Focus Construction Interiors Limited v Spaceworks Design Group Limited - [2020] NZCA 269

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA515/2019
[2020] NZCA 269

BETWEEN	FOCUS CONSTRUCTION INTERIORS LIMITED Appellant
AND	SPACEWORKS DESIGN GROUP LIMITED First Respondent
AND	ELIZABETH MARY CHARLOTTE HINES (nee WHALEY) Second Respondent

Hearing:	15 June 2020
Court:	Goddard, Ellis and Katz JJ
Counsel:	B P Henry and A R Kenwright for Appellant M C Harris for First and Second Respondents
Judgment:	1 July 2020 at 11.00 am

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe appellant must pay costs to the respondents for a standard appeal on a band A basis with usual disbursements.

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Table of contents

Para No

Introduction

Background

High Court judgment

Period within which Spaceworks was required to refer work to Focus
Negotiated tender work
The obligations imposed on Spaceworks to refer work
Allegations of breach by Spaceworks
Causation and loss

Issues on appeal

The obligation imposed on Spaceworks

Appellant’s submissions

Analysis

Did Spaceworks breach the Agreement?

Appellant’s submissions

Analysis

Result

REASONS OF THE COURT

(Given by Goddard J)

Introduction

The appellant, Focus Construction Interiors Ltd (Focus), is a construction company which provides interior fitout construction, joinery and project management services. The first respondent, Spaceworks Design Group Ltd (Spaceworks), is a commercial interior design company. The second respondent, Ms Whaley, is the owner, sole director and chief executive officer of Spaceworks. We will refer to both respondents as “Spaceworks”, except where it is necessary to make specific reference to the position of Ms Whaley.
In February 2010 Focus and Spaceworks entered into an agreement which required Spaceworks to make reasonable endeavours, acting in good faith, to refer work to Focus with a total gross value of $3 million[1] (the Agreement). Only work actually carried out by Focus would count towards this total.
[1]This figure, and all other figures in this judgment, are exclusive of GST.
Over the next four and a half years Spaceworks provided a number of opportunities to Focus to undertake work with a potential value of around $6.5 million, mostly involving opportunities to participate in competitive tenders for projects managed by Spaceworks. Focus carried out work with an aggregate value of $1,252,255.96. Focus declined to tender for some projects, and unsuccessfully tendered for a number of other projects.
Focus formed the view that Spaceworks was failing to use reasonable endeavours and act in good faith in seeking to refer work to Focus. In July 2016 Focus notified Spaceworks that it would no longer tender for any more of Spaceworks’ projects. Focus then brought proceedings claiming that Spaceworks had breached its obligations under the Agreement. The claim was unsuccessful in the High Court. Gault J found that Spaceworks had met its obligations under the Agreement.[2]
[2]Focus Construction Interiors Ltd v Spaceworks Design Group Ltd [2019] NZHC 2211 [High Court judgment].
Focus appeals to this Court, arguing that:
(a)The Judge erred in his interpretation of the Agreement. He set the bar too low for Spaceworks’ obligation to use reasonable endeavours, acting in good…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] NZCA 269
Decision Date: 1 July 2020 at 11.00 am

CaseChat Overview and Summary

Focus Construction Interiors Limited (Focus) appealed against the High Court's judgment dismissing its claim that Spaceworks Design Group Limited (Spaceworks) had breached a contractual obligation to refer work to Focus with a total gross value of $3 million. The Agreement, entered into in February 2010, required Spaceworks to use reasonable endeavours, acting in good faith, to refer work to Focus with a total gross value of $3 million (excluding GST). Spaceworks and Focus had to appoint a liaison person acceptable to the other to liaise between them and negotiate in good faith to resolve any issues. Spaceworks reported annually to Focus regarding the work it had undertaken and what part of that work had been referred to Focus. Over the next four and a half years, Spaceworks provided a number of opportunities to Focus to undertake work with a potential value of around $6.5 million, mostly involving opportunities to participate in competitive tenders for projects managed by Spaceworks. Focus carried out work with an aggregate value of $1,252,255.96. Focus declined to tender for some projects and unsuccessfully tendered for a number of other projects. Focus formed the view that Spaceworks was failing to use reasonable endeavours and act in good faith in seeking to refer work to Focus. In July 2016 Focus notified Spaceworks that it would no longer tender for any more of Spaceworks' projects. Focus then brought proceedings claiming that Spaceworks had breached its obligations under the Agreement. The claim was unsuccessful in the High Court. The Court of Appeal held that the Judge's interpretation of the Agreement was correct. The Court also held that Focus had not established that Spaceworks had failed to use reasonable endeavours, acting in good faith, to refer work to Focus. Spaceworks sought to refer a significant number of projects to Focus, with a value in excess of $6.5 million. Spaceworks provided explanations for the decisions it made not to refer other projects to Focus. Focus was not able to identify any projects or classes of project where the reasons given by Spaceworks for not referring the project to Focus were not genuine or were unreasonable. The appeal was dismissed. The appellant must pay costs to the respondents for a standard appeal on a band A basis with usual disbursements.

Orders