UNITED GAMING LIMITED v DANGOR TRADING LIMITED [2002] NZCA 261 (17 October 2002)

IN THE court of appeal of new zealand

ca129/02

	between	United Gaming Limited
		Appellant

	and	Dangor TRading limited
		Respondent

Hearing:	16 October 2002
Coram:	Blanchard J Robertson ACJ Randerson J
Appearances:	M J Koppens for Appellant P H Thorp for Respondent
Judgment:	17 October 2002

judgment of the court delivered by ROBERTSON ACJ

Background

[1]This is an appeal from a decision delivered on 31 May 2002 by France J determining and interpreting the terms of a contract entered into between the parties in mid 2001.

[2] The Gaming and Lotteries Act 1977 ("the Act") restricts the ownership of gaming machines operated outside casinos to non-commercial organisations (societies) licensed by the Minister of Internal Affairs (Minister) at sites approved by the Minister.

[3] The respondent ("Dangor") arranges for the supply of gaming machines to societies.Dangor had agreements to supply, on an exclusive basis, gaming machines and other similar equipment to various approved societies one of which was Trillian Trust Incorporated ("Trillian").

[4] The appellant ("United") is an agent for the supply of gaming machines.

[5] Until early in 2001, Dangor supplied the Aristocrat brand of gaming machines to its clients and was the main competitor for IGT Gaming Machines. Dangor was paid by Aristocrat the difference between the normal retail price paid by Dangor's clients for Aristocrat and an agreed discount price.At 30 April 2001 the agreed discount came to an end and was only available on the supply of spare parts.Dangor was looking to replace its lost source of income with another manufacturer and entered into an arrangement with United.

[6] The trial Judge found the relevant terms of the contract to be:

1. United will supply IGT machines and pay Dangor commission for sales of those machines.

2. The commission is payable on the retail price, namely,

IGT GU4 Game King Multistar$19,995.00 plus GST

IGT GU4 Spectrum$16,995.00 plus GST

3. The rates of commission on IGO machines are as follows:

0 to 20 machines - 2% of net retail price

21 to 40 machines - 4% of net retail price

41 to 60 machines - 6$ of net retail price

61 to 80 machines - 8% of net retail price

4. The rate of commission increased to 10% for all machines, including jackpots, optic couplers, and looming, if 135 machines were sold and paid for by 31 March 2002.

[7] On various dates between July and October 2001, Trillian Trust received from United but United did not (and has refused to) pay commission to Dangor for them on the basis there was not a sale in which Dangor was instrumental.

[8] The Judge found that the principal area of dispute was whether, as Dangor contended, the parties had agreed that United would pay Dangor commission on all orders for gaming machines placed through Dangor and paid for by societies. United, on the other hand, contended that the deal was to pay commission only where Dangor brought both the site and the buyer together.United claimed that no commission was payable where United found the site although the order for the machines was placed through Dangor and was for supply to a Dangor client.

[9] As the appeal has been run before us, the issue really came down to the proper meaning of"sale/sell" in the contractual arrangement between the parties.

[10] The Judge had regard to the dictionary meaning of these words and rejected the suggestion that it necessarily followed that there was some particular effort involved in the notion. She noted that in the Shorter Oxford Dictionary the meanings of "sell" included "To give up or hand over (something) to another ... for money ...".

[11] The Judge also had regard to the sales procedure which was adopted by the parties as indicative of the position and also analysed the context within which the transactions occurred.

[12] After setting out applicable principles, she referred to various decisions in this Court including recent comments in Mount Joy Farms Limited & Ors v Kiwi South Island Co-operative Dairies Limited & Ors (CA 297/00, 6 December 2001) where it was noted:

The day has long since passed in our Courts where words are to be given a purely literal meaning.The words used are to be given their natural and ordinary meaning, and having regard to what those words as used in a document would convey to a reasonable person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

In that case, the Court had referred to several authorities for this well-established proposition, including, Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98; Boat Park Ltd v Hutchinson [1999] 2 NZLR 74; Yoshimoto v Canterbury Golf International Ltd [2001] 1 NZLR 523; WEL Energy Group Ltd v Electricity Corporation of New Zealand Ltd [2001] 2 NZLR 1.

[13] Against that background, the Judge said:

I consider the natural and ordinary meaning of this contract is that commission is payable by United on receipt of an order for an IGT gaming machine where that order is placed by Dangor and the society then pays United for the machinery. This meaning is apparent from the written correspondence.

Appellant's case

[14] In this Court, Mr Koppens has argued that the meaning of "sell" is more defined and encompassing.He has again referred to various definitions in the Random House Dictionary of the English Language for sell and sale including:

"2. to deal in ; keep or offer for sale",

"3. to make a sale or offer for sale to",

"4. to persuade or induce (someone) to buy something",

"6. to cause to be accepted",

"7. to cause or persuade to accept",

"9. to force or exact a price for",

"14. to be employed to persuade or induce others to buy,".

He also seeks assistance from a definition in the Oxford Dictionary as:

"persuade someone of the merits of".

[15] Appellant's counsel submits that each of these indicates a requirement of activity and involvement on the part of the seller and that, without that, a sale has not been effected.

[16] By particular reference to some of the transactions, Mr Koppens argued that all that had occurred was a delivery process which did not fulfil the essentials of the meaning of a requirement to sell.

[17] Particular emphasis was placed on the fact that some of the arrangements had occurred without the knowledge of Dangor and that, had it been the parties' intention to contract on the basis that United was liable for commission on any sale to an exclusively held society of Dangor in any circumstances at all, then that could have been said simply without doing offence to the plain meaning of words.

[18] Mr Koppens further argued that, although the Judge said she was applying the principles enunciated by this Court in Valentine Properties, she in fact had misapplied them and that the consequences of the interpretation which she placed upon the idea of sale would not have been in contemplation in any way.

Respondent's case

[19] Mr Thorp for the respondent, in his written submission, adopted the reasoning of the Judge at first instance and submitted that not only was the natural and ordinary meaning of the words clear, but the interpretation of the Judge was consistent with the overall context of the contract.

[20] Mr Thorp submitted that the contract simply meant that Dangor was entitled to be paid commission by United whenever United received an order placed by Dangor once there was payment for that order to United.

[21] He contended that this simple and unambiguous meaning was supported by the fact that Mr Moore of United knew of the client base of Dangor.Mr Moore knew of the previous arrangements between Dangor and Aristocrat and that when one of his staff had tried to deal directly with Trillian Trust they had been directed to go to Dangor.There was therefore a presumption that Mr Moore wanted access to the business of Dangor clients and the way he could do that was by entering into the contractual arrangement with Dangor.Counsel noted, in particular, that immediately after the contractual deal was concluded, United had received and performed two orders even though one of them was to an established United site.

[22] It was Mr Thorp's contention that the interpretation advanced by United led to uncertainty as to which sales would attract commission and that the arrangement between the parties was that whenever there was a sale by United to one of the societies which was an exclusive customer of Dangor, then the commission became due and payable.

Conclusion

[23] There is no serious challenge to the summation of the trial Judge as to the terms of the contract recorded in paragraph [6] of this judgment.

[24] Each counsel filed detailed and exhaustive submissions with regard to the meaning of the word "sale" but there are some salient matters which provide the hallmarks of the context within which the word must be interpreted.

[25] In the letter dated 26 July 2001 from United to Dangor, it was noted:

All agreements including invoices will be between United Gaming Limited and the Society as earlier proposed.The order for the equipment may be raised by you but our purchase agreement and invoice will be in the name of the Society. Obviously the documentation will reflect your order number if required.

[26] Secondly, in a letter of 27 June 2001 from United to Dangor, it is noted:

... you [Dangor] would purchase the units in the name of the Society through me for the retail prices as previously discussed and [commission will be paid] at the rates listed ... once [United] are paid by the Society.

And this letter concluded by saying:

I trust this will assist you in your endeavours with your clients and help us toward a mutually beneficial working relationship.

[27] It is clear that, in the transactions which occurred thereafter, there were varying and various scenarios which occurred between Dangor, United and Trillian, but nothing turns on the precise transaction in any one case.There was a symbiotic relationship which involved the transfer of goods from United to Trillian for consideration with the direct or indirect involvement of Dangor in those transactions.

[28] In our view they each constituted a sale and therefore, in accordance with the contractual arrangement, commission was payable.

[29] We agree with the assessment of the trial Judge that the sales procedure was an important factor and this is spelt out in the letters of 27 June and 26 July 2001 about which France J said:

The former refers to Dangor purchasing the machines in the name of the society through United, and Dangor being paid once United is paid by the society.The latter letter similarly envisages an order for the equipment being raised by Dangor although the purchase agreement and invoice from United's perspective will be in the name of the society.There is no additional requirement that Dangor, for example, find a site or marry up buyer and site, or provide anything other than the order.

[30] Similarly we agree that the other important factor is context and that the interpretation advanced by the respondent is consistent with that.The parties were contracting within a constrained environment.There was a limited pool of buyers and the fact that there were exclusive arrangements which existed between Dangor and some societies including Trillian was of substantial advantage to anyone with machines to market.

[31] It is clear that United was anxious to obtain entry into part of this captured market with their product. In that context an arrangement by which commission was paid for all transactions to Dangor clients of United products could well be considered as within the parties' contemplation.

[32] There is nothing which has been advanced before us which leads us to think that any narrow or restrictive interpretation of `sale' or `sell' is justified. The contractual arrangement as evidenced by the correspondence and conduct between the parties and the wider context (including the purchasing arrangement which already existed between Dangor and Trillian) support the interpretation.

[33] Having reached that conclusion, it is not necessary to turn to the subsidiary point as to whether Dangor was actually instrumental in achieving sales. As the Judge said, Dangor was instrumental in persuading Trillian to shift to the IGT brand from Aristocrat, and accordingly had a pervasive involvement in what occurred thereafter.

[34] The appeal is accordingly dismissed with costs for the respondent of $3,500 together with disbursements as fixed by the Registrar.

Solicitors:

Wynward Wood, Auckland, for Appellant

John Sellers, Auckland, for Respondent