BDM Grange Ltd v Trimex (New Zealand) Ltd
[2017] NZHC 1259
•9 June 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2016-404-743 [2017] NZHC 1259
BETWEEN BDM GRANGE LIMITED
Plaintiff
AND
TRIMEX (NEW ZEALAND) LIMITED First Defendant
TRIMEX PTY LIMITED Second Defendant
Hearing: 31 October 2016 & 1 November 2016 Counsel:
L J Turner for Plaintiff
MHL Morrison and T P Refroy-Butler for DefendantsJudgment:
9 June 2017
JUDGMENT OF DUFFY J
This judgment was delivered by me on 9 June 2017 at 2.00 pm pursuant to
Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Solicitors / Counsel:
Whaley & Garnett, Auckland
Lowndes Jordan, Auckland
Counsel:
L Turner, Auckland
BDM GRANGE LTD v TRIMEX (NEW ZEALAND) LIMITED [2017] NZHC 1259 [9 June 2017]
[1] The plaintiff BDM Grange Ltd (BDM Grange) and the second defendant Trimex Pty Ltd (Trimex Australia) were previously involved in litigation against each other.1 The first defendant (Trimex New Zealand) was not a party to this litigation.
[2] The earlier proceedings resulted from a breakdown in the business arrangement between BDM Grange and Trimex Australia (the arrangement). The arrangement initially involved BDM Grange purchasing and importing into New Zealand Clarins beauty products under licence from Trimex Australia (the Trimex products). BDM Grange operated as a wholesaler which on sold these products to retailers throughout New Zealand. The arrangement was later extended to include
other similar products as well.2
[3] Trimex Australia ended the arrangement, which ceased operation in September 2012. At the time Trimex Australia contended there were monies owing to it under the arrangement, and demanded payment from BDM Grange. BDM Grange pre-emptively commenced proceedings against Trimex Australia alleging the business arrangement was conducted in the context of a partnership between Trimex Australia and BDM Grange, which amongst other things on termination left the parties accountable to each other for the residual value of the partnership assets. Trimex Australia denied the existence of a partnership and counterclaimed for the
monies it was owed under the arrangement.3
[4] The earlier proceedings went to trial, and at an early stage BDM Grange was permitted to amend its statement of claim to include an alternative cause of action against Trimex Australia alleging the parties conducted the arrangement as part of a
joint venture that gave rise to fiduciary duties which each owed to the other. BDM
1 See BDM Grange Ltd v Trimex Pty Ltd [2015] NZHC 2469.
2 Full details of the arrangement are set out in BDM Grange Ltd v Trimex Pty Ltd, above n 1.
3 Trimex Australia took the first step by issuing BDM Grange with a statutory demand dated 31
May 2013 for $619,586. BDM Grange filed an originating application dated 17 June 2013 to set the statutory demand aside. Trimex filed a notice of opposition dated 2 July 2013. On 11
September its solicitors advised solicitors for BDM Grange the statutory demand was withdrawn and shortly Trimex Australia would be commencing substantive proceedings in the High Court for recovery of all unpaid royalties. Then on 11 October 2013 BDM Grange filed its notice of proceeding and statement of claim, thereby commencing the earlier proceeding. This led to Trimex Australia bringing its claim for recovery of all unpaid royalties by way of counterclaim in the earlier proceeding.
Grange claimed that on termination of the joint venture the parties were required to
account to each other for the residual value of the joint venture’s assets.
[5] In a judgment delivered on 8 October 2015: (a) I found there was money owing to Trimex Australia and ordered BDM Grange to make payment; and (b) I dismissed BDM Grange’s claims against Trimex Australia (the judgment).4
[6] BDM Grange appealed against part of the judgment against it. The appeal was successful in part, and the quantum of the judgment debt reduced.5 Trimex Australia then issued a statutory demand against BDM Grange to recover the remainder of the judgment debt. BDM Grange commenced proceedings for the statutory demand to be set aside. BDM Grange also filed a new proceeding making a further claim against Trimex Australia and a claim against Trimex NZ for use, by way of set-off, as a defence to the statutory demand (the benefits proceeding). These two proceedings were consolidated by consent and heard together. Given that BDM Grange’s application for a stay of the statutory demand rests on the benefits
proceeding, I will address the benefits proceeding first.
[7] The benefits proceeding makes claims in quantum valebat against the Trimex parties for use of assets owned by BDM Grange.6 In response the Trimex parties seek summary judgment dismissing the benefits proceeding on the grounds it raises issues that were covered in the judgment, and accordingly, estoppel per rem judicatam and abuse of process preclude those issues being raised again. BDM Grange contends the benefits proceeding raises issues which fall outside the scope of the judgment. In addition, the Trimex parties contend the claims in restitution now
being raised are so lacking in merit that they can be summarily dismissed.
4 BDM Grange Ltd v Trimex Pty Ltd, above n 1.
5 BDM Grange Ltd v Trimex Pty Ltd [2017] NZCA 12.
6 Lord Mackay (ed) Halsbury’s Laws of England: Volume 88 (5th ed, LexisNexis, London, 2012)
at [407] refers to quantum valebat as a claim “to recover reasonable remuneration for … goods supplied.” Halsbury’s Laws of England also notes at [407] that towards the end of the 17th century, quantum meruit was confined to similar claims for work done. It states that the practical significance of the distinction between quantum valebat and quantum meruit has disappeared in modern times, with both actions being commonly referred to by the label of quantum meruit. Accordingly, I shall use quantum meruit to include recovery of remuneration for goods supplied.
The earlier proceeding
[8] Ownership of the counters and general testing units (GTUs) from which the Trimex products were sold in retail stores featured in the earlier proceedings.7 The cost of those items and their installation was borne equally between BDM Grange and the retailers. However, despite the retailers’ financial contribution, under its legal relationships with the retailers BDM Grange retained sole legal ownership of both the counters and GTUs.
[9] Once the arrangement came to an end Trimex Australia supplied the same products to Trimex New Zealand, which began operating in New Zealand as a wholesaler of the Trimex products. New Zealand retailers, who were now purchasing products from Trimex New Zealand, apparently continue to sell the products from the existing counters and GTUs, despite these items being legally owned by BDM Grange. There is no evidence as to the extent to which this is still happening, or whether new counters and GTUs that do not involve BDM Grange are in use. The present proceedings are being dealt with on the basis that at some relevant time after the arrangement ended, BDM Grange’s counters and GTUs in various retail outlets were used for the sale of Trimex products.
[10] It is common ground that at no time since the arrangement ended has BDM Grange taken action against the retailers to stop them from using counters and GTUs legally owned by BDM Grange to sell Trimex products.8 In the earlier proceedings BDM Grange claimed that as part of the alleged partnership/joint venture these counters and GTUs were beneficially owned jointly by it and Trimex Australia, and that once the arrangement ended they were required to account to each other for the residual value of the counters and GTUs. To expedite the hearing of the earlier proceeding the parties agreed that quantification of this value would be deferred to a
separate hearing.
7 See BDM Grange Ltd v Trimex Pty Ltd, above n 1, at [175]–[193]. The counters are the type of counter from which Clarins and other similar products are sold in retail stores. The GTUs are the display stands for the various items of Clarins beauty products.
8 See BDM Grange Ltd v Trimex Pty Ltd, above n 1, at [185]. In the present proceeding BDM Grange’s managing director Andrew Berryman acknowledges in his affidavit evidence that BDM Grange has chosen not to remove the counters and GTUs it owns from the retail stores because it has ongoing commercial relations with those stores and such action would be detrimental to those relations.
[11] In the judgment I found that BDM Grange was the sole legal and beneficial owner of the counters and GTUs, which meant there was no need for me to determine whether the parties had to account to each other for the residual value of those assets:
[193] Therefore, I am satisfied that the circumstances of the parties’ arrangement reveal a common intention on their part that BDM Grange initially purchased the stock in trade, the counters and the GTUs and at all material times held legal and beneficial ownership of those assets until it decided to sell or otherwise dispose of them to a third party.
[12] I also rejected the argument that the arrangement was a partnership and a joint venture, which was a further factor against the counters and GTUs being beneficially owned jointly by BDM Grange and Trimex Australia.9
[13] One of the features of the earlier proceedings, which the Trimex parties now rely upon, is an abandoned attempt by BDM Grange to amend its statement of claim to include a claim that Trimex Australia was liable to account to BDM Grange for profits or benefits arising from the use of the counters and GTUs after the
arrangement ended. The proposed amendment read as follows:10
8.In accordance with the notice of termination, the joint venture/partnership ceased operation on 30 September 2012.
9.The parties are required to account to one another in respect of the following matters:
a.Net distributions owed, taking into account write-downs on promotional and general stock held by BDM Grange.
b. Residual value of counters and GTU’s.
c.$58,058.87 owed by Trimex Pty for Clarins stock paid for by BDM Grange but shipped to the Trimex Pty business at its request.
d.Profits made by Trimex utilising the counters and GTUs since 1 October 2012.
10.Trimex has refused to cooperate in a final taking of account and has denied that the parties were in a joint venture or partnership, despite accepting in or around the year 2000 that the joint venture was a
9 See BDM Grange Ltd v Trimex Pty Ltd, above n 1, at [194]–[273].
10 See marked version of “Draft Amended Statement Of Claim” dated 25 November 2014 which
was provided to Trimex Australia on that day.
partnership and acting accordingly for a period of some years after that.
[14] Trimex Australia opposed the proposed amendment, and ultimately BDM Grange abandoned pursuing the inclusion of paragraph 9(d) as an amendment to its statement of claim (the abandoned amendment).11 The Trimex parties rely on this as a relevant factor supporting their arguments that BDM Grange is now barred from making any claims based on them allegedly benefitting from the counters and GTUs.12
The benefits proceeding
[15] In the benefits proceeding BDM Grange asserts sole ownership of the same counters and GTUs that featured in the earlier proceedings. It then alleges that at the knowing direction of Trimex Australia, Trimex New Zealand wholesales Clarins products in the New Zealand market on the basis the retail sales will be made using counters and GTUs owned by BDM Grange. BDM Grange further alleges that it is a term of Trimex New Zealand’s terms of trade with New Zealand retailers that Trimex New Zealand must provide counters and GTUs, which Trimex New Zealand has done by using those of BDM Grange. BDM Grange contends that the use of its property in this way has allowed Trimex New Zealand and Trimex Australia to incontrovertibly benefit in the following ways:
(a) to enjoy profits from the sale of Clarins products that were not
available without the use of BDM Grange’s counters and GTUs;
(b) Trimex Australia has gained management fees which it charges
Trimex New Zealand for management services; and
11 At 2.16 pm on 26 November 2014 BDM Grange provided the Court with a revised proposed claim which did not include paragraph 9(d). The amended pleadings were allowed. BDM Grange was permitted on the same evidence to maintain a new allegation of joint venture as opposed to partnership, see BDM Grange v Trimex Pty Ltd HC Auckland CIV-2013-404-4460, 8
October 2015 (Reasons for Rulings) at [5]–[10]. This was permitted because no additional evidence was required.
12 I will return to this in more detail later.
(c) Trimex Australia has been saved advertising and promotion costs which it would otherwise have had to bear through the funding of the construction of new counters and GTUs.
[16] BDM Grange seeks equitable compensation or an account of profits made by Trimex New Zealand for profits derived from the use of the counters and GTUs. It also seeks equitable compensation or an account of profits made by Trimex Australia for profits it has derived from the use of the counters and GTUs.
[17] Whilst the statement of claim does not refer to quantum meruit, this is what
BDM Grange relies upon in its submissions to found its recovery.13
Relevant law
[18] The underlying purposes of estoppel per rem judicatam and abuse of process are the same: namely, that there should be finality in litigation and that a party should not be vexed twice in the same matter.14 The relevant principles are well settled.
Those relating to res judicata are well explained in Shiels v Blakeley:15
The rule is, so far as material to the present case, that where a final judicial decision has been pronounced by a New Zealand judicial tribunal of competent jurisdiction over the parties to, and the subject-matter of, the litigation, any party or privy to such litigation, as against any other party or privy thereto, is estopped in any subsequent litigation from disputing or questioning the decision on the merits.
...
In one branch of the law of res judicata the cause of action put in suit in the first proceeding passes into judgment so as no longer to have an independent existence. There is both a merger of the cause of action in the judgment and a cause of action estoppel. While in the case of what is commonly called issue estoppel a particular matter of fact or law in issue in the second proceeding is held to have been decided by the prior judgment but may or may not be determinative of the second proceeding. See Blair v Curran (1939) 62 CLR 464, 532 per Dixon J and generally Spencer Bower and Turner, Res Judicata (2nd ed, 1969) paras 1, 2, 7, 191 and 192.
13 That approach is not compliant with Berryman v Toup-Nicolas [1958] NZLR 1170 (CA) which held that quantum meruit must be expressly pleaded as a cause of action. However no issue was taken with the form of the statement of claim at the hearing.
14 See Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 (HL) at 31.
15 Shiels v Blakeley [1986] 2 NZLR 262 (CA) at 266.
[19] Later in Shiels v Blakeley, after some discussion regarding the House of Lords’ decision in New Brunswick Railway Company v British and French Trust Corp Ltd,16 the Court of Appeal outlined the scope of issue estoppel in this way:17
In substance we think the New Brunswick case recognises that before there can be an issue estoppel it must be possible to say positively and without room for doubt that the issues are identical.
[20] The application of issue estoppel extends beyond the same parties to their privies as well. Shiels v Blakeley recognised there is no exhaustive definition of “privies” and after reviewing relevant case concluded:18
Privity in this sense denotes a derivative interest founded on, or flowing from, blood, estate, or contract, or some other sufficient connection, bond, or mutuality of interest. No case has yet sought to define exhaustively the degree or nature of the link necessary to render a person privy in interest. That this is so is not surprising for the necessary connection may arise in a variety of ways and its existence falls to be tested in the light of the object of the rules about estoppel by res judicata and their effect in preventing the party in the subsequent proceeding from putting his case in suit.
…
We conclude that there must be shown such a union or nexus, such a community or mutuality of interest, such an identity between a party to the first proceeding and the person claimed to be estopped in the subsequent proceeding, that to estop the latter will produce a fair and just result having regard to the purposes of the doctrine of estoppel and its effect on the party estopped.
[21] Abuse of process goes further than res judicata by precluding litigation that could or should have been brought at the same time as earlier litigation. The principle was first developed in Henderson v Henderson when it was then described as an extension of res judicata.19 The principle has since been refined. In Johnson v
Gore Wood & Co Lord Bingham observed:20
… Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current
16 New Brunswick Railway Company v British and French Trust Corp Ltd [1939] AC 1 (HL).
17 At 267.
18 At 268.
19 Henderson v Henderson (1843) 3 Hare 100.
20 Johnson v Gore Wood & Co (a firm), above n 14, at 31; approved in Commissioner of Inland
Revenue v Bhanabhai [2007] 2 NZLR 478 (CA) at [60].
emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in early proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.
[22] As with estoppel per rem judicatam, the bar against subsequent litigation due to abuse of process does not require absolute identity of parties.21
Discussion
Identity of parties
[23] Trimex Australia was a defendant in the earlier proceeding and it is a defendant in the benefits proceeding. The additional defendant, Trimex New Zealand, is a wholly owned subsidiary of Trimex Australia. It is common ground that it acts at the direction of Trimex Australia. The relationship between a parent company and its wholly owned subsidiary is recognised to have the necessary nexus for one to be the privy of the other in the context of estoppel per rem judicatam and
abuse of process.22 Accordingly, I find that Trimex New Zealand is the privy of
Trimex Australia.
Estoppel per rem judicatam
[24] The restitutionary claim in the benefits proceeding is premised on the counters and GTUs having a different legal status than was alleged in the earlier
21 See Commissioner of Inland Revenue v Bhanabhai, above n 20, at [61].
22 See Hamed Abdul Khaliq Al Ghandi Co v New Zealand Dairy Board (1999) 13 PRNZ 102 (CA).
proceedings, and the claim targets a different time frame regarding use. This places the benefits proceeding outside the scope of estoppel per rem judicatam.23
[25] The counters and GTUs as well as evidence relevant to their use were addressed in the earlier proceeding. In principle, it was open to BDM Grange to bring the claims made in the benefits proceeding as alternative claims in the earlier proceeding. In fact, in the earlier proceeding BDM Grange did attempt to bring a claim based on Trimex Australia being liable to account for its use of the counters and GTUs after the arrangement ended. This is what the abandoned amendment alleged, only in that instance the proposed claim was based on the counters and GTUs being beneficially owned by BDM Grange and Trimex Australia as partners or
persons engaged in a joint venture.24 Had BDM Grange been permitted to amend its
statement of claim in this way, it would now be the case that it was trying by means of an alternative cause of action to obtain a remedy for the same unlawful conduct involving the same subject matter against the same party plus its privy. In my view this would give rise to an issue estoppel.
[26] However, because in the earlier proceeding BDM Grange abandoned any claim against Trimex Australia for its conduct after the arrangement ended, such conduct has never been the direct subject of litigation between them or Trimex New Zealand. The claim BDM Grange made in the earlier proceeding for an accounting of the residual value of the counters and GTUs may have indirectly allowed some redress for use of the counters and GTUs after the arrangement ended.25 Had BDM Grange succeeded in proving those assets were beneficially owned by a partnership or joint venture, their subsequent potential use may have been reflected in their
residual value. However, this would have depended upon the extent to which the valuation exercise took their future into account, which I consider to be too removed to support an issue estoppel.
[27] Accordingly, I consider that an estoppel does not arise.
24 See [13] herein which sets out the proposed amended statement of claim including 9.d, which later became the abandoned amendment.
25 See [13] herein. This allegation which is shown at 9.b of the proposed amended statement of claim was one of the permitted amendments to the statement of claim.
Abuse of process
[28] Whether the benefits proceeding is an abuse of process is more problematic. [29] Ordinarily a different cause of action based on a different time frame may
have been sufficient to distance the benefits proceeding from the earlier proceeding despite the same parties (plus a privy) being involved. However, in the present case the reason why the time frame covered by the benefits proceeding was not the subject of litigation in the earlier proceeding is because BDM Grange did not raise this issue in a timely fashion. BDM Grange had wanted to attack Trimex Australia’s use of the counters and GTUs post the arrangement; it found it could not do so because it had not pleaded the issue before trial, and its belated attempt to amend its statement of claim in this way during the course of the trial was abandoned. This was in the face of strong opposition to the proposed amendment from Trimex Australia and in the face of the Court indicating that a better course of action might be for BDM Grange to discontinue its claims against Trimex Australia and start
again with a fresh proceeding.26
[30] BDM Grange’s wish to expand the scope of its claims against Trimex Australia so belatedly placed BDM Grange in a difficult position. Trimex Australia strongly opposed any expansion of BDM Grange’s claims and it also strongly opposed adjournment of its counterclaim for moneys owed to it by BDM Grange, if BDM Grange did discontinue its claims against Trimex Australia. BDM Grange’s pleaded claims in the earlier proceeding were being used preemptively to counter Trimex Australia’s money claims against BDM Grange. So, unless BDM Grange’s claims were heard at the same time as Trimex Australia’s counterclaim their
effectiveness as a shield to the counterclaim was arguably diminished.27
Accordingly, BDM Grange was faced with either electing to proceed with its case
26 Because the claims BDM Grange made against Trimex Australia were not time barred by the Limitation Act 2010, r 15.24 of the High Court Rules 2016 allowed BDM Grange to discontinue and then bring a fresh proceeding.
27 The effect of each party’s proceeding being heard at the same time meant BDM Grange could readily set off any judgment it obtained against any judgment Trimex Australia obtained. If BDM Grange had discontinued its proceeding and Trimex Australia proceeded to obtain judgment against BDM Grange, it would then have been reliant on the law of equitable set-off to allow it to raise an unproven unliquidated claim as a defence to the enforcement of the Trimex money judgment. The latter was a more precarious position for BDM Grange than the former.
against Trimex Australia without the abandoned amendment, or discontinuing, for the purpose of bringing fresh expanded proceedings, in circumstances where the trial of Trimex Australia’s claims was likely to continue.
[31] On the other hand, had BDM Grange chosen to discontinue with its statement of claim in the earlier proceedings, all would not have been lost for BDM Grange in terms of it resisting Trimex Australia’s counterclaim. Any claims BDM Grange might have brought against Trimex Australia in a fresh proceeding would have provided a basis for equitable set off against any money judgment Trimex Australia obtained, in the same way as BDM Grange now seeks to use the benefits
proceeding.28 Further, a fresh proceeding would have allowed BDM Grange to join
Trimex New Zealand as a defendant and to expand the statement of claim to include causes of action now relied upon in the benefits proceeding.
[32] By electing to proceed without the abandoned amendment, BDM Grange effectively chose to confine its chance for redress from Trimex Australia for the use of the counters and GTUs to an accounting of the residual value of those assets following termination of a partnership or joint venture.
[33] During the exchanges between the Court and BDM Grange in the earlier proceeding, the question of issue estoppel and abuse of process in relation to the abandoned amendment was touched on. Indeed, when the Trimex parties first raised the question of issue estoppel and abuse of process in the benefits proceeding, BDM Grange maintained that the abandoned amendment happened in the context of Trimex Australia giving assurances no such issues would be raised if at some later time BDM Grange sought to bring fresh proceedings based on the same subject matter. BDM Grange abandoned this position once a transcript of the chambers hearing on those matters became available.
[34] In the earlier proceeding BDM Grange made certain strategic decisions in the face of difficult choices. These included a decision not to discontinue its claims
against Trimex Australia so that it could freely make them afresh. This decision was
28 See BICC plc v Burndy Corp [1985] Ch 232 (CA) at 250–251 for principles relevant to equitable set off, cited with approval in Property Ventures Investments v Regalwood Holdings [2010] 3
NZLR 231 (SC) at [64].
taken with knowledge the abandoned amendment might face issue estoppel and abuse of process obstacles if it was brought later in a fresh proceeding. BDM Grange found itself in this position because seemingly it did not realise until it opened its case against Trimex Australia that the pleaded claims against Trimex Australia did not go far enough.29
[35] In short, therefore, if a party fails to plead its case fully in one set of litigation and at trial knowingly decides not to pursue a late amendment to its pleading, is it an abuse for that party in subsequent litigation against the same party (and its privy) to bring a new cause of action to obtain redress for conduct that it chose not to attack in the earlier proceeding.
[36] One of the public interests underlying abuse of process stems from the same root as those underlying the courts’ reluctance to permit late amendments to pleadings: namely, fairness to the parties and efficiency and economy in the conduct of litigation.30 In Aon Risk Services Australia Ltd v Australian National University,31 a case that concerned an application to amend pleadings, the High Court of Australia allowed an appeal against an order granting leave to amend a statement of claim.
Regarding the Judge’s discretion to allow an application for adjournment and amendment of pleadings, the Court gave weight to the importance of case management concerns. French J stated:32
Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system. (emphasis added).
29 The trial commenced on 24 November 2014. What later became the abandoned amendment was first mentioned in BDM Grange’s opening address. This amendment first took form in a draft statement of claim dated 25 November 2014. It was not part of the amended statement of claim that was filed on 26 November 2014.
30 Johnson v Gore Wood & Co (a firm), above n 14, at 31.
31 Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27, (2009) 239
CLR 175.
32 At [5].
[37] The other Judges, Gummow, Hayne, Crennan, Kiefel and Bell JJ, concurred
with French J’s comments and stated:33
The stated object in the Court Procedures Rules, of minimising delay, may be taken to recognise the ill-effects of delay upon the parties to proceedings and that such effects will extend to other litigants who are also seeking a resolution in their proceedings.
[38] BDM Grange now seeks to recover from the Trimex parties a benefit they allegedly enjoy from using the counters and GTUs after the arrangement had ended. That is what BDM Grange initially tried to do with the abandoned amendment in the earlier proceedings and what it tries to do now, albeit by a different cause of action. It makes no difference that the earlier claim was based on joint beneficial ownership of the counters and GTUs whereas the present claim is based on BDM Grange being their sole owner. Had BDM Grange acted sooner in the earlier proceedings, it could have claimed in the alternative: (a) as a beneficial joint owner entitled to an account for Trimex Australia’s use of partnership/joint venture assets following termination of those relationships; or (b) as sole owner in quantum meruit for Trimex New Zealand’s use of the assets once the arrangement ended. The public interests that weighed against permitting BDM Grange to amend its statement of claim in the earlier proceeding now weigh against permitting BDM Grange to make a second attempt at recovery. To do otherwise would be to allow an abuse of process.
[39] Further, the potential for abuse of process is reinforced here when it is realised the benefits proceeding has the same purpose, by way of equitable set off, as did the claims BDM Grange brought in the earlier proceeding: namely, that of shielding BDM Grange from recovery by Trimex of money contractually due to it under the arrangement. With the benefits proceeding Trimex Australia is yet again left with facing delay in obtaining payment of this money.
[40] Accordingly, I find the benefits proceeding is an abuse of process. This finding provides reason for allowing the summary judgment application brought by
the Trimex parties and dismissing the benefits proceeding.34 However, I will also
33 At [101].
34 See Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26] for the principles applicable to a summary judgment application.
deal with the arguments the Trimex parties made regarding the lack of merit of that proceeding.
The merits of the benefits proceeding
[41] Since the arrangement ended Trimex New Zealand has operated as the New Zealand wholesaler of Clarins products. BDM Grange alleges that the Trimex parties enjoy incontrovertible benefits as a result of retailers selling Clarins products from counters and GTUs owned by BDM Grange. These benefits include the profits from the sales of Clarins products as well as costs the Trimex parties have avoided incurring as a result of having ready-made counters and GTUs installed in the retail stores.
[42] BDM Grange further alleges that it is a term of Trimex New Zealand’s terms of trade with New Zealand retailers that Trimex New Zealand must provide counters and GTUs in its role as wholesaler of Clarins products, which Trimex has done by using the counters and GTUs belonging to BDM Grange.
[43] BDM Grange seeks equitable compensation or an account of profits made by Trimex New Zealand in respect of the profits derived from the use of the counters and GTUs. It also seeks equitable compensation or an account of profits made by Trimex Australia for profits it has derived from the use of the counters and GTUs. The basis for such recovery was identified in BDM Grange’s submissions as being quantum meruit, although the thrust of BDM Grange’s arguments were formulated on a broader approach which relied on general principles of unjust enrichment.
[44] BDM Grange contends the benefits proceeding is clearly arguable and soundly based on authority to the effect that a party gaining an incontrovertible benefit from the use of another’s property is liable to account. Here it relies on Cassels v Body Corporate No 8697535 and Villages of New Zealand (Pakuranga) Ltd
v Ministry of Health.36
35 Cassels v Body Corporate No 86975 (2007) 8 NZCPR 740 (HC).
36 Villages of New Zealand (Pakuranga) Ltd v Ministry of Health HC Auckland CIV-2003-404-
5143, 6 April 2005.
[45] On the other hand the Trimex parties dispute the elements of quantum meruit are satisfied. They say that to date such claims have generally involved requests for services or goods, and here there was none. Further, they argue that BDM Grange can only point to historic expenditure on the counters and GTUs, which they contend is immaterial.
[46] The Trimex parties also argue that BDM Grange can rely on tort law to enforce ownership rights it might have of the counters and GTUs. However, the availability of tortious remedies is no barrier to a plaintiff using restitutionary remedies for redress.37
[47] In The Law of Restitution,38 Professor Burrows describes quantum meruit as a common law remedy that falls within the category of personal restitutionary remedies. The United Kingdom courts no longer emphasise such distinctions. Instead, Halsbury’s Laws of England views the House of Lords decision in Lipkin Gorman (a firm) v Karpnale Ltd39 as heralding the existence of an independent law of restitution based upon the principle that unjust enrichments must be reversed, which is now clearly established in that jurisdiction.40 Accordingly, Halsbury contends there is no need to plead traditional causes of action like quantum meruit; instead all a plaintiff need do now is state the nature of the claim and the facts on which he or she relies; assert the defendant has been unjustly enriched at his or her expense; and specify the remedy sought.41 This is essentially how BDM Grange pleads its case.
[48] The idea the doctrine of unjust enrichment might provide a distinct and overarching cause of action that encapsulates all personal restitutionary causes of action, thus rendering their traditional forms redundant, has still to gain acceptance in New Zealand.42 Nonetheless, the doctrine is seen to be a “unifying legal
concept”43 which underlies and so shapes their evolving forms.44
37 See Lord Mackay (ed), above n 6, at [561]–[564].
38 Andrew Burrows The Law of Restitution (2nd ed, LexisNexis, London, 2002) at 52–53.
39 Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (HL).
40 See Lord Mackay (ed), above n 6, at [401].
41 See Lord Mackay (ed), above n 6, at [409].
42 See Villages of New Zealand (Pakuranga) Ltd v Ministry of Health, above n 36, at [98]–[99].
43 See Pavey & Mathews Pty Ltd Paul [1987] HCA 5, (1987) 162 CLR 221 at 256, approved in
[49] Further, despite the divergence between New Zealand law and the law of England and Wales regarding unjust enrichment being a stand-alone cause of action, there appears to be common acceptance in both jurisdictions that any personal restitutionary claim (quantum meruit included) usually entails four elements: (a) the defendant has been enriched; (b) the enrichment is at the expense of the claimant; (c) the enrichment is unjust; and (d) consideration is then given to any applicable
defences.45
[50] Quantum meruit has traditionally involved circumstances where a plaintiff has been requested to provide services or goods to the defendant but no consideration is agreed between them.46 These fit readily enough with the above four elements. In such circumstances courts have allowed the plaintiff to recover a reasonable payment for the goods or services following delivery.
[51] Here there was no request made of BDM Grange. On its account of events, its counters and GTUs are simply being used by the current wholesaler and retailer of Clarins products. BDM Grange has not pleaded any present disadvantage to itself from the counters and GTUs being used in this way. Nor has BDM Grange pleaded making expenditure on the counters and GTUs since the arrangement ended. Accordingly, the present circumstances go beyond the traditional scope of quantum meruit.
[52] Nonetheless, as Winkelmann J recognised in Villages of New Zealand
(Pakuranga) Ltd v Ministry of Health “the quantum meruit cause of action continues to evolve.” 47
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48, (1992) 175 CLR
353 at 378–379.
44 See Transpower New Zealand Ltd v Meridian Energy Ltd [2001] 3 NZLR 700 (HC) at [59];
Villages of New Zealand (Pakuranga) Ltd v Ministry of Health, above n 36, at [76].
45 Lord Mackay (ed), above n 6, at [410]; Charles Mitchell, Paul Mitchell and Stephen Watterson
(eds) Goff and Jones: The Law of Unjust Enrichment (9th ed, Sweet and Maxwell, London,
2016) at [1-09], citing Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 (HL) at 227, applied in Investment Trust Companies v Revenue and Customs Commissioners [2017] UKSC 29, [2017] 2 WLR 1200 at [24]. The four elements appear in essence as a common factor in relevant New Zealand case law.
46 See Villages of New Zealand (Pakuranga) Ltd v Ministry of Health, above n 36, at [74]–[76].
47 At [74].
[53] Quantum meruit is now recognised to extend in some circumstances to where a defendant has received an unsolicited benefit. In Cassels v Body Corporate 86975
Miller J opined:48
The authorities recognise a further class of quantum meruit claims involving
‘incontrovertible benefit’. A defendant may be required to pay in certain circumstances, although there was no request and nothing to show that the defendant ought to have appreciated that payment was wanted. Relief appears to be limited to cases in which it is clear either that the plaintiff saved the defendant an expense that it would necessarily have incurred or that the plaintiff’s work resulted in the defendant making a realisable financial gain: Goff & Jones at [1-023].
[54] In Villages of New Zealand (Pakuranga) Ltd v Ministry of Health
Winkelmann J described the “incontrovertible benefit doctrine” in this way:49
If the plaintiff has provided a service at the request of the defendant, or the defendant has freely accepted those services, and the defendant knew or should have known that the plaintiff expected to be paid for them by the defendant, then the cause of action is made out. In my view the “incontrovertible benefit” doctrine is better regarded as an extension to the request/free acceptance model of quantum meruit, such that where it cannot be said that the defendant requested or freely accepted the services, such as where the defendant was ignorant of the provision of the services, the plaintiff may still recover if the defendant has been incontrovertibly benefited by the services.
[55] BDM Grange alleges that Trimex New Zealand is contractually obliged under its terms of supply with retailers to provide counters and GTUs. If this is so, Trimex New Zealand is enjoying a benefit by it not having to provide counters and GTUs while those owned by BDM Grange are still in use. Trimex Australia benefits more nebulously in that the fee it receives from Trimex New Zealand is allegedly untouched by deductions that Trimex New Zealand would otherwise make if it contributed to the installation costs of counters and GTUs in the retail stores. The Trimex parties dispute they would be obliged to bear such costs. However, a summary judgment application by a defendant does not allow for resolution of
disputed material facts.50 Accordingly, I propose to assume the position is as BDM
Grange pleads, in which case I find the Trimex parties enjoy an unsolicited benefit
48 At [43].
49 At [87].
50 See Jones v Attorney-General [2003] UKPC 48, [2004] 1 NZLR 433 at [5].
from the use the retailers make of BDM Grange’s counters and GTUs.51 However, I note that there is no allegation, nor evidence to suggest, the Trimex parties sought this benefit from BDM Grange, nor have they directly accepted this benefit from BDM Grange. Instead, the benefit has seemingly come to them as a result of the retailers’ decision to use the existing counters and GTUs in their stores. Accordingly, the unsolicited benefit is directly derived from third parties who can control the use made of the counters and GTUs by reason of them being situated in the third parties’ premises.
[56] The circumstances here are not analogous with current case law. At best they lie close to the recognised margins of quantum meruit. Do they fall within those margins?
[57] The fatal weakness in BDM Grange’s case is with the second and third elements of these types of claims: namely, the company cannot show the Trimex parties have been enriched at BDM Grange’s expense, or that this enrichment is unjust. An additional fatal weakness, which is related to those elements, is that the
Trimex parties do not directly enjoy benefits from BDM Grange.52
[58] Ever since the arrangement ended, the counters and GTUs cannot be used by BDM Grange to sell Clarins products. The counters and GTUs may have value to BDM Grange, if they could be altered and re-branded to sell other beauty products that BDM Grange supplies to the retailers, but this is not pleaded, nor is there evidence to suggest this possibility. For a start it would require the retailer’s agreement, and there is nothing to suggest that would be forthcoming.
[59] The terms of the contracts between BDM Grange and the retailers were not in evidence in the earlier proceeding, and they have not been put in evidence now. Accordingly, whether those parties had agreed on how the counters and GTUs were to be treated once BDM Grange ceased supplying Clarins products to the retailers is
unknown.
51 Whether an unsolicited benefit is an “incontrovertible benefit” is a separate legal question.
52 See Investment Trust Companies v Revenue and Customs Commissioners, above n 45, at [50]–
[53].
[60] BDM Grange has not and seemingly cannot point to any expenditure it has made on the counters and GTUs since the arrangement ended. At the time BDM Grange expended money to build the counters and GTUs it was engaged in the wholesale of Clarins products under its arrangement with Trimex Australia and therefore it benefited from this expenditure. While the arrangement subsisted there was no room for quantum meruit claims. Now BDM Grange seemingly has no use for and no ability to use the counters and GTUs, in which case it is difficult to see how their present use is at the expense of BDM Grange. So, while the Trimex parties may now be enjoying present benefits from the counters and GTUs, this is not at the current expense of BDM Grange.
[61] After a careful and extensive analysis of relevant case law, the Supreme Court of the United Kingdom in Investment Trust Companies v Revenue and Customs Commissioners concluded that to satisfy the second element of a personal restitutionary claim, a claimant needed to prove a loss in the form of a transfer of value through the provision of something for the benefit of the defendant.53 When it
came to proof of such loss the Supreme Court of the United Kingdom recognised:54
[The] claimant may have received the consideration for which he bargained as the counterpart of his own expenditure, and in that event will not usually have suffered any loss. Even if he has incurred a loss, it will not normally have arisen through his provision of something for the benefit of the defendant, since the benefit received by the defendant will have been merely incidental or collateral to the reason why the expenditure was incurred. A “but for” causal connection between the claimant’s being worse off and the defendant’s being better off is not, therefore, sufficient in itself to constitute a transfer of value.
[62] The above passage fits nicely with what has occurred here. When BDM Grange incurred expenditure on the counters and GTUs it did so as part of an arrangement with retailers where it and they shared the cost of constructing and installing the counters and GTUs. In return, BDM Grange sold Clarins products to the retailers for them to sell to consumers from the counters and GTUs. This is the counterpart BDM Grange received from its expenditure on those assets. Both the
expense and its counterpart are now historic. BDM Grange cannot use “but for”
53 At [52]–[55].
54 At [52].
causal reasoning to breathe life into what is no more than historic expenditure in order to satisfy the second element of its claim.
[63] Because BDM Grange has suffered no present expense or transfer of value to the Trimex parties I also do not see how they can be said to be unjustly enriched by the present circumstances. The benefits the Trimex parties enjoy do not come at BDM Grange’s expense. Further those benefits do not come directly from BDM Grange. The Trimex parties enjoy them because the retailers, who are independent third parties, have chosen to use existing counters and GTUs rather than to require the Trimex parties to contribute to the cost of new ones. Existing case law does not support restitutionary claims based on unjust enrichment (quantum meruit included) where the claimant and defendant have not dealt directly with one another and so the
benefit enjoyed by the defendant has been indirectly obtained.55 Accordingly, BDM
Grange’s claim is outside the present margins of quantum meruit.
[64] The counters and GTUs are now used to sell products BDM Grange once supplied. Others now benefit from their use, but in circumstances where there is no current loss to BDM Grange. That the wholesaler is Trimex New Zealand rather than a stranger to BDM Grange seems to me to be immaterial. These circumstances do not invite extension of quantum meruit to include circumstances where the plaintiff has suffered no current expense, and so the defendant has not been enriched at the plaintiff’s expense. Indeed it is difficult to see why quantum meruit would ever be extended to include such circumstances.
[65] There is some suggestion that unconscionable conduct can support a claim in quantum meruit.56 However, here there can be no suggestion Trimex Australia acted unconscionably when it ended the arrangement, as the only complaints BDM Grange made relating to the termination failed.57 All that has happened here is simply that a
commercial arrangement between BDM Grange and Trimex Australia came to an
55 See discussion in Investment Trust Companies v Revenue and Customs Commissioners, above n
45, at [46]–[51] and see Lord Mackay (ed), above n 6, at [419].
56 In Cassels, above n 35, at [48], Miller J referred to the principle championed by Professor Birks which would justify restitution being awarded on the ground of the unconscionable conduct of the defendant in receiving the services. The approach is not without criticism, see Andrew S Burrows “Free Acceptance and the Law of Restitution” (1988) 104 LQR 576.
57 See BDM Grange Ltd v Trimex Pty Ltd, above n 1.
end, as often happens. That ending brought the commercial relationship between BDM Grange and the retailers of Clarins products to an end. The retailers are now using the counters and GTUs that remain in their stores for their own ends, which has resulted in a coincidental benefit for the Trimex parties, because each in its own way has a commercial interest in the supply of Clarins products to the retailers. In such circumstances there is no basis for viewing what is occurring through the lens of unconscionable conduct. To do so here would risk creating the very licence that Investment Trust Companies v Revenue and Customs Commissioners for good reason
refused to countenance:58
A claim based on unjust enrichment does not create judicial licence to meet the perceived requirements of fairness on a case by case basis: legal rights arising from unjust enrichment should be determined by rules of law which are ascertainable and consistently applied.
[66] It may strike BDM Grange as unfair that the Trimex parties ended the arrangement and now benefit from the use of the counters and GTUs, but such subjective feelings of unfairness are not to be considered.59 Resistance to allowing general notions of unfairness or unconscionable conduct to influence outcomes is partly why courts have been reluctant to abandon established restitutionary causes of action for a single cause of action of unjust enrichment. When viewed objectively and in accordance with settled legal principles, the Trimex parties are not unjustly enriched by the retailers using BDM Grange’s counters and GTUs. If BDM Grange
is aggrieved by what is happening, there are other legal remedies available to it as the owner of the counters and GTUs. Like any property owner it can stop others from using its property.
[67] For all the above reasons I am satisfied that on the merits the benefits proceeding has no prospect of success.
Conclusion
[68] The Trimex parties are entitled to the summary judgment they seek. They have a complete defence to the benefits proceeding both in terms of it being an abuse
58 Investment Trust Companies v Revenue and Customs Commissioners, above n 45, at [39].
59 See Peter v Beblow (1993) 1 SCR 980 at 988 approved by Investment Trust Companies v
Revenue and Customs Commissioners, above n 45, at [39].
of process and on the merits of the claim it brings. Accordingly, the benefits proceeding is dismissed.
Statutory demand
[69] BDM Grange’s application for a stay of the statutory demand rested on the benefits proceeding. Now that the benefits proceeding has been dismissed, BDM Grange has no good reason for resisting payment of the statutory demand.
[70] Trimex Australia has been trying since 2013 to obtain payment for money due to it under its contractual arrangement with BDM Grange. The need for payment has been confirmed by the success Trimex enjoyed in the earlier proceeding, which resulted in it obtaining a money judgment against BDM Grange. Although the quantum was reduced in part as a result of BDM Grange’s successful appeal against part of the High Court judgment, there is still a significant sum that is now due to Trimex Australia as a judgment debt. Trimex Australia is entitled to recover it.
[71] I am satisfied that BDM Grange’s application to set aside the statutory demand should be dismissed and accordingly I do so. Further, I direct that BDM Grange must comply with the statutory demand within 10 working days of delivery of this judgment.
[72] The Trimex parties sought orders from the Court that would result in BDM Grange being placed in liquidation if the debt owed to Trimex Australia was not paid. I have concerns about adopting that approach as the making of a statutory demand does not in itself commence a legal proceeding. Before orders can be made placing BDM Grange in liquidation, Trimex Australia must commence an application for an order to that effect.
Result
[73] The summary judgment application brought by the Trimex parties is granted.
[74] The proceeding brought by BDM Grange against the Trimex parties is dismissed.
[75] BDM Grange’s originating application to set aside the statutory demand
issued by Trimex Australia is dismissed.
[76] BDM Grange has 10 working days from delivery of this judgment to comply
with Trimex Australia’s statutory demand.
[77] Leave is reserved to the parties to file memoranda as to costs.
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