Cayman Spectrum (NZ) Co v Spark New Zealand Trading Limited
[2025] NZHC 1535
•12 June 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-2687
[2025] NZHC 1535
BETWEEN CAYMAN SPECTRUM (NZ) CO
First Plaintiff/Counterclaim Defendant
EVEREST WIRELESS PARTNERS I LP
Second PlaintiffAND
SPARK NEW ZEALAND TRADING LIMITED
Defendant/Counterclaim Plaintiff
Hearing: 19, 22 and 23 May 2025 Appearances:
A F Pilditch KC and M B Wigley for First Plaintiff/Counterclaim Defendant
Z G Kennedy KC and M D Toulmin for Defendant/Counterclaim Plaintiff
Judgment:
12 June 2025
Reissued:
16 June 2025
JUDGMENT OF LANG J
[assessment of compensation under quantum meruit principles]
This judgment was delivered by Justice Lang On 12 June 2025 at 11.30 am
Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors/counsel:
Wigley and Company, Wellington/F Pilditch KC, Auckland
MinterEllisonRuddWatts/Z G Kennedy KC/M D Toulmin, Auckland
CAYMAN SPECTRUM (NZ) CO v SPARK NEW ZEALAND TRADING LTD [2025] NZHC 1535 [12 June 2025]
[1] On 8 February 2024, I issued a judgment (the liability judgment)1 in which I dismissed claims by the plaintiffs, Cayman Spectrum (NZ) Co (Cayman) and Everest Wireless Partners I LP (Everest), against Spark New Zealand Trading Ltd (Spark).2
[2] In the same judgment I dismissed the first cause of action in Spark’s counterclaim against Cayman based on breach of contract.3 However, I found in Spark’s favour on its alternative claim based on quantum meruit principles.4 This judgment determines the amount Cayman is to pay to Spark in accordance with those principles.
Background
[3] I take the reader to be familiar with the liability judgment and do not propose to set out the factual background other than is necessary to explain the issues the Court is now required to determine. In short, however, Cayman owned the management rights to two bands of radio spectrum in the 2.5 to 2.7 GHz range (the 2.5 spectrum). It needed to make the spectrum compliant with implementation criteria imposed by Ministry of Business, Innovation and Employment (MBIE) no later than 30 November 2015. If it did not do so, the management rights would be forfeited to the Crown.
[4] One of Cayman’s directors, Mr Boyd Craig, approached Spark in late November 2025 to enquire whether it would be prepared to assist Cayman in rendering its spectrum compliant. After some negotiation, Spark reached agreement with Mr Craig regarding the terms on which it would endeavour to assist Cayman to make its spectrum compliant. In return, Mr Craig purported to bind Cayman to an arrangement under which it would give Spark the right of last refusal to purchase the
2.5 spectrum if it subsequently decided to sell it. In addition, Mr Craig agreed that Spark would receive 20 per cent of any sale price that Cayman subsequently achieved
1 Cayman Spectrum (NZ) Co v Spark New Zealand Trading Ltd [2024] NZHC 107 [liability judgment]. The judgment was subsequently re-issued on 19 February 2024 to correct some minor factual errors counsel identified in the judgment.
2 At [145].
3 At [215]–[216].
4 At [219].
for the spectrum if Spark did not buy it. The parties sought to record the terms of the arrangement in a document known as the Network Services Agreement (NSA).
[5] Spark was able to assist Cayman to render its 2.5 spectrum compliant. It did so in part by adapting its own transmission infrastructure to enable this to host transmissions by Cayman using the 2.5 spectrum.
[6] I found that Cayman was not bound by the payment arrangement to which Mr Craig had purported to agree on its behalf. This was because Mr Craig did not have the actual or apparent authority of Cayman’s other director and shareholders to enter into that arrangement.5 However, I found that Spark was entitled to be compensated by Cayman under quantum meruit principles.6
The law
[7] The doctrinal basis of claims based on quantum meruit principles has been the subject of some debate. However, the approach to be taken to such claims is not controversial. In Worldwide NZ LLC v NZ Venue and Event Management Ltd, the Supreme Court observed:7
Claims for quantum meruit were initially based on actions of indebitatus assumpsit (on the basis of an implied contract). The defendant was required to pay the plaintiff a reasonable value for the services rendered. The implied contract theory has been doubted … We make no comment on the basis of the claim. What is clear, however, is that quantum meruit involves claims for reasonable compensation to be paid for services where the level of remuneration has not been agreed and that this compensation is fixed by the courts …
[8] The most recent appellate authority in New Zealand is the judgment of the Court of Appeal in Edubase Ltd v Ministry of Education.8 In that case, the Court held that a plaintiff has a right to recovery under quantum meruit principles where it has provided services to the defendant in the expectation that it will be paid for those services and the defendant has freely accepted, or at least acquiesced in, the provision
5 At [107] and [215].
6 At [219].
7 Worldwide NZ LLC v NZ Venue and Event Management Ltd [2014] NZSC 108; [2015] 1 NZLR 1 at fn 24, citing Harrison v French [2007] NZCA 538 at [32] and Benedetti v Sawiris [2013] UKSC 50, [2014] AC 938 at [17] per Lord Clarke, Lord Kerr and Lord Wilson.
8 Edubase Ltd v Ministry of Education [2024] NZCA 430.
of the services.9 These were the principles I applied in the liability judgment to find that Spark had established liability on Cayman’s part under quantum meruit principles.10
[9] The Court of Appeal also noted in Edubase that the courts in New Zealand have generally treated the market value of services provided as being the proper starting point for recovery of compensation under quantum meruit principles.11 The Court rejected12 an approach, suggested by this Court in Electrix Ltd v Fletcher Construction Co Ltd (No 2),13 under which the cost to the provider of providing the services may be an appropriate starting point. The Court in Edubase said this would represent a departure from the settled approach of taking the objective market value of the services as the starting point.14 The Court noted that the real issue in most cases involving quantum meruit principles was to “identify relevant contextual factors against which to, first, identify the market in which the services were provided and, secondly, assess the market value of those services”.15
Preliminary issue
[10] I propose to deal next with what I consider to be a preliminary issue. This relates to the evidence Spark has adduced as to the actual costs it incurred in providing the services to Cayman. This formed the bulk of the evidence given at the hearing as to quantum.
[11] I have already noted that the Court of Appeal in Edubase did not accept that the costs of providing services should be adopted as the starting point for an enquiry into the amount of compensation that should be payable under quantum meruit principles. However, the Court went on to say that in some cases the cost of providing the services may be a useful cross-check as to the level of compensation to be paid.16 This observation has prompted Spark to adduce evidence about the costs it incurred in
9 At [70], citing Morningstar (St Lukes Garden Apartments) Ltd v Canam Construction Ltd
CA90/05, 8 August 2006.
10 Liability judgment at [219].
11 Edubase, at [71]–[73].
12 At [78]–[79].
13 Electrix Ltd v Fletcher Construction Co Ltd (No 2) [2020] NZHC 918.
14 At [79].
15 At [80].
16 At [79].
rendering Cayman’s spectrum compliant. However, counsel for Spark was at pains to emphasise in both opening and closing submissions that Spark does not consider this evidence provides a useful form of cross-check in the present case.
[12] It became plain during the hearing that Spark’s evidence on this issue provided very little assistance in assessing the market value of the services it provided to Cayman. Having heard that evidence, I have concluded that the factual circumstances in the present case are such that the direct costs incurred by Spark, to the extent they can reliably be ascertained, do not provide a useful cross-check in the present case. This is largely due to the fact that Spark agreed to provide the services in a context that is unlikely to have arisen in the past and will probably never arise again.
[13] There is no doubt that Spark’s staff needed to act very quickly between 24 and 30 November 2015 to render Cayman’s spectrum compliant. However, Spark was in the fortunate position of already having in place much of the infrastructure and equipment necessary to undertake this task. This was due in large part to the fact that it had very recently achieved compliance for its own 2.6 spectrum. That process had taken many months. Further, Spark was able to use its influence with Huawei to obtain a deferral of licence fees that would otherwise have been payable to Huawei once Spark began to host Cayman’s transmissions.
[14] The fact that Spark was so far advanced because of its own prior work is not a matter that should detract from the market value of the services it provided to Cayman. It would also be an artificial and meaningless exercise to attempt to notionally attribute a proportion of these to Cayman. I therefore put to one side the evidence about the costs Spark incurred in rendering Cayman compliant.
Issues
[15] Adopting the approach taken in Edubase, I am required to decide the following issues:
(a)What were the services Spark agreed to provide to Cayman?
(b)What was the market in which those services were provided?
(c)What as the market value for those services?
The arguments
[16] Spark contends that the arrangement Mr Craig negotiated with Spark in November 2015 was a bespoke agreement that was tailored to the circumstances in which both parties found themselves at the time. It says the amount Mr Craig agreed to pay under this arrangement therefore provides the best evidence of the objective market value of the services that Spark agreed to provide at that time.
[17] Cayman ultimately sold the 2.5 spectrum to a third party on 20 November 2018 for the sum of USD 10 million. Spark therefore seeks judgment for the sum of USD 2 million, which is equivalent to 20 per cent of the gross sum that Cayman realised when it sold the spectrum. Spark does not seek to be compensated for the fact that Cayman did not first offer the spectrum to Spark before selling it to that third party.
[18] Cayman contends that Spark cannot rely upon the arrangement negotiated between Mr Craig and Spark for present purposes because Spark terminated the NSA in July 2016. As a result, it never provided the services that it agreed to provide under that arrangement. However, Cayman has not advanced any alternative formula to compensate Spark for the services it received from Spark between November 2015 and July 2016.
What were the services that Spark agreed to provide to Cayman?
[19] The NSA itself is not particularly helpful when it comes to defining the services that Spark agreed to provide Cayman under the arrangement. As I noted in the liability judgment:
[37] Although nothing turns on the issue it is fair to say that the final iteration of the NSA does not spell out clearly what the parties intended. It is therefore not surprising that Mr [Malcolm] Dick had difficulty in understanding the terms of the NSA when he acquired Everest’s interest in Cayman in April 2016. With the benefit of hindsight it may have been preferable for Spark to have used the wording contained in an earlier document in which it provided Mr Craig with a non-binding indicative offer to assist it to achieve compliance. However, Mr Craig and Spark both clearly understood that the NSA was intended to record that Spark agreed to use its
best endeavours to assist Cayman in achieving compliance in return for specified benefits that Cayman was to provide for it.
[20] The arrangement between Spark and Cayman, only part of which was captured in the NSA, contained two broad components. First, Spark agreed to assist Cayman to achieve compliance with its implementation obligations by 30 November 2015. Secondly, it agreed to assist Cayman to maintain compliance until 31 December 2016. There is no dispute that Spark achieved the first of these objectives. However, it did not achieve the second because it terminated the NSA in July 2016.
[21] The implementation obligations were specified in deeds that successful bidders for management rights were required to enter into with MBIE when they acquired those rights. In order to achieve compliance, Cayman needed to have met the specified implementation requirements continuously for a period of six months from 30 November until 30 May 2016. At that point it was required to provide MBIE with a declaration confirming that it had met these requirements. Cayman then needed to continue to meet the implementation requirements for the next six months.
[22] Cayman was required to provide a wireless broadband service that was available on a commercial basis in at least 15 of 75 territorial local authorities (TLA’s). Within each of the 15 TLA’s the service had to be available to at least 30 per cent of the residential population. The service was required to operate for 24 hours each and seven days a week.
[23] Spark had taken many months during 2015 to achieve compliance with its own implementation obligations for its 2.6 spectrum. These were broadly the same as those for Cayman. In doing so Spark worked closely with Huawei, its preferred radio access network partner. Spark had achieved compliance with its implementation obligations on or about 20 November 2015, just a matter of days before Mr Craig approached it on Cayman’s behalf. It therefore had a reasonable understanding of what it would need to do to render Cayman’s spectrum compliant.
[24] Mr Craig initially told Spark that Cayman only required assistance on two transmission sites. However, this proved to be incorrect. The number of sites on which Cayman required assistance eventually grew to 13 sites situated in ten TLA’s.
As I have already noted, Spark used some of its own infrastructure to host transmission services by Cayman. Working with Huawei, Spark modified the solution it had adopted for its own 2.6 spectrum. This involved reconfiguring the Huawei base station equipment on Spark’s transmission towers to enable Cayman and Spark to share Huawei’s radio access network. This allowed Spark’s 2.6 spectrum and Cayman’s 2.5 spectrum to be hosted on the same sites. However, the hosting arrangement meant that Spark was required to reduce the power output for its 2.6 spectrum. This resulted Spark’s coverage area being reduced within these areas for the period that it hosted Cayman’s spectrum.
What was the market in which those services were provided?
[25] As I have already noted, Spark contends that the relevant market in this context was the provision by Spark of bespoke and “one off” services to assist Cayman to meet its implementation obligations on an urgent basis in late November 2015 and to provide ongoing hosting services through to 31 December 2016. I did not take counsel for Cayman to argue to the contrary.
[26] Mr Craig did not approach Spark until 24 November 2015. During the period leading up to that date Mr Craig had been in regular contact with Mr Malcolm Dick, a well-known and longstanding participant in the telecommunications industry. He was interested in acquiring the management rights for Cayman’s 2.5 spectrum on behalf of his Blue Reach group of companies. Mr Dick had already made an offer to purchase the spectrum from Cayman for the sum of USD 3 million provided Cayman could make it compliant by 30 November 2015.17
[27] In the liability judgment I noted that Mr Dick had sent Mr Craig an email on 22 November 2015 advising him that his Blue Reach companies did not have the ability to assist Cayman to meet its implementation obligations by 30 November 2015.18 He also told Mr Craig that 2degrees, another player in the radio spectrum field, was placing pressure on MBIE to ensure it monitored compliance with implementation obligations rigorously. Mr Dick believed 2degrees was hoping to
17 In the liability judgment I erroneously said (at [119]) that Mr Dick had offered to buy the management rights for Cayman’s 2.5 spectrum for NZD 3 million.
18 Liability judgment, at [123].
acquire management rights that were forfeited to the Crown for non-compliance with implementation obligations. This meant that by the time Mr Craig approached Spark he knew that Blue Reach would not be able to assist Cayman to become compliant. He was also aware that 2degrees would have no interest in assisting Cayman to achieve compliance because it would prefer the spectrum to be forfeited to the Crown. 2degrees did not own spectrum in the 2.5 or 2.6 range at that time so it could not have assisted Cayman to achieve its implementation obligations in any event.
[28] The only other entity that may have been able to assist Cayman was Vodafone, which held spectrum in the 2.5 range. However, by 23 November 2015 Mr Craig knew that Vodafone would need two weeks to obtain the equipment it would need to assist Cayman to achieve compliance. This would not enable Cayman to achieve compliance by 30 November 2015.
[29] This meant that Spark effectively represented Cayman’s last hope of achieving compliance. Further, Spark could only provide such a service because it had recently achieved compliance with its own implementation obligations. This gave Spark the unique ability, with Huawei’s co-operation, to assist Cayman to achieve compliance.
[30] In assessing compensation in a quantum meruit context the Court is entitled to have regard to the exigencies of the situation in which the parties find themselves at the time services are provided. This was confirmed in Edubase, where the Court of Appeal referred to the approach taken by the United Kingdom Supreme Court in Benedetti v Sawiris19 in the following passage:20
[76] Lord Clarke considered that the test is the price a reasonable person in the defendant’s position would have had to pay for the services. This figure is found by identifying the ordinary market value of the services, taking into account conditions that increase or decrease the objective value of the benefit to any reasonable person in the same position as the defendant. He added:
The editors of Goff & Jones note that such conditions would seem to include the defendant’s buying power in a market[:]
so that a defendant who can invariably negotiate a better price for the product than any other buyer will be allowed to say that this price
19 Benedetti v Sawiris, above n 7.
20 Edubase, above n 8 (footnotes omitted).
reflect the “objective value” of the product to him, or, in effect, that there is one market for him and another for everyone else.
[77] Lord Reed addressed the importance of context in determining market value:
[104] … It is an expression which can be used in more than one way, but the definition used by the Royal Institution of Chartered Surveyors captures the essence of the concept:
The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgably, prudently and without compulsion.
[105] So understood, market value is specific to a given place at a given time. That point can be illustrated by the episode in Vanity Fair in which Becky Sharp sells her horses during the panic which grips the British community in Brussels after the battle of Waterloo, when rumours reach the city that Napoleon has defeated Wellington and that his army is approaching. The circumstances create a market in which horses are exceptionally valuable, and Becky obtains a price which is far in excess of the ordinary value. It is, nevertheless, the value of the horses in the market in which they are sold.
[106] That example illustrates the general point that market value depends critically on the identification of the relevant market, since there are different markets for many types of goods and services.
[31] I accept Spark’s submission that the market in this case comprised a bespoke and “one off” arrangement that involved the provision of assistance to Cayman to become compliant by 30 November 2015 and remain compliant until 31 December 2016. It was a market with a single buyer and a single seller. Further, the buyer was under extreme pressure (of its own making) to obtain the seller’s services whilst the seller was not under any pressure to provide those services. Nor was it a provider of such services generally.
How is the market value of the services to be objectively assessed?
[32] The fact that this was a bespoke and “one off” transaction obviously restricts the ability of the Court to assess the market value of the services Spark agreed to provide significantly. This is because there is no wider market against which to assess the amount that would be considered reasonable compensation for the services Spark provided.
[33] However, in cases where a negotiated price for services has been rendered legally ineffective, the courts have placed considerable significance on the parties’ own assessment as to the value of the services provided. In Cassels v Body Corporate 89675 Miller J observed:21
The Court should always be influenced by a price that the person receiving the services has agreed to pay for them. As Goff & Jones put it at 1-034, only in exceptional circumstances should a Court ignore the terms of an agreement that has been held ineffective. Such a price is compelling evidence of what the parties themselves thought reasonable. The Court need not adopt an agreed price. Lodder v Slowey [1904] AC 442 is an instance of a plaintiff winning more in quantum meruit. Professor Watts considers … that the agreed price ought prima facie to govern. Professors Grantham and Rickettes approach the issue in the same way … The rationale is that, in the absence of mistake, to award a different sum in a claim resting on a promise to pay is to rewrite the bargain and alter the risk allocation implicit in it. The agreed rate is all the plaintiff expected to get, and the defendant might not have asked for the services at a higher price.
[34] Spark relies on this passage for its submission that the Court need go no further than the agreement that Spark and Mr Craig reached to determine the market value of the services Spark agreed to provide in November 2015. I accept this submission in part for the following reasons.
[35] First, both Mr Craig and Spark were highly experienced operators in the field of telecommunications. Spark was the pioneering entity in that industry in New Zealand under the name Telecom New Zealand Ltd. Following the deregulation of the industry it continued to be a leading player in the field.
[36] Mr Craig was also no stranger to the industry. His family were based in North America and had operated globally in the field for many years under the name Craig Wireless Systems Ltd (Craig Wireless). In New Zealand they traded through Woosh Wireless Holdings Ltd and its subsidiary, Woosh Wireless (NZ) Ltd (together, Woosh). Both parties therefore had a clear understanding of the issues that Cayman faced and the importance to it of compliance with its implementation obligations. This meant they were both well placed to assess the value that should be placed on those services.
21 Cassels v Body Corporate Number 89675 HC Wellington CIV 2006-485- 701, 13 June 2007 at [53].
[37] Secondly, the arrangement represented an arm’s length agreement negotiated by the parties, albeit over a necessarily short period. The negotiating techniques employed by both Spark and Mr Craig were the subject of a considerable body of evidence at the liability trial. Much of this related to the negotiations between July and November 2025 that led to Spark acquiring two bands of spectrum from Craig Wireless and Woosh in the 2.3 range.22 These concluded at the same time as Mr Craig negotiated with Spark to obtain assistance in relation to Cayman’s 2.5 spectrum.
[38] The evidence confirmed that both Spark and Mr Craig were skilled negotiators. For its part Spark conducted negotiations in a careful, consistent and conservative manner. This is demonstrated by the fact that at the outset it undertook an internal benchmarking exercise that set an indicative value for the 2.3 spectrum. This was subsequently supported by an independent valuation Spark obtained as to the price range within which the 2.3 spectrum was likely to fall.
[39] Mr Craig was a much more unpredictable negotiator. In the liability judgment I made the following observation:23
[74] The ensuing negotiations were frustrating from Spark’s perspective because of Mr Craig’s tendency to suddenly change course and follow different approaches. At times he would appear to be going down one track in the negotiations only to change to a different track a short time later. This meant it was difficult for Mr Cowley and Mr Wesley-Smith to gain a sense of where the discussions were heading.
[40] Despite their very different negotiating styles, Mr Craig and Spark were ultimately able to reach agreement regarding the price to be paid for the 2.3 spectrum on 24 November 2015. Spark agreed to pay the sum of NZD 4.5 million for each of the two bands of spectrum owned by Woosh and Craig Wireless. This was within the range identified in both its internal benchmarking exercise and the independent valuation that Spark obtained to guide it in the negotiations.
[41] The negotiations regarding the assistance Cayman sought from Spark were obviously much more truncated given the urgency involved. The ultimate outcome
22 These are described at [70]–[95] of the liability judgment.
23 Liability judgment, above n 1.
nevertheless reflected a process of give and take on both sides.24 Spark initially sought payment for its services in the sum of 50 per cent of any sale price Cayman obtained for the 2.5 spectrum. Mr Craig did not accept this. On 26 November 2015 he counter-offered at 15 per cent of the sale price. Two hours later Spark reduced its asking price to 25 per cent. A short time later Mr Craig suggested that they split the difference at 20 per cent and Spark agreed to this. The important point to be taken from this process is that neither party agreed to the first offer that was put to them. Rather, they negotiated the price up and down to the point where it was acceptable to both.
[42] For Cayman, the risk of not reaching agreement with Spark was obvious. In that event it stood to lose the management rights to the spectrum. Seen in this light the ultimate loss of 20 per cent of the sale price was not overly onerous. It was certainly much less onerous than losing the management rights completely because it still retained 80 per cent of any eventual sale price. Had the management rights been forfeited they would obviously have been rendered valueless.
[43] The advantage of the arrangement to Cayman was also obvious. Not only did it retain the management rights but it also avoided the need for any upfront payment for Spark’s services. Cayman was not in a good financial position at that time and depended on its shareholders for support. One of these was Everest and its directors had made it clear to Mr Craig that money was an issue.
[44] I gained the impression that the attraction of the proposal for Spark was principally strategic. As matters then stood, Spark knew it was unlikely to obtain Commerce Commission approval to the acquisition of further spectrum in the 2.5 range. However, the right of last refusal gave it the future ability to do so if the regulatory landscape changed. The right of last refusal also gave Spark visibility over any future sale of the spectrum to a third party. This was important given the fact that Spark would be entitled to be paid a proportion of the sale proceeds.
[45] Spark also assumed risk in agreeing to the proposal. First, it had no means of knowing whether it would be able to achieve compliance for Cayman. If that could
24 This is described in the liability judgment at [90]–[93].
not be done, Spark would receive nothing for its services. Secondly, there was no guarantee that Cayman would ever sell the management rights or, if so, when that would occur. Thirdly, there was always the risk that Cayman would forfeit the management rights to the Crown for some other reason before being able to sell them to Spark or a third party.
[46] Finally, by entering into the arrangement Spark ran the risk of repercussions from MBIE. As I noted in the liability judgment, on 22 November 2015 Mr Dick sent an email to Mr Craig’s assistant, Mr Gary Birkland, advising him that MBIE had told Mr Dick that Blue Reach would be putting its own spectrum at risk if it assisted Cayman to achieve compliance.25 I went on to explain:
[128] Spark also risked jeopardising its relationship with MBIE if it assisted Cayman to achieve compliance. Mr Wesley-Smith [Spark’s General Manager for Regulatory Affairs] said that Spark was aware MBIE did not approve of the assistance Spark was providing to Cayman. This flowed from the fact that Everest and Craig Wireless had agreed that Cayman would seek to achieve compliance at minimum cost because they did not intend Cayman to build up a customer base. Rather, they intended to sell the spectrum in a compliant state after 30 November 2015.
[129] This type of strategy did not conform with MBIE’s philosophy. Mr Wesley-Smith said that MBIE viewed spectrum as a scarce resource that should be gainfully employed for the benefit of the community as a whole. It did not approve of efforts by spectrum owners to assist others to achieve compliance when those entities did not intend to offer transmission services to the public.
[47] In summary, the payment arrangement that Mr Craig negotiated with Spark reflected a commercial arrangement between experienced players in the industry. It was the outcome of a negotiation process and reflected the financial and strategic risks and advantages that each party factored into the equation. It also reflected the position each was in at the time they concluded their negotiations. I am therefore satisfied that the agreement Mr Craig reached with Spark in November 2015 reflects an appropriate starting point in any assessment of the market value of the services provided by Spark.
25 At [123].
What sum should Cayman be required to pay to Spark?
[48] Spark contends that this should be the end of the assessment process. It says that it was contractually entitled to terminate the NSA in July 2016 and that Cayman has never challenged the validity of that act. Spark therefore argues that the amount to be paid to it under the arrangement should not be reduced to reflect the fact that it did not continue to host Cayman’s transmissions between July and December 2016.
[49] Cayman disagrees. It points out that quantum meruit principles are designed to provide compensation to a party for services rendered. They are not designed to provide compensation when the agreed services have not been rendered.
[50] I accept Cayman’s submission on this point. I do not consider it matters for present purposes that Spark was entitled to terminate the NSA. The NSA expressly provided that it was to remain in force between 30 November 2015 and 31 December 2016 unless terminated earlier in accordance with its terms. The short point is that once Spark terminated the NSA it ceased to host Cayman’s transmission services. This meant it did not provide all the services it had agreed to make available to Cayman. The amount Spark should receive by way of compensation needs to be adjusted to reflect that fact.
[51] However, I do not consider the reduction should take into account the fact that, by terminating the agreement, Spark left Cayman in jeopardy of losing the management rights because it was no longer compliant. As it transpires, Cayman was able to obtain a waiver from MBIE for the fact that it became partially non-compliant after Spark terminated the NSA. This enabled Cayman to retain the management rights.
[52] I briefly described the circumstances that led to Spark terminating the NSA in the liability judgment.26 It was not necessary for me to examine them in any detail because the validity of the termination was never put in issue. In short, however, Spark elected to terminate the NSA after Woosh was placed in administration. Woosh had guaranteed Cayman’s obligations under the NSA and its guarantee effectively became
26 At [33]–[35].
worthless once that occurred. Spark terminated the NSA after the parties could not reach agreement regarding the replacement security that Cayman should provide.
[53] This means that the events that led to Spark terminating the NSA were precipitated by Cayman’s guarantor going into liquidation and Cayman being unable to provide replacement security. They were not precipitated by Spark.
[54] Further, the NSA contained an express provision confirming that the obligation to pay Spark 20 per cent of the sale proceeds remained in force even if Spark terminated the agreement for the reason that it did. Spark obviously cannot rely on that provision because the NSA has been held to be legally ineffective. Nevertheless, the fact that Mr Craig agreed with Spark that the payment arrangement should survive termination reinforces my view that Spark should be entitled to compensation for the services that it provided prior to the NSA being terminated. I did not take counsel for Cayman to argue to the contrary.
[55] This leads to the issue of how to calculate the reduction necessary to reflect the fact that Spark did not provide all the services it agreed to provide under the NSA. I consider the most reliable indicator of the market value of the hosting services that Spark would have provided if it had continued to host Cayman’s transmissions until 31 December 2016 comes from Mr Dick’s actions shortly after Spark terminated the NSA in July 2016. Mr Dick had assumed control of Cayman approximately two months earlier after acquiring the shares held by Everest and Craig Wireless.
[56]In the liability judgment I described what happened in July 2016 as follows:
[131] The efforts that Spark was prepared to go to on Cayman’s behalf plainly had substantial value for Cayman. This is demonstrated by an email that Mr Dick sent to Spark in July 2016 after he learned Spark had terminated the NSA. Mr Dick proposed that the NSA be replaced by an arrangement under which Blue Reach would pay Spark the sum of NZD 600,000 to continue hosting Cayman’s existing transmission services on Blue Reach’s behalf until December 2016. Mr Dick made that offer after he had told Mr Birkland it would cost approximately NZD 100,000 in legal fees to obtain an injunction to compel Spark to continue providing transmission services to Cayman under the NSA.
[132] Blue Reach was therefore prepared to pay Spark the sum of NZD 600,000 for hosting transmission services for a period of just five months. That figure did not include the cost of establishing transmission capability on
an extremely urgent basis. This places in perspective the level of consideration Mr Craig was prepared to offer Spark in November 2015.
[57] As I have already noted, Mr Dick has a great deal of experience in the telecommunications field. He would undoubtedly have exercised commercial judgment in making this offer to Spark once he learned that it had terminated the NSA. There is no reason to believe he would have made an offer that did not reflect what he believed to be the market value of the services he was asking Spark to continue to provide. I therefore consider the amount that Cayman is required to pay to Spark should be reduced by NZD 600,000 to reflect the fact that it did not continue to host Cayman’s transmissions after it terminated the NSA.
Result
[58] Spark is entitled to compensation for the services it provided to Cayman in the sum of USD 2 million (to be calculated in NZD using the exchange rate applicable as at 20 November 2018) less the sum of NZD 600,000. Although it is not in evidence, I note that the Reserve Bank of New Zealand lists the exchange rate prevailing on 20 November 2018 for USD to NZD as being 1.4615. If this rate is applied, Spark would be entitled to compensation in the sum of NZD 2.923 million before applying the deduction of NZD 600,000.
[59] The parties are, of course, free to reach their own agreement regarding the method by which the exchange rate is to be calculated. Should they not be able to reach agreement, they have leave to ask the Court to determine that issue.
[60] Spark is entitled to interest under s 10(1) of the Interest on Money Claims Act 2017 on the sum as finally calculated from 20 November 2018 to the date of payment.
Costs
[61] If the parties cannot reach agreement on costs they have leave to file concise memoranda on that issue and I will determine costs on the papers.
Lang J
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