Kendle (2011) 243 CLR 253 at 284 [98]. 51The mere fact that the particular contract is said to, amongst other things, create a trust does not lead to the application of any different principles of construction: Byrnes v Kendle (2011) 243 CLR 253 at 273 [53], 275 [58], [59], [60] per Gummow and Hayne JJ and 284 [98] 286 [102]. As Gummow and Hayne JJ said in Byrnes, the question is "What is the meaning of what the parties have said", [53]. 52There are numerous statements in decisions of the High Court suggestive of the fact that in the pursuit of the "objective intention" of the parties, the court is entitled to take into account surrounding circumstances. There was debate before me as to when it is or is not appropriate to resort to surrounding circumstances. 53I was referred to the decision of the Court of Appeal in Franklins Pty Ltd v Metcash Trading Ltd [2009] 76 NSWLR 603 (Metcash) and the reasons of the High Court in refusing special leave in Western Export Services Inc v Jireh International Pty Ltd [2011] 86 ALJR 1 (Western Export). I would of course normally be bound by Metcash. However counsel for the plaintiff submitted that, notwithstanding Metcash, by reason of what the High Court said in Western Export, I am not permitted to consider such surrounding circumstances until I detect an ambiguity in the language used by the parties or that it is susceptible to more than one meaning. CSG submitted I was bound by Metcash and as a result I was free to consider the relevant surrounding circumstances, ambiguity or not. 54The Court of Appeal in Metcash carefully reviewed the authorities, and in particular the judgment of Mason J in Codelfa Constructions Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337. Having reviewed the authorities before and since Codelfa, Allsop P considered that although Codelfa had not been superseded by later authority, it is not necessary to identify an ambiguity before any resort can be made to evidence of surrounding circumstances: at 616 [14]. Giles JA agreed with Campbell JA: Giles JA, 621 - 623 [42], [49]. Campbell JA appears to have considered that Codelfa has been superseded (673 - 675, [286] in particular). 55In Western Export three judges of the High Court, Gummow, Heydon and Bell JJ gave reasons for refusing special leave in that case. Their Honours must be understood as stating clearly that the use of evidence of surrounding circumstances will only be permissible for the purposes of assisting the interpretation of language that is ambiguous or susceptible of more than one meaning (Western Export [3], [4] and [5]). In particular the court it seems clearly disapproved the decision of the Court of Appeal in Metcash. 56In addition their Honours in Western Export appear to have approved a statement by Macfarlan J in Jireh International Pty Ltd t/as Gloria Jean's [2011] NSWCA 137, when he said at [55]: In my view the primary judge erred in taking this approach. So far as they are able, courts must of course give commercial agreements a commercial and business-like interpretation. However, their ability to do so is constrained by the language used by the parties. If after considering the contract as a whole and the background circumstances known to both parties, a court concludes that the language of a contract is unambiguous, the court must give effect to that language unless to do so would give the contract an absurd operation. In the case of absurdity, a court is able to conclude that the parties must have made a mistake in the language that they used and to correct that mistake. A court is not justified in disregarding unambiguous language simply because the contract would have a more commercial and businesslike operation if an interpretation different to that dictated by the language were adopted. 57In McCourt v Cranston [2012] WASCA 60, the Court of Appeal of Western Australia considered the current state of authority on the subject of contractual construction: Pullin JA with whom Newnes JA agreed said: [20] Until recently, it was possible to read Paribas and Toll and Royal Botanic as meaning that even without ambiguity, evidence of surrounding facts and the object or aim of the transaction was admissible. This is what other intermediate courts of appeal thought they meant: see for example Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 [17]; MBF Investments Pty Ltd v Nolan [2011] VSCA 114 [198] - [203]. [21] However, in the brief reasons of the High Court in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 [5] the members of that court (Gummow, Heydon & Bell JJ), did not accept that its earlier decisions may be read in that way. Their Honours said that they did not "read anything said" in Paribas, Toll, Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 [15] or International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 [8] as "operating inconsistently" with what was said by Mason J in the passage in Codelfa on page 352 and quoted above. This is not withstanding that in Wilkie, in the paragraph referred to in Jireh's case, Gleeson CJ said: "Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure [15]." Also in the Ansett case, Gleeson CJ at the paragraph referred to ([8]), stated that in giving a commercial contract a businesslike interpretation, it is necessary to consider the language used by the parties, the circumstances addressed by the contract and the objects which it is intended to secure. [22] None of the statements in Paribas, Toll, Wilkie or Ansett were preceded by a qualification that a contract had to be "ambiguous or susceptible of more than one meaning" before evidence of surrounding circumstances could be received. Many judges around Australia did not appreciate that there was such a qualification. However the reasons in Jireh require courts to consider whether the statements in those cases should be read with that qualification; "until" the High Court embarks upon "a reconsideration" of Codelfa: see Jireh [3]. In doing so, courts will have to consider whether the pronouncements in Jireh were ratio or "seriously considered dicta": Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [134]. In that respect, consideration will have to be given to whether a set of reasons of the High Court dismissing an application for special leave have anything more than persuasive value: see North Ganalanja Aboriginal Corporation v The State of Queensland [1996] HCA 2; (1996) 185 CLR 595, 643 (McHugh J); Mason A, "The Uses & Abuses of Precedent" (1988) 4 Aust Bar Rev 93, 96 - 97; Wong D and Michael B, "Western Export Services v Jireh International: Ambiguity as the gateway to surrounding circumstances?" (2012) 86 ALJ 57, 64. On the facts of this case these questions do not have to be answered. [23] In view of the pronouncements in Jireh, when an issue arises about the proper construction of a contract and there is evidence of surrounding circumstances known to the parties or evidence of the purpose or object of the transaction, that evidence will not be admissible unless the court determines that the contract is: (a) "ambiguous"; or (b) "susceptible of more than one meaning". [24] Usually, the meaning of "ambiguous" is taken to include "open to various interpretations": see Macquarie Dictionary, but by using the phrase "ambiguous or susceptible of more than one meaning" perhaps Mason J wished to emphasise that not only a contract open to more than one meaning would allow in evidence of surrounding circumstances but also one where the contract is merely "difficult to understand". Once evidence of surrounding circumstances is allowed in, the restrictions on such evidence are clear. Evidence of subjective opinions are not admissible, nor is evidence of negotiations; the surrounding circumstances have to be objective facts and they have to be known to both parties. [25] If a trial judge decides that the contract under examination is not ambiguous or susceptible of more than one meaning, and rules that evidence of surrounding circumstances is not admissible, and an appeal court then decides that decision to be in error, then the case will have to be reheard, because relevant evidence will have been excluded. If, however, the trial judge receives evidence of surrounding circumstances and evidence of the object or aim of the transaction, and if the trial judge's construction is found to be in error, then the Court of Appeal will be able to remedy that on appeal without sending it back for retrial. [26] Until the High Court says more about the subject, it would be wise for trial judges, in cases where a party reasonably contends that the contract is ambiguous or susceptible of more than one meaning and there is relevant evidence of objective relevant surrounding circumstances known to both parties or objective evidence of the aim or object of the transaction, to allow that evidence in provisionally, even if the trial judge considers that his or her likely conclusion will be to reject the argument of the party contending that the agreement is ambiguous or susceptible of more than one meaning. 58The position taken by the High Court in my view in Western Export is unequivocal. The approach suggested by the Western Australian Court of Appeal is a practical and principled solution to the dilemma facing primary judges. I therefore propose to follow that guidance.

Discussion 59The plaintiff submits that not only is the trust in item 9(5) the same trust as in clause 3(4) but that the words "all finance amounts collected" in item 9(5) should be read as meaning the same monies as identified in clause 3(4) as the "portion of the monies that pertain to the rental of the equipment". That must be so in both respects in my view. Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 [16], per Gleeson CJ, McHugh, Gummow and Kirby JJ. 60The plaintiff further submits that impression charges under clauses 6(c), 6(d) or 14 of the co-branded Docu/mation agreement each involves CSG collecting finance amounts under a cost per impression lease contract for the purposes of item 9(5) of the DFA. It is submitted the same is true of amounts collected that "pertain" to the rental of equipment under clause 3(4). That may be so, but clause 6 is directed to the obligations of the customer and the types of charges that may be imposed and the timing of those payments. Clause 14 deals specifically with the situation at the expiration of the agreement and what is to occur thereafter if the equipment is not returned. I do not regard clauses 6 and/or 14 as having any real utility when construing the language of the DFA. 61The plaintiff however submits that the amounts described in the first and second sentences of item 9(5) are not co-extensive. That is that "all finance amounts" is not intended to be regarded as a synonym of "Rentals". It is by no means clear, in my view, that that is correct. 62To similar effect it is submitted by the plaintiff that the obligation to pay the "Rentals" in item 9(5) is separate from and independent of CSG's obligation as trustee. It is submitted this is so because its obligation as such is engaged even though the customer has not paid CSG. It is said that that obligation is limited to the finance component of the agreed impression charges. So much emerges from the balance of item 9(5) which creates a contractual obligation on the part of CSG to pay FXF even where the customer has not paid. It is also limited in time because after 90 days if CSG has not caused or contributed to the customer's failure to pay, it's obligation to pay FXF ceases. I do not consider this materially assists the plaintiff on construction. 63The plaintiff further submits that the words in clause 3(4) namely "the portion of the monies that pertain to the rental..." operates so as to qualify the scope of the trust in item 9(5). That must be so. 64The plaintiff also accepts that the qualifying words in clause 3(4) were to ensure that the trust did not apply to the portion of the monies payable by the customer and collected by CSG which involve the maintenance and service components of the payments. This is again clear from the language, so that the term "all additional monies collected" as characterised are excluded from the trust. It is only the portion of monies pertaining to the "rental" of the equipment that is to be included. 65The plaintiff submits that CSG's construction must mean that the words in clause 3(4), namely the "portion... that pertains to the rental..." is synonymous with the "Rentals" in item 9(5) and is erroneous. The reason for this is, the plaintiff submits, that that construction creates disharmony between item 9(5) and clause 3(4), because item 9(5) is not limited to a trust in respect of "Rentals". 66It is also submitted by the plaintiff that a fundamental object or purpose of the DFA was to ensure that in all circumstances where a client under a Cost per Copy Agreement terminated, FXF would recover all capital representing the amount financed and interest thereon. So much may be acknowledged. But the minimum monthly amount the customer was obliged to pay, as I understood it, had been structured so as to ensure that payment of that sum each month would fully recoup FXF as financier for capital and interest. 67The plaintiff says, again by reference to the co-branded Docu/mation agreement, that it could be terminated in one of three ways. First under clause 3(b) where the agreement expired after running the Minimum Term. In that event FXF would recoup the amount financed and interest thereon, through the finance component of each of the monthly payments (clause 13(b)(iii)). 68Secondly the agreement could be terminated under clause 3(c) or for default. Clause 3(c) provides for early termination by agreement. Again in that event the plaintiff submits, an agreed termination would attract an obligation to pay the termination value (clause 13(b)). That amount would represent the discounted capital value of the future monthly minimum payments which would have been payable during the balance of the term if the contract had run its course. 69Thirdly however, the plaintiff submits that where, through excessive use of the equipment and before the "Minimum Term" had expired, the customer had achieved the Maximum Volume, under clause 3(b), FXF would be worse off than under the first two scenarios. The plaintiff says that if the customer achieved the "Maximum Volume" but in less time than the "Minimum Term", then the customer could terminate pursuant to clause 3(b) of the co-branded Docu/mation agreement and return the equipment to either FXF or CSG. There would be no holding over pursuant to clause 14(a) so the agreement would not be extended on the same terms and conditions. In that event FXF would only ever receive monthly payments (as I understand the argument) for the period the customer used the equipment, and would not receive the monthly payments for the full term, and FXF would thereby be out of pocket. This would operate unfairly and this third scenario is a reason why the language of the DFA should be construed to include "overs" in the trust. Otherwise the situation would operate, it is submitted, as a windfall to CSG. That is because CSG would have received overs as if the agreement had run its full term (the maximum impression volume having been reached before the agreed term had in fact expired) but FXF would not have received the payments for the full term as agreed. 70There are a number of answers to this. First the construction of the co-branded Docu/mation agreement wherein one out of three scenarios produces a commercially unfavourable result is hardly a reason to otherwise ignore the language of the DFA. There is no provision of the DFA which provides, for example, that the terms of the DFA would be trumped by the language of the Docu/mation agreement. Secondly and perhaps more importantly the plaintiff appears entirely to ignore that if the equipment is returned to FXF or CSG on behalf of FXF, in circumstances where FXF has financed the purchase/rental of the equipment, it (FXF) will gain possession of an asset, namely equipment which it can either on lease or on sell. On the other hand the revenue flow to CSG ceases in relation to that customer. In those circumstances it is by no means clear FXF would be worse off or the dealer obtains a windfall gain. I do not see this argument assisting the plaintiff on the construction issue. 71CSG on the other hand submits that the relevant words in clause 3(4) are "monies collected that pertain to the rental of the equipment". The word "pertain" it is submitted in its natural and ordinary meaning means "to have reference or relation" or "to belong to be connected as part". (Macquarie Dictionary). 72It is put by CSG that FXF's only interest in the transaction is that of a financier who was to receive the monthly rental for which it invoiced the defendants. The monthly rental was identified in the deal sheet. That rent was thus not affected or did not otherwise bear any relation to the number of excess impressions made or copies made throughout any given period. CSG therefore submits that it cannot be that any overs "pertain to rent". Further it points out that the critical words in item 9(5) are "finance amounts" and that the only sensible construction of those words is that they refer to rental, being the amount FXF provided by way of finance together with interest. There is much force in that argument in my view. Clearly the trust applies to "all" finance amounts and, whatever that term means, if the trust in item 9(5) is the same trust as in clause 3(4) it must be synonymous with monies that "pertain to the rental of the equipment". This latter concept must sensibly capture at least the payments of rental calculated by FXF and payable by the customer. 73If the term "all finance amounts" is a wider concept than "Rentals", then there is an obligation only to pay the "Rentals" monthly. That would mean a portion of monies would be held by CSG but not paid over. Are those monies then to be held on an interest bearing or a no interest bearing account? Are they to be payable upon the request of FXF, as and when they are required? If, on the other hand "all finance amounts" is synonymous with "Rentals" then there is an obligation to pay such amounts as may be included in an invoice, on a monthly basis. 74The term "Rentals" as defined of course contains a number of components. First it refers to payments "owing". This would certainly include monies the subject of the invoice referred to in item 9(5) which in turn includes rent. It could also include the residual value (if any) which may be stated in the contact, and if it is a Cost per Impression Contract, the hardware portion of the payments. Therefore within the term of "Rentals" there are different species of monies. On that basis it is more than arguable in my view that "all finance amounts" would be synonymous with "Rentals". The concept of payments "owing" would also accord with amounts or payments due to FXF by reason of the issue of an invoice as identified in item 9(5). 75I favour CSG's construction of the DFA, but at the same time accept there is a certain complexity and hence a lack of clarity about the language of that agreement. Overs or excess impressions is a well understood phenomenon and it would have been a very simple matter to have expressly referred to them or at least that portion of them not used in a particular way, if that portion truly was to be the subject of a trust. That would have provided clarity and certainty. 76It is argued by the plaintiff that overs represented no more than the payment of "click charges" in an amount that exceeded the minimum amount per billing period, therefore there was a portion of the overs paid by every customer and collected by CSG that was referable to the rental and finance charges owing to FXF. Therefore the overs were and continue to be held by CSG in favour of FXF pursuant to clause 3(4) of the DFA. Again I do not consider this focuses on the language of the relevant clauses sufficiently. 77It is also said by the plaintiff that the Docu/mation agreement is a "Cost per Impression Agreement", the definition of which means a contract that has a rental and maintenance component embedded in the base charge "payable periodically by the customer". The term base charge is not defined but it is submitted that the means by which a rental component was embedded into the charges payable under a Docu/mation agreement was by allocating some portion of each impression charge to rental. It is therefore submitted that the parties contemplated that even charges for excess impressions would, as to part, "pertain to the rental". I have my doubts about that proposition. 78It is further submitted that each deal sheet records, in relation to the "click" charge for each impression processed through the leased equipment, the various portions of it allocated to rental and maintenance fees payable to CSG. The task therefore, it is said, of identifying what monies may be said to "pertain to the rental" owing to FXF requires that recourse be had to the lease proposal and in particular the deal sheet. 79It is further submitted that neither of the deal sheets in Mr Doherty's evidence (affidavit of 5 April 2012, [35]), suggest that once a customer has generated the minimum impressions volume for a particular billing period, the "click" charges payable in respect of excess impressions processed during the period are to be treated as being only attributable to the dealer's maintenance fees. 80It is also submitted that it was envisaged in each deal sheet that every copy generated by the relevant equipment, even those in excess of the agreed minimum impressions volume, would attract a "click" charge, which "pertained" to rental. It follows it is submitted that "overs" levied as excess impressions must as to the parts specified in the relevant deal sheet, pertain both to maintenance fees and to rental owing in favour of FXF. 81Finally as a result of the above, it is suggested there is no basis for contending that the text of clause 3(4) of the DFA does not include, within the ambit of the trust established by that provision, the portion of each "click" charge incurred over and above the minimum amount per billing period, which on the basis of what is set out in a deal sheet, must be attributed to rental payments. 82I consider the plaintiff's submission to be somewhat convoluted and quite frankly it gives the deal sheet contractual superiority over what are the critical clauses of the DFA. In short, it again avoids actually grappling with the language of the DFA. 83CSG is obliged to pay "Rentals" pursuant to an invoice. There are obviously a number of potential components to "Rentals". There is no doubt these monies are received by CSG and are obviously the subject of a trust. They are held pending receipt of an invoice. The Cost per Impression Agreement envisages both a rental component and a maintenance component. The better view in my opinion is that the term "all finance amounts" in item 9(5) is a reference to the "Rentals" as defined. That would achieve the commercial purpose of FXF, namely the return of capital and interest. The better view again in my opinion is that the notion of the phrase "pertain to the rental" is the amount received monthly pursuant to the invoice which does not include "overs". The word "reflective" in clause 3(4) is perhaps a strange choice and in effect it seems to effect a deeming, as it were, which characterises all other monies (whatever they might be) other than those that "pertain to rental of the equipment" as not being the subject of the trust. 84On the basis of the above although it is not entirely clear I do not consider the parties objectively intended to include overs in those monies held on trust for FXF. There is nothing in the DFA as to what should or should not, as it were, happen in the event the overs were to be the subject of a trust. This is a commercial relationship and I would have expected if overs were to be a trust asset in whole or in part, there would have been clear provisions dealing with the holding of those monies (on an interest bearing account or otherwise). Furthermore I would have expected the provisions for payment of them to FXF, which presumably FXF would wish, especially where payment is otherwise expressly contemplated of the "Rentals". That those monies could or should simply languish in an account endlessly is a rather uncommercial outcome. 85It must of course be acknowledged that a trustee must deal with any monies the subject of a trust in accordance with the terms of that trust. Generally however the trustee would be the subject of a personal obligation to hold moneys for the benefit of the beneficiary. That would oblige a trustee to keep proper accounts and provide the beneficiary with information as to the investment of any dealings with the trust property. Spellson v George [1987] 11 NSWLR 300 at 315 - 316, per Powell J. Hartigan Nominees Pty Ltd v Rydge [1992] 29 NSWLR 405 at 431 - 2 per Mahoney JA. 86There is also no doubt that (subject to the terms of the trust and again generally speaking) a trustee would be obliged not to mingle trust funds with the trustees own funds. Federal Commissioner of Taxation v Bargwanna [2012] 86 ALJR 406, per French CJ, Gummow, Hayne and Crennan at [10]. 87Justices Gaudron, McHugh, Gummow and Hayne in Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at 605, [34] said: [34] This is not one of those cases where the language employed by the parties for the transaction is inexplicit so that the court is left to infer the relevant intention from other language used by them, from the nature of the transaction and from the circumstances attending the relationship between the parties. An express obligation upon the buyer to keep the "proceeds" separate would have pointed to the existence of a trust if none had been explicit. This would have been because, as McPherson A-CJ has put it, such an obligation "is a hallmark duty of a trustee". But where the existence of a trust is explicit, the absence of an express obligation to keep trust moneys separate does not deny the trust. Rather, there being a trust, it follows that equity imposes various obligations and duties on the trustee. One of these is the obligation to get in the trust property and keep it distinct from the property of the trustee and from property held on other trusts. No question presently arises of the variation or abrogation of such obligations by statute or by express provision in a settlement. 88As I have said I consider the better view is that when the DFA is properly construed, the relevant parties did not intend to make overs the subject of a trust.

The Surrounding Circumstances 89Although I have formed the aforementioned view on the construction of the DFA, the matter is both complex and by no means free from doubt. In the circumstances because of the ambiguity of the language or alternative meanings arguably open, relevant surrounding circumstances are capable of being resorted to in the construction exercise. 90What is or is not a surrounding circumstance can be a matter for debate. As Allsop P said in Metcash at 619 [24]: [24] The High Court authorities to which I have referred and in particular Pacific Carriers v BNP Paribas and Toll (FGCT) v Alphapharm, and the recognition of the significance of the objective theory assist in appreciating the scope of the evidence that is admissible. The evidence, to be admissible, must be relevant to a fact in issue, probative of the surrounding circumstances known to the parties or of the purpose or object of the transaction, including its genesis, background, context and market in which the parties are operating. What is impermissible is evidence, whether of negotiations, drafts or otherwise, which is probative of, or led so as to understand, the actual intentions of the parties. Such evidence might be legitimate, however, if directed to one of the legitimate aspects of surrounding circumstances. The distinction can be subtle in any particular case. As Macfarlan JA and I said in Kimberley Securities Ltd v Esber [2008] NSWCA 301 at [5]; (2008) 14 BPR 26, 121: "[5] The possible subtlety of the distinction can be seen in Lord Wilberforce's reasons in Prenn v Simmonds ... at 1384-1485, and the recognition that the objective commercial aim may, possibly, be ascertained from some aspect of what has passed between the parties. The distinction can also be seen in what Mason J said in Codelfa at 352 about prior negotiations and their legitimate use 'to establish objective background facts which were known to both parties and the subject matter of the contract', and their inadmissibility in so far as they consist of statements and actions of the parties which are reflective of their actual intentions or expectations'..." 91The plaintiff relies upon a number of matters as surrounding circumstances. First the co-branded Docu/mation agreement, and in particular it submits finance amounts were included in impression charges exacted under clause 6(c) and 6(d). The latter it is contended include rental overs. I have already commented on these aspects of this agreement. I do not consider in the end this particular agreement advances the plaintiff's construction. Clause 6 deals with pricing and deals with how charges for each billing period are to be calculated, whether they be "agreed" or "excess" charges. It deals with the obligations of the customer to CSG. As I have already observed in my view it says nothing relevant about the relationship between FXF and CSG. 92Secondly the plaintiff relies upon the earlier agreement, (the Xerox Dealer Copy Cost Agreement) which made it plain that the dealer was entitled to retain the overs. This is not controversial and the agreement provided accordingly. 93Thirdly the plaintiff submits that it was known to all concerned that dealers used overs to provide incentives. Again this is not controversial but it is not the whole story. 94Fourthly, the plaintiff contends that in the negotiations for the DFA, FXF it is alleged, sought to impose a trust over all finance amounts, and this was to be a departure from the previous arrangement (in particular reference is made to an email from Ms Clark who was negotiating the DFA for CSG/dealers and CSG's Managing Director, on 24 June 2008) to demonstrate she appreciated that fact. This matter clearly needs to be viewed in context. 95CSG, whilst acknowledging the existence and relevance of the previous agreement (Xerox Dealer Agreement) and the co-branded Docu/mation agreement as surrounding circumstances, insist that at all relevant times before and during negotiations there was a practice whereby the parties did not treat overs as being a trust asset, and that it was not intended that the DFA was to change that practice, whatever may have transpired in some of the negotiations. Further that the plaintiff never requested payment of overs or any accounting in respect of them, and more to the point never itself accounted for them as an asset of any description. That was so, it is submitted, before and during negotiations. 96I should say that it does seem to me on the basis of the evidence that over the life of the negotiations, and, until relations soured and termination was effected in March of 2010, it is uncontroversial the plaintiff did not seek the reimbursement of any portion of the overs from CSG. It did not seek any information at any time from CSG in relation to what if any overs it held, nor an accounting of what if any portion of the overs was attributable to commercial incentives provided (whether by discount or otherwise) by CSG to any customer. Conduct however subsequent to the date of agreement cannot of course be called in aid to construe a contract. Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at 582 [35].

Evidence of Mr Doherty 97In addition to the documents referred to, the plaintiff called a Mr Stephen Doherty as to the negotiations and practice amongst other issues. He is a manager employed by FXA but holds the position as manager of FXF. He provided two affidavits to the court and was cross examined. He is highly qualified holding the degree of Bachelor of Science (Information Systems). He is also a certified public accountant (2002 - 2010) and holds a Master of Commerce Degree (Professional Accounting) which he acquired in 2002. He has worked for FXA from about 1994. His evidence is clearly of importance on any number of issues and I need to deal with it in some little detail. 98Mr Doherty purports not only to describe in some detail the process which was undertaken from time to time in relation to agreements with customers but also his intentions and/or state of mind in relation to overs. He describes how FXF provided financing services to its customers through CSG and other dealers. Customers were given a number of options where they could obtain the use of equipment through the FXA dealers. The options would include purchasing the equipment outright from those dealers or renting the equipment from FXF or an alternative financier. He says (and there was no issue about this) that the usual practice was that customers would typically enter into a separate full service and maintenance agreement known as FSMA with one of FXA's dealers. Where customers made an outright purchase the FXA dealers would purchase the equipment from FXA and in turn on supply it to the customer for a profit. Where customers entered into a rental agreement with FXF the usual practice was that FXA dealers purchased the equipment from FXA (or another distributor) and then on sold the equipment to FXF for a profit. FXF would then rent the equipment to the customer under the terms of the rental agreement. Under the FXF rental agreement FXF retained the title and the equipment. None of this was controversial. 99It is accepted that a customer has (or as Mr Doherty put it) is "treated as having" a right to terminate an agreement upon the expiration of the minimum agreement term or upon the customer reaching the maximum impressions volume or maximum copy volume specified in the agreement. He gave evidence (which is uncontroversial) that it was part of FXF's marketing and sales program to approach customers (usually through FXA or FXA's dealers) offering to upgrade or replace the equipment prior to the expiration of the agreements. This was an important part of the business model as it permitted FXF to continue its relationship with the customer and make new and ongoing sales. This process he believed assisted FXF in preserving its client base and gave it a competitive edge so as to enable it again through its agents or dealers to sign new customers up to new agreements. He said that many customers exceeded their minimum impression volumes in respect of one or more billing periods such that if the levels were maintained they would have reached their maximum impression or maximum copy volume well in advance of the expiration of the "minimum agreement term". Mr Doherty expressed the opinion that in practice the expiration of the agreement was very uncommon. This was no doubt because, watchful of the progress of a particular client's arrangements, it was the practice of the dealer with the active encouragement of FXF to approach the customer and hopefully churn the customer into new equipment. Again this cannot be disputed. 100Mr Doherty stated quite explicitly that FXF relied on CSG and the dealers to ensure that agreements with customers in fact did not reach expiration. The usual practice was to approach customers (via CSG) before expiration occurred. Clearly FXF was satisfied when arrangements were harmonious to leave all or most of the client contact to CSG but would collaborate and assist it with information it may require about customers from time to time. Most importantly FXF was the source of payout amounts. I accept this evidence. 101Occasionally, during harmonious times, where a customer wished to churn prior to the expiration of the agreement, FXF would consent to such an arrangement, provided the customers either paid the termination value of the contract (the payout figure) in cash or as part of a new deal in respect of new financed FXF equipment. Again this was, it seems, uncontroversial. 102Where a customer sought new equipment financed by a competitor of FXF and it was clear the customer wished to churn, but into the equipment of a competitor, FXF would provide what Mr Doherty described as a "standard payout figure". The standard payout figure was calculated as the net present value with a discount factor of 5% per annum of the future minimum charges per billing period for the remainder of the agreement term, plus other costs and an administration fee. Some of the earlier agreements had a discount factor of 6% per annum. Where however a customer sought to churn their equipment for new equipment under a lease with FXF, the usual practice was to calculate what Mr Doherty described as a "concessional payout" figure. This was determined in the same manner as the standard payout figure but with a higher discount factor. The concessional payout did not include an administration fee. Again this was not controversial. 103Mr Doherty described in some little detail the position in relation to overs. In many cases customers exceeded the minimum impression volumes in respect of one or more billing periods. That of course had the consequence that CSG would receive payments in excess of the customers minimum payment obligations per billing period. 104Mr Doherty stated in his affidavit of 5 April 2012 that whilst CSG received, or was likely to receive overs in each billing period "FXF did not have a practice of invoicing CSG or the dealers, as part of the Rentals to be paid over by them to FXF" [92]. He argued however that the excess monies were held by CSG although they were monies "due to FXF", [93]. He said that in the past FXF did not call on CSG to pay the overs "directly" to FXF. He went on to say that as FXF only received from the dealers the "financial" portion of the minimum impression volume commitment per billing period, the payout figure "calculated by FXF did take into consideration any rental overs paid by the customers" [97]. I will return to this aspect of Mr Doherty's evidence, because it was controversial. 105Mr Doherty accepted that from his experience in the equipment finance industry, with particular reference to FXF's internal practices, it would be more difficult to offer a competitive and profitable new deal which did not provide a discount to the customer to reflect any "overs" that the customer had paid under a previous agreement. He said that it was the practice of FXF's own sales team to reduce, by the whole of the overs previously paid by the customer, the amount of capital to be paid by that customer in the form of the finance charges due under the agreement in respect of the new equipment. "This is the way in which FXA uses and has always used Rental Overs generated by customers", [96]. Again I will return to this. 106It is clear that FXF (Mr Doherty in particular) not only knew that overs were being received by CSG but that they were being used from time to time in various proportions to provide discounts to structure commercially attractive propositions for customers. It is also clear, I think, that some of the overs were used for advertising or marketing the plaintiff's and CSG's business. In any event Mr Doherty said he was content for CSG to have the ability to use the overs because it was commercially advantageous to FXF that the customers remain loyal and continue to buy new equipment in advance of the expiration of their agreements. 107However he provided a further reason for his satisfaction with the process. Namely he asserted that the calculation of the payout figure, either standard or concessional, involved the "Rental Overs" paid by the customer being "realised by FXA upon the early termination of an agreement", [102]. In addition he opined that "Rental Overs" could be regarded "at one level" as pre payments of capital. Again I will return to this as it was controversial. 108He expressed the view that because the standard payout figure was calculated as the net present value of all finance charges yet to be received by FXF for the balance of the term of an agreement, that amount "by definition" included the value of the pre-paid capital constituted by the "Rental Overs" paid by the customer, [108]. He asserted that "the practice" that developed between FXF and CSG "always ensured that the Rental Overs, far from being retained by CSG for all purposes, were ultimately remitted to FXF, albeit in the form of a payout figure either standard or concessional" [109]. This evidence needs careful scrutiny. 109On this basis Mr Doherty said he was "content" to allow the dealers to utilise the overs in order to structure competitive deals. "This was implicitly allowed on a case by case basis", [110]. He therefore explained that by reason of this "practice" FXF did not have any need to request details of the overs so that it could invoice CSG for the payment of them. "This was because the above practice operated to FXF's benefit", [111]. 110It is plain that the change of heart so to speak on the part of the plaintiff was because CSG in mid April 2010 started to negotiate with Canon Australia (Canon) to become a Canon dealer in Sydney, Melbourne, Perth and Canberra. The negotiations lead to Canon and CSG entering several agreements in May 2010. Relations between the plaintiff and CSG and the other defendants broke down, leading to the termination by the plaintiff of the relevant agreements in 2010. 111It is also plain such overs as have been received but not expended on new deals with the plaintiff will no longer, as a matter of practical reality (unless the subject of the trust arrangements) be used in the plaintiffs commercial interest. I should observe in passing that the history of the events leading to the termination of the agreements and the legal consequences thereof are set out in the judgments of McDougall J in Fuji Xerox Australia Pty Ltd v CSG Ltd [2010] NSWSC 1258, and the Court of Appeal in CSG Ltd v Fuji Xerox Australia Pty Ltd [2011] NSWCA 335. 112Mr Doherty was the subject of a good deal of cross examination. 113There was little doubt that in his affidavit material and to some extent in cross examination Mr Doherty attempted to insist that at all relevant times, (that is, during the course of for example the negotiations of the DFA) it was always his understanding that monies which CSG received by way of overs from customers were to be held on trust for the plaintiff. He accepted that one of the reasons why he never actually asked the defendants to inform him of precisely how much money was being held on "trust" was because he believed it was being used to the mutual benefit of both the plaintiff and CSG. He had to accept however that no request was ever made of CSG to either account for monies or to identify precisely what was being held in relation to monies paid by way of overs, even where for example a churn occurred and FXF lost the commercial relationship and the customer went to one of its competitors. He agreed in that situation (although he insisted that this situation was rare) the plaintiff did not seek to invoice CSG for anything other than a payout figure. [T33] Q: And in the payout amount there is no account taken of overs, is there? A: No there is not 114Mr Doherty appeared to insist that somehow, notwithstanding this evidence, overs were included in the payout figure. (T39) Q: You are trying to say I think that somehow buried in the payout figure itself you can find the overs. Is that what you are trying to say? Objection Q: Is that what you are saying A: The payout includes, as I've said, all the amounts owing under the finance agreement. So if there are prepaid rentals at that point in time when we issued the invoice that's when they get paid Q: But when you calculate the amount of money that you get paid you don't take into account the overs, do you? A: We take into account the, the full requirement of the contract. 115He was also asked the following, (T40 - 41): Q: May we take it therefore that you understood that sometimes CSG would not use the rental overs to structure a competitive deal so as to allow a churn process? A: It was my understanding that they were always using it and the "if necessary" is if it is a competitive deal or if it's a non competitive deal in the terms of their engagement with the customer Q: The words "if necessary" clearly indicate that what you were trying to convey in paragraph 99 was you knew that sometimes CSG would not use the overs to structure a competitive deal? A: Well, they may not have Q: It is obvious, isn't it? CSG to your understanding was trying to make as much money for itself as it could, correct? A: Correct Q: So when it was trying to structure a deal with a customer it was trying to structure a deal that would get the customer over the line but also a deal that would get as much profit as possible into CSG's pocket? A: Correct.... ... Q: I see. So we should read paragraph 99 as you saying that when there was a churn involved it was a matter for CSG whether they used the overs at all to structure a competitive deal? A: Correct Q: And if they could structure a deal that involved the overs being pocketed by them, good on them. Is that your position? A: Well, my position is the payout that is involved in the churn encapsulates the overs but the amount of money in total that CSG makes on a deal is, as you say, good on them. 116A little further in the cross examination the following exchange took place, (T 47): Q: Would you have His Honour believe that you are sitting there happily thinking those overs, whatever they might be, are being held on trust for FXF? A: Yes Q: You are then asked to give a payout figure? A: Correct Q: Which is calculated not by reference to past, present or future overs, correct? A: Correct Q: You accept the payout from the customer and that is the end of that contract with the customer, correct? A: Well, when we are churning Q: Yes? A: We accept the payout, we give the payout to CSG Q: But in fact the customer is paying out CSG who in turn... A: Yes Q: But you are also saying that you are accepting the payout as full discharge of CSG's trustee obligation in relation to the past overs, aren't you? A: Once a contract is terminated it is finalised, so yes. 117The following exchange occurred, (T65): Q: And you never issued invoices for any overs did you? A: No Q: The invoices you issued to both the customer and CSG were for the standard payout figure? A: Yes Q: And you didn't at this time, ask CSG for details of the amounts of any overs held, did you? A: No Q: And once again if it was your state of mind at this time that CSG were holding monies on trust for FXF you were content for the payout figure when received to deal with that obligation, yes? A: Correct. 118It was put quite bluntly to Mr Doherty that insofar as he was asserting that at all relevant times he believed monies were being held on trust in respect of the overs, that was simply made up for the purposes of the case. He rejected that notion. 119He was asked specifically to accept that at no time had FXF accounted for the "so called trust monies as an asset". He gave the following answer, (T69): A: Well as I said, we accounted for the asset in its entirety, in the entire amount of future rentals that was due, and if the customer paid overs, pre-paid rentals or finance amounts, then our asset didn't change because of it because the term of the agreement actually shrinks. So the paying of the overs doesn't give us a larger asset than that we had already accounted for. It was put to Mr Doherty that what he had just said was "gibberish". He rejected that notion. 120Again the following exchange is insightful, (T97 - 98): Q: So all you are saying is you knew they would have collected overs on some contracts and you were happy for them if they chose to use those overs to sweeten the deal? A: Correct Q: If they chose not to you were happy for them not to use the overs in that way? A: Yes ... Q: So any overs that they didn't tip into the deal, as far as you're concerned whether they were held on trust beforehand or not, they are no longer held on trust. Is that right? A: Once this deal is struck, yes Q: Once the payout figure is received? A: Yes 121And the following took place, (T105 - 106): His Honour Q: Mr Doherty I'm just going to ask you one or two questions about paragraph 108 and 109 so that I understand what you are saying. At the very end of 108 you say that the balance, etc, that you are talking about there, "that the amount by definition included the value of the pre paid capital constituted by the rental overs paid by the customer". ... "In this way the practice which was developed" etc. Then the monies that you were talking about, the rental overs, were ultimately remitted to FXF albeit in the form of a payout figure. Is that what you are saying that you regarded when a payout figure was made, that the overs were in fact notionally received by FXF? Is that what you mean in accounting terms? A: Yes Q: And therefore the obligation in relation to those overs was then discharged, was it? A: Correct Q: On the part of CSG? A: Yes Q: Even though at the time you constructed the payout figure you had no knowledge whatsoever of the precise amounts of overs, if any, that might be included? A: Correct 122During a series of exchanges Mr Doherty was asked a number of questions as to whether or not in negotiating the DFA he was intending to change any previously existing practice in relation to the treatment of overs. For example in terms of what, if any, practice existed at the time. For example with regard to the period when negotiations for the DFA were being undertaken, he gave somewhat confused evidence, (T117 - 188): Q: And it's obvious, isn't it, that what you were trying to achieve by the words you were using was a continuation of that commercial practice. It's as simple as that isn't it? A: Well, the change in definition from the shorter version to the longer version was as a result of conversations with Kim saying that, well, we're the service provider so we want to make sure that the service portion is carved out of the trust arrangements, and we agreed to that Q: Weren't you trying to document the very arrangement the parties were performing throughout the whole of the eight or nine months that the negotiations took place? You weren't trying to change it were you? A: I wasn't trying to change the practice. This was about... Q: You were... ... His Honour Q: I think you said you weren't trying to change the practice? A: No I was trying to make sure that any finance or rentals that were collected by CSG in relation to our FXF agreements are held on trust and anything that relates to service is not .... Newlinds Q: The practice at the time was that CSG you thought was using the overs to inject into deals to do good deals? A: Correct Q: You certainly didn't want to, by the terms of the contract, stop that practice, did you? A: No 123He was also asked, (T119 - 120): Q: It was obviously the practice at the time that if a payout figure was received in relation to a contract, that was the end of the matter as far as FXF was concerned? A: Correct Q: You intended that practice to continue after the agreement was signed? A: Correct Q: And, indeed, the agreement had to capture that practice because it covered a period of many months when that had been going on? A: Correct Q: And that practice continues to this very day; Correct? A: Correct... Q: You weren't trying to craft a contract that immediately put CSG into breach, were you? A: No Q: You intended on the day after the contract had been signed for the practice that we have discussed to continue on? A: Correct 124At another point in his cross examination the following exchange occurred, (T121): Q: And you were trying to capture that practice, not to change it, by the contract you were negotiating; Correct? A: No. We were trying to capture all finance amounts. We weren't necessarily informed.... His Honour Q: Mr Doherty, it is a direct question. I would like you to answer it for my benefit. Were you trying to change the practice with this agreement or not? A: Well, yes 125Following the above exchange counsel for CSG put to Mr Doherty that when he had answered that he intended to change the practice he was making this up. His answer to that was, (T122): A: Well, I guess I wasn't intending to change the practice, I was intending to make sure that the trust related to all finance amounts so that as a contract shrinks as customers do overs, we are not, I guess, left short by the overs, we are not disadvantaged. ... His Honour Q: It was put to you that the evidence you gave a moment ago was not true. You may not agree with that. A: Well, I guess I was looking at slightly differently in terms of the contract rather than the practice, but the practice didn't change. Newlinds Q: When you said a few minutes ago that you intended by the contract to change the practice, you made that up, didn't you? A: Well, I was incorrect. Q: When you said a few moments ago, that you intended by the contract to change the practice, you made that up, didn't you? A: I was incorrect 126Mr Doherty is clearly a highly qualified accountant. He holds a senior position with the plaintiff. He conceded readily that during all relevant contracts no invoices were ever sent to CSG in relation to overs. There was never any separate accounting required of CSG, nor was there any accounting practice apparently adopted by the plaintiffs in relation to the overs. In other words it was never accounted for as an asset in its own books and records, not the least because the plaintiffs never had the faintest idea from month to month precisely what order of overs (if any) existed. The suggestion in his evidence that somehow or other overs were taken into account in certain circumstances when a payout occurred is in my mind fanciful and indeed implausible. I found his explanation in that regard incomprehensible. Apart from his merely asserting that overs were taken into account in my opinion he completely failed to explain satisfactorily in accounting terms how it could be that they could be taken into account. 127I am satisfied on the evidence that for a considerable period of time, indeed for some years, but certainly during the period when the DFA was being negotiated, the parties had a practice whereby the plaintiff never requested or invoiced CSG for the payment of overs. Further the plaintiff never required information about the extent if any of any overs held from time to time. It was well aware that CSG from time to time were using some, perhaps all, of the overs in order to advance both CSG's commercial interests and that of FXF. 128The plaintiff was also aware and was content with CSG as it were using for their own purpose portions of the overs from time to time. In particular the plaintiff at no time required overs to be paid to it, even in circumstances where a churn occurred whereby a customer was lost and customers entered arrangements for the acquisition or rental of a competitors product. 129These facts in my mind are tantamount to an admission that FXF never treated the overs as its property (or held on trust) and CSG well understood that and conducted its business accordingly. To the extent Mr Doherty asserted to the contrary I reject his evidence. There was of course no express obligation for CSG to use overs in FXF's commercial interest but it was accepted a proportion probably would be. 130It is also clear that FXF only had an interest when an upgrade or churn occurred to ensure it received its full pay out figure under the Docu/mation agreement and it displayed not the slightest interest in the overs. 131The documentation or deal sheets by which FXF approved new deals set out the payout for the existing Docu/mation agreement and the amount to be financed in the new deal. No provision was made in this documentation to record or deduct the amount of overs collected by CSG at any point in time. Equally nothing was stated in this documentation about CSG using any portion of the overs to enhance the deal. 132The monthly invoice for rental was fixed at the outset of the arrangement in the deal sheet. That monthly rental amount never varied, nor was it, the evidence would suggest, intended to be varied by reason of the number of impressions made by the customer during the relevant period. 133The calculation of the payout figure when requested clearly in my view could not as a matter of fact take into account the amount (if any) of overs paid by the customer. Early payout would have perhaps heavily hinted at overs but FXF never sought any details of overs for the purposes of calculating the payout figure. 134There is no doubt the above practice of FXF was adhered to, as I find from the earlier agreements, but certainly during the 9 months or so of the negotiations of the DFA ultimately signed on 18 February 2009. 135Although his evidence is conflicting in parts the better view is that Mr Doherty who was responsible for negotiating the DFA from FXF's perspective did not intend that practice (of not claiming entitlement to overs etc) to change by entry into the DFA, and I so find. Of course this is evidence of Mr Doherty's subjective intentions. That clearly can have no effect whatsoever on the construction issue. It potentially goes to the rectification claim of the defendants and perhaps the estoppel claim but his conduct before and during the negotiations and execution of the DFA is consistent with what was a mutually recognised practice and is of considerable relevance in that regard. 136It was simply not contemplated by FXF or CSG, that CSG would be in breach of any trust arrangements by it using any portion of the overs to enhance a new deal with a customer or to pocket a portion as commission. 137The most telling aspect of the surrounding circumstances hence is the practice that I have found existed. I do not consider the co-branded Docu/mation agreement or the deal sheets affect that position. 138My findings above in relation to the surrounding circumstances fortifies my view that the terms of the DFA should be construed as excluding overs from the trust otherwise described in clause 3(4) or item 9(5).

Rectification 139In the event that I was against CSG on the question of construction it sought to make a case for rectification. By reason of my view on construction however it is strictly unnecessary for me to determine this issue. I consider however that I should record my views on the matter in the event that I am wrong on the question of construction. 140It is now clearly established that what is necessary for rectification of a document is the existence of a common intention of the parties that continues "up to the time of execution of the document in question, but that an antecedent concluded contract is not needed". Ryledar Pty Ltd v Euphoric Pty Ltd [2007] 69 NSWLR 603 per Campbell JA at [259]. 141The type of intention that is relevant to rectification of a contract as opposed to the construction of it is the relevant subjective intention. Put another way it is the actual intention of the parties. 142Mason J said in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 346: The implication of a term is to be compared, and at the same time contrasted, with rectification of the contract. In each case the problem is caused by a deficiency in the expression of the consensual agreement. A term which should have been included has been omitted. The difference is that with rectification the term which has been omitted and should have bee included was actually agreed upon; with implication the term is one which it is presumed that the parties would have agreed upon had they turned their minds to it - it is not a term that they have actually agreed upon. Thus, in the case of the implied term the deficiency in the expression of the consensual agreement is caused by the failure of the parties to direct their minds to a particular eventuality and to make explicit provision for it. Rectification ensures that the contract gives effect to the parties' actual intention; the implication of a term is designed to give effect to the parties' presumed intention. 143What the court needs to do is to determine whether the parties were in complete agreement on the terms on their contract but in error when they wrote them down. Frederick E Rose (London) Ltd v William H Pim Junior and Co Ltd [1953] 2 QB 450 at 461. 144In Australia Hotel Co Ltd v Moore (1899) 16 WN (NSW) 132 at 134 Simpson CJ in Equity said: The Court will require very clear and strong evidence to satisfy it that the defendant intended to enter into any such agreement as that now alleged by the plaintiffs... so I must be satisfied on perfectly clear, strong evidence, that both parties intended the meaning which the plaintiffs now allege was always their construction.... Where it is sought to upset a document, the Court is very chary of acting on the testimony on a single witness, especially where he comes to swear himself into a decree. In Jordan v Money (5 H L C 185) the Court went as far as to say that the evidence of a single witness cannot be received against the evidence of a written document. Without going so far as this, it is necessary to be very cautious in this class of cases.... This rule, though modified by subsequent cases, and declared not to be a rule of law, is still a rule of prudence, which this Court would do well to observe. 145Brightman LJ observed in Thomas Bates & Son Ltd v Wyndham's (Lingerie) Ltd [1981] 1 WLR 505 at 521 that: It is not I think the standard of proof which is high, so differing from the usual normal standard, but the evidential requirement needed to counteract the inherent probability that the written instrument truly represents the parties' intention because it a document signed by the parties. 146It is plain therefore that parol evidence is receivable in an action for rectification in order to establish what was the actual intention of each of the parties to the contract. In this case Mr Doherty gave evidence on behalf of the plaintiff and he was cross examined (not on all matters). I observe that Ms Clark swore an affidavit on behalf of CSG but a forensic choice was made not to call her to give evidence. 147Although Mr Newlinds SC for CSG submitted that this was the type of case where I would be able to act on the evidence of Mr Doherty and/or other materials, I cannot accept that argument. There is simply no evidence from the relevant mind of CSG namely Ms Clark as to what she subjectively intended to achieve when negotiating the relevant agreement. Nor do I consider there is a sufficient basis to infer it. Failure to present her for cross examination in my mind is forensically fatal. Rectification is the very species of case where parties are expected and indeed invited to say what subjectively they intended to do. Determination of that relevant intention cannot be found objectively by for example ignoring inconsistent evidence which establishes that, subjectively speaking, no such common intention as is asserted was held. See Campbell JA in Ryledar at [258]. 148In this case Mr Doherty was at pains in his affidavit (especially of 23 May 2012) to deny ever making certain statements to Ms Clark as she had alleged. This went to the very heart of the rectification claims so far as the trust was concerned. Mr Doherty said that what he was attempting to achieve when negotiating the relevant agreement through 2008 was that the defendants would hold all the finance monies on trust for the plaintiff. He further said that he was trying to protect the finance amount paid by the customer to the dealers when negotiating the agreement. He also said that it was his understanding that all finance amounts collected by the dealers were to be held on trust and that overs were to be incorporated in those monies. I did not accept Mr Doherty's version of events and indeed I have made findings adverse to him and hence otherwise have considerable reservations about his evidence, Cubillo v Commonwealth [2000] 103 FCR 1 at 45 - 47, [118] - [123]. Rejection of Mr Doherty on this matter would not of course prove the contrary and prove the relevant subjective intention of Ms Clark, Steinberg v Federal Commissioner of Taxation (1973) 134 CLR 640 at 684 per Barwick CJ. In my view CSG has simply, by failing to call admissible and probative evidence of Ms Clark's subjective intention, failed to discharge its onus. I observe that she undoubtedly would have been appropriately cross examined especially on her email to Mr McKenzie of 24 June 2008. 149I am of the view that it is an untenable proposition that CSG could prove the relevant subjective intention without calling the relevant mind namely Ms Clark. The rectification case would have to fail.

Estoppel 150Again by reason of the conclusion I have reached on the question of construction it is unnecessary to consider the question of estoppel. Campbell JA, again in Ryledar however said at ([199] - [201]): [199] Recently the principles were restated by Brereton J in Moratic Pty Ltd v Gordon [2007] NSWSC 5, where his Honour observed (at [30]) that the doctrine of conventional estoppel precluded either party to a contract from denying an assumption which has formed the conventional basis of the relationship between them. Accordingly, it is necessary to determine whether the parties have in fact adopted such an assumption as the conventional basis of their relationship. [200] His Honour then stated the matters necessary to establish conventional estoppel (at [32]) as being that: "(a) the plaintiff has adopted an assumption as to the terms of its legal relationship with the defendant; (b) the defendant has adopted the same assumption; (c) both parties have conducted their relationship on the basis of that mutual assumption; (d) each party knew or intended that the other act on that basis; and (e) departure from the assumption will occasion detriment to the plaintiff." [201] In noting the differences between promissory estoppel and conventional estoppel his Honour then observed with respect to the latter (at [33]) that it: "is focussed on the consensual basis of the parties' relationship: it operates when both parties have adopted the same assumption as the basis of their relationship, often without appreciating that any departure from the strict legal position is involved so as to hold both parties to their common understanding." 151Again notwithstanding the reservations I have expressed about Mr Doherty's evidence there is simply no evidence called by CSG for example on the question of detrimental reliance. Given the state of the evidence here it is not a matter about which in my view an inference can reasonably be drawn. There are other answers to CSG's estoppel case outlined in FXF's written closing submissions (29 May 2012 [47] - [53]) which I need not deal with. The estoppel case would likewise fail. 152One issue however that did arise was whether or not, even if there were a common assumption, it came to an end of 15 December 2010 as opposed to 20 January 2011. 153On 15 December 2010 the solicitor for the plaintiff sent an email to the solicitor for CSG in which he stated: I am instructed that your client has refused to provide my client with details of the "overs" it holds in respect of FXF Docu/mation Agreements notwithstanding it holds those sums as trustee and owes fiduciary obligations to FXF. 154On 21 January 2011 a further email was sent between the solicitors in which a request was made for payment of the "overs". That letter otherwise reiterated the same proposition, namely that the "overs" were held by CSG as trustee. 155In my view CSG could not have believed, upon a receipt of the communication of 15 December 2010, (even if a common assumption was otherwise established) that the plaintiff was not then asserting it was entitled to the benefit of the "overs", and such assertion was entirely inconsistent with the assumption that otherwise existed. Therefore if I had needed to determine it I would regard the common assumption as having come to an end on 15 December.

Implied Terms 156CSG by its cross claim, seeks a declaration that there is an implied term in each co-branded Docu/mation agreement to the effect that: FXF would not unreasonably withhold consent to a premature termination of the agreement where the customer was prepared to pay the termination value representing an amount required to discharge the agreement; FXF would provide a termination value or payout figure within a reasonable period of time; and FXF would retake possession of the relevant equipment within a reasonable period of time of receiving payment of the termination value. 157It was submitted by CSG that FXF has engaged in a practice of deliberately delaying the provision of payout figures to customers where they wished to upgrade. It is to be noted of course that the circumstances in which the implied term is said to operate is where CSG was no longer one of FXF's dealers but where CSG was seeking to arrange for a customer to churn to a competitors equipment. 158In these circumstances I do not consider as a matter of law the five requirements for the implication of a term under the Codelfa test are satisfied. See also BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283. 159In any event, having heard Mr Doherty cross examined on the issue, I am by no means satisfied that even if an implied term of the kind as alleged here did exist there is any evidence whatsoever of breach and I so find.

Information About Overs 160By reason of my views on the construction this issue does not arise. As the plaintiff is not a beneficiary under a trust it is not entitled to the information sought and therefore relief on that basis is refused. Alternatively the plaintiff sought a declaration that the relevant information is not Confidential Information pursuant to clause 13(c) of the DFA. 161Clause 13 of the DFA is in the following terms: 13. Confidentiality (a) Other than as required by law, each party must keep the terms of this agreement and all information exchanged between the parties and stipulated to be confidential or which would reasonably be inferred as confidential (including any such information relating to our policies, products, or pricing (Confidential Information) strictly confidential. (b) Where disclosure of any Confidential Information is required by law, the party who is required to disclose the information must inform the other party as soon as possible. (c) This clause 13 survives termination or expiry of this agreement, but does not apply to the disclosure and use of customer information and lease contract information by us or FXA which is governed solely by clause 19. 162Clause 19 is in the following terms: We will not during the term of this Agreement supply customer information and Lease Proposal details that have been provided to us by the Dealer or CSG to any sales person employed by or contracted with FXA or their immediate manager. This clause does not prevent us from disclosing information that is independently developed or disclosed to us. 163What is in issue is what use if any the plaintiff can make of material provided in relation to the extent of overs referable to certain customers provided after the agreement had been terminated. It seems to me that the only common sense interpretation of clause 13 is that it applied to information which came into the plaintiff's possession during the operation of the DFA. I do not consider that the agreement should be construed as providing an ongoing obligation after termination to provide information which otherwise was not supplied prior to the termination of the agreement.

Conclusion 164For the reasons set out above I am of the view that overs were not intended to be subject to the trust created by the terms of the DFA, and I therefore refuse the various forms of relief sought on this basis. 165My views on other issues are recorded for convenience as follows: Rectification (149), Estoppel (151) and Implied Terms (158) and Information about Overs (163). 166I would reserve the question of costs and invite the parties to approach my associate to have the matter relisted so that this issue can be dealt with.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 August 2012