Flemdale Pty Ltd t/a Xerox Business Centre v Gripske and Sons P/L

[2005] QDC 412

DISTRICT COURT OF QUEENSLAND

CITATION:	Flemdale Pty Ltd T/AS Xerox Business Centre v Roy Gripske & Sons Pty Ltd and Paul Gripske [2005] QDC 412
PARTIES:	FLEMDALE PTY LTD T/AS XEROX BUSINESS CENTRE

Plaintiff

ROY GRIPSKE & SONS PTY LTD

First Defendant

PAUL GRIPSKE

Second Defendant

FILE NO/S:	BD3589 of 2003
DIVISION:	Civil
PROCEEDING:	Trial
ORIGINATING  COURT:	District Court, Brisbane
DELIVERED ON:	24 November 2005
DELIVERED AT:	Brisbane
HEARING DATE:	11 August 2005
JUDGE:	Nase DCJ
ORDER:
CATCHWORDS:
COUNSEL:	Mr M.P van der Walt for the Plaintiff Mr P.D Lane for the Defendants
SOLICITORS:	Hopgood Ganim Lawyers for the Plaintiff Lippiatt & Co for the Defendants

[1]      The issue in this action is a question of construction of a clause in a rental agreement.

[2]      The Plaintiff is Flemdale Pty Ltd (Xerox). The First Defendant is Roy Gripske & Sons Pty Ltd (Gripske). In early June 2000 Gripske entered into a five year rental of photocopying equipment from Xerox for use in its business. The Second Defendant, Paul Gripske, guaranteed the First Defendant’s payments under the rental agreement.

[3]      The rental agreement is styled a “Facilities Management Program”. The agreement consists of a proforma sheet setting out details of the customer (Gripske), the equipment rented, and the general details of the rental, together with another document containing the “terms and conditions” of the rental.

[4]      The rental agreement was varied on three occasions: 14 March 2001, on or about 30 April 2001[1], and 28 November 2002[2]. The issue between the parties is whether the figure entered in the third variation as the “total print volume” is the total print volume for the life of the rental (as Gripske contends), or is the total print volume only for the period from the third variation to the end of the rental (as Xerox contends). If Gripske’s interpretation is correct the rental ended around mid 2003, approximately three years into the five year rental period specified in the rental agreement.

[1]            This was an informal variation of the document not signed by Xerox as required by the rental agreement: see clause 26.1.

[2]            For convenience the variations will be referred in these reasons as the first second and third variation respectively. Each of the variations is on a proforma document entitled “Facilities Management Variation Tax Invoice”.

[5]      The termination of the rental is governed by Clause 1.2 of the rental agreement which provides for the rental to continue until either the “total print volume” is invoiced by Xerox or until the term of the rental expires (60 months). At the time a dispute arose between the parties in mid 2003, Xerox had invoiced the First Defendant for a total print volume in excess of the total print volume specified in the third variation. The Defendant argued this had the effect of terminating the rental (subject only to the holding over provision in the rental agreement[3].)

[3]            Essential the holding over clause allowed the rental to continue on a month to month basis after termination: see clause 14.

[6]      If Gripske’s argument is correct the damages recoverable under the rental agreement for Gripske’s admitted repudiation of the agreement is $4250.40 together with interest. If Xerox’s argument is correct the amount recoverable is the sum of $4250.40[4] and $79,952.36[5] together with interest.

[4]            Pursuant to clause 16.2A.

[5]            Pursuant to clause 16.2B.

[7]      The term “total print volume” appears in the rental agreement on the proforma sheet. Under the heading “The Schedule” is set out details of the “customer”, the “equipment”, and the “payments”. The payments section is set out as follows: -

PAYMENTS

Maximum Term:	months from the date of this agreement
Total print volume:	prints
Agreed print volume per billing period:	prints
Cost per print:	cents
Toner List † or $	Billing Period † Monthly † Quarterly † Yearly

The form was completed as follows (the entries in bold type face were entered by hand in the original document):

PAYMENTS

Maximum Term:	Sixty months from the date of this agreement
Total print volume:	210,000 prints  666,000
Agreed print volume per billing period:	3500 prints  11,000
Cost per print:	53 cents  4,491
Toner List † or $	Billing Period ; Monthly † Quarterly † Yearly

[8]      The total print volume (210,000 prints for colour, 660,000 prints for black and white) are derived by multiplying the agreed print volumes per billing period by the number of billing periods (3500 prints x 60 months for colour, and 11,000 prints x 60 months for black and white). This relationship is important, and is present in each of the variations completed. Although the terms “total print volume” and “agreed print volume per billing period” are not defined their meanings are reasonably clear[6].

[6]            The definitions for “prints made”, “print charge”, and “volume” in clause 27 of the rental agreement provide some assistance.

[9]      The first variation was executed approximately nine months after the rental commenced. Apart from the addition of a photocopier the relevant entries are in a section of the proforma document headed “amended terms and payments”:

AMENDED TERMS & PAYMENTS colour B+W

Maximum Term:	51 months from the date of this agreement	51
Total print volume:	178,500 prints	1,785,000
Agreed print volume per billing period:	3,500 prints	35,000

Cost per print:	cents, plus GST
Toner List † or $	Billing Period ; Monthly † Quarterly † Yearly

The figures in bold are the hand written entries effecting variations to the rental agreement. The words, “from the date of this agreement” immediately following the period specified of 51 months, confirm the rental is to continue for a further 51 months from the date of the first variation. This entry preserves the original rental period of 60 months. The absence of any words qualifying the entries for “total printed volume” (that is, the entries of 178,500 colour prints and 1,785,000 black and white prints) introduces a potential uncertainty as to whether the entries represent the total number of prints for the whole life of the rental, or the total number of prints from the first variation to the end of the rental. In the former case, but not the latter, the total colour print volume invoiced by Xerox from the commencement of the rental agreement to the first variation (a period of approximately nine months) would count as part of the 178,500 colour prints (and in the case of black and white prints the prints invoiced up to the first variation would count as part of the 1,785,000 black and white prints).

1. The figure of 178,500 colour prints is the product of the monthly print volume for coloured prints and the number of months left in the rental (3,500 prints x 51 months). Similarly, the figure of 1,785,000 entered in the first variation is the product of the monthly print volume for black and white prints and the number of months left in the rental (35,000 x 51 months). The mathematical relationship between the entries for “total print volumes”, “agreed print volumes per billing period”, and the number of months left in the rental suggest the total print volumes (of 178,500 prints for colour, and 1,785,000 for black and white) are the total print volumes for the remaining 51 months of the rental.

2. The second variation altered the agreed print volume per billing period to 3006 for colour and 36,000 for black and white prints, and the cost per print for colour to 58.25 cents from 53 cents per print.

3. The third variation took effect on 28 January 2002, approximately 29 months into the rental. Once again the variation preserved the original term of 60 months by specifying a term of 31 months to take effect from the date of the variation. The relevant variations are in the section headed “amended terms and payments”:

   AMENDED TERMS & PAYMENTS

Maximum Term:	31 months from the date of this agreement	31
Total print volume:	71,300 prints	620,000
Agreed print volume per billing period:	2,300 prints	20,000
Cost per print:	4.26 cents, plus GST	10.8c plus gst

Toner List † or $ Billing Period ; Monthly † Quarterly † Yearly

The figures in bold are the handwritten entries effecting variations to the rental agreement (as amended by variations 1 and 2).

1. The monthly agreed print volumes (2300 colour prints and 20,000 black and white prints) when multiplied by the remaining time left in the rental (31 months) produces the figures entered as the amended total print volumes (71,300 print for colour, 620,000 prints for black and white). Once again the mathematical relationship between the entries suggests the entry for total print volume is the total number of prints for the remaining 31 months of the agreement.

2. One way of testing this hypothesis is to suppose the entries for “agreed print volume per billing period” in fact relate to the whole period of the rental agreement (i.e. the 60 months). In the case of colour prints the agreed print volume per month (2300 prints) multiplied by the term (60 months) results in a figure of 138,000 colour prints over the life of the rental agreement; and in the case of black and white prints the corresponding figure is 1,200,000 prints. These numbers are inconsistent with the numbers entered for the total print volume in the third variation, and are inconsistent with the internal logic of the rental agreement[7].

   [7]            That is, the correlation between the monthly print volume and the total print volume. This correlation is only maintained in the third variation if the entries for “total print volume” relate to the remaining term of the rental (i.e. the remaining 31 months).

3. The Plaintiff’s main argument is that the words set out below, which appear in the third variation, confirm the entries for “total print volume” and “agreed print volume per billing period” are the numbers for the time remaining in the rental (i.e. for the 31 months) not the numbers for the whole term of the rental agreement:-

   “The Owner and the Customer agree that the Facilities Management Agreement is amended with effect from the variation date in the manner set out above. Except as set out above, nothing in this Agreement amends the terms of the Facilities Management Agreement, which remains binding on the parties. Nothing in this Agreement affects the rights and obligations of the parties under the Facilities Management Agreement arising before the variation date”

4. I do not think this argument is conclusive: for example, a figure representing the sum of all of the past prints invoiced, and all the future prints proposed would be correctly described as the “total print volume” and would not be inconsistent with the general statement relied on by Xerox. In other words I tend to agree with Gripske’s argument the phrase “with effect from” is neutral as far as the point of contention between the parties is concerned[8]. The general statement however is important: it confirms any amendment takes effect from the variation date, and does not retrospectively affect the terms of the rental agreement as they were before the variation date.

   [8]            See Mr Lane’s written submissions para 60

5. In this case I am satisfied the entry for “total print volume” denotes the total print volume for the remaining 31 months of the rental agreement. The internal logic of the variation documents points only to that conclusion. The general statement relied on by Mr van der Walt supports this analysis in so far as it denies any retrospective effect to any amendment[9].

   [9]            Any variation to the “cost per print” or to the “agreed print volume per billing period” cannot be given retrospective effect.

6. Mr Lane, who appeared for Gripske, proposed a number of arguments based on the absence of any qualifying words after the entry for “total print volume”10 or, elsewhere in the variation document. Despite the absence of any qualifying words I am satisfied the entries for “total print volume” denote the total print volume for the remaining 31 months of the rental agreement.

7. The correct approach to the issue of interpretation is to endeavour to ascertain the meaning of the particular entry from an objective point of view having regard to what reasonable people in the position of the parties would have understood the entry to mean. In his written submissions Mr Lane suggested the relevant question to ask was what reasonable business people in the position of the parties would have taken the entry to mean in light of the whole contract11. In the course of his argument he developed the idea it was quite reasonable for the parties to intend the arrangement continue as a monthly rental. To this suggestion Xerox could reply that a reasonable businessman is unlikely to agree in one part of the contract that the rental should continue for 31 months, and in another part agree to a variation which effectively terminated the contract within 6 months.

8. Unfortunately for the Defendants there is no real doubt in my mind about the correct interpretation of the relevant entry in the third variation. In these circumstances the contra proferentem rule of interpretation cannot be used to determine the issue between the parties.

9. The dispute which arose between Xerox and Gripske related to the current payout figure on termination of the rental agreement by Gripske. In the absence of agreement Gripske wrote to Xerox (by facsimile) on 21 July 2003 giving Xerox seven days notice to collect the equipment. In the circumstances this amounted to a repudiation of the rental agreement. In response Xerox formally terminated the rental agreement by its solicitor’s letter of 1 August 2003.

10. The parties are in agreement on all issues arising in the action apart from the issue relating to the interpretation of the rental agreement as varied by the third variation.

11. The parties are agreed as to the quantum to the Xerox’s damages for the purposes of clause 16.2(a) and 16.2(b) of the terms and conditions of the rental agreement in the event the Court holds in favour of Xerox on the construction point.

12. Accordingly, it is ordered that the first and second Defendants pay to the Plaintiff the sum of $84,202.76 together with interest from 1 August 2003.