Real Cool Holdings Ltd v Northpower Ltd
[2012] NZHC 1604
•6 July 2012
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
CIV-2010-470-1143 [2012] NZHC 1604
BETWEEN REAL COOL HOLDINGS LIMITED Plaintiff
ANDNORTHPOWER LIMITED First Defendant
ANDPOWERCO LIMITED Second Defendant
Hearing: 21 May 2012
Appearances: Mr M Colthart for Plaintiff
Mr J Browne for First Defendant
Mr T Smith for Second Defendant
Judgment: 6 July 2012
JUDGMENT OF ASSOCIATE JUDGE DOOGUE
This judgment was delivered by me on
06.07.12 at 4 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Counsel:
Mark Colthart, P O Box 535, Shortland Street, Auckland – [email protected]
Henderson Reeves Connell Rishworth, P O Box 11, Whangarei –
Chapman Tripp, P O Box 993, Wellington – [email protected]
REAL COOL HOLDINGS LIMITED V NORTHPOWER LIMITED & ANOR HC TAU CIV-2010-470-1143 [6
July 2012]
[1] The plaintiff, Real Cool Holdings Ltd (“RCH”) is a cold storage facility operator. The second defendant, Powerco Ltd (“Powerco”) is a lines company providing electricity distribution services. The first defendant, NorthPower Ltd (“NorthPower”) is an electrical contractor approved by Powerco to carry out works on its lines. In 2006, RCH sought to expand its cool store facility, and increase its lines capacity. To this end, RCH engaged NorthPower to carry out the works required. The expansion would require two new transformers to be installed on or near RCH’s premises. All three parties were involved in the discussions taking place in August 2006.
[2] This case concerns a dispute about charges levied on RCH in relation to the transformers. The background to the negotiations is as follows.
Background
[3] RCH appears to have hoped that the Powerco, in addition to simply making its transformers available in exchange for payment, would also provide a financial contribution to whatever deal the parties might arrive at. Just how the contribution might work out in practice is not clear. RCH spoke in terms of the Powerco providing a lump sum, or at least a defined figure. There were at least two possibilities. It could have been that Powerco would make a contribution to the cost of acquiring of the new capital equipment required to reticulate electricity to RCH’s premises. If Powerco was to supply that equipment, this contribution arrangement may involve a discount against the cost of the equipment. Another possibility is that RCH would not own, nor be invoiced for the cost of, the equipment, but would be periodically charged the equivalent of a rental fee for use of the equipment. In reduction of the future periodic payments that RCH would have to make, it is possible that the parties had in mind that Powerco would make one lump sum payment at the outset of any commercial arrangements that they might enter into.
[4] RCH, by its representative Mr Rhodes, claims that Powerco by its representative agreed that RCH would only have to contribute "about $80,000" to the arrangement after Powerco had made its contribution.
[5] Powerco, while accepting that there was at one point some discussion about a possible contribution, claims that the end agreement did not include any such contribution.
[6] Furthermore, whatever the details of the ultimate agreement entered into were, it was clear that:
a) Only one party — NorthPower as the power supplier — would be invoicing RCH. Powerco did not know of the terms of agreement between NorthPower and RCH;
b)RCH engaged NorthPower as a contractor to carry out the upgrade of its cool store premises. To this end, NorthPower’s position was to function as RCH’s agent, and that it would enter into any contract that may result on behalf of RCH;
c) NorthPower had a contractual relationship with Powerco, under which
NorthPower must pay Powerco for the use of Powerco’s lines.
[7] NorthPower and Powerco eventually agreed on the terms that the installation would take place. Thereafter, NorthPower, as the power supplier company, periodically invoiced RCH. Eventually, a different power company, Contact Energy Ltd (“Contact”), replaced NorthPower as RCH’s electricity provider, but the way in which charges were levied on RCH did not alter. That is to say, RCH’s claim relates to charges during both the period when NorthPower was the electricity provider, and when Contact was. NorthPower provided only one figure in the accounts that it sent to RCH. There was no breakdown into separate items such as power supply and equipment leasing costs.
[8] In fact, the amounts that NorthPower charged RCH for the power upgrade project were the sum of electricity charges, and equipment rental and line charges, the latter being for amounts that NorthPower was required to pay to Powerco.
[9] RCH claims that while it entered into a contract, it was a different contract from that which NorthPower and Powerco allege. RCH claims that it would become the owner of the transformers. Powerco, on the other hand, says that it was never agreed that RCH would own the transformers, and that from the time when installation occurred in 2006, it alone had rights of access to the building where the transformers were housed, and that it alone carried out safety checks and maintenance, the last without any apparent reference to RCH.
Issues
[10] RCH has made three claims:
a) Unjust enrichment: that because it owned the equipment, it did not need to make any payment — whether directly to Powerco, or indirectly through the payments to NorthPower that would subsequently be partially redirected to Powerco. RCH claims that the Powerco has been "unjustly enriched" to the extent of the payments it had made in regard to the new transformers.
b)Estoppel: that Powerco must be held to an alleged representation that it had made — that it would contribute a sum so that RCH would only have to pay approximately $80,000 to the agreement.
c) Implied term: that the contract to install the transformers contained an implied term that NorthPower would carry out the work with reasonable economy, and only charge a reasonable price, and that NorthPower breached this term.
Summary judgment application by defendants
[11] Rule 12.2(2) of the High Court Rules states:
The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[12] I accept the submission made by Mr Browne for NorthPower concerning the principles that guide the application of the above rule. The leading statements of principle that the Court is required to apply when dealing with defendants’ summary judgment applications are found at [58]-[62] of Westpac Banking Corporation v M M Kembla New Zealand Ltd.1 The following points can be drawn:
a) The onus is on the defendant to show on the balance of probabilities that none of the causes of action in the plaintiff's claim can succeed.
b)Summary judgment against a plaintiff is only appropriate where there is a clear answer that cannot be contradicted, and where that is a complete defence.
c) Except in clear cases, it is not appropriate to decide by summary judgment the adequacy of proof of the plaintiff’s claim. It is not enough to show that the plaintiff’s claim has weaknesses.
d)If the defendant supplies evidence that would satisfy the Court that the claim cannot succeed, the plaintiff will usually have to respond with credible evidence.
[13] For strike out applications, r 15.1(1)(a) of the High Court Rules states:
The court may strike out all or part of a pleading if it discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading.
[14] The correct approach to take is to approach the matter in the way indicated by
Elias CJ in Couch v Attorney-General:2
...Whether the circumstances relied on by the plaintiff are capable of giving rise to a duty of care is the question for the Court. If a duty of care cannot confidently be excluded, the claim must be allowed to proceed. It is only if it is clear that the claim cannot succeed as a matter of law that it can be struck out.
1 Westpac Banking Corporation v M M Kembla New Zealand Ltd (CA) (endorsed by the Privy
Council in Jones v Attorney General [2003] UKPC 48, [2004] 1 NZLR 433 (PC)).
2 Couch v Attorney-General [2008] 3 NZLR 725 (SC) at 732.
[3] We are of the view that the claim is not so clearly untenable as to be suitable for peremptory determination on untested facts.
[15] That dictum, although given in the context of an application to strike out a claim in negligence, gives guidance to the appropriate test to be applied here.
Implied term
[16] The plaintiff alleges against NorthPower that the contract pursuant to which the transformers would be installed was subject to an implied term that the amounts to be charged for doing the work would be fair and reasonable, and that the work would be carried out with reasonable economy.
[17] Mr Browne for NorthPower summarised the claim in this way:
In essence, Real Cool alleges that there was an implied term of the contract that Northpower would carry out the power upgrade work with reasonable economy and charge a reasonable price for the work, and Northpower breached this terms by installing two new transformers instead of one and by overcharging.
[18] NorthPower argues that there was no legal basis for implying such a term, and that in any case, even if such a term had been implied into the contract, and had been breached, no loss had resulted to the plaintiff.
[19] In BP Refinery (Westernport) Ltd v Shire of Hastings, the Privy Council laid down a five-point test for the implication of terms. The term sought to be implied must be:3
a) Reasonable and equitable;
b)Necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
c) So obvious that “it goes without saying”;
3 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363 at 376 (PC).
d) Capable of clear expression; and
e) Not contradict any express term of the contract.
[20] The five-point test set out above sets a high standard. There has been growing acceptance that it is easier to imply terms where the contract has never been the subject of any documentation, and the parties have left obvious gaps in their oral arrangements, and there is a need to fill in the detail that they have not attended to.4
[21] Mr Browne submits that the above requirements have not been established in the circumstances of this case. He dealt first with the question of whether there was an implied term that the cost would be reasonable. As Mr Browne pointed out, NorthPower was asked to give, and gave, a fixed price of approximately
$206,000.00 for the contract. RCH accepted this offer. I accept that at the three-way meeting that took place on 22 August 2006, that RCH and Powerco discussed a further component of the pricing arrangements. However, this discussion did not affect the price that the NorthPower agreed to carry out the work for, but rather, concerned how much Powerco would contribute to the cost of the work that had been agreed between the other two parties. Given that there was a firm price communicated to and accepted by RCH, there is no room to imply a term that the price had to be reasonable, as such a term would be inconsistent with the arrangement between RCH and NorthPower.
[22] I also agree with Mr Browne’s submission that the term should be rejected because it is not necessary to give business efficacy to the contract. Again, as the price was agreed upon, the implied term is unnecessary. In cases where the parties have documented their agreement via a detailed written agreement, there is an initial presumption that the parties have recorded the whole of their agreement in the written document — it may be less appropriate to imply a term in such cases.5
[23] RCH also alleges that there was an implied term to carry out the work with reasonable economy. I would conclude that there can be no such implied term: the
contracting party must satisfy itself as to whether the work method on which the
4 LJ Smits Ltd v Auto-Tec International Ltd (1992) 5 TCLR 21 (HC) at 35.
5 Ibid.
price is based is reasonably economical before the contract is entered into, not after. That is, RCH had the opportunity to make its own enquiries. This is not a case where NorthPower, as the party being asked to price a contract, assumed parallel obligation to function as an independent adviser to the contracting party with whom it was dealing. Nor did RCH suggest that the agreement fell within a particular class of contracts, into which the Court should imply a term that the work will be
performed in a “workman-like” fashion, as a matter of law.6 Finally I do not
consider that such a contractual term would satisfy the requirements of BP Refinery, given that it is not necessary to give business efficacy to the contract.
[24] In any case, even if there was such a term, there is no evidence that it has been breached. In evidence, NorthPower referred to the calculations carried out by its CFO, which established that the profit on the contract was no more than $19,000, or a margin of 9 per cent. No evidence was filed in reply to this evidence. The evidence is not inherently unbelievable.
[25] RCH also contended that NorthPower was obliged to ensure that the actual work carried out was economical and no more than what was reasonably required. NorthPower, not unexpectedly, claimed that the work actually done could be so described.
[26] RCH asserted that there was at least one respect in which this implied term had been breached. The director of RCH gave evidence that, as recently as 2005, it had upgraded the transformer at its Mount Maunganui site. This 2005 transformer was virtually new. It would have been more financially efficient to incorporate it into the upgrade that NorthPower was commissioned to undertake. Against that evidence, NorthPower contended that the upgrade to 2000 kVA could not be accomplished by retaining the 2005 transformer and supplementing its capacity by the installation of an additional transformer. This is because the 2005 transformer (and its predecessors) had been designed for interior use. The 2005 transformer had been housed inside a building on the Mount Maunganui site. However, RCH required the space the building had occupied as part of a planned expansion. In fact,
NorthPower contended, that because RCH was under pressure to increase the size of
6 See McKey v Rorison [1953] NZLR 498 (CA).
its cool store, in the planned expansion, there was no provision for a transformer room.
[27] Any arrangement involving the 2005 transformer would require the construction of a fireproof outbuilding, which would be have to be constructed on a concrete pad that could accommodate the 2005 transformer. Any new transformers supplementing the 2005 transformer would be weatherproof, and would not require a building to be constructed to house them. However, there would be little point in trying to incorporate the 2005 transformer into the arrangement, as the cost of doing so would exceed the cost of installing two new exterior transformers.
[28] The evidence concerning these matters has been provided by Mr Pankhurst (for NorthPower), who has had wide experience in the electrical industry, where he works to this day. His evidence is to the effect that RCH’s account as to the most cost effective and appropriate way of proceeding with the new transformers was wrong. His evidence stands uncontradicted by anyone with suitable qualifications (by way of work experience in the same industry). Nor has any calculation been attempted of what loss RCH might incur as the result of alleged wrong advice and wrong choices being made regarding the new installation.
[29] For these reasons, I conclude that RCH’s cause of action based upon an implied term has no chance of success.
The claim against Powerco — unjust enrichment
[30] The pleaded cause of action in RCH’s amended statement of claim is “unjust enrichment”. RCH’s basic allegation is that:
a) RCH owned the transformers;
b)Powerco has wrongly charged “lines charges” to, and received payment from, Contact Energy Ltd (Contact), the current electricity retailer to RCH’s premises, for use of the transformers;
c) The line charges are passed on by Contact to RCH as part of its monthly electricity account, although the charges are not itemized or separately accounted for; and
d)RCH has paid Contact the amount invoiced in its monthly electricity account.
[31] I consider that this is an accurate summary of RCH’s claims. The reference to “Contact” requires brief explanation. Originally, NorthPower supplied electricity at retail to the plaintiff. Subsequently, Contact took over the supply.
[32] RCH claims against Powerco on the basis that Powerco has been unjustly enriched via dealings between Contact and RCH. RCH argues that because it, RCH, owned the transformers, there is no legal justification for Powerco to charge RCH for using the transformers. RCH asserted that the amounts that Contact charged it for power supply included charges representing the amount that Powerco was charging Contact for use of the transformers, and that Contact passed Powerco’s charges on to RCH.
[33] For the purposes of Powerco’s application for summary judgment, it must be accepted that Powerco owned the two transformers.
[34] It was accepted for the second defendant that the amounts for which Contact invoiced RCH included such line charges (though they were not itemised on the invoice), although there was no acceptance that these came to $3,000 per month as RCH alleged.
[35] Three issues arise for consideration with regard to the claim for unjust enrichment:
a) Does New Zealand law recognise a cause of action for unjust enrichment?
b)Even if the previous question is answered in the affirmative, is there a factual basis to conclude that Powerco has been unjustly enriched?
c) Even if there is a factual basis to conclude that RCH has been overcharged, can RCH recover the overcharges from Powerco, when the overpayments were actually made to Contact?
Is the plaintiff able to bring a claim for unjust enrichment?
[36] Counsel for RCH, Mr Colthart, submitted to me that having regard to the statements in Prince v Attorney-General, it would be wrong to strike out a cause of action in a developing area of the law,7 and that recognition of a cause of action of unjust enrichment was just such an area. As it turns out, I am able to deal with all of the causes of action on the basis of the summary judgment, though I keep the cautionary words in Prince in mind.
[37] However, the leading authority on this aspect of the law, Rod Milner Motors Ltd v Attorney-General, is a Court of Appeal judgment, where Salmon J held that the principle of unjust enrichment does not have the status of a cause of action.8 I consider that even if I were otherwise inclined, I would not be entitled to open the door to such a cause of action at High Court level. Nor do I see any real possibility that if the matter went to trial, there would be a prospect that the Court might find
some reason why it should depart from the law as stated in Rod Milner Motors.
[38] Mr Colthart was not able to point me to any case in a superior court that suggested reconsidering Rod Milner Motors. The position, as I see it, is exactly as it was described by Winkelmann J in Villages of New Zealand (Pakuranga) Ltd v Ministry of Health:9
… I do not accept that there is yet such an independent cause of action [of unjust enrichment]. The elements identified by Laurenson J can accurately be identified as the common threads running through the various forms of action, both at common law and equity, which give rise to a claim to restitution or compensation in respect of a benefit conferred. However, when extracted in this bare form, and taken in isolation, the principles identified are singularly unhelpful in identifying in what circumstances such relief is available.
7 Prince v Attorney-General [1996] 3 NZLR 733 (HC) at 738.
8 Rod Milner Motors Ltd v Attorney General [1992] 2 NZLR 568 (CA) at 576.
9 Villages of New Zealand (Pakuranga) Ltd v Ministry of Health (2006) 8 NZBLC 101,739 (HC) at
[99].
[39] RCH’s case could only be founded on the cause of action of restitution. But as Mr Smith submitted, RCH has not attempted to bring the case on the recognised grounds on which restitution is able to be claimed — such as for recovery of money had and received, or money paid pursuant to a contract which has failed for lack of consideration.
[40] In case I am wrong about the availability of an unjust enrichment claim in New Zealand, I will go on to consider whether, on the assumption that such a claim is open to RCH, it can successfully be brought in this case.
The factual basis for the unjust enrichment — does RCH actually own the transformers?
[41] RCH’s claim that Powerco’s charges are unjust assumes that it, not Powerco, owns the transformers. Powerco has claimed that it owns the transformers, not RCH. While appreciating that care has to be taken at summary judgment level to determine issues of this kind, I am in no doubt that RCH did not own the transformers.
[42] Powerco points to the terms on which it had agreed to connect the upgraded system to its grids. Mr Pankhurst deposed that the work for RCH was referred to internally by Powerco as “Customer Initiated Work” or CIW. With a CIW project, NorthPower would log onto Powerco’s CIW system and enter details of the proposed extension to the network as part of a CIW request. After RCH’s application regarding the proposed upgrade had run its course through the CIW process, Powerco required RCH to accept the conditions that had attached to the consent, including acknowledging that Powerco would own the transformers. Mr Pankhurst accepted these conditions, proceeding on the basis that it was RCH’s agent in doing so. Thereafter, Powerco agreed to connect the upgraded facilities to its network, proceeding on the basis of NorthPower’s ostensible authority to act.
[43] Mr Colthart for RCH, on the other hand, did not accept that NorthPower had any such authority.
[44] It cannot be overlooked that NorthPower’s invoice for carrying out the upgrade work included the price for two new transformers. I also note the new transformers were to be sourced from Powerco. However, Powerco was to retain ownership of them, despite the fact that RCH would pay for the transformers.
[45] At first sight it may appear odd that Powerco could insist on retaining ownership of the transformers, as well as invoice Northpower for a charge, that in turn, was being passed on to RCH, given the usual inference that the party who has paid for an item will end up as the owner of the item. If RCH were not to own the transformers, but rather, possess them as a bailee, it is not immediately clear to see why it should be charged the full value of the items rather than paying a fee for the use of them.
[46] However, I understand that Powerco’s insistence on retaining ownership was not based so much upon its economic interests, but upon the necessity that as the network power provider, it should retain control over the transformers. Connecting transformers up to the network in cases like the present could pose risks to the safety of the network — risks that must be properly managed. In Powerco’s judgment, such an objective could only be achieved by the company retaining ownership of the transformers: ownership allowed them to control the use of the transformers and to have an undisputed right of access to them for safety and maintenance reasons. While I accept that the position is not straightforward, NorthPower prepared its quotation on the basis that it would on-charge the cost of the transformers to the plaintiff, but that ownership of the transformers would remain with Powerco. There was credible evidence that there are good reasons for contracts being structured in this way, and that it was not out of the way for this to happen.
[47] It cannot be overlooked either that Mr Pankhurst’s evidence was that owning the transformers was something of a liability, having regard to the maintenance and replacement responsibilities.
[48] In any case, I accept that RCH actually accepted a contract with those features. The matter can be short-circuited, because Mr Rhodes himself accepted that the terms on which he was contracting with the defendants included that the
transformers, once installed, would be Powerco’s assets. In his affidavit affirmed on
2 September 2011, Mr Rhodes stated, in relation to the meeting on 22 August 2006, after discussing what contribution might be expected from the two power companies:
My recollection is that Mr Devonport was reluctant to commit to an exact figure, but after I pressed him he told me that Real Cool Holdings’ contribution would be “about $80,000” and that the balance of the costs would be met by Powerco. That was on the basis that the transformers once installed, would be Powerco assets. Doug Pankhurst confirmed to me that North Power would only invoice Real Cool Holdings for Real Cool Holdings’ share of about $80,000 and North Power would invoice Powerco for Powerco's share.
(Emphasis added)
[49] Mr Pankhurst, the project engineer from NorthPower, said in his affidavit sworn in 18 August 2011, that he explained to Mr Rhodes before the contract was entered into that:
[E]quipment on [Powerco’s] networks such as transformers and switchgear
were owned and operated by Powerco ... After our conversation [on 8 August
2006], I was left in no doubt that Mr Rhodes understood that any new assets would be owned and operated by Powerco.
[50] In his affidavit, Mr Rhodes made it clear that he did not regard ownership of the transformers as being in issue. Rather, the dispute was about the level at which Powerco would contribute to the overall cost of the transaction. Nor did it appear that there was any dispute about what the installation would cost — it was going to be at least $200,000, with Mr Rhodes recalling that he was told it would be
$218,000. Knowing that the transformers would be owned by Powerco, Mr Rhodes
signed the goods order authorising NorthPower to carry out “work as needed”.
[51] I do not consider that it is arguable that the parties agreed that RCH, and not Powerco, would own the transformers. The unjust enrichment claim must be examined on that basis.
Can RCH recover the benefit from Powerco?
[52] RCH’s claim is that it has paid for excessive amounts that NorthPower/Contact charged to it for the supply of lines services, and for Powerco making available equipment for uses ancillary to the supply of power.
[53] RCH has not provided any analysis or evidence as a basis upon which to critique the Powerco charges.
[54] RCH faces difficulties in bringing a claim in this category for the reasons Mr Smith elucidated in his submissions. There is in general no authority that a restitutionary claim can be passed on to a person or entity who is not a party to the transaction under which the payment is extracted. In other words, the general rule is that there must be a direct transfer between the claimant and the defendant.10
Mr Smith said there are obvious exceptions, such as where a party, by virtue of a
proprietary interest, is able to trace property into the hands of a third party. I accept that no such exceptions apply here.
[55] This is not a case, as Mr Smith pointed out, where the claimant is attempting to recover money or benefits from the party (in this case, Powerco) who has enriched itself at the expense of the claimant. The reasoning underlying that submission is as follows: Powerco has charged NorthPower/Contact for the use of the transformers. RCH does not allege any direct relationship (contractual or otherwise) between itself and Powerco. If it is assumed that the charges levied on RCH for the supply of electricity and line rental have increased as a result of the upgrade to the equipment installed at RCH’s premises, it is NorthPower/Contact, as the electricity supplier, not Powerco, who receives the payment from RCH. However, NorthPower/Contact is not the party that was enriched, as it was required to charge RCH for the amounts in question and also to pass on the amounts recovered to Powerco. I accept this submission. Even if an unjust enrichment or restitution claim were available to RCH on the basis that it owned the transformers, such a claim could not be brought by RCH against Powerco. The result is that there is no basis upon which RCH can succeed in its unjust enrichment claim against Powerco.
Result
[56] A claim founded on unjust enrichment cannot succeed on the present state of the law in Zealand. In any case, because RCH did not own the transformers,
Powerco had a right to charge for the use of the transformers, and cannot be said to
10 Lord Goff and Gareth Jones The Law of Unjust Enrichment (8th ed, Sweet & Maxwell, 2011) at [6-
18]; Andrew Burrows The Law of Restitution (3rd ed, Oxford University Press, 2011) at 69–71.
have received a benefit it was not entitled to by doing so. RCH is not entitled to recover any amount from the party who did not benefit directly.
Estoppel
[57] RCH argues that because Powerco should be held to its representation made at the meeting of 22 August 2006 between Messrs Rhodes, Devonport and Pankhurst, that it would make a contribution that would result in RCH paying no more than “about $80,000” of the total charges for the project. Mr Colthart told me that if detriment were a necessary element that needed to be proved, then RCH suffered detriment when it entered into the contract to pay charges of approximately
$208,000, less the $30,000 contribution that NorthPower agreed to make.
[58] Both Mr Devonport and Mr Pankhurst denied that any such representation was made. The Court’s task is to determine whether there is sufficient substance to Mr Rhodes allegations that the matter ought to be determined at trial on the basis that the Court cannot satisfactorily resolve the issue in the course of a summary judgment application.
Can this dispute of fact be resolved at summary judgment?
[59] The correct approach to resolving a dispute of fact in an application for summary judgment by a defendant was described in Kembla as follows:11
[62] Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits….
[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff's claim. That would permit a defendant, perhaps more in possession of the facts than the plaintiff (as is not uncommon where a plaintiff is the victim of deceit), to force on the plaintiff's case prematurely before completion of discovery or other interlocutory steps and before the plaintiff's evidence can reasonably be assembled.
11 Westpac Banking Corporation v M M Kembla New Zealand Ltd, above n 1, at [62]–[63].
[60] Mr Rhodes claims that Mr Devonport (the Key Account Manager for
Powerco) made the alleged representation at a meeting between all the parties on 22
August 2006. At that meeting, Mr Rhodes also signed the authority for NorthPower to commence the work, although no firm price was mentioned in the authorisation form. In the next week or two after that meeting, the contract work commenced. There were also discussions between Powerco and NorthPower about whether RCH would receive a refund in respect of the old transformer, with Mr Devonport determining that there would be no refund. Mr Pankhurst communicated this decision to Mr Rhodes on 13 September 2006. Mr Rhodes says in his affidavit that having received this advice, he immediately telephoned Mr Devonport and remonstrated with him about what he saw as Powerco going back on its word. He says that Mr Devonport agreed to revisit the issue. Mr Devonport does not recall having any such telephone conversation. Neither of the parties appears to have a diary note or e-mail or some other form of confirmation of this discussion.
[61] In the meantime, the work continued, and on 26 September 2006, NorthPower accepted the conditions that Powerco had attached to its consent to the works being connected to the network.
[62] On 1 October 2006, the first of the two transformers was enlivened at the site. Mr Rhodes would have known that this step had been taken, just as he would have known that NorthPower staff had been working on the transformer project for some weeks. Messrs Pankhurst and Devonport continued to debate the question of who would pay the various costs under the contract. Apparently around this time, Mr Rhodes wanted to verify his recollection of what had been discussed at the 22
August meeting, because he requested from Mr Pankhurst verification of what, he, Mr Pankhurst remembered. Mr Pankhurst set out his recollections in an e-mail that he sent to Mr Rhodes on 12 October 2006. He said that:
David Devonport indicated to us both (verbally) that Powerco Ltd would make a contribution towards the capital cost of the new assets to be retained in Powerco's ownership.
[63] Mr Devonport says that he called Mr Rhodes on 17 October 2006 and informed him that Powerco had determined that it would make a contribution of
$30,000 to the works. Mr Rhodes says that the discussion became heated, and he
spoke of Powerco “reneging” on the advice given at the 22 August meeting. Mr Rhodes says that Mr Devonport agreed to again revisit the issue. Mr Devonport made a file note of the discussion and sent an e-mail the following day confirming the $30,000 figure, but remaining silent about revisiting the question of Powerco’s contribution. Mr Rhodes does not have any note or e-mail supporting his recollection of the conversation, and he does not say that he made one.
[64] However, on 25 October, Mr Pankhurst advised that Powerco had agreed to contribute $32,400 (plus GST), leaving RCH to pay $185,196 (plus GST). Mr Rhodes says that following this advice, he again telephoned Mr Devonport, and stated that the contribution from Powerco was significantly less than he had been advised at the meeting on 22 August 2006. Mr Rhodes claims that Mr Devonport said he would “revisit it again”. Mr Devonport does not have any recollection of such a phone call, and he has not made a file note about it. Nor does it appear that Mr Rhodes made any record of the discussion. Mr Devonport says that there would have been no need in his mind to further revisit of Powerco’s contribution because Powerco had already considered and “signed off” the matter.
[65] Powerco submitted a document intended to record agreement about the ownership of assets, including the transformers, to RCH. However, this document was never executed.
[66] NorthPower sent an invoice to RCH in November 2006. It was not paid. Apparently, there was no communication between the two companies until the end of February 2007, when Mr Pankhurst followed up the non-payment of the account. Mr Pankhurst noted via e-mail that he understood that there was a disagreement between RCH and Powerco regarding ownership of the transformers, but that had nothing to do with NorthPower. He said his company was an independent contractor employed by RCH to do a job.
[67] Mr Rhodes responded in a letter to NorthPower on 16 March 2007 in the following terms:
We find it hard to believe that your role is as an independent contractor. Powerco clearly has delegated to you its functions of maintaining and installing its lines and equipment.
We relied on you to offer good advice as to providing adequate line and power input so as to run our business.
It would seem also that Powerco considers itself to remain the owner of the lines and transformers.
This is a matter which should be pursued pursuant to the Fair Trading Act and the Commerce Act.
To this end we intend to instruct our counsel to issue proceedings for a determination of these matters in the High Court...
[68] The defendants raised the point that there was not one mention in this letter of the alleged representation that Mr Rhodes claimed would limit RCH’s liabilities to approximately $80,000. Instead, the letter mentioned other complaints. In effect, the most glaring and obvious breach of the arrangements between the parties — at least according to the position Mr Rhodes has since taken — was omitted. This letter again raises the issue as to the ownership of the transformers — curiously, this contrasts with Mr Rhodes’ first affidavit, where he noted in passing that, at the meeting of 22 August 2006, he had been told that the transformers would belong to Powerco.
[69] Although they did not put it that way, the thrust of the defendants’ submissions is that RCH has attempted to contrive a dispute over the contribution in order to avoid payment.
[70] I find it significant that such an important matter was not unequivocally placed on the record until between four and five months after the date when RCH knew that Powerco was not proposing to make a contribution as per the alleged representation. Mr Rhodes, of course, says that he did raise the issue orally. Though the fact that he did not take a written position on the matter does not of itself prove that he is not to be believed, I regard it as surprising that he did not do so, given that a substantial amount of money was at stake. According to his account of matters, Powerco gave an assurance to the effect that it would pick up $126,000 worth of work under the arrangement, leaving RCH the approximate balance of $80,000. However, from October 2006 onwards, Powerco made it known to RCH that it
would only be contributing $30,000, leaving RCH with the liability of approximately
$176,000. But the fact that the letter of 16 March 2007 completely omitted to refer to this issue raises real suspicions as to RCH’s version of events. While Mr Rhodes might not be in the habit of making file notes or placing his position on the record by way of a confirmation e-mail, the other two main parties, Messrs Pankhurst and Devonport, did follow such practices, and they do not appear to have noted the conversations which Mr Rhodes claims he had with them. Given the conversations concerned important matters, one might have expected some reference to them in the e-mails the parties produced or file notes made at the time.
[71] In general terms, issues of credibility are not appropriately determined at summary judgment stage. They are left to the trial. However, credibility is not something that is assessed exclusively on the basis of considerations such as how the witness responded to cross examination at trial, although in the appropriate case that can be an important factor. For no matter how plausible a witness might be, there can be cases where there are circumstances present, such as inconsistent correspondence or patterns of conduct, which cannot be explained in oral evidence. In cases of that kind, there is no real evidential issue requiring to be tried. It will follow that there is no arguable defence that the plaintiff ought to be permitted to pursue through the interlocutory phases of the case to trial. In such a case there is not, in truth, a defence available to the respondent to the summary judgment application.
[72] I accept that Mr Rhodes may believe that he was told that RCH’s contribution would be about $80,000 at the meeting in August. But it is clear from authority that the Court may still conclude that there is no defence, notwithstanding a sworn statement from the respondent setting out the circumstances that are relied upon to defeat the application for summary judgment. This point was made clear in the case of Mitchell v Trustees Executors Limited:12
We accept Mr Gordon’s submission that, when the Eng Mee Yong v Letchumanan approach is applied to Mr Richards’ assertion about Mr Dellabarca’s representation, it becomes clear that Mr Richards’ evidence can be discounted. There is not a single contemporaneous document or exchange which is consistent with Mr Richards’ story, and it is simply unbelievable
12 Mitchell v Trustees Executors Limited [2011] NZCA 519 at [55].
that such a key representation affecting a very significant personal liability on the part of Mr Richards and Ms Mitchell would have escaped mention in every document.
[73] Though the conspicuous omissions from the evidence that I have set out above are cause for real doubt, I conclude, just, that this is not a case where it is possible to say that Mr Rhodes’ account of the facts will not be accepted. I will next consider whether, even if Mr Rhodes’ account of the facts are accepted, RCH will still have a defence to the summary judgment application. If there is some chance which is greater than negligible that RCH will be able to succeed, then it will have a defence to the defendants’ summary judgment application.
Has RCH established the elements of estoppel?
[74] For an estoppel claim to succeed, the party alleging an estoppel must show that:13
a) A belief or expectation has been created or encouraged through some action, representation or omission to act by the party against whom the estoppel is alleged;
b)The belief or expectation has been reasonably relied on by the party alleging the estoppel;
c) Detriment will be suffered if the belief or expectation is departed from; and
d)It would be unconscionable for the party against whom the estoppel is alleged to depart from the belief or expectation.
[75] Estoppel requires a clear and unambiguous representation,14 which is sufficiently unequivocal to justify the other party’s reliance on it — what amounts to sufficient clarity “is hugely dependent on context”.15 In this case, given that RCH
and Powerco (and their respective representees) were well within the commercial
13 Gold Star Insurance Co Ltd v Gaunt [1998] 3 NZLR 80 (CA) at 86.
14 Marine Steel Ltd v The Ship “Steel Navigator” [1992] 1 NZLR 77 (HC) at 83.
15 Thorner v Major [2009] UKHL 18, [2009] 1 WLR 776 at [56] per Lord Walker.
paradigm of self-interested parties of equal bargaining strength dealing at arm’s length in a commercial transaction, I find it reasonable that any representation RCH seeks to rely on must meet a high standard of certainty, clarity and precision.
[76] In this case, RCH claims that at the 22 August 2006 meeting, Mr Devonport said that after the contribution from Powerco, RCH would be required to contribute “about $80,000”. This representation is not a clear and unequivocal representation. The end figure that RCH claims it would be required to contribute is only a rough approximation. I note that Powerco did not contest that an estoppel of the kind that RCH contends for is legally untenable. But in a case of the kind now under consideration, where the plaintiff seeks to enforce the terms of the representation, it is particularly important to know what representation the representor is to be held to have made.
[77] Part of the context includes considering why Powerco’s representative did not simply specify a figure then and there, when the question of his company’s contribution was raised at the October meeting. It would have been obvious that that was because the person making the utterance was unable or unwilling to bind his company to a defined contribution at that point. A moment’s reflection would have suggested that was because not all the information that would influence the decision was at hand, that he needed to get authority from someone who was not at the meeting or that he simply wanted to think about it further – to mention some examples. Indeed, in his evidence Mr Devonport said that he could not have suggested a contribution figure until he had calculated what the line charges would be. That being so, it was not a reasonable expectation for Mr Rhodes to conclude that the point was decided and he could expect that his company would not have to pay anything more than $80,000. It may be that Mr Rhodes subjectively convinced himself that that was the case, but that is not the question the Court poses when considering whether the representation is enforceable.
[78] Support for the view that no firm commitment was made at the August 2006 meeting is to be found in the fact that on 12 September 2006, Mr Pankhurst who had been at the meeting, e-mailed Mr Devonport requesting Powerco to confirm its contribution “ASAP”.
[79] Further, it would not be unconscionable for Powerco not to be held to the terms of the representation. In fact, the opposite is the case. To require that the expression of an opinion about what the company might decide to do in the future to be construed as a commitment having immediate effect, would be unconscionable from the second defendant’s perspective.
[80] Mr Colthart argued that Powerco was under pressure at the October meeting to get a decision made because it needed the upgraded power supply as part of the expansion of its premises which was then underway. But it is not suggested that as at the date of the October meeting Powerco had been in any way responsible for Mr Rhodes’ company finding itself under pressure – if indeed that was the case.
[81] My assessment, therefore, is that the estoppel point must fail, and the basis for an arguable defence has not been made out.
Conclusion
[82] RCH’s claim as to the implied term must fail. There is no implied term in the contract with RCH that the charges would be fair and reasonable, or that NorthPower would take reasonable care to ensure its recommendations for the upgrade would result in the most economical outcome for RCH. Even if there were such terms, there is no factual basis for RCH to allege that they have been breached. There was never any possibility that the original transformer could be incorporated into the new design.
[83] The claim for unjust enrichment must fail. The cause of action would be struck out as not being one that is recognised by the law in New Zealand. It would not survive an application for summary judgment by Powerco, either, because it has at its heart the proposition that RCH, and not Powerco, owned the new transformers. But that is not what the contract provided for. Further, even if it were capable of being viewed as a restitution claim, it could not succeed because the effect of the claim is to seek restitution from a party other than the one who received the direct benefit, which RCH now seeks to recover.
[84] The estoppel claim must also fail. Though I am not willing to conclude that there is no prospect of RCH establishing at trial that Powerco made a representation that RCH would only have to put “about $80,000” into the contract after Powerco had made its contribution (despite conspicuous omissions in the surrounding evidence), even if such a representation were established, it is insufficiently clear and unambiguous to ground an estoppel claim.
[85] The result of my decision is that there is no cause of action that can survive the defendants' application for summary judgment. Further, the unjust enrichment cause of action brought against Powerco cannot survive a strike out application because the cause of action in the form pleaded is not legally sustainable. The result is that judgment will be entered for the defendants against RCH on all causes of action.
[86] The parties should confer on the matter of costs, and if they are not able to agree they are to file memoranda which are not to exceed five pages within 15 days
of the date of this judgment.
J.P. Doogue
Associate Judge
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