M2 NZ Limited v The Phone Company Limited
[2019] NZCA 230
•19 June 2019 at 11.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA563/2018 [2019] NZCA 230 |
| BETWEEN | M2 NZ LIMITED |
| AND | THE PHONE COMPANY LIMITED |
| Hearing: | 21 May 2019 |
Court: | Stevens, Duffy and Dobson JJ |
Counsel: | L L Fraser and J Marcetic for Appellants |
Judgment: | 19 June 2019 at 11.30 am |
JUDGMENT OF THE COURT
AThe appeal is allowed.
BThe preliminary question is answered as follows: cl (f) of the Termination Agreement is to be interpreted in the manner set out in paragraphs [32]–[34] of this judgment.
CThe respondent must pay the appellants one set of costs for a standard appeal on a band A basis and usual disbursements.
DCosts in the High Court are to be determined in that Court.
____________________________________________________________________
REASONS OF THE COURT
(Given by Stevens J)
Introduction
This appeal concerns the interpretation of a commission clause in an agreement entered into by M2 NZ Ltd, M2 Telecommunications Pty Ltd (M2 Pty) and The Phone Company Ltd (TPC). M2 Pty had previously entered into a marketing alliance with TPC in December 2005. This alliance was brought to an end approximately one year later by an agreement (the Termination Agreement), a commission clause of which has given rise to the present litigation between the parties.
The parties together sought the determination of a preliminary question concerning the construction of the commission clause in the Termination Agreement. These provisions were interpreted in the High Court by Peters J in the manner contended for by TPC.[1] M2 NZ Ltd and M2 Pty (together M2) appeals against the judgment given contending that the preliminary question should be answered differently.
Factual background
The proceedings
[1]The Phone Company Ltd v M2 NZ Ltd [2018] NZHC 2167.
The issue presently under appeal is part of a broader dispute which arises as follows. M2 Pty (together with its other related companies) operated out of Australia and was said to have global reach, and through a merger with an Australian company, Vocus Communications, it became the fourth largest integrated telecommunications company in Australia.
It is not in dispute that in 2005, M2 Pty was attempting to establish a presence in New Zealand for the first time. To facilitate this market penetration M2 Pty and TPC formed a marketing alliance which was documented in a Heads of Agreement dated 14 December 2005. The alliance would see TPC work closely with M2 and its relevant suppliers to establish the necessary operational functions to enable customers to be supplied with services in New Zealand and to establish a dealer network to promote the services. The parties would work together for the purpose of facilitating establishment and subsequent development of an active presence in the New Zealand market for the supply of the telecommunications services of M2 to target customers in New Zealand. The services comprised fixed line, mobile and data communications.
As part of the marketing alliance TPC introduced M2 to a number of telecommunication dealers in New Zealand, who in turn were to be responsible for procuring customers of M2’s telecommunication services. It seems TPC also facilitated a deal between M2 and Vodafone New Zealand Ltd (Vodafone) for a Mobile Virtual Network Operator (MVNO) agreement. Such an agreement allows a company like M2, without having a physical mobile phone network, to provide mobile phone services to its end users, invoice them under its own brand, own the relationship with the customer and collect payments for services directly from those customers. In a sense, an MVNO piggybacks on an existing mobile phone network and essentially purchases wholesale air time and re-sells that to customers.
In 2006 the parties entered into the Termination Agreement which ended the marketing alliance and provided for two kinds of commission payable to TPC. Central to this appeal is cl (f) of this agreement, which in summary provides:
TPC is entitled to receive an additional commission in perpetuity equal to one percent (1%) of Net Receipts arising from mobile phone services customers (“end users”) of M2 (or its related subsidiary companies), including customers of M2 procured by any M2 contractor, dealer or agent in New Zealand when the Vodafone NZ mobile network is used to deliver the mobile services. …
In mid‑2012, the parties entered into the Deed of Variation of the Termination Agreement (the Variation Agreement). This gave an option to either party to bring the perpetual payment of commissions from M2 to TPC to an end, upon which a lump sum (calculated by an agreed formula) would be paid to TPC. TPC exercised the option in July 2012 and was paid a lump sum by M2.
In 2015 TPC issued proceedings against M2 seeking to set aside the Variation Agreement and to have M2 comply with the terms of the Termination Agreement. TPC says it was induced to enter into the Variation Agreement as a result of representations made by M2. If TPC succeeds in its claims, the Termination Agreement would once more become operative and govern the commissions payable to TPC.
As a first step M2 applied in the High Court to strike out TPC’s proceeding or for summary judgment. This was largely unsuccessful.[2]
[2]The Phone Company Ltd v M2 NZ Ltd [2016] NZHC 2283.
Next M2 applied in the High Court to have the preliminary question determined. By way of a consent memorandum the parties jointly agreed to seek the determination of the preliminary question. This is because the parties disagree over the correct interpretation of cl (f) of the Termination Agreement. The issue is important because, if TPC succeeds in setting aside the Variation Agreement and securing the reinstatement of the Termination Agreement, TPC will once again become entitled to commission payments under cl (f).
The preliminary question was set out in the memorandum as follows:
Should clause (f) of the Termination Agreement dated 4 December 2006 be interpreted to provide for a perpetual commission right in favour of the plaintiff amounting to:
A: 1% of Net Receipts arising from mobile phone services customers of M2 (or its related or subsidiary companies) including customers procured by any M2 contractor, dealer or agent in New Zealand when the Vodafone NZ mobile network is used to deliver the mobile services, exclusive of:
- Net Receipts used to calculate commissions under paragraph (e) of the Termination Agreement; and
- Wholesale and licensing arrangements as are described in clause (f) of the Termination Agreement;
OR
B: 1% of all revenues received directly and indirectly by M2, (or its related or subsidiary companies), for telecommunication services (exclusive of any applicable taxes, statutory charges, fixed line rental income, any services categorised as a Telecom Smart Phone service or any equipment charges received by M2) arising from Mobile Phone Services Customers (“End Users”) of M2 (or its related or subsidiary companies), including customers of M2 procured by any M2 contractor, dealer or agent in New Zealand when the Vodafone NZ Mobile Network is used to deliver the mobile services, and exclusive of:
- Net Receipts used to calculate commissions under paragraph (e) of the Termination Agreement; and
- Wholesale and licensing arrangements as are described in clause (f) of the Termination Agreement.
[M2 says] the answer should be “A”. [TPC] says the answer should be “B”.
High Court judgment
Counsel for M2 argued before Peters J that the commission payable under cl (f) is confined to Net Receipts arising from mobile phone services customers of M2 when the Vodafone mobile network is used to deliver those services. Counsel for TPC argued for a wider interpretation: that the commission is not confined to services delivered by the Vodafone network, but rather payable on all revenues received from M2’s mobile phone services customers.
The Judge favoured a literal reading of the clause. She stated:[3]
[41] In my view, the ordinary and natural meaning of clause (f), with the comma after “companies)” and before “including”, is that the commission is to be calculated on Net Receipts deriving from all M2 mps customers, regardless of the network on which their services are delivered. The position would be different if there was another comma after “New Zealand” and before “when”. …
[3]The Phone Company Ltd v M2 NZ Ltd, above n 1.
The Judge noted that M2’s best submission was that, if the commission was not confined to services on the Vodafone network, then the reference to that network in the clause would be made redundant.[4] However, she considered this submission faced the difficulty that the parties did not provide any evidence addressing whether there was a reason to refer to the Vodafone network in the context of customers procured by an M2 contractor, dealer or agent.[5] She also noted that if there were an ambiguity in the clause, then the issue would have been determined in TPC’s favour.[6]
[4]At [44].
[5]At [45].
[6]At [47].
Before summarising the arguments of counsel it is necessary to set out in detail some of the provisions of the Termination Agreement because they are important to the interpretation task.
Key provisions of the Termination Agreement
The first relevant commission payable to TPC provided for a commission of two per cent on all customers contracted to M2 by four named dealers:
(e)TPC is entitled to receive a commission in perpetuity of two percent (2%) of the Net Receipts* from all customers contracted to M2, or its related or subsidiary companies, (whether orally or in writing) by the following dealers: (1) Phone and Travel Limited (previously named Rex Distribution Limited), (2) Cytek Communications Ltd (3) Etari Corporation Ltd and (4) The P2P Group Ltd.
If M2, at its sole discretion secures a Phone & Fly dealership agreement with Warren Tibbotts (or his nominated entity) on or before 30 June 2007, M2 agrees to include the Net Receipts from customers contracted to M2, or its related or subsidiary companies, (whether orally or in writing) by this dealer in the amounts payable in accordance with this paragraph (e).
A further commission provision related to payment of one per cent on receipts from mobile phone services customers as follows:
(f)TPC is entitled to receive an additional commission in perpetuity equal to one percent (1%) of Net Receipts arising from mobile phone services customers (“end users”) of M2 (or its related or subsidiary companies), including customers of M2 procured by any M2 contractor, dealer or agent in New Zealand when the Vodafone NZ mobile network is used to deliver the mobile services. For the avoidance of doubt, the Net Receipts used to calculate the commission set out in paragraph (e) will not be included in determining the commissions payable in accordance with this paragraph and no commission is payable to TPC in accordance with this paragraph for customers which may be procured via such wholesale arrangements and/or licensing arrangements, as are described below, which M2 may enter into with third parties in New Zealand with respect to mobile services. Wholesale arrangements are distribution models whereby M2 enters into a commercial wholesale arrangement to supply mobile or other services to a party for the purpose of that party on-selling the services to its own customers. Licensing arrangements are licensing models that are materially consistent with Attachment B to this letter of agreement.
Additional provisions relevant to the commercial context are contained in the following clauses:
(g)For avoidance of doubt, the payments to TPC described in paragraphs “(e)” and “(f)” above include those from all customers which are contracted either prior to or after the date that this letter is duly executed by Bryan Holmes on behalf of TPC and are made indefinitely for each customer whilst M2, or its related or subsidiary companies, receives Net Receipts in relation to that customer.
(h)If M2, or its related or subsidiary companies, sells or transfers any or all of the customers (that are relevant to any commission under this letter) to another entity M2 shall procure that, prior to such sale or transfer, such entity agrees with TPC in writing that:
(i)the entity will pay to TPC all commissions described in this letter of agreement, as if it were M2;
(ii)TPC shall have all rights and remedies in relation to those commissions and payments (including, without limitation, under paragraphs (i) and (m) below) as against that entity, as if that entity were M2; and
(iii)this paragraph (h) shall, with the necessary changes, also apply to that entity if it were to sell or transfer any or all of the customers (that are relevant to any commission under this letter) to another entity.
(i)TPC may at any time assign its right to receive any payments under this letter of agreement to any legal person without M2’s consent.
(j)M2 and TPC acknowledge that it is in the interests of both parties that the dealers referred to in paragraph (e) (including any successors, assignees, transferees or replacements to those dealers) (in each case, a “Dealer”) continue to operate a successful business. Consequently:
(i)M2 shall provide TPC with prompt written notice of the expiry or termination of any agreement between a Dealer and M2 (with such notice to include a copy of the relevant agreement between M2 and that Dealer (“Dealer Agreement”)).
…
(m)TPC shall have the right to engage, at TPC’s expense, an independent accountant/auditor to review only the accuracy of the commission payments made to TPC in accordance with paragraphs (e) and (f). This may only occur once per calendar year, at which time M2 will provide the services of a relevant member of its accounting personnel for not more than one working day in order to provide the TPC appointed accountant/auditor with the required assistance. M2 shall promptly provide access to and copies of all relevant documentation and information that TPC may reasonably require to confirm the accuracy of the commission payments.
* In this letter of agreement “Net Receipts” means all the revenues received directly or indirectly by M2, or its related or subsidiary companies, from customers mentioned in paragraphs (e) and (f) of this document for telecommunications services, exclusive of any applicable taxes, statutory charges, fixed line rental income, any services categorised as a Telecom Smart Phone service and any equipment charges received by M2.
Summary of arguments on appeal
On appeal, M2 submits that the literal reading of the clause is problematic because it creates a “significant redundancy”. This is because the clause would have the same scope and effect as if the reference to the Vodafone network were deleted. Ms Fraser submits the definition of “Net Receipts” is a global definition in the Termination Agreement and it does not limit revenue by network provider. Hence the importance of the reference in cl (f) to mobile phone services customers of M2 as including customers of M2 procured by any M2 contractor, dealer or agent in New Zealand when the Vodafone NZ mobile network is used.
M2 argues that the literal reading is therefore unnatural and improbable. Importantly at the time the clause was agreed, all M2 mobile phone services customers were on the Vodafone NZ network. Further, the literal reading places considerable emphasis on a comma in the clause, while at the same time assuming a redundancy in other words used in the clause.
M2 submits that there are strong commercial reasons why the reference to the “Vodafone NZ mobile network” ought to be given meaning as defining TPC’s commission entitlement:
(i)The negotiation of M2’s arrangement with Vodafone (allowing M2 to provide mobile services to customers) was TPC’s “crowning achievement”, and it occurred just before the Termination Agreement was entered into.
(ii)The other commission provision (cl (e)) is based on TPC’s actual achievements as M2’s agent.
(iii)All TPC’s commission entitlements through the course of its commercial relationship with M2 were based on TPC’s actual achievements as M2’s agent.
TPC supports the High Court’s interpretation of cl (f). Mr Grove submits this interpretation is consistent with the context in which the Termination Agreement was entered into. Counsel points to contemporaneous evidence in the affidavits of Mr Holmes which indicates that the work which TPC did for M2 went beyond securing an agreement to offer services on the Vodafone network. TPC further submits that if there is ambiguity in the clause, then the contra proferentem rule applies. Since the Termination Agreement was drafted by M2, the issue should be resolved in TPC’s favour.
Legal principles
The parties are agreed on the relevant principles of contractual interpretation applicable to this case. The court is required to establish, as a matter of interpretation, the meaning the parties intended their words to have. An objective approach is required. As stated in Vector Gas Ltd v Bay of Plenty Energy Ltd, the exercise of interpretation is concerned with “what a reasonable and properly informed third party would consider the parties intended the words of their contract to mean”.[7] In carrying out this exercise, the court must be properly informed of the commercial or other context in which the contract was made and the facts and circumstances known to the parties.[8]
[7]Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [19].
[8]At [19].
Both counsel agree that the clause creates difficult issues of interpretation and was “imperfect”. The letter containing the agreement was headed “Termination of Arrangements with [TPC]” and was seemingly drafted without legal advice. The dilemma for the Court is that, on the one hand, a literal reading of cl (f) could be said to favour TPC’s argument that the entitlement to commission is not confined to services provided on the Vodafone network. On the other hand, such an interpretation runs the risk of nullifying other words in the clause.
Both parties have sought to invoke the commercial context. TPC points to the scope of the work undertaken by Mr Holmes. M2 says the focus should be on actual achievements, in particular the fact that the arrangement with Vodafone was entered into just before the Termination Agreement was agreed. Moreover, at the time of contracting all of the services were operating on the Vodafone network.
Tipping J in Vector recognised the importance of the commercial context of an agreement:
[22] Nor does the objective approach require there to be an embargo on going outside the terms of the written instrument when the words in issue appear to have a plain and unambiguous meaning. This is because a meaning that may appear to the court to be plain and unambiguous, devoid of external context, may not ultimately, in context, be what a reasonable person aware of all the relevant circumstances would consider the parties intended their words to mean. An example of that situation is when plain words, read contextually, lead to a result which does not make sense, whether commercially or otherwise: a meaning that flouts business commonsense must yield to one that accords with business commonsense. … While displacement of an apparently plain and unambiguous meaning may well be difficult as a matter of proof, an absolute rule precluding any attempt would not be consistent either with principle or with modern authority.
(Footnotes omitted.)
Tipping J also observed that “a meaning which appears plain and unambiguous on its face is always susceptible to being altered by context”.[9] On this issue the United Kingdom Supreme Court in Arnold v Britton has held that:[10]
… the reliance placed in some cases on commercial common sense and surrounding circumstances … should not be invoked to undervalue the importance of the language of the provision which is to be construed. … Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision.
Our analysis
[9]At [24].
[10]Arnold v Britton [2015] UKSC 36, [2015] AC 1619 at [17]. See also Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [63].
The Judge answered the preliminary question, after giving her detailed reasons, by opting for formulation B contended for by TPC. Before us counsel for M2 again advanced formulation A and largely repeated the submissions advanced in the High Court.[11] Essentially, M2’s approach is to interpret the words of cl (f) by omitting the comma between the words “companies” and “customers”. This is supported by the fact that the commercial context at the time had all M2’s mobile phone service customers carried on the Vodafone network.
[11]As summarised at [19]–[21] above.
A key difference between formulations A and B is the positioning of the comma. This is relied on by TPC, together with the literal meaning of the clause. TPC’s formulation also inserts part of the definition of “Net Receipts” (which follows cl (m)) to import the crucial words “all revenues received directly and indirectly by M2 … for telecommunication services”.
Significantly both formulations A and B omit the words in the first line of cl (f), namely “TPC is entitled to receive an additional commission in perpetuity equal to”.[12] This tends to separate cl (f) from what we regard as an important contextual element of cl (e), providing the two per cent commission on receipts from customers contracted to M2 by four named dealers.
[12]Emphasis added.
Having considered the submissions of both parties, we are not satisfied that either of the alternative formulations of A and B provides the correct answer to what the parties, by the words they used, intended their contract to mean.
First, we consider that cl (f) plainly excludes net receipts from customers whose contracts with M2 were procured by the four dealers identified in cl (e) because the larger commission provided for in cl (e) is payable to that class of customers. Also excluded are net receipts from third parties in New Zealand with whom M2 makes wholesale and licensing arrangements pursuant to which M2 provides mobile or other services for on-sale by that contracting party to its own customers. These exclusions just mentioned give meaning to the following words in cl (f):
For the avoidance of doubt, the Net Receipts used to calculate the commission set out in paragraph (e) will not be included in determining the commissions payable in accordance with this paragraph and no commission is payable to TPC in accordance with this paragraph for customers which may be procured via such wholesale arrangements and/or licensing arrangements, as are described below, which M2 may enter into with third parties in New Zealand with respect to mobile services.[[13]]
[13]The terms “wholesale arrangements” and “licensing arrangements” are each defined in the balance of cl (f). Licensing arrangements are likened to an “Attachment B” but we were not referred to the evidence.
Secondly, we consider the intended meaning of the more problematic part of cl (f) is as follows. TPC is entitled to a commission, in addition to the larger commission provided for in cl (e), in perpetuity, at one per cent of:
·net receipts arising from mobile phone services customers (end users) of M2 plus its related and subsidiary companies; and
·net receipts from customers of M2 that have been procured by any contractor to, dealer for or agent of M2 in New Zealand when the Vodafone NZ mobile network is used to deliver the mobile services for which the net receipts are received.
This interpretation excludes net receipts received from customers of M2 who were procured by its contractors, dealers or agents where the end users have the services delivered on a mobile network other than that of Vodafone NZ.
Our preferred interpretation accommodates the correct grammatical usage of the comma in “… companies),” in that the rest of the sentence thereafter describes a subset of M2’s customers, with the last requirement that they be customers whose mobile services are delivered on the Vodafone NZ mobile network qualifying the subset of customers who are procured by M2 contractors, dealers and agents in New Zealand.
This more restricted interpretation of cl (f) is consistent with cl (g), which specifies that all such customers qualify for the calculation of net receipts whether they were contracted before or after completion of the Termination Agreement. Without the constraint on customers procured after the Termination Agreement to those whose mobile services are provided via Vodafone NZ, it would instead be entirely open-ended and likely to be exhaustive given the prospect that M2 might well seek to procure business largely or substantially via its contractors, dealers and agents.
In the same way, M2’s on-going obligations in cl (h) to procure from the purchaser of any of its customers, an on-going commitment to continue paying the commission (including in cl (h)(iii) imposing the obligation on such a purchaser to impose the same obligation on subsequent purchasers of those customers) is limited to those customers that are relevant to the commissions provided for in cls (e) and (f). That obligation would be uncommercial, and difficult of definition and enforcement, if the parties did not intend a readily identifiable constraint on the scope of the customers from whom net receipts triggered a commission entitlement under cls (e) or (f). If the limitation to customers serviced by Vodafone NZ did not exist, there would have been no need to include in cls (h) and (h)(iii) the limitation that those provisions applied only to the customers that are relevant to any commission under the Termination Agreement.
We consider that the structure of cls (g) and (h) are of assistance in determining the contractual intention of the parties. Clause (g) refers to the payments to TPC described in cls (e) and (f). Clause (h) inserts provisions “that are relevant to any commission under this letter”. We are satisfied that the parties intended that the contents of cls (e) and (f) respectively should drive the nature and scope of the commissions payable to TPC. We regard the definition of “Net Receipts”, inserted (in italics) after the asterisk following cl (m), as being less influential because in our view it is inherently unlikely that a definition clause of this nature would be used to drive the interpretation of a key provision in the agreement. The non-expert nature of the drafting is also apparent from the fact that the term “Net Receipts” has an asterisk in cl (e), but not in cl (f).
Also relevant is cl (i) of the Termination Agreement, which gives TPC an open‑ended right to assign its entitlement to receive payments under the agreement, without M2’s consent. Given the extent of the financial obligation that would potentially accrue if there were no constraints on the definition of customers, net receipts from whom qualified under cl (f), it would be inherently unlikely and entirely uncommercial for M2 to grant TPC an unqualified right to assign the benefit of that obligation, without M2’s consent.
The Judge felt able to disregard the relevance of the reference to customers who are serviced on the Vodafone NZ network because of the absence of any evidence on the reason why the parties included it.[14] That view was taken despite the general rule that it is preferable to attribute a meaning to words rather than disregarding them in determining the meaning of a contentious provision.[15] We consider the absence of evidence on why the reference to the Vodafone NZ network was included does not justify disregarding it. The interpretation we have adopted attributes a meaning to the reference to the Vodafone NZ network that is more consistent with commercial common sense than the default assumption that the parties had no reason for its inclusion.
[14]The Phone Company Ltd v M2 NZ Ltd, above n 1, at [44]–[45].
[15]At [44], citing Kim Lewison The Interpretation of Contracts (6th ed, Sweet & Maxwell, London, 2015) at [7.03].
We are satisfied that, standing back and assessing the commercial interests of each party at the point the Termination Agreement was reached, the interpretation of cl (f) we have preferred, taken together with the entitlement to a larger commission under cl (e), reflects an entitlement for TPC that more logically reflected the nature and extent of work it had done. A likely commercial rationale for identifying that subset of customers in cl (f) is that, although TPC could not claim credit for recruiting that group as customers of M2, it did facilitate the terms on which services are offered to them by its involvement in securing M2’s agreement with Vodafone.
Clause (m) sets out TPC’s rights to audit M2’s records to review the accuracy of commission payments made. As already noted, the clause has included, in italicised type suggesting its transposition from elsewhere, a definition of “Net Receipts”. This is the second partial definition of “Net Receipts”, given that the latter part of cl (f) itself specifies certain categories of net receipts that will not be included in calculating the commission under cl (f). This second aspect of the definition relates net receipts to amounts received from the categories of customers identified in both cls (e) and (f), defining net receipts as the amounts received for telecommunications services exclusive of taxes, statutory charges, fixed line rental income, any equipment charges received by M2 and amounts received for services “categorised as a Telecom Smart Phone service”.
Peters J did not place any weight on the reference to “Telecom Smart Phone service” in interpreting the scope of cl (f). She noted it might not be reliable because it applied to both cls (e) and (f). Her view was that there was no evidence on the point.[16]
[16]At [42].
On one view, the exclusion of this category suggests that other receipts for services related to Telecom may be included in the net receipts on which commission is to be calculated. However there appears to be no evidence addressing the meaning and scope of “Telecom Smart Phone services”. We consider that a number of alternative explanations for excluding a category of receipt of this type arise. It may be, for example, that irrespective of the mobile network operator being used by M2, parts of the services for which charges would be rendered would have been recognised as a “Telecom Smart Phone service”. We do not consider the reference to “Telecom” in this definition justifies altering the preferable definition of categories of customers whose net receipts will qualify for the calculation of additional commission under cl (f). It may be that in 2006 “Telecom Smart Phone service” was an expression used in the industry generically, irrespective of the network provider that provided the service.
In the course of argument we put the interpretation outlined above to Mr Grove. Counsel observed that such an interpretation had not so far been advanced by either party. Mr Grove submitted in response that if such were the parties’ intention there would have been a comma after the words “in New Zealand” in line 5 of cl (f) before the word “when”. We disagree.[17] The word “when” is a conjunction that introduces the qualifying characteristic that follows, without the need for punctuation. Further, the factors which we have identified in favour of our preferred interpretation outweigh any argument regarding the presence or otherwise of a comma.
[17]See discussion at [35]–[41] above.
Mr Grove also emphasised the literal meaning which TPC advanced. He submitted that the intention of the definition of “Net Receipts” and the wording of cl (g) supported the lack of restriction sought by TPC. In light of the views we have already reached on cl (g) and the relevance of the definition of “Net Receipts” following cl (m), we do not accept those submissions.[18]
[18]See [38] above.
Finally, Mr Grove submits that if there is any ambiguity in the meaning of cl (f) then the provision should be interpreted against M2. This is on the basis that the uncontradicted evidence is that the Termination Agreement was drafted by M2 and the contra proferentem rule applies.
While the drafting of cl (f) was imperfect we have not found any genuine ambiguity. For the reasons given we have been able to discern the meaning the parties intended the words to have, both from the words used and the commercial context.
Result
For the above reasons we consider that the appeal must be allowed.
The preliminary question is answered as follows: cl (f) of the Termination Agreement is to be interpreted in the manner set out in [32]–[34] of this judgment.
The respondent must pay the appellants one set of costs for a standard appeal on a band A basis and usual disbursements.
Costs in the High Court are to be determined in that Court.
Solicitors:
Chapman Tripp, Auckland for Appellants
Foy & Halse, Auckland for Respondent
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