Plaintiff v Defendants

"The question of law upon which the appeal is brought is whether on the proper construction of cl. 13 of the agreement dated 14 October 2002 made between the plaintiff and the first and second defendants as comprised by pages 1, 3, 5, 6, 13 and 14 thereof ("the Agreement") and in the events which have occurred the plaintiff was under a legal liability to the said defendants, or either of them, for the sum claimed in the proceeding brought before the Tribunal."

Grounds of appeal

5 The grounds of appeal are also described in the Amended Notice of Appeal :

"1. The Tribunal should have refused to make the order the subject of this appeal because, on the proper construction of cl. 13 of the agreement and in the events which had occurred the plaintiff was under no liability to the said defendants, or either of them, for the sum claimed.

2. The Tribunal erred in concluding that on the proper construction of cl. 13 of the agreement having regard to pages 1, 3, 5, 6, 13 and 14 thereof and in the events which had occurred:

(a) the cost incurred in installing additional power points (in respect of which the sum was claimed) constituted an 'upgrade' within the meaning of cl. 13.1 of the agreement;

(b) the plaintiff was obliged to bear the expense thereof.

3. The Tribunal ought to have concluded that on the proper construction of cl. 13 of the agreement having regard to pages 1, 3, 5, 6, 13 and 14 thereof and in the events which had occurred:

(a) the provisions of cl. 13.1 of the agreement were not engaged;

(b) the object, purpose and effect of cl. 13.1 of the agreement was to express the parties' intention that lottery terminals, hardware, software or other equipment of a technically superior nature supplied to the first and second defendants in substitution for or in addition to that originally installed at their lottery outlet would be supplied at the cost of the plaintiff;

(c) the first and second defendants were otherwise obliged to bear the costs of installing and maintaining a dedicated power supply for the operation of lottery terminals installed at their lottery outlet by operation of the provisions of cll. 3.1, 3.6 and 15.1 of the agreement;

4. The Tribunal erred in failing to consider, interpret or properly construe cll. 3.1, 3.6 and 15.1 of the agreement, or pages 1, 3, 5, 6, 13 and 14 of that agreement.

5. The Tribunal ought to have concluded that the application made for an order that the plaintiff pay the first and second defendants the sum of $850 as claimed therein should be dismissed."

6 I note that it was common ground that the expression "the events which had occurred" in the Amended Notice of Appeal refers to the factual matrix which could have been taken into account by the Tribunal in construing the Agreement in accordance with the relevant authorities.

The Agreement

7 The Agreement recites that the defendants are to be granted accreditation, as Tattersall's representatives, for the sale of entries in the lottery conducted by Tattersall's. The relevant clauses in the six pages of the Agreement which were before the Tribunal set out some of the terms and conditions of the accreditation. They provide:

1.1 In this Agreement, unless the contract otherwise requires:- ...

'lottery terminal' means such model of computer terminal installed at the Outlet from time to time for the purposes of processing subscriptions ...

3.1 The Accredited Representative must expeditiously and at the Accredited Representative's cost, prepare the Outlet in accordance with the Operating Manuals and any additional requirements of Tattersall's relating to the installation of Tattersall's property and presentation of the Outlet. Without limitation to any other remedy Tattersall's may have, if the Outlet is not prepared as required by this Clause Tattersall's may defer the commencement of the sale of tickets in Public Lotteries from the Outlet until such preparation has been carried out.

3.5 Tattersall's shall provide the number of lottery terminals to the Accredited Representative as determined by Tattersall's and shall cause the same to be installed at the Outlet. Tattersall's will be responsible for the maintenance of each lottery terminal and only persons authorised by Tattersall's shall operate any lottery terminal to process subscriptions. No lottery terminal will be used for any other purpose. If any lottery terminal is destroyed or otherwise rendered inoperative through no fault of the Accredited Representative, Tattersall's will replace the same at its expense.

3.6 The Accredited Representative must cause to be installed and maintained at the Outlet at its own expense, a power supply which must be dedicated as the power supply for any lottery terminal at the Outlet and the Accredited Representative must not cause or allow any interruption to such supply. ...

13.1 From time to time Tattersall's may be desirous of upgrading their lottery terminal network by substituting hardware, software or other equipment of a technically superior nature for or adding the same to, existing lottery terminals, associated software or peripheral equipment. In this event Tattersall's may advise the Accredited Representative of the proposed upgrading and:

13.1.1 the Accredited Representative must cooperate fully with Tattersall's in the upgrading;

13.1.2 any Tattersall's property substituted for any Tattersall's property then in or on the Outlet shall thereafter be the subject of this agreement as fully as if the same appeared in or on the Outlet at the date hereof;

13.1.3 such upgrading shall be at the expense of Tattersall's. ...

15.1 The Accredited Representative acknowledges that from time to time, Tattersall's may issue directions requiring the Accredited Representative to carry out shopfitting at the Outlet to make the Outlet comply with Tattersall's latest design requirements.

15.2 If such a direction is issued by Tattersall's the Accredited Representative must cause the necessary shopfitting to be carried out at the Outlet to Tattersall's' specifications, entirely at its own expense and such that the shopfitting is completed within three (3) months of the direction being issued.

15.3 Tattersall's shall not require the Accredited Representative to carry out such shopfitting on more than one occasion during the term of this Agreement, save and except for minor upgrades of ancillary facilities."

The material before the Court

8 The plaintiff relies upon an affidavit sworn by its solicitor, Peter John Davies, on 7 March 2005 ("the affidavit"). Exhibited to the affidavit and marked :

(1) "PJD 1" is a copy of the Agreement;

(2) "PJD 2" are copies of news bulletins entitled "Tattersall's New Lottery System Update" numbered 9, 10 and 11, respectively;

(3) "PJD 3" are copies of a tax invoice from the defendants' business to Tattersall's seeking payment of the sum of $850 for "provision of power supply for new terminals" and a notification of dispute notice issued under the terms of the Agreement (stating the defendants' view that the power points were part of the "peripheral equipment" referred to in clause 13.1);

(4) "PJD 4" is a copy of a letter from the plaintiff to the defendant rejecting the defendants' attribution of liability to it for the cost and relying upon clauses 3.1 and 3.6 of the Agreement;

(5) "PJD 5" are copies of relevant VCAT notices relating to the hearing before the Tribunal;

(6) "PJD 6" is a copy of the Tribunal's reasons for decision, dated 1 February 2005;

(7) "PJD 7" is a copy of the draft Notice of Appeal;

(8) "PJD 8" is a copy of the plaintiff's submissions to the Tribunal; and

(9) "PJD 9" is a copy of the transcript of the hearing before the Tribunal on 22 December 2004.

9 It is common ground that the Tribunal was not provided with the news bulletins, copies of which constitute exhibit "PJD 2", or any "Operating Manual" or other documents referred to in the relevant clauses of the Agreement. As a consequence, it is also common ground that clause 13 should be construed by the Court without reference to such documents and in the context only of pages 1, 3, 5, 6, 13 and 14 of the Agreement.

The Facts

10 The facts were not in dispute before the Tribunal.

11 The plaintiff conducts public lotteries through agents operating some 950 outlets in Australia. The defendants previously, at all relevant times, conducted their business as the plaintiff's Accredited Representatives, under the terms of the Agreement, from premises at Shop 25, Brandon Park Shopping Centre, Mulgrave, Victoria.

12 The plaintiff supplied new lottery terminals to its outlets throughout Australia in the period between June 2003 and November 2004. The new lottery terminals required an adequate power supply, involving the installation of extra power points. The lottery terminals being replaced each required only one power point. However, there was to be a period during which the old and new terminals were to operate at the same time and be used for staff training purposes, necessitating the installation of more power points than would, ultimately, be required to run the replacement terminals alone.

13 In the case of the defendants, three new lottery terminals were supplied in November 2004. These terminals required 14 new power points. Each lottery terminal required four power points and there were two more power points needed for the supply of power in relation to the transmission of data to the new terminals. It is common ground that the 14 power points should be regarded, for the purposes of the appeal, as being required for the provision of the power supply for the new lottery terminals.

The Tribunal's decision

14 The Tribunal determined that an "upgrade", within the meaning of clause 13.1 of the Agreement, had occurred and that the plaintiff was responsible for the cost of the installation of the power points under clause 13.1.3. Although the full amount claimed by the defendants was not allowed as part of that cost, there is no appeal in relation to the Tribunal's decision as to the quantum of the costs allowed.

15 In the reasons given for its decision, the Tribunal noted the defendants' argument that the plaintiff was responsible for the costs under clause 13.1 and the plaintiff's contention that the defendants should bear the expenses, characterised as the cost of the provision of electrical services, for which they were responsible under clause 3.6.

16 The Tribunal rejected a further submission by the plaintiff to the effect that clause 15 obliged the defendants to assume the costs of the installation of the power points, as part of the "shopfitting" required by it. It noted that it had not been provided with the bulletins (exhibit "PJD 2" in the appeal) and that, as a result, it was not possible for it to determine whether the bulletins stated that a "shopfit" was required and whether one had occurred.

17 The Tribunal then dealt with the defendants' contention that the plaintiff was responsible for the costs of the power points, installed as part of an "upgrade", stating :

"25 The upgrade required the [defendants] either by direction or implication to have additional power points installed to enable the existing business to continue to run whilst the new system was installed, tested and used for training.

26 The installation of the power points may be seen as peripheral to the existing system but essential to accommodate two systems concurrently.

27 The manner in which the power supply was to be distributed to the new system was in addition to the power supply for the existing system and accordingly the additional power points were integral to the upgrade and must be seen in the same context as the cabling installation which the [plaintiff] acknowledged to be at [its] cost.

28 This upgrade cannot be construed as a one occasion 'minor upgrade of ancillary facilities', as submitted by the [plaintiff]. To construe power points as ancillary facilities is to endeavour to retrospectively exclude accessories from an upgrade which was far from minor. Indeed, counsel for the [plaintiff] submitted it was an enormous project and given the scope of the works it would be unreasonable to characteristic (sic) power points as ancillary facilities in this context.

29 This dispute has at its heart whether or not an upgrade occurred. I am satisfied that it did, the costs of which should have been borne by the [plaintiff].

30 The [defendants] are entitled to be reimbursed the costs of the electrician in the sum of $600 ... ."

Submissions in the appeal

Clause 13.1

18 Notwithstanding the contentions in paragraph 2(a) of the grounds of appeal, counsel for the plaintiff concedes that the installation of the new machines constituted an "upgrade" within the meaning of clause 13[1]. However, he contends that the Tribunal erred in determining that the plaintiff was liable for the cost of the installation of the power points under clause 13.1.3.

19 Counsel for the plaintiff submits that only the cost of the "hardware, software or other equipment of a technically superior nature" to be substituted for or added to "existing lottery terminals, associated software or peripheral equipment" was the responsibility of the plaintiff under that clause and that the power points were not properly so regarded. He relies upon what he argues is the applicable maxim of statutory construction, expressum facit cessare tacitum, described by the learned authors of the fifth edition of Statutory Construction in Australia as being, in most circumstances, a restatement of the approach expressed as expression unius est exclusio alterius[2] or "an express reference to one matter indicates that other matters are excluded"[3]. Counsel for the plaintiff submits that the failure of clause 13.1 to expressly mention power points, amongst the listed items to be added or substituted, results in them not being included within the scope of the provision. He contends that the installation of the power points did not constitute part of the upgrade. He argues that the plaintiff's responsibility for the costs of an upgrade stops, in effect, at the point at which the new terminals were to be plugged in to the power supply[4]. Looking at the broad picture, the premises are the responsibility of the defendants and the network that of the plaintiff[5].

20 Counsel for the defendants responds that the cost of "such upgrading", for which the plaintiff is liable under clause 13.1.3, includes the cost of the installation of the additional power points, required as a consequence of the upgrade. She submits that the Court should conclude that such a construction reflects the common intention of the parties at the time of the agreement. The power points should be regarded as "other equipment of a technically superior nature" being substituted for or added to the power points they replace which are "peripheral equipment" within the meaning of clause 13.1.

21 Counsel for the defendants submits that the "technically superior" nature of the power points is demonstrated, in part, by the fact that the new lottery terminals require more power points than were necessary to supply the terminals being replaced. The nature of the equipment substituted should be considered and the whole system regarded as "technically superior", including the power points which should be regarded as "peripheral equipment" in relation to the lottery terminals. Counsel submits that the power points fall within the definition of the adjective "peripheral" in The New Shorter Oxford English Dictionary, where the following appears at p 2164 :

"peripheral ...3 Computing. Designating equipment used in conjunction with a computer without being an integral or necessary part of one; designating operations involving such equipment."

Clause 3.1

22 The plaintiff concedes that it does not rely upon clause 3.1 as the specific source of the defendants' liability: its solicitor having made that concession before the Tribunal[6]. However, the plaintiff does rely upon clause 3.1 as part of the contractual context in which clause 13.1 should be construed. Counsel for the plaintiff submits that clause 3.1 indicates that there might be continuing obligations on the part of the defendants requiring them to incur costs[7].

Clause 3.6

23 The plaintiff also contends that its argument as to the construction of clause 13.1.3 is supported by the terms of clause 3.6 which impose the relevant obligation upon the defendants, in the circumstances. It argues that the defendants' obligation to install and maintain "a power supply which must be dedicated as the power supply for any lottery terminal at the Outlet", in clause 3.6, is a continuing obligation relating to any lottery terminal installed to replace an existing one. Such lottery terminals are included within the definition of "lottery terminal" under clause 1.1 because each is a "computer terminal installed at the Outlet from time to time for the purposes of processing subscriptions". Counsel for the plaintiff submits that the fact that the Tribunal emphasised the last words of the definition of "lottery terminal" in clause 1.1 indicates that the Tribunal failed to recognise the importance of the first words of the definition.

24 The plaintiff also submits that the defendants' obligations under clause 3.6 are to be considered in the context of the plaintiff's concurrent obligation, under clause 3.5, to provide lottery terminals and to "cause the same to be installed at the Outlet".

25 The defendants respond that clause 3.6 refers to a "power supply" which must be distinguished from a "power point". Such a distinction, they contend, is drawn in common parlance between the supply and the means by which it is distributed. The defendants rely upon the following definitions of "power point" and "power supply" in the second edition of The Shorter Oxford English Dictionary at p 2316 :

"power point a socket in a wall etc. by which an electrical appliance or device can be connected to the electricity supply;"

"power supply the supply of power, esp. electricity"

They also refer to the definition of "power point" in The Macquarie Dictionary at p 1493_:_

"power point ... noun 1. a socket, connected to a power supply, usually made of plastic with metal conductors and set in a wall, into which the plug of an electrical appliance may be inserted."

26 The defendants submit that the plaintiff required "something substantially more than the maintenance of power supply" in relation to the upgrade. In any event, they contend, clause 3.6 must be read in conjunction with clause 13.1.3, under which the additional power point installation cost was one for which the plaintiff was liable, being a direct and necessary expense of the upgrade process.

Clause 15

27 The plaintiff then argues that shopfitting, required to make an outlet comply with the plaintiff's latest design requirements as a consequence of a particular upgrade, might also fall within the ambit of clause 15, in which case the obligation to install power points would devolve to the defendants[8]. Even the costs of the subject power points could be sheeted home to the defendants, under clause 15.2, if the necessary direction were given under clause 15.1[9] However, counsel for the plaintiff does not go so far as to contend that clause 15 is applicable to the upgrade under consideration.

28 Counsel for the plaintiff argues, generally, that the Tribunal failed to subject those pages of the Agreement which were before it to any "close or reasoned examination" and failed to apply relevant principle to the construction of those pages[10]. The plaintiff contends that such analysis discloses that the Agreement gives rise to what counsel for the plaintiff describes as concurrent obligations of a continuing nature. The plaintiff contends that the Tribunal erred by concluding that the obligations under the various clauses before it were mutually exclusive in their operation[11].

Conclusions

29 The construction of the term of an agreement is a question of law[12]. The meaning of a commercial agreement is to be determined objectively[13]. The words used are to be given the meaning which a reasonable person would attribute to them[14]. The Agreement is a commercial one and, accordingly, is to be construed, in context, in a commercially sensible way, rather than by the adoption of a strict and technical approach to its terms[15].

30 The Agreement does allocate responsibility for the preparation of the outlet to the defendants, under clause 3.1. It also obliges the defendants to install and maintain a dedicated power supply to any lottery terminal installed at the outlet from time to time, under the combined operation of clause 3.6 and the definition of "lottery terminal" in clause 1.1. In my view, a commercially sensible reading of clause 3.6 results in the conclusion that the parties agreed that the defendants should be responsible for the installation of any necessary power points to give access to the power supply for any terminals installed at the outlet from time to time. On the other hand, the Agreement obliges the plaintiff to bear the cost of the installation of any lottery terminal, under clause 3.5.

31 Nevertheless, notwithstanding the parties' continuing general obligations, the Agreement deals specifically with the allocation of costs in certain particular situations. So, the costs of any shopfitting which the defendants are directed to carry out, in order to comply with the plaintiff's latest design requirements, are to be met by the defendants under clause 15.2. (I note that the Agreement offers some protection to the defendants, by prohibiting such a direction more than once during the term of the Agreement, with the exception of any expenses relating to a "minor upgrade of ancillary facilities".)

32 Clause 13.1 then governs the particular circumstances of an "upgrade". It provides that the expense of such an exercise is to be borne by the plaintiff. It is the plaintiff's desire to upgrade its lottery terminal network and its advice of the proposed upgrade to the defendants which trigger the defendants' obligations to co-operate, under clause 13.1.1, as well as the plaintiff's own obligation to meet the expense of the upgrade, under clause 13.1.3.

33 I consider that the expense attached to the installation of the power points required for the substituted lottery machines is, as counsel for the defendants contends, a necessary and direct cost or expense of the upgrade. I reach this conclusion even though I consider that the cost of the installation of the power points would otherwise fall within the ambit of the defendants' general obligations under clause 3.6.

34 I do not think that this conclusion requires that the power points themselves be regarded as falling within the description, in clause 13.1, of "hardware, software or other equipment of a technically superior nature" to be substituted or added in the upgrade process. I note that I am not persuaded by the defendants' argument that the additional power points constitute "equipment of a technically superior nature" because more are required for the substituted machines or because that expression is to be interpreted as referring to power points as part of the "peripheral equipment" to be replaced.

35 There is no express qualification of the plaintiff's obligation to meet the expenses of the upgrade (by reference in clause 13.1 to any continuing obligations on the part of the defendants, under clauses 3.6 or 15.2 or otherwise). I consider that the applicable specific provisions of clause 13.1 override the general provisions of clause 3.6, which might otherwise apply, when the relevant clauses of the Agreement are construed in a commercially sensible way.

36 I conclude that the Tribunal did not err in determining that the plaintiff is liable for the cost of the installation of the power points required in relation to the upgrade.

37 The question should be answered in the affirmative and the appeal dismissed.

[1] T 42 line 7.

[2] Pearce D.C. and Geddes R.S. Statutory Interpretation in Australia (5th ed.) 2001 at p 111 {4.28].

[3] Ibid at p 109 [4.26].

[4] T 30 lines 13-6.

[5] T 29 line 22- T30 line 16.

[6] T65 lines 21-4.

[7] T 65 line 26 to T 66 line 8.

[8] T 58 lines 7-8.

[9] T 60 lines 19-23.

[10] T 61 line 21- T62 line 2.

[11] T 28 lines 13-25.

[12] Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR60 at 78 per Isaacs J.

[13] Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at 461 per Gleeson, Gummow, Hayne, Callinan and Heydon JJ.

[14] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors (2004) 169 CLR at 179 per Gleeson, Gummow, Hayne, Callinan and Heydon JJ.

[15] See: M L W Technology Pty Ltd and Anor v Roger Thomas May [2005] VSC 26 per Gillard J at [49] -[52].