Newland Burling no.10 v JJ Niven Engineering Limited
[2017] NZCA 354
•16 August 2017 at 3.30 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA591/2016 [2017] NZCA 354 |
| BETWEEN | NEWLAND BURLING NO. 10 LIMITED |
| AND | JJ NIVEN ENGINEERING LIMITED |
| Hearing: | 3 August 2017 |
Court: | Clifford, Simon France and Toogood JJ |
Counsel: | D J G Cox for the Appellant |
Judgment: | 16 August 2017 at 3.30 pm |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Toogood J)
Introduction
Newland Burling No. 10 Ltd (Newland Burling) appeals against the refusal of Associate Judge Sargisson to make an order under s 290 of the Companies Act 1993 setting aside a statutory demand dated 21 January 2016 made against it by JJ Niven Engineering Ltd (Niven).[1]
[1]Newland Burling No. 10 Ltd v JJ Niven Engineering Ltd [2016] NZHC 2590.
The demand arises out of the failure or refusal of Newland Burling to pay the balance owing on a total sum of $107,026 for four unpaid invoices amounting to $92,350.18, together with interest and costs. There is one invoice dated 13 February 2015, two dated 31 March 2015 and one dated 30 April 2015. Of the total amount invoiced, Newland Burling has paid only a deposit of $17,064.16 on two of the invoices.
The invoices relate primarily to work done in early 2015 by Niven, a mechanical engineering company with particular expertise in the repair of cranes. The company 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 premises in Levin. It also carried out associated works to strengthen the building where the cranes were situated. Most of these works were required to obtain certification for the cranes. That was necessary before they could be put to use, in accordance with the relevant regulatory requirements, by a lessee of the premises, Fletcher Steel Ltd (Fletcher).
In arguing that the statutory demand should have been set aside, Newland Burling says there is a substantial dispute about whether the invoiced sums are owed and that it has a fairly arguable counterclaim for an amount that exceeds the amount claimed in the demand.[2] Its three assertions are:
(a)The amounts charged were excessive.
(b)Newland Burling accepted a formal quote for the cost of getting the cranes to operational and certifiable standard which was significantly less than the actual costs charged.
(c)Newland Burling has a counterclaim based on Niven’s negligence in preparing the quotation in November 2014.
Submission that the amounts charged are excessive
[2]Companies Act 1993, ss 290(4)(a) and (b).
The first of the grounds relied upon is that the charges set out in the four invoices are excessive for the work completed. Before the Associate Judge, however, Newland Burling did not lead any evidence in support of the proposition and the Judge rejected it as having no substance.[3] It was not pursued on appeal and we do not need to consider it further.
Claim that Newland Burling accepted a formal quote for the cost of getting the cranes to operational and certifiable standard
[3]Newland Burling No. 10 Ltd, above n 1, at [87].
The second ground for asserting the existence of a substantial dispute rests on Newland Burling’s allegation that pricing documents issued by Niven in November 2014 amount to a formal quotation, accepted by Newland Burling, to get the cranes to an operational and certifiable standard. The estimated costs set out in the pricing documents are significantly less than the actual costs incurred.
In September 2014, Newland Burling emailed Niven about the cost of remedial work which was required to repair and re-certify the three gantry cranes for use by Fletcher, then a proposed tenant of the premises. The proposed lease terms required that the cranes should be operational and certified. Mr Carl Burling, who represented Newland Burling in its dealings with Niven, says that he wanted costing on a “worst case scenario” basis because he needed to know, “as best as could possibly be estimated”, the cost of bringing the cranes up to operational and certified standard before Newland Burling concluded the lease negotiations with Fletcher. It is not disputed that Niven’s representative in the matter, the service foreman Mr Shane Fergus, was aware of this background.
Newland Burling claims it received a “formal quotation” of $47,687.00 plus GST from Niven on 11 November 2014 which was amended to $37,687.00 plus GST by an email dated 14 November 2014. It says that it relied upon the amended quotation in entering into the lease with Fletcher on 24 November 2014, but says the quotation was negligently prepared and that it grossly understated the actual costs it incurred to meet its obligations under the lease. It points to the Niven invoices for the completed work, and other costs incurred, as proof of the discrepancy which, it says, raises a substantial dispute about whether the sums claimed in the invoices are owed.
Whether there is any merit in that argument turns on whether the alleged quotation was the basis of a contract between Newland Burling and Niven for the provision of services to get the cranes up to the standard required under the lease. Niven says the pricing document dated 11 November 2014 and the amending email amounted to no more than a highly qualified estimate, and that the contract was formed by the work commissioned by Newland Burling and carried out in early 2015 on the basis of revised quotations.
The Associate Judge’s decision
Associate Judge Sargisson held that Niven made no more than:[4]
[A]n offer to provide services for the repair and certification of the cranes on the basis that the ultimate cost was dependent upon contingencies outside [Niven’s] present state of knowledge and within the control of the entity that would act as certifier.
[4]At [47].
We agree with the Associate Judge’s view, largely for the reasons set out carefully in the judgment.
Our reasons for agreeing with the Associate Judge
Although Mr Fergus knew that Mr Burling was endeavouring to have Niven provide a firm quotation, because the pricing would dictate the terms of the lease between Newland Burling and Fletcher, it does not follow that that is what he provided. Whether the pricing document dated 11 November 2014, as amended by the 14 November 2014 email, amounted to a firm quote and, therefore, the terms of a contract to carry out the services, turns principally on the wording of the two documents construed in the context of the surrounding circumstances.
The only reference to a “quotation” in the pricing document of 11 November 2014 is in a note under the Niven letterhead which begins:
All quotations/estimates are subject to the standard terms & conditions of this company …
Niven’s general conditions of sale (referred to in the 11 November 2014 pricing document as standard terms and conditions) were not provided to Newland Burling with the pricing document or before Newland Burling entered the lease with Fletcher.
Niven made it clear that the pricing provided was qualified by being based on its “visual assessment only”.
Because of that limitation, Niven said it could not guarantee that there would not be other costs following completion of the known repairs and inspection by the equipment inspector, and once the gantry cranes were in their full operational state. Niven said that if an issue arose it could “only offer the solution with extra costs to be detailed and agreed upon”.
The pricing document included a note that no allowance had been made for extra costs “due to unforeseen repairs following crane operation and certification” (emphasis added). Although Mr Cox argued for Newland Burling that this was a reference to additional costs after the contracted works had been completed, we are satisfied from the history of the dealings between the parties, the nature of the issues, and the scope of work which had been requested, that the statement referred to unforeseen repairs arising out of the process of getting the cranes operational and certified as required.
The pricing document also contained a statement, in relation to the price given for gantry certification and verification of $5,000.00 plus GST per gantry, that it allowed for site measure, supply of drawings, and submittal of drawings to the verifier and verification costs but did not include any “allowance for extra costs relating to non compliance of the design”.
The prices given in the pricing document are referred to as “Budget Prices”, an expression which Mr Fergus explained was a term in common usage which was particularly appropriate where final costs could not be stated. He described it as “an estimated order of magnitude price which the customer should budget for, accepting that there may be, and usually are, uncertainties and conditions as to what may finally need to be supplied and hence what the final cost may be.” That explanation was not challenged.
The pricing document does not provide a total sum. The document adduced in evidence shows a handwritten total of $47,687.00 which, it appears, was written on the document by Mr Burling or someone else on behalf of Newland Burling.
It is clear from the context and from the wording of the document that Mr Fergus remained cautious about what the actual costs of getting the cranes up to standard might be, bearing in mind the limited nature of the inspection carried out by Niven and the need for a certifier to closely inspect the cranes and direct such other work as may be necessary to get the cranes up to standard.
The amending email of 14 November 2014 was sent to Mr Burling by Mr Fergus after some records which had formerly been missing had been located and an inspector had said that, for two cranes, he would load test and accept the official numbers as “cranes already certified”. That meant that the budget prices for load testing of $5,000.00 per crane would not be required for those cranes. It led Mr Fergus to say that he considered a saving of $10,000.00 plus GST “has been achieved”. We agree with Associate Judge Sargisson that that did not change the overall nature of the pricing document.[5] The saving which was said to be confirmed merely followed from a discussion with the certifier and remained contingent on a judgment that could not be made by Niven.
[5]Newland Burling No. 10 Ltd, above n 1, at [49].
An analysis of the documents of 11 and 14 November 2014, therefore, does not support Newland Burling’s case — Niven provided no more than a significantly qualified estimate. We agree with Mr Leggat’s submission on behalf of Niven that Newland Burling accepted the commercial risk of entering into the lease with Fletcher without fixed pricing.
Moreover, Newland Burling never indicated to Niven that it accepted the figures set out in the pricing document and the variation document at any time prior to entering into the agreement to lease with Fletcher on 24 November 2014. Mr Burling told Mr Fergus by email on 28 November 2014 that it was “all go with Fletchers now”. He advised Mr Fergus in an email on 10 December 2014 that Newland Burling wanted the work to proceed “ASAP” and that Fletcher may have some additional requirements that would be charged separately. After discussions between Fletcher and Niven, the work on the cranes was scheduled for January 2015.
In the course of argument, Mr Leggat appeared to concede that Newland Burling’s direction on 10 December 2014 that it wanted the work to proceed formed a contract with Niven but one which post-dated the execution of the lease with Fletcher and which was, in any event, superseded by arrangements agreed to in January and February 2015. We are not sure that such a concession was necessary. As Mr Leggat submitted and we have found, the November pricing documents contained merely qualified estimates. Niven could not be held to have had any intention to enter into a contract on that basis and the documents could not be treated as an offer capable of contractual acceptance. Important terms such as the scope of work and price were too uncertain. The direction by Newland Burling that it wanted the work to proceed “ASAP” could only mean that, having entered into the lease with Fletcher, it needed to have the cranes made operational and certified as soon as possible so that the terms of the lease were met.
For that reason, it is not necessary to address Mr Leggat’s reference to “post‑contractual” conduct by Newland Burling as informing the construction of the November pricing documents. But we accept the thrust of his argument. It was not until 21 August 2015, when Newland Burling was coming under pressure to pay its debt to Niven, that Newland Burling first contended that the letter of 11 November 2014 was a “quote”. That tends to confirm our finding that the documents did not comprise a binding quotation.
This ground of appeal fails.
Events after 10 December 2014
Before considering the third ground for Newland Burling’s application to set the demand aside — counterclaim — we return to the narrative of events.
Once Newland Burling had authorised Niven to start the necessary work on the cranes and those parts of the building which needed strengthening, Niven engaged an experienced certifier, SGS, to examine the cranes and provide specifications for getting them up to certifiable standard. Having regard to the discussions which preceded the provision of the pricing documents in November 2014 and the nature of the qualifications in the pricing document of 11 November 2014, the engagement of a certifier was inevitable and it is clear Newland Burling understood that. Indeed, as we discuss below, Newland Burling now asserts that Niven was negligent in not engaging a certifier at an early stage and before it provided its pricing information.
The expected costs of achieving certification changed markedly once SGS became involved. On 22 January 2015, Niven gave Newland Burling an estimate of $157,434 plus GST to complete the repair and refurbishment of the cranes according to SGS’s requirements. By subsequent negotiation, Niven was able to persuade SGS to accept a less expensive process which resulted in a revised quotation dated 3 February 2015 of $75,264 plus GST. On 9 February 2015, Newland Burling directed Niven to go ahead on the basis of that “third quote”. A deposit of $17,064.16, being 20 per cent of the price estimate of 3 February 2015, was paid on 20 February 2015. Niven carried out the work and on 3 March 2015 the cranes were recommended for certification after being successfully load tested by SGS’s equipment inspector.
The project also involved the cost of engaging consulting engineers, Silvester Clark, to deal with issues relating to the structural suitability of the building. Niven was engaged to do that work.
The final outcome was that Niven completed the necessary work on the cranes and the work required to repair the building (as recommended by Silvester Clark). As it happened, the cost of the repairs to the cranes was less than that quoted on 3 February 2015. The total cost for Niven’s services in respect of both the cranes and the building are set out in the four invoices for which Niven seeks payment.
Alleged counterclaim based on Niven’s negligence in preparing the quotation in November 2014
The third ground for Newland Burling’s contention that the statutory demand should be set aside is an alleged counterclaim based on what it says was Niven’s negligence in failing to engage SGS or some other suitably qualified certifier prior to giving its pricing estimate in November 2014. It alleges that the failure to engage a certifier at that stage amounted to a breach of either a contractual obligation or tortious duty to do so in accordance with standard industry practice or, alternatively, that the failure led to a negligent misstatement entitling Newland Burling to seek damages on a Hedley Byrne basis.[6]
[6]Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (HL).
Associate Judge Sargisson said there was insufficient information before the Court to determine whether industry practice could reasonably result in the imposition of a duty upon Niven to engage a certifier before giving pricing information for such a project.[7] The Associate Judge held, reasonably we think, that the real question was whether it was arguable that 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 or certifier before the lease was entered into on 24 November 2014.[8]
[7]Newland Burling No. 10 Ltd, above n 1, at [57].
[8]At [57].
The Associate Judge analysed both the evidence and the law, particularly in relation to negligent misstatement, before concluding that Newland Burling was well aware that Niven had not engaged a certifier before it provided its advice on 11 November 2014.[9] That much is clear from the history of the dealings between the parties and the terms of the 11 November pricing document. The Associate Judge held there was:[10]
… no room, on any reasonable construction of the heavily qualified advice given on 11 and 14 November, for Mr Burling to place … reliance on the figures contained in it as if it was a quote or a reasonable accurate estimate.
[9]At [84].
[10]At [80].
We agree.
It follows that we do not need to address the argument for Newland Burling based on the evidence of its independent expert, Mr Erasmus. Nor do we need to address Mr Leggat’s backup argument that, in any event, the counterclaim by Newland Burling, if successful, would not result in an award of damages sufficient to meet the requirement in s 290(4)(b) of the Companies Act — that Newland Burling must satisfy the Court that it appears to have a counterclaim of an amount which, after taking into account of the demand by Niven, is greater than the prescribed amount of $1,000.[11] There appears to be some force in that submission, however.
Result
[11]Companies Act 1993 Liquidation Regulations 1994, reg 5.
Having found that Associate Judge Sargisson was right to reject all three of Newland Burling’s grounds for setting aside the statutory demand, we dismiss the appeal.
The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.
Solicitors:
Rennie Cox, Auckland for Appellant
Michael Leggat, Wellington for Respondent
0
1
0