Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Current Images Pty Limited v Dupack Pty Limited [2012] NSWCA 99
• Hearing dates: 30 November 2011
• Decision date: 20 April 2012
• Before: Bathurst CJ at [1]; Macfarlan JA at [76]; Sackville AJA at [77]

Decision

(1)Appeal allowed.

(2)Orders 1 and 2 of the orders made by the primary judge on 11 March 2011 set aside.

(3)Judgment for the appellant against the respondent for $157,947.

(4)Direct the appellant within 14 days to make submissions:

(a)As to the calculation of interest on the judgment sum.

(b)The appropriate order for costs of the proceedings.

(5)Direct the respondent within a further 14 days to make such submissions in reply it may wish to make on the matters referred to in pars 4(a) and (b) above.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: CONTRACT - construction - whether primary judge erred in considering post-contractual conduct and subjective intention of parties; CONTRACT - construction - incorporated terms - whether terms incorporated in error or contradict express terms in principal agreement; CONTRACT - termination - repudiation - date of repudiation on which claim arose; DAMAGES - breach of contract - difference between loss of bargain and loss of profit - whether loss caused - whether loss mitigated - onus of showing loss avoided
• Legislation Cited: Civil Procedure Act 2005 s 100
• Cases Cited: Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570; Alarm Facilities Pty Limited v Jackson Constructions Pty Limited [1975] 2 NSWLR 22; Brien v Dwyer [1978] HCA 50; (1978) 141 CLR 378; Codelfa Construction Pty Limited v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337; Commonwealth v Amann Aviation Pty Limited [1991] HCA 54; (1991) 174 CLR 64; Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420; Ford Motor Co of Australia Ltd v Arrowcrest Group Pty Ltd [2002] FCA 1156; Franklins Pty Limited v Metcash Trading Limited [2009] NSWCA 407; (2009) 76 NSWLR 603; Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125; Izzard v Universal Insurance Company Limited 1937 AC 773; Jireh International Pty Ltd v Western Export Services Inc [2011] NSWCA 137; McRae v Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377; Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297; Sandra Investments Pty Limited v Booth [1983] HCA 46; (1983) 153 CLR 153; Secured Income Real Estate (Aust) Limited v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596; Suttor v Gundowda Pty Limited [1950] HCA 35; (1950) 81 CLR 418; Tasman Capital Pty Limited v Sinclair [2008] NSWCA 248; (2008) 75 NSWLR 1 Tyco Australia Pty Limited v Optus Networks Pty Limited [2004] NSWCA 333; Western Export Services Inc v Jireh International Pty Limited [2011] HCA 45; World Best Holdings Limited v Sarker [2010] NSWCA 24
• Category: Principal judgment
• Parties: Current Images Pty Limited (Appellant); Dupack Pty Limited (Respondent)
• Representation: Counsel; Mr M Ashhurst SC with Mr S Ipp (Appellant); Mr E White (Respondent); Solicitors; Macquarie Legal Practice (Appellant); Dominic Stamfords (Respondent)
• File Number(s): 2011/115646

Decision under appeal

• Date of Decision: 2011-03-11 00:00:00
• Before: O'Toole DCJ
• File Number(s): 3883/2009

Judgment

1 BATHURST CJ: On 3 June 2008, the appellant, Current Images Pty Limited ("Current Images") and the respondent, Dupack Pty Limited ("Dupack") signed a document entitled "Agreement of Purchase" ("purchase agreement") and one entitled "Shared Maintenance & Usage Plan Agreement" ("maintenance agreement") relating to the sale and maintenance of an HP Indigo 4500 Digital Offset Press ("the press").

2 The purchase agreement required Dupack to pay a 10 per cent deposit when placing the order and to take delivery of the press in August 2008. Dupack did not pay the deposit for the press and was not in a position to take delivery in August. Current Images sought to terminate the agreements and sought damages against Dupack for breach of contract.

3 Dupack denied that the agreements were binding. It relied upon conditions included in a proposal letter dated 26 May 2008 ("the proposal") that set out special pricing incentives available at Drupa, a printing industry exhibition held in Germany at which the agreements were negotiated and signed. The proposal listed "HP Indigo Drupa Pricing Structure and Incentives" on page two, followed by "HP Indigo Drupa Pricing - Conditions" on page three. Relevantly, the "Pricing - Conditions" stated that a refundable 5 per cent deposit was to be paid within 14 days after the end of Drupa, and that the customer must enter into a binding purchase contract with finance approved by 15 July 2008. Dupack argued that these conditions were expressly incorporated into the purchase agreement by the words on the first page of that agreement: "Includes all incentives and pricing conditions as per Proposal dated 26 May 2008". It argued that these conditions were also expressly incorporated into the maintenance agreement by the words on the second page of that agreement: "Notes: a) SPECIAL DRUPA OFFER - All price incentives and conditions apply as per our Proposal dated 26 May 2008". Dupack argued that as it had not paid a deposit and was not able to secure finance by 15 July 2008, no contract existed.

4 It is useful to set out the relevant portions of the agreements and proposal. The relevant portions of the purchase agreement are as follows (emphasis in original):

"Agreement of PurchaseContract No: 8291

Customer: Dupack Pty Ltd [Address]

Agrees to purchase:

One (1) only new HP Indigo 4500 Digital Offset Press

Delivery Date: August 2008

Made up of:

HP Indigo 4500 press (7 Colour) Including:

- HP indigo 4500 digital press

- 5, 6 and 7th colour units

- Ink Mixing System (excludes PC)

-Web-Reinsertion

-Flexible Packaging Rewinder

TOTAL $695,000.00 [Exc GST] $69,000.00[GST Amount]

$764,500.00[Total Price]

Includes all incentives and pricing conditions as per Proposal dated 26 May 2008.

Payment Terms: 10% deposit with order Balance due upon completion of installation

This contract is subject our [sic] terms and conditions as attached, in the event that finance approval is not received within fourteen (14) days of the Contract, Current Images reserves the right to withdraw this contract."

5 The "Terms and Conditions of Sale" attached to the purchase agreement provided relevantly:

"2. ACCEPTANCE

Acceptance of Buyers purchase order is expressly made conditional on Buyers acceptance of these Conditions, which shall constitute the complete agreement between the parties. Additional or different provisos, or attempts by Buyer to vary in any degree any provisions of these Conditions, shall be deemed material and herby objected to and rejected, and these Conditions shall be deemed accepted by Buyer without such additional or different provisions. Failure to specifically dissent to these Conditions within a reasonable time of Buyers receipt hereof shall constitute acceptance of these Conditions, and they shall be controlling in every case, including without limitation a case wherein these Conditions shall be deemed a counter offer to and rejection of buyers prior offer. ...

12. DISPUTES

... Current Images and Buyer specifically agree that any legal action brought relating to Equipment purchased or relating to this contract will be commenced in New South Wales within (1) year after the relevant claim arises, failing which such claim shall be barred notwithstanding any longer statutory period of limitations. ...

15. CANCELLATION

The Buyer's purchase order is not cancellable, in whole or in part, unless mutually agreed to in writing by both parties, which agreement must include, at a minimum, Buyer's agreement to assume a stated termination charge. ...

19. INTEGRATION; MODIFICATION

The provisions hereof; including all attachments hereto, represent the entire agreement between the parties with respect to the purchase of the Equipment and cancel all prior understandings, written or oral. No amendment, waiver, or cancellation of any part of the agreement shall be valid unless in writing and signed by Buyer and an authorised representative of Current Images."

6 The relevant portions of the maintenance agreement are as follows (emphasis in original):

"Shared Maintenance and Usage Plan Agreement

Between Current Images Pty Ltd. Part of the Currie Group [Address] ("Us") and the customer ("You")

This agreement shall be read subject to Current Images Pty Ltd Shared Maintenance and Usage Plan Terms and Conditions. All pricing excludes GST.

The Customer

[Dupack's details are set out]

The Equipment

[Details of the press are set out]

Maintenance and Support

Shared Maintenance & Usage Charge pricing for the HP Indigo Press 4500 (all pricing excludes GST)

Service, Support and Extended Warranty Charge 0 -36 Months $ 0per month After 36 Months$1,950 per month

Usage charges per month Note: see below SPECIAL DRUPA OFFER applies

[the usage charges per month are set out according to volume per month tiers]

Notes:

a)SPECIAL DRUPA OFFER - All price incentives and conditions apply as per our Proposal dated 26 May 2008:

-Free service - no service cost for the thirty 36 months from the purchase of the press, parts and labour are included.

-Free printing clicks - first one million free clicks - to be used over the first 6 months from installation.

-High volume discount guarantee level for clicks program - Minimum tier 3 click price for the first 12 months.

Additional details

Impression costs are net; payment must be made in accordance with the terms & conditions of this agreement.

...

Terms of Contract

The shared maintenance and usage charge agreement will operate over twelve (12) months. It will then be renewable on a monthly or annual basis.

...

Execution of Agreement

[Signed and dated by the parties]

Upon signing this agreement you offer to contract to us based on our Terms and Conditions of trade and you acknowledge receipt of these."

7 The attached "Shared Maintenance Agreement and Usage Plan Terms and Conditions" relevantly provided:

"5.TERM

Current Images Pty Ltd shall provide the Shared Support and Maintenance Services and the applicable Extra Support and Maintenance Service (when applicable), during the Support and Maintenance Period specified on the face of this Order. The term of this Order shall thereafter continue for additional periods of 12 months each, unless either party gives the other party a written notice of termination not less than 30 days before the expiration of the initial or any additional period.

...

16.ENTIRE AGREEMENT AND AMENDMENT

This order, together with all attachments hereto, constitute the entire agreement between the parties, and supersedes all oral or written prior agreements with respect to the subject matter hereof; and may not be amended other than by a written agreement signed by the Customer and by the General Manager of Current Images Pty Ltd."

8 The parties agree that the "proposal" referred to in both agreements was the 10 page letter dated 26 May 2008 from Current Images to Dupack, which provided relevantly (emphasis in original):

"Current Images Pty Ltd are pleased to present you with this proposal for the supply, installation and ongoing support of the HP Indigo Press. ...

HP Indigo Drupa Pricing Structure and Incentives

In recognition of the strategic value enabled through our potential ongoing business relationship HP and Current Images are pleased to offer the following very special value package for you to consider while at Drupa 2008.

HP Indigo Press 4500$695,000

5th, 6th and 7th ColoursIncluded

Web-ReinsertionIncluded

HP Indigo Ink Mixing SystemIncluded

-Includes BID Washer

Plus the following additional incentives:

-HP Capture Marketing Program - this will be designed in line with the customer request and requirement - sales training, launch events, direct marketing program, etc - to the value of US $10,000

-Free service - no service cost for the thirty 36 months from the purchase of the press, parts and labour are included. Value $58,000

-Free printing clicks - first one million free clicks - to be used over the first 6 months from installation. Value $22,500

-High volume discount guarantee level for clicks program - Minimum tier 3 click price for the first 12 months. Potential Value $27,000

...

HP Indigo Drupa Pricing - Conditions

1/ A customer is required to sign a agreement [sic] with the local channel partner on or before the closing day of the Drupa trade show (11th June 2008) agreeing to the purchase of a Indigo Digital Press

2/ The signed agreement must be submitted to HP for acceptance prior to or on the last day of the show

3/ A 5% fully refundable deposit if [sic] to be paid to the channel partner within fourteen days after the end of Drupa. (25th June 2008)

4/ The customer enters into a binding purchase contract with finance approved by the 15th July 2008."

9 As stated above, "Drupa" refers to the printing industry exhibition that occurred in Germany from 29 May to 11 June 2008, during which the agreements were negotiated and signed (Affidavit of Phillip Rennell 29 January 2010, filed below).

10 Current Images issued an invoice to Dupack on 16 June 2008 claiming a "10% refundable deposit" payable by 25 June 2008. Dupack did not pay a deposit or secure finance.

11 On 17 July 2008, Current Images ordered a new press from Hewlett-Packard Indigo Limited at a cost of US $425,000, which had to be shipped to Brisbane from Singapore. Current Images undertook to pay Hewlett-Packard Indigo for the press by 17 October 2008. The press arrived in Brisbane on 12 August 2008 (primary judgment [42]-[45]).

12 The parties were in contact occasionally between June and August 2008, and Current Images knew of Dupack's difficulties securing finance and the fact that its factory was not yet completed. On 2 September 2008, the manager of Current Images in Queensland, Richard Watson, telephoned Wu Mei Lin, a director of Dupack, asking for the 10 per cent deposit. She stated that Dupack was unable to pay the deposit as it could not raise the finance, and that as no deposit had been paid, no contract existed (primary judgment [48]).

13 In a letter to Dupack dated 4 September 2008, Current Images stated that the "contract was signed unconditionally" and that Current Images was "not in a position to accept [Dupack's] cancellation" (primary judgment [49]).

14 On 19 September 2008, Current Images signed agreements for the sale and maintenance of the press with a third party located in Victoria, on terms slightly more favourable to Current Images than the agreement with Dupack (primary judgment [51]-[52]). The press was eventually transported as part of a consignment of eight pallets of goods from Queensland to Victoria. The total cost for transporting all eight pallets was $2,580.00 (primary judgment [55]).

15 On 24 September 2008, Current Images sent a letter to Dupack which stated:

"As you have not responded to our letter of 4th September, nor arranged for the installation and payment of the Machine which is the subject of contract 8291, and have previously advised that you would not be proceeding with the purchase, we advise that we accept your repudiation of the contract.

We will proceed to immediately resell the machine and sue you for the damages suffered as result [sic] of your repudiation and breach of the contract." (primary judgment [54])

16 Current Images had negotiated with Hewlett-Packard Indigo to delay payment for the press (without penalty) to 31 October 2008 (primary judgment [50]). Current Images discharged this debt on 30 October 2008. It is relevant to note that the press was paid for in US dollars, and that the rate of exchange from US to AU dollars was fluctuating significantly around this time.

At first instance

17 Current Images filed a Statement of Claim against Dupack in the District Court on 31 August 2009. The matter was heard over four days in August 2010 and one day in November 2010. On the second day of the hearing, the primary judge gave leave to Current Images to file an Amended Statement of Claim which quantified the damages claimed. The damages were itemised as loss of profit under the maintenance agreement, costs associated with delivery, wasted expenditure incurred in organising a demonstration of the press in Singapore, loss of use of money, and loss caused by currency fluctuations from the date of Dupack's alleged repudiation to the date Current Images' debt to Hewlett-Packard Indigo was discharged which increased the actual purchase cost of the press, totalling $317,222.24.

18 The evidence led on behalf of Current Images was to the effect that the statement in the purchase agreement, "includes all incentives and pricing conditions as per proposal dated 26 May 2008", did not include the "HP Indigo Drupa Pricing - Conditions". It said this was because during the course of the Drupa trade exhibition the nature of the offer to Dupack changed from that contained in the proposal. Current Images said that by the time the agreements were signed, on offer were the additional incentives listed in the proposal as well as a "Flexible Packaging Rewinder" (worth approximately $42,000.00) at no extra charge in exchange for the final purchase agreement being signed by Dupack at the trade fare "unconditionally". That is, not conditional on Dupack securing financing, as per the proposal. Current Images relied upon the evidence of its representatives present during the negotiations at Drupa.

19 The primary judge delivered judgment on 11 March 2011. Her Honour found that the evidence of Dupack's employee, David Lin, who was also the son of its directors, was a more plausible version of the parties' oral representations during negotiations than that given by Current Images' representatives (at [217]). Her Honour was not convinced, as Current Images had argued, that the agreements were offered by Current Images on an "unconditional" basis, or that Dupack offered or agreed to sign an "unconditional" contract in these circumstances (at [221], [223], [227], [229]). Her Honour held that in any event, such agreement would have constituted an attempt to vary the purchase agreement orally, which was expressly prohibited by cl 19 of the terms and conditions of that agreement (at [228]).

20 Her Honour held that the purchase and maintenance agreements expressly incorporated the proposal, and that the purchase agreement, maintenance agreement and proposal "record the whole of the express contractual terms and conditions, binding the parties" (at [233]). Her Honour found that the operation of the purchase agreement was:

"contingent upon Dupack's paying a refundable deposit by 25 June 2008 ... and upon Dupack's obtaining finance approval by 15 July 2008 ... Dupack's failing to received finance approval within fourteen days of signing the Contract ... permits Current Images to withdraw the offer of 'this contract' ... Dupack's liability under 'a binding purchase contract' for the TOTAL purchase price of seven hundred and sixty four thousand five hundred Australia dollars, including GST, is contingent upon Current Images accepting the refundable deposit as a 'Buyers [sic] purchase order' from Dupack, 'with finance approved by the 15th July 2008'" (at [235]).

21 Her Honour held that the maintenance agreement was contingent upon the operation of the purchase agreement (at [236]).

22 Her Honour found that as Dupack never paid the deposit:

"Consequently, there was no 'Buyers [sic] purchase order' by Dupack nor 'a binding purchase contract with finance approved by 15th July 2008', requiring Dupack to purchase the WS4500 Press or its inclusions from Current Images. Neither the Purchase Agreement nor the back-to-back Maintenance Agreement required Dupack to accept delivery of the Press or to use the Press. The 'term of the services to be provided' by Current Images never commenced."

23 Her Honour concluded that, "as no deposit had been paid no contract existed" (at [242]).

24 Her Honour found that the parties' conduct before and after they signed the purchase agreement supported her construction, as neither Current Images nor Dupack regarded the purchase agreement as a "Buyers [sic] purchase order", nor expected a "10 per cent deposit with order" to be paid on the day the agreement was signed (at [237]). Her Honour pointed to the tax invoice issued by Current Images to Dupack shortly after the agreement was executed, which referred to a ten per cent refundable deposit payable by 25 June 2008, as reflecting Current Images' understanding that condition 3 of the HP Indigo Drupa Pricing - Conditions was incorporated into the purchase agreement (at [238]).

25 The primary judge concluded that if she were wrong and Dupack had breached the purchase agreement, most of the damages claimed by Current Images were not made out.

26 Her Honour found that by 24 June 2008 Current Images knew that a component of the press was unlikely to be in Australia during August 2008, and that it therefore would be unable to deliver the press in August. Her Honour also found that by 25 June 2008 Current Images knew that the Dupack factory that was to receive the press was incomplete (its floors were unsealed), and that the 10 per cent deposit was unpaid (at [239]). When Current Images ordered the press on 17 July 2008 it "gambled, in the normal course of business, on persuading Dupack or someone else to purchase the press", and similarly speculated on the cost in Australian dollars of satisfying the purchase price from Hewlett-Packard Indigo in three months time (at [251]).

27 Her Honour found that Dupack "would not resist a verdict and judgment of $2,840.48 for Current Images", however, any breach of the purchase agreement occurred on 15 July 2008 at the latest, and therefore when Current Images lodged its original Statement of Claim on 31 August 2009, the 12 month period for making a claim provided by cl 12 of the purchase agreement's terms and conditions had expired, and Current Images' claim would have been barred.

Submissions

28 Current Images raised eleven grounds of appeal:

"1The trial judge erred in finding that the document described as "Agreement of Purchase Contract No 8291" (Purchase Agreement) expressly incorporated the HP Indigo Drupa pricing conditions referred to in the letter dated 26 May 2008 (Drupa Pricing Proposal) from the appellant to the respondent as an unequivocal offer.

2The trial judge ought to have held that only the pricing structure and incentives in the Drupa Pricing Proposal were incorporated into the Purchase Agreement.

3The trial judge erred in finding that the Purchase Agreement included a condition precedent that the respondent had obtained finance approval by 15 July 2008.

4The trial judge erred in finding that the Purchase Agreement included a condition precedent that the respondent had paid a refundable deposit by 25 June 2008.

5The trial judge erred in having regard to post contractual conduct as an aid to construction of the Purchase Agreement and the document described as "Shared Maintenance & Usage Plan Agreement" (Shared Maintenance Agreement).

6If special condition 4 of the Drupa Pricing Proposal was incorporated into the Purchase Agreement the trial judge erred by failing to find that it was a condition for the benefit of the appellant only.

7The trial judge erred by finding that the appellant was not entitled to terminate the Purchase Agreement and the Shared Maintenance Agreement.

8The trial judge erred by finding that the Purchase Agreement and the Shared Maintenance Agreement was not enforceable because the respondent had not obtained finance.

9The trial judge erred in finding the respondent did not cause any loss or damage to the appellant.

10If the trial judge had rejected the appellant's evidence of usage in relation to its claim for loss of profits from the Shared Maintenance Agreement then the trial judge should have held that the appellant was entitled to expectation damages or, in the alternative, reliance damages in respect of the Purchase Agreement and the Shared Maintenance Agreement.

11The trial judge erred in finding that clause 12 in the terms and conditions of the Purchase Agreement applied to defeat the appellant's claim."

29 Grounds 1-4, 6 and 8 relate to the construction and operation of the words "includes all incentives and pricing conditions as per proposal dated 26 May 2008" and of the pricing conditions within the proposal, and may be dealt with together on this basis. However, it is appropriate to first deal with ground 5.

Ground 5

30 Current Images submitted that the trial judge erred by relying on the parties' post contractual conduct, in particular the invoice of 16 June 2008, as a basis for supporting her construction of the purchase agreement, citing Agricultural and Rural Finance Pty Limited v Gardiner [2008] HCA 57; (2008) 238 CLR 570 at [35]: "to approach issues of construction in this way would be at odds with the general principle that 'it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made'."

31 Dupack submitted that the trial judge was referring to later conduct for the permissible purpose of determine if and when a contract had been formed, citing Allsop P and Campbell JA in Franklins Pty Limited v Metcash Trading Limited [2009] NSWCA 407; (2009) 76 NSWLR 603. Current Images responded that this misunderstood the nature of the dispute, which was not a question of whether a contract existed, but rather whether the terms of the proposal were conditions precedent to performance or conditions precedent to contract, both of which are questions of construction for which evidence of post-contractual conduct may not be used.

32 The difficulty with Dupack's submission is that what was in issue between the parties in the present case was whether objectively speaking the pricing conditions in the proposal and in particular pricing condition 4 were incorporated into the purchase agreement. That seems to me to turn on the construction of the purchase agreement. Whilst the ambiguity which exists having regard to the discrepancy between the apparent incorporation of the pricing conditions and, for example, the requirement of a 10 per cent deposit with the order and the provisions of cl 15 of the attached terms and conditions of sale (fleshed out at [48] above), makes it permissible to consider the surrounding circumstances objectively known to the parties at the time of entry into the agreement (but not including prior negotiations except to the extent that they throw light on the surrounding circumstances: see Codelfa Construction Pty Limited v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 at 352; Western Export Services Inc v Jireh International Pty Limited [2011] HCA 45), it does not permit the contract to be construed by reference to the post contractual conduct of the parties: Agricultural and Rural Finance Pty Limited v Gardiner supra.

33 It is apparent that the primary judge failed to have regard to these principles. This appears from her ultimate conclusion (at [237]-[238]):

"237It seems to me that the parties' conduct before and after they signed Purchase Agreement 8291, supports my construction of the Agreement, of the back-to-back Maintenance Agreement and of the Drupa Pricing proposal to Dupack. On 3 June 2008, none of [the parties] regarded the signed Purchase Agreement as a 'Buyers [sic] purchase order' or as 'a binding purchase contract'. Current Images did not demand and Dupack did not expect to pay a '10% deposit with order' nor any part of the Balance of seven hundred and sixty four thousand five hundred Australian dollars on that day.

238On 11 June 2008, which was the final day of the DRUPA trade fair in Germany, Richard Watson [of Current Images] instructed Peter Gay [of Current Images] to write Current Images' invoice to Dupack under the Payment Terms: 10% deposit with order, on Page 1 of the Agreement of Purchase Contract No 8291. On 16 June 2008 - that is, within fourteen days of the parties' signing Contract 8291 - Richard Watson received and understood the ordinary meaning of Current Images' tax invoice 020454, which complies with his instructions to Peter Gay. The invoice confines Current Images' claim of 16 June 2008 to sixty nine thousand five hundred Australian dollars ... The '10% Refundable deposit payable by 25 June 2008', claimed in the invoice, refers to the fourteen day period after 11 June 2008, in paragraph 3/ of the [pricing conditions] ...

239It seems to me that the parties' conduct before and after 16 June 2008, supports my construction of Current Images' tax invoice ... When David Lin received the invoice, Dupack was 'still trying to get finance' ... On Tuesday 24 June 2008, [Current Images' representatives] knew 'the rewind component' of Purchase Agreement 8291 was unlikely to be in Australia during August 2008. On Wednesday 25 June 2008, [Current Images' representative] knew the factory at Helensvale was incomplete, and the ten per cent refundable deposit, claimed by Current Images ... was unpaid."

34 The primary judge, also erroneously, took into account the subjective understanding and intention of the parties before and after signing the agreements. For example:

"On Monday afternoon, 2 June 2008, Richard Watson and Morris Lin understood the ordinary meaning of the [proposal]'s conditions" (at [220]);

"Within hours of the meeting [at Drupa, the representatives of Current Images] knew that for the ensuing seven to eleven weeks, Current Images could not deliver a new WS4500 Press to Dupack. ... They knew that delivery of the Press, its standard inclusions and a Flexible Packaging Rewinder depended upon Current Images' making mutually satisfactory arrangements with Dupack to install the equipment at Helensvale" (at [224]);

"On Monday night, 2 June 2008, [representatives of Current Images] understood the ordinary meaning of Purchase Agreement 8291 and of the back-to-back Maintenance Agreement, which they 'put together' ... In Gavin Joyce's words and as Richard Watson intended, the Purchase Agreement offers to vary the proposal by including a Flexible Packaging Rewinder" (at [225]);

"[Current Images' representative] understood the ordinary meaning of the [pricing conditions] and the ordinary meaning of both Agreements", (at [227]);

"In the context of the proposal's [pricing conditions], Richard Watson and David Lin understood the ordinary meaning of whatever Phillip Rennell recited from the Agreements" (at [232]);

"As [Current Images' representatives] intended, the sole material difference between the Purchase Agreement and the proposal is the inclusion of a Flexible Packaging Rewinder ... and standard inclusions" (at [233]);

and at [237]-[239] as set out above.

35 As a result, in reaching her conclusion on the issue of construction, the primary judge fell into error both in having regard to post-contractual conduct and in admitting into evidence and relying upon the subjective intention of the parties: Secured Income Real Estate (Aust) Limited v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 606.

36 It follows that ground 5 of the appeal is made out.

Grounds 1-4, 6 & 8

37 Grounds 1-4, 6 and 8 are each concerned with construction, in particular with the effect of the words "Includes all incentives and pricing conditions as per Proposal dated 26 May 2008" in the purchase agreement, and the effect of the HP Indigo Pricing - Conditions ("pricing conditions") "3/ A 5% fully refundable deposit is to be paid to the channel partner within fourteen days after the end of Drupa. (25th June 2008)", and "4/ The customer enters into a binding purchase contract with finance approved by the 15th July 2008" of the proposal. It is convenient to deal with these grounds together.

38 Current Images submitted that the primary judge's conclusion that the contract was subject to a 5 per cent deposit being paid and finance approved by 15 July 2008 by virtue of incorporated pricing conditions 3/ and 4/ was incorrect. I have already indicated that the manner in which she reached that conclusion was erroneous.

39 In oral submissions, three arguments were submitted in the alternative on behalf of Current Images. First, that the inclusion of the words "and pricing conditions" in the statement "Includes all incentives and pricing conditions as per Proposal dated 26 May 2008" was an error, and that properly understood what the statement meant was "includes all incentives as per proposal dated 26 May 2008". It was submitted this was supported by the location of the words in the pricing agreement, which occurred within a box on the first page of the agreement underneath a description of the price and goods, and that words to a similar effect were similarly located in the maintenance agreement. Current Images submitted it was open to the Court to correct this drafting error by constructing the contract as though the words "and pricing conditions" did not appear: Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420.

40 Second, it was submitted in the alternative that to the extent the words "Includes all incentives and pricing conditions as per Proposal dated 26 May 2008" incorporate the pricing conditions, and to the extent that those pricing conditions are contradicted by the purchase agreement, the purchase agreement prevails because cl 19 provides that it is the totality of the agreement between the parties.

41 Third, in the course of oral submissions it was put that the statement "Includes all incentives and pricing conditions as per Proposal dated 26 May 2008" can also be understood simply to be confirming that the price in the purchase agreement is as per the proposal, and there is no need to ignore these words or regard them as inconsistent with the proposal.

42 Counsel for Dupack submitted in reply that all four conditions were expressly incorporated into the purchase and maintenance agreements, that Dupack had the benefit of all four, and that if Current Images had meant to exclude the pricing conditions, it could have done so expressly. It was submitted that the pricing conditions were intended for the benefit of Dupack as part of the overall package of incentives and benefits it would receive if it entered into the agreement before the end of Drupa.

43 Counsel for Dupack submitted that to the extent of any inconsistency, the terms and conditions of the purchase agreement are superseded by the pricing conditions in the proposal because they are expressly referred to on the front page of the agreement document, as opposed to in the small print. It was submitted that this was analogous to a term being handwritten in.

44 It was also submitted that there is no inconsistency between pricing condition 4/ being for the benefit of Dupack, and the expressly reserved right for Current Images to "withdraw" from the contract if finance approval was not received within fourteen days of the contract on the first page of the purchase agreement.

45 Dupack also filed a Notice of Contention on the ground that it "was open for the trial judge to find that if any ambiguity or lack of clarity existed in construing the terms of the contract between the parties, the contract should have been construed contra proferentem, against [Current Images] being the party that formulated the terms of the contract in circumstances where [Dupack] was denied the benefit of legal, or any independent, advice when the contract was executed."

Consideration

46 With respect, it cannot be, as Dupack submits, that the pricing conditions were intended for the benefit of Dupack as part of the overall package of incentives it would receive if it entered into the agreement before the end of the Drupa Trade Show. As was conceded on behalf of Dupack during the course of oral submissions, when the proposal is read on its own, the pricing conditions are clearly conditions that have to be fulfilled if a purchaser is to get the benefits listed as "Incentives" on the preceding page. One of these conditions was the entry into a binding contract, not a contract from which it had a right to withdraw.

47 A document may be construed otherwise than according to its literal meaning if the literal meaning results in absurdity: Fitzgerald v Masters supra at 427. As was noted by Basten JA in Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297, with whom McColl and Campbell JJA agreed, the test of absurdity is not easily satisfied: "The courts have no mandate to rewrite agreements, so as to depart from the language used by the parties, merely to give a provision an operation which, as it appears to the court, might make more commercial sense", Miwa at [18]; see also Jireh International Pty Ltd v Western Export Services Inc [2011] NSWCA 137 at [55], upheld in Western Export Services Inc v Jireh International Pty Ltd supra.

48 In considering this issue it is important to have regard to the internal inconsistencies in the purchase agreement if in fact the whole of the pricing conditions in the proposal were incorporated. They may be summarised as follows:

(a) The purchase agreement provided for a 10 per cent deposit with the order whereas the pricing conditions in the proposal referred to a 5 per cent fully refundable deposit to be paid within 14 days after the end of Drupa.

(b) The provision in the pricing conditions that the customer enter into a binding purchase contract with firm approval by 15 July 2008 is inconsistent with cl 15 of the standard terms and with the fact that Current Images was the only party given the right to withdraw from the purchase agreement.

(c) Having regard to the entry into the purchase agreement, cll 1 and 2 of the pricing conditions in the proposal concerning the submission of a signed agreement to Current Images before the end of Drupa for acceptance have no work to do. They can also be contrasted with the fact that, subject to a limited right of withdrawal, Current Images was immediately bound to deliver the machinery in August 2008.

49 Further, if, as Dupack submitted, it had a unilateral right to withdraw if it did not pay the deposit (whether 5 per cent or 10 per cent) it is difficult to ascertain the commercial purpose of the agreement. If Dupack's submission were correct, the agreement would simply be a reiteration of the proposal.

50 In that context, the inclusion of the pricing conditions would not merely create an agreement of little commercial sense; it would incorporate terms in direct conflict with the express terms of the agreement. This was the precise effect of the term in Fitzgerald v Masters that necessitated the literal meaning be disregarded. It seems to me that having regard to the discrepancies to which I have referred above, the pricing conditions were not incorporated into the purchase agreement. The purchaser obtained the benefit of the incentives which were expressly incorporated into the purchase agreement, but the pricing conditions did not form part of the agreement.

51 If I am wrong and the pricing conditions are incorporated into the purchase agreement, the proper approach is to disregard the incorporated terms that conflict with the expressly agreed terms of the contract: Ford Motor Co of Australia Ltd v Arrowcrest Group Pty Ltd [2002] FCA 1156 per Finkelstein J; see also Izzard v Universal Insurance Company Limited 1937 AC 773 at 780 per Lord Wright. The result is that the pricing conditions on which Dupack relies, 3/ and 4/, are superseded by the express terms of the purchase agreement. Condition 3/ is superseded by the words: "Payment Terms: 10% deposit with order" on page 1 of the purchase agreement. Condition 4/ is superseded by the words: "This contract is subject our terms and conditions as attached, in the event that finance approval is not received within fourteen (14) days of the Contract, Current Images reserves the right to withdraw this contract," which expressly reserve the right to rescind to Current Images only, and also cl 15 which provides: "CANCELLATION: The Buyer's purchase order is not cancellable, in whole or in part, unless mutually agreed to in writing by both parties, which agreement must include, at a minimum, Buyer's agreement to assume a stated termination charge."

52 In these circumstances, the third alternative submitted by Current Images does not need to be considered.

53 The result is that on 3 June 2008, Dupack entered into a binding contract with Current Images to purchase the press under the terms and conditions attached to the purchase agreement.

54 Dupack submitted that Current Images did not put these arguments to the primary judge. However Dupack could not point to any resulting prejudice, nor does any appear, and it did not pursue the point in oral submissions: Suttor v Gundowda Pty Limited [1950] HCA 35; (1950) 81 CLR 418 at 438. However, I think any order as to costs should be deferred pending further submissions from the parties on this point.

Ground 7

55 Current Images submitted that the trial judge erred by finding implicitly that it was not entitled to terminate the agreements. It relied upon what was said by Wootten J in Alarm Facilities Pty Limited v Jackson Constructions Pty Limited [1975] 2 NSWLR 22 at 26 (approved in Brien v Dwyer [1978] HCA 50; (1978) 141 CLR 378):

"It seems to me that the purchaser signifies his intention to be bound by signing the contract, and payment of the deposit is not required as a further signification of his intention to be bound. If he, having signed the solemn contract, fails to pay the deposit, there is every reason in justice why the other party should have a right to rescind the contract, if it so elects, but none why the purchaser should be able to evade liability because he has not fulfilled his first obligation under the contract." (Approved by Gibbs and Stephens JJ in Brien v Dwyer (1978) 141 CLR 378 at 393, 397-8.)

56 Current Images submitted that the trial judge erred by confusing a condition subsequent to performance for the benefit of one party only which might be waived by that party, with a condition subsequent to performance that either party may rely on and enforce, citing Sandra Investments Pty Limited v Booth [1983] HCA 46; (1983) 153 CLR 153. It submitted that Dupack's repudiation of the contract entitled Current Images to terminate the agreement, which it did on 24 September 2008.

57 In reply, Dupack relied on its construction of the pricing conditions, which I have held were not incorporated into, or else were superseded by, the purchase agreement.

Consideration

58 Current Images was entitled to waive the condition that Dupack pay a 10 per cent deposit at the time of placing the order on 3 June 2008 and not exercise its right to withdraw from the contract when Dupack did not obtain finance within 14 days. Current Images having taken that course, the contract remained on foot.

59 When Dupack repudiated the contract by stating on 2 September 2008 that it was unable to pay the deposit as it could not raise the finance, and that as no deposit had been paid no contract existed, Current Images became entitled to accept that repudiation and terminate the contract, which it did on 24 September 2008 (or possibly by its conduct in entering into a new agreement for the sale of the machinery on 19 September 2008).

Ground 9

60 Current Images submitted that the trial judge erred in finding that Dupack did not cause any loss or damage to the appellant on three bases. First, that her Honour confused loss of bargain damages with loss of profits damages. Second, that she failed to treat the increased purchase price of the press caused by currency fluctuations as loss of bargain damages. Third, that she failed to make any finding on Current Images' claim for loss of use of money damages.

61 First, Current Images submitted that the trial judge confused damages for the sale of goods (loss of bargain) with damages for failure to comply with a service agreement (loss of profits) in dismissing its claim for loss of profits on the maintenance agreement, relying on what was said by Giles JA in Tasman Capital Pty Limited v Sinclair [2008] NSWCA 248; (2008) 75 NSWLR 1 at [70]. It submitted that, even though it entered into a maintenance agreement with the third party purchaser, there was no basis for concluding that Current Images could not have entered into service agreements with both Dupack and the third party purchaser. Current Images had sold six identical presses over the seven years preceding the contract, which, it said, evidenced that the press was not a one-off product, and that the possibility of selling multiple service agreements therefore existed. It submitted that the onus was on Dupack to show that the loss of profit on the service agreement had been mitigated, and that it had not done this.

62 This argument ignores the fact that Current Images had previously accepted, for the purpose of calculating damages relating to repudiation of the purchase agreement, that the press was a one-off item of which the subsequent sale to a third party was a substitute sale. It is difficult to see how a maintenance agreement relating to a one-off item could be entered into twice. This is also the way Current Images ran its case below: entry into the maintenance agreement with the third party was included under the heading "Current Images mitigates its loss" in its outline of submissions at first instance. Regardless of the fact that damages for loss of profits may be calculated differently to damages for loss of bargain, if, as the primary judge found at [246], the service agreement was a "back to back" agreement with the purchase agreement, there is no basis for finding that Current Images could have entered into both maintenance agreements.

63 Further, whether or not Dupack bore the onus of showing that the loss had been avoided, Current Images produced evidence in reply to Dupack's defence that "the plaintiff failed to make reasonable efforts to mitigate its loss and damage". That evidence included the maintenance contract it entered into with the third party, which on its face appears more lucrative than the original maintenance agreement signed with Dupack. In both agreements, the service price is based on the number of impressions made by the press, and the price per impression reduces as the volume of impressions increases. In the agreement with the third party, the impression price in each volume category is greater than the price in the equivalent volume category in the agreement with Dupack. Current Images submitted that this did not demonstrate that the maintenance agreement with the third party was in fact more lucrative and that evidence that the volume of impressions made by the third party was comparable to or greater than those that would have been made by Dupack would be necessary for Dupack to discharge its onus of demonstrating that damages for the loss of the maintenance agreement had been avoided.

64 I do not accept this submission. Dupack is entitled to rely on Current Images' maintenance agreement with a third party, relating to the same press, at price per impression rates in excess of its repudiated agreement as evidence that Current Images had mitigated its loss. Further, Current Images calculated the damages it claimed as a result of loss of profit on the maintenance agreement by averaging the number of impressions made by its other six maintenance clients. There is no reason why Dupack cannot have the advantage of this same averaging treatment in estimating the volume of impressions the third party was likely to make.

65 I am not satisfied that Current Images suffered a loss of profit it was likely to have attained, see McRae v Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377 at 388; nor that it did not fully mitigate its loss of the maintenance agreement, see Tyco Australia Pty Limited v Optus Networks Pty Limited [2004] NSWCA 333 at [149].

66 Dupack also made submissions disputing the length of time Current Images claimed the maintenance agreement covered, however these do not fall to be considered in the circumstances.

67 Second in relation to damages, Current Images submitted that the trial judge erred in treating the increased acquisition cost of the press (due to the currency fluctuations between the alleged date of repudiation by Dupack, 2 September 2008, and the belated payment date to Hewlett-Packard Indigo by Current Images, 30 October 2008) as anything other than loss of bargain damages.

68 In oral argument counsel for Current Images reformulated this submission. He contended that when Dupack repudiated the contract, on 2 September 2008, Current Images lost profit was the difference between the purchase price of the press, $764,500, and the amount that would have been paid to the supplier, Hewlett Packard Indigo, shortly thereafter (there was evidence before the primary judge that Current Images' policy was to pay the supplier as soon as it had been paid by the purchaser). Accepting the price in Australian Dollars of the press on 2 September 2008 as $502,067, Current Images' loss of profit as at September 2008 was therefore $262,433. It attempted to mitigate this loss by reselling the press to a third party, but it did not make the loss up in full because the actual purchase price from the supplier increased in the intervening time as a result of currency fluctuations. The actual profit Current Images realised on the sale of the press to the third party was $133,773, being the price paid by the third party, $770,000, less the actual purchase price of the press $636,227, resulting in a loss after mitigation of $128,660.

69 Whilst it is correct that that increased price payable by Current Images to Hewlett Packard for the machine was due to currency fluctuations, there is nothing to suggest that Current Images did not act reasonably in not paying for the machine in August or on 2 September 2008 and obtaining an extension for payment until 31 October 2008. The fact that it may have paid less (or more) had it chosen a different payment date is immaterial.

70 It follows that Current Images is entitled to receive $128,660 for the loss it suffered on resale of the machine.

71 Finally, Current Images submitted that the trial judge failed to make any express findings on Current Images' claim for loss of use of money. Current Images claimed that Dupack's failure to pay the purchase price resulted in $26,446.61 net interest charges under its overdraft account, after accounting for instalment payments received from the third party purchaser (see Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 at 142, 144, 149 and 152). The period over which the loss was said to have been incurred was from 2 September 2008 to 21 April 2009 (affidavit Phillip Damian Rennell sworn on 9 August 2010 pars 13-17).

72 Dupack was not able to point to any reason why Current Images was not entitled to this amount. It follows that Current Images suffered a total loss of $157,947.09, being $128,660 for loss of bargain on the purchase agreement, $26,446.61 for loss of use of money, and $2,840.48 being the cost of transporting the press from Brisbane to Melbourne to deliver the press to the third party. The claim for loss of use of the money is a substitute for any claim for interest under s 100 of the Civil Procedure Act 2005 up to 21 April 2009.

Ground 10

73 Current Images submitted that if the trial judge rejected its evidence of usage in relation to its claim for loss of profits from the maintenance agreement, her Honour should have found that it was nevertheless entitled to expenditure damages for the increased cost of the press, or alternatively, that it was entitled to reliance damages on the basis that expenditure reasonably incurred in preparation for, or in the course of, performance of a contract is recoverable to the extent to which it is wasted as a result of the breach (see Commonwealth v Amann Aviation Pty Limited [1991] HCA 54; (1991) 174 CLR 64; World Best Holdings Limited v Sarker [2010] NSWCA 24 at [74]-[82]). Counsel for Current Images did not pursue this point in view of its reformulated submission on damages summarised at [68] above.

Ground 11

74 Current Images submitted that the trial judge incorrectly held that its claim arose on 15 July 2008, rather than on 24 September 2008, when her Honour held that Current Images' claim would have been time barred by cl 12 of the terms and conditions of the purchase agreement, which required proceedings to commence within one year of the claim arising. The proceedings commenced on 31 August 2009. Counsel for Dupack conceded that the date of 15 July 2008 is dependent on pricing condition 4/ being incorporated into the contract. I have found that the relevant breach occurred on 2 September 2008. This is therefore the date on which the claim arose, and is the appropriate date from which time should run. When Current Images commenced proceedings on 31 August 2009, it was within one year of the claim arising, and is therefore not time barred from making its claim.

Orders

75 I would therefore make the following orders:

(1)Appeal allowed.

(2)Orders 1 and 2 of the orders made by the primary judge on 11 March 2011 set aside.

(3)Judgment for the appellant against the respondent for $157,947.

(4)Direct the appellant within 14 days to make submissions:

(a)As to the calculation of interest on the judgment sum.

(b)The appropriate order for costs of the proceedings.

(5)Direct the respondent within a further 14 days to make such submissions in reply it may wish to make on the matters referred to in pars 4(a) and (b) above.

76 MACFARLAN JA: I agree with Bathurst CJ.

77 SACKVILLE AJA: I agree with the orders proposed by the Chief Justice and with his Honour's reasons.

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Decision last updated: 20 April 2012