Focus Construction Interiors Ltd v Spaceworks Design Group Ltd - [2019] NZHC 2211

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-2609

[2019] NZHC 2211

BETWEEN FOCUS CONSTRUCTION INTERIORS LIMITED
Plaintiff

AND

SPACEWORKS DESIGN GROUP LIMITED

First Defendant

ELIZABETH MARY CHARLOTTE HINES (nee WHALEY)

Second Defendant

Hearing: 27, 28, 39, 30, 31 May and 4 June 2019

Appearances:

L Ponniah for the Plaintiff

M Harris and A Goodwin for the Defendants

Judgment:

5 September 2019

JUDGMENT OF GAULT J

This judgment was delivered by me on 5 September 2019 at 9:00 a.m. pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar

……………………………………

Solicitors:
Mr L Ponniah, Corban Revell, Henderson, Auckland Mr M Harris, Gilbert Walker, Auckland

FOCUS CONSTRUCTION INTERIORS LTD v SPACEWORKS DESIGN GROUP LTD [2019] NZHC 2211
[5 September 2019]

[1] The plaintiff, Focus Construction Interiors Ltd (Focus), is a construction company and part of the Focus Group providing interior fitout construction, joinery and project management services. Mr Plumpton is the managing director.

[2] The first defendant, Spaceworks Design Group Ltd (Spaceworks), is a commercial interior design company. The second defendant, Ms Whaley, is the owner, sole director and chief executive officer of Spaceworks.

[3] Focus claims that the defendants have breached their contractual obligation in a settlement agreement to make reasonable endeavours, acting in good faith, to achieve the referral of construction work to Focus having a gross value of $3 million (excluding GST).

Background

[4] Focus and Spaceworks’ predecessor had a working relationship dating back to 2002 when the business of Spaceworks’ predecessor changed to interior design. That relationship saw Focus recommended to do the build element of interior fitouts. The work was said to be of a negotiated tender nature, where only Focus was asked to provide a quote.

[5] In 2004 Ms Whaley joined Spaceworks’ predecessor as an employee. In mid-2006 the previous owner wished to sell the business. Ms Whaley was interested in buying the business and discussed this with Mr Plumpton. They agreed to buy the business. The purchase took place in October 2006. It was structured with Mr Plumpton buying a one-third interest in the newly incorporated Spaceworks through an entity called Franklin Investment Holdings Ltd (Franklin), and Ms Whaley contributing two-thirds in a mix of cash and borrowings. A draft heads of agreement in October 2006 proposed that Focus would be the preferred contractor for all jobs. The arrangement was formalised in a shareholders’ agreement between Ms Whaley and Franklin dated 7 September 2007, which included a provision in relation to Focus:

The Company has for many years used the expertise of Focus in relation to many interior fitout contracts. It is anticipated that the Company will continue to work with Focus wherever possible in relation to interior design fitouts, and continue to foster the business between Focus and the Company.

[6] In 2008 the relationship broke down. The parties disagreed as to the cause. In any event, referral work diminished in 2008. In 2009 Focus alleged that Ms Whaley was…

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

AGLC: Focus Construction Interiors Ltd v Spaceworks Design Group Ltd [2019] NZHC 2211
Case: [2019] NZHC 2211
Decision Date: 5 September 2019

CaseChat Overview and Summary

Focus Construction Interiors Ltd commenced proceedings against Spaceworks Design Group Ltd and its sole director and CEO, Ms Whaley, claiming that the defendants breached their contractual obligation to make reasonable endeavours to refer work to Focus having a gross value of $3 million over a period of four years. The court was required to decide whether the obligation was to make reasonable endeavours over four years or until the $3 million target was reached; whether the obligation was for referral of work of a negotiated tender nature; whether the defendants failed to make reasonable endeavours in breach of the agreement; and, if so, the quantum of loss. The court found that the obligation was to make reasonable endeavours until the $3 million target was reached. It found that the obligation was not limited to referral of work of a negotiated tender nature. The court found that the defendants did not breach the agreement and dismissed the claim. The defendants were entitled to costs.

The plaintiff's claim is dismissed. The defendants are entitled to costs. If costs cannot be agreed, the defendants are to file and serve a memorandum within 15 working days, and the plaintiff is to file a memorandum in response within 10 working days thereafter. The court will deal with costs on the papers.

Orders