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[2006] VSC 42
Supreme Court of Victoria
2006-02-16
DODDS-STREETON J
Original judgment source is linked above.
CONTRACT - Unilateral contract - Whether defendant's statements in comic presentation at dealers' conference constituted a contractual offer, subsequently accepted by plaintiff's procurement of finance business for the defendant - Whether statements too vague and uncertain - Whether consideration stipulated - Whether availability of benefits limited to current dealers.
Introduction
1 In this proceeding, the plaintiff, Mildura Office Equipment & Supplies Pty Ltd, claims that the defendant, Canon Finance Australia ("CFA"), breached an agreement made between the parties in early 1998.
2 The plaintiff claims that the defendant's representatives, in the course of a five minute comic skit at a Canon Australia business dealers' conference in February 1998, made a contractual offer to sell all Canon photocopiers (save for two models) subject to CFA rental agreements within the dealer's area to that dealer for only $1 when the rental agreements expired or terminated (irrespective of whether its dealership was by that stage still on foot), in consideration for the dealer procuring its customers to enter rental agreements with the defendant. The plaintiff maintains that it accepted the defendant's contractual offer by procuring a customer to enter a rental agreement with the defendant in April 1998, thereby concluding a "unilateral" contract of the Carlill v Carbolic Smoke Company Limited[1] ("Carlill v Carbolic") class. It argues that the parties subsequently agreed to successive additional terms of the contract, which expanded the types and brands of machines available for the $1 purchase. Throughout the plaintiff's Canon Australia business dealership, it purchased various photocopiers and office equipment from the defendant for $1 at the end of their rental agreements. After the plaintiff's Canon Australia business dealership was terminated in February 2003, the defendant refused to sell the plaintiff photocopiers or other equipment for $1 at the end of the rental agreements. The plaintiff claims that the defendant has thereby breached the contract.
3 The defendant does not deny that, as an incentive to increase its financial services business, its officers represented, during the skit at the conference, that dealers would be entitled to purchase for $1 certain photocopiers at the expiration of rental agreements in their dealer's area; that it subsequently extended the types of equipment covered; and that it made the relevant machines available to current Canon Australia business dealers for the $1 purchase.
4 It contends, however, that the representations made during the skit were too vague and uncertain to amount to a contractual offer and that no act of performance was specified as consideration. Moreover, the subsequent conduct of the parties did not evidence or establish a contractual relationship. Rather, the defendant argues that the statements made during the skit related to an incentive scheme or campaign and did not give rise to legally enforceable entitlements. Further, the defendant contends that irrespective of whether its "offer" was legally binding, on a proper construction, the opportunity to purchase machines for $1 was limited to current Canon Australia business dealers.
Facts and Evidence
5 The plaintiff at all relevant times has traded under the business name "Office Everything" Its business includes the supply and servicing of office equipment.
6 In about 1967, the plaintiff became an authorised dealer of Canon Australia consumer products, such as printers, calculators, printers, facsimile machines, digital cameras and scanners. Canon Australia sells such items of office equipment and classifies them as consumer products. The plaintiff currently remains an authorised dealer of Canon Australia consumer products.
7 The plaintiff was also an authorised dealer of Canon Australia business products, which include photocopiers, and a product known as "Information Management Solutions", for the area of Mildura, Swan Hill, Horsham and their surrounding districts from 1978 until that dealership was terminated by Canon Australia in February 2003.
8 Canon Australia sells its consumer products through retailer dealers. It sells its business products, including photocopiers, by two main methods. In capital cities, it sells either through its own direct sales staff or by agents. In rural and regional areas, it sells business products through dealers known as Business Imaging Solutions Group dealers ("BISG dealers"). BISG dealers, in contrast to dealers for consumer products, must generally be capable of servicing the machines. The plaintiff was, until February 2003, a BISG dealer supplying and servicing Canon Australia photocopiers within the relevant area.
9 Until about February 2002, BISG dealers were not required to enter a formal written agreement with Canon Australia. There are currently about 70 Canon Australia BISG dealers operating throughout regional Australia.
10 The defendant, CFA, is a subsidiary of Canon Australia. CFA is a finance provider. It makes finance available to direct customers of Canon Australia and to customers of Canon Australia's BISG dealers, through a range of methods, including rental, hire-purchase, leasing, asset purchasing and a method known as "pay for print".
11 From 1999 until December 2003, CFA also offered finance to customers for non-Canon business products.
12 Rental agreements are the most common form of finance provided by CFA, accounting for about 70% of its business. Such rental agreements originate either from a Canon Australia direct sales representative or a BISG dealer.
13 Where equipment is financed by a rental arrangement, CFA buys the equipment chosen by the customer and rents it to that customer for a specified period, which is usually either 36 or 48 months.
14 When the rental agreement relates to a copier machine, service calls to replace and repair the machine throughout the term of the rental agreement are necessary.
15 Mr Lagos, the General Manager of CFA, gave evidence that it was usual for the relevant BISG dealer to contact a customer at some stage prior to the expiration of the rental term in order to ascertain whether the customer wished to upgrade the machine or continue to rent the same machine after the expiration of the rental agreement. If the customer did not wish to continue to rent the same machine, prior to 1998, CFA's usual practice was to offer the customer the opportunity to buy the machine at 10% of its invoice price. If the customer did not wish to purchase the machine, it would be required to return it to CFA (if dealing with a sales representative) or to the BISG dealer (if dealing with a BISG dealer).
16 If the customer decided to continue to rent the machine after the expiration of the original rental agreement, it would do so under a month by month rental agreement or a rental extension agreement for a fixed period. If the customer wished to upgrade the equipment, and the existing rental agreement ended, pursuant to the standard CFA terms and conditions, the old equipment would be returned to CFA as owner.
17 When a continuing rental agreement ended, the usual practice was for the customer to contact the relevant BISG dealer to arrange for the collection of the copier and CFA would be notified accordingly.
18 Mr Janssen, a director of the plaintiff, gave evidence that prior to February 1998, the plaintiff's practice was to purchase copiers from Canon Australia at wholesale price. From the late 1980's, in the majority of cases, it, as lessor, entered into a rental agreement with its customers, typically for a five year term. The plaintiff would collect the copier at the expiry of the rental term and would refurbish it and sell or re-rent it.
19 According to Mr Janssen, the plaintiff made little profit from a rental agreement per se. In his amended witness statement, he asserted that the real value of a rental agreement to the plaintiff flowed from the opportunity to build its customer base, to obtain regular income and to secure a profit through refurbishment and re-rental at the expiration of the rental term.
20 In about February 1998, as the plaintiff was a BISG dealer which had met its budget for the year, Canon Australia invited Mr Janssen, as a director of the plaintiff, and his wife, to a Canon Dealer Incentive Conference in Christchurch New Zealand ("the conference") as a reward for achieving the budget. The conference commenced on 25 February 1998 and continued for three or four days. Approximately 40 BISG dealers attended the conference.
21 Mr Janssen, in his amended witness statement stated that:
"On the morning of 26 February 1998, I and the other representatives of the BISG dealers attended a formal conference session in the Hotel. At that formal session Canon Australia had a number of speakers who spoke for a total of about two hours. During that session John Mortimer was introduced. His speech was to encourage us to use the finance services of Canon Finance Australia (CFA); it was in the form of a five minute comedy skit and talk. Mortimer said words to the effect that: 'From now onwards you'll be able to purchase copiers as they come out of finance - not for $1,000.' Mr Mortimer had a co-speaker, Charlie Blancato, who replied: 'How about $500?' Mortimer replied: 'Not for $500.' The co-speaker said: 'How about $100?' Mortimer replied: 'No you can buy the copier back for only $1.' The skit caused much laughter. Mortimer then elaborated on the skit. He concluded that the offer might not apply to Canon copier models NP6030 and NP6050 but that, if they were excluded, he would get back to us."
The alleged speech was defined in the amended witness statement as "the $1 offer."
22 At trial, I gave leave for Mr Janssen to give oral evidence in chief to clarify what was said by the presenters of the skit. When asked for his best recollection of what was said, he replied:
"The statement was around the wording [indistinct] 'that they would sell the machines for a thousand dollars. No. How about $100. No, you can only buy the machines for a dollar. All machines will be made available at the end of the rental term for $1 in your dealer area'."
23 When asked whether any qualification was made in relation to the $1 offer, he replied:
"The only qualifications that were made were for two models, a medium volume machine, NP6030 and a high volume machine, NP6050, that they may be included but that we would be notified if that was the case."
24 He subsequently described the NP6030 and NP6050 machines as "black and white copiers, one low volume and one high volume".
25 Mr Janssen was asked "was there anything further said by the gentleman on the stage about the $1 offer?" He replied: "That's all that I - I am certain there were no further qualifications."
26 In cross-examination, Mr Janssen denied that models NP6030 and NP6050 were excluded, or that their position was uncertain. Rather, he asserted that the presenter had stated that the relevant models were not excluded and would not be excluded until there was notification to that effect.
27 The plaintiff's amended statement of claim, drawn on Mr Janssen's instructions, alleges that models NP6030 and NP6050 were excepted from the "$1 offer". In cross-examination, Mr Janssen denied that he had ever contended that those models were excluded. In his letter to Canon Australia dated 10 December 2003, however, Mr Janssen stated that "No conditions were mentioned at the time [of the conference] apart from the initial exclusion of two models which were later also included". His letter to Canon Australia dated 17 December 2003 also referred to "a temporary unrelated exception".
28 At trial, Mr Janssen agreed that the presentation was "a comical skit" in the form of a mock auction, in which one of the presenters spoke to the audience, while the other speaker protested. He said "it was funny but it had facts". Mr Janssen had had only one dealing with CFA before the conference, but could recall no details of it. He asserted that he understood that Messrs Mortimer and Blancato were speaking on behalf of CFA, not Canon Australia. That was not disputed. He agreed that attendance at the conference was limited to Canon Australia BISG dealers who had achieved their budget and it was a Canon Dealer Incentive Conference.
29 Mr Janssen acknowledged that he had at first been confident that Mr George Lagos, the General Manager of CFA, had been the principal speaker at the skit. He had remained of that view until up to a week before trial and all the plaintiff's pleadings, and Mr Janssen's original witness statement, were based on that assumption.
30 The successive versions of the statements of claim filed prior to trial alleged, and Mr Janssen's original witness statement asserted, that the principal speaker was George Lagos and that the date of the conference was about 18 February 1998. The defendant consistently denied that allegation. Mr Lagos, by his witness statement filed shortly before trial, asserted that he did not attend the conference in New Zealand, exhibiting his passport to establish that fact.
31 At trial, the plaintiff sought and was granted, leave to file a third amended statement of claim. Mr Janssen filed an amended principal witness statement and a supplementary witness statement, acknowledging that Mr Lagos was not the main speaker, but rather, that the skit was performed by two persons whose identity Mr Janssen now knew to be Messrs Mortimer and Blancato of CFA. He acknowledged that he could not now recall which part Messrs Blancato or Mortimer spoke. In cross-examination, he also acknowledged that he had recently contacted Mr Mortimer (who was no longer employed by CFA), had asked him to give evidence on the plaintiff's behalf and had offered to pay his business class air fares to Melbourne. His solicitor had prepared a draft witness statement for Mr Mortimer. Mr Mortimer did not, however, give evidence on the plaintiff's behalf.
32 Mr Charles Blancato was the Accounting and Administration Manager of CFA at the time of the conference. He gave evidence on behalf of the defendant.
33 From 1989 to September 2000, Mr Blancato occupied various managerial positions with Canon Australia or CFA. In September 2000, his employment with the Canon Group ceased.
34 Mr Blancato, in his witness statement, stated that in the course of the conference, he:
"gave a presentation to Canon BISG Dealers on the last day of the conference as a 'pep talk' to keep them up to date with CFA finance products, the amount of business being financed and encourage the dealers to get customers to use CFA when financing the purchase of equipment. I was the last formal presenter at the conference.
My presentation began with information as to CFA's performance in the previous year. That was followed by the presentation of an award to the BISG Dealer that had put the most deals through CFA the previous year. I then invited John Mortimer (then a Dealer Account Manager for Canon [Australia] and formerly an Acceptance Officer of CFA) to address the audience. I cannot recall precisely what he said, but toward the end he commenced an auction or 'bidding war' with the audience for an ex-rental copier. This was pre-arranged as a role play or skit to introduce a new campaign whereby certain machines would be offered to BISG Dealers for $1.00 at the end of a CFA rental agreement.
John pretended to offer an ex-rental copier to the audience by asking how much they would pay for it. I then stood up and said 'You can't do that!' and then John and someone else whom I cannot now recall, tied me up in a chair and we acted out a routine during which John, aided by the audience, negotiated a price at which I (representing CFA) would sell the ex-rental copier to the BISG Dealer. Gradually, with audience members shouting out various prices, we negotiated a price at which I (representing CFA) would sell the ex-rental copier to the BISG Dealer. Gradually, with audience members shouting out various prices, we negotiated the selling price of the ex-rental copier down to $1.00. At the conclusion of the skit, I was untied. I then told the audience in a very general way how the $1.00 campaign was to work. I said that it was to start immediately and was available to all Canon BISG Dealers. I said that it did not apply to all models and I identified those excluded - they were high-end black and white photocopiers and colour photocopiers. I said that it could only be utilised at the end of the rental term or when the customer no longer required the copier, whichever was the latter. I said that it only applied to copiers sold through Canon BISG Dealers and not by Canon directly. I also said that the copier could not remain with the same customer, but that it had to be collected."
35 In cross-examination, Mr Blancato stated that in performing the skit with Mr Mortimer, he used a Powerpoint presentation which was shown while the skit was presented. He could not comprehensively recall what was in the Powerpoint presentation, but did not believe that it contained the above qualifications. He stated that he orally summarised the main points of the scheme at the end of the skit and put up a big dollar sign inscribed "Machines back for a dollar".
36 He recalled that he said words to the effect that under the scheme:
"once the term had expired for the rental period if the customer no longer wished to have a machine then they could be offered the machines for $1, that is, the dealer. If the customer chose to continue renting at the end of the period they will continue to do so until they decided they no longer wanted the machine."
37 Mr Blancato described the presentation as part of a campaign "to encourage dealers and even our ... direct sales force to use more ... finance options." He agreed that the $1 offer was an incentive to dealers to send business to CFA.
38 Mr Blancato asserted that he made the general statement that "our high end black and white machines and our colour machines" would be excluded. He denied that he specifically identified the models which would or could be excluded. As he was principally engaged in finance, he was not familiar with particular models of photocopier.
39 He testified that he stated that there were "conditions and exclusions".
40 Mr Blancato did not recall whether anything was said about whether the $1 offer could be withdrawn.
41 He explained that the restriction on re-renting a purchased machine to the same customer was contrary to "the spirit of what this campaign was all about."
42 Mr Lagos conceded that in 1998, CFA wished to encourage Canon dealers to refer customers to it, and that he worked on ways to encourage them to do so.
43 Mr Lagos testified that he had originally intended to attend the conference in New Zealand but had ultimately arranged for Mr Blancato to attend in his stead. He had requested Mr Blancato to present the skit on his behalf. He did not recall whether he devised the skit, wrote a script or discussed it with Mr Blancato. Nor could he recall whether he had discussed the presentation with Mr Mortimer. He stated, however, that in accordance with his usual practice, he would have provided Mr Blancato with a Powerpoint presentation. The Powerpoint presentation could not now be located and had not been discovered by the defendant.
44 Mr Lagos also stated that he had prepared handwritten notes or bullet points in order for his secretary to prepare the Powerpoint presentation. The handwritten notes would have been discarded immediately after the Powerpoint presentation had been prepared. The handwritten notes had not been discovered.
45 Mr Lagos could not recall whether he received a report on the presentation of the skit after the conference, but acknowledged that he understood that a promise had been made on behalf of CFA.
46 He testified that CFA purchased photocopiers for rental from its parent company, Canon Australia. After the expiry of the rental agreement, CFA would sometimes return the used copiers to Canon Australia to be remanufactured. In such a case, if a customer still owed money on a copier, Canon Australia would pay the outstanding amount to CFA, but otherwise, CFA did not require Canon Australia to pay for the ex-rental copiers.
47 Mr Lagos gave evidence that Canon Australia, rather than CFA, determined whether or not a given model of photocopier would be available for purchase for $1. Canon Australia informed CFA by email, telephone or inter-office memorandum which models it required to be returned to it for remanufacture. On being informed by Canon Australia of excluded models prior to 31 March 2000, CFA had informed dealers of models which were or were not available.
48 Mr Lagos stated that the ex-rental machines were of no value to CFA. The transport and collection costs were such that it would have been willing for the dealers keep all used machines for nothing. CFA, however, complied with Canon Australia's requirement that particular models be returned to it for refurbishing. When CFA did make ex-rental machines available to dealers, it did not in fact require payment of the $1 price, which was merely symbolic.
49 Mr Janssen testified that on returning from the conference, he decided to promote CFA finance for copiers to the plaintiff's customers, because that would free up working capital needed to operate the plaintiff's business.
50 In his amended witness statement, Mr Janssen stated that he "was impressed by the $1 offer and thought at the time that Office Everything should encourage its customers to obtain finance from CFA" and that on his return from the conference, he instructed the plaintiff's staff to encourage customers to finance their copiers through CFA. He stated that the reason for his decision to promote CFA was that "by doing so it would decease the amount of working capital required to operate Office Everything's business ... ". [U]sing CFA would free up working capital as, at the commencement of the rental arrangement, Office Everything would now purchase the copier from Canon Australia and then sell the copier to CFA".
51 The amended witness statement further stated:
"Two factors influenced my decision to procure customers to enter into rental arrangements with CFA. First, it was necessary that Office Everything was able to purchase copiers from CFA on finalisation of rental terms for $1. Office Everything's method of business, prior to February 1998, required that customers return copiers to Office Everything at the completion of their rental terms. This was a critical factor in the profitability of Office Everything's business. Office Everything made little profit in respect of the supply of new copiers. However, refurbishing and then selling or re-renting refurbished copiers was profitable. As the $1 offer allowed Office Everything to purchase copiers for $1 at the completion of their rental terms I believed that my decision to encourage customers to enter into rental arrangements would be neutral to Office Everything's profitability in respect of it being able to refurbish and sell on re-rent copiers when rental arrangements expired.
Second, it was necessary that customers would not have to pay higher periodic rental payments in the event that they entered into rental arrangements with CFA rather than with Office Everything as otherwise Office Everything would be less competitive in the market. My examination of the CFA rental payments that customers would pay to CFA led me to believe that they would be similar to those previously payable to Office Everything."
52 Mr Janssen stated that after attending the conference, in March 1998 "I procured Mildura Kode School to enter into a rental arrangement with CFA for a Canon copier, model number NP6045. I did this in reliance on the $1 offer".
53 He prepared and witnessed the Mildura Kode School rental documents on 30 April 1998, prepared an invoice in relation to the copier for $13,480 and faxed it with the agreement to CFA, which accepted it.
54 In cross-examination, Mr Janssen was unable to recall the first rental arrangement the plaintiff procured after the conference. When asked whether it was with the Mildura Kode School, he replied that "it could be that, right, yes ... if you say so".
55 Although the third amended statement of claim alleges that the plaintiff acted on the speech shortly after 18 February 1998 and his amended witness statement stated that the plaintiff procured the Kode School rental arrangement in March 1998, Mr Janssen conceded in cross-examination that it was not entered into until late April 1998.
56 In his oral evidence-in-chief, Mr Janssen testified that his reasons for deciding to refer customers to CFA for financial accommodation were "that nothing changed as far as we were concerned apart from the fact that Canon Finance would take over the financial obligations, the financial contracts. Nothing else changed. There was no reason not to change and it would allow us to work on less capital."
57 In cross-examination, Mr Janssen agreed that the use of CFA or any other external financier had the advantage of freeing up the plaintiff's capital. Further, he conceded that in some instances at least, the CFA rates were quite a lot better than those previously offered to customers by the plaintiff.
58 A CFA dealer newsletter dated April 1998 included the following notice:
"For Sale
Expired Rental Machines to Dealers for $1
Dealers are now able to purchase certain CFA Rentals at the end of their term for $1.
The Exceptions to this rule are:
Photocopier Models - NP6085, NP8530, NP8580, NP9800, BJAIP, BJAISP, CLC700, CLC800.
Any machines where the rental contract has been signed up by Canon and not the Dealer.
The machine cannot stay with the same customer. It must come back to the Dealership for on-sale to another party. There will be 100% audits by CFA to ensure this is adhered to".
59 Mr Janssen stated that he "did not recall reading" the April newsletter prior to discovery in this proceeding.
60 The CFA dealer newsletter dated May 1998 recorded an interview with a dealer who stated the following:
"As a general rule, we try and avoid external finance companies. We use CFA for the following reasons:
- Good rates
- Easy upgrades
- Ability to buy expired CFA rentals for $1
- Easy use of finance applications and now flexible documents
- Convenient one-stop shopping"
61 Mr Janssen stated that the May newsletter encouraged him "to continue procuring customers to enter rental agreements with CFA".
62 In October 1998, Canon Australia entered a so-called "national" arrangement with Southcorp Wines. In the case of national accounts, Canon Australia entered the arrangement with their relevant customer and the dealer in the relevant territory would service the machine for a fee. Although the Southcorp Wines account was a national account and the plaintiff did not procure any rental or other agreement between Southcorp Wines and CFA, in November 2000, CFA permitted the plaintiff to buy the used equipment for $1.
63 The CFA newsletter dated February 1999 included an interview with a dealer who stated "we are now using CFA more as it can offer flexibility with competitive rates, and we can keep rental copiers for $1."
64 By letter to Peter Parker of Canon Australia dated 20 October 1999, Mr Janssen requested "Canon's assurance in print that [certain equipment] will revert back to us at the end of the period after us of course paying out the amount of any position we have taken ... This does bring me to another problem which is a recent letter from Canon Finance where they said that the arrangement of us being able to buy end of contract machines for $1 had changed retrospectively. I have sought clarification from Canon Finance on a number of occasions including this morning and have been told that whereas they don't like the breaking of the promise we have to take this up with you". The letter further stated, "I believe that a clear and unequivocal statement by you on behalf of Canon will need to be made now to clear the air."
65 The letter also stated that Josh Noakes of CFA had, until recently, orally confirmed to Mr Janssen on most occasions that the equipment would revert to the plaintiff.
66 At trial, Mr Janssen stated that he sought the written assurance because "George Lagos kept on giving me evasive answers in my phone conversation". The letter to Peter Parker, however, did not refer to a telephone conversation with Mr Lagos. At trial, Mr Janssen did not testify that Mr Noakes had confirmed that the plaintiff would be entitled to the relevant equipment. The "recent letter" from CFA to which Mr Janssen's letter referred was not identified.
67 By a letter to Mr Lagos dated 25 March 2000, Mr Janssen stated, inter alia,
"A meeting was held last Friday with all the Victorian and Tasmanian dealers attending as a number of issues in our dealings with Canon and Canon Finance needed to be sorted out.
I have been asked to write to you in order to seek written assurance that the promise made in New Zealand by Canon Finance to make available to the dealers all machines which reached the end of their finance contract for $1 will be kept.
Many of us have in fact installed copiers at little if any profit, knowing that the machine would bring a return when it would be made available at the end of the contract. There have been some rumours floating around that this unconditional promise may not be kept in some instances."
68 Mr Janssen denied that he was seeking clarification from CFA. He asserted he "knew clearly what the position was", but desired a written assurance.
69 Mr Penrose, state supervisor of CFA throughout the relevant period, gave evidence that "at some stage during 1999 the plan by which Canon dealers could buy ex rental machines for $1 was varied to include facsimile machines and non-copier electronic equipment".
70 The Inter Office Memorandum of Mr Lagos to all Dealers dated 31 March 2000 stated,[2] inter alia:
"Purchase of Rentals for $1.
As was promised in New Zealand, Dealers are able to purchase certain models for $1 at the end of their term or after the customer no longer wants to rent the equipment, whichever is the latter. Dealers are not allowed to buy equipment at the end of the term for $1 then rent it back to the same customer.
The only exception to this will be if there is still money owing on the machine, then the dealer will be offered those machines at the amount owing. For example, when Canon Australia has taken positions there could be money outstanding on those machines hence they will be offered to dealers at the amount outstanding when the machines are returned.
As a new model is released, Canon will at that time inform you whether or not it qualifies for $1 purchase."
71 The Inter office memorandum also required dealers to complete an attached Canon Finance Dealer Machine Pick-Ups form whenever a CFA rental machine was to be removed from a customer's premises. The Canon Finance Dealer Machine Pick-Ups form relevantly stated:
"If expired rental with nil pay out, do you wish to purchase for $1 (non-expired CFA to advise purchase price)
Yes □ No □"
72 Mr Janssen did not respond to the above inter office memorandum.
73 The Canon dealer newsletter dated May 2000 included a notice under the heading "Rent Rent Rent ... The dealer gets - increased selling opportunities as Rentals roll over - various ex-rental machines for $1". Under a heading "Why is CFA financing non Canon equipment good for you?" the newsletter stated, inter alia, "Incentives payable on Canon equipment financed is [sic] also paid on the non-Canon financed and of course ...
a great chance to win a trip to lovely Queenstown."
74 Mr Janssen conceded in cross-examination that he had read the May newsletter, but did not seek further clarification about which ex-rental machines were covered, as he "had no reason to doubt".
75 The e-mail of George Lagos to Grant Penrose and other Canon personnel dated 29 November 2000 relevantly stated:
"As you know Grant Penrose has been liasing [sic] with you trying to sort out a serious matter with the Dealers re them keeping certain models for $1 at the end of rental.
I mistakenly thought that Grant was trying to get you to agree to let Dealers keep machines which were on [the] list that had to be returned.
However I now understand the situation is that the models the dealers are referring to are not on the list. Thus the dealers are 100% correct in demanding that they be able to keep them and this is something I guaranteed to them. Because the dealers know that they will be getting machines back for $1 they reduce their margin significantly on the initial sale. We cannot turn around and then say we want them back. We have to let dealers know whenever a new model is released whether it is one that is earmarked for return to CA for remanufacturing (which I have mentioned before). Accordingly I have advised Grant to inform Dealers that they can keep the models in question ... ".
76 By an inter office memorandum dated 29 November 2000 e-mailed to "All Dealers", Grant Penrose of CFA stated, inter alia:
"We have some great news in regard to clarifying models NP6030 and NP6050, being made available to dealerships for $1.00 at the completion of the CFA rental. Effective immediately we confirm that machine models NP6030 and NP6050 can be purchased by the dealers for $1.00. The only exception to this is where Canon may have taken a position on the machine. In these cases the dealership would be required to purchase the machine for the amount of the position."
77 The inter office memorandum of George Lagos to Mr Penrose and others dated 1 December 2000 stated:
"Attached please find an extract from our April 1998 newsletter which confirmed Dealers purchasing machines for $1 which was announced at the conference in Christchurch.
Kevin you are correct in that an e-mail came out in June 1999 stating NP6330's and NP605's are to be returned but the problem is that the Dealers were selling them at reduced margins from early 1998 as they were going to be able to re-sell them when bought back at the expiry of rental.
Could I propose that you, possibly in conjunction with Russel Irving, formulate a policy to handle existing machines in the field and new models as they are released."
78 In February 2001, Mr Janssen attended a Canon Australia BISG dealer conference in Sydney, at which Mr Lagos gave a presentation stressing the $1 offer "without any change to its effect" but requiring dealers to complete a pick up form. At that conference, Mr Janssen received a copy of the Canon Finance Manual section 11 dated 23 February 2001. The Manual contained, inter alia, a "CFA rental agreement - dealer master agreement", which stated, inter alia:
"The dealer has requested CFA to enter into a rental agreement with the customer referred to in schedule 1 on the principal terms set out in Schedule 2 to the Dealer Facility Agreement ("DFA"). The dealer and CFA agree that if CFA enters into the Rental Agreement and the DFA, the rights and obligations of the Dealer and CFA pursuant to the DFA are as follows."
79 The document does not refer to a right or entitlement of dealers to purchase equipment for $1 on the expiration of the rental agreement.
80 A separate section of the manual under the heading "End of Term Procedures - Rental/Operating Lease Options" did refer to the $1 purchase. It stated:
"If the customer has completed all their financial obligations with CFA and returns the equipment to the Dealer, the Dealer may purchase that equipment for $1 (one dollar) ON SELECTED MODELS.
The Dealer will be notified whenever Canon introduces a new model as to whether Canon will require it returned to Canon.
If not advised, the Dealer may purchase it for $1 (one dollar).
Important
This does not apply where positions have been taken, i.e. there is a residual still owing.
The Dealer may purchase any equipment with a position for an amount quoted by CFA.
The dealer must notify CFA that the equipment has been returned via completing the following Canon Finance Dealer Machine Pick-Ups form.
If this is not done, then CFA will continue charging rentals and CFA will need to recoup these from proceeds of sale of the returned equipment that the Dealer has received."
81 The Canon dealer newsletter dated March 2001 reported a dealer interview in which the interviewee identified the principal benefits of CFA and stated, inter alia, "with the confirmation of the $1 Buy-Back [it is] even better for the future".
82 Mr Penrose confirmed that, at some stage during 2001, the plan by which Canon dealers could buy ex-rental machines for $1 was extended to include office equipment.
83 In February 2002, Canon Australia gave the plaintiff notice that its BISG dealership would expire in 12 months.
84 In February 2003, Canon Australia terminated the plaintiff's BISG dealership. It appointed a new BISG dealer for the relevant territory.
85 Following the termination of the plaintiff's BISG dealership, the defendant refused to make available to the plaintiff machines for purchase for $1 when the rental agreements expired or terminated in the plaintiff's former area. The plaintiff insisted that its entitlement to purchase ex-rental machines for $1 subsisted, despite the termination of its BISG dealership.
The Pleadings
Third amended statement of claim
86 The third amended statement of claim alleges:
87 It is thus alleged that the plaintiff's acceptance of the offer can be inferred not only from its procurement of the identified rental agreements, but from the defendant's entry into those agreements and from other acts of the defendant specified in paragraph 15 of the third amended statement of claim, which are stated to constitute acts of part performance.
88 The matters contained in paragraph 15 which are characterised as acts of part performance are:
The copier implied term;
The customer rental term;
The non-exclusion term;
The facsimile office equipment term (alternatively the office equipment term);
The additional implied term.
"Where a rental arrangement for a Canon copier, which related to the plaintiff's customer terminated prior to its expiry date, the defendant would notify the plaintiff and give it the opportunity of purchasing the said Canon copier from the defendant for $1 plus the amount owing to the defendant under such rental arrangement."
90 The copier implied term is stated to be implied by the necessity to give business efficacy to the alleged agreement.
91 The customer rental term is alleged to be that the plaintiff was not permitted to purchase a Canon copier for $1 from the defendant under the alleged agreement and then rent it back to the same customer.
92 The customer rental term is alleged to have been set out in a facsimile of CFA dated 27 April 2000, to that effect, and the plaintiff's consent to it is alleged to be inferred from its procurement of customers within its area to enter rental arrangements with CFA on or shortly after 27 April 2000.
93 The non-exclusion term is alleged to be that the defendant would, after 29 November 2000, permit the plaintiff to purchase Canon copiers model numbers NP6030 and NP6050 for $1.
94 It is alleged that the parties' consent to the non-exclusion term can be inferred from CFA's facsimile to that effect dated 29 November 2000, the plaintiff's procurement of its customers' entry into rental arrangements with CFA thereafter, and CFA's entry into those agreements.
95 The facsimile office equipment term is alleged to be an additional term to which the parties consented in November 1999, to the effect that if the plaintiff procured its customers to enter rental arrangements with CFA for facsimile machines or non-copier equipment, the plaintiff could purchase such equipment for $1 when the rental period terminated or expired.
96 The parties' consent to the facsimile office equipment term is alleged to be inferred from at least one telephone conversation in about November 1999 between Mr Janssen of the plaintiff and Mr Penrose of CFA, in which they consented to such a term, the plaintiff's procurement of customers to enter specified rental arrangements for office equipment with CFA in or shortly after November 1999 and CFA's entry into those arrangements.
97 The office equipment term is alleged to be an additional or alternative term consented to by the parties shortly after January 2001, and to the effect that if the plaintiff procured customers to enter rental agreements with CFA for office equipment, the defendant would permit the plaintiff to purchase the office equipment for $1 when the rental periods terminated or expired.
98 The parties' consent to the office equipment term is alleged to be inferred from a telephone conversation between Mr Penrose of CFA and Mr Janssen of the plaintiff to that effect, the plaintiff's acting on the telephone conversation in or shortly after January 2001 by procuring customers within its area to enter specified rental agreements for office equipment with CFA and the defendant's entry into such agreements.
99 The additional implied terms are alleged to be that as at November 1999, or alternatively January 2001, where a rental arrangement for office equipment which related to the plaintiff's customer terminated prior to its expiry date, the defendant would notify the plaintiff to give it the opportunity of purchasing the said office equipment for $1 plus the amount owing to CFA under such rental arrangement.
100 The additional implied terms are alleged to arise by necessity in order to give business efficacy to the alleged agreement.
Second amended defence and counterclaim
101 By its second amended defence and counterclaim, the defendant denies that statements made by its representatives at the conference constituted a contractual offer.
102 It further denies the existence of the copier implied term, customer rental term, non-exclusion term, facsimile office equipment term and additional implied term.
103 Alternatively, the defendant alleges that any contract was conditional upon the plaintiff continuing to carry on business as an authorised BISG dealer of office equipment for Canon Australia. The defendant alleges that such a condition was partly written and partly to be implied.
104 The written condition is alleged to be contained in two memoranda from CFA to Canon dealers dated 31 March 2000 and 29 November 2000, and a Canon dealer newsletter dated May 2000.
105 The implied condition is alleged to arise from the fact that those present at the Conference were invited Canon dealers, from the content of the memoranda referred to above, and from the content of the form styled "dealer machine pick-up" attached to the memorandum dated 31 March 2000.
106 The defendant admits that, from March 1998 to February 2003, it entered into agreements with the plaintiff in relation to copiers and other equipment. It admits that the plaintiff's dealership was terminated and by letter dated 9 April 2003 to the plaintiff, it confirmed that all benefits associated with the BISG dealership would cease.
107 By counterclaim, the defendant alleges that the plaintiff wrongfully removed and retained possession of two Canon photocopiers belonging to the defendant which were the subject of leases dated 16 February 2001 and 27 July 2001 between the defendant and Sons of Gwalia Ltd and Wingara Wine Group Pty Ltd respectively, ("the Gwalia and Wingara copiers"). Following a demand from CFA on 15 January 2004, the plaintiff returned the Gwalia and Wingara copiers to the defendant on 18 August 2004 on a without prejudice basis.
108 The defendant claims damages for conversion and an injunction retraining the plaintiff from taking any steps to obtain possession of any copier or non-copier equipment owned by the defendant and in the possession of any third party (or former customer of the plaintiff). Alternatively, the defendant seeks a declaration that the plaintiff is not entitled to claim any title to or right to possession of copiers and office equipment supplied by the defendant pursuant to rental agreements procured by the plaintiff.
The Parties' Contentions
109 In essence, the plaintiff contends that the announcement made at the conference constituted a clear, unambiguous offer which outlined the essential terms with sufficient certainty and evinced the defendant's intention to be contractually bound immediately upon the plaintiff's acceptance, constituted by its performance of the stipulated consideration.
110 As I understand it, the plaintiff's primary argument was that, upon the plaintiff's acceptance of the offer by first procuring a customer to enter a rental agreement with CFA in April 1998 in reliance on the offer, the plaintiff was thereafter (irrespective of whether it remained a Canon BISG dealer) entitled to purchase all Canon copiers (save for specified excluded models) in the dealer's area for $1 on the expiry of their rental agreements with CFA. As a subsidiary alternative argument, the plaintiff contended that it was entitled to purchase for $1 all Canon copiers for which it had procured customers to enter rental agreements with CFA, at the expiry of the rental agreements. The plaintiff also contended that the original offer contained an implied term that if the rental agreement terminated prior to its expiry date, the plaintiff could purchase the machine for $1 and the amount outstanding under the rental agreement.
111 Mr Bigmore, senior counsel for the plaintiff, submitted that CFA's announcement at the conference was intended as an inducement to obtain referrals of profitable finance business to CFA. The plaintiff, prior to the conference, did not refer customers to rental arrangements with CFA, but rather, purchased Canon copiers at wholesale rates from Canon Australia and itself rented them to customers. The plaintiff's sole incentive to refer business to CFA was the opportunity to purchase ex-rental copiers for $1.
112 Mr Bigmore contended that, as the plaintiff had altered its business practice of funding rental agreements itself in reliance on CFA's offer, it should be entitled to the fruits of its labours, irrespective of whether it retained the status of a Canon BISG dealer.
113 Although the plaintiff submitted that the contract was concluded by the plaintiff's acceptance by procuring a rental arrangement for CFA in April 1998, it contended that the parties subsequently performed the agreement and, over time, successively consented to additional express terms, many of which successively expanded the subject matter of CFA's offer.
114 The first additional term extended the offer to include Models NP6030 and NP6050.[3] Subsequent additional terms extended the offer to facsimile or non-copier machines[4] and non-copier office equipment.[5] The plaintiff alleges that the parties also allegedly consented to an additional term prohibiting a dealer from renting a machine it had purchased for $1 back to the same customer.
115 Although the plaintiff contended that the contract was constituted by the offer accepted by the doing of the act, it also relied on conduct and communications which occurred after April 1998 as further acts of performance confirming that CFA had made a contractual offer at the conference, capable of acceptance by the stipulated performance.
116 The defendant did not dispute that its representatives, Messrs Blancato and Mortimer, presented a short skit at the conference in which Mr Blancato stated that certain models of Canon copiers would be available for purchase for $1 by BISG dealers. It submitted, however, that he stated that the opportunity would arise at the end of the rental agreement or when the customer no longer required the copier, whichever was the later.
117 It submitted that Mr Blancato's presentation was of a general, rather than detailed, character.
118 Mr Corbett, counsel for the defendants, submitted that Mr Janssen was an unreliable witness, whose evidence should not be accepted. His evidence was, Mr Corbett submitted, vague, inconsistent and contradictory.
119 Mr Corbett submitted that there was, in any event, no evidence to support the plaintiff's allegation that an offer of a sufficiently certain promissory character was made at the conference in the terms alleged.
120 He contended that, in contrast to Carlill v Carbolic, the statements made at the conference were too vague and uncertain to amount to a contractual offer. In particular, they did not specify any acts which the plaintiff must perform in order to secure the entitlement. They were made in the course of a five minute comic skit as part of an incentive campaign and policy, and although the defendant subsequently both acknowledged and acted upon the commitment to make machines available to dealers, the address was not intended to be an offer legally binding upon performance by dealers, and would not be apprehended as such by a reasonable member of the audience.
121 Mr Corbett argued that the very uncertainty about the terms and conditions and how the scheme would work made clear that it was a fluid, evolving scheme, rather than an contractual offer. Much remained to be worked out.
122 He further submitted that evidence of subsequent conduct or individual's construction of the statements made in February 1998 was not admissible to establish their contractual nature.
123 Further, the defendant argued that if there were an agreement, it was clear that any contractual entitlement to purchase machines for $1 did not arise until the end of the rental agreement and was restricted to current BISG dealers as at that date. The audience at the conference was limited to invited BISG dealers, and the relevant subsequent memoranda and newsletters were also addressed to BISG dealers. Any entitlement was thus conditional on the retention of that BISG dealer status.
124 The defendant submitted that, properly analysed, the "offer" was one of a number of non-contractual incentives offered to improve dealers' performance.
125 Mr Corbett also submitted that Mr Janssen's evidence did not convincingly establish that he procured customers to enter CFA rental agreements in reliance on an offer in the term alleged. Rather, it indicated that he was motivated by other considerations, particularly the freeing up of the plaintiff's capital. Nor was Mr Janssen's evidence on reliance corroborated by other employees of the plaintiff.
126 Further, the alleged implied terms contradicted the alleged express terms of the offer and "did not go without saying", thus failing to satisfy the test for implication.[6]
127 Mr Corbett further submitted that, although the plaintiff allegedly procured rental agreements referred to in the schedules to the third amended statement of claim in reliance on the offer, it adduced no evidence of various alleged rental agreements.
Relevant Legal Principles
128 The principles governing the formation of contracts frequently described as "unilateral" contracts[7] were authoratively established in the land mark case of Carlill v Carbolic.[8]
129 A so-called unilateral contract is more accurately "a contract constituted by an offer of a promise for an act",[9] in contrast to the usual exchange of promises. The relevant act constitutes both the performance and the acceptance of the offer and no separate notice of acceptance is required.
130 In Carlill v Carbolic, the defendants inserted an advertisement for their pharmaceutical smoke ball product in a newspaper. The advertisement stated, inter alia:
"100L reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza cold or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. 1000L is deposited with the Alliance Bank, Regent Street, showing our sincerity in this matter."[10]
The advertisement further extolled the benefits of the carbolic smoke ball product.
131 The plaintiff bought, and used as directed, a carbolic smoke ball on the faith of the advertisement, but nevertheless contracted influenza.
132 The Court of Appeal upheld Hawkins J's decision in the plaintiff's favour. It rejected the respondents' arguments that the advertisement was "mere puff", too vague and uncertain to amount to a binding promise, not an offer made to anybody in particular and that the plaintiff had furnished no consideration.
133 A.L. Smith LJ (with whom Lindley and Bowen LJJ agreed) concluded that the advertisement constituted "an offer intended to be acted upon, and when accepted and the conditions performed constituted a binding promise on which an action would lie, assuming there was consideration for that promise ...".[11] Lindley LJ stated that "here is a distinct promise expressed in language which is perfectly unmistakable".[12] Although the length of protection from influenza obtained by the use of the smoke ball was not expressly stated in the advertisement, Bowen LJ considered that, on a common sense construction, the promised immunity from influenza would be co-extensive with the use of the carbolic smoke ball. Lindley LJ took the view that the promised protection would last for a reasonable time after usage had ceased. He considered that the reference to the deposit of the reward in the bank excluded the conclusion that the advertisement was "mere puff".[13]
134 Further, Lindley LJ considered that the advertisement was an offer made to all the world, which could "ripen into a contract with anybody who comes forward and performs the condition? It is an offer to become liable to anyone who, before it is retracted, performs the condition ... If this is an offer to be bound, then it is a contract the moment the person fulfils the condition."[14]
135 Moreover, the offerer had, in making the offer, expressly or impliedly intimated in the offer that it would be sufficient to act on the proposal without communicating the acceptance, so that performance of the condition was a sufficient acceptance without notification.
136 In Carlill v Carbolic, the Court of Appeal considered that the requirement of consideration was satisfied, either by the inconvenience sustained by plaintiff in using the smoke ball or by the benefit received by the respondents from that user in promoting their sales.
137 In Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd & Ors ("Mobil Oil"),[15] the plaintiffs, a number of franchisees of the defendant, Mobil, made various claims based on breach of contract, promissory estoppel and contravention of s.52 of the Trade Practices Act arising from, inter alia, certain statements made by the defendant's representative at a breakfast address to Mobil dealers at a dealers' convention. In essence, the plaintiffs alleged that by the address and/or certain later events, Mobil had assured them that if they performed to a certain level at their respective service stations, their tenure at their service stations would be renewed for various periods of time, depending upon the period over which they had performed to that specific level.
138 Mobil had in place a system of assessment for service stations, with detailed criteria. A group of franchisees which attained a particularly high standard comprised a "Circle of Excellence", which already received certain annual rewards from Mobil.
139 The plaintiffs alleged that, by the convention address, Mobil made two new distinct promises, offers or representations.
140 First, that for any year in which a dealer received 90% or better in Circle of Excellence judging, it would receive one additional year's tenure following the expiry of the dealer's current franchise.
141 Secondly, if a dealer received 90% or better in all six years following 1991, it would receive a franchise at no cost for a further nine years at the expiry of the dealer's current franchise.
142 At the convention breakfast, the presenter made a lengthy speech in a tone of "corporate enthusiasm", in which he referred, inter alia, to the systems of assessment and rewards in place. He then referred at length to rewards of additional tenure which would be made in the future on the basis of performance.
143 With accompanying displayed captions such as "tenure for performance" and "basis for extension - one extra year for each year at 90%", the presenter stated, inter alia, "Now we've got a lot more work to do on this but the commitment that we're making to you today is that we will find a way to extend your tenure automatically no cost if you consistently achieve 90% or better in Circle of Excellence judgings."[16]
144 Certain plaintiffs also relied on Mobil's post-convention conduct, including a video tape of the address with commentary sent to franchisees one month after the convention; a dealer magazine distributed by Mobil to franchisees, which gave an account of the address and included additional commentary; and screenings of the convention address at regional dealers' meetings in September 1991 with further commentary by a Mobil representative, to the effect that "You heard the speech. For every year you achieve 90% or better in Circle of Excellence you will receive an additional year's tenure."[17]
145 Further, the plaintiffs relied on brochures subsequently distributed by Mobil to dealers which contained tear-off slips stating, inter alia, that the franchisees "accept the challenge to exceed 90% in Circle of Excellence judging and quality for extra tenure."[18] Certain plaintiffs had completed and returned the tear-off slips.
146 It was undisputed that Mobil had subsequently failed to extend the tenure of franchisees who had achieved the stipulated standards of performance.
147 At first instance, the trial judge held that the convention speech contained two offers which, on acceptance by the franchisees through performance, gave rise to a legally enforceable contract.[19]
148 On appeal, however, the Full Court held that the address given at the convention must be construed in context, as part of a speech in a tone of "corporate enthusiasm" to rouse, encourage and challenge Mobil dealers at a convention breakfast to perform better
149 The Full Court observed that the rewards referred to in the breakfast address were to be made no earlier than the expiry of the relevant franchises. They were thus a long way off for most of the franchisees. Various anomalies could therefore arise, in that a franchisee could perform well for one year only and badly thereafter, but would still be entitled to a one year renewal of its franchise on its expiry. Other franchisees did not have six years remaining in their franchise, so could not satisfy the requirement for a nine year renewal.
150 The Full Court stated:
"The variety of the circumstances in which franchisees were placed and the anomalies and disparities in the ways in which the supposed promises could have effect, coupled with the fact that on any reckoning, they would not fall due for performance until quite some years hence, combine to suggest strongly that [the presenter's] speech should not readily be construed as a legally enforceable offer of a promise."[20]
151 Their Honours analysed the address against that background and identified "numerous indications in the address that the system of reward by renewal of tenure of which [the presenter] spoke was in a developmental stage only."[21]
152 They concluded that despite the unqualified statements in the accompanying displayed captions, the presenter had noted that there would be difficulties in implementing the extensions and that "there is still a lot of work to do on the idea so we haven't finalised how it's going to work."[22]
153 The Full Court also considered that the terms of various post-convention communications were not sufficiently certain to give rise to a contract. Despite the Mobil brochures subsequently provided to dealers and the original presenter's reference to Mobil's commitment to "find a way to extend your tenure automatically at no cost if you consistently achieve 90% or better in Circle of Excellence judgings", the Full Court concluded that the essential problem was that neither the terms of the speech nor those of the tear-off slip were sufficiently certain to give rise to a contract.
154 Their Honours concluded that there was no contractual offer of extended tenure for achievement of standards to be found in the address.
155 In Australian Woollen Mills Proprietary Ltd v The Commonwealth[23] the High Court stated that in order to establish a contract:
"constituted by an offer of a promise for an act, the offer being accepted by the doing of the act ... it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act, and that the act was really done in consideration of a potential promise inherent in the statement or announcement. Between the statement or announcement, which is put forward as an offer capable of acceptance by the doing of an act, and the act which is put forward as the executed consideration for the alleged promise, there must subsist, so to speak, the relation of a quid pro quo."[24]
156 It is clear that a contractual offer of the Carlill v Carbolic class requires sufficient certainty and precision, including a sufficiently precise statement of the condition or act which must be performed in order to accept it. Consideration remains essential, although it coincides with acceptance. In Carlill itself, the condition was the prescribed use of the smoke ball three times daily as directed. In Mobil Oil, the conditions to be performed were clearly prescribed, although sufficient certainty was wanting in relation to other elements. While certainty does not require that every element of the offer, promise and acts necessary for acceptance be expressly set out, the fundamental elements must be clear. As Mobil Oil indicates, where the promised rewards will not fall due for various extended periods, there is an increased likelihood of complexities which must be addressed in order to satisfy the requirement of certainty.
157 If a statement is not sufficiently detailed and comprehensive to achieve the requisite level of certainty in relation to essential matters and contingencies, it will not constitute "a legally enforceable offer of a promise",[25] even where language of unequivocal commitment is employed.
158 Further, although a convention address designed to arouse "corporate enthusiasm" does not in itself preclude the making of a legally enforceable offer, the statements must be construed in context. Where the address is not only comic but also very brief relative to a potentially complicated long-term arrangement, both the tone and the impossibility of developing necessary matters of substance may weigh against an offer of a legally enforceable character.
159 In the present case, the plaintiff sought to rely on correspondence and conduct which post-dated the alleged act of acceptance in April 1998. In FAI Traders Insurance Company Ltd v Savoy Plaza Pty Ltd,[26] the Full Court rejected an argument that where a covenant was ambiguous, regard could be had to the parties' subsequent conduct as an aid to its interpretation.
160 Brooking J, with whom Nathan and Eames JJ agreed, referred to:
"Codelfa Construction Pty Ltd v State Rail Authority of NSW (182) [1982] HCA 24; 149 CLR 337, where Mason J, as his Honour then was, cited with approval, at p.348, something that Lord Wilberfoce had said in the Schuler Case: 'The general rule is that extrinsic evidence is not admissible for the construction of a written contract; the parties' intentions must be ascertained, on legal principles of construction, from the words they have used. It is one and the same principle which excludes evidence of statements, or actions, during negotiations, at the time of the contract, or subsequent to the contract, any of which to the lay mind might at first sight seem to be proper to receive'."
"Any general principle that the conduct of the parties after a contract has been made may be used as throwing light on its meaning would be uncertain in its operation and mischievous in its effect. ...
The view which a party to a contract takes of its effect has no bearing on its construction, whether that view is made manifest by conduct or by express statement and whether that view is sought to be proved by evidence of conduct (including statements) or by direct evidence of state of mind given in the litigation by the party to the contract. As a matter of legal principle, I can see only one basis on which the subsequent conduct of a party to a contract might be said to bear on its interpretation so as to support a general principle that evidence of conduct by the parties under a contract might be used in its interpretation. That is the principle which allows admissions by words or conduct made by a party to litigation or his predecessor in title to be used against him. There is some support for the view that the matter of conduct under a contract as bearing on its interpretation should be considered in terms of admissions. ...
The construction of a written contract is a question of law. But it seems that a question of law may be made the subject of an admission: see Grey v Australian Motorists and General Insurance Co Pty Ltd [1976] 1 NSWLR 669, at p.684, per Mahoney JA. Where, however, the question of law is one of the construction of a written contract that is before the court, it seems to me that the court will derive no as opposed to little assistance in determining that question from the fact that one party or his predecessor in title has made an informal admission on the question. As a matter of strict analysis I would venture the suggestion that the admission, while theoretically available for use, is not admissible because it could not be given any weight at all by the court in construing the contract. ... "
162 Despite the adoption of a somewhat different approach in other authorities,[27] in Ryan (Receiver & Manager of Honfray Carpets Australia Pty Ltd) v Textile Clothing and Footwear Union[28] Brooking JA reaffirmed that until the High Court determined otherwise, the common law rule in Australia should be taken by a Victorian court to be that laid down in FAI Traders Insurance Company Ltd v Savoy Plaza Pty Ltd.
Application
163 Mr Janssen's evidence was, in my view, inconsistent, shifting and sketchy.
164 His last minute retraction of the longstanding assertion that Mr Lagos presented the speech on 19 February 1998 did not engender confidence in his command of, and capacity accurately to recall, the crucial events and statements at the conference.
165 The plaintiff, in that context, criticised the defendant's failure to correct Mr Janssen's mistaken assumption prior to the filing of Mr Lagos' witness statement and also complained that the defendant did not discover the Powerpoint presentation and preliminary notes which had been lost or destroyed. The defendant's failure to comply with Rule 29.04(c) of the Supreme Court Rules was regrettable. The defendant's witnesses, however, volunteered the existence of the Powerpoint presentation. I am not persuaded that the defendant's non-compliance with Rule 29.04(c) was a deliberate ploy adopted in order to conceal the fact that the relevant documents had once been in its possession. The plaintiff itself failed to discover relevant documents until the filing of Mr Lagos' witness statement provoked a further search. The defendant had consistently denied the allegation that Mr Lagos gave the speech and deficiencies in its discovery are not a substitute for the positive evidence necessary to establish the plaintiff's case.
166 Further, Mr Janssen's vagueness and lack of detail in relation to the crucial address were very marked. He did not allude to notable features of the skit, such as the tying up of Mr Blancato and he made no reference to a Powerpoint presentation.
167 His evidence on the position of models NP6030 and NP6050 was also inconsistent and unconvincing. In his amended witness statement, he asserted that the CFA representatives stated that there would be notification if those models were to be excluded from the $1 offer. The pleadings drawn on his instructions indicated that the relevant models were excepted. In oral evidence-in-chief, he asserted that the CFA representatives stated that there would be notification if the relevant models were to be included. While at trial he denied that he had ever asserted that the models were excluded, such an assertion appeared in his correspondence with Canon Australia.
168 In Mr Janssen's amended witness statement, he stated that the entitlement to purchase would arise when the machine "comes out of finance". In his oral evidence, however, he stated that the entitlement would arise "at the end of the rental term".
169 Despite the centrality of the speech to the plaintiff's case, Mr Janssen's evidence in relation to it was extremely scant. Although given leave at trial to supplement the sketchy account of the address contained in his amended witness statement, Mr Janssen's oral evidence added nothing of substance and in some respects was inconsistent with that in the amended witness statement.
170 Significantly, Mr Janssen's oral evidence did not support the plaintiff's central allegation of an offer which could be accepted by the dealer's procurement of customers to enter rental agreements with CFA.
171 His amended witness statement merely sets out the verbal exchange between Messrs Mortimer and Blancato in relation to the price for which the machines could be purchased and the statement that models NP6030 and NP6050 might be excluded if dealers were so advised.
172 The amended witness statement states that the speech "was to encourage us to use the finance services of CFA". No objection was taken to Mr Janssen's statement of CFA's purpose, although no factual basis for it was set out. The defendant did not deny that its objective was to encourage the use of its financial products. The existence of such a commercial purpose in the defendant is not, however, equivalent to a stipulated condition that the dealer must procure customers in its area to enter rental agreements with CFA as consideration for a promised reward.
173 Due to the inconsistencies, imprecision, equivocation and lack of detail in Mr Janssen's evidence, I consider it unreliable. In contrast, Mr Blancato was a consistent, direct and credible witness. In the case of a conflict, I prefer his evidence to that of Mr Janssen.
174 Importantly, however, were the totality of Mr Janssen's evidence to be accepted, it would not support the plaintiff's allegation that the dealer's procurement of rental agreements with CFA, or indeed any other act, was specified in the address as the consideration. An essential element of a unilateral contract of the Carlill v Carbolic class is therefore lacking.
175 The slightness of Mr Janssen's evidence on the terms of the "$1 offer" and how the arrangement would operate over time given various contingencies, in my view also militates against a firm contractual promise. Further, the alleged successive additional contractual terms are not a substitute for sufficient certainty at the date of the alleged acceptance. There was also no persuasive evidence that the alleged additional terms were agreed upon by the parties, rather than unilaterally promulgated or imposed by the defendant. They suggest an evolving programme rather than new terms of a contract. Moreover, I am not persuaded that a term that machines could be purchased for $1 plus the amount outstanding on their rental agreements where they terminated early can be implied on the basis of the applicable tests.
176 Mr Blancato, whose evidence I accept, provided a considerably more coherent and detailed account of the presentation and speech. He testified, however, that the address was very general. He conceded that he stated that:
(a) the opportunity to purchase machines for $1 was available to Canon BISG dealers;
(b) some models would be excluded from the offer - high end black and white and colour photocopiers;
(c) machines sold by Canon directly would be excluded;
(d) The right could be used only at the end of the rental term or when the customer no longer required the machine, whichever was the later;
(f) a copier could not remain with the same customer after being purchased by the dealer.
177 His evidence indicates that he did not identify which models would be excluded and that he stated that conditions would apply, but did not comprehensively identify them.
178 As in Mobil Oil, the receipt by dealers of the advantage or benefit would necessarily be delayed until the rental agreements (which were typically of three or four years duration) expired, or later, in cases where the customer wished to retain the machine for a longer period.
179 While Mr Blancato did not state that there was "a lot more work to do",[29] as in Mobil Oil, it would, in my view be obvious from the lack of detail and comprehensive information in the five minute comedy skit, given the complexity of the subject-matter, that various questions and contingencies would have to be addressed.
180 The fact that the plaintiff's case necessarily involves an implicit extension of the entitlement to former dealers aggravates the uncertainties inherent in the potentially lengthy and indefinite postponement of the benefit.
181 The plaintiff's primary case is that a former dealer's entitlement is not limited to machines for which it procured the rental agreement. If that be so, further questions of the duration and basis of the former dealer's entitlement to machines for which it did not procure the rental agreements arise. Neither the initial speech nor any subsequent document addressed such matters and the plaintiff did not satisfactorily explain them.
182 Therefore, despite the additional details to which Mr Blancato testified, the defendant's presentation at the conference lacked the requisite certainty.
183 More fundamentally, neither the evidence of Mr Janssen nor Mr Blancato supported the requirement "that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of an act"[30] in order to establish a unilateral contract.
184 Although Mr Blancato stated that the $1 purchase would only apply to copiers sold through Canon BISG dealers and not by Canon directly, that is different from stating that the dealer must procure customers to enter rental agreements with CFA as quid pro quo for the entitlement to purchase ex-rental machines for $1, as alleged by the plaintiff. The stated restriction cannot be convincingly construed as a stipulation of the act required of the offeree as consideration for the benefit. There is thus no "distinct promise ... in language which is perfectly unmistakeable",[31] and no "offer of a promise for an act" indicating a "relation of quid pro quo" necessary to establish a contract of the Carlill v Carbolic class.
185 Post-contractual conduct and communications are not admissible in order to establish the existence of a contract. In my view, in this case, the conduct, newsletters and communications after 1998 cannot be other than post-contractual. They do not, in any event, supply the precision, level of detail and certainty requisite for a contract, but are more consistent with a programme of incentives to dealers which lacked fixed, comprehensive rules of operation. The excluded machines varied and the eligible class of machines expanded over time.
186 Although the alleged contract is not in writing, to the extent to which Mr Lagos' descriptions of the speech as a "promise" or "guarantee" are admissible, little or no weight can be attributed to his construction of the legal character of the parties' dealings. Further, as Mobil Oil indicates, the use of terms such as "promise", "guarantee" or "commitment" is not decisive in this context.
187 The post-conference conduct and communications also fail to satisfy the requirement that quid pro quo be specified. No communications, including Mr Janssen's letters and the memoranda of 31 March 2000 and 29 November 2000, refer to a requirement that the dealer must procure rental agreements with CFA for copiers as a pre-condition of the entitlement. A requirement limiting the entitlement to machines where the rental agreement was signed up by the dealer appeared only in an April 1998 newsletter. That limitation could not, in my view, be construed as a statement of quid pro quo. Further, Mr Janssen had not read the April 1998 newsletter prior to discovery.
188 In Vroon BV v Fosters Brewing Group Ltd,[32] Ormiston J recognised that, in cases where although "no direct evidence is available as to what was said by the parties, but where the parties' conduct is consistent only with the hypothesis that an agreement was in fact made by them",[33] the court may infer that an outstanding offer had been accepted.
189 His Honour also referred to authorities and commentary which indicated that, although analysis by way of offer and acceptance remained the primary mode of ascertaining agreement, a contract could, in some cases, "be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that manifestation of mutual assent must be implied from the circumstances".[34] His Honour concluded that "there is now sufficient authority to justify the court enquiring as to the existence of an agreement evidenced otherwise than by offer and acceptance".[35]
190 In such cases, however, as Cooke J recognised in Meates v Attorney-General,[36] "the acid test ... is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain". It therefore remains necessary to satisfy the essential elements, such as certainty and completeness.
191 The plaintiff did not present its argument on the basis of either category of cases discussed in Vroon, but for completeness, I express the view that neither category applies in the present case. It was not "impossible at the trial to ascertain what was said or what correspondence passed between the parties". [37] Further, the evidence of the parties' conduct and communications after the conference does not establish that they were acting on the basis that a contract existed.
192 Although it is unnecessary, given the conclusion I have reached, to determine whether the offer, if contractual, was limited to current BISG dealers, consistently with the views expressed above, I consider that it was. The audience at the presentation was limited to invited BISG dealers. The conference was an incentive conference for BISG dealers. All subsequent brochures and relevant inter-office memoranda were addressed to BISG dealers and stated that the entitlement applied to BISG dealers. There was no express extension of the application to former BISG dealers and no basis on which to imply such an extension. The anomalies and other matters which would have to be resolved if the entitlement extended to former BISG dealers were never addressed.
193 The plaintiff put its case solely in contract and thus faced the relatively high hurdles attending such a claim. In my opinion, the plaintiff has failed to establish the existence of a unilateral contract constituted by the defendant's offer made at the conference in February 1998 and accepted by the plaintiff's procurement of its customers' entry into rental agreements with CFA. It follows that the plaintiff's claim should be dismissed.
194 The defendant counterclaims for injunctive and declaratory relief in relation to machines which the plaintiff collected, or may collect in future, in reliance upon its entitlement under the alleged contract. The plaintiff has returned the nominated machines to the defendant.
195 There is no evidence that the plaintiff currently retains any machines to which the defendant is entitled or that it is likely to persist in the collection of the defendant's machines, given its failure to establish its claim in this proceeding. I am not satisfied that there is a present or likely future conflict. Although the defendant submitted that more CFA machines may be held by the plaintiff, there are as yet no facts "fully known or found".[38] In such circumstances, there is no basis for injunctive or declaratory relief.
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[1] [1892] EWCA Civ 1; [1893] 1 QB 256.
[2] There was also an inter-office memorandum dated 27 April 2000 in identical terms.
[3] 29 November 2000.
[4] November 1999.
[5] January 2001.
[6] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266.
[7] That designation has been criticised. See United Dominicans Trust (Commercial) Ltd v Eagle Aircraft Services Ltd [1968] 1 WLK 74 at 83-4 and Australian Woollen Mills Proprietary Ltd v The Commonwealth [1954] HCA 20; (1954) 92 CLR 424 at 456.
[8] [1892] EWCA Civ 1; [1893] 1 QB 256.
[9] Australian Woollen Mills Proprietary Ltd v The Commonwealth [1954] HCA 20; (1954) 92 CLR 424 at 456.
[10] [1892] EWCA Civ 1; [1893] 1 QB 256 at 257
[11] At 273.
[12] At 261.
[13] Ibid.
[14] At 268.
[16] At 203.
[17] At 204.
[18] Ibid.
[19] At 205-7.
[20] At 218.
[21] Ibid.
[22] At 219.
[23] [1954] HCA 20; (1954) 92 CLR 424.
[24] At 456-7.
[25] 153 ALR 198 at 218.
[26] [1993] VicRp 76; (1993) 2 VR 343.
[27] See Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310.
[28] [1996] VicRp 67; [1996] 2 VR 235.
[29] (1998) 153 ALR 198 at 203.
[30] Australian Woollen Mills Proprietary Ltd v The Commonwealth [1954] HCA 20; (1954) 92 CLR 424 at 456.
[31] 1 QB 256 at 261.
[32] [1994] VicRp 53; [1994] 2 VR 32.
[33] At 80.
[34] At 81.
[35] At 83.
[36] [1983] NZLR 308 at 377.
[37] [1994] VicRp 53; [1994] 2 VR 32 at 80.
[38] ASC v Ampolex Ltd (1995) 38 NSWLR 504 at 508.
Mildura Office Equipment & Supplies Pty Ltd
Canon Finance Australia Ltd [2006] VSC 42
(1977) 180 CLR 266
(1954) 92 CLR 424
(1998) 153 ALR 198
(1993) 2 VR 343
(1990) 20 NSWLR 310
(1995) 38 NSWLR 504