Newland Burling No. 10 Limited v JJ Niven Engineering Limited
[2016] NZHC 2590
•1 November 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-000187 [2016] NZHC 2590
BETWEEN NEWLAND BURLING NO.10 LIMITED
Plaintiff
AND
JJ NIVEN ENGINEERING LIMITED Respondent
Hearing: 28 April 2016 Appearances:
D J G Cox for the Applicant
M Leggat for the RespondentJudgment:
1 November 2016
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 1 November 2016 at 9.30 a.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Rennie Cox, Auckland
M Leggat, Wellington
NEWLAND BURLING NO.10 LTD v JJ NIVEN ENGINEERING LTD [2016] NZHC 2590 [1 November 2016]
Introduction
[1] Newland Burling No 10 Limited applies for an order under s 290 of the Companies Act 1993 to set aside a statutory demand made against it by JJ Niven Limited.
[2] JJ Niven opposes the application.
[3] The demand, served on Newland Burling on 22 January 2016, arises out of the parties’ dealings over the repair and certification of three cranes at premises acquired by Newland Burling in Levin. The total sum demanded is $107,026 for four unpaid invoices amounting to $92,350.18, plus the balance claimed for interest and costs under JJ Niven’s general terms of contract for late payment.
[4] Details of the four invoices are as follows:
(a) Invoice 43557 for $2,061.84 dated 13 February 2015 for the manufacture and installation of bracing as per Opus sketches;
(b)Invoice 43791 for $57,018.84 dated 31 March 2015 for repairs, inspections and certification of three gantry cranes;
(c) Invoice 43792 for $19,837.50 dated 31 March 2015 for crane loading assessment and modifications to buildings; and
(d)Invoice 43910 for $13,432.00 dated 30 April 2015 for structural repair of corroded columns. 1
[5] The invoices relate primarily to work done in early 2015 by JJ Niven, a mechanical engineering company with particular expertise in the repair of cranes. It carried out substantial repairs and refurbishment on three old gantry cranes (all around 40 years old and in various states of disuse) located at Newland Burling’s
Levin premises. It also carried out associated works to strengthen the building on
1 All figures referred to in this judgment are inclusive of GST unless indicated otherwise.
the premises where the cranes are housed. Most of these works were needed to obtain certification for the cranes which was needed before they could be put to use in accordance with the relevant regulatory requirements.
[6] Of the total amount of $109,414.34 that JJ Niven invoiced for the work, Newland Burling has paid only a deposit of $17,064.16 on invoices 43791 and
43792 for the work on the cranes.
[7] Newland Burling has the onus. It says that in terms of s 290, there is a substantial dispute whether or not the invoiced sums are owing; and that it has a fairly arguable counterclaim for an amount that exceeds the amount that is claimed in the demand as owing.
[8] In its application grounds, Newland Burling gives reasons for claiming that a substantial dispute exists over the balance as stated in the invoices, that are essentially threefold:
(a) The charges in the four invoices are excessive for the work completed.
(b)It was given and accepted an “initial quote” that was “to complete repairs and certification inspections and works to three gantry cranes as required”. The quote was given on 11 November 2011 and it was for $54,840.2 The amount was varied downwards on 14 November
2014 to $43,340.3
(c) This “initial quote” was negligently prepared, as it did not include all works required to bring the gantry cranes up to a certifiable standard as directed. Newland Burling relied on it in negotiating the terms of the lease for the Levin premises to its tenant, Fletcher Steel Limited. It entered into the lease on 24 November 2014 only to find later that it did not in fact cover all such works. The result was that Newland Burling lost the opportunity to recover the additional cost of repair
and certification from Fletcher Steel.
2 $47,687 plus GST.
3 $37,687 plus GST.
[9] The second of the application grounds, relating to an alleged counterclaim, is based on the same broad factual allegations.
[10] It is common ground that if Newland Burling discharges the onus, it is entitled to have the statutory demand set aside so that the dispute can be dealt with by arbitration pursuant to JJ Niven’s standard conditions of contract, or litigated as a disputed matter in the usual way.
Newland Burling’s Position
[11] Newland Burling’s managing director, Mr Carl Burling, has set out in his affidavit evidence what he describes as the “main thrust” of the argument as to why Newland Burling considers it should not have to pay the balance and why it has a counterclaim that significantly exceeds the balance.
[12] Mr Burling relies upon two figures that were provided to him by email in November, being $54,840 and a reduced figure of $43,340. The first was given on the 11th when JJ Niven wrote to “…provide an update of the costs required to allow certification of these gantry cranes ...”. It included a small amount for work already carried out on one of the cranes ($1,232.80) plus the balance comprising “budget pricing” for other specified items relating to the servicing, repair and certification of the three cranes. The second was given on the 14th when JJ Niven wrote again, and advised that “…we consider that a saving of $10,000 + GST has been achieved”.
[13] Mr Burling says the advice of 11th and 14th November was given in response to his request for JJ Niven “to provide an accurate costing (whether it is called a quotation or estimate) to get all three of the cranes operational and certified”. He says that he had been asking JJ Niven’s maintenance engineer, Mr Shane Fergus, since September “for the costing on a worst case scenario”. He did this because Newland Burling needed to finalise the terms of the lease with Fletcher Steel. To do that he needed to know “as best as could possibly be estimated the costs of bringing the cranes up to operational and certified standard”.
[14] He contends that Mr Fergus made a “fundamental error” in not involving a crane certifier at the outset when preparing JJ Niven’s costings, and in overlooking that the certifier would be the person to ultimately determine what work was required to ensure that the cranes would be safe and suitable for certification. He argues that making such a determination necessarily:
… involved a close examination of the cranes themselves, whether the rails would be able to hold up each crane; whether structure on which each crane was attached was sufficiently strong, and whether the hoists would be able to hold the wire rope. Essentially everything had to be tested from scratch, for example the cranes themselves had to be completely ground back to the steel so that the wells could be checked by the certifier. Without having involved the certifier from the outset, Nivens did not, and I believe could not have anticipated all the costs of the certification process. … The scope of works requirement for certification of these old cranes [was] clearly driven by the certifier (here, SGS, not Nivens).
[15] Mr Burling (himself a certified engineer) contends that he asked Mr Fergus to give his best estimate of the timeframe to complete the works, as that would dictate the commencement date for the lease. Additionally, he contends that the costing he asked for was to be “an all-inclusive estimate” so as to include all of the costs to achieve certification of the three cranes, but that “ultimately we learned that it did not”. He maintains that “the real cost of the works required to the cranes, the building supporting the cranes and the crane rails was $131,098.63”. He says this was made up of work undertaken by JJ Niven and consulting engineers, Silvester Clark, as follows:
(a) Crane repairs - $74,083 (Nivens);
(b) Repairs to the rails – $19,838 (Nivens);
(c) Repairs to the columns - $13,432 (Nivens).
(d) Consulting engineers - $23,745.63 (Silvester Clark).
[16] Mr Burling contends that to these sums there should be added extra costs relating to the loss of rental; the loss of “my wasted time” ($5,000) and legal costs
($14,000). All of this, he says, makes a total of $173,098.63, against JJ Niven’s
November 2014 reduced pricing of $43,340 of 11 November.4
[17] Mr Burling points out that Mr Fergus acknowledges that “Mr Burling was attempting to obtain fixed prices to get the cranes operational and certified”. He says this is exactly what he was looking for and asked Mr Fergus for. Mr Burling also maintains that:
At no stage did Mr Fergus tell me that he could not give a costing to achieve operational and certified status for the cranes. If he had done so, we would have engaged another expert to see if a reliable costing could be obtained.
I reiterate that in my discussions with Mr Fergus regarding the costing, I requested his “worst scenario costing”, as we needed to work from the worst scenario in our negotiations with Fletchers. If he had been unable to provide an accurate costing, then he should have told me.
[18] Mr Burling further contends that:
At no stage did Mr Fergus ever suggest to me that there would be costs involved in checking and upgrading the building structure that the cranes were attached to, and indeed pulling apart the cranes to check the weldings, as proved to be the case.
[19] Newland Burling has also provided an affidavit from a Mr Erasmus, a registered engineer surveyor with 14 years’ experience in the certification of cranes, to rebut JJ Niven’s contention that it would be unusual in a project to re-certify a crane for which certification has lapsed to engage the certifier before necessary repair work had been carried out. Mr Erasmus’s opinion is that the only way for JJ Niven or any other crane repair company to provide “an accurate estimate of costings” to have the particular cranes made operational and certified would be to engage a certification company “such as SGS” or Bureau Veritas, the company he is employed by, at the outset of the costing process.
[20] JJ Niven says that there are serious flaws in Mr Burling’s line of argument. It says prior to 11 and 14 November it made very clear in correspondence that it could
not provide a fixed price or accurate costings to get the cranes operational and up to
4 Omitted from these additions is any mention of $2,061.84 for work charged for in the first invoice, invoice 43557.
a certified standard. Further it says there was no contractual arrangement for the repair and certification work until after the lease was entered into with Fletcher Steel. It points out that it was not until 10 December that Newland Burling responded to the 11 and 14 November emails, when Mr Burling gave the instruction “go ahead”. JJ Niven submits that instruction could only have been given with the full knowledge of the limitations and qualifications set out in the earlier advice.
[21] I am satisfied that JJ Niven is right and that Newland Burling’s case must fail. Before turning to my reasons I pause to make brief reference to the legal principles that govern applications of the present kind.5
Law
[22] Applications to set aside statutory demands are governed by s 290 Companies
Act 1993. Section 290(4) states:
(4) The court may grant an application to set aside a statutory demand if it is satisfied that—
(a) there is a substantial dispute whether or not the debt is owing or
is due; or
(b) the company appears to have a counterclaim, set-off, or cross- demand and the amount specified in the demand less the
amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c) the demand ought to be set aside on other grounds.
[23] The applicant in this case relies on the first two grounds.
[24] The principles applying to statutory demand applications are well- established. They were summarised in Risk Management Holdings v Fuji Xerox by Lang J, and they apply as follows:6
(a) In respect of the claims that the debts are disputed, the applicants must establish there is a genuine and substantial dispute as to the
existence of the claimed debts. The mere assertion that a dispute
5 Zurich Australian Insurance Ltd t/a Zurich New Zealand v Cognition Education Ltd [2014] NZSC 188,[2015] 1 NZLR 383 at [52].
6 Risk Management Holdings v Fuji Xerox Finance Limited HC Auckland CIV-2007-404-6908, 22
May 2008, at [22]-[23].
exists is not enough; some material, though not proof, is required to support the claim that debts are disputed.
(b)In respect of the counter-claim issue, the applicants must establish that there is a reasonably arguable counterclaim or cross-demand; it will also be necessary to provide some material falling short of proof to support the existence of a counter-claim.
(c) It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, especially when issues of credibility arise. As such, neither the dispute over the debt nor the counter-claim is to be finally resolved in this proceeding.
(d)Even if these requirements are made out, there remains a discretion under s 290(1) not to set aside the statutory demand, though it is only rarely exercised.7
[25] The Court is not required to delve deeply into the evidence on an application such as this; the dispute or counter-claim need only be arguable. The threshold for detailed argument to set aside a statutory demand is low. See Industrial Group Ltd v Bakker, where the Court of Appeal observed:8
... the statutory scheme ... for application to set aside statutory demands [is] a summary proceeding ... The section calls for a prompt judgement as to whether or not there is a substantial dispute. The test may be compared with the principles in cognate fields such as applications to remove caveats [and], leave to appeal an arbitrator’s award ... The tight time constraints distinguish a s 290 discretion from that say exercised on say, a summary judgment application, where the presence of complex legal issues is not necessarily a bar to a remedy. As with leave to appeal an arbitrator’s award, the hearing should, in the normal course be short and to the point.
[26] I bear these comments in mind. As I have previously said in Takanini Central Residential Ltd v Terra Group NZ Limited,9 it is important that this Court does not overstep its role in this proceeding by attempting to determine disputed
issues of fact. It will be sufficient if the party upon which the statutory demand is
7 Alfex Doors and Windows Ltd v Alutech Windows and Doors Ltd (2001) 16 PRNZ 963 (CA).
8 Industrial Group Ltd v Bakker [2011] NZCA 142 at [24], [25].
9 Takanini Central Residential Ltd v Terra Group NZ Limited [2016] NZHC 478 at [34].
made is able to cast doubt on a proportion of the debt in order to have the demand set aside in whole or in part.
[27] But equally when debts are disputed, it is usually because the parties cannot agree whether there is a debt or how much is actually owed. The affidavit evidence will usually indicate a dispute regarding important facts in the matter. And though the Court is reluctant to make critical decisions, it is not required to accept every claim of a disputed fact without scrutiny. The claims must pass the threshold of credibility and evidence that is inconsistent with incontrovertible facts or is inherently improbable will not be supportive of such claims.
Assessment
[28] I turn then to the grounds for the application and my reasons for rejecting them. I put aside momentarily the first of these grounds: that the charges in the four invoices are excessive for the work completed. I begin with the second ground that there was an initial quote and that Newland Burling accepted it.
Do the letters of 11 and 14 November contain an “initial quote” for all of the work
needed to achieve certification for the three cranes?
[29] This ground, as set out in the application, turns on the advice JJ Niven gave by email on 11 and 14 November 2014 and appears to put in issue whether it is arguable that the emails are properly construed as providing a fixed price quote for all work to achieve certification of the cranes, and therefore whether Newland Burling’s response of 10 December amounted to acceptance of a fixed price quote. At the hearing it was not pursued with any sense of conviction and it can be dealt with in short order.
[30] Relevant, for the purpose of providing context for this and the other application grounds, are the parties’ dealings in the preceding weeks before
11 November, about which there is no material controversy. Also relevant are the regulatory requirements for the certification of gantry cranes. I pause therefore (before turning to the emails of 11 and 14 November, and the response of
10 December) to refer to these matters, dealing first with the regulatory requirements.
[31] Gantry cranes are required to be certified for use by an approved inspection body. They must be “design verified” by such a body in accordance with the PECPR Regulations and Parts 2 and 6 of the Approved Code of Practice for Cranes before they can be certified.10 A supplier or controller of a gantry crane must provide various documents to the inspection body carrying out the design verification and equipment inspection. Certification is a matter for the judgment of the inspection
body. In this case it was SBS New Zealand Limited that was the inspection body.
[32] The parties’ dealings over the issue of repair and certification of Newland Burling’s cranes began in September 2014. JJ Niven undertook preliminary servicing on one of the cranes at Newland Burling’s request and on 15 September
2014 JJ Niven provided service reports for two of the cranes. It reported that it had been unable to access the third crane. It recommended fixing a number of electrical and mechanical issues before the cranes were inspected by a crane certifier, with a view to certification, which was necessary before they could be brought back into operation after some years of disuse. It also raised as a critical issue the need to view previous certification:
We could not ascertain if all the above gantry cranes have been previously certified. Please confirm and provide evidence of previous crane certification. … the equipment inspector may require these to be load tested prior to certification and we/they can only confirm this, once previous certificates can be viewed.
Please advise your instructions regarding
1. The recommended repairs for the serviced cranes
2. Whether the south west gantry requires a full service
3. The supply of information of gantry official numbers and previous certification.
[33] Newland Burling replied on 15 September requesting information about the cost and timeframe to get two of the cranes operational and certified, and to do the
same for all three. The reply did not address the issue of the cranes’ previous
10 Health and Safety in Employment (Pressure Equipment, Cranes, and Passenger Ropeways) Regulations 1999; Department of Labour, Approved Code of Practice for Cranes, 3rd Edition,
2009.
certification as JJ Niven had requested. Both sides however set about trying to determine the certification history of the cranes and whether they had been “design verified and previously certified”.
[34] On 25 September Newland Burling emailed JJ Niven stating that it hoped to get back to Fletcher Steel that week about the lease. In the email Mr Burling asked if JJ Niven had the costings prepared.
[35] The parties then shared information about a load test that had apparently been undertaken in 2011 by an inspector from SGS. JJ Niven had attempted without success to contact the inspector11, but he was not available to provide the information and the question whether final certification had occurred continued to elude both of the parties. On 26 September JJ Niven emailed Newland Burling that it had not been able to contact the inspector. In an accompanying document it set out its recommendations for repairs and budget prices at that time. It stated that it could still find no evidence of the previous certification and that it was therefore unsure of
the costs involved.
[36] On 1 October, Mr Burling of Newland Burling emailed regarding costs of the crane repairs again. He asked whether they should allow “$10K for the third crane” and whether the “$14K quoted so far would get the two cranes fully certified and operational”. JJ Niven replied the same day in qualified terms:
Further to our letter and your query below, unfortunately we cannot determine the cost and extent of obtaining certification for all cranes.
If we need to re-apply for crane certification, assuming no previous evidence of certification and verification is found, the following would apply:
Crane verification est $5000.00 + GST each gantry
Recertification est $1600.00 + GST excluding test weights each gantry
Building design check unknown cost
Repairs as priced
11 SGS was the inspection body in this case; it is a company which provides inspection, verification, testing and certification services for a variety of industries overseas and in New Zealand. the gantry crane certifying company.
There is evidence that a load test has been completed by SGS in 2011 but unfortunately no certificate was issued. The inspector whom completed this is on annual leave and cannot therefore discuss his exact certification requirements.
[37] Following these communications, Newland Burling instructed JJ Niven to conduct a site visit which JJ Niven confirmed would be done on 6 November. An inspection of the third crane was undertaken.
[38] On 11 November, Newland Burling emailed JJ Niven urgently requesting “the costs to get the cranes fully operational” so it could “satisfy the lease requirement of the new tenant”. Mr Burling set out his own “estimate” of what he considered the costs to be. His figure was $42,595, apportioned between JJ Niven, Opus and SGS.
The emails of 11 and 14 November
[39] JJ Niven replied by email the same day with pricings totalling $54,840.00. All of them (except that of $1,232.80 for servicing already completed) were noted as “budget prices” and qualified with advice of much the same kind as in previous communications.
[40] The email included in its list of items and budgeted prices a section headed “Gantry Certification and Verification” which gave a budget price of $5000 plus GST for each crane and stated:
In view of the gantry cranes requiring verification, a budget of $5000.00 + GST will be required for each gantry crane. This allows for site measure, supply of drawings and submittal of drawings to the verifier and verification costs. No allowance for extra costs relating to non compliance for the design.
[41] Relevantly, the email prefaced all of the budgeted prices and the items they related to with the following advice:
Following the service of the gantry cranes with reports dated 12 September
2014 and our recent visit to the Levin site, we provide the following update of the costs required to allow certification of these gantry cranes based on
our visual assessment only.
The x3 gantry cranes require varying degrees of repair based on our visual inspection only and therefore we cannot guarantee there will [sic]12 be other items required following our completion of the known repairs, inspection by the equipment inspector, and once the gantry cranes are in there full operational state. If an issue arises, we can only offer the solution with extra costs to be detailed and agreed upon.
Our visit to the site on 6th November unfortunately confirmed the Official Numbers or evidence of certification on all cranes could not be found.
…
We have made no allowance of the following
- Extra cost due to unforeseen repairs following crane operation and certification
- Hire + delivery of test weights
- Building certification
[Emphasis added]
[42] The email also concluded with notes advising that payment terms were to be agreed and that JJ Niven’s standard terms and conditions would apply, a copy of which were attached.
[43] Three days later on 14 November, Mr Fergus of JJ Niven emailed Newland Burling indicating that there had been a discussion between himself and an inspector on the basis of which JJ Niven considered that a saving of $10,000 had been achieved:
I have spoken to an inspector and he will load test these x2 cranes and therefore accept the official numbers as “cranes already certified”. We have provided budgets for load testing including labour and weights.
In view of this we consider a saving of $10,000 + GST has been achieved.
[44] On 10 December 2014 Newland Burling instructed JJ Niven by email to proceed with the crane work, stating “Yes, we do want the work to proceed ASAP. Fletcher’s may have some additional requirements for the cranes that will be charged separately.”
[45] On 11 December JJ Niven responded, saying it had been in touch with
Fletcher Steel and that it would review the work and provide “a commitment with dates etc.”
12 The omission of the word ‘not’ in the letter is an obvious typographical error.
Were the emails of 11 and 14 November a quote?
[46] If the figures conveyed by JJ Niven in its emails of 11 and 14 November were given in unqualified terms for all work to achieve certification for the three cranes, then the argument that the combined effect of these emails was to give an all- inclusive fixed quote of $43,340 to achieve that outcome may have had some apparent substance. There might have been an arguable case that there was an initial quote that was accepted on 10 December, with the possible exception of the “additional requirements” that Mr Burling mentioned on 10 December.
[47] However, the emails were not given in such terms. As JJ Niven points out, on 11 November the advice was that the figures that made up the total of $54,840 were qualified. They comprised budgeted prices for “known” repairs to the cranes and were qualified as being based on “a visual inspection only”. The advice also made clear that the figures were contingent upon the crane certifier’s requirements (as yet unknown and potentially open to change), and that JJ Niven could not guarantee there would not be revisions. It also expressly made clear that no budget prices were given for building certification and other work that was identified as not included. It was essentially an offer to provide services for the repair and certification of cranes on the basis that the ultimate cost was dependent upon contingencies outside JJ Niven’s present state of knowledge and within the control of the entity that would act as certifier.
[48] If issues should arise, extra costs would be detailed (when known) and would have to be agreed upon. It gave no estimate as to the time that would take to complete the work.
[49] I agree with JJ Niven that the advice of 14 November did not change the overall nature of the offer of 11 November. The “confirmed” savings of $10,000 referred to in the email of 14 November were reported as based on a discussion with the certifier and as such, on any reasonable view, clearly remained contingent upon on a judgment that was very much one for the certifier.
[50] Mr Burling himself is rather equivocal about the assertion that JJ Niven gave a quote on 11 and 14 November. In his evidence he treats the email of 11 November as a response to his request for as accurate a “costing” as possible “whether called a quotation or an estimate” and refers to the figures set out in the emails interchangeably as both quotes and estimates. Tellingly, in describing the “main thrust” of Newland Burling’s case he does not claim that the emails constituted a binding quote. Of greater significance however than Mr Burling’s description of the contents of these emails is whether on any reasonable construction they might be objectively viewed as providing a quote.
[51] In Firm Pl1 v Zurich Australian Insurance Ltd T/A Zurich New Zealand the Supreme Court discussed the proper approach to interpreting contractual documents, and eliciting contractual intention:13
It is sufficient to say that the proper approach is an objective one, the aim being to ascertain “the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were in at the time of the contract”. This objective meaning is taken to be that which the parties intended. While there is no conceptual limit on what can be regarded as “background”, it has to be background that a reasonable person would regard as relevant. Accordingly, the context provided by the contract as a whole and any relevant background informs meaning.
[52] Applying these principles to the present case, I am satisfied that these emails cannot be construed as a quote to do all the work to achieve certification of the cranes. They are an offer of a “solution”, in which an estimate is given for some of the work (repair and refurbishment work in particular on the cranes), and a heavily qualified one at that. They also propose a process for dealing with additional costs.
[53] I turn next to the third ground for the application and whether the advice as to pricing in the letters of 11 and 14 November might provide the foundation for a tenable argument that JJ Niven provided negligent costing advice in breach of a duty of care owed to Newland Burling.
Is there a tenable argument based on negligently prepared pricing?
13 Firm Pl1 v Zurich Australian Insurance Ltd T/A Zurich New Zealand [2014] NZSC 147, [2015]
1 NZLR 432 at [60].
[54] Newland Burling’s essential position is that JJ Niven provided negligent costing advice in breach of a duty to prepare an estimate to achieve certification of the cranes with the input of a certifier. It says such a duty arises (principally in contract or tort) because JJ Niven knew the advice was to be relied upon for the purpose of the lease negotiations. It says further that it had no reason to believe that the ultimate costs to achieve certification could be well in excess of $43,340, and it relied on that figure to its detriment in negotiations over the terms of the lease, losing the opportunity to pass on “the real cost of the works required to the cranes, the building supporting the cranes and the crane rails” to Fletcher Steel. It says the real cost was $131,098.63 based on charges it received from JJ Niven and Newland Burling’s consulting engineers, Silvester Clark, as follows:
(a) JJ Niven:
(i)Crane repairs - $74,083. (This is the deposit already paid plus the outstanding sum of $57,018.84 claimed in invoice 43791 for repairs, inspections and certification of three gantry cranes);
(ii)Repairs to rails – $19,837.50. (This is the outstanding amount claimed in invoice 43792 for crane loading assessment and modifications to buildings);
(iii)Repairs to the columns - $13,432 (this sum in claimed in invoice 43910 for structural repair to columns).
(b) Silvester Clark Consulting engineers - $23,745.63.
[55] Mr Burling contends that to these sums there should be added extra costs relating to the loss of rental, and his wasted time and legal costs.
[56] In his submissions, counsel for Newland Burling posited that there is a sufficient evidential basis for these contentions and to point to a genuinely arguable dispute in relation to the four invoices and additionally to a number of genuinely
arguable causes of action upon which a counterclaim could be founded. Counsel referred to a seven causes of action most of which are not identified in the grounds for the application.14 All have in common alleged inaccurate or misleading assessments as to the cost of work needed to achieve certification for the three cranes upon which Newland Burling is said to have relied in negotiating the terms of the lease with its tenant.
[57] It is common ground that there is a dispute on the evidence that cannot be resolved in the context of this application as to whether or not it is normal or practical to involve a certifier in preparing an accurate estimate of the costs to achieve certification of cranes. In this case the question is whether or not it is arguable that JJ Niven ought to have provided a more accurate assessment of the work needed to bring the cranes up to a certifiable standard by involving an inspector before 24 November.
[58] For its part, JJ Niven says it is not usual to engage a certifier before initial repairs and servicing are undertaken, and that it was not practical to do so otherwise in this case. In his evidence, Mr Taylor, a mechanical engineer specialising in crane design and a director of JJ Niven, justifies this by reference to the lengthy and inherently uncertain process of achieving certification. He points out that JJ Niven engaged SGS early in the New Year in 2015, by which time there was agreement with Newland Burling and SGS in general terms as to the scope of the repair work. He points out that:
(a) In the following days after SGS’s engagement, he communicated with the SGS inspector, striving to achieve a cheaper solution for recertification of the cranes.
(b)The entire process of identifying and agreeing the exact extent of the repair and other requirements to get the cranes to the point where they could be recommended for certification took place over
several months.
14 He set out a list of causes of action that he submitted are arguable, including causes of action based on the Fair Trading Act and on estoppel.
(c) The ultimate judgment as to what was required was outside of JJ Niven’s hands and getting to that point involved ongoing discussion and negotiation with the inspector. That process inevitably led to an ongoing review of the costs involved.
Repair and refurbishment of the cranes
[59] It is also common ground that the expected costs of achieving certification changed markedly once SGS became involved. On 20 January JJ Niven provided what it described as a “fair estimate” of the cost of repairing and refurbishing the cranes, taking account of SGS’s requirements. The estimate was $181,049.10.15
That estimate was then reduced, as a result of Mr Taylor’s efforts and his
negotiations with the inspector, to $86,553.6016 on 3 February. Each of these estimates was coupled with advice that expressly excluded unforeseen repairs and building certification and modification. The actual figure ultimately charged for this work came down to $74,083.17 (All of these figures exclude building work).
[60] In his evidence Mr Taylor explains how these revisions came about. He describes the process of discussion and negotiation that was involved. It appears that SGS and its inspector initially took a conservative line, but “documentation supplied to SGS finally allowed them to accept the hoisting equipment was Design Verified” and that “ACOP clause 3.7 allowed the equipment to be stripped and assessed as opposed to being replaced”. Mr Taylor says he endeavoured, with some success, to persuade SGS that all of the cranes did not need to be design verified. The outcome was that design verification was ultimately only required for the “6 tonne” crane as no files could be found for it, but not for the two “Andrew & Taylor” cranes; and SGS agreed to abandon its requirement for replacement hoists for the two smaller cranes. Mr Taylor says that was the reason why a revised figure was given on
3 February.
15 $157,434 plus GST.
16 $75,264 plus GST.
17 $64,420 plus GST.
[61] On 9 February Newland Burling advised JJ Niven to go ahead on the basis of the “third quote” of 3 February. Newland Burling’s acceptance was coupled with expressions of both disappointment and appreciation:
As discussed previously we were disappointed that SGS were engaged in assessing the cranes at such a late stage in the project. Additionally your personal involvement at such a late stage may have contributed to inaccurate costings to have the cranes certified and up and running. As mentioned when we met at your office we have relied on the first quote given by Shane to make a major commercial decision with the …lease…
This said we are now unconditional with the Fletcher lease and have no choice but to proceed with the third quote received 3 February and appreciate your offer to reduce costs and margins.
[62] An invoice for a 20% deposit of the price estimate was sent to Newland
Burling on 3 February. That deposit was paid on 20 February. It was for
$17,064.16.18
[63] After receiving the approval on 9 February for the repairs and refurbishment work to the cranes, JJ Niven proceeded to carry out that work between 9 February and 3 March. On 3 March the cranes were recommended for certification, all three cranes having been successfully load tested with SGS’s equipment inspector.
Building work
[64] Additionally Mr Taylor says that because building certification was required, on JJ Niven’s recommendation Newland Burling instructed Silvester Clark, consulting engineers, to deal with any issues relating to the structural suitability of the building. He explains that one of SGS’s requirements was for a chartered engineer’s statement that the support structure design and condition was suitable for the cranes at current standards, and that he advised Newland Burling of SGS’s position that “the cranes can’t be certified until they receive a satisfactory design and construction certificate”. Mr Taylor also says he told Newland Burling that “Once costs are finalised with subcontractors such as SGS, we will be in a position to
advise costs”.
18 That is $14,838.40 plus GST.
[65] Again, on JJ Niven’s recommendation, Newland Burling arranged for Silvester Clark to carry out an inspection and to prepare drawings for the necessary building modifications. Mr Taylor says this accounts for Silvester Clark’s work and its costs, which he says were charged directly to Newland Burling and were nothing to do with JJ Niven.
[66] Silvester Clark determined that strengthening of the building structure supporting the gantry cranes was required, and identified corrosion in some of the column bases. It also prepared the necessary drawings for the remedial work; and JJ Niven was asked to provide a cost to undertake the work. It provided a price of
$18,908.30.19 That price was accepted by Newland Burling on 9 February 2015.
There was a variation on 7 April as the number of fly braces was clarified by
Silvester Clark to $19,837.5020 (being the amount claimed invoice 43792).
[67] On 7 April, at Newland Burling’s request JJ Niven set out by email the overall costs for the crane refurbishment and its remedial work on the building strengthening. Mr Taylor says that as the project turned out, JJ Niven was able to reduce the overall costs for the repair and refurbishment of the cranes from the price estimate set out in its advice of 3 February. This was due to savings in PC sums made in allowances for electrical costs and replacement parts. The final cost for this
component of the work was $74,08321. Taking into account the deposit paid of
$17,064.16, the amount unpaid for this work is $57,018.84, being the amount owing under invoice 43791.
[68] On 8 April Newland Burling requested JJ Niven to provide an estimate for the repair to the columns. That estimate was provided on 9 April 2015; the figure including GST was $13,43222 (being the amount claimed in invoice 43910). JJ Niven’s uncontroverted evidence was that it was instructed to proceed.
[69] The remaining invoice is invoice 43577 (issued somewhat earlier). It relates to wall bracing work that was invoiced on 13 February 2015. The approval for this
19 $16,442 plus GST.
20 $17,250 plus GST.
21 $64,420 plus GST.
22 $11,680 plus GST.
work, the manufacturing and installation of bracing designed by Opus, was given on
21 January 2015. JJ Niven emailed Newland Burling advising that it was looking over:
The document about wall bracing which Mike measured yesterday. Can you confirm what grade of R20 you would like us to use please … Do you want us to proceed with manufacturing this, or do you want a price first?
The emailed response was “Just proceed with installation ASAP”. Relevantly,
Mr Burling takes no objection to this invoice in his evidence.
[70] It is clear on this evidence (which is not disputed in any material way) that throughout the entire process undertaken to achieve certification of the three gantry cranes, Newland Burling was advised of developments and its approval was sought to costs for each part of the work.
[71] It is against this background that I turn to the question whether it is arguable that JJ Niven has acted in breach of the alleged duty.
The issue for determination
[72] At issue is whether an accurate estimate of the ultimate costs (including the costs for the building works) ought to have been provided to JJ Niven before
24 November 2014 when it entered into the lease with Fletcher Steel. That turns on whether the earlier figures given on 11 and 14 November were provided in circumstances where there existed a duty to involve the certifier when preparing the earlier advice.
[73] There is no doubt that a professional or a tradesperson who provides an estimate may do so in circumstances where the law will impose a duty to take reasonable care in preparing the estimate. It is incumbent on Newland Burling to show an arguable basis for the breach of duty it contends for.
[74] In McFarlane v Dickson Marine (Refits) Ltd, Miller J referred to the significance of an estimate in law by reference to a leading authority:23
[40] The leading authority is J & JC Abrams v Ancliffe, a 1981 judgment of the Court of Appeal. A builder got judgment at first instance for building work, but the award was offset by damages in negligence for a carelessly handled estimate. He had failed to respond to the owner's repeated requests for a final price at a time when he ought to have known that the price would greatly exceed the estimate. On appeal Cooke J held that:
“ … if there was a contract, it must have entailed a duty on the builder to take such steps to safeguard his client's interests as would be taken by a reasonably careful builder in his shoes and in all the circumstances. If there was no contract, there would be a like duty in tort.”24
[75] There would seem to be no reason in principle why a “like duty in tort” may not apply when a negligently prepared estimate is provided where the estimate is expressly sought from a third party for the purpose of relying on it in contractual negotiations and the plaintiff relies on it to its detriment. It has been noted by the learned authors of Burrows Finn and Todd on Contract that a third person not party to a particular contract may be liable in tort for a negligent representation that
induces the contract.25
[76] The Supreme Court’s approach to third party advice inducing the recipient to enter into a contract, set out in Marlborough District Council v Altimarloch26 is apposite in terms of general principle. That case concerned a contract induced by misrepresentation by the vendors and the Council, which was a non-contracting party. Altimarloch successfully claimed for damages against the Council, for breach of a duty of care owed to it in preparing and providing a land information memorandum. The memorandum misstated the extent of water rights attaching to the property being sold to the purchasers. The negligent information was a factor
inducing the purchaser to enter into a contract on terms that proved to be adverse.
23 McFarlane v Dickson Marine (Refits) Ltd, [2013] NZHC 647.
24 In Abrams, damages were considered appropriate because the owner had lost the opportunity to abandon the job without loss.
25 Burrows, Finn and Todd The Law of Contract (5th ed, LexisNexis, Wellington, 2016) at 2.45.
26 Marlborough District Council v Altimarloch [2012] NZSC 11, [2012] NZLR 726.
[77] However, proffering advice in circumstances where the recipient makes clear it wants to rely upon it in contractual negotiations with another, does not inevitably lead to the assumption or imposition of a duty of care.
[78] Lord Reid said in Hedley Byrne v Heller:27
A reasonable man, knowing that his skill and judgment were being relied upon, would, I think, have three courses open to him. He could keep silent or decline to give the information or advice sought: or he could give an answer with a clear qualification that he accepted no responsibility for it or that it was given without that reflection or inquiry which a careful answer would require: or he could simply answer without any such qualification. If he chooses to adopt the last course he must, I think, be held to have accepted some responsibility for his answer being given carefully, or to have accepted a relationship with the inquirer which requires him to exercise such care as the circumstances requires.
[Emphasis added]
[79] As the editors in Law of Torts in New Zealand posit, this extract raises two questions.28 The first is concerned with the need to show that the claimant relied on the words that are complained of, and the second with whether the circumstances giving rise to the information or advice give rise to a duty to take care. A basic requirement is that it is reasonable for the recipient to rely on the defendant’s statement. Reliance even given in response to an important business inquiry may not be reasonable for any number of reasons. It will not be reasonable where the inquirer would have known that the advice was dependent upon the fulfilment of
contingencies outside the defendant’s control, and where the advice could not reasonably have created even more than a hope. Such a case is discussed in Hunt v New Plymouth District Council. 29 Additionally there must always be reliance by the plaintiff in fact. Assuming reasonable and actual reliance the question becomes whether a duty is owed. This is sometimes explained on the basis that the defendant accepted or assumed responsibility for its words, and sometimes on the basis that
there was a special relationship between the parties.
[80] In this case it is not necessary to discuss whether there was a special relationship, though I accept the existence of such a relationship may well be
27 Hedley Byrne v Heller [1964] AC 465 at 487.
28 Stephen Todd (ed) The Law of Torts in New Zealand (7th ed, Brookers, Wellington 2016)
29 Hunt v New Plymouth District Council 2011 NZCA 406.
arguable. What is fatal here to Newland Burling’s case is that reliance of the kind described by Mr Burling in his evidence would clearly be unreasonable. There was no room, on any reasonable construction of the heavily qualified advice given on
11 and 14 November, for Mr Burling to place such reliance on the figures contained in it as if it was a quote or a reasonable accurate estimate.
[81] Newland Burling’s case therefore fails to meet the basic requirement of reliance. I am satisfied that it could not have had a reasonable belief that it was safe to rely upon the figures as such, given the heavily qualified nature of the advice they were contained within.
[82] Further, as Mr Burling himself says, had he been told that Mr Fergus was unable to give an accurate costing to achieve certification, he would have engaged another expert. The advice of 11 and 14 November told Mr Burling just that; it made plain that Mr Fergus’s advice was contingent on the certifier’s input, among other things. Mr Burling was squarely on notice that if he relied on it, he did so at his risk, and he knew (or should have known) that if he wished to avoid the risk, he had the choice of engaging another expert. He did not do so. It was not until early in the New Year that SGS was instructed. In the meantime it should have been obvious to Newland Burling that by proceeding with the lease without knowing the costs of certification, it did so at its risk and not JJ Niven’s.
[83] Newland Burling was also on notice that JJ Niven’s advice did not include building work necessary to achieve certification, or the timeframe for completing works. It did nothing to deal with these uncertainties arising from that when it negotiated the lease.
[84] Newland Burling’s purported counterclaim in negligence must therefore fail. As Newland Burling relies on the same facts for a range of other causes of action, those purported causes of action must also fail. Additionally, its claim that the advice of 11 and 14 November was given in breach of contract must fail for another reason. There was no binding contract before 24 November for the repair and certification of the cranes.
Are the charges in the four invoices excessive?
[85] This ground was not developed at the hearing as a distinct ground for the application, and it is not necessary to consider it. It is sufficient to note that any suggestion of excessive charges for the work completed is wholly unsubstantiated in the evidence, and at odds with Mr Burling’s evidence that the “main thrust” of Newland Burling’s case is that it has lost the opportunity to pass on the “real” cost of achieving certification for the three cranes to its tenant. It is not that the true costs are of themselves unreasonable or excessive.
[86] Relevantly, on each occasion when the “real” cost of particular parts of the work were put to Mr Burling, he accepted them without any protest as to excessive charging or overcharging. There is therefore no apparent substance to this ground.
Conclusion
[87] Newland Burling has failed to demonstrate that the application grounds have any realistic evidential foundation. There is no dispute of any substance that there was a quote given on 11 November (with a downward variation on
14 November) for $43,340 for all of the work to achieve certification. There is no substance to the contention that the figures given at that time were reasonably relied upon by Newland Burling in its dealings with Fletcher Steel. Nor is there any substance to the claim that the charges in the four outstanding invoices are excessive for the work completed.
Result
[88] The applicant has not satisfied me that the amount claimed in the statutory demand is the subject of a reasonably arguable dispute, or that there is sufficient basis for an arguable counterclaim that exceeds the amount in the demand.
[89] The application to set aside the demand is dismissed. Under s 291(1)(a) the applicant, Newland Burling, is ordered to pay the full amount of the invoices,
$92,350.18, to JJ Niven by 21 November 2016. If Newland Burling fails to do so, an application to appoint a liquidator may be made under s 291(1)(a).
[90] With regard to the interest claimed, JJ Niven is to provide updated details (including any contractual provisions relied upon) by way of memorandum to be filed and served within 10 working days. With regard to costs, JJ Niven is to include in the memorandum supporting material for the costs claimed. Alternatively, as costs follow the event under the statutory costs regime, it may seek an order for costs
against Newland Burling on a 2B basis plus disbursements as fixed by the Registrar.
Associate Judge Sargisson
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