Casares v Oktobor Group Limited

[2012] NZHC 606

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-2140 [2012] NZHC 606

BETWEEN  CHRISTINA CASARES Plaintiff

ANDOKTOBOR GROUP LIMITED Defendant

Hearing:         31 October 2011

Counsel:         B Henry and P Knapp for Plaintiff

D Chesterman for Defendant

Judgment:      2 April 2012 at 4 pm

RESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON (Summary Judgment)

This judgment was delivered by me on 2 April 2012 at 4 pm pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date ..........................

Solicitors:

Swarbrick Beck MacKinnon, PO Box 7120, Auckland

DJ Gates, PO Box 222, Whangaparaoa

CHRISTINA CASARES V OKTOBOR GROUP LIMITED HC AK CIV-2011-404-2140 [2 April 2012]

[1]      The   defendant,   Oktobor   Group   Ltd,   applies   for   summary   judgment dismissing the plaintiff ’s claim under High Court Rule 12.2.  Relevantly, that rule states:

(2)       The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff's statement of claim can succeed.

[2]      The plaintiff, Ms Casares, opposes the application. She contends that her claim is arguable and that it should be allowed to proceed to trial.

[3]      Ms Casares’ claim is essentially that Oktobor is liable for commission on a quantum meruit basis in respect of her introduction of new customers to Oktober. Oktobor asserts that it can satisfy the Court on the balance of probabilities that Ms Casares’ claim cannot succeed.  It says it has a clear answer to her claim (based on a binding contract of employment) that cannot be contradicted regardless of the evidence she offers and regardless of her claims of disputed issues of material facts.

[4]      Oktobor  bears  the  responsibility  of  proving  that  Ms  Casares’ claim  for commission is untenable.

The plaintiff ’s claim and the claim for summary judgment – an overview

The Claim

[5]      It is not disputed that in November 2009 Ms Casares and Oktober entered into a contract of engagement termed the ‘Freelance Agreement’. But Ms Casares claims that the terms of her engagement were not confined to the Freelance Agreement and that she was entitled to commission because:

(a)       There was a separate oral agreement for the payment of commission;

and

(b)Though the terms of that commission were never specified, she is entitled to a reasonable commission on a quantum meruit/unjust enrichment basis.

[6]      Ms Casares’ case is that although she was engaged by Oktober as an account manager under the Freelance Agreement, it was discussed that she would assume the additional  responsibility  of  seeking  new  customers  for  which  she  would  be separately rewarded.  She asserts that the parties had a common understanding that they would reach an agreement for the payment of commission to remunerate her for this additional responsibility.  She claims that:

(a)      She made introductions, including instigating contact with Backyard Studios on or about 27 February 2010 whose business was worth about $15 million;

(b)Despite such success, Oktober left her in a ‘contractual wilderness’ from about February 2010 and negotiations for a commission came to a halt when Oktobor realised that it faced a substantial payment for that introduction; and

(c)      A dispute  subsequently  arose  as  to  commission  and,  despite  that dispute, a commission is due.

The claim for summary judgment

[7]      Oktobor’s  position  is  that  Ms  Casares  was  paid  $1,200  per  week  plus expenses, as provided by the Freelance Agreement, and that no agreement for further remuneration was ever made.  It says there is no evidence that it ever agreed to pay commission or that commission was payable.

[8]      For  Ms  Casares  it  is  argued  that  this  case  is  not  suitable  for  summary judgment.   Quantum meruit is a developing area of law and the issues cannot be resolved summarily on  the facts before the Court. There are,  counsel  contends, material disputes of fact as the parties expressly disagree about the oral and written

statements that are pertinent to the plaintiff’s claim.  Such disputes render summary judgment inappropriate.

[9]      There  are,  Oktober  contends,  no  material  disputes  of  fact  and  a  robust approach to claims of such disputes is warranted.  Dismissal by summary judgment is, it asserts, appropriate.

Issues

[10]     Putting to one side the developing nature of the law on quantum meruit, the parties’ respective positions on the defendant’s summary judgment application turn substantially on  the  evidence  and  whether  there  are  genuine  disputes  regarding material facts.  Thus, a review of the evidence is required.  The evidence consists mostly of written correspondence and the requisite evidential enquiry must examine the parties’ correspondence, the making of the Freelance Agreement, and the subsequent actions of the parties for the purpose of drawing such conclusions from it as are proper.  Such conclusions may not indulge in speculation but must give due recognition to logical and appropriate inference.  The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel & Anor (1987) 1 PRNZ 84 (CA).

[11]     For reasons that I come to presently, I am satisfied that there are no genuine disputes on the material facts.  I begin with the factual background.

Background

[12]     In around October 2009, Oktober and Ms Casares commenced negotiations as  to  the  legal  relationship  between  them.   At  the  outset  of  those  negotiations Oktobor initially proposed an employment relationship with a possible commission structure.

[13]     In late November 2009 Ms Casares rejected that employment proposal and instead chose to sign a Freelance Agreement.  That agreement dated 18 November

2009 provided for a one-month contract of 40 hours per week at $1,200 per week plus expenses upon the conditions that Ms Casares was to secure:

(a)       Two retail or corporate projects with a combined value of $25,000, such projects to start within the contract period;

(b)Two three-dimensional projects, such projects to be confirmed within the contract period but which could start later; and

(c)       Long form project relationships that will benefit Oktobor in the next six months.

[14]     The Freelance Agreement allowed Ms Casares to control her tax payments, to invoice through her company La Luna Ltd, and to continue her own business.

[15]     The Freelance Agreement did not provide for the payment of commission.

[16]     The primary work required of Ms Casares under the Freelance Agreement was to bring in new projects for Oktobor, including three-dimensional animation projects.

[17]     Though  the  Freelance  Agreement  was  for  a  term  of  four  weeks  to  16

December  2009  it  provided  for  extension  by  agreement  between  the  parties. Oktobor says the parties continued to perform their obligations to each other under its terms for the duration of their relationship which terminated on 6 May 2010. Throughout  the duration of the  Freelance Agreement Ms  Casares was paid and received her weekly entitlements.

[18]     Oktober says that it was not until late February or early March 2009 that there were further discussions about commission.  It was on 27 February 2009 that Ms Casares received a telephone call from Backyard Studios requesting an urgent meeting with Oktobor’s Mr Everett to discuss a potential joint venture, which involved their potential contracts with Nickelodeon.   Ms Casares telephoned Mr Everett and advised him of Backyard Studios’ enquiry.   He says she instigated the discussions about commission and her contract, and that before her telephone contact

with Backyard Studios she had not queried the nature of her contract nor suggested that she was entitled to commission.

[19]     On 6 May 2010 Ms Casares gave one week’s notice of her resignation and the following day gave notice of her personal grievance.   In the case before the Employment Relations Authority (the Authority) on 1 December 2010 it was determined that Ms Casares was an independent contractor and that there was no oral agreement for the payment of commission.

The evidence

[20]     In  her  evidence  Ms  Casares  accepts  that  her  role  under  the  Freelance Agreement was as an account manager, as Mr Everett describes, but insists that it was contemplated that she would also seek new customers and would receive a commission for any clients introduced.   She says that in that role she introduced Backyard Studios which was negotiating a potential contract with Nickelodeon. She contends that in response to her claim Oktobor emailed her on 26 April 2010 offering to settle all outstanding matters, by which offer Oktobor stated:

... In the context of the support and continuity of payments Oktobor has made to you over the last 5 months and that your general level of qualifying closed business has not totalled [sic] to a high enough level to attract commission in your Oktobor Sales role, the above offers constitutes full and final agreement to the conclusion of payments to you in respect of your time here with us. Thank you.

[21]     Ms Casares claims that this is a clear acknowledgement of a liability for commission in circumstances where she was seeking and introducing customers; she had a clear expectation that there would be a commission payable to her on introduction.   She otherwise claims with respect to the introduction of Backyard Studios that it is hard to imagine what commission threshold Oktobor had in mind but that a commission payment was clearly contemplated though it had not been finally agreed.   Her position is that a reasonable commission was payable on all work she produced.

The submissions for Ms Casares

[22]     It is against this background that counsel for Ms Casares, Mr Henry, submits that  key  factual  issues  for  trial  are:  was  there  an  oral  agreement  regarding commission and what is a reasonable commission.  Mr Henry also referred me, in connection with his argument, to the fact that quantum meruit is a developing area of law and as such summary judgment is not appropriate.  In Couch v Attorney-General the Supreme Court stated:[1]

[1] Couch v Attorney-General [2008] 3 NZLR 725 (SC) at [33].

It is inappropriate to strike out a claim summarily unless the court can be certain that it cannot succeed.  The case must be “so certainly or clearly bad” that it should be precluded from going forward. Particular care is required in areas where the law is confused or developing.  And in both X (Miners) v Bedfordshire County Council and Barrett v Enfield London Borough Council liability in negligence for the exercise or non-exercise of a statutory duty or power was identified as just such a confused or developing area of law.  Lord Browne-Wilkinson in X thought it of great importance that such cases be considered on the basis of actual facts found at trial, not on hypothetical facts assumed (possibly wrongly) to be true for the purpose of the strike-out.

[23]     Mr Henry submits that on the facts before the Court the issues cannot be resolved  summarily;  this  relies  upon  the  proposition  that  if  there  are  material disputes of fact that cannot be resolved on evidence by affidavit, summary judgment will have to be refused.

[24]     Mr Henry submits that in their affidavits the parties expressly disagree about the oral and written statements which are pertinent to the terms and conditions of the contract in dispute.  He says that the affidavit evidence demonstrates a clear conflict not only on the word of the deponents, but also in the actual interpretation of the exhibited documents.

[25]     In  Mr  Henry’s  assessment  the  parties’ disagreement  as  to  material  facts includes:

(a)      Whether Oktobor agreed to pay Ms Casares a commission;

(b)When the issue of commission was first raised; Oktobor claims that the issue was not discussed until late February/early March 2010 but

Ms Casares states that the commission was discussed in late 2009 as part of the contract negotiations;

(c)      The value of the Nickelodeon contract and the rate of commission payable.

Discussion

[26]     Ms Casares’ case is based upon a claim that there was an oral contract for the payment  of  commission  or,  alternatively,  that  such  was  contemplated notwithstanding entry into the Freelance Agreement.

[27]     However, the evidence discloses that:

(a)      The Freelance Agreement was regarded by the parties as essential to their particular bargain.   Its terms were reduced to writing, and payment was made and accepted according to those terms.

(b)The Freelance Agreement continued to apply until terminated.   Ms Casares was paid for the services that she provided; and she accepted those payments in the knowledge that such payments related to all of her services including the bringing in of new business.

(c)      Such discussions as there were regarding commission occurred prior to entry into the Freelance Agreement.   Materially, any mention of commission is absent.   Either there was no agreement that Oktober would pay commission or the discussions on the subject were superseded by the Freelance Agreement.

(d)At most it would appear that Oktobor indicated an intention that some time in the future it might consider payment of commission but the extent of such payment was at its discretion.   It follows that any agreement or terms as to commission were not essential to the bargain reached and therefore cannot be implied into the relationship.

[28]     As recently as the decision of the High Court in Villages of New Zealand (Pakuranga) Ltd v Ministry of Health quantum meruit was described as a restitutionary claim that arises in two common contexts:[2]

[2] Villages of New Zealand (Pakuranga) Ltd v Ministry of Health (2006) 8 NZBLC 101, 739 (HC)

at [72] per Winkelmann J.

...firstly where services have been provided under a contract which is subsequently found to be void or unenforceable for some reason, and secondly, where services are provided in anticipation of a contract being concluded, which ultimately is not concluded.

[29]     In Villages of New Zealand the essential elements of a claim in quantum meruit were described as follows:[3]

[3] At [73].

(i)       A request by the defendant of the plaintiff to provide services, or; (ii)        free acceptance of the services provided by the defendant;

(iii)     a benefit to the defendant from the provision of the services.

[30]     It follows that a claim in quantum meruit arises primarily for claimants who have not been paid for their services.  Therefore when a contract provides relief for a given set of circumstances, such as a specified payment for the provision of specific services, it is not usually open to the Court to conclude that a restitutionary remedy also exists in respect of the same subject matter.

[31]     In this instance Ms Casares was clearly paid for the services she provided; under the Freelance Agreement  those  services  included  the introduction  of new clients.

[32]     Mr Henry submits that there exists an exchange of emails between the parties in October and November 2009 and in March and April 2010 (identified in paras 2a

– 2h of the statement of claim) which support Ms Casares’ claim of an oral contract to agree upon a commission payable.   In my assessment the most those emails indicate was that Oktobor would give consideration to a commission structure based

on monthly revenue brought in by Ms Casares and that any commission would be

limited to a maximum amount per year, but that whether Oktobor agreed to pay that commission remained solely at its discretion.

[33]     Indeed, the evidence to which Ms Casares refers in support of her contention contains her acknowledgement that she was a contractor.  Her own description of the only contractor relationship offered to her as having no commission shows that she had no entitlement to commission.  Also, the documents to which Ms Casares refers only record proposals about commission payable monthly and based upon monthly revenue from sales.  Her documents show that no actual agreement was reached nor was  there  any proposal  or agreement  to  pay an  ‘introduction  fee’ which  is  the essence of what she now claims but which she has framed as a ‘commission’.

[34]     By her proceeding Ms Casares is actually claiming an introduction fee which she  describes  as  ‘a  reasonable  commission  based  upon  the  gross  value  of  the business introduced’.  This fee extends beyond the point of time when Ms Casares terminated her contract with Oktobor on 6 May 2010 and has no relationship in its terms to even the general commission proposals presented to her in October 2009 - which she rejected.  I agree with Mr Chesterman, counsel for Oktobor, that it seems Ms Casares must characterise her commission claim in this way because the first project with Nickelodeon did not commence until 10 May 2010 by which time Ms Casares had terminated her engagement with Oktobor.

[35]     Ms Casares goes to some lengths to link early pre-contractual proposals of monthly commission based on monthly revenue to the alleged ‘introduction’ fee. Yet the  first  time  the  introduction  fee  ever  appears  in  correspondence  is  when  Ms Casares raised it in an email to Mr Everett dated 8 April 2010.  That is, almost six months after she started as a contractor.

[36]     Nothing in the earlier discussions suggests contemplation of the payment of an introduction fee.   Oktobor’s initial commission proposal offered a ‘monthly commission structure of 5% upon reaching or exceeding the total monthly revenue target of $50,000’.   The commission was to be limited and ‘based on reaching monthly  targets  the  potential  annual  income  is  NZ$82,000’.    Even  within  Ms Casares’ own  commission  counter-proposal  on  the  same  day  (which  was  never

accepted), commission was still based upon monthly revenue and was still limited in identical terms to ‘a potential annual income of NZ$82,000’.  There is in all of this no mention of an introduction fee based upon gross value of business introduced.

[37]     All initial emails and communications sent prior to her engagement on 18

November 2010 reflect negotiations or discussions which were surpassed when Ms Casares started work as an independent contractor without commission under the terms of the Freelance Agreement.   After these discussions there were no further commission proposals offered to Ms Casares. There were discussions, but no offers.

[38]     I agree with Mr Chesterman that while emails between Ms Casares and Mr Everett expressed hopes, disappointments and expectations, they do not evidence an agreement for the payment of a commission or an introduction fee.  Most favourable for Ms Casares’ case is an email from Mr Everett to her that upon review appears to offer  her  more  than  the  prospect  of  payment  of  commission.    Regardless,  the accepted position between the parties is that there was no agreement on the rate of commission.   As Ms Casares acknowledged in her witness statement filed in the Authority, the issue of commission was still being negotiated and was not resolved as the parties had not agreed what was fair and reasonable; it was, she said, expected that there would be a further agreement for the payment of commission.  At best Ms Casares’ case asserts an expectation.  No agreement resulted.

[39]     Even if Ms Casares was to prove a claim for mutual expectation for the payment of commission there is an insufficient basis upon which a Court can order such payment.  Ms Casares contends for a percentage of gross revenue but there is nothing to explain why.  Usually a Court will intervene in situations where there has been no payment at all, but that is not the case here as Ms Casares was paid for her services and, as Mr Chesterman submits, there is no basis for a Court to intervene to provide her essentially with a contractual share of profits.

[40]     The  quantum  meruit  claim  is  also  muddied  by  considerations  that  the Freelance Agreement anticipated payment for the introduction of new business and not just existing business.   The Freelance Agreement specially set as a target ‘to secure  2  x  Retail  or  Corporate  projects...’.    Ms  Casares’ claim  of  being  in  a

‘contractual wilderness’ has to be measured against the fact that she continued to be

paid $1,200 per week plus expenses.

[41]     The evidence shows Ms Casares was being paid for bringing new contracts into Oktobor, as the Freelance Agreement provided payment solely for the bringing in of new contracts ‘to secure long form project relationships’.  Ms Casares concedes that she knew she was being paid to bring in new work.  In her evidence before the Authority she stated:

As an account manager, my duties were particularly focused on bringing Television Commercials, Retail and Corporate work to Oktobor in the short term, and Television Series and Feature Films in the long term.  As per my duties, in January 2010 I began developing a proposal to evaluate an opportunity to set up an animation studio at Oktobor which could service long form projects.

[42]     In her affidavit Ms Casares refers to the period after 16 December 2009 when she claims her contract expired and that she was in a ‘contractual wilderness’.  By agreeing that she was to be paid a weekly set sum as remuneration, Ms Casares indicated that she accepted payment for all of the services she was providing.  The draft employment agreement presented to her on 11 November 2010 defined her role as account manager “to identify, develop, and secure profitable revenue streams for Oktobor and other incoming Omni Lab Services – with existing and new clients in New Zealand and Internationally”.

[43]     An email from Mr Everett to Ms Casares dated 27 October 2009 clearly identifies that she was to be paid for bringing in new business.   In that email Mr Everett stated:

what I’m missing from your proposal is your part in selling our existing business to projects that actually exist and have immediate revenue attached. That is what Oktobor is looking for from you need at this point, additional business with money to trade for superb creative and... great work.

[44]     In an email dated 31 March 2010, Ms Casares confirmed:

I understand that my current role as an account manager is to bring work to oktobor [sic] prioritising first TVC, retail and corporate and then bringing feature films and tv series.   Even if to date after different discussions and different contracts offered, my salary and commissions structure hasn’t been

defined yet, I trust from our conversations that the outcome is going to be fair.

[45]     I agree with Mr Chesterman that this correspondence clearly identifies Ms Casares’ own perception of herself as a contractor.  It follows that it is untenable for her to claim that her relationship with Oktobor or how she was paid was not legally structured.

[46]     That  brings  me  back  to  the  submission  on  the  law  of  quantum  meruit. Though it is evolving, the authority of older cases remains helpful.  The case of Way v Latilla[4] remains a primary authority in cases involving quantum meruit and commission.   In that case quantum meruit was based upon the number of hours worked and by fixing an hourly rate of work.  The Court had earlier found that there was no concluded contract between the parties and it was impossible for the Court to conclude a contract for them, but that it was clear that the work was not to be done gratuitously.

[4] Way v Latilla [1937] 3 All ER 759 (HL).

[47]     In this case the Court should not be invited to consider constructing a contract where no adequate basis for it exists.

[48]     In this case Ms Casares’ claim proceeds in the absence of material evidence of an agreement to pay commission.   The fact is that quantum meruit claims will seldom be recognised in the following circumstances:

(a)       Where contractual relationships are concerned;

(b)      Where there is no contract in place as to commission;

(c)       Where  letters  of  intent  and  oral  representations  impose  no  legal obligations upon the paying contractor; and

(d)Where letters of intent are deemed not to be a contract because they create no legal relationship in the absence of an agreement reached on

all matters.

[49]     New Zealand Courts have been willing to grant either strike out or summary judgment in quantum meruit cases: Watt v Millison Holdings Ltd;[5]  Programmed Maintenance Services (NZ) Ltd v Witters.[6]

[5] Watt v Millison Holdings Ltd HC Auckland CP 47/92, 15 October 1993.

[6] Programmed Maintenance Services (NZ) Ltd v Witters HC Auckland CIV 2008-416-90, 8 April 2009.

[50]     In this case Ms Casares made no mention in her pleading of the fact that she was paid or of the fact that she signed a contract.   Instead, this information was provided by Oktobor.

Conclusion

[51]     Oktobor needs to prove on the balance of probabilities that none of Ms Casares’ causes of action can succeed.  In the relevant assessment this Court must apply caution to prevent prejudice to Ms Casares’ claim, but this is to be balanced with a robust and realistic judicial attitude when that is called for by the particular facts of the case.   Before the Authority Ms Casares claimed she had a contract of employment.   Now before this Court she claims that she was in a contractual wilderness.   For her it is claimed that the money she was paid was ‘maintenance’ unrelated  to  any  work  she  did  towards  the  Nicholodeon  contract.     But  that submission is not supported by the evidence and Ms Casares’ affidavit on the point is silent.

[52]     I cannot but agree with Mr Chesterman’s submission that it makes no sense that Ms Casares continued to invoice Oktobor at $1,200 per week, as agreed in the Freelance Agreement,  yet had no understanding of the nature of the contractual relationship.

[53]     Ms Casares has only one cause of action and it is based on quantum meruit. Oktobor has discharged its burden of proving on the balance of probabilities that Ms

Casares’ claim cannot succeed.

Judgment

[54]     Oktobor’s claim for summary judgment is granted. Pursuant to r 12.2 I give judgment against Ms Casares and dismiss her claim.

[55]     As costs follow the event under the statutory costs regime, costs are awarded to Oktobor on a 2B basis together with disbursements approved by the Registrar.

Associate Judge Sargisson