Kingsbeer Transport Ltd v Martin-Brower New Zealand

[2021] NZHC 3494

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-2499

[2021] NZHC 3494

BETWEEN

KINGSBEER TRANSPORT LIMITED

Plaintiff

AND

MARTIN-BROWER NEW ZEALAND

Defendant

Remote hearing:	1–5 and 8–12 November 2021
Appearances:	D M Fraundorfer, A G Needham and S A Stretton for plaintiff S S Cook and M J Cassaidy for defendant
Judgment:	16 December 2021

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 16 December 2021 at 3.00pm.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Solicitors:

Holland Beckett, Tauranga Buddle Findlay, Auckland

KINGSBEER TRANSPORT LTD v MARTIN-BROWER NEW ZEALAND [2021] NZHC 3494 [16 December 2021]

Contents

Background  [2]

The pleadings  [48]

KTL’s first cause of action — breach of contract  [50]

—applicable law  [54]
—discussion  [56]

KTL’s second cause of action — repudiation of contract  [83] KTL’s third and fourth causes of action — equitable estoppel/misleading and deceptive conduct     [85]

MBNZ’s affirmative defences — KTL’s failure to mitigate  [89] KTL’s fifth cause of action — breach of collateral agreement  [90] KTL’s sixth cause of action — quantum meruit  [92]

—applicable law  [96]
—discussion  [99]

MBNZ’s first counterclaim — breach of contract  [103]

—applicable law  [104]
—discussion  [105]

MBNZ’s second counterclaim — unjust enrichment  [110]

Result  [111]

Costs  [114]

Next steps  [115]

Comment  [116]

[1]    In this proceeding, the plaintiff (“KTL”) seeks damages from the defendant (“MBNZ”), and MBNZ counterclaims against KTL similarly, in respect of losses arising out of the ending of their relationship in June 2018.

Background

[2]    Tony Kingsbeer has been a professional truck driver for 34 years. Together with his wife, Nicola Kingsbeer, and a small fleet of trucks and drivers, they operated a North Island trucking business, first in partnership trading as Kingsbeer Transport and subsequently as KTL, which they own in equal shares (and Tony is its sole director).

[3]    Since 2011, KTL’s customers included MBNZ. MBNZ is the New Zealand arm of an international logistics company based in Chicago in the United States of America, predominantly (and at least in New Zealand, exclusively) serving the McDonald’s chain of fast-food outlets. MBNZ is managed by Martin-Brower Australia Pty Ltd (“Martin-Brower Australia”).

[4]    On 20 January 2016, the partnership entered into (or renewed) an Independent Contractor Agreement (“ICA”) with Martin-Brower Australia, expiring on 31 January 2019 but terminable prior — if by the partnership, on 12 weeks’ written notice. The ICA engaged the partnership to provide heavily-regulated refrigerated transport services twice-weekly between the McDonald’s Auckland distribution centre and its Gisborne and Whakatāne outlets.1 The first two schedules to the ICA specified rates respectively for “regular” and “ad-hoc” services, for adjustment by reference to Consumer Price Index movements. The third provided a “fuel adjustment factor” (or “FAF”) calculator to adjust the contract fuel rate for the average monthly wholesale fuel rate, exemplified in a table. The six remaining schedules specified applicable Martin-Brower policies. Each schedule was suffixed with the acknowledgment “if this Schedule is amended or updated a replacement schedule will be inserted and read as part of this Contract and is to override the replaced schedule”, for acceptance by signature.

[5]    The services included delivering ingredients to the outlets and constituents as backloads to the distribution centre. Martin-Brower’s usual specification for such deliveries was the delivery truck’s trailers be outfitted with a tail lift: a hydraulically raised and lowered panel at the rear of the trailer, from and to which pallets of goods could be transferred using manual pallet jacks. However, with Martin-Brower’s apparent agreement, KTL used forklifts to transfer pallets directly from and to the trailers on its Gisborne and Whakatāne deliveries.

[6]    On 10 October 2017, MBNZ’s  New  Zealand  Distribution  Manager, Andrew Millin, asked the Kingsbeers for “a plan and costs on how you’d service the following (that is if you want the additional work …), we may be looking at making this change after Xmas (Jan/Feb)”. The “following” was twice-weekly deliveries to nine Bay of Plenty McDonald’s outlets in the vicinity of Rotorua and Tauranga.    Mr Millin said his request was “VERY private and confidential”. The Bay of Plenty outlets then were being served by one of KTL’s competitors, Hall’s Group Ltd, whose contract was to expire in late January 2018. Deliveries to McDonald’s outlets in Taupō, and in Hawke’s Bay’s Napier and Hastings, also were in prospect.

1      No issue is taken with KTL’s apparent succession to the partnership’s role under the ICA. KTL was incorporated in 2014.

[7]    Mrs Kingsbeer explored KTL’s logistical and resource requirements to expand service to the additional outlets. Central to KTL’s response was its long-term lease of a new truck and trailer for each run from a specialist provider of commercial transport equipment, TR Group, with build times for the trucks by late-February and trailers by mid-March 2018, if the vehicles were ordered “within 2 weeks”. The builds included to meet Martin-Brower’s specifications. In seeking quotes for the vehicles’ lease, she provided a broker with the vehicles’ estimated annual travel distance, which she explained would be for “5 year contracts”. Mrs Kingsbeer’s stipulation of that duration seems to have sprung from her unrelated March 2017 investigations of long-term leased new vehicles.

[8]    Mrs Kingsbeer responded to MBNZ on 24 October 2017 with a proposed timetable and trip rate of $3.35 per kilometre for each the Bay of Plenty  and Hawke’s Bay runs, omitting backloads “as there is minimal time to reload and unload”. She added:

We are mindful of the delayed build times[.] Obviously if runs had to commence earlier we would have to short term lease gear that wasn’t 100% to spec, most TR Group gear does not have tail lifts[.] If this was the case forklifts would need to be available on sites (as a short term fix to that issue).

The response also observed:

We are thinking about a forklift being fitted to the truck for [the Bay of Plenty] run, as we fell it would assist in more efficient delivery times and significantly reduce temperature abnormalities due to the number of stores on this run, limiting door time openings. Both Gisborne and Whakatane work well like this for both time and temperature [efficiency] due to forklift unloading.

[9]    The parties further discussed logistics, including at the Kingsbeers’ house on 16 November 2017. In apparent response to KTL’s need to order the new vehicles, the parties then or subsequently may have discussed the possibility of a “letter of intent”. On 24 November 2017, by text message, Mrs Kingsbeer enquired of its progress with Mr Millin, who responded “just chased it up”. She followed up with Mr Millin by text message again on 28 November 2017, and the next morning supplied KTL’s postal address to him, presumably in response to some enquiry by Mr Millin.

[10]   That same morning, 29 November 2017, Martin-Brower Australia’s Operations Director — ANZ, Cameron Sutherland, sent Mr Millin a letter addressed to KTL at its postal address and signed by Mr Sutherland in the following terms:

Letter of Intent for Kingsbeer Transport to sign the MB Contractor Agreement

Martin  Brower  intends  to  progress  in  assessing  the  ability   of Kingsbeer Transport to comply with all safety and service requirements for undertaking work on behalf of Martin Brower in the Bay of Plenty & Rotorua regions. We would like to establish the next steps towards ensuring compliance.

1)   Kingsbeer Transport is required to review and meet the contractor capability requirements as set out within competency response document. This document is attached to this letter and will assess and confirm:

a.Kingsbeer Transport has, or can obtain within the required timeframe compliant assets as set out in the competency document

b.Kingsbeer Transport has adequate process and controls to ensure that all employees engaged in Martin Brower work meet the requirements set out in the competency document.

c.Kingsbeer Transport meets all other requirements set out in the competency document.

2)   Upon successful completion of the competency document to the satisfaction of Martin Brower the intent is to implement a contractor agreement which will establish service levels and all other terms and conditions between Martin Brower and Kingsbeer Transport.

To ensure and facilitate prompt progress, Andrew Millin will continue to be the main point of contact for Martin Brower and can clarify any questions. Thank you for working with Martin Brower in this process.

[11]   Mr Millin promptly forwarded the letter of intent to KTL. No documents were provided with the letter of intent. KTL took the view the letter of intent was insufficiently specific for its purposes. After consulting with KTL’s professional adviser, Jim McGregor, Mrs Kingsbeer emailed Mr Millin a copy of Mr McGregor’s advice:

I am aware that you will be asked to sign an agreement to lease plant on a five year basis today.

You need confirmation that the Napier/Hastings run will be offered to you and that the contracts will include the following:

1     Km rate of $3.35

2     Annual CPI adjustment

3     Maximum pallet number per run (must fit on your truck/trailer)[.]

Mrs Kingsbeer explained “for us to start signing up gear to be built to meet the timeframes of 28th January and potentially 25th February 2018, this is what needs to be done”. (The January and February dates related to starting dates respectively for KTL’s Bay of Plenty and Hawke’s Bay runs.) Mr Millin responded a couple of minutes later, saying “I can confirm the below, I just need to do some work before I change over the Napier route to Kingsbeer Transport”. (“[B]elow” referred to Mr McGregor’s advice.)

[12]   Over December 2017 and into early January 2018, Mrs Kingsbeer continued to pursue Mr Millin for a contract for the Bay of Plenty run and draft contract or letter of intent for the Hawke’s Bay run.

[13]   On 10 January 2018, Mr Millin asked Mrs Kingsbeer for the “trip [rates]” for the Bay of Plenty  runs  “so I  can send them to  Chicago to put in the  contract”.  Mrs Kingsbeer responded with trip rates for each of the runs, calculated at $3.35 per kilometre. She appears then to have become aware MBNZ anticipated they would be calculated at a lower per kilometre figure. She raised it with Mr Millin, noting he had agreed to $3.35 “at our meeting you had at our house” and in providing the confirmation sought by Mr McGregor. The next day, 11 January 2018, Mr Millin explained his earlier confirmation of $3.35 erred; the rate would need to be no more than $3.25 or he would need to “have the necessary conversation to ensure continuity of service to the restaurants”. After conferring with Mr McGregor, Mrs Kingsbeer provided rates for each of the runs calculated at $3.25 per kilometre.

[14]   On 12 January 2018, Mr Millin forwarded Mr Sutherland’s updated letter of intent dated 10 January 2018 to KTL. The updated letter otherwise was in identical terms to the original, except at its numbered paragraph 2 the intent was “to implement a multi-year contractor agreement” (emphasis added), and its final paragraph instead read:

Subject to the above the intended commencement date for Kingsbeer Transport on these additional deliveries (attached) is Monday 29th January 2018. With further consideration acknowledged for the Hawke’s Bay region within the next 6 months. Andrew Millin will continue to be the main point of

contact for Martin Brower and can clarify any questions. Thank you for engaging with Martin Brower in this process.

[15]   Later that evening, Mr Millin resent the updated letter to KTL, together with its “additional deliveries”, being a  load  out  and  delivery  schedule  for  the  total 12 McDonald’s outlets, including the agreed rates for the various runs and backhaul quantities.  Mrs Kingsbeer   enquired   of   Mr Millin   by   text   message   “what’s   a competency document?”. Mr Millin responded “Don’t worry about the ‘Competency’ Document, you already provide a service for us so that’s a given”.

[16]   As with the original letter of intent, Mrs Kingsbeer referred the updated letter of intent to Mr McGregor for comment, observing:2

In the letter of intent, it says to implement a “multi-year” contractor agreement. As we are wanting to sign up to TR Group for 5 years, should the letter of intent say 5 years, I would hate to get a contract that says 2 or 3.

[17]   Mr Millin ceased acting in his position on 12 January 2018. His position ceased to exist on MBNZ’s restructuring, his absence initially being described to KTL as his being  “on   leave”.   Lacking   a   direct   email   address   for   Mr Sutherland,   on 15 January 2018, Mrs Kingsbeer sent Mr McGregor’s feedback on the updated letter to MBNZ’s Transport Supervisor, Phillip Gordon, for on-sending to Mr Sutherland. The feedback read:

Just a few points to get sorted in the letter of intent.

The contract must be for five years as this is the commitment you are making with your financing.

The trip rate for Gisborne/Whakatane is $3250[.]

The contract (or the load out and delivery schedule) should record the backload of oil and hashbrowns and the rate.

All rates must be plus GST.

The contract must include a CPI annual adjustment.

Also must cover road closures where you have to divert with more kms and longer hours.

2      Mrs Kingsbeer also noted Mr Millin’s specification of distances for the calculation of trip rates was beneficial to KTL: “the way Andy set it out added extra KMS, which he has added to the rate, im not going to say anything!!!! It works out an extra $32K for us on that run and we need it!!!”.

Do you know when a draft contract will be available for review. Thanks[.]

[18]   Later that day, 15 January 2018,  Mrs Kingsbeer  explained  to  Mr Gordon Mr Kingsbeer had asked her to advise him “[w]e are in the final stages of signing up with TR Group”. She said:

We will be leasing the … equipment on a short term month by month arrangement (this is a costly exercise (costs unknown as yet) and a financial loss could be possible in the first few months but it’s what needs to be done in the timeframe of contract commencement of 29/01, there just isn’t enough time, so its fine, we are looking at the bigger 5 year picture) in the interim … Because we don’t have a copy of contract, TR Group won’t sign up long term lease but their intention is to sign us up on the 5 year lease and are acknowledging the letter of intent, but the long term lease [won’t] commence until they have a copy of the contract.

She also explained how KTL intended operating in the interim, extending the Gisborne and Whakatāne truck’s operation to take in Rotorua and Taupō, and using a leased truck for the other Bay of Plenty outlets, with a smaller truck carrying forklifts for the new routes. She added “[t]his is the  plan,  and  this  will  be  implemented  from  27th January, when we collect our first BOP delivery”. Mr Gordon referred the advice to Mr Sutherland.

[19]   On  17  January  2018,  Mrs Kingsbeer  followed  up  for   a  response   to   Mr McGregor’s feedback, first to Mr Gordon  and  then  —  on  his  provision  of  Mr Sutherland’s email address — to Mr Sutherland directly, seeking “[the] letter of intent and load out/delivery schedule updated to reflect changes”. She added to     Mr Sutherland “[d]on’t panic, we have everything 100% under control, just need the documentation, so we can finalize everything”. Mr Sutherland responded a little over an hour later, attaching a further updated letter of intent and saying:

I have made a couple of changes to the letter of intent, clarifying that these additional routes are already covered under the existing Contractor Agreement until a new one is signed. It is noted 5 years is your preferred length of the new agreement.

Can you please forward your final proposed rate schedule (including back haul)?

Rates are normally noted exclusive of GST.

Agreed that significant diversions due to road closures should be compensated as required and agreed.

The existing and any future Contractor Agreements cover CPI etc.

Also, Shaun Galway will send (if not already received) the Competency Response document as well as a couple of policies which require updated acknowledgment.

Any queries please let me know.

[20]   The further updated letter of intent again was in identical terms to its predecessor, including its 10 January 2018 date and reference to Mr Millin, except — at its numbered paragraph 2 — the intent now was “to implement a multi-year (maximum 5 years) contractor agreement” (emphasis added) and a final sentence also was added:

Note the additional routes are to fall under the current Contractor Agreement expiring 31 January 2019 in the interim and significant diversions due to road closures will be compensated as required and agreed.

[21]   Shaun Galway, MBNZ’s Compliance Officer, followed up the same day —  17 January 2018 — with the documents referred to in the letter of intent, comprising a raft of Martin-Brower policies for KTL’s acknowledgment and competency response. Mrs Kingsbeer replied to Mr Sutherland that afternoon, attaching the new routes’ schedule supplied by Mr Millin after correcting and later explaining its Gisborne and Whakatāne run rate, saying she would get Mr Galway’s documents “signed and sent back to you ASAP”. The following day, 18 January 2018, MBNZ’s then-Field Service Consultant, Emily Thomas, sent Mrs Kingsbeer delivery methods, forklift safety and route  information  for  each  McDonald’s  outlet,  and  advised  Mr Gordon would be in contact to discuss driver training on the policies.

[22]   Also on 18 January 2018, Mrs Kingsbeer asked Mr Sutherland for his “final sign off” on the further updated letter of intent and schedule. She explained she would be forwarding his response “directly to TR Group, as well as a copy of our current contract, which as you explain in [the] letter of intent has been extended to include the new runs”. She reinforced KTL “require[d] this ASAP, in order to finalise rental equipment required to commence runs next week”. Mr Sutherland confirmed the further updated letter of intent and schedule the next day, adding “[w]e look forward to working with you on this expanded business”.

[23]   After the final iteration of the letter of intent was received on 19 January 2018, KTL secured short-term rentals of the necessary equipment from TR Group, on terms including TR Group would credit KTL with the difference between those short- and long-term lease expenses for a maximum of six weeks (later extended to  whenever  a long-term contract was agreed). In anticipation of its work for MBNZ, KTL terminated its business for other customers, meaning it was to be wholly-reliant on MBNZ’s business.

[24]   On 24 January 2018, Ms Thomas and Mr Gordon met with the Kingsbeers at their house to address operational paperwork with them. With the short-term rented equipment from TR Group, KTL then commenced the additional Bay of Plenty runs with a pickup from MBNZ’s Auckland depot on 27 January 2018.

[25]   On 29 January 2018, Mark Bavister, a long-standing Martin-Brower Australia employee, commenced  employment as MBNZ’s  New Zealand Country Manager,    a new position created in MBNZ’s restructuring. The Kingsbeers briefly met him in mid-March 2018. He may have followed up with an email, because on 21 March 2018 the Kingsbeers emailed him. Mrs Kingsbeer then seems to have become aware he had not seen the email. She sent a further email on 28 March 2018, appearing to resend the former, which said “[w]e wanted to give some feedback on the last email” (which does not appear to be in evidence). After responding to some operational issues, the email continued:

I think at some stage soon if we could organise a meeting with more time to go over everything. I understand and appreciate that you are busy and have lots going on, post Andy leaving and new contractors starting etc etc, but some of our issues are post Andy as well, and we feel there’s no resolution.

When Andy approached us about the runs, we had all agreed on the KM Rate, at the last hour he changed that rate and cut it by 0.10 cents, this was a significant income cut and we said to Andy at the time that because of the margin cut, there was no give in our expenses, mainly wages, which is why its time critical to get trucks loaded and gone in 1 – 1 ½ hours, not 2 [–] 2 ½ hours, because we simply haven’t budgeted for that and also because of how the runs are set up, we need the drivers to get home and be rested and without exceeding their legal hours.

As you can see below, Cameron emailed us on 19/01/2018 with the letter of intent. The start date was 27/01/2018 first load ex Auckland. That gave us 5 working days to organise equipment, staff, and all logistics needed in order for the runs to commence with no disruptions to store franchisee’s and Martin

Brower Distribution, which was successfully executed. As was discussed with Andy at the time, this short time frame meant that we would have to short term lease equipment to commence the work.

The ideal set up which we had planned for was to long term either, Lease or purchase equipment purpose built for the job. Trucks were to be ordered and Forklifts mounted behind the cab, in lieu of tail lifts as the forklift provided a faster more efficient unload. By doing this ensured that there would be no compromise to temperature control during deliveries.

We advised Andy at the time that although the letter of intent assisted us in being able to short term lease equipment, it wasn’t a long term fix and we would need to have a contract in place within 6 weeks of commencement. We advised Andy that we needed a long term contract in place before we could order the equipment. After a discussion with [A]ndy that we agreed that we would operate the runs using a forklift which would be transported on a separate vehicle.

As I said above the timeframes to commence the runs and equipment needed to service them was very tight and at the time we advised Andy that we would have to hire gear and run it until contracts were in place and correct equipment was in place. Andy had indicated on his part that he acknowledged the short timeframe and in lieu remuneration for this extra contract expense would and be reimbursed.

We feel we are stuck, we can’t order the right equipment, because we don’t have a long term contract, but in the meantime, we have all these extra expenses, that weren’t part of the original deal, that we do, in order to get the job done …. If that makes sense. The original plan was by now to have contracts in place, equipment on order (build times for trucks and trailer will take at least 4 to 6 months). In the meantime be reimbursed, and by now the gear would have been arriving next month or may …. But none of that has happened, and we are now at the tail end of March, without a resolution.

I have attached a spreadsheet outlining the expenses only (up until 28/02/2018) that are associated with the small 4 wheeler truck/transporter trailer/forklift and driver that follows the truck around 6 days a week to complete the deliveries. These are actual expenses, I am happy to provide you with the evidence if you require.

I realise this is a lot to take in, but we need to move forward, otherwise we are going to go backwards.

The spreadsheet identified KTL’s runs for MBNZ since 27 January 2018 and associated expenses totalling $9,207.48. On 31 March 2018, KTL issued invoices 108 and 109 dated 28 February 2018 and 31 March 2018 to MBNZ, each for some $15,000 plus GST identified as “above contract expenses” for either month. (Further invoices 116 dated 30 April 2018 and 123 dated 31 May 2018 increased the total sum claimed to $54,865.42 plus GST.)

[26]   Mr Bavister replied the next day, 29 March 2018, thanking the Kingsbeers for their email and seeking a meeting. They met on 4 April 2018. On 6 April 2018,     Mr Bavister advised “I’m working on getting a draft of your contract and should have something next week”. On 9 April 2018, Mrs Kingsbeer responded:

Thank you for taking time to meet with Tony and I on Wednesday and thanks for the update on Friday regarding contract.

As was discussed was mainly the issue around the over contractual expenses Kingsbeer Transport are accumulating monthly, and will continue to accumulate until the right equipment is in place.

Due to the short notice to start on 27 January we made it clear to Andy that there would be extra costs.

We worked with Andy to sort out these runs making it clear throughout that this was a temporary solution so that MB and the stores were not affected.

We trust that you will be able to have your finance department and Cameron look at these extra expenses and be able to repay these costs to us.

It was one of those situations where we simply turned up on our day to commence work, and it’s at whatever costs, because at the end of the day, we were given minimal notice to start this, and our philosophy as you know was to make sure there was no disruption to stores, which there wasn’t and never has been. As was explained our start date was set in concrete. The 27" January was the date, we weren’t about to let MB or the stores down because we couldn’t get the right gear because of short timeframes, and now we feel to some degree we could be getting punished for this, by these extra expenses not being paid.

The other discussion centred around the contract, which you have said can be taken care of pretty quickly. You have to appreciate when taking out either Long term Leases or Purchasing equipment required, any financial organisation is going to require contracts, and contracts that match the duration of the lease/loan i.e 5 years. this draft contract has been promised since January, and we are now in April.

The one thing that we forgot to bring up was CPI. We have been doing MB work for 6 years and the run that was in place (Gisborne/Whakatane) had a CPI clause in that contract. We have not been paid compensation for the CPI increases, over the entire period.

We had discussed this with Andy and | have attached an email from Cameron acknowledging the CPI of the existing contract.

I've also attached the email you requested where Andy had agreed to the $3.35 per KM rate, I've also attached an email regarding Napier/Hastings being given to us once Halls had been given notice. You will see on some of them a name “Jim @endeavour” He is our accountant.

If you require any further info, please do not hesitate to contact me.

[27]   On 10 April 2018, Mr Bavister replied to say he had forwarded the correspondence to Mr Sutherland, with whom he had discussed it that morning, and “should have some further updates later in the week”. Mrs Kingsbeer asked for an update on 13 April 2018, to which Mr Bavister replied he was “currently away on leave” but was to meet with Mr Sutherland on 16 April 2018 when he returned and would have further information then. On 17 April 2018, Mr Bavister explained “[the] current contractor agreement is currently being rewritten and is pending legal review with our legal counsel … We are discussing how long this may take”. Martin-Brower was reviewing the balance of Mrs Kingsbeer’s points, on which it would respond “by Monday”, 23 April 2018, with the “intention to [close] these items as soon [as] practically possible”.

[28]   Mrs Kingsbeer forwarded Mr Bavister’s 17 April 2018 email to Mr McGregor, who responded, copying his response to Mr Bavister:

Nicky

Am surprised that this is taking so long.

It was made very clear to MB in January that there would be additional costs that they would have to meet while the trailers were being built and it was agreed that they would meet these costs.

You commenced these runs on very short notice to help them.

The contract discussions started in December and draft contracts were expected in late January for review, signing and then ordering the trailers.

I also raised with you the CPI matter which I thought would have just been an annual adjustment per your existing contract. There is four years of adjustment needed.

You cannot carry these additional operating costs and as your accountant am concerned as this an ongoing unresolved situation.

It appears the feedback from the stores is excellent so well done. This matter now requires urgent action from MB.

Please keep me posted.

Mr McGregor then had not directly been involved in any dealings with MBNZ, although he obviously had been kept informed of their progress. On 20 April 2018, Mrs Kingsbeer forwarded Mr McGregor’s response to Mr Sutherland.

[29]   On 24 April 2018, Mr Bavister called Mrs Kingsbeer to discuss the interim arrangements under the letter of intent. Mrs Kingsbeer expressed her frustrations to Mr McGregor, who wrote directly to Mr Sutherland on 27 April 2018:

We are the accountants for Kingsbeer [T]ransport Limited.

When they commenced the additional runs for you in January it was at short notice to help you.

There was full discussion with your company regarding the additional costs to commence the runs and we were advised that these costs would be met by Martin Brower.

This situation was to continue until the new contract was in place and new trailers were built to suit the operation.

The new contract was to be signed up soon after the commencement being late January.

To date no contract has been received for review.

Additionally the accounts for the additional running costs have not been paid.

We have seen a letter of intent but this this is not suitable for financing purposes as legally it has no standing.

We need a response today confirming that the additional operating costs will be paid by next Wednesday.

This situation has now gone on for 3 months and is unacceptable. Thanks[.]

[30]Mr Sutherland responded the same day, 27 April 2018:

Thank you for your note. The more preparation time the better for these transitions, however sometimes this is not possible. Certainly Tony and the Kingsbeer team worked hard to provide a solution which maintained service.

In terms of the contract, the incremental work was included as additional services under the existing contractor agreement expiring 2019 (which I confirmed via email). MB are in the final stages of an updated agreement template which when reviewed and mutually signed would override the existing one.

In terms of additional costs, we are not aware of any commitment by MB to pay additional costs nor do we understand the breakdown of these claims. Should you be able to clarify these points please forward to Mark Bavister and myself.

Look forward to hearing from you soon.

[31]A week later, on 4 May 2018, Mrs Kingbeer replied directly to Mr Sutherland:

In response to your email on Friday, there was plenty of preparation time, the problem was Andy, Mark and MB didn’t and still haven’t supplied the necessary documentation required by us to order required equipment. You can’t book $1.5 million of equipment on a letter of intent, and furthermore TR Group are not going to supply equipment to us at long term rates without the contract.

In terms of the contract, as you are aware our current contract expires Jan 2019, and we have expressed on so many occasions that it isnt adequate time, nor was what was agreed upon prior to commencement. Andy assured us back in December 2017 that we would be supplied with a new 5 year contract. We are now 3 months into doing the additional runs, and because of the unbudgeted above contractual expenses we have endured due to no contract, it is becoming financially unviable. Can you please supply us with an explanation as to why we have not received our contract before now, and if or when we will be receiving one.

We have been a contractor with MB for nearly 6 years, and back when we started our first run (with a days notice to start) , within the first week the contract was signed, long term lease rates were in place, and trailer was refurbished to MB specs and on the road within the month, I cant understand why this situation is so different. Is there a reason why you don’t want to supply us with a contract? If so please advise.

Please respond to the following matters.

1.    Can we see a draft 5 year contract by 11/05/2018[?]

2.    Should we get our accountant to calculate the CPI adjustment?

3.    Should we get our accountant to calculate the Fuel Adjustment Factor[?]

[32]On 22 May 2018, Mr McGregor wrote to Mr Bavister, copying Mr Sutherland:

We spoke on 10 May re the new 5 year contract and you advised that it was with your New Zealand lawyer.

You were going to follow up progress and confirm back to me.

In the present set up my client is incurring additional costs but with a longer term contract this can be corrected.

This contract was promised back in December. Please advise urgently[.]

Mr Bavister responded the same day to say “[t]he contracts are still under review with our legal counsel”, and explaining he was “advised we will have an update on this by Monday 28th”. Mr McGregor replied he “look[ed] forward to seeing it”.

[33]   KTL continued to invoice MBNZ for its monthly “above contract expenses”. From 20 May 2018, it included a fuel adjustment factor in its weekly run invoices, using the ICA’s Schedule 3 table, and separately invoiced some $22,000 on that basis backdated to January 2018. On 27 May 2018, Mr Bavister sought to meet the Kingsbeers to discuss the claim. Mrs Kingsbeer responded the following day, replicating the ICA’s Schedule 3 table, saying:

This table is in our current contract and I have simply taken that formula and worked out our calculations based on what it says.

Do you have a different calculation/formula that we should be using?

FAF is a variable component to any business and because of its nature of increasing and decreasing, it cannot be included in any fixed KM rate.

As this issue relates to this week’s invoice 121 also, which is due to be paid on Wednesday 30/05 can we please have this resolved urgently, as not paying this would have significant impact on our cashflow.

I have used those exact calculations and formulas as per Schedule 3 in our contract.

A day later, 29 May 2018, Mrs Kingsbeer followed up her earlier email to Mr Bavister:

Can you please respond to the email below I sent yesterday afternoon.

This issue directly effects this weeks invoice which is due for payment tomorrow, and as far as I know this invoice is on hold, so this issue really needs to be resolved today, so the invoice can be approved for payment and paid tomorrow, non-payment tomorrow is going to seriously impact my cashflow.

If there is another FAF table/formulation calculation you require me to use, can you please send it ASAP.

[34]   Mr Bavister replied later that afternoon to explain specific data, as to fuel burn and fuel cost reference, and actual rates were required to be agreed for input into the calculator. In a further email that day, Mrs Kingsbeer specified the rates she used and sought confirmation KTL’s weekly run invoice containing the fuel adjustment factor would be paid the following day. When Mr Bavister responded, declining to give that confirmation pending discussion with Mrs Kingsbeer the next day, Mrs Kingsbeer replied with further documentation substantiating her calculation, adding:

If you are going to pursue disagreeing with our FAF Calculation%, at the very least, short pay our invoice of the FAF component. Not paying our invoice at

all today, will have serious repercussions on our cashflow position today, and will put our business in a compromising position.

On 30 May 2018, Mr Bavister agreed to pay the undisputed portion of the invoice.

[35]Early on 31 May 2018, Mrs Kingsbeer emailed Mr Bavister:

Yesterday you said that the invoice had been approved for payment. No funds were paid to us last night.

This has caused an issue which I will try to resolve at 9.00am when bank opens, in the meantime can you please chase up at your end. It is a must that funds are deposited today into my account.

Can you resend the FAF calculator we worked out yesterday on the phone and I will adjust invoice 124.

Can we also have a phone discussion, perhaps tomorrow morning, regarding Tony, Hire Forklifts, Hire Trailer etc etc, following trucks around. Going forward, even when we get the contract (hopefully tomorrow) it’s going to take time to order and build gear, and these extra expenses will still continue, until that right gear is in place.

Mr Bavister responded half-an-hour later:

The invoice was definitely approved for payment yesterday and a special request was made to ensure it was paid. I will chase up with accounts this morning, but it could be due to it being released yesterday and will appear today.

FAF calculation attached. Summary of our conversation below:

·     Kingsbeer were charging FAF (@ $0.32/km) for the Gisborne route until the end of Jan 2018

·     Rate for Gisborne route increased in Feb 2018 and the FAF ceased.

·     No FAF charged for any routes Feb-May

·     Due to increase in Fuel costs FAF needs to be applied.

·     Calculation of FAF needs to align when the routes commence, not contract commencement.

·     Martin-Brower agrees to pay FAF are the correct calculation.

The FAF calculation for ALL routes will reference the fuel rate from Feb 2018 of $1.01 per litre.

Please forward me the revised invoice for FAF when ready.

Later that morning, Mr Bavister advised Mrs Kingsbeer “[i]t appears [that] accounts didn’t process the final stage of the payment yesterday. They have promised it will be done today and they will contact you once completed”. The weekly run invoice then

was paid. The backdating invoice was revised from some $22,000 to about $2,500, and also paid.

[36]   On Saturday, 2 June 2018, Mr Kingsbeer was returning home after attending to a Rotorua McDonald’s delivery in the smaller truck and trailer carrying the forklift. A wheel detached from the trailer and hit an oncoming campervan. There was no injury or significant damage, and the issue appears to have been addressed between insurance companies. Mr Kingsbeer called Ms Thomas  to  notify  MBNZ  of  the  incident.  Mr Sutherland then called him.

[37]   Early on the following Monday, 4 June 2018, Mr Bavister emailed the Kingsbeers, and Mrs Kingbeer responded in highlighted annotation:

Hello Tony and Nicky,

I would like to catch up this week to discuss a couple of items, including the status of the contract.

Over a week ago Tony had a conversation with Cameron where he “assured” Tony that there would be a draft contract or contract presented to us on either Thursday or Friday of last week. Mark, talking to you last week, you also indicated that we would be receiving a copy on Friday. You both were aware that we were waiting to receive it, and yet you both failed to communicate with us, either by phone or email on Friday, this was very disappointing.

There has been some good feedback from the restaurants which is very pleasing. Well done.

I almost find this insulting. We have been doing these new runs for nearly six months, bad news travels fast, I’m sure if “WE” weren't doing the job right, we would of heard about by now!!!! I think you all forget, we have been a MB Contractor for 6 years, with zero incidents.

There has also been some feedback to Cameron on Saturday around the vehicles being overweight and some accidents/incidents due to this. We are very concerned around this and we ask that you bring along information which relates to this situation(s).

As far as the incident on Saturday, this is the 2" incident involving this set up.

The underlying issue is, this set up was never intended to go for this long!! Before the work commenced Andy assured us, it would take no longer than 3- 5 weeks for contracts to be in place, any extra costs outside of our agreement were to be reimbursed, and the right gear sorted. This has all been the main reason we have been chasing payment of those invoices and copy of the contract.

In the 3 times Tony has met with you Mark, he has addressed the same issues.

A Contracts

B Reimbursement of extra expenses C Dock times

All 3 of these issues are still unresolved

I was hoping we could catch up tomorrow afternoon after 3pm. Please let me know when would be suitable.

As far as having a meeting, we find this pointless and a waste of our time, unless those issues above are resolved having yet another meeting is not going to solve anything. This situation has pushed us to our limits, both mentally and financially, so as Tony discussed with Cameron on Saturday after his accident, its not our fault the way things are set up, its not our fault we have a rental forklift on a rental trailer that’s overweight, it's not our fault we are 19 weeks into this with unresolved issues, none of this is our fault, yet we are the ones paying for it.

[38]   MBNZ continued to enquire about the forklift trailer incident, which ultimately appears to have been resolved to its satisfaction. Parallel discussions continued about the contract and expenses. On 6 June 2018, Mrs Kingsbeer emailed Mr Bavister:

Just following on from your discussion with Tony yesterday.

Tony has talked to Cameron regarding the extra expenses we are incurring. I think its been established with all parties now that these extra expenses incurred are solely because of the way the runs are currently set up, and this set up is due to the delay in receiving the contract.

Once everything is in place …… i.e the forklifts are mounted to the actual trucks, these extra expenses will cease. As Cameron has indicated to Tony in their conversation yesterday, he now fully understands what these expenses are for and that they will not be an ongoing expense once correct gear is set up with Forklifts mounted to the trucks, he indicated that there shouldn’t be any problem in you signing off on those [February–April 2018] invoices …, and paying us. I will email you May Invoices expenses later in the week.

Now that everyone is on the same page, and you can clearly see from the invoices what every expense is for, can you please confirm what date they will be paid.

Thank you and we look forward to hearing from you tomorrow (Thursday) as we should be receiving a copy of contract. …

We cannot stress enough the importance of sorting all of this ASAP.

Mr Bavister replied Mr Sutherland would “be responding around the contract and the extra expenses”. On Sunday, 10 June 2018, Mr Bavister emailed the Kingsbeers to say “[w]e are working through the details of the contract and we should have something to you Tuesday afternoon”.

[39]   In the morning of Thursday, 14 June 2018, Mr Bavister raised queries with the Kingsbeers about some invoice details. Mrs Kingsbeer responded the questions were “disappointing and frustrating”; “these are the actual expenses we are incurring, that we never budgeted for. Attached are all relevant invoices”. Later that afternoon,     Mr Bavister provided the Kingsbeers with “the draft version of your contractor agreement”, between MBNZ and KTL. He noted its schedule 2 and 3 rates required the parties’ agreed insertions, and invited their review and response. Half an hour later, Mr Bavister responded to the Kingsbeers on the expenses, to which Mrs Kingsbeer again replied in highlighted annotation:

Hello Nicky and Tony,

Thanks for the reply. There are frustrations between both parties with regards to this situation. We are a fair and reasonable organisation, however we have processes which need to be followed. Once we have resolved this we can discuss how we will handle this situations moving forward.

With regards to the items below please see my commentary and questions.

1.   Martin-Brower does not accept the cost for Tony to follow the route are incremental and we will not cover these costs.

So the person doing this is expected to work for free, whether it be Tony or a paid employee? It is not a "incremental cost", it is a "actual cost" incurred, and not one we budgeted for doing for the period of time we have been doing it for.

2.   We accept the costs for the truck to tow the forklift during the deliveries.

3.   We accept the costs for the hiring of the trailer towing the forklift during the deliveries. …

4.   We dispute the costs associated with the forklift hire at Tauranga and Taupo. The proposal for the deliveries already included one forklift, therefore we accept the charges for one forklift, not both.

That may be the proposal but the reality is something different, we are not working to the proposal, therefore need to have forklift based in Taupo, as Tony is unloading Rotorua Fenton Street at 5.00am he cant be with the second truck in Taupo at 5.00am, can he?

5.   With regards to the running costs of the forklifts. We accept storage costs at Taupo, however we only accept the running costs of one unit.

$10 diesel?

6.   We also have some questions regarding the TR Group rental costs. See attached.

a.Why are these costs not consistent? The first two months were the same weekly cost for a four or five week month. I will get a report from TR Group

b.Since April there has been the inclusion of a truck, but the trailer rates have change as per above point. What is this? It was missed from the first invoice . We have had the same rental truck since commencement 26/01/2018

Cameron and I have spoken extensively today and we are keen to get this resolved by COB today.

And we have been trying to get these things resolved for the last 5 months, today you have sent a draft contract to us to review and agree to, that is practically word for word , exactly the same as the current contract we have, so I cant understand why it has taken so long to send this to us, and why is it missing schedule 2 and 3? These schedules should read exactly as they read on the Route/rate Schedule that was attached to the letter of intent.

I'm not sure how we can move forward, you have stated above that Martin Brower wont accept the cost for Tony and or a paid driver to follow Route, you do not want to pay for the last 5 months, and it could take at least 6 months to get correct gear on the road, so Tony and or driver works basically a year for free how is that fair and reasonable?

I'm happy to catch up over the phone to discuss any of these points and questions.

[40]   The next day, 15 June 2018, Mrs Kingsbeer asked Mr Bavister to respond that day. He did so, to which Mrs Kingsbeer replied on 18 June 2018, again in highlighted annotation:

Martin-Brower is committed to finalising these discussions as quickly as possible. We need to meet next week face to face, otherwise it is difficult for us to move forward. I have asked for meetings on several occasions over the past number of weeks due to the importance of these points to both parties.

Yes we acknowledge we need to have a meeting, we need to move some things around to make this happen, its not easy for us to come to you. I will get back to you to confirm, but I would say it will be either later in the week, or next week.

At our meeting I would like to discuss the following.

1.  Additional Expenses. Martin-Brower has reviewed the information and we agree with covering the majority of expenses. Our review currently agrees with approximately $34000 of presented costs. This is 2/3 of the claim currently.

Great news, we appreciate that you have come to the party in resolving and paying these additional expenses, which will solve the cashflow problems we are currently experiencing, this is a step in the right direction in moving forward, would it be possible to pay monies today? If it is not today, can you please advise date, as we need to advise our bank manager.

Can you please provide us with a detailed breakdown of this claim, highlighting what additional expenses you are paying.

2.   Contract. The current rates, routes serviced and other schedules need to be inserted to proceed.

Yes they do need to be inserted and reviewed, can you please email these for our solicitor to review in the meantime.

…

Please let me know a suitable time. Our Finance Director, Ian Thomas will be visiting the DC on Monday and Tuesday. If you can make either day, it would be a good opportunity to meet Ian.

[41]   Early that evening, 18 June 2018, Mr Bavister provided Martin-Brower’s analysis of the claimed expenses, and proposed the invoices be cancelled, and substituted with one comprising the agreed elements addressed to “the corporate Australian business” for its payment. He said a copy of the revised contract would be sent the next day. Later that evening, Mrs Kingsbeer emailed Mr Bavister with the revised invoice to be “processed and paid ASAP”. In a separate email she added:

I have credited the original invoices and raised one invoice for the agreed items. I have emailed it to both you and Cameron. Can I please ask that this gets paid ASAP. Please email me confirmation of this, and payment date. I have to report to my bank manager before COB today of a payment date of invoice 131 so it would be much appreciated, if you could get back to me ASAP, we are hoping it will be paid tomorrow with our other invoices?

[42]   The next day, 19 June 2018, Mr Bavister acknowledged the invoice’s receipt and would confirm next steps “[o]nce I have spoken to Corporate”. After doing so, he asked Mrs Kingsbeer to make changes to the invoice, reducing its narration and specifying KTL’s NZD invoice and bank account number, essentially to facilitate Australian payment. Mrs Kingsbeer promptly made the sought changes, issued as invoice 131 for NZD 34,541.40 (plus GST). Later that evening, Mr Bavister provided the full draft ICA for the Kingsbeers’ review, and confirmed their meeting for Friday, 22 June 2018.

[43]The following morning, 20 June 2018, Mrs Kingsbeer responded:

Thank you for sending this, we will instruct our lawyer to look over this, and advise.

Yesterday I asked that you let me know when invoice 131 will be paid, as I had to report to my bank before COB. I cannot stress the importance of this. We are hoping it will be paid today, so can you please advise this morning that this is being done.

Mr Bavister replied “[w]e definitely understand the importance. I will discuss with Ian today and let  you know”. Later in the day,  Mrs Kingsbeer asked for an update.     Mr Bavister responded, on Mr Thomas’ return to Australia the following day, “we are planning to have this resolved by Friday” on  which he would be able to provide      a further update.

[44]   Very early in the morning of Thursday, 21 June 2018, Mrs Kingsbeer emailed Mr Bavister:

We were hoping for a faster resolution to this, than Friday.

On Monday and Tuesday I had to report to my Bank Manager, as I informed you in my emails, hence the urgency.

I assumed by amending the invoice and emailing promptly on Monday, that it would be paid either Tuesday or Wednesday, and I asked you Wednesday morning for an update, and again expressed the urgency. I cannot express enough the financial stresses we have been under for the last 5 months because of these extra expenses, and the toll they have had on Tony and I. We please ask that this invoice is paid on Thursday. Please send confirmation of this.

Mr Bavister responded:

We absolutely understand the importance of this to your business. There are processes which Martin-Brower need to follow with the payment of all invoices.

Ian is now part of this email thread and we have also spoken around trying to turn this around as fast as possible.

Once the team in Australia is on board today, I’m sure we can have an answer on when this will occur around 1pm.

And Mrs Kingsbeer replied:

We look forward to receiving a response regarding this situation at 1pm today, once this matter is all sorted, and invoice 131 is paid today, we feel we can move on to the next step of arranging a time and place for a meeting.

We feel this situation needs to be resolved first, for us to proceed.

Shortly before 1.00 pm, Mr Bavister confirmed to the Kingsbeers “payment has been completed this morning by the Australian team”. He attached Martin-Brower’s bank’s payment detail report, which indicated NZD 39,722.61 was scheduled for payment that day if “fully authorised” by 12 noon AEST (that is, by 2.00 pm NZT), but noting the payment’s status at 9.54 am AEST, as “[u]nauthorised / created”.

[45]   On receipt of Mr Bavister’s payment advice, Mrs Kingsbeer nominated a mid- point location between Auckland and Tauranga for their meeting the following day, to which Mr Bavister agreed late in the afternoon. She referred Mr Bavister’s advice to Mr McGregor, observing “Have a closer look at this. It was only set up to be paid and had to be authorised. Will be interesting to see if it goes through?”

[46]   Early the following morning, 22 June 2018, the Kingbeers emailed Mr Bavister saying “[m]eeting today for 11.30am is cancelled”. Later that day, MBNZ received an emailed letter from KTL’s then-solicitors:

(a)advising payment of the invoice had not been received;

(b)seeking Martin-Brower’s payment of KTL’s additional expense invoices 134 ($25,409.79 plus GST), 135 ($3,300.00 plus GST) and

136  ($14,161.79  plus  GST),  totalling  $42,871.58  plus  GST,  by  27 June 2018;

(c)notifying MBNZ KTL “would cease undertaking the [Bay of Plenty and Taupō] runs on 30 June 2018”; and

(d)acknowledging KTL’s continuing obligations under the ICA in relation to deliveries to McDonald’s Gisborne and Whakatāne outlets (and oil backhaul).

With considerable effort, using its own and other contracted resources, MBNZ ensured continuity of service  to  the  Bay  of  Plenty  and  Taupō  McDonald’s  outlets.  On  3 September 2018, after substantial correspondence between solicitors, KTL also gave MBNZ 12 weeks’ notice to terminate the Gisborne and Whakatāne runs.

[47]   It transpired the NZD 39,722.61 transaction was the subject of MBNZ’s bank error, resulting in its failure to be paid to KTL. The error was remedied, with payment ultimately being made to KTL on 3 July 2018.

The pleadings

[48]   KTL raises six causes of action against MBNZ. They largely are founded on a contention MBNZ agreed to provide documented terms for the additional runs “within six weeks … or … a reasonable time” of their commencement, and to pay KTL’s “short-term costs” incurred by reason of the terms remaining undocumented, such provision and payment being “implicitly agreed” essential to KTL:

(a)first, in failing so to provide and pay, MBNZ breached the agreement;

(b)second, in failing so to provide and pay, MBNZ repudiated the agreement, which KTL terminated;

(c)third, alternatively to the prior causes, MBNZ is estopped from denying its representations of provision and payment, and of such provision in terms suitable for KTL’s long-term lease or finance of plant required for the additional runs and their five-year duration;

(d)fourth, alternatively to the prior causes, MBNZ’s representations in trade   were   misleading   and    deceptive    in    terms    of    the    Fair Trading Act 1986;

(e)fifth, alternatively to the prior causes, KTL alleges a collateral agreement by which:

(i)it would carry out the additional runs;

(ii)MBNZ would provide documented terms suitable for KTL’s long-term lease or finance of plant required for the additional runs and their five-year duration “within six weeks … or … a reasonable time” of their commencement; and

(iii)in consideration for KTL’s agreement to carry out the additional runs, MBNZ would pay KTL’s additional expenses incurred until entry into the documented terms; and

(f)sixth, alternatively to the prior causes, the additional expenses incurred by KTL were for MBNZ’s benefit in enabling the additional runs to be conducted absent suitable documented terms, which MBNZ agreed, knew or should have known were to be reimbursed to KTL.

On the first four causes, KTL says it lost opportunity to profit and incurred the additional expenses. KTL calculates its losses as $679,475 in lost profit, and “$91,261.44 (including GST)” in expenses.3 The last two causes claim the expenses sum alone.

[49]   Denying each of KTL’s causes (including, by way of an affirmative defence to the first four causes, KTL failed to mitigate its loss), MBNZ counterclaims, first, KTL breached its contract with MBNZ by failing to give due or reasonable notice of its termination of the additional runs; and second, if KTL was successful in its claim for lost profits, such profits should be reduced by the sum of NZD 39,722.61 paid to KTL, as unjustly enriching KTL.

KTL’s first cause of action — breach of contract

[50]   KTL’s pleadings heavily rely on a concatenation of private dictionary terms. Thus, for example, this first cause for breach of contract refers to an “Agreement”, defined by reference to “[t]he oral and written correspondence between [KTL] and [MBNZ] between around October 2017 and June 2018”. Such correspondence is alleged to establish KTL undertaking the “BOP Additional Runs” for MBNZ, on terms of a “Written Contract” required to meet its “Logistical Requirements” and for MBNZ’s reimbursement of “Short-Term Costs” incurred “while there was no Written Contract in place”.

3      As an aside, it is unclear why KTL — presumably GST-registered, and therefore receiving GST input credits for GST paid — claims to recover GST in damages. See Gunton v Aviation Classics Ltd [2004] 3 NZLR 836 (HC) at [199]–[204]; and New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282, (2016) 23 PRNZ 260 at [6], citing Dunedin Catering Supplies v Mr Chips Ltd [2013] NZHC 1815, (2013) 21 PRNZ 798 at [34].

[51]   By “BOP Additional Runs” is meant deliveries to the nine Rotorua and Tauranga McDonald’s outlets, to which it is alleged the Taupō outlet later was agreed to be added. By “Written Contract” is meant “a written contract documenting the BOP Additional Runs”. By “Logistical Requirements” is meant KTL’s requirement to “lease additional machinery, and equipment including fuel tanks, forklifts, trailers, refrigeration and other rental equipment (‘Plant’) and employ additional staff”. By “Short-Term Costs” is meant KTL’s requirement to enter into short-term leases for the Plant, incurring short-term costs.

[52]Thus KTL pleads the express terms of the Agreement to be:

(a)“[KTL] would undertake the BOP Additional Runs for [MBNZ]”;

(b)for a term of five years;

(c)“[MBNZ] would provide [KTL] with the Written Contract suitable to enter long-term leases for the Plant and/or obtain finance on”;

(d)“[t]he Written Contract would be provided within six weeks of the Commencement Date” (which ‘Commencement Date’ is undefined, but KTL pleads it “commenced the BOP Additional Runs for MBNZ pursuant to the Agreement” on 27 January 2018); and

(e)“[MBNZ] would pay for the Short-Term Costs”.

Further, or alternatively to (d) above, KTL pleads the Agreement contained an implied term “[MBNZ] would provide [KTL] with the Written Contract suitable to enter into long-term leases and/or obtain finance on within a reasonable time”. Of all that, KTL pleads the Agreement’s “essential terms” were (d) above “or within a reasonable time”, and (e) above “until the Written Contract was provided”.

[53]   KTL goes on to plead, “by failing to meet the Essential Terms”, MBNZ breached   the   Agreement.   It   pleads   such   failure    in    terms    of    the Contract and Commercial Law Act 2017’s s 37(2)(b), inferentially meaning KTL thus was entitled to cancel the contract, which its solicitors’ letter of 22 June 2018 did.

—applicable law

[54]   If a partly oral and partly written contract was entered into and, if so, what its terms are, are questions of fact.4 Such agreement is to be “inferred from conduct, and is not a mental state”.5 Consistently with the law on contractual interpretation,6 “[t]he facts must be objectively assessed to see whether sufficient agreement has been reached”.7 That sufficiency is of the parties’ respective intentions immediately to be bound (“at the point when the bargain is said to be agreed”), and their express or implied agreement on essential terms.8 As such, “all evidence to assist that task is admissible, including evidence of the parties’ subjective intentions and subsequent conduct”.9

[55]   If the meaning of the parties’ intentions is to be established by implication, as “strictly necessary to spell out what the contract, read against the relevant background, must be understood to mean”:10

(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”;

(4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.

The Supreme Court emphasised:

Whilst conditions (4) and (5) must always be met before a term will be implied, conditions (1)–(3) can be viewed as analytical tools which overlap

4      ANZ Bank New Zealand Ltd v Bushline Trustees Ltd [2020] NZSC 71, [2020] 1 NZLR 145 at [65], citing Carmichael v National Power plc [1999] 1 WLR 2042 (HL) at 2049 per Lord Hoffmann.

5      Corrick v Silich [2018] NZCA 221, (2018) 24 PRNZ 210 at [40].

6      Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85 at [43], approving Firm PI 1 Ltd v Zurich Australian Insurance [2014] NZSC 147, [2015] 1 NZLR 432 at [66] per McGrath, Glazebrook and Arnold JJ (see also [60]–[61] and [63]) as “settling the general approach to contractual interpretation”.

7      Corrick v Silich, above n 5, at [40], citing Wilmott v Johnson [2003] 1 NZLR 649 (CA) at [35]: “[t]he law of contract is concerned with the conduct of contracting parties inter se, viewed objectively as it would be by an independent third party observer.” See similarly Meates v Attorney-General [1983] NZLR 308 (CA) at 377; and Fleming v Beevers [1994] 1 NZLR 385 (CA) at 390.

8      Fletcher Challenge Energy Ltd v Electricity Corp of New Zealand Ltd [2002] 2 NZLR 433 (CA) at [53].

9      ANZ Bank New Zealand Ltd v Bushline Trustees Ltd, above n 4, at [65].

10 Bathurst Resources Ltd v L & M Coal Holdings Ltd, above n 6, at [94], [116(f)] and [232(b)], approving BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 (PC) at 283, and referring to Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988 at [211], and Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] USKC 72, [2016] AC 742 at [21].

and are not cumulative. The business efficacy and “the “so obvious that ‘it goes without saying’” conditions are both ways, useful in their own right, of testing whether the implication of a term is strictly necessary to give effect to what the contract, objectively interpreted by the court, must be understood to mean.

—discussion

[56]   Despite the pleaded cause’s reliance on the whole of the parties’ dealings in relation to the additional runs, the contended ‘Agreement’ principally is founded on dealings between Mr and Mrs Kingsbeer and Mr Millin.

[57] In her evidence-in-chief, Mrs Kingsbeer described the parties’ further meeting to discuss logistics, referred to at [9] above:

On 16 November 2017, Tony and I met with Andy and Phil Gordon (Phil) at our house to discuss KTL’s plan in more detail. Phil was the Dispatch Manager of MBNZ at the time. At that meeting, Phil and Andy proposed that KTL take on the Taupo delivery run as well. It would work efficiently with the Bay of Plenty and Rotorua runs. We also asked whether KTL could pick up the Napier/Hawke’s Bay delivery runs. Andy agreed, but said they would not start until after the Bay of Plenty, Rotorua and Taupo runs.

At the meeting, we told MBNZ that KTL would need a written contract in place within a reasonable time. Without a contract, KTL would not be able to secure finance and order the necessary equipment and machinery to carry out the Additional Runs. We told Andy and Phil that, if there was no written contract in place by MBNZ’s required start date, KTL would have to incur costs of leasing equipment on a short term basis. There would also be costs of setting everything up at such short notice. KTL could not maintain those ongoing costs indefinitely. Andy told us that if KTL incurred extra costs, that MBNZ would cover those expenses.

It is unclear if this meeting also raised the prospect of a ‘letter of intent’, the first iteration of which issued subsequently,11 or if that arose out of some later input or intervention. ‘Letters of intent’ were not common MBNZ practice.

[58]   Mrs Kingsbeer earlier conveyed Mr McGregor’s advice of KTL’s requirements to MBNZ.12 She referred also to a later telephone conversation with Mr Millin, after having Mr McGregor work through the financials with the revised $3.25 per kilometre trip rate insisted on by Mr Millin and specify KTL’s consequent minimum requirements:

11 See [9] above.

12 See [11] above.

Although the letter of intent had not been finalised and KTL had not received the written contract yet, everything was progressing. Andy had assured KTL that MBNZ was committed to a contract of five years. KTL had a relationship with MBNZ that was based on six years of trust and respect, so there was no reason to doubt them. All previous contract negotiations had gone smoothly. Even when KTL had not received a contract before starting delivery runs in the past, it was always sorted out.

…

On 12 January 2018, I called Andy and told him the terms Jim had said KTL needed. Andy verbally accepted the terms during our phone call. I reiterated to Andy that KTL would not be able to enter into long-term leases until it had a written five-year contract in place. I told him again that KTL would need to hire equipment on a short-term basis in the meantime, and that this would be an extra cost for KTL. Again, Andy confirmed that MBNZ would cover the costs incurred.

[59]   Mrs Kingsbeer closely was tested on those contentions under cross-examination. She accepted MBNZ could not have known the quantum of short- term costs to be incurred by KTL, but insisted it had MBNZ’s agreement to cover them. And she insisted also, in recited mantra, MBNZ had agreed it would provide the draft contract “within three to six weeks”.

[60]   The extent of Mr McGregor’s involvement in matters between KTL and MBNZ is unclear. Although he plainly was engaged in work to establish the additional runs’ financial viability for the Kingsbeers, he largely was reliant on Mrs Kingsbeer’s advice for his knowledge of KTL’s position. As a minor example, after being copied into correspondence from the Kingsbeers’ broker about quotes for the new trailers in mid-December 2017, he responded to Mrs Kingsbeer “I thought you were getting     a lease deal from [another provider] but [the broker] is looking at several places”. Similarly, his 29 November 2017 response to her for provision to MBNZ, “I am aware that you will be asked to sign an agreement to lease plant on a five year basis today”, is not supported by evidence of any immediate expectation for such execution.13 The broker’s correspondence makes it clear the financial viability of the additional runs anticipated their inclusion  of  the  Hawke’s  Bay  McDonald’s  outlets.  Certainly  Mr McGregor reinforced, as the leases were to be for five-year terms, KTL’s contract with MBNZ required to be of the same duration. But, other than his endorsement of

13 See [11] above.

KTL’s proposal, his assertions of KTL’s dealings with MBNZ are not of assistance in objectively determining their content.

[61]Mr Kingsbeer acknowledged in his evidence-in-chief:

During October and November 2017, we had a number of meetings with MBNZ. Andy, Phil, Nicky and I discussed the routes, contract rates, and other details for the extra runs. At one of the meetings, in mid-November 2017, Andy suggested KTL could also take on deliveries to Taupo.

adding:

KTL also needed a written, five year contract in place as soon as possible. Without it, KTL could not enter into long-term leases for the trucks and other equipment. The rates for hiring equipment short-term would be too high to manage for very long. When we told Andy about this, he confirmed that he understood. He assured us that a written, five-year contract would be provided shortly. Andy also said that MBNZ would cover the costs KTL would incur to start the delivery runs until a written five-year contract was provided.

Under cross-examination, Mr Kingsbeer said they had discussed “the short term cost[; the] five year contract, the three to six weeks of getting the contract” with Mr Millin at their 16 November 2017 meeting. Mr Kingsbeer apprehended KTL’s short-term expenses would be in the vicinity of $20,000–$50,000. He said Mr Millin “assured [him] that the short-term costs would be covered” and “promised … a contract within three to six weeks” for a five-year duration: “that was a gentlemen’s handshake conversation that we had”. Mr Kingsbeer said those matters were discussed again in the 12 January 2018 telephone call.

[62]   In  evidence-in-chief,  Mr Millin  confirmed  he  understood  “KTL  needed   a written contract to secure finance and to order or lease the trucks and plant they required”, and had agreed “MBNZ would cover KTL’s reasonable costs to commence the Additional BOP Runs”. He added:

I recall speaking to Cameron about KTL’s start-up costs. We agreed to help KTL during this period. It was expected the costs would be paid back over time, but due to KTL’s service and high standards we were willing to step outside normal practice to assist.

…

Phil Gordon and Cameron Sutherland were present at some of the meetings with KTL. On at least one occasion, at a meeting with KTL, I recall Cameron assuring KTL of MBNZ’s commitment to the five year contract for the

Additional Runs and agreeing that MBNZ would pay KTL’s costs associated with starting the Additional BOP Runs.

Also in evidence-in-chief, Mr Millin explained “[t]he letter of intent was to show MBNZ’s commitment to enter into the formal contract with KTL for the Additional Runs for a five year term”. He did not refer to Mrs Kingsbeer’s 12 January 2018 telephone call, but instead to issue of the letter of intent’s second iteration that day, which was his last active day for MBNZ.14

[63]   Under cross-examination, Mr Millin explained he had become aware of KTL’s “ballpark” short-term expenses in late December 2017 or early January 2018 “because we were running out of time to get the contract in place”. He remembered “a discussion of equipment they needed to hire for the work”. He said of the consequent expenses:

I’d be discussing with them the costs and we discussed what I’d cover, but I said I would, they gave me a ballpark figure that the costs would be under 50,000 and we’d be discussing them as they come in.

Mr Millin accepted any agreement on KTL’s short-term expenses only arose then, and “was subject to discussing and approving the actual costs” — “as they come in”, in his words, to be “negotiated”. But he had “agreed to support [KTL] through the early stages”, albeit he also accepted for repayment by KTL over the course of the long-term contract and therefore subject to its entry.

[64]   As to the duration of that long-term contract — despite the letter of intent’s progressive iterations referring initially to no duration, then a “multi-year”, and finally “multi-year (maximum 5 years)” contract — Mr Millin was clear in cross-examination he had agreed “… as … New Zealand distribution manager … to sign a … five-year term contract with Kingsbeers”. Mr Millin distinguished the prospective contract from the letter of intent, which was:

… so they can get a short-term lease of the vehicles, waiting for the contract so then they can purchase the vehicles that they were requiring. This was so they could get a short lease on the vehicles. That’s what the letter of intent is for.

…

14 See [12]–[17] above.

… to access the short term equipment so they can do the job I’ve asked them to do. With the end goal being a five year contract.

Mr Millin denied having given the Kingsbeers any indication of the time period in which a draft long-term contract would be made available to KTL. He agreed he could not give KTL any binding commitment to provide the contract within a period of time, explaining that was “because [he] didn’t know the period of time that [it] was going to be provided”.

[65]   Mr Gordon was uncertain of the reason  for  his  attendance  at  the  November 2017 meeting. He said:

[M]y role did not require me to be involved in contractual matters, so it would not be usual for me to be involved in contract negotiations. However, Andy invited me along to meet with the Kingsbeers at their home on or around 16 November 2017, to discuss taking over the runs from Halls. I believe Andy invited me to this meeting simply because of my positive relationship with the Kingsbeers at the time, not necessarily because that was within the scope of my role (although my knowledge of the runs would have been beneficial).

Although I attended that 16 November 2017 meeting, I was not present for most of the discussions that occurred. I spent most of the meeting outside in the garden dealing with other matters on the telephone.

I was not aware of any promises by Andy (or anyone else at MBNZ) to pay certain costs incurred by KTL above the contract fee, or any promises to provide a written contract within a certain time, whether at that meeting or at any other time.

[66]   Under  cross-examination,  Mr Gordon  contemplated   his   attendance   on 16 November 2017 may have been to cover any gaps in Mr Millin’s operational knowledge. He disavowed any detailed knowledge of MBNZ’s other dealings with KTL, but acknowledged he had a long and friendly relationship with the Kingsbeers in which Mrs Kingsbeer in particular advised him of KTL’s progress in working for MBNZ over the years. He considered transfer of the additional Bay of Plenty runs to KTL put the Kingsbeers “in a big spot, things [were] happening”. While he did not discuss contract arrangements with them, he was present when Mr Millin proposed arrangements with Mr Kingsbeer additionally to compensate KTL for backhauls, which the previous contractor had built into its trip rates.

[67]Mr Sutherland denied being at any 2017 meeting with KTL:

I never agreed with [Andy] that we would pay KTL’s start-up costs for any of the new runs. I also did not make either of the assurances to KTL that Andy alleges. I did not make any verbal commitments or assurances to KTL regarding paying their start-up costs or that we would enter into a five-year contract, and I did not authorise Andy to do so. I did not deal directly with KTL regarding the Additional BOP Runs until I exchanged emails with Nicky Kingsbeer in mid-January 2018 after Andy had left.

Neither Mr Kingsbeer nor Mrs Kingsbeer contended for Mr Sutherland’s presence at any 2017 meetings.

[68]   Viewed objectively, I see nothing in the parties’ conduct prior to KTL’s commencement of the runs from which to infer their respective intentions immediately to be bound, less still to their agreement on essential terms, as pleaded. I take that commencement as the last point to determine if sufficient agreement had been reached, despite the Kingsbeers’ insistence such was established earlier.

[69]   First, if KTL was to undertake the additional Bay of Plenty and Taupō runs clearly remained in issue as late as 11 January 2018, when Mr Millin explained KTL’s proposed kilometre rate required to be reduced, the “necessary conversation” being an unsubtle reference to continue with Hall’s Group Ltd for the runs,15 as Mr Millin earlier had said remained his alternative.

[70]   Second, the contended term of the contract was driven by KTL’s intended long-term lease duration, which duration was sought by Mrs Kingsbeer, seemingly from her earlier investigations.16 Mr McGregor’s feedback, on Mrs Kingbeer’s query, was the contract term should at least match KTL’s lease commitments.17 Mr Millin’s ‘agreement’ “to sign a … five-year term contract” illustrates his comprehension KTL’s proposal was founded on that back-to-back foundation. The ICA was of a three-year term, although possibly renewed from a five-year term. The progressive iterations of the letter of intent illustrate MBNZ had made no commitment to the contract’s duration, but ultimately only to an intention it be “a multi-year (maximum five year) contract”, which maximum duration MBNZ expressly noted was KTL’s preference.18

15 See [13] above.

16 See [7] above.

17 See [16]–[17] above.

18 See [10], [14] and [20] above.

And — in correspondence with Mr McGregor, with express reference to the intended five-year leases — Mrs Kingsbeer understood MBNZ yet might offer a lesser term.19

[71]   Third, other than that five-year term, there was no evidence at all whatever TR Group or any other financier may have required as “suitable” for long-term leasing or other financing was communicated to MBNZ, still less that MBNZ accepted the contract would be provided in those terms. TR Group’s correspondence with KTL in evidence went no further than TR Group was waiting on “some paper information”, which it later explained as requiring KTL’s “financial information to be confident to make” its $500,000 or more investment in the new equipment required by KTL.

[72]   TR Group’s managing director, Andrew Carpenter, said in evidence-in-chief it needed proof its customer was “committed to a long-term contract and/or their business was in a financial position which satisfied us they could meet the costs for the duration of the lease”. Under cross-examination he explained his “and/or” meant ‘or/and’:

So there’s two tests here. One is the financial strength of the client all in their own right. So for example if a very large financially strong organisation came to us that would satisfy us. You know we wouldn’t necessarily go looking for, to further evidence of their affairs in order to be satisfied. However, if the financial position of the client or potential client is not strong enough to pass that test, then the conversation turns to more of the detail about why the vehicle is wanted and how it is that it is going to be sort of economic success for them, therefore also for us …

If that may have been provided by the terms of MBNZ’s contract for KTL alone is conjecture.

[73]   Fourth, neither is there any contemporaneous evidence MBNZ even indicated a draft contract would be provided within any particular time period. As Mr Millin explained, he did not know when the draft contract may become available.20 Rather, the six-week period may have been a consequence of Mrs Kingsbeer’s comprehension of lead times for TR Group’s provision of bespoke trucks  and  trailers  in  mid-March 2018, if ordered by late-January 2018 (a late 2017 construction slot having

19 See [16] above.

20 See [64] above.

been missed).21 Coincidentally or not, on 23 January 2018, TR Group offered to credit KTL with the difference between short-term rental and long-term lease expenses over the first six weeks, although referring only to that period being “a bit more” than the first month’s rental.22 But neither comprehension can be attributed to MBNZ, less still in any commitment on its part. At least from 10 January 2018, when Mr Millin indicated contractual information required to be provided “to Chicago”,23 KTL could not have thought provision of the draft contract was in local control.

[74]   Last, Mr Millin again was express, MBNZ’s payment of short-term expenses was for negotiation as they were incurred, but for recovery from KTL over the duration of the contract.24 It is unclear from the latter if Mr Millin contemplated some form of bridging finance. The illogic of Mr Millin’s indiscriminate consideration of KTL’s additional expenses incurred by short-term rentals for payment, and inevitable start-up expenses for recovery, indicates his further confusion. There is no evidence he was aware of TR Group’s preparedness to credit KTL, which may have made sense of MBNZ’s ‘recovery’; that preparedness was not in any event indicated by TR Group until well after Mr Millin says he discussed short-term expenses with the Kingsbeers.25

[75]   KTL clearly accepted — before commencing the additional runs, pending entry into a contract for some term — it may be incurring monthly rental expenses possibly exceeding revenue (and Mrs Kingsbeer, representing KTL was “in the final stages of signing up with TR Group”, told MBNZ that was “fine, we are looking at the bigger 5 year picture”).26 In reality, that excess became difficult for KTL financially to bear, as Mrs Kingsbeer indicated to MBNZ in seeking FAF and additional expense payments be made urgently to avoid banking complications.27 Nonetheless, in that correspondence, Mrs Kingsbeer did not outright contend for MBNZ’s prior agreement to pay its additional expenses in sum — even on amending the spreadsheet attached to her 21 March 2018 email to Mr Bavister, to include those additional expenses in

21 See [7] above.

22 TR Group also referred to KTL taking the rental equipment on a one-month “trial”, possibly suggesting KTL’s commitment to any longer term. But that perception cannot be attributed to KTL, Mrs Kingsbeer being clear ‘trial’ could only mean month-by-month rentals.

23 See [13] above.

24 See [63] above.

25 See [23] above.

26 See [18] above.

27 See [33], [41] and [43] above.

putting KTL’s claim for payment on 28 March 201828 — ‘trusting’ instead KTL would be reimbursed for the additional expenses.29

[76]   Mrs Kingsbeer noted to Mr Bavister KTL incurring additional expenses was “a temporary solution”,30 and “this set up was never intended to go for this long”.31 She said in evidence KTL could not maintain the position “indefinitely”. By mid-April 2018, Mr McGregor observed to Mrs Kingsbeer “you cannot carry these additional operating costs and as your accountant [I] am concerned as this [is] an ongoing unresolved situation”.32 But, despite not being involved in any prior discussion between Mr Millin and the Kingsbeers, Mr McGregor then directly asserted to MBNZ its agreement “the  costs  would  be  met  by  Martin  Brower”,33  which Mr Sutherland promptly rejected.34 Thereafter, Mrs Kingsbeer continued to articulate the problem as “the unbudgeted above contractual expenses we have endured due to no contract, it is becoming financially unviable”.35 Mr McGregor, too, reverted to “[i]n the present set up my client is incurring additional costs but with a longer term contract this can be corrected”.36 Only in the wake of Mr Kingsbeer’s 2 June 2018 incident did Mrs Kingsbeer ultimately stipulate to MBNZ “Andy assured us … any extra costs outside of our agreement were to be reimbursed”.37

[77]   Having heard the witnesses directly over a period of days, my assessment is the Kingsbeers have sought to rationalise KTL’s circumstances in hindsight, and adopted immutable beliefs as to how they came to pass. I do not ascribe to the Kingsbeers any dishonesty in doing so; rather, both appear to base their comprehension of what occurred on ‘mantra’ — as I have noted, in relation to the three

28 See [25] above. It was argued for MBNZ Mrs Kingsbeer also had amended the text of her 21 March 2018 email describing Mr Millin’s commitment from “would and should” to omit ‘should’ in its 28 March 2018 resending. That is not correct: the amendment is from her draft to Mr McGregor to the 21 March 2018 email; ‘should’ is omitted from both the 21 and 28 March 2018 emails.

29 See [26] above.

30 See [26] above.

31 See [37] above.

32 See [28] above.

33 See [29] above.

34 See [30] above.

35 See [31] above.

36 See [32] above.

37 See [37] above.

to six weeks for MBNZ’s provision of the draft contract,38 but also for a five-year term and with payment of short-term expenses — repeated as gospel. Neither do I overlook the Kingsbeers’ desire to escape the competitive stresses of their previous transport business for MBNZ’s monopsony. But clearly the actual circumstances of their continuing and expanded work for MBNZ gave rise to unexpected and on-going financial and personal stresses for the Kingsbeers,39 which may have exacerbated their rationalisations.

[78]   Ultimately, in my assessment, KTL commenced its provision of the additional runs for MBNZ without any certainty as to the longer-term conditions for that work, in reliance on its knowledge of MBNZ’s general requirements for the conduct of and payment for such work and its generally constructive experience with MBNZ since 2011 (which included, “[e]ven when KTL had not received a contract before starting delivery runs in the past, it was always sorted out”).40 It provided those services in the expectation it would be paid at its specified rates, as occurred, and in the hope its additional expenses would not — either in sum, or by reason of MBNZ’s contribution to  them  —  be  beyond  KTL’s   ability  to  bear,   pending  MBNZ’s   provision  of  a longer-term contract. In the end, that also is what happened, although by that time the Kingsbeers had moved from their original reliance.

[79]   Finally, as to the pleaded alternative implied term, it is unclear why “[MBNZ] would provide [KTL] with the Written Contract suitable to enter into long-term leases and/or obtain finance on within a reasonable time” is pleaded as an alternative to [52](d) above’s “[t]he Written Contract would be provided within six weeks of the Commencement Date”. Presumably the pleading means as an alternative also to [52](c) above’s “[MBNZ] would provide [KTL] with the Written Contract suitable to enter long-term leases for the Plant and/or obtain finance on”. If including the latter (as it must), the conjecture inherent in the implication’s content as I have explained at [71]–[72] above illustrates it disqualifyingly is not capable of clear expression.

38 See [59] above.

39 See [37] and [44] above.

40 See [31] and [58] above.

[80]   In any event, KTL’s first cause of action is contingent on me inferring from the parties’ conduct sufficient agreement has been reached between them, which I have not, rather than I should supply terms to reinforce that sufficiency.41 Given that failure, I need not to, and do not, contemplate if MBNZ nonetheless may be said in breach of KTL’s pleaded essential terms for contract provision and short-term expenses’ payment, or any resultant quantification of lost profits. Such is to pile conjecture on conjecture. But it should not go without mention MBNZ provided a draft five-year contract,42  and paid short-term expenses,43  to KTL. Whether  that was provision at   a reasonable time, or payment of all payable, is not now for determination under this first cause. The pleaded essential terms also omit any obligation on KTL to perform work for MBNZ, which might be thought fatal to the pleaded terms’ contended essentiality.

[81]   There was a minor diversion in the evidence, if KTL had in any event met the letter of intent’s “contractor capability requirements” so as to be eligible to contract with MBNZ. The issue was if KTL  had  executed  all  the  requisite  documents.  Mrs Kingsbeer was certain it had, as she had provided signed originals to Ms Thomas when they met on 24 January 2018.44 MBNZ’s record-keeping may have been incomplete, as is suggested by the unavailability in evidence of any 2016 ICA executed on its behalf. But KTL raised an alternative argument: Mr Millin’s text message waived that capability requirement for them.45 That is not a credible interpretation of the text message, which more readily reads as Mr Millin’s assurance to KTL they were so capable (which also was Mr Millin’s evidence). The argument for waiver is another example of the Kingsbeers’ rationalisation:46 here, of KTL’s unconditional entitlement to enter the proffered contract, to give certainty to its first pleaded express terms

41 Fletcher Challenge Energy Ltd v Electricity Corp of New Zealand Ltd, above n 8, at [58], citing Hillas (WN) & Co Ltd v Arcos Ltd (1932) 147 LT 503 (HL); R & J Dempster Ltd v Motherwell Bridge and Engineering Co Ltd 1964 SC 308 (ScotIH); and Attorney-General v Barker Bros Ltd [1976] 2 NZLR 495 (CA); and approving Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27, (2000) 22 WAR 101 at 132–133.

42 See [39] and [42] above.

43 See [41]–[42] and [47] above.

44 See [24] above. Mrs Kingsbeer said in evidence she had not been able earlier to provide the documents electronically to MBNZ because the Kingsbeers’ scanner was not working.

45 See [15] above.

46 See [77] above.

“[KTL] would undertake the BOP Additional Runs for [MBNZ] … for a term of five years”.47

[82]KTL’s first cause of action fails.

KTL’s second cause of action — repudiation of contract

[83]   Given I have found no sufficient agreement to have been reached between the parties to establish a contract between them, there can be no question of MBNZ’s repudiation of its essential terms. But I repeat, MBNZ provided a draft five-year contract, and paid short-term expenses, to KTL. Again, if provision at a reasonable time, or payment of all payable, is not now for determination under this second cause either.

[84]KTL’s second cause of action fails.

KTL’s third and fourth causes of action — equitable estoppel/misleading and deceptive conduct

[85]   Under its third and fourth causes of action, KTL pleads, by entering into short-term leases and commencing the additional Bay of Plenty and Taupō runs, it relied to its detriment on MBNZ’s representations (also as misleading and deceptive in terms of the Fair Trading Act) otherwise broadly in terms of the pleaded Agreement. KTL’s pleading particularises that reliance as including it entered into the short-term leases and commenced the additional runs “with the expectation that the contract would run for five years”, presumably to support its claim for lost profits.

[86]   For all the reasons I have expressed in relation to KTL’s first cause of action,48 I do not find any representation by MBNZ in those terms. I add, for Mr Millin’s statements to be attributed to MBNZ, MBNZ must have held him out as having authority to bind it.49 Nothing in his role as New Zealand distribution manager

47 See [52](a) above.

48 See [69]–[76] above.

49  Bishop Warden Property Holdings Ltd v Autumn Tree Ltd [2018] NZCA 285, [2018] 3 NZLR 809 at [30], citing Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] QB 480 (CA), Lysaght Bros & Co v Falk (1905) 2 CLR 421 at 427 and Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 205.

inherently carried that authority. He witnessed the Kingsbeers’ execution of their 2016 contract (the copy in evidence not being executed by MBNZ at all),50 suggesting he lacked authority to execute it or similar for MBNZ. And the letter of intent only identified him as MBNZ’s “main point of contact” for MBNZ, to clarify questions.51 None is sufficient to convey any sense he carried MBNZ’s authority to commit MBNZ in the terms pleaded.52

[87]   I therefore do not address MBNZ’s contentions, by reason of particular of KTL’s contended ‘unconscionable’ conduct,53 KTL lacked ‘clean hands’ to claim equitable relief.54 Had I to do so, I should have found none of the particularised conduct to be so disqualifying, but in the circumstances of the relationship between KTL and MBNZ — absent any good faith or like obligation — commercially acceptable non-disclosures.55

[88]KTL’s third and fourth causes of action also fail.

MBNZ’s affirmative defences — KTL’s failure to mitigate

[89]   Given failure of KTL’s first four causes of action, I do not address MBNZ’s affirmative defences to them KTL failed to mitigate its losses. Had I to do so, I should have found KTL’s disposal of the means of conducting its business was as available  a reasonable step to be taken in mitigation,56 in light of all the circumstances (including KTL’s own interests),57 as continuing otherwise in business.

50 See [81] above.

51 See [10] above.

52     The context and scope of MBNZ’s approval code matrix, identifying Mr Millin had authority to

$200,000, was unclear, but in any event not known to Mr Millin or, more particularly, to KTL.

53   For example, not disclosing its apprehension MBNZ’s trip rates may have erred (see [16] above  at n 2); not disclosing TR Group’s credit (see [23] and [73]–[74] above); not highlighting changes to KTL’s claimed additional expenses (see [75] above at n 28); and not notifying MBNZ of its suspicions as to invoice 131’s intended payment (see [45] above).

54 National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 (CA).

55 Such countervailing power tends against any suggestion the parties’ economic disparity entitled KTL to relief on that ground alone.

56 Lander v Sorensen [1955] NZLR 219 (CA) at 228.

57 Wu v Body Corporate 366611 [2014] NZSC 137, [2015] 1 NZLR 215 at [141]; and Hooker v Stewart [1989] 3 NZLR 543 (CA) at 547.

KTL’s fifth cause of action — breach of collateral agreement

[90]   Under its fifth cause of action, KTL alternatively pleads a collateral agreement, under which, in consideration of KTL carrying out the additional runs, MBNZ would pay its short-term expenses until entry into the “Written Contract”. But the contended collateral agreement otherwise is founded on the same terms as the principal Agreement, for MBNZ to provide a ‘suitable’ contract within a ‘reasonable’ time. Particularly given my conclusion in dismissing KTL’s first cause of action,58 and my reasons for doing so,59 I also do not find any such collateral agreement sufficiently established.

[91]KTL’s fifth cause of action fails.

KTL’s sixth cause of action — quantum meruit

[92]   KTL’s last alternative cause of action claims reimbursement of its expenses in acquiring “the Plant” as quantum meruit. The pleading introduces some confusion in its nomenclature here, as it describes such expenses as “Short-Term Costs”, which the pleading earlier defines as those expenses incurred on short-term leases, while ‘Plant’ more broadly is defined as any leased equipment.60

[93]   KTL’s invoices 131, 134, 135 and 136 for additional February to May 2018 expenses together amounted to $77,420.93 plus GST. Of that sum, invoice 131 in the amount of $34,541.40 plus GST was paid by MBNZ, leaving $42,879.53 plus GST outstanding on invoices 134–136.

[94]   Paul Manning, an expert accountant engaged for KTL, reduced recoverable costs claimed under invoices 134–136 to $42,122.05 plus GST. He endorsed further KTL expenses in the amount of $33,686.47 plus GST (which may or may not have included some of the disputed items omitted from invoice 131). Together, those amounts comprise KTL’s $75,808.52 plus GST quantum meruit claim.

58 See [78] above.

59 See [69]–[76] above.

60 See [51] above.

[95]   Mike Rowe, an expert accountant engaged for MBNZ, observed invoice 134 sought to recover some of the disputed items from invoice 131; invoice 135 sought to recover nominal expenses KTL previously indicated it did not charge; and invoice 136 sought to recover further expenses for June 2018 in the nature of those addressed in the February–May 2018 invoices. He would exclude items on a variety of grounds generally contended as unreasonable to reduce the invoices to $11,430 plus GST, and the further KTL expenses to $4,311 plus GST, together being $15,741 plus GST.

—applicable law

[96]   That KTL has issued invoices on a wrongly-contended contractual basis does not preclude it from recovering in quantum meruit. The question is if the amount charged is reasonable for the services rendered.61 The Supreme Court has noted:62

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 in Pavey & Matthews Pty Ltd v Paul (1987) 161 CLR 221; United Australia Ltd v Barclays Bank Ltd [1941] AC 1 (HL); and Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (HL). 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: see Harrison v Franich [2007] NZCA 538 at [32]; and Benedetti v Sawiris [[2013] UKSC 50, [2013] 3 WLR 351] at [17] per Lord Clarke, Lord Kerr and Lord Wilson.

[97]This Court also has explained:63

Quantum meruit is the generic term used to identify a right to reasonable remuneration for goods supplied or services rendered; the same expression is used irrespective of whether the right to remuneration is an incident attached by implication to a contractual relationship or whether it arises independently of contract in one of the assortment of situations which are classified, for lack of a better term, as quasi contractual. This indiscriminate use of the expression can lead to confusion.

The contractual kind of quantum meruit is no more than the effect of the implication which the law makes when there is a contract for the supply of goods or services which the parties intend shall be paid for by the recipient but in respect of which the contract does not fix the quantum of remuneration: in such a case, there is implied a term that the remuneration will be a

61     Nicholls v Airways Corp of New Zealand Ltd [2012] NZCA 444 at [32].

62     Worldwide NZ LLC v NZ Venue and Event Management Ltd [2014] NZSC 108, [2015] 1 NZLR 1 at [27], n 24.

63     Seton Contracting Co Ltd v Attorney-General [1982] 2 NZLR 368 (HC) at 376–377.

reasonable sum. The quasi contractual species of quantum meruit embraces a number of situations which share, as do all quasi contractual situations, a common denominator: they all seem to be traceable to the concept of restitution or undue enrichment. They are a heterogeneous collection, all with respectable and recognised legal credentials. But none of them can be fitted into the dichotomy of tort and contract. What has to be borne in mind is that, by definition, these are all cases in which there is no contractual basis for the plaintiff’s claim. If, in relation to the relevant subject matter, there is a valid and enforceable contract in force between the parties, then the contract and only the contract can speak: the rights and liabilities of the parties are regulated only by the contract: there is no room for quasi contractual rights.

[98]   But it is “not consistent with the nature of quantum meruit [for KTL] effectively to determine the amount [MBNZ] should pay”.64 Thus — if KTL rendered extra-contractual services, benefiting MBNZ — the question is what amount is ‘reasonable’, rather than what amount was invoiced.

—discussion

[99]   Mr Millin’s expectation,65 and Mrs Kingsbeer’s ‘trust’,66 MBNZ would agree short-term expenses for reimbursement  to  KTL  was  made  out  in  practice. Invoice 131’s substitution for the February–May 2018 invoices 108, 109, 116 and 123 illustrates the outcome of that negotiation.67 In settling invoice 131, Mrs Kingsbeer advised “I have credited the original invoices and raised one invoice for the agreed items”.68 There was no express reservation of the balance.69 Thus the inference effectively is of the parties’ agreement, leaving ‘no room’ to revisit the balance of the earlier invoices on a quantum meruit basis. The services to which invoice 134 refers therefore are not recoverable by quantum meruit.

[100]   So far as invoice 135 is concerned, I view KTL’s explicit assertion to MBNZ it did not charge for those services as disqualifying any attempt now to do so. And I do not know how the parties may have agreed remuneration for the services referred to in invoice 136 for June 2018, even if consistently with the approach embodied in invoice 131, or for those services claimed as further expenses. I have some doubts if,

64     Harrison v Franich [2007] NZCA 538 at [32].

65 See [63] above.

66 See [26] and [75] above.

67 See [25] and [42] above.

68 See [41] above.

69     Mrs Kingsbeer requested MBNZ’s “detailed breakdown of this claim, highlighting what additional expenses you are paying”, but without suggesting KTL sought a second bite: see [40] above.

given the parties’ effective agreement to negotiate reimbursement of short-term expenses, a claim in quantum meruit may stand here either.

[101]   Nonetheless, as the parties have not to my knowledge negotiated either invoice 136 or the further expenses claim between them, I propose to address those claims in a supplementary judgment after advice of the result of the parties’ negotiation of them. I accept in principle MBNZ is not entitled to the benefit of KTL’s effort (including expenditure) on its behalf without a concomitant obligation to pay reasonable compensation for it. But MBNZ has paid KTL on invoice for its delivery services.

[102]   KTL’s quantum meruit claims in respect of invoices 134 and 135 fail. Its claims in relation to invoice 136 and the further expenses claim will be reserved for supplementary judgment.

MBNZ’s first counterclaim — breach of contract

[103]   Under this first counterclaim, MBNZ contends KTL contractually was required to give it 12 weeks’ notice of cessation of the Bay of Plenty and Taupō runs, either expressly in terms of the letter of intent’s incorporation of or reference to the ICA between the parties, or as reasonable notice.

—applicable law

[104]   Again, the issue turns first on if the parties can be thought in ‘sufficient agreement’.70 If a requirement of reasonable notice then is to be implied depends on “the circumstances existing when the contract is made”, the length of such notice being that “deemed to be reasonable in the light of the circumstances in which the notice is given”:71

That does not mean that the reasonable time is the time during which one party or the other could reasonably wish for the contract to continue. It is unlikely that when the notice is given the parties could agree on that. The reasons which moved one party to desire a long notice would move the other to desire a short one. The implication of reasonable notice is intended to serve only the common purpose of the parties. Whether there need be any notice at all, and,

70 See [54] above.

71     Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [2007] 3 NZLR 169 at [4], citing Australian Blue Metal Ltd v Hughes [1963] AC 74 (PC) at 99.

if so, the common purpose for which it is required, are matters to be determined as at the date of the contract; the reasonable time for the fulfilment of the purpose is a matter to be determined as at the date of the notice. The common purpose is frequently derived from the desire that both parties may be expected to have to cushion themselves against sudden change, giving themselves time to make alternative arrangements of a sort similar to those which are being terminated.

The Supreme Court cautioned the Privy Council’s reference to common purpose “should not be read as if it appeared in a statute” but in context.

—discussion

[105]   Mr Sutherland’s observation in the letter of intent — “the additional routes are to fall under the current Contractor Agreement expiring 31 January 2019 in the interim” — is of uncertain genesis.72 It is not acceptance of anything proffered by KTL, Mrs Kingsbeer previously indicating the letter of intent in any form would be inadequate on its own to secure long-term leases from TR Group.73 Neither can it be said an offer accepted by KTL, Mrs Kingsbeer only noting Mr Sutherland’s ‘explanation’ of the ICA’s extension to include the additional runs.74 Although her acknowledgement is in the context of her representing interim terms to TR Group, which might otherwise constitute a concession the ICA applied, that was only to secure the month-to-month rental equipment. KTL should not be taken to have committed to any more onerous terms than were required for that purpose. Last, if the ICA formally was so to be extended, its first or second schedules required executed acceptance in writing,75 which had not occurred.

[106]   Particularly in the face of that requirement, KTL’s commencement of the additional runs, invoicing consistently with its ICA practice in terms of the additional runs’ rate schedule accepted by MBNZ, inferentially only objectively establishes the parties’ agreement for KTL’s conduct of the additional runs for reimbursement at those rates, as occurred. There is no express foundation on which MBNZ may claim entitlement to 12 weeks’ notice. In my assessment, the only objectively agreed foundation for the letter of intent was to give substance to KTL’s intention to lease

72 See [19]–[20] above.

73 See [18] and [22] above.

74 See [22] above.

75 See [4] above.

equipment over a longer term. Had I concluded the parties objectively agreed the additional runs were informally to engage the ICA, its first schedule’s “[a]dditional deliveries within or outside the dedicated run schedules may be required from time to time as requested” enabled such extension without requirement for more formality.

[107]   But, without any certain or ascertainable end to the runs,76 neither can there be any sensible contention the parties have contracted to each other in perpetuity. Nor, especially given the Supreme Court’s caution, is the ICA’s 12 weeks’ notice informative of what may be reasonable notice. Given McDonald’s outlets’ reliance on MBNZ’s provision of supplies, and KTL’s commitment to month-by-month short-term rentals by which to do so, reasonable notice would be such as is sufficient for MBNZ to substitute KTL’s services within KTL’s continuing rental duration; that is, reasonable to both parties.

[108]   For example, notice four weeks prior to month-end might suffice; one day prior is unlikely to do so. If MBZN required longer than one month to substitute KTL’s  services, reasonable notice would extend to the end of the subsequent month, aligning with KTL’s rental commitment. In fact, MBNZ substituted KTL’s services within the eight days’ notice given to the month’s end, if at a higher rate than charged by KTL, also while taking advantage of internal resources to avoid some of those expenses. But reasonable notice is not in any event to require the notifier’s indemnity of the notified. In the particular circumstances here, KTL’s notice to MBNZ was reasonable.

[109]MBNZ’s first counterclaim fails.

MBNZ’s second counterclaim — unjust enrichment

[110]   MBNZ’s second counterclaim is contingent on KTL succeeding on any of its first to fourth causes of action. As KTL has not, this counterclaim is redundant.

Result

[111]KTL’s first to fifth causes of action are dismissed.

76     Ward Equipment Ltd v Preston [2017] NZCA 444, [2018] NZCCLR 15 at [31]–[57]; and

Power Co Ltd v Gore District Council [1997] 1 NZLR 537 (CA) at 551.

[112]   I reserve KTL’s sixth cause of action for determination after the parties’ advice of their negotiations in relation to KTL’s invoice 136 and its further expenses claim.

[113]MBNZ’s counterclaims are dismissed.

Costs

[114]I reserve costs until after determination of KTL’s sixth cause of action.

Next steps

[115]   I  direct  the  parties  to  file  (desirably,  joint)  memoranda  by  Monday,  31 January 2022, advising of the result of the negotiations (not of their course),77 and if my supplementary judgment remains required. If so, I then will issue it.

Comment

[116]   During trial, faced with a raft of proposed reply briefs for KTL witnesses — intended to be read after completion of their primary evidence, but before I had heard the evidence to which they sought to reply — I directed witnesses may be recalled after conclusion of MBNZ’s evidence, to give any evidence in reply as may then be required. But I observed matters now sought to be addressed in reply first should be raised where possible in cross-examination of MBNZ’s witnesses, for any outstanding evidence in reply desirably to be led, not read. I said this judgment would include comment on reply evidence. In the event, the reply evidence ultimately tendered was relatively constrained. I therefore only draw attention to my observations elsewhere.78

—Jagose J

77 See [101] above.

78     SCC (NZ) Ltd v Samsung Electronic New Zealand Ltd [2018] NZHC 2780 at [204]–[207].