Durham v Durham - [2011] NSWCA 335

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation: CSG Limited v Fuji Xerox Australia Pty Ltd [2011] NSWCA 335
Hearing dates: 21 July 2011
Decision date: 04 November 2011
Before: Bathurst CJ at 1
Campbell JA at 2
Sackville AJA at 3
Decision:
1. Grant the applicant (" CSG ") leave to appeal.
2. Direct CSG to file a notice of appeal within 7 days.
3. Direct the parties to file agreed short minutes of order giving effect to this judgment (including any question of costs) within 14 days.
4. If no agreement can be reached, direct:
(a) CSG to file and serve within 14 days short minutes of the orders that it says should be made (including on any question of costs), together with brief written submissions (not exceeding four pages) in support of those proposed orders; and
(b) the respondent to file and serve within a further 14 days short minutes of the orders that it says should be made (including on any question of costs), together with brief written submissions (not exceeding four pages) in support of those proposed orders.
[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 - dealership agreements relating to multi-function photocopiers - whether the supplier had determined "target quotas" in accordance with the agreements - whether dealer had breached agreements by creating potential conflict of interest - whether dealer entitled to terminate agreements for breach of essential conditions - whether the word "assign" in dealership agreements includes novation of service contracts between dealer and customers
Cases Cited: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; 156 CLR 41
Howell v Macquarie University [2008] NSWCA 26
Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; 276 ALR 375
Leveraged Equities Ltd v Goodridge [2011] FCAFC 3; 191 FCR 71
Olsson v Dyson [1969] HCA 3; 120 CLR 365
Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40; 149 FCR 395
Phipps v Boardman [1967] 2 AC 46
Shepherd v Felt and Textiles of Australia Ltd [1931] HCA 21; 45 CLR 359
Category: Principal judgment
Parties: CSG Limited (Applicant)
Fuji Xerox Australia Pty Ltd (Respondent)
Representation: Counsel:
J Gleeson SC with D Sulan (Applicant)
RM Smith SC with G Ng (Respondent)
Solicitors:
DLA Phillips Fox (Applicant)
Corrs Chambers Westgarth (Respondent)

File Number(s): 2011/56823
Decision under appeal

Citation:

[2010] NSWSC 1258

Date of Decision:

2010-11-23 00:00:00

Before:

McDougall J

File Number(s):

2010/281890

Judgment

BATHURST CJ : For the reasons given by his Honour I agree with the orders proposed by Sackville AJA.

CAMPBELL JA : I agree with Sackville AJA.

SACKVILLE AJA : This is an application for leave to appeal from a decision of a Judge of this Court (McDougall J). The proceedings concern two " Dealership Agreements " under which the respondent (" FXA ") appointed the appellant (" CSG ") to be a dealer in products supplied by FXA for the territories, respectively, of Brisbane and Maroochydore in Queensland. The products subject to the Dealer Agreements were mainly machines based on photocopier technology known as " multi-function devices " (" MFDs ").

The primary Judge found that FXA had validly terminated each of the Dealership Agreements pursuant to a contractual right to do so, as CSG had breached essential terms of the Dealership Agreements. His Honour dismissed CSG's cross-claim, in which it contended that FXA had repudiated the Dealership Agreements and that CSG, in reliance on that repudiation, had validly terminated the Agreements.

The primary Judge delivered two judgments. In the first, delivered on 23 November 2010, he made declarations that:

FXA, by a termination notice dated 20 August 2010, had validly terminated each of the Dealership Agreements; and
CSG was contractually obliged to provide to FXA certain sales and customer information, to return certain Confidential Information to FXA and to provide commercially reasonable co-operation to FXA to procure the novation to FXA of existing maintenance contracts with customers.

His Honour also ordered CSG to execute deeds of novation for certain customer contracts in favour of FXA: Fuji Xerox Australia Pty Ltd v CSG Ltd [2010] NSWSC 1258 (" First Judgment ").

In a second judgment delivered on 14 December 2010, the primary Judge dealt with disputes as to the form of the orders made on 23 November 2010: Fuji Xerox Australia Ltd v CSG Ltd (Unreported, 14 December 2010) (" Second Judgment "). As his Honour explained (at [5]ff), the position had been complicated by the belated joinder, on its own application, of Capital Finance Australia Ltd (" CFAL ") as a party to the proceedings. CFAL sought to be joined as it provided finance to about 401 of CSG's customers who had acquired FXA's MFDs.

In the Second Judgment, the primary Judge held that:

novation should not be ordered in respect of CFAL's customers and FXA should be left to its rights in damages against CSG arising from CSG's failure to perform its contractual obligations in relation to those customers (at [44]); and
a " moratorium " should be imposed on CSG contacting FXA's customers for a limited period of time to enable FXA to approach those customers seeking to retain their business (at [70]).

CSG's draft notice of appeal names only FXA as a respondent. CSG requires leave to appeal because some issues in the proceedings, including assessment of damages, have yet to be determined. Since the orders made by the primary Judge effectively decide the question of liability, leave to appeal should be granted.

The issues raised by the notice of appeal can be summarised as follows:

(i) Was the primary Judge correct to find that CSG had failed to meet its " Target Quotas " for the 2009 calendar year, thereby entitling FXA to terminate the Dealership Agreements? The answer depends on whether his Honour correctly found that FXA had determined the 2009 Target Quotas in accordance with the Dealership Agreements.

(ii) Was the primary Judge correct to conclude that FXA was also entitled to terminate the Brisbane Dealership Agreement pursuant to cl 29.1.4 by reason of CSG having a potential conflict of interest arising out of its dealings with Canon Australia Ltd (" Canon "), a competitor of FXA?

(iii) Were the orders made by the primary Judge, in particular those requiring CSG to execute deeds of novation, justified by the terms of the Dealership Agreement? CSG contended that the primary Judge, in making a finding that CSG had placed itself in a position of potential conflict of interest, contrary to cl 29.1.4, had misconstrued cll 30.1.4 and 37.2.2 of the Dealership Agreement, (these three clauses are set out at [20], [21] and [24] below).

By a notice of contention, FXA sought to uphold the primary Judge's finding that CSG's actions created a potential conflict of interest on two additional grounds, both of which had been rejected by his Honour. I deal briefly with the notice of contention at [105]ff, below.

DEALERSHIP AGREEMENTS

The Dealership Agreements between FXA and CSG were confined to specific territories and to a specific section of the market for MFDs known as Tier 3 Small and Medium Enterprises. The Brisbane and Maroochydore Dealership Agreements were not materially different. The following outline is of the terms of the Brisbane Dealer Agreement. FXA was described as " Fuji Xerox " and CSG as " the Dealer ".

The " Purpose of the ... [D]ealer[ship] [A]greement " was described as follows:

"The objective of this Fuji Xerox dealer agreement is to optimise sales revenue, profitability and after-sales service through a tied dealer network where all Fuji Xerox dealers offer customers outstanding performance consistent with the Fuji Xerox brand image. To achieve this, we must ensure that we consistently meet our customer obligations and internal service standards.

This agreement, outlining the required levels of performance from all parties, is based on the key factors necessary to help ensure success across a national dealer network. It requires a consistently high standard of performance from both Fuji Xerox and our dealers and recognises that a successful dealer network encompassing excellent performance standards will maximise the value of your business and ours.

The performance of both the Fuji Xerox dealer network and each individual dealer are a critical part of Fuji Xerox's overall distribution strategy. This agreement formalises Fuji Xerox's expectations of its dealers and Fuji Xerox's support."

CSG's appointment as FXA's dealer was effected by cl 2.1, as follows:

" Appointment . ... Fuji Xerox appoints the Dealer from the date of execution hereof as an Authorised Dealer for the products specified in the dealer price books published by Fuji Xerox ('the Products') in respect of the territory specified in Item 4 of Schedule 1 ('the Territory'). Nothing in this Agreement prevents Fuji Xerox from appointing other dealers or agents, or itself supplying any goods and services, within the Territory."

Clause 3 of the Dealership Agreement set out " General Obligations ". Clause 3 relevantly provided as follows:

"The Dealer must:

3.1.1 actively promote, demonstrate and solicit the sale and maintenance of the Products within the Territory;

3.1.2 purchase from Fuji Xerox the target quota of Products set out in Schedule 3 ('the Target Quota') and appropriate quantities of consumables relative to the Dealer's MIF [Machines in the Field] as determined by Fuji Xerox (acting reasonably);

3.1.3 if the Dealer is an Authorised Servicing Dealer, it must if requested by Fuji Xerox; deliver and install Products directly sold and supplied by Fuji Xerox into the Territory; and maintain all Fuji Xerox products in the Territory in accordance with Schedule 4 ('the Services'); and

3.1.4 ..."

CSG was an Authorised Servicing Dealer, meaning that it was authorised by FXA to provide support and maintenance services within the Territory: cl 45(b). Schedule 4 set out detailed " Dealer Product Service Requirements ".

Schedule 3 of the Dealership Agreement set out the " TARGET QUOTA ", as follows:

"To be determined for the 2007 year as provided in the Agreement by reference to dealership purchase revenue target from 1 st January 2006-31 st December 2006 of:

Revenue Target = $6,802,000

The Dealer's revenue for the purpose of comparison to the Revenue Target is to be calculated by adding the sum of ex tax purchases of equipment, accessories and software purchased directly from FXA ... Spares, consumables, paper, supplies, extended warranties or equipment purchased from resellers or other distributors will not be included."

Clause 5 dealt with " Target Quota Review ":

"The Target Quota is subject to review by Fuji Xerox and the Dealer on an annual basis as determined by Fuji Xerox. In the event that the parties do not review the quota or cannot agree upon a new target quota within a reasonable time (as determined by Fuji Xerox), the Target Quota will be determined by Fuji Xerox by reference to the average increase over the previous three years or if there is no such average, ten (10) percent."

Clause 7 provided that Products purchased by CSG from FXA would be sold at the prices set out in FXA's Dealer Price Book. CSG was entitled to determine independently the prices of the Products supplied or offered to its customers. CSG was also entitled to determine the charges for the supply of maintenance services provided by it directly to customers.

Clause 14.1 set out " Standard Obligations ", as follows:

"The Dealer warrants, acknowledges and covenants that for the term of this Agreement it will:

14.1.1 refrain from doing any act which may injure the goodwill or reputation of Fuji Xerox;

...

14.1.7 at the written request of Fuji Xerox, provide Fuji Xerox with copies of the Dealer's standard customer contract templates; and within a reasonable time of a written request from Fuji Xerox, insert into the Dealer's standard customer contract templates, language reasonably required by Fuji Xerox to protect Fuji Xerox's legitimate business interests;

...

14.1.10 conduct its business in accordance with the ethical and other commercial standards set out in Schedule 5."

Schedule 5 to the Dealership Agreement was headed " BUSINESS ETHICS ". Paragraph 1 of Schedule 5 provided as follows:

" Personal Investment . Dealers shall not be involved in any activity, including personal investment, which is or gives the appearance of conflict of interest with the business of Fuji Xerox."

Clause 29.1 dealt with " Termination for Cause ". It provided as follows:

"Either party ('the Terminating Party') may, immediately terminate this Agreement in whole or in part by notice in writing to the other party ('the Defaulting Party'), if the Defaulting Party

29.1.1 is in breach of any of its material obligations under this Agreement, and if the failure or breach is capable of remedy, has failed to rectify that failure or breach within twenty (20) Business Days after receipt of written notice from the Terminating Party;

29.1.2 is in breach of any of its material obligations under this Agreement and the breach is not capable of remedy, or is capable of remedy but concerns an Essential Term of this Agreement;

...

29.1.4 has a potential conflict of interest and has not to the reasonable satisfaction of the Terminating Party put in place measures which sufficiently reduce or eliminate the potential for that conflict of interest occurring; or

29.1.5 being the Dealer:

29.1.5.1 has not met the Target Quota for any twelve (12) month period;

29.1.5.2 ...; or

29.1.5.3 any other Dealer Agreement between:

(a) the Dealer and Fuji Xerox; or

(b) an entity in which the Dealer has an interest and Fuji Xerox,

is terminated by Fuji Xerox under the provisions of that Dealer Agreement."

Clause 30 dealt with the " Effect of Termination ", as follows:

"Upon expiration or termination of this Agreement for any reason, all rights of the Dealer under this Agreement cease and the Dealer must:

30.1.1 immediately cease holding itself out as an authorised dealer of Fuji Xerox or soliciting maintenance orders for submission to Fuji Xerox (as the case may be) and cease all use of Fuji Xerox's trade marks;

30.1.2 immediately return any Fuji Xerox Confidential Information and Fuji Xerox Material which is in the possession or control of the Dealer;

30.1.3 at the request of Fuji Xerox and to the extent possible continue to perform the Services to Fuji Xerox customers at commercially competitive prices to be agreed by the parties and to perform the Services in accordance with the Flow-Through Terms and with due skill, diligence and professionalism;

30.1.4 provide commercially reasonable co-operation to Fuji Xerox and any intended alternative dealer in establishing an alternative dealer in the Territory (which may include the assignment or novation of existing Customer maintenance contracts under clause 37.2.1);

...

30.1.6 immediately provide all information requested by Fuji Xerox in relation to all sales of the Products or the performance of Maintenance by the Dealer (including without limitation all customer names, addresses, and the applicable customer contracts)."

It was common ground before the primary Judge that the cross-reference in cl 30.1.4 to " clause 37.2.1 " should be read as a cross-reference to cl 37.2.2.

Clause 31.1 specified " without limitation " that the " Essential Terms of this Agreement " included each of the Dealer's obligations under cll 3, 14 and 37.

Clause 36 defined the " Relationship " between the parties, as follows:

"The relationship between the parties is: in relation to the Products, that of buyer and seller; and, for Authorised Service Providers, that of an independent contractor. Unless this Agreement expressly states otherwise, nothing in this Agreement is intended to create a relationship of partnership; agency; franchisor and franchisee; or employer and employee amongst the parties and it is the express intention of the parties that any such relationship is denied."

Clause 37 dealt with " Assignment and Novation ". It read as follows:

"37.1 Prohibition Subject to clause 37.2, the rights and obligations of each party under this Agreement are personal and must not be assigned, charged, or otherwise dealt without the prior written consent of the other party which may be granted or refused at the absolute discretion of the other party. The Dealer may not assign or novate a customer agreement without Fuji Xerox written approval (which will not be unreasonably withheld/delayed).

37.2 Permitted Assignment . Notwithstanding clause 37.1:

37.2.1 Fuji Xerox may by notice to the Dealer assign its rights and obligations under this Agreement (in whole or in part) to any related corporation without such consent; and

37.2.2 in the event that Fuji Xerox terminates this Agreement under 29.1 Fuji Xerox may at its option: require that the Dealer assign to Fuji Xerox or Fuji Xerox nominated third party, any or all Customer maintenance and Software licence agreements (but not lease or rental agreements) in respect of the Products which are in effect at the effective date of termination."

Clause 38 dealt with " Conflict of Interest ", as follows:

"If a conflict of interest or potential conflict of interest arises, the Dealer must notify Fuji Xerox immediately of the nature and extent of that conflict of interest or the potential conflict of interest."

Clause 43 provided that the rights and obligations contained in a number of specified clauses survived the termination of the Dealership Agreement. These included cl 30.

Clause 44 provided that the law of New South Wales governed the Agreement. It also provided that the parties submitted to the non-exclusive jurisdiction of the courts of New South Wales.

BACKGROUND

The following account is based on factual findings made by the primary Judge that were either common ground or are not now in dispute.

FXA was a wholly owned subsidiary of a company incorporated in Singapore. The ultimate holding company of the Singaporean company was incorporated in Japan. However, Xerox Corporation was a minority shareholder of the parent company.

FXA's business included the importation and distribution of Fuji Xerox MFDs. These machines have the ability to copy, print and scan documents and to do so in colour. Some MFDs are " web-enabled ", meaning that they can scan documents to email.

FXA sold MFD machines directly through its own agents and indirectly through a network of dealers. Some of FXA's retail customers acquired MFDs with finance provided by an associated company, Fuji Xerox Finance Ltd (" FXF "), which had the same managing director as FXA (Mr Kugenthiran).

CSG was a publicly listed company whose business activities included the sale, servicing and maintenance of MFDs. CSG sold MFDs pursuant to dealership or distributorship agreements in various parts of Australia. CSG sold MFDs though a network of agents who were not employees and worked on commission.

FXA and CSG executed the Brisbane Dealership Agreement on or about 6 March 2007. The Maroochydore Dealership Agreement was executed at or about the same time. At one stage, in addition to Brisbane and Maroochydore, CSG was appointed as a dealer for FXA MFDs in the territories of Cairns, Toowoomba and Darwin.

When an FXA MFD was " sold " (a term the primary Judge used to include a lease or hire purchase arrangement), the customer entered into a " full service management agreement " (" FSMA "). In some cases, the cost of providing service and maintenance (excluding consumables) was fixed as a component of rental payments made by the customer or of payments made to the financier (whether FXF or a third party). In other cases, the charge was payable separately, usually on a " cost per copy " basis. The primary Judge found (at [18]) that the income stream from FSMAs (known as " annuity income ") was more profitable than revenue from sales of MFDs.

Machines that were sold and were the subject of FSMAs were known as " machines in [the] field " or MIFs. Repeat sales and therefore fresh streams of income from FSMAs were derived from the replacement of MFDs. This process was known in the trade as " churning ". His Honour found (at [21]) that distributors and dealers jealously guard identifying details of customers to prevent a competitor attempting to attract the customer's business.

In cases where CSG " sold " an FXA MFD to a customer and the customer entered into a finance agreement, the transaction involved the following steps:

FXA sold the MFD to CSG;
CSG sold the MFD to the relevant finance company;
the finance company entered into a rental agreement or other financing arrangement with the customer; and
the customer entered into an FSMA with CSG.

If no financier was involved, the second and third steps were replaced by a sale by CSG to the customer. However, the parties still entered into an FSMA.

Between 2007 and 2009, CSG had sought to become a dealer in FXA products in capital cities other than Brisbane and Darwin. FXA resisted these overtures, apparently initially on the basis that it did not want any single dealer to have more than 25 per cent of FXA's business. A further factor that influenced FXA is that by 2009 it was considering a strategy whereby it would use its own sales agents in metropolitan markets, rather than distribute through independent dealers.

Faced with being rebuffed by FXA, CSG sought other opportunities for growth. It acquired interests in several companies in the industry, moves that it knew FXA would not view kindly.

In April 2010, CSG negotiated with Canon Australia Ltd (" Canon ") to become a Canon dealer in Sydney, Melbourne, Adelaide, Perth and Canberra. As a result of these negotiations, CSG and Canon entered into three agreements on 11 May 2010. These were:

a " Canon Partner Accreditation Agreement " (" Partner Agreement "), whereby CSG became a " Canon Accredited Partner " (equivalent to a dealer);
an " Implementation Agreement " whereby Canon granted CSG an option (" Brisbane Option ") exercisable at any time between execution of the Agreement and 30 June 2012, to become Canon's subcontractor in respect of Canon's Brisbane customers and also a " Brisbane Dealer " for Canon; and
a " Subcontracting Agreement " whereby Canon appointed CSG and an associated company to perform Canon's service obligations owed to customers in Sydney, Melbourne, Adelaide, Perth and Canberra.

The primary Judge found (at [34]) that CSG understood that its entry in the Canon agreements was likely to provoke FXA to cancel the Brisbane Dealer Agreement and perhaps others. If that occurred, CSG wanted to become Canon's Brisbane dealer. This explains the Brisbane Option, which was exercisable at any time prior to March 2012.

On 28 June 2010, FXA wrote to CSG stating that it would terminate the Brisbane, Maroochydore, Cairns and Darwin Dealer Agreements on 12 July 2010. Termination was delayed to allow the parties to engage in without prejudice negotiations. These were unsuccessful.

On 24 August 2010, FXA wrote to CSG terminating the Brisbane and Maroochydore Dealer Agreements with immediate effect. Relevantly, the letter relied on asserted breaches by CSG of the Dealer Agreements as follows:

CSG's failure to meet its " Target Quota " for the 2009 calendar year (said to be a breach of cll 29.1.5.1 and 3.1.2, the latter being made an essential term by cl 31.1); and
the existence of an actual or potential conflict of interest (said to breach cll 29.1.4 and 14.1.10, the latter being an essential term).

The letter demanded that CSG immediately comply with its obligations under cl 30.1.1 of the Dealer Agreements by ceasing to hold itself out as FXA's authorised dealer in the Territories and cease soliciting maintenance orders in those Territories. The letter made other demands relating to the return of Confidential Information (cl 30.1.2) and customer information (cl 30.1.6).

On 6 September 2010, CSG's solicitors wrote to FXA's solicitors. The letter stated that FXA had no right to terminate the Dealer Agreement and that the purported termination constituted a repudiation of those Agreements by FXA. CSG advised that it accepted the repudiation as terminating the Dealer Agreements.

Shortly thereafter, CSG exercised the Brisbane Option.

REASONING: TARGET QUOTAS

The first question is whether the primary Judge was correct to find that CSG had breached cl 29.1.5 of the Dealership Agreements by not meeting the Target Quotas in respect of the calendar year 2009. The critical issue is whether his Honour was correct to find that the Target Quota for Brisbane had been validly set at $9.4 million and that for Maroochydore at $1.4 million.

The Evidence

As has been seen, Sch 3 to the Brisbane Dealership Agreement recorded that the Target Quota for the 2007 calendar year as provided in the Agreement by reference to the " dealership purchase revenue target " for 2006 of $6.802 million. Schedule 3 to the Maroochydore Dealership Agreement contained a comparable provision.

There was no evidence as to the process which led to Target Quotas being fixed for 2007. However, FXA internal documents, apparently created in 2010, recorded " Targets " for CSG's five Territories for each of the 2007, 2008 and 2009 years. This document recorded that the Targets for 2007 were $8 million for Brisbane and $1.146 million for Maroochydore. There was no dispute between the parties that these were the Target Quotas for 2007.

The evidence as to the Target Quotas for 2008 was a little more detailed. An undated FXA document, signed on behalf of CSG, recorded that the " Dealership purchase revenue target " for 2008 in respect of the Brisbane Dealership Agreement was $9.4 million, the same figure as recorded in the 2010 business record. A similar document recorded that the target in respect of the Maroochydore Dealership Agreement for 2008 was $1.4 million. Neither document explained the process by which the respective targets had been determined, but the written acknowledgement on behalf of CSG suggests that it agreed to the Target Quotas for 2008.

No equivalent documents to those created in respect of 2008 were in evidence in relation to 2009. Mr Slater, the commercial operations manager of FXA, gave affidavit evidence that his understanding was that the targets for 2009 were the same as 2008. Mr Slater gave oral evidence but was not asked questions as to the basis of his understanding nor as to the process, if any, that led to the fixing of Target Quotas for 2009.

The primary Judge relied on four documents to support his finding that FXA had set the Target Quotas for 2009 at the same level as for 2008. The first was an email of 26 March 2010 from Mr Slater to Mr Ward, CSG's general manager. The email attached spreadsheets which provided " historical data " on the " Sch 3 Revenue Target " for each of CSG's five dealerships. The Target for Brisbane in 2009 was $9.4 million and that for Maroochydore was $1.4 million. Although his Honour did not refer to the 2010 business record ([48] above), that document recorded the same Target Quotas for 2009).

The second document was a letter dated 30 April 2010 from Mr Slater to Mr Mackenzie, CSG's managing director, relating to the Brisbane Dealership Agreement. The letter stated as follows:

"As you know, the Target Quota for the Brisbane Dealership for the 12 month period ending December 2009 (inclusive) was $9,400,000. We are concerned that with $7,549,592 of purchases against a target of $9,400,000, CSG Limited has failed to meet the Target Quota for the period 1 January to 31 December 2009 and therefore may be in breach of its obligations under the Brisbane Dealer Agreement.

The figure of $7,549,592 is inclusive of adjustments made by us based upon information provided by CSG to reflect the reallocation of purchases between CSG's various dealerships in 2009. If CSG does not agree with the accuracy of these results, please advise us in writing within 7 days of the date of this letter providing detailed supporting evidence of any proposed adjustment. If we do not receive such information, we will assume that you accept the accuracy of the dealership's purchases set out above.

Please also advise us within 7 days of the date of this letter of any other matters that you wish FXA to take into account when considering its options in relation to CSG's apparent failure to meet the Target Quota for the Brisbane Dealership.

In the meantime, FXA reserves its rights in relation to this suspected breach by CSG of its obligations under the Brisbane Dealer Agreement, including but not limited to its right to terminate that agreement."

The third document was a letter of the same date from Mr Slater to Mr Mackenzie, relating to the Maroochydore Dealership Agreement. This letter included the following:

"As you know, the Target Quota for the Maroochydore Dealership for the 12 month period ending December 2009 (inclusive) was $1,400,000. We are concerned that with $590,226 of purchases against a target of $1,400,000, CSG Limited has failed to meet the Target Quota for the period 1 January to 31 December 2009 and therefore may be in breach of its obligations under the Maroochydore Dealer Agreement.

The figure of $590,226 is inclusive of adjustments made by us based upon information provided by CSG to reflect the reallocation of purchases between CSG's various dealerships in 2009. If CSG does not agree with the accuracy of these results, please advise us in writing within 7 days of the date of this letter providing detailed supporting evidence of any proposed adjustment. If we do not receive such information, we will assume that you accept the accuracy of the dealership's purchases set out above."

The letter concluded with substantially the same two paragraphs as the letter concerning Brisbane.

The fourth document was Mr Mackenzie's reply of 11 May 2010 to the letter of 30 April 2010. This letter, as his Honour found, was prepared after CSG had received legal advice and indeed was drafted by CSG's lawyers. The reply included the following:

"With regard to recent correspondence on schedule 3 targets, we make the following points:

Â· CSG runs a centralised purchasing function and believes that it is only proper to regard the total volume across all 'Territories'. Darwin and Toowoomba dealerships cannot be excluded.

Â· the 12 months to December 2009 was impacted by the heavy purchasing CSG made in October - December 2008. This was a result of FXA increasing prices effective from early 2009. This price rise came as the market was contracting due to the global financial crisis.

Â· If not for those purchases in late 2008, it is likely that CSG would have met the 2009 schedule 3 targets.

Â· On a 12 month basis from April 2009 to March 2010, CSG is ahead of schedule 3 targets with volumes of $15.8m compared to schedule 3 targets of $15.7m." (Emphasis added.)

The Primary Judgment

The primary Judge observed that FXA had not tendered documents demonstrating that Target Quotas for 2009 had been fixed in the same manner as for the 2008 calendar year. Mr Slater of FXA, the person responsible for setting Target Quotas, had merely given evidence that it was his understanding that the Target Quotas for 2009 had remained unchanged from 2008. That evidence was " bold and conclusory " and could not of itself establish that FXA had fixed the Target Quotas for 2009 in accordance with cl 5 of the Dealership Agreements (at [82], [83]).

Nonetheless, the primary Judge considered that the four documents referred to above (at [51]-[54]), supported a finding that FXA had fixed the Target Quotas for 2009 at the same levels as for 2008. In his Honour's view, it was particularly significant that Mr Mackenzie's letter of 11 May 2010, written with legal advice, did not deny that Target Quotas had been set for 2009. On the contrary, his letter appeared to recognise that Sch 3 Target Quotas had been set for Brisbane and Maroochydore.

His Honour accepted (at [94]) that there was no evidence of any review by FXA and CSG pursuant to cl 5 of the Dealership Agreement. However, cl 5 did not proceed on the basis that Target Quotas could only be reviewed by a meeting between the parties. If the parties did not review the Target Quota, FXA could determine the Quota by reference to the average increase over the previous three years or, if there was no such average, ten per cent. It was open to FXA to conclude that the target Quota should be increased by less than ten per cent or should not be increased at all.

The evidence was sufficient to establish that FXA determined that there should be no increase in the Target Quota between 2008 and 2009 and that it fixed the Target Quota as recorded in the spreadsheet accompanying the email of 26 March 2010 and as stated in the letters of 30 April 2010.

CSG's Submissions

Mr Gleeson SC, who appeared with Mr Sulan for CSG, submitted that the primary Judge had not given sufficient weight to FXA's failure to adduce evidence from Mr Slater as to the process, if any, that led to the 2009 Target Quotas being set at the 2008 levels. His Honour had not taken into account that he was entitled to infer that Mr Slater's evidence could not have assisted FXA. Mr Gleeson submitted that when the evidence was considered as a whole it fell short of establishing that Target Quotas had been fixed in conformity with cl 5. He said that this Court was in as good a position as the primary Judge to evaluate the evidence and he invited the Court to conclude, on the evidence, that no Target Quotas had been fixed for 2009.

Mr Gleeson submitted that cl 5 of the Dealership Agreements required a two stage process for the fixing of Target Quotas. The first stage was an annual review of the Target Quotas which each party had a right to initiate. If the review produced an agreement, the agreed figure would become the Target Quota for the purposes of cl 3.1.2.

The second stage could proceed only if the parties did not undertake the first stage review at all or if the review did not produce agreement within a reasonable time. At that point it was open to FXA to determine the Target Quota by reference to the matters identified in cl 5. Since it was common ground that by 2009, there was not yet an average increase over a period of three years, FXA had to have regard to the figure of ten per cent in cl 5.

Mr Gleeson submitted that it was not open to FXA simply to fix the Target Quotas unilaterally, for example at the beginning of the calendar year. There first had to be an opportunity for review in which both parties could participate. Only if that opportunity had not been availed of (or, if availed of, had not produced an outcome) could FXA make a determination unilaterally. To be validly " determined " for the purposes of Sch 3 to the Dealership Agreement, the determination had to be communicated to CSG, either in writing or verbally.

Mr Gleeson submitted that FXA was the party in a position to prove that the Target Quotas had been set in conformity with cl 5 and that, in particular, the Quotas had been communicated to CSG. Furthermore, since the consequence of a failure to meet the Target Quota was that FXA could terminate the Dealership Agreement, it was incumbent on FXA to produce " clear and weighty evidence " to show that it had made the necessary determination and had communicated it to CSG.

The absence of direct evidence to this effect and the failure of Mr Slater to address the topic should have led the primary Judge to find that FXA had not discharged its burden of proof. The documents relied on by FXA were insufficient. The email of 26 March 2010 and the letters of 30 April 2010 post-dated the relevant events and could not rationally support the conclusion reached by his Honour. CSG's letter of 11 May 2010 was not relevant because CSG subsequently put in issue whether a Target Quota had been set for 2009 in its further Amended Commercial List response.

FXA's Submissions

Mr Smith SC, who appeared with Mr Ng for FXA, did not submit that the evidence established that FXA and CGS had agreed that the Target Quotas for 2009 would remain unchanged from 2008. He was no doubt influenced to take this course because some of FXA's business records were admitted into evidence on the basis that they could not be relied on to establish an agreement between FXA and CGS as to Target Quotas for 2009. However, he contended that the primary Judge was correct to find that FXA had made a determination of the Target Quotas in accordance with cl 5. Mr Smith placed particular reliance on CSG's failure to dispute the assertions made in FXA letters of 30 April 2010.

Mr Smith submitted that there was no basis for an inference that Mr Slater's evidence could not have helped FXA. Mr Slater had given evidence of his understanding as to the setting of the 2009 Target Quotas and had annexed to his affidavit an FXA document, prepared in March or April 2010, which recorded the Target Quotas for 2009. Mr Slater had been cross-examined on the basis that the 2009 Target Quotas had been determined, so that any further evidence from him would have been superfluous.

Mr Smith submitted that there was evidence not specifically referred to by his Honour that supported his Honour's finding that FXA had fixed the 2009 Target Quotas in accordance with cl 5 of the Dealership Agreements. This included evidence of a meeting on 24 June 2009 between representatives of FXA and CSG at which CSG's performance was reviewed and assessed against the Target Quotas for that year. It also included evidence of a Dealer Bulletin (a circular distributed to dealers) which recorded that the targets for 2008 had been used to establish the targets for 2009.

Mr Smith pointed out that it had never been put to the primary Judge that cl 5 required a two stage process or that FXA could not directly proceed to a determination of the Target Quotas. In any event, so he submitted, on the correct construction of s 15 it was a matter for FXA to decide whether a review should take place or whether it should proceed directly to a determination.

Analysis

Mr Gleeson did not dispute that the " two stage " construction of cl 5 of the Dealership Agreements had not been put to the primary Judge. Mr Smith, although drawing attention to this omission, did not contend that CSG was precluded from raising the issue of construction on the appeal. His approach was rather to dispute CSG's contention that cl 5, on its proper construction, prevented FXA from determining the Target Quotas unless it had first offered CSG the opportunity to join in a review.

CSG's submission is difficult to reconcile with the language of cl 5. The first sentence of cl 5 provides that the Target Quota is subject to review by FXA and CSG on an annual basis " as determined by [FXA] ". This suggests that whether or not there is to be an annual review of Target Quotas in which both FXA and CSG participate is a matter for FXA to determine.

I accept that if the first sentence of cl 5 is read in isolation, a possible (although less likely) interpretation of the concluding words is that FXA is to determine the form of the joint review, as distinct from deciding whether a joint review of the Target Quota is to take place at all. However, the next sentence says that " [i]n the event that the parties do not review the quota or cannot agree upon a new target quota within a reasonable time (as determined by [FXA]) ", FXA is to determine the Target Quota. The second sentence of cl 5 does not merely contemplate that a joint review may not produce agreement as to the Target Quota for the current year. The sentence expressly contemplates and makes provision for the case where the parties do not review the Target Quota. In that situation, FXA is to determine the Target Quota.

In my opinion, cl 5 does not require FXA to provide CSG with the opportunity to participate in a joint review of the Target Quota before FXA can determine the Target Quota for a particular calendar year. Clause 5 leaves the decision as to the process for determination in FXA's hands. If FXA decides to make a determination itself, cl 5 requires it to have reference to the average increase over the previous three years or, if there is no such average, to ten per cent. CSG did not suggest that a determination to maintain 2009 Target Quotas at 2008 levels, if made by FXA, was not effective because FXA chose not to increase the Target Quota.

I should add that even if cl 5 can be read as contemplating what Mr Gleeson described as a " two stage " process, it does not necessarily follow that a failure by FXA to invite CSG to participate in a joint review would lead to the invalidity of a unilateral determination by FXA of the Target Quotas. This is particularly so when the determination (assuming it was made) does not increase the Target Quota from the previous year and there is nothing to indicate that CSG objected to the unilateral determination. An objective bystander would not readily construe a clause in a Dealership Agreement as if it were legislation conferring power on a decision-maker subject to judicial review. However, the point was not argued and need not be decided.

While I do not accept CSG's two stage construction of cl 5, I think that Mr Gleeson was correct in his submission that in order for FXA to " determine " the Target Quota for the purposes of cl 5, it had to communicate its decision to CSG. As Mr Gleeson pointed out, a failure by CSG to meet the Target Quota for any twelve month period provided a ground for FXA to terminate the Dealership Agreement for cause (cl 29.1.5.1). Such a termination has serious consequences for CSG (cl 30). The parties could hardly have contemplated that FXA would be entitled to terminate the Dealership Agreement by reason of CSG's failure to meet a Target Quota of which it had never been informed.

Mr Gleeson accepted that FXA could notify CSG of the Target Quota informally, including by a verbal communication. Thus, while a determination of the Target Quota for the purposes of cl 5 involved communication of FXA's decision, cl 5 does not require any particular form of communication.

If Mr Slater's evidence (or lack of it) is put to one side, the primary Judge's finding that FXA determined the Target Quotas for 2009 at the 2008 levels is amply supported by the evidence. The four documents on which his Honour specifically relied point strongly towards FXA having made such a determination and having communicated it to CSG.

Contrary to Mr Gleeson's submission, the spreadsheet attached to the email of 26 March 2010 cannot be dismissed as a non-contemporaneous document of little or no probative value. It is a business record of FXA which recorded as an historical fact that the Target Quotas for Brisbane and Maroochydore were as FXA claimed. Other records of FXA were to the same effect. The 2010 document to which I have already referred (at [48] above) recorded the Target Quotas for 2009 as $9.4 million for Brisbane and $1.4 million for Maroochydore. An FXA document exhibited to Mr Slater's affidavit, apparently prepared in March 2010, recorded the same " Target " for each of Brisbane and Maroochydore.

The letters of 30 April 2010 from Mr Slater to Mr Mackenzie explicitly asserted that the Target Quotas for Brisbane and Maroochydore for the 12 month period ending December 2009 were, respectively, $9.4 million and $1.4 million. Mr Mackenzie's reply, sent with the benefit of legal advice, not only did not dispute the assertions but implicitly accepted that the " 2009 schedule 3 targets " had been set in accordance with cl 5 and that CSG was aware of them. It is difficult to understand why, if Mr Mackenzie and his legal advisers were in any doubt as to whether 2009 Target Quotas had been validly determined and communicated, the reply did not say so. The reply constitutes cogent evidence that FXA had set the 2009 Target Quotas at 2008 levels and communicated its decision to CSG.

There is evidence, not specifically referred to by the primary Judge, which strongly suggests that discussions were held between FXA and CSG relating to the Target Quotas and CSG's difficulties in meeting the targets for certain Territories including Brisbane and Maroochydore. Mr Slater sent an email to Mr Ward of CSG dated 28 May 2009. The email, which was headed " CSG Review ", requested a meeting to discuss performance concerns " around CSG dealerships - Brisbane in particular ". Mr Kugenthiran of FXA gave evidence the meeting with Mr Ward took place in Brisbane on 24 June 2009. According to Mr Kugenthiran's unchallenged evidence, he told Mr Ward that CSG " had an obligation to deliver on our plan and the target ". Mr Ward responded by saying he was prepared to take a friendly bet that by the end of the year CSG would be in the top three in the country.

The inference to be drawn from this evidence is that by 24 June 2009, CSG had been informed by FXA of the 2009 Target Quotas that had been set for Brisbane and Maroochydore. Whether the information was actually conveyed for the first time at the meeting of 24 June 2009 or earlier in the year is not clear. What is clearly to be inferred is that CSG's representatives were told of the Target Quotas.

I have so far put to one side the significance of Mr Slater not giving any evidence as to the process that led to FXA determining that the Target Quotas for 2009 should remain unchanged from 2008, nor as to whether the determination was communicated to CSG. Mr Gleeson relied on the observations in the joint judgment of the majority of the High Court in Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; 276 ALR 375 (Heydon, Crennan and Bell JJ). Their Honours stated (at 393-394 [63]) the relevant principle as follows:

"The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn. These principles have been extended from instances where a witness has not been called at all to instances where a witness has been called but not questioned on particular topics. Where counsel for a party has refrained from asking a witness whom that party has called particular questions on an issue, the court will be less likely to draw inferences favourable to that party from other evidence in relation to that issue." [Citations omitted.]

It will be seen that an unexplained failure to call a witness or to ask questions of a witness on a contested issue " may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case ". This statement reflects the established principle that in a civil trial by judge alone, Jones v Dunkel licences but does not compel the drawing of inferences when a witness is not called or is not asked about matters in dispute: Howell v Macquarie University [2008] NSWCA 26, at [97]-[98] per Campbell JA (with whom Spigelman CJ and Bell JA agreed).

The primary Judge cannot legitimately be criticised for not adverting to the principle stated in Kuhl v Zurich. I accept that, although Kuhl v Zurich was not decided until after the primary judgement was handed down, there was existing authority to the same effect: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389, at 418-419, per Handley JA. However, the principle was not drawn to his Honour's attention and, as Mr Gleeson accepted, his Honour was not invited to conclude that Mr Slater's evidence would not have been helpful to FXA.

Mr Gleeson nonetheless submitted that this Court should take the principle into account in determining whether the primary Judge's finding on Target Quotas was correct. There are two reasons, however, why I do not think that, in the circumstances of this case, an inference should be drawn that Mr Slater's evidence would not have assisted FXA's case.

First, Mr Slater was not entirely silent on the question of the Target Quotas for 2009. He said in his affidavit that CSG's targets for 2009 were the same as in 2008. That assertion was admitted only as evidence of his understanding. While his understanding was not probative of the proposition that the 2009 Target Quotas had been determined at 2008 levels in accordance with cl 5, it at least indicated that he did not affirmatively believe that the Target Quotas had never been so determined. Moreover, by exhibiting to his affidavit documents recording the 2009 Target Quotas he provided a basis for his understanding.

Secondly, and more importantly, when the totality of the evidence is considered it comfortably supports a finding, on the balance of probabilities, that FXA determined that the Target Quotas for 2009 should be unchanged from 2008 and that FXA duly communicated that determination to CSG on or prior to 24 June 2009. Even if an inference could be drawn that Mr Slater's evidence was not helpful to FXA, that inference would not outweigh the substantial documentary evidence supporting the finding made by the primary Judge. Accordingly, CSG's challenge to the finding that FXA determined the Target Quotas for 2009 at the same levels as 2008 must be rejected.

Mr Gleeson did not press a ground in CSG's draft notice of appeal that CSG had in any event complied with the 2009 Target Quotas. It follows that the primary Judge was correct to conclude that CSG breached cl 3.1.2 of the Dealership Agreements and that FXA was entitled to terminate each Dealership Agreement by reason of CSG's breach of an essential Term of the Agreement.

REASONING: CONFLICT OF INTEREST

The second issue is whether the primary Judge correctly found that CSG breached cl 29.1.4 of the Dealership Agreement by having a potential conflict of interest and failing to put in place measures which sufficiently reduced or eliminated the potential for that conflict of interest. His Honour found that this breach constituted an independent basis for FXA's termination of the Dealership Agreements.

Primary Judgment

FXA contended at the trial that CGS had breached cl 29.1.4 of the Dealership Agreement in a number of respects. His Honour rejected all but one of FXA's contentions. The contention he upheld was that CGS's actions created a conflict of interest or at least a potential conflict of interest when it made a commitment to churn FXA's MFDs to Canon once the Dealership Agreements was terminated and FXA exercised the Brisbane Option. His Honour found that the commitment to churn FXA's MFDs to Canon involved a direct conflict with CSG's obligations under cl 30.1.4 (to co-operate with FXA in establishing an alternative dealer in the relevant territory) and, if applicable, cl 37.2.2 (requiring CGS to assign to FXA all FSMAs following termination of the Dealership Agreements).

The primary Judge found (at [128]-[131]) that in meetings that took place on 27 April and 29 April 2010, representatives of CSG committed to transferring to Canon Brisbane's MIFs. His Honour accepted (at [137]) that CSG had not attempted to " churn " FXA's products to Canon prior to CSG's exercise of the Brisbane Option. Indeed, the primary Judge found that CSG actually bought more FXA products between May and August 2010 (the period from entry into the Canon agreements until termination of the Dealership Agreements), than it had done during the corresponding months of 2009. However, CSG had a substantial incentive to maximise the churn of FXA's customers to Canon. Clause 8.1 of the Implementation Agreement between Canon and CSG provided that for a period of four years after completion of the Agreement Canon would pay a " Bounty " for each FXA machine, up to a limit of 6,000 machines. The Bounty was payable in respect of each FXA machine serviced by CSG at completion, where that machine was replaced with a Canon branded machine.

Although the primary Judge did not specifically refer to the evidence of Mr McLaine (CSG's chief financial officer) on this topic, he explained the negotiated agreement between FXA and CSG as follows:

"Q. And whilst you say there was no legal objection to churn the MIF, that is certainly what Mr Mackenzie told the Canon representatives he proposed to do, correct?

A. Yeah, it was part of the arrangement, yes, what he was thinking.

Q. And an important part, was it not?

A. For us, yes.

Q. Because churning the Brisbane MIF after termination would involve, I suggest, the following features: first, on exercise of the Brisbane option under the agreement ultimately concluded with Canon, as you understood it, CSG incurred a debt of $5 million in respect of the acquisition of rights to subcontract Canon's Brisbane MIF, correct?

A. Yes.

Q. Second, that MIF was expected to be in the order of 2,000 machines?

A. At the time it was, yes.

Q. Third, CSG negotiated and obtained a right to reduce that $5 million debt by the sum of $1,000 for each FXA machine that was transferred to Canon, correct?

A. Yes.

Q. Fourth, there was a limit on the $1,000 entitlement up to 6,000 machines, correct?

A. Yes, I believe that's correct.

Q. Fifth, if all of the 6,000 MIF was churned, CSG would not have to pay $5 million for the Canon Brisbane MIF; do you agree?

A. Yes.

Q. And it would end up with $1 million in its pocket, correct?

A. Yes."

The primary Judge concluded (at [142]) that the promise to churn customers to Canon was in direct conflict with CSG's obligations to use commercially reasonable co-operation in establishing any intended alternative dealer including assignment or novation of existing customer maintenance contracts (cl 30.1.4). His Honour considered (at [144]) the position to be clear:

"Stepping back from the detail for a moment: in substance, what CSG undertook to Canon was that it would take from FXA the benefit of the MIF that CSG had maintained and built up for it in Brisbane, pursuant to the dealer agreement, and give the benefit of that MIF to Canon. How it could be argued that such an undertaking was not in conflict with the legitimate expectations and interest of FXA under the Brisbane dealer agreement is something that I have difficulty in understanding."

The primary Judge found that FXA did not become aware of the facts relating to CSG's conflict of interest until after proceedings were commenced. Accordingly, it did not rely on these facts in its notice of termination of the Brisbane Dealership Agreement. However, on the authority of Shepherd v Felt and Textiles of Australia Ltd [1931] HCA 21; 45 CLR 359, it was open to FXA to rely on CSG's breach of cl 29.1.4 even though it was not identified in the notice.

CSG's Submissions

CSG submitted that cl 29.1.4, on its proper construction, applied only to conflicts or potential conflicts arising during the period in which the Dealership Agreement was on foot. Once the Agreement was terminated, CSG and FXA were bound to be in conflict as CSG would be pursuing its legitimate commercial interests. Mr Gleeson pointed out that the Dealership Agreement did not contain a restraint of trade clause which operated after terminations to prevent CSG exploiting business opportunities.

CSG also submitted that the primary Judge had erred in finding that a potential conflict of interest could be created in relation to the performance of CSG's obligations under cl 30.1.4 of the Dealership Agreement. This submission assumed that cl 30.1.4 imposed obligations on CSG only if FXA decided to appoint a new dealer for the relevant territory (rather than deciding to deal directly with customers). Mr Gleeson contended that, as his Honour found that FXA decided not to appoint an alternative dealer for Brisbane, no potential conflict of interest could arise from CSG's commitment to transfer its Brisbane MIFs to Canon.

Analysis

Clause 29.1.4 of the Brisbane Dealership Agreement refers to a " potential conflict of interest ". Mr Gleeson submitted that the phrase " potential conflict of interest " should be given the meaning attributed to the expression " possible conflict of interest " in Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; 156 CLR 41, at 103, per Mason CJ (following Phipps v Boardman [1967] 2 AC 46, at 124, per Lord Upjohn). Lord Upjohn said that the expression meant that:

"the reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict; not that you could imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in a conflict."

I am content to adopt this construction of " potential conflict of interest " for present purposes.

A potential conflict of interest in the sense identified by Lord Upjohn may take many forms. However, the expression at least includes actions by CSG which create a significant incentive for it to breach its obligations under the Dealership Agreement, including obligations which continue after termination of the Agreement. There is nothing in the language of cl 29.1.4 to confine its operation to actions which take place during the currency of the Agreement. Indeed, the Brisbane Dealership Agreement expressly provided (cl 43) that certain obligations were to survive termination of the Agreement. These included cl 30.1.4, which obliged CSG to provide commercially feasible co-operation to FXA and to any intended alternative dealer in establishing an alternative dealer in the relevant territory.

As the primary Judge found (at [200]), the purpose of cl 30.1.4 was to protect FXA's MIFs in the territories upon termination. His Honour also found (at [204]) that in the negotiations between Canon and CSG, both regarded the MIFs to be churned as FXA's MIFs. This was consistent with the understanding of the industry that FXA had " a very real interest in protecting 'its' [MIFs] " (at [205]).

As the primary Judge's findings indicate, CSG's actions created, from the perspective of the reasonable bystander, a real and sensible possibility that CSG would experience a conflict between its commercial interests and its obligation to perform its post-termination obligations. If CSG decided to perform those obligations to the letter, it would have to ignore the very strong financial incentive to take a different course. In reaching this conclusion, I have not overlooked Mr McLaine's denial of the proposition that by 30 April 2010 it was clear that it was in CSG's interests to maximise the number of MIFs available to be churned on termination of the Brisbane Dealership Agreement. The issue is not what Mr McLaine thought but, in CSG's own case, what a reasonable bystander would think in the circumstances.

The actions found by his Honour to have created the potential conflict of interest took place during the currency of the Brisbane Dealership Agreement. Even if cl 29.1.4 was subject to an implied temporal limitation, the potential conflict arose while the Dealership Agreement was on foot, notwithstanding that an actual conflict between CSG's contractual obligations and its commercial interests may not have occurred until after FXA terminated the Agreement. It follows that CSG breached cl 29.1.4 prior to FXA terminating the Agreement.

CSG's second submission encounters two obstacles. Assuming that CSG's interpretation of cl 30.1.4 is correct, the submission overlooks that the primary Judge found that at the time CSG made its commitment to Canon, FXA had not finally decided - and had certainly not decided to CSG's knowledge - that FXA would deal directly with its Brisbane customers. Thus on the information available to CSG, its actions in making a commitment put it in a position of where its interests would almost inevitably conflict with FXA's interest in ensuring that CSG would observe its post-termination obligations. A reasonable person looking at the circumstances would conclude that there was a " real sensible possibility of conflict ". The possibility was not merely theoretical or " conceivable ".

The other difficulty is that cl 30.1.3 of the Dealership Agreement required CSG, following termination of the Agreement, to continue to perform services to FXA's customers to the extent possible. Independently of cl 30.1.4, therefore, CSG's actions put it in a position of potential conflict of interest for the purposes of cl 29.1.4.

There was a suggestion in interchanges between Mr Smith and the bench on the appeal that CSG could have avoided an actual conflict of interest by postponing the exercise of the Brisbane Option until its post-termination obligations under the Dealership Agreement had been fully performed. I did not understand Mr Gleeson to take up the suggestion as part of his submissions. In any event, I do not think it is an answer to the findings made by the primary Judge.

FXA was entitled to terminate the Brisbane Dealership Agreement if CSG had a potential conflict of interest and the terms of cl 29.1.4 were otherwise satisfied. The potential conflict was the commitment made by CSG to churn FXA's MIFs to Canon once FXA terminated the Brisbane Dealership Agreement and CSG exercised the Brisbane Option. The primary Judge made no finding and we were not taken to any evidence suggesting that CSG would postpone exercising the Brisbane Option until it had fulfilled all its post-termination obligations to FXA. Independently of its need to obtain another source of revenue to replace its dealership with FXA, cl 8.1 of the Implementation Agreement provided CSG with a powerful incentive to commence churning MIFs to Canon as soon as possible after FXA terminated the Dealership Agreement. As his Honour found, CSG fully expected FXA to terminate the Queensland Dealership Agreements if CSG reached an agreement with Canon.

FXA'S Notice of Contention

Because I have concluded that his Honour was correct to find that CSG's commitment to churn FXA's MFD constituted a potential conflict of interest for the purposes of cl 29.1.4 of the Dealership Agreement, it is not necessary to consider FXA's notice of contention. However, it is appropriate to comment briefly on the issues raised by it.

The notice of contention sought to uphold the primary Judge's finding that CSG had a potential conflict of interest on two of the grounds rejected by his Honour. FXA contended that his Honour should have found that:

the very existence of the Brisbane Option, coupled with the incentive created by cl 8.1 of the Implementation Agreement (providing for a payment for each MIF churned Canon), created a potential conflict of interest within the meaning of cl 29.1.4 of the Dealership Agreement; and
CSG's appointment as a Canon dealer for territories outside Queensland created a potential conflict of interest, in that if CSG's customers outside Queensland sought to acquire or upgrade MIFs in Brisbane or Maroochydore, CSG would have supplied them with Canon's products rather than FXA's products.

The primary Judge rejected FXA's first contention on the ground (at [137]) that CSG retained commission agents to sell on its behalf in the territories and these agents controlled the churn of MIFs. His Honour accepted CSG's submission that the agents would act in their self-interest, by churning all customers who were ripe to be churned to FXA. Moreover, there was no evidence that CSG directed agents to slow down or delay the churning of their customers' MIFs to FXA's products pending the exercise of the Brisbane Option. On the contrary, his Honour found (as I have noted), that CSG bought more of FXA's products between May and August 2010 than it had in the corresponding period the previous year.

The primary Judge rejected the second contention on the ground (at [147]-[148]) that when CSG sold FXA's products out of territory, the sale was conducted by CSG in the territory in which the sale actually occurred. In the case of Brisbane, this meant that the relevant agent would control the sale of FXA's MFDs, both within the Brisbane territory and to branches of customers located outside the territory. These agents " controlled the churn " and had only FXA's products to sell. They therefore had no interest in selling, nor any ability to sell, Canon's products outside the territory.

Had it been necessary to do so I would have upheld FXA's first argument. FXA did not dispute the finding that CSG's agents in the Brisbane territory had an incentive to churn MIFs to FXA. However, the answer to the question of whether CSG's actions created a potential conflict does not depend on whether it had agency arrangements in place at the time it entered into the formal arrangements with Canon. The question is whether (to use the language of Lord Upjohn in Phipps v Boardman ) CSG's actions, viewed from the perspective of the reasonable bystander, created a " real sensible possibility of conflict ".

By entering into the agreements with Canon, CSG created an extremely powerful financial incentive for it to maximise the churn of FXA's MIFs to Canon, rather than to FXA. As events transpired, CSG apparently resisted temptation and did not seek to terminate their own agency agreements or to take other measures to delay churn of the MIFs until it exercised the Brisbane Option. But as soon as CSG created the financial incentive for itself, a reasonable bystander would conclude that there was a real possibility of conflict in that CSG might well be induced to take measures designed to maximise churn of MIFs to Canon. Any such measures would adversely affect FXA's interests.

I would not have upheld FXA's second contention. I think that CSG was correct to submit that the Brisbane Dealer Agreement did not restrict CSG's operations outside the defined territories. The evidence to which our attention was drawn did not establish that there would be anything more than a theoretical risk of a conflict of interest arising out of extra-territorial sales.

REASONING: POST-TERMINATION ORDERS

The third issue concerns CSG's attack on one of the declarations and certain of the orders made by the primary Judge. This attack is not dependent on CSG succeeding on the first two issues I have identified. CSG's position is that even if FXA was entitled to terminate the Dealership Agreements, the primary Judge misconstrued cll 30.1.4 and 37.2.2 and thus imposed unwarranted post-termination obligations on CSG.

The Declaration and Orders

In the First Judgment, the primary Judge made a declaration " in terms of prayer 3 of the second further amended summons ("2 FAS")". Prayer 3 of the 2 FAS sought a declaration that:

"following termination of the dealer agreements, [CSG] contractually bound to:

a) ...

b) ...

c) provide commercially reasonable cooperation to [FXA] to procure the novation to [FXA] of existing maintenance contracts which [CSG] had with customers."

His Honour also made an order that the obligations described in prayer 3 of the 2 FAS be specifically performed and put into execution (Order 4).

In addition, his Honour made an order in terms of prayer 5 of the 2 FAS. Prayer 5 sought the following orders:

"a) in respect of each agreement styled 'Full Service Maintenance Agreement' to which [CSG] is a party, ... [CSG] must execute and deliver, or cause to be executed and delivered, to [FXA] a deed in the terms of the deed annexed ...; and

b) in respect of each agreement styled 'Full Xerox Finance Docu/mation Agreement' to which [CSG] is a party ... [CSG] must execute and deliver, or cause to be executed and delivered, to [FXA] a deed in the terms of the deed annexed ..."

The deed referred to in prayer 5(a) was styled a " Deed of Novation ". The Deed of Novation contemplated that the customer would execute the deed and substituted FXA for CSG as a party to the FSMA. Under the deed, the customer released CSG from its obligations under the FSMA and FXA assumed these obligations. The deed referred to in prayer 5(b) was also described as a " Deed of Novation ".

Following the Second Judgment, the primary Judge made, inter alia, the following orders on 16 December 2010:

"7. Until 5.00 pm on 28 January 2011 the first defendant will, by itself, its servants and its agents:

a. not solicit an FXA customer for the purpose of persuading that customer to acquire a non-FXA MFD, replace its FXA MFD or churn an FXA MFD contract without first obtaining FXA's written consent;

b. not seek to vary any term or condition of a FSMA with any FXA customer without first obtaining FXA's written consent;

c. not seek to churn, change or vary any finance arrangement or the identity of any financier financing an FXA customer without first obtaining FXA's written consent;

d. not seek to persuade or solicit any FXA customer not to novate its service and maintenance contract to FXA;

8. The first defendant will procure its subsidiaries to comply with Order 7, where a subsidiary, and not CSG, does any act referred to.

9. The first defendant will not instruct, facilitate or encourage any third party to perform conduct that would breach Order 7, had such conduct been undertaken by CSG, its agents or subsidiaries."

Notice of Appeal

CSG's draft notice of appeal contains the following grounds:

"4. The primary judge erred in construing clause 30.1.4 of the Dealer Agreements as having any application:

4.1 in circumstances where the respondent had not appointed an alternative dealer in the territory ...;

4.2 so as to impose a restraint of trade upon the appellant as an incidence of the obligation to provide commercially reasonable cooperation to procure the novation of customer maintenance contracts ....

5. The primary judge erred in construing clause 37.2.2 of the Dealer Agreements as having any application:

5.1 so as to require the appellant to novate to the respondent the customer maintenance agreements;

5.2 in circumstances where the respondent had not exercised its right under clause 14.1.7 of the Dealer Agreements to require the appellant to include a clause which made the customer maintenance agreements capable of assignment ...

6. By reason of grounds 4 and 5 the primary judge erred in:

6.1 making declaration 3 and orders 4 and 5 (so far as they related to prayer 3(c) and 5 of the [2 FAS];

6.2 ...

6.3 making orders 7, 8 and 9 of the 16 December 2010 orders."

Primary Judgment

The primary Judge noted (at [189]) that CSG had argued that cl 37.2.2 of the Dealership Agreement could not found an order for novation of the FSMA because the sub-clause was limited to post-termination obligation to assign the FSMAs. Clause 37 is reproduced at [24] above.

The primary Judge observed (at [189]) that it had been common ground that the FSMAs between CSG and its customers were not capable of assignment. However, cl 37.2.2 was not to be construed in a vacuum (at [190]). FXA and CSG had substantial industry experience and must have understood that the FSMAs were not capable of assignment. Clause 37.2.2 was not to be construed as creating a meaningless and unenforceable obligation.

Furthermore, cl 30.1.4 (reproduced at [21] above) required CSG to provide co-operation in establishing an alternative dealer including " the assignment or novation of existing [FSMAs] under cl 37.2.1 ". It was common ground that the reference to cl 37.2.1 was intended to be to cl 37.2.2. According to his Honour (at [191]), cl 30.1.4 showed that:

"the parties intended that the right and obligation given by cl 37.2.2 was for FXA to require and for CSG to effect ' assignment or novation of existing Customer maintenance contracts '."

The primary Judge rejected CSG's submission that cl 30.1.4 was not engaged following termination of the Dealership Agreement because FXA had not appointed an alternative dealer. His Honour reasoned as follows (at [199]-[201]):

"The purpose of cl 30.1.4 is to enable FXA and any intended alternative dealer to establish that alternative dealer in the territories. The word ' dealer' is not defined. In context, it must refer to a person who deals in FXA's ' Products ' as defined in cl 2.1. FXA deals in such goods because it distributes them throughout Australia. If, in addition, it sold them directly (through sales agents) in the territories, it would deal in them in that way also. Clearly, the parties contemplated that FXA might itself sell goods in the territory (see cl 2.1). Why would they think that, in the event of termination, FXA might not sell goods itself in the territory, rather than through another dealer? Why would they not intend the obligations of cl 30.1.4 to extend when FXA did take the latter course, as well as when it took the former?

In general terms, the purpose of the dealer agreements, from FXA's perspective, was to maintain and build up FXA's business in the territories - in particular, its MIF. The evident purpose of cl 30.1.4 ... is to protect FXA's MIF in the territories upon the termination of the agreements. That purpose is as much applicable where FXA itself becomes the dealer as it is where FXA appoints a third party as dealer.

In my view, the construction for which [CSG] contends is subversive of that purpose. And the language used - in particular, ' establishing an alternative dealer in the Territory ' - is not so intractable as to require that in context, the word ' dealer ', although it may include anyone but FXA, necessarily excludes FXA."

Submissions

CSG's Submissions

CSG submitted that there was no ambiguity in cl 30.1.4. The Dealership Agreement drew a clear distinction between FXA and its appointed dealers. The express language and commercial context of cl 30.1.4 demonstrated that the reference to " dealer " could not be construed to include FXA itself supplying goods or services within a territory.

Mr Gleeson contended that if this construction of cl 30.1.4 was correct, the only provision which could require CSG, following termination of the Dealership Agreement, to novate FSMAs was cl 37.2.2. There were no express words in cl 37.2.2 which required novation of FSMAs. On the contrary, cl 37 itself recognised the distinction between novation and assignment and the obligation created by cl 37.2.2 was deliberately limited to assignment of the FSMAs. Furthermore, it was not permissible to import words from cl 30.1.4 into cl 37.2.2 to create an obligation which otherwise did not exist. Clause 30.1.4, which applied whatever the circumstances of termination, dealt with a different situation than cl 37.2.2, which applied only when the Dealership Agreement was terminated pursuant to cl 29.1.

In the course of his oral submissions in this Court, Mr Gleeson sought to withdraw the concession made on behalf of CSG at the trial that cl 30.1.4 was intended to refer to cl 37.2.2 and not to cl 37.2.1. He submitted that it made more sense to read cl 30.1.4 as if it were intended to refer to cl 37.1 (although this would also attribute a mistake to the wording actually used in cl 30.1.4). If cl 30.1.4 lent no support to a reading of cl 37.2.2 that included not only an assignment but a novation of the FSMAs.

FXA's Submissions

FXA submitted that the undefined expression " alternative dealer " was broad enough to include FXA itself if it chose to deal directly with customers rather than through an appointed dealer. Mr Smith accepted that if FXA's sale distribution channel was through appointed dealers, there might have been a justification for reading the expression " alternative dealer " as excluding FXA. But in the absence of evidence demonstrating that FXA distributed only through dealers why (Mr Smith asked rhetorically) would FXA have fettered its range of business options in this way?

Mr Smith submitted that the obvious purpose of cl 37.2.2 was to protect FXA's interests, after it had terminated the Dealership Agreement pursuant to cl 29.1, by allowing it to obtain the benefit of FSMAs in effect at the date of termination. Since the FSMAs could not be assigned (as was common ground), unless " assign " was read as including novation cl 37.2.2 would serve little or no practical purpose.

Mr Smith did not suggest that the word " assign " would ordinarily be read as including novation. However, in this case it was necessary to reconcile cl 30.1.4 (assuming that the cross-reference was to cl 37.2.2) and cl 37.2.2. The way to reconcile the two was to read cl 37.2.2 as accommodating novation of the FSMAs. This construction received support from the fact that cl 30.1.4 contemplated that not only the benefits of the FSMAs could be transferred, but also the burdens. The only way this could be done was through novation of the FSMAs.

Analysis

The Agreement

It is convenient to deal first with Mr Gleeson's submission that CSG should be entitled to withdraw from the agreed position at trial as to the intended wording of cl 30.1.4. Mr Smith objected to CSG being permitted to take a different course on appeal. He submitted that had CSG not accepted that cl 30.1.4 was intended to refer to cl 37.2.2, FXA may well have given consideration to other issues. For example, it might have investigated how the apparent mistake came about and whether FXA should have sought rectification of the Dealership Agreement.

Mr Smith's submission may have been difficult to sustain if the parties had reached agreement only during final submissions at the trial (as Mr Gleeson, on instructions, first suggested). However, it emerged subsequently that the agreement had in fact been reached between the parties at a directions hearing, some six weeks before the trial. In these circumstances, CSG should not be permitted to resile on appeal from the basis on which this aspect of the trial was conducted: see Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418.

Clause 30.1.4

FXA's construction of cl 30.1.4 encounters the difficulty that the Dealership Agreement very clearly distinguishes between FXA's dealers supplying goods and services within a territory and FXA itself supplying goods and services. Clause 2.1, having referred to the appointment of a " Dealer " and to " dealer price books ", states that nothing in the Dealership Agreement

"prevents [FXA] from appointing other dealers or agents, or itself supplying any goods and services, within the Territory." (Emphasis added.)

This language shows that the Dealership Agreement was drafted on the basis that there were two distinct models for the sale or distribution of FXA's products. One such model was through a dealer; the other was through FXA itself dealing directly with customers.

Clause 30.1.4 obliged CSG, once the Dealership Agreement expired or was terminated, to provide commercially reasonable co-operation to FXA and any " intended alternative dealer in establishing an alternative dealer in the Territory ". When the Dealership Agreement is read as a whole, cl 30.1.4 was clearly intended to apply only where FXA decided to replace the outgoing dealer with a new dealer. The language of cl 30.1.4 is simply not apt to require the outgoing dealer to provide co-operation to FXA where FXA decides not to appoint a replacement dealer, but to distribute products directly to customers.

Clause 37.2.2

In principle, the distinction between the novation of a contract and the assignment of a contract is clear, although the results in each case may be similar. The classic statement, made in reference to a debt, is that of Windeyer J in Olsson v Dyson [1969] HCA 3; 120 CLR 365, at 388:

"That the result of a novation may be the same, or much the same, as if there had been an effective assignment is not surprising. At one stage of the history of our law, when debts were not freely assignable at law, novation was a common method of circumventing the common law rule and accomplishing the same result as can now be accomplished directly by assignment pursuant to the statute. Novation can still be used as it was in earlier times. It can still be the means to the end which the law now allows to be reached by other means. The ultimate distinction, in juristic analysis, between a transfer of a debt by assignment and by novation is simple enough. Novation is the making of a new contract between a creditor and his debtor in consideration of the extinguishment of the obligations of the old contract: if the new contract is to be fully effective to give enforceable rights or obligations to a third person he, the third person, must be a party to the novated contract. The assignment of a debt, on the other hand, is not a transaction between the creditor and the debtor. It is a transaction between the creditor and the assignee to which the assent of the debtor is not needed. The debtor is given notice of it; for notice is necessary to complete an assignment pursuant to the statute or in the case of an equitable assignment to preserve priorities. But the debtor's assent is not required. He is not a party to the transaction."

The distinction has perhaps become a little less distinct now that it has been held that a party to a contract can prospectively authorise a novation to be made by another party unilaterally: Leveraged Equities Ltd v Goodridge [2011] FCAFC 3; 191 FCR 71, at 108-110 [299]-[317], per Jacobson J (with whom Finkelstein and Stone JJ agreed); Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40; 149 FCR 395, at [32], per Finn and Sundberg JJ. Thus, while it remains the law that the burden of a contract cannot be assigned ( Pacific Brands , at [32]), a party to a contract may agree in advance that a third party can later assume the obligation to perform the contract.

Clause 37 of the Dealership Agreement is headed " Assignment and Novation ". On a first reading, the clause distinguishes between the assignment and the novation of an FSMA or other customer agreement. Clause 37.1 provides that the Dealer may not " assign or novate a customer agreement " without FXA's consent. By contrast, cl 37.2 twice refers to requiring the Dealer " to assign " contracts or contractual rights without reference to an obligation to novate. In particular, cl 37.2.2 gives FXA the option, upon termination of the Dealership Agreement, to require CSG to assign to FXA any or all agreements of the kind mentioned. There is no mention in cl 37.2.2 of CSG being obliged to novate the FSMAs or, more accurately, to take such steps as might be open to it to procure novation of the FSMAs, (bearing in mind that the novation of an FSMA requires the consent of the customer). The contrast between cl 37.1 and cl 37.2 supports CSG's contention that cl 37.2.2 does not oblige it to join in the novation of the FSMAs current at the date of termination of the Dealership Agreement.

However, the construction of cl 37.2.2 has to take account of two other important textual indications as to its intended scope. The first is cl 37.2.1, which provides that FXA may " assign its rights and obligations under [the Dealership] Agreement " to a related corporation without CSG's consent. Clause 37.2.1 is drafted on the incorrect assumption that an assignment of a contract may include not only the benefit of the contract but its burden. The obvious intention underlying cl 37.2.2 can be given effect only if the word " assign " is understood to include a novation of FXA's obligation under the Dealership Agreement. So understood, cl 37.2.2 must be read as recording CSG's prospective consent to FXA's unilateral decision to novate the burden of the Dealership Agreement to a related corporation.

The second important textual matter is cl 30.1.4. As the parties agreed before the primary Judge, cl 30.1.4 required CSG to co-operate with FXA in establishing an alternative dealer in the territory and such co-operation was to include the assignment or novation of existing FSMAs under cl 37.2.2. When cl 30.1.4 is read as including a cross-reference to cl 37.2.2, cl 30.1.4 clearly assumes that cl 37.2.2 obliges CSG to co-operate in novating FSMAs to FXA or a nominated third party, should FXA terminate the Dealership Agreement.

Clause 37.2.2 must be construed in the context of the Dealership Agreement as a whole. When cl 37.2.2 is read with cll 30.1.4 and 37.2.1, the word " assign " must be interpreted to include such actions within CSG's power as will result in the burden of FSMAs and the other agreements referred to in cl 37.2.2 being novated to FXA or to a nominated third party. This interpretation is consistent with the meaning of " assign " in cl 37.2.1 and with the assumption expressly incorporated in cl 30.1.4.

Accordingly, cl 37.2.2 required CSG, in the event of termination of the Dealership Agreement, to perform all acts within its power necessary to procure the novation of the FSMAs and other identified agreements to FXA or to its nominated third party.

Conclusion on Post-Termination Orders

The parties' submissions did not specifically address the consequences for the orders made by the primary Judge, if any, that would flow from concluding that:

cl 30.1.4 applied only when FXA decided to replace an outgoing dealer with a new dealer and did not apply where FXA decided not to appoint a replacement dealer, but to distribute products directly to customers; but
cl 37.2.2 required CSG, in the event that FXA terminated the Dealership Agreement, to perform all acts within its power necessary to procure the novation of the FSMAs and other identified agreements to FXA or to nominated third party.

The parties should be given an opportunity to make written submissions as to the consequences, if any, that flow from these conclusions.

ORDERS

With one exception, I have rejected CSG's grounds of appeal. The exception is that I have concluded that his Honour erred in construing cl 30.1.4 of the Dealership Agreement to apply in circumstances where FXA decided not to appoint a replacement dealer for CSG, but to distribute products directly to customers. I have indicated that the parties should have an opportunity to make written submissions as to the consequences, if any, of the error I have identified.

I propose the following orders:

1. Grant CSG leave to appeal.

2. Direct CSG to file a notice of appeal within 7 days.

3. Direct the parties to file agreed short minutes of order giving effect to this judgment (including any question of costs) within 14 days.

4. If no agreement can be reached, direct:

(a) CSG to file and serve within 14 days short minutes of the orders that it says should be made (including on any question of costs), together with brief written submissions (not exceeding four pages) in support of those proposed orders; and

(b) FXA to file and serve within a further 14 days short minutes of the orders that it says should be made (including on any question of costs), together with brief written submissions (not exceeding four pages) in support of those proposed orders.

**********

Decision last updated: 04 November 2011

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Cited Sections

Medium Neutral Citation:	CSG Limited v Fuji Xerox Australia Pty Ltd [2011] NSWCA 335
Hearing dates:	21 July 2011
Decision date:	04 November 2011
Before:	Bathurst CJ at 1 Campbell JA at 2 Sackville AJA at 3
Decision:	1. Grant the applicant (" CSG ") leave to appeal. 2. Direct CSG to file a notice of appeal within 7 days. 3. Direct the parties to file agreed short minutes of order giving effect to this judgment (including any question of costs) within 14 days. 4. If no agreement can be reached, direct: (a) CSG to file and serve within 14 days short minutes of the orders that it says should be made (including on any question of costs), together with brief written submissions (not exceeding four pages) in support of those proposed orders; and (b) the respondent to file and serve within a further 14 days short minutes of the orders that it says should be made (including on any question of costs), together with brief written submissions (not exceeding four pages) in support of those proposed orders. [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 - dealership agreements relating to multi-function photocopiers - whether the supplier had determined "target quotas" in accordance with the agreements - whether dealer had breached agreements by creating potential conflict of interest - whether dealer entitled to terminate agreements for breach of essential conditions - whether the word "assign" in dealership agreements includes novation of service contracts between dealer and customers
Cases Cited:	Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; 156 CLR 41 Howell v Macquarie University [2008] NSWCA 26 Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; 276 ALR 375 Leveraged Equities Ltd v Goodridge [2011] FCAFC 3; 191 FCR 71 Olsson v Dyson [1969] HCA 3; 120 CLR 365 Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40; 149 FCR 395 Phipps v Boardman [1967] 2 AC 46 Shepherd v Felt and Textiles of Australia Ltd [1931] HCA 21; 45 CLR 359
Category:	Principal judgment
Parties:	CSG Limited (Applicant) Fuji Xerox Australia Pty Ltd (Respondent)
Representation:	Counsel: J Gleeson SC with D Sulan (Applicant) RM Smith SC with G Ng (Respondent) Solicitors: DLA Phillips Fox (Applicant) Corrs Chambers Westgarth (Respondent)
File Number(s):	2011/56823
Decision under appeal	Citation: [2010] NSWSC 1258 Date of Decision: 2010-11-23 00:00:00 Before: McDougall J File Number(s): 2010/281890