Triastra Limited v Proprietors of Taharoa 'C' Block
[2019] NZHC 2230
•6 September 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-419-318
[2019] NZHC 2230
BETWEEN TRIASTRA LIMITED
Plaintiff
AND
THE PROPRIETORS OF TAHAROA “C” BLOCK
Defendant
Hearing: 8 to 12 April 2019 Counsel:
BD Gustafson and FD Porteous for plaintiff AJ Horne and JJK Spring for defendant
Judgment:
6 September 2019
JUDGMENT OF FITZGERALD J
This judgment was delivered by me on 6 September 2019 at 10:30 am, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
7
Solicitors: Rainey Law, Auckland (G Grant)
MinterEllisonRuddWatts, Auckland
Triastra Limited v The Proprietors of Taharoa “C” Block [2019] NZHC 2230 [6 September 2019]
Contents
Introduction [1]
The pleaded claims [7]
Observations on the evidence [12]
Factual background – more detail
The wind farm project [18]
The contractual arrangements with Triastra [20]
Agreements with potential joint venture partners [27]Taharoa’s letter of 26 July 2012 and ensuing correspondence [30]
Triastra’s work after 18 October 2012 [38]
Developments in first half of 2013 [47]
Taharoa’s second purported termination [51]
Events in the second half of 2013 [61]
Triastra claims payment for the period June to November 2013 [63]
Did Taharoa validly terminate the Final Agreement as of 18 October 2012?
Introduction [65]
Interpretation of termination clause [66]
Did the July Letter give three months’ notice of termination? [71]
The parties’ relationship from 18 October 2012 to June 2013
The parties’ submissions [81]
Discussion [84]
Termination of the Ad Hoc Contract
Should a term be implied that the Ad Hoc Contract was terminable on
reasonable notice? [89]
What was a reasonable notice period? [91]
Triastra’s estoppel claim
Legal principles [103] Discussion [104] Result and next steps
[113]
Costs
[117]
Introduction
[1] The plaintiff (Triastra) and the defendant (Taharoa) were parties to a contract pursuant to which Triastra provided consultancy services to Taharoa. The services related to the investigation and pursuit of a wind farm by Taharoa on land it owned near the Kawhia Harbour.
[2] The parties had been in a contractual relationship since 2005. This comprised a series of written agreements which were extended by mutual agreement from time to time. Under those arrangements, there was the potential for Triastra to earn a substantial success fee in connection with the wind farm project.
[3] But in July 2012, Taharoa purported to terminate the contractual arrangements, by giving Triastra three month’s written notice (such that the arrangements came to an end in October 2012). A key issue for determination in these proceedings is whether Taharoa was entitled to give such notice, and even if so, whether its July 2012 letter was effective in doing so.
[4] Irrespective of the resolution of the above issue, there is no dispute Triastra continued to provide consulting services to Taharoa after October 2012 and that Taharoa continued to pay for them. This gives rise to subsidiary issues as to the basis upon which those services were provided and paid for, and whether a later letter sent by Taharoa in May 2013 was effective in bringing to an end whatever arrangements were then in place.
[5] When Triastra first filed its claim, it sought some $2 million by way of damages for what it said was Taharoa’s unlawful repudiation of the contractual arrangements. By the time of the hearing before me, however, the issues had narrowed and Triastra’s claim had reduced to approximately $155,000.
[6] Before setting out the factual background to the claim in more detail, and to put that background into its proper context, it is helpful first to summarise Triastra’s pleaded claims.
The pleaded claims
[7] There is no dispute a contractual arrangement existed between the parties over the period 25 February 2008 to 18 October 2012 (the “Final Agreement”). Taharoa says it was entitled to terminate the Final Agreement by giving three months’ notice, and that it gave such notice by way of a letter dated 26 July 2012. It therefore says the Final Agreement came to an end in October 2012.
[8] Triastra does not agree. It first argues that the Final Agreement does not permit (unilateral) termination on three months’ notice. It further says that Taharoa’s July 2012 letter, properly construed, was intended to vary the terms of the Final Agreement only, rather than to terminate it.
[9] Triastra’s first cause of action for breach of contract is therefore predicated on the Final Agreement remaining in force until three months after receipt by it of a letter from Taharoa’s solicitors dated 3 December 2013 (which it accepts did give notice of termination of the agreement). Triastra claims approximately $155,000, being amounts it says ought to have been paid to it under the Final Agreement over the period June 2013 to March 2014.
[10] In the alternative, if the Final Agreement was validly terminated by Taharoa’s July 2012 letter (and thus came to an end on 18 October 2012), Triastra says that an unwritten agreement came into force at that point, which contained an implied term that it could only be terminated by giving three months’ prior notice.1 In purporting to give two weeks’ notice of termination in May 2013, Triastra says Taharoa breached the implied term and the (unwritten) agreement therefore remained in force (until the three months’ notice of termination referred to at [7] above). Taharoa, on the other hand, says that after 18 October 2012, no contract existed between the parties. It says that on 21 May 2013, it validly gave two weeks’ notice of termination of all arrangements between the parties, with those arrangements terminating on 4 June 2013.
1 I granted Triastra leave to amend its claim during the hearing to include this alternative cause of action.
[11] Finally, Triastra pleads in the alternative that if Taharoa is not contractually obliged to pay Triastra’s outstanding invoices, it nevertheless gave instructions to Triastra over the period June to 30 November 2013 to continue to carry out work on the wind farm project (for which Triastra would be paid). Triastra says it reasonably relied on those instructions and carried out the requested work. It therefore says it would be unconscionable for Taharoa to act in a manner contrary to its representations. The same sum is sought by way of damages on this cause of action as on the contractual causes of action.
Observations on the evidence
[12] Before turning to the factual background, I first make some brief observations on the evidence generally.
[13] The issues in this case are relatively narrow, focussing primarily on contractual interpretation, and the proper interpretation and effect of certain correspondence which passed between the parties. Those are objective inquiries. Despite this, however, there was considerable (inadmissible) evidence of witnesses’ subjective views and opinions on the interpretation and effect of various contracts and items of correspondence.
[14] Triastra’s evidence was largely given by its sole shareholder and director, Mr Adam Poulopoulos. I do not rely solely on Mr Poulopoulos’ evidence on contested factual matters, unless corroborated by other parties’ evidence or contemporaneous materials. While I do not intend any direct criticism of Mr Poulopoulos in this context, he had in my view a natural tendency to “talk up” the contents of documents and factual matters. That is perhaps understandable, given his long-standing work on the wind farm project and his inevitable disappointment when the project was abandoned. But by way of example only, Mr Poulopoulos said in evidence that his contract with Taharoa:
… provided that Triastra would not charge Taharoa its standard hourly rate of
$250 per hour plus GST but instead would reduce that hourly by 50 per cent to $125 per hour plus GST for hours incurred after May 2015.
[15] The contract does not, however, say anything to that effect. It simply provides that Triastra will bill Taharoa $16,000 (plus GST) a month, plus expenses. While
Mr Poulopoulos said the $16,000 per month did in fact reflect a reduced fee on his part, that is quite different to a contractual term to that effect.
[16] Similarly, Mr Poulopoulos said his contract with Taharoa provided that “Triastra would receive a success fee when it had completed its part in the project”. Again, however, that is not what the contract says. It instead states “should a success fee be payable to Triastra…”. A further example is Mr Poulopoulos’ evidence of ANZ Bank’s willingness to fund the wind farm project. The overall impression he gave, both in contemporaneous documents and in his evidence, was that ANZ had agreed to provide funding of approximately $70 million,2 subject to certain conditions precedent being satisfied. However, there was no documentary evidence of any formal funding offers or agreements to lend on ANZ’s part.
[17] A further issue was that a number of persons who represented Taharoa in its dealings with Triastra were either unavailable or not called to give evidence. This meant that witnesses who were called on behalf of Taharoa were often giving evidence on matters in respect of which they did not have any personal involvement or knowledge. There was also a lot of evidence about the overall viability of the wind farm project and Taharoa’s ability to finance it. However, little, if any, of that evidence is relevant to the issues I must determine. For that reason, I have not addressed that evidence in any detail in the following factual background section of this judgment.
Factual background – more detail
The wind farm project
[18] Taharoa is a Māori incorporation which owns land near the Kawhia Harbour (known as the “Taharoa C Block”). The land is known for its iron sands mining operation, for which Taharoa has received a royalty. Since 2018, it has been the majority owner of the current iron sands mining company.
[19] In 2004, Taharoa began investigating the possibility of utilising land it owned in the region for a wind farm. Taharoa is governed by a Committee of Management
2 Which he described as “the largest loan negotiation in New Zealand at that time”.
(CoM). Recognising that it did not have the internal skills to consider and advance such a project, Taharoa engaged several consultants to work with it on the wind farm project. One of them was Triastra. As noted, Triastra’s sole shareholder and director is Mr Poulopoulos. He is the driving force behind the company.
The contractual arrangements with Triastra
[20] In early 2005, the parties entered into an arrangement pursuant to which Triastra provided consultancy services to Taharoa in relation to the proposed wind farm. The terms of the arrangement were recorded in an (unsigned) document titled “Proposal for Advisory Services” and numbered 095/2004 (First Agreement).3
[21] The First Agreement envisaged that Mr Poulopoulos would spend one day a week at Taharoa’s offices in Hamilton. The consulting work was to include “assist[ing] where necessary to co-ordinate negotiations with funders, suppliers, advisors, joint venture parties, legal and specialist advisers and any other interested parties who could be required.” For this work, Triastra was to be paid a monthly fee of $6,500 plus GST. In addition, the First Agreement provided that:
Should a success fee be payable to Triastra for the raising of capital then this will be split on a 50/50 basis with Taharoa C less any direct expenses which may arise as a result of the payment of such fee.
[22] The First Agreement’s duration was stated to be a period of 14 months from 1 March 2005 until 30 April 2006, after which “a further term can be arranged by the parties, the duration of which will be subject to a separate agreement”.
[23] The First Agreement was replaced in March 2006 by a second (unsigned) agreement titled “Proposal for Advisory Services” and numbered 217/2006 (Second Agreement). The Second Agreement noted that after full investigation of the land at Taharoa as a potential wind farm site, an application for resource consent was to be made. Triastra’s work was to include “ensuring the renewable energy project [was] commercially viable”, and “looking for satisfactory funding arrangements should the
3 This and the second and final agreements (discussed below) were all unsigned. There is no dispute, however, that they were legally binding as between the parties.
project prove financially viable”. Mr Poulopoulos was to spend four days per week in Taharoa’s Hamilton office.
[24] The Second Agreement’s duration was stated to be from 1 May 2006 to 31 March 2008, again after which the parties could, by separate agreement, arrange a further term. Given the increase in work to be carried out by Triastra, its fee was raised to $16,000 per month (plus GST). Mr Poulopoulos explained this was around half his “normal” fee.4 He said the reason he was prepared to contract on a reduced hourly rate was the possibility of earning a success fee. The Second Agreement’s provision on the success fee was the same as in the First Agreement (see [21] above).
[25] The Second Agreement also contained a termination provision, which is of central importance to the issues to be determined in this judgment. It said as follows:
While we both reserve the right to terminate this agreement prior to completion, on 3 months’ notice, the arrangements outlined will continue in effect unless we mutually agree in writing to vary them.5
[26] On 25 February 2008, Mr Poulopoulos wrote to the Chairman of Taharoa, noting that the Second Agreement’s term was about to expire. The letter noted that Triastra was happy to provide ongoing services until March 2011 on the same terms, but with two minor changes (which are not relevant for present purposes). I will refer to the Second Agreement, as amended and extended by the 25 February 2008 letter, as the Final Agreement. While the Final Agreement was stated to have effect until March 2011, the parties agree it continued to govern the relationship between them after that date.
Agreements with potential joint venture partners
[27] Progress on the wind farm project continued. On or around 29 June 2012, Taharoa entered into a Limited Partnership Agreement with the Australian subsidiary
4 When broken down into an hourly rate across 32 hours per week, giving an hourly rate of $125 per hour, rather than $250 per hour.
5 The reference to “completion” is unclear; it could refer to refer to the (then) contractual expiry date, being 31 March 2008, or the completion of the wind farm project (though none of the agreements referred to any specific project milestones). I do not, however, need to resolve this issue, given Taharoa’s (purported) notice of termination was given before “completion” of either the contract term (as later extended) or the wind farm project.
of a Chinese turbine manufacturer, Goldwind. Goldwind had been identified as a potential joint venture partner in the wind farm project. On the same day, the parties to the Limited Partnership Agreement entered into a project subscription agreement (PSA). In the PSA, Taharoa agreed that it would not, prior to the Completion Date (as defined in the PSA):6
Hire, terminate or vary the terms of employment or engagement of any employee, agent, distributor or independent contractor who is materially involved in the Project, or agree to do any of those things.
[28]Goldwind had a right to terminate the PSA should Taharoa breach this clause.7
[29] Despite referring to these aspects of Taharoa’s arrangements with Goldwind in argument, Mr Gustafson, counsel for Triastra, confirmed that Triastra did not seek to enforce or otherwise rely on these clauses by way of a privity of contract argument.
Taharoa’s letter of 26 July 2012 and ensuing correspondence
[30] On 26 July 2012, Taharoa wrote a letter to Triastra (the July Letter) which is also of central importance to this case. Given its importance, its full text is set out below:8
For the last three weeks we have been discussing your continued services to Taharoa C Block. Thank you for your time and openness during our meetings.
As such, to initiate the next phase, please accept this as our formal written notice to conclude your current contract. Your services under the current arrangements shall cease on 18 October 2012, being the three-month notice required.
I ask that we meet before 31 August 2012 to complete the negotiations regarding your services in terms of:
·The needs of our organisation
·An update of the current projects you are working on and their viability
·Transfer of those projects to our organisation
·Your services regarding the Taharoa Wind Farm during construction
6 PSA, cl 6.2(b)(v).
7 PSA, cl 9.
8 Grammatical and typographical errors in the quoted correspondence in this judgment are from the original.
Once our discussions are complete a new contract for services will be drawn up to commence on 18 October 2012. Please contact me to arrange a suitable time for us to meet here at the office.
[31] As outlined in the introductory section of this judgment, a key issue is whether this letter validly terminated the Final Agreement on three months’ notice (Taharoa’s position), or merely sought to vary the Final Agreement (Triastra’s position).
[32] For completeness, I also note that the July Letter was sent by Charles Willison, who was Taharoa’s appointed Manager. Although in his evidence Mr Poulopoulos made several references to and in effect queried Mr Willison’s authority to send the letter, there is no formal pleading by Taharoa that he lacked actual or ostensible authority to act on Taharoa’s behalf. Nor was any argument to that effect advanced by Mr Gustafson in his submissions. Other than to record that it is tolerably clear from the evidence that Mr Willison would have had the requisite authority, I say nothing further on this topic.
[33] Returning to the chronology, Triastra responded to the July Letter by way of a letter dated of 29 August 2012. It said the following:
Thank you for your letter dated 26 July 2012.
We would like to highlight that the Triastra contract for services (TRI 290 2008) is to be novated by the Taharoa Windfarm partnership (LP).
As a consequence, early termination would not be prudent in the interest of Taharoa C (TAH C) as by novating TRI 290-2008 the success fee payable to Triastra would become the responsibility of the LP. If on the other hand TR1290-2008 should be terminated prior to novation, the success fee would become the responsibility of TAH C. The contract TRI 290-2008 once novated and paid out would then be terminated by the LP.
At present, the full time work on the Taharoa Windfarm will continue into November or December. This is being driven by delays arising as a result of Goldwind’s inaction in completing the commercial, legal and corporate requirements necessary to finalise the establishment of the Limited Partnership and the resultant holdup in the work required to complete the planning phase of the Windfarm project, prior to handing over to the EPC contractor for the start of construction.
There is little doubt that there are between 60 and 90 days of work required to finalise this first phase. The exact length of time required, will be determined by how smooth the hand over process is managed.
[34] As can be seen, Triastra did not (expressly at least) dispute Taharoa’s right to terminate the Final Agreement; rather it sought to persuade Taharoa not to terminate.
[35]Taharoa responded on 31 August 2012, stating the following:
Thank you for your letters dated 29 and 30 August 2012 and for identifying tasks for the Windfarm.9
However as per my letter dated 26 July 2012 and our discussions during August 2012, we need to identify specific timeframes, lead responsibility holder(s) for the respective Windfarm finalisation tasks. This will avoid any unnecessary duplication of our resources.
…
New Service Contract for Taharoa C – to negotiate
Furthermore, in terms of your comments regarding early termination of the Triastra contract (ref: TRI 290-2008 & 217-2006), please note that these contracts will be replaced by the new contract scheduled to begin on 18 October 2012. This contract will be for services to Taharoa C Block and not necessarily the Windfarm,
As previously advised, I would like the opportunity to discuss this further to confirm how you can assist with other projects from October 2012. During our trip to Australia this coming week, we will discuss this matter.
…
Our requirements - Taharoa Windfarm project
I do ask that you work on the Taharoa Windfarm project only, by providing the aforementioned Taharoa Windfarm Project plan and to report directly to me on a weekly basis. Therefore we will need you to be at our office two days per week.
Therefore, for the period 10 September to 18 October 2012, you will not be required to assist with the rollout of nominated energy related projects or to look for other renewable energy projects. Please prepare a written update on these other projects and the handover of the information and resources to the Incorporation.
Payments to Triastra Limited to 18 October 2012
I confirm that we will continue to pay you to 18 October 2012 on your current rates.
[Emphasis in original]
9 The 30 August 2012 letter was not produced in evidence.
[36] A meeting of the CoM was also held on 31 August 2012. Mr Poulopoulos attended the meeting for a time and gave a general update on the wind farm project. The minutes indicate there was a general level of concern expressed by CoM members at the progress (or lack thereof) on the wind farm project and the ongoing negotiations with Goldwind. After external consultants had in all likelihood left the meeting,10 the minutes record the following report from Mr Willison in relation to the consultants:
Linda has the accounts process sorted, therefore Murray works on the Windfarm.
We are at a critical time as we need our consultants in order to progress and complete the Wind Farm, engāri at times I am not sure what our consultants are doing?
With Adam, Ken & Murray, I have am repeatedly requested tasks & timeframes, before being authorized. My concern is we have no weekly/monthly tasks to measure performance against, only target is to build a windfarm! My concern is the repetition and duplication of work!
Murray has been given notice, finish 2 Sept — he can work from the Office for one day per week and the rest he works from Auckland. This is not yet implemented. Adam determines the majority of Murrays work i.e. Wind farm financials. We are not there yet re: contracts.
Maxine Moana-Tuwhangai
The issue is, he has no contract, he only has one day, and find out what task he is doing, he needs a contract and he needs to know why we are employing him. We do need someone who has an indepth historical knowledge. Linda's role was to do the day to day things that Murray didn't need to do and therefore cut down costs.
Actions:
Ø Peter Bowker Finish 30 Sept No Renewal Ø Ken Hulls Finish 30 Sept New 1 Oct Ø Murray Phillip Finish 2 Sept New 3 & 10 Sept or 1 Oct Ø Adam Poulopoulos Finish 18 Oct Renew 19 Oct
[37] Mr Willison and Mr Poulopoulos (and another consultant) met again on 18 October 2012 to discuss contracting arrangements. Mr Willison’s email of that evening reported on the discussions as follows:
10 Mr Poulopoulos confirmed that from time to time, the consultants would be asked to leave CoM meetings.
Triastra & Clansman. Formalise and update consulting contracts
Thank you for your time this afternoon to progress your consulting contracts with Taharoa C Block
The purpose of the meeting
The purpose of this meeting was to formalise and update consulting contracts going forward.
Background
These consulting contracts discussions commenced in late July 2012, and have been on-going through August and September 2012. Terminations letters have been set to Clansman and Triastra respectively. The consulting contracts pertain to the Taharoa Wind Farm Project, in principle.
Taharoa C GOALS to formalise and update consulting contracts
·Commence the construction phase of the Taharoa Wind Farm by 30 November 2012
·Management/staff succession planning beyond project commissioning when consultants have finished
a.For Best Practice, Linda (Accountant) needs to control Xero, and in order qualify all accounting transactions for 2013 Audit
b.Costs. Linda is cheaper than Murray to produce financial information of the Group, excludes Wind Farm modelling
c.Security & duplication of the records -for future use.
·Minimise resource duplication and overlay (Efficiencies)
·Isolate the Taharoa Group financials from the Taharoa Wind Farm project
Review of today's discussions
As discussions have been on-going since late July 2012, I ask for feedback on previous and todays discussion by no later than 5pm Thursday 25 October. Draft contracts will be forward in the next few days.
Triastra’s work after 18 October 2012
[38] From 18 October 2012 to 4 June 2013, there is no dispute Triastra continued to provide consultancy services to Taharoa and that Taharoa paid for them (being
$16,000 per month, plus GST, i.e. the same amount as under the Final Agreement).
[39] On or around 26 October 2012, Taharoa sent Triastra a draft contractor’s agreement. It is common ground this was never executed or agreed to by Triastra. It was for a proposed term of one month only, from 29 October 2012 to 30 November 2012, though somewhat curiously given that term, provided that either party could terminate the agreement on one month’s notice.
[40] Mr Willison, Mr Poulopoulos (and Taharoa’s legal counsel) met on 30 October 2012 to continue discussions on the contractual arrangements. Mr Willison sent a letter to Triastra later that day, summarising the discussion at the meeting. The letter recorded Mr Poulopoulos’ rejection (on behalf of Triastra) of the draft consultancy agreement sent to him on 26 October. It also recorded “your request to continue your role to the end of December 2012 (under terms prior to October 2012) is not accepted”. The letter went on to state:
On July 2012 Taharoa C gave Triastra three months’ notice advising that your role would cease on 18 October 2012. Therefore Taharoa C has met this requirement.
…
Going forward I reiterate that we want you to continue to work with Tahroa C Block to bring the Taharoa Windfarm to fruition. However, this cannot occur unless a written Service Agreement between Taharoa C Block and Triastra Limited is in place by the end of this week.
Therefore I request that we meet here on Thursday morning [2 November 2012], to discuss this matter to confirm the terms of engagement and to finalise a Signed Service Agreement beginning 29 October 2012. This will be my final proposal to Triastra Limited.
[41] It appears a meeting was held on 2 November 2012 and some form of agreement was reached that Triastra would continue to work on the wind farm project until 12 December 2012. In this context, Mr Willison send Mr Poulopoulos (and others) an email on 2 November (bearing the subject line “Taharoa Windfarm – Deadline Wed, 12 December 2012) stating:
Our target!!
This email is to confirm the date of Wednesday, 12 December 2012 for all pre construction work and agreements to be completed, and the Project handover to the EPC Contractor. I attach the Pre Construction Project Milestones provided by Triastra that need to completed by 12 December 2012.
Charles Involvement
I advise that I will be taking a more active role within this project, therefore I expect;
1. Weekly written updates- Friday at 4pm. Please send these to me via email detailing what has been achieved during the week and what needs to be done the week coming.
2. All Agreements are to be in final form by this date (if not already completed) so that our Committee can sign them off on Friday, 14 December being their last meeting of the year.
3. All communications (including emails} are to be sent to our office. Therefore please include myself and Delia (email: deliaw@taharoa- c.co.nz)
4. All original documents are to be sent to and stored at our office.
I am attending the FoMA conference this weekend. Have a great weekend. And see you Monday.
[42] A later email sent by Mr Willison to Mr Poulopoulos on 18 December 2012 is also consistent with an agreement to continue to work with Triastra until 12 December 2012. It recorded:
As per on-going consulting contract negotiations, the completion of the Wind Farm in to construction is imperative. HOWEVER this does not mean there is no budget, no timeframe and no consulting contracts. At your respective request I have rolled through work from the October 2012 notices, through to the 12 December 2012 deadline. The deadline has passed, and I need to complete consulting contracts with you respectively. Please note payment of
November invoices will be dependent on concluding consulting contracts.
…
Progress (& lack of) of consulting contracts was raised at the Friday’s Committee of Management. I have reiterated that the Tahroa C Block vision is to be “leaders in our businesses”, therefore these consulting contracts are one of many functions we have to have in place.
[Emphasis in original]
[43] The above email refers to a meeting of the CoM. That had been held on 16 November 2012. Mr Poulopoulos had attended, at least to the extent of giving an update on the wind farm project. The minutes record that he reported:
Final stages to bring to deal and hopefully will be done by 6-12 December, we need to have most of it signed off by then to be able to produce power by December 2013.
[44]A separate section of the minutes relating to consultants recorded:
• The review of Consultant Contracts is to ensure we optimize their time and related resources
• Do not want to jeopardize the Wind Farm Project just to save $50k
• Currently in negotiations with Adam and Murray
• Murrays verbal contract is terminated with agreed payment to 28 October
• Adams written contract is terminated and paid up to 26 October
• They both declined to sign a written contract with Taharoa C Block which was due to begin 29 October 2012
• Reasons for refusing is the consultant has disclaimer on all work right from the beginning; Not wanting to sign into the ICA's; One does not believe that he is an Independent contractor; tried to use the PSA to bind Taharoa. C Block to their engagements to the end of the Windfarm construction - this was negated.
• Between now and Christmas, we need banking arrangements confirmed, if we don't we will have no turbines turning before end of December 2014
• Meet with Adam and Murray and we tie this down its costing lots of money and we are not there yet, it is the shareholders who are the ones missing out.
[45] In the context of the continuing discussions on consultant contracts, Mr Willison sent a further email to Mr Poulopoulos on 18 December 2012 stating:
1.TRI 290-2008 ceased on 18 October 2012
2.On-going work for Taharoa C Block post 18 October 2012 to 30 November 2012 has been at the managers discretion
3.A new agreement needs to be negotiated from 1 December going forward to handover to the EPC contractor.
[46] Mr Poulopoulos responded the next day. He did not respond to or specifically challenge the contents of Mr Willison’s email, but noted he looked forward to meeting the following day. Mr Poulopoulos said that as matters transpired, no meeting took place the following day, and no further meetings or discussions occurred until early the following year.
Developments in first half of 2013
[47] Unfortunately, the wind farm project did not progress as expected in 2013. Goldwind was to provide certification of the proposed turbines by the end of March 2013. This was a necessary pre-condition for any bank funding of the project.
[48] On 10 April 2013, Mr Poulopoulos wrote to Taharoa informing it that Goldwind had not satisfied the certification requirement and that without it, ANZ would not provide funding. He also advised that Genesis Energy (who was to take the electricity generated by the wind farm) had advised that they did not intend to extend their power purchase agreement to buy power from the wind farm. Mr Poulopoulos advised that Taharoa would have to contribute $26 million of equity to a scaled down project if it was to retain its 50 per cent shareholding. Taharoa’s financial accounts for 30 June 2013 recorded net assets of $11.825 million. While Mr Poulopoulos challenged the basis for these accounts, on any view, funding the project would have been somewhat challenging for Taharoa.
[49]In his 10 April letter, Mr Poulopoulos concluded:
The reality is that the project as it stands at present belongs to Taharoa C. If Goldwind for whatever reason are not prepared to fall into line with the MoU they signed, then allowing for the need to follow legal protocols, maybe the best outcome is for Goldwind to withdraw as an equity participant and for Taharoa to follow another course which in the longer term might prove to be more beneficial.
[50]In a CoM meeting held on 19 April 2013, Mr Willison reported that:
·Goldwind cannot build the Windfarm by 31 December 2013
·Genesis has formally terminated the PPSA. Therefore we do not have a secured Power Purchaser but options are there to go to Spot Market
·Management recommendation is to stop our relationship with Goldwind in terms of equity and to terminate our Consultants current contracts.
·We have asked them to review the project and to provide options going forward.
Taharoa’s second purported termination
[51] On 21 May 2013, Mr Willison wrote to Triastra. Again, this is a key piece of correspondence. His letter stated:
As you know the Wind Farm Project has come under some scrutiny from the Committee of Management (Committee) and therefore a review of the Project and Project team was initiated in April 2013.
Since the May Committee meeting last Friday, we have been directed to terminate your services and re-negotiate your contract going forward, on a milestone basis. Therefore please accept this as our formal termination of your services under the current arrangements which shall cease on 4 June 2013.
I thank you for the work you have done over the last six weeks in assessing the current project with Goldwind and to develop the framework for the smaller 9 Turbine Wind Farm. We have a number of milestones to achieve and I would like to meet later this week to discuss your contract going forward from 05 June 2013.
Please let me know when you are available to meet to discuss the terms of your new contract.
[52] As can be seen, the letter was somewhat vague (perhaps deliberately so) on what the “current arrangements” were which were being terminated.
[53] The parties met on 4 June 2013 to discuss the possible scaled down wind farm project. Mr Poulopoulos’ notes of the meeting record that Mr Willison informed him that Triastra’s involvement was on hold until a new agreement was drawn up.
[54] The following day, Mr Poulopoulos wrote to Taharoa recording that the parties were at “an impasse”. His letter stated that “as I have indicated in the past”, Triastra had a valid contract in place, namely the Final Agreement. He stated “I would like to highlight that under the agreement both parties have the right to exit the agreement on three months’ notice.” He confirmed Triastra did not accept the terms of a new agreement which had been provided by Taharoa in the interim (and presumably discussed at the meeting the previous day). He concluded that if matters could not be agreed, the alternative was for “Taharoa to exercise their right to give 90 days’ notice of termination”.
[55] I interpolate to note that this was the first time Triastra had disputed, in writing at least, that the Final Agreement had come to an end on 18 October 2012. Mr Poulopoulos said, however, that he had challenged Taharoa’s position verbally on prior occasions. For the reasons set out at [14] above, however, I do not accept that evidence. It would also be somewhat odd to have done so, but not to have also
recorded that position in any of the many items of correspondence passing between the parties in the intervening period.
[56] Mr Willison replied to Triastra’s letter the following day, 6 June 2013. He stated:
In response we advise that Taharoa C Block exercised our right to exit the former arrangement with you in July 2012 and those arrangements ceased on 18-October 2012. Since that time Taharoa C has engaged Triastra Limited on a fortnightly basis.
In April 2013, the Committee of Management (CoM) were informed that the 40MW Windfarm project could not be completed and the loss of the Power Purchase Service Agreement with Genesis Energy. The Committee of Management then demanded;
1.A full review of the 40MW Windfarm project and reasons it had failed and;
2.That Management and the Windfarm team identify what can be salvaged from the 40MW Windfarm project and whether a new Windfarm project would be viable and economic for Taharoa. C.
3.That Management seek legal advice in terms of our obligations in terms of the 40MW Windfarm Project.
4.That all of the Consultants arrangements be terminated and;
5.That Taharoa C negotiates with you a new Independent Contractors Agreement for services going forward. Such an agreement to be specific in purpose and timeframe.
As a result of the numbers 1 to 5 above, on 21 May 2013 Taharoa C gave Triastra Limited two weeks, notice and offered Triastra a new Independent Contract agreement to be negotiated.
Further, we advised that such an agreement needed to be in place by 4.00pm, yesterday 05 June 2013. Your letter received last night declined our offer dated 21 May 2013 and terms.
Therefore, I formally advise that your services are no longer required. Today, we will inform all of our Energy Project partners and service providers of your departure from the Project and wish you well in your future endeavours.
[57] The same day, Mr Willison reported to the CoM by email, noting that Triastra (and another consultant) “were given current contract (two weeks) termination notices on 21 May 2013”.
[58] On 17 June 2013, Triastra wrote to Taharoa summarising its view of the status of the wind farm project and concluded:
We would like to thank you for your past instruction and take this opportunity to wish the incorporation all the best for the future.
[59]There is no dispute Taharoa paid Triastra’s invoices up to 6 June 2013.
[60] Mr Willison resigned as Manager and a member of the Taharoa CoM at the end of June 2013 (due to ill health).
Events in the second half of 2013
[61] Mr Poulopoulos says that after June 2013, he was instructed to continue work in Auckland to produce a scaled down version of the wind farm project, and to try and locate a new entity to replace Goldwind. Mr Poulopoulos says those instructions came from three named individuals, being Mr Peter Bowker, Ms Pet Martin and Mr John Forbes, and that the instructions were conveyed in meetings and telephone calls. Mr Bowker and Ms Martin are both deceased. Mr Forbes was called by Taharoa to give evidence and denied giving Mr Poulopoulos any such instructions. I address these competing positions later in this judgment.
[62] A Mr Wayne Coffey was appointed Taharoa’s Chief Executive Officer in September 2013. Mr Coffey also gave evidence for Taharoa at the hearing. While he clearly held strong views and opinions about the role of and work the consultants had provided to Taharoa over the preceding years, given he was only employed by Taharoa in September 2013, he could not give any admissible evidence on those matters. He explained, however, that very soon after his appointment, he conducted a full review of the wind farm project and on 13 September 2013, recommended to the CoM that the project should be abandoned altogether. The CoM accepted that recommendation at its meeting on 20 September 2013.
Triastra claims payment for the period June to November 2013
[63] Triastra did not send any invoices to Taharoa over the period June 2013 to November 2013. But on 6 November 2013, Triastra wrote to Taharoa giving details
of what it said were its unpaid fees for that period.11 Taharoa, by its solicitors, responded on 3 December 2013. They rejected Triastra’s claim. They said:
There is no ongoing contractual relationship between Taharoa C and Triastra. There has been no contractual relationship between the two entities at all since 5 June 2013. Furthermore, the relationship has effectively been in a fortnightly holding pattern from October 2012 to June 2013 following the termination (in July 2012) of the previous long term contractual relationship between the parties by Taharoa C.
…
A review of correspondence sent by you to Taharoa C throughout the last twelve months suggests that either you do not understand Taharoa C's position in this regard, or for some reason you choose to ignore it, or disagree with it. For example, in your most recent letter (6 November 2013) you confirm your rejection of terms recently proposed by Taharoa C for a new agreement, and then make the observation that “[a]s a result, the original Triastra proposal for Advisory Services dated 27 January 2008 (Tri 290-2008) Still remains valid."
With respect, and in light of the history outlined above, that cannot be correct. Taharoa C has clearly elected to terminate both the earlier ongoing contract with you effective 18 October 2012 and now also the ongoing fortnightly contract effective 5 June 2013. There is now no ongoing contractual relationship between the parties.
[64] Triastra says this letter was effective in giving it three months’ notice of termination of the Final Agreement.
Did Taharoa validly terminate the Final Agreement as of 18 October 2012?
Introduction
[65]Mr Gustafson advanced two primary arguments under this issue:
(a)First, properly interpreted, the termination clause in the Final Agreement did not provide a “clean” right of termination on three months’ notice; rather the agreement could only be terminated once the parties had reached an agreement on alternative terms.
11 There is a dispute as to whether Triastra enclosed its invoices for that period with its letter, or only a schedule of them.
(b)Second, even if the Final Agreement could be (unilaterally) terminated on three months’ notice, Taharoa’s July Letter was not a clear and equivocal notice of termination. Rather, Triastra’s position is that the letter sought to vary the Final Agreement’s terms only.
Interpretation of termination clause
[66]For ease of reference, cl 3 of the Final Agreement is repeated here:
3. General
While we both reserve the right to terminate this agreement prior to completion, on three months’ notice, the arrangements outlined will continue in effect unless we mutually agree in writing to vary them.
[67]Mr Gustafson submits that cl 3:
… is not termination of that contract as opposed to variation, unless there is mutual agreement in writing to that effect. Put another way, it is an arguable interpretation of clause 3 that notice by itself under clause 3 does not terminate all rights and obligations under [the final agreement].
[68] Mr Gustafson submits that in the context the parties were operating at the time, the above is a fair interpretation of the clause. He says the success fee was potentially worth $600,000 to Triastra, and if that right could otherwise be extinguished by Taharoa giving notice of termination three months and one day before the “completion point”, it is understandable that Triastra would want to agree the terms of exit and to protect the ability to claim the success fee.
[69] I am unable to accept the interpretation advanced by Triastra. While cl 3 is somewhat inelegant in its terms, it is nevertheless clear in its meaning. I accept Taharoa’s submission that the word “While” before “we both reserve the right” makes it clear that the reference which follows, i.e. that the arrangements were to continue in effect unless varied by mutual agreement, was subject to the right of termination. In this way, cl 3 simply combined two standard contractual provisions; one being the right to terminate on the giving of a certain period of notice; the other being that agreement in writing was required in order to vary the agreement’s terms.
[70] I accordingly proceed on the basis the Final Agreement could be terminated on the giving of three months’ prior notice. This brings me to the second issue, namely whether the July Letter was effective in doing so.
Did the July Letter give three months’ notice of termination?
[71] Mr Gustafson submits that “termination, or the threat of it, was simply a means to obtain the [CoM’s] intended goal of a varied contract with Triastra more favourable to Taharoa”. He says the July Letter was not a clear and ambiguous communication of termination, given it invited negotiations on a varied arrangement, which was never agreed. He says the Court ought not to consider the July Letter in isolation. Rather, and with reference to Morris v Baron and Sookraj v Samaroo, Mr Gustafson says the real issue for determination is that if, on 19 October 2012, there was some informal ad hoc arrangement in place, was that intended to rescind the Final Agreement, or merely vary it?12 He says the text of the July Letter, coupled with the correspondence and arrangements in place as of 18 October 2012, evince an intention to vary the Final Agreement only, rather than terminate it.
[72] Despite Mr Gustafson’s comprehensive submissions on behalf of Triastra, I do not accept these arguments.
[73] Morris v Baron and Sookraj v Samaroo do not assist Triastra’s case. They both concern factual scenarios in which there was an existing contract (contract A), but the parties subsequently entered into a second contract (contract B). The issue in each case was whether contract B merely varied contract A’s terms, or operated to rescind contract A altogether. Having referred to Morris v Baron & Co, Lord Scott in Sookraj v Samaroo identified the determining factor as being the parties’ intention at the time the second agreement is made.13 He went on to state:
The question whether in signing the 23 February 1981 agreement Mr Ramute and Mr Samaroo intended to discharge the 3 November 1980 agreement is a question of fact to be decided by inference from the surrounding circumstances and the contents of the two agreements.
[Emphasis added]
12 Morris v Baron & Co [1918] AC 1; Sookraj v Samaroo [2004] UKPC 50.
13 At [21].
[74] Mr Gustafson said that the highlighted text above permits evidence of the parties’ subjective intentions, and criticised Taharoa for not calling Mr Willison to give evidence on that point. He invited me to draw adverse inferences against Taharoa as a result.14 But Lord Scott’s comments do not sanction the subjective inquiry Mr Gustafson suggests. The effect one contractual arrangement has on an earlier contractual arrangement is an objective inquiry, as Lord Scott’s observations make clear. The same approach is to be taken to the proper interpretation and effect of a notice of termination; i.e. what meaning do the words used convey to a reasonable person in the recipient’s position?
[75] Further, neither Morris v Baron nor Sookraj v Samaroo involved a party having sought to terminate the first contract, but also invited negotiations on a new, replacement contract. This fact alone distinguishes those authorities from the present case.
[76] Turning to the proper interpretation and effect of the July Letter itself,15 I am satisfied it clearly communicated Taharoa’s intention to give three months’ notice of termination of the Final Agreement. While it is correct Taharoa also expressed a desire to enter into negotiations on a new agreement, that does not displace the clearly expressed intention to terminate the Final Agreement.
[77] Mr Gustafson submits that termination of the Final Agreement was not Taharoa’s intended result in the negotiations with Triastra in the second half of 2012. But even if Taharoa’s subjective intention was relevant, I disagree. Taharoa’s correspondence over the second half of 2012 was clear that it viewed the Final Agreement as having come to an end on 18 October 2012. There was no attempt by Taharoa to revoke its notice of termination. On the contrary, it regularly repeated its position that the Final Agreement had ceased to exist, hence the need to agree new terms with Triastra. Mr Gustafson is right that Taharoa did not intend to “get rid of” the consultants altogether. It needed them to help complete the wind farm project. But it clearly expressed its intention to “get rid of” the Final Agreement.
14 Perry Corporation v Ithaca (Custodians) Ltd [2004] 1 NZLR 731 at [153]-[155].
15 The full text of which is set out at [30] above.
[78] In terminating the Final Agreement, Taharoa left itself in a somewhat vulnerable position, given its reliance on Triastra. That was no doubt the reason why, despite the Final Agreement having been terminated and Triastra refusing to agree new terms, Taharoa continued to involve Triastra in the wind farm project and to pay for its services in doing so. The situation also gave rise to risk on Triastra’s part; it no longer had a formal contract with Taharoa, or any express agreement concerning the success fee. Further, the basis upon which Taharoa could bring the arrangements to an end was at large.
[79] I am accordingly satisfied Taharoa gave three months’ notice of termination of the Final Agreement. The Final Agreement accordingly came to an end on 18 October 2012.
[80] This brings me to what I consider the more difficult issue, namely what were the arrangements between Triastra and Taharoa after 18 October 2012, and how could they be brought to an end?
The parties’ relationship from 18 October 2012 to June 2013
The parties’ submissions
[81] After 18 October 2012, there were essentially two “streams” of communication between the parties; one in which Taharoa sought to engage in negotiations on new terms to replace the Final Agreement; and second, one in which Triastra continued to provide consulting services to Taharoa and Taharoa continued to pay for them.
[82] Mr Gustafson says that by the parties’ conduct, an “ad hoc” contract came into existence on the following terms:
(a)Triastra would provide consultancy services to Taharoa on the wind farm project;
(b)Triastra would bill $16,000 per month, plus GST, for its services, invoiced in advance on the first of the month and on the 15th of that month, and Taharoa would pay Triastra on that basis; and
(c)Taharoa would pay Triastra a success fee as agreed in the Final Agreement.
[83] Taharoa, on the other hand, says no contractual arrangement came into effect,16 and that by paying Triastra on a fortnightly basis, the ad hoc arrangement could validly be brought to an end on two weeks’ notice.
Discussion
[84] There is no doubt a contract can be inferred from the totality of parties’ conduct, in particular words and documents that have passed between them, i.e. rather than searching for a discrete offer and acceptance in the traditional way. The former approach is sometimes referred to as the “global” or “objective” approach to contract formation.17 As the authors of The Law of Contract in New Zealand explain:
…the court is not concerned to discover the objective effect of individual communications between the parties but rather to ascertain whether the cumulative effect of these communications has led to a situation where an objective bystander would consider that the parties must each have considered that some contractual nexus had been established.
[85] I also agree with the authors’ comments that what a court seeks to do in most cases is to determine whether there is an appearance of mutual agreement.18
[86] In the present case, it is clear there was no meeting of the minds on a comprehensive contractual agreement. But I am satisfied the parties’ communications and, importantly, conduct, evidence the appearance of mutual agreement to a basic contractual arrangement from 18 October 2012 to 12 December 2012, with that arrangement then extended for an indefinite period. That basic contractual arrangement was limited, however, to terms that Triastra would continue to provide consultancy services in relation to the potential wind farm project, and Taharoa would continue to pay for those services at a rate of $16,000 per month plus GST (plus services). I do not consider the parties’ divergent views on entry into new, formal and
16 And presumably that if Triastra had provided services for which Taharoa did not pay, a claim in quantum meruit would have been available. Mr Gustafson confirmed that Triastra did not pursue such a claim (and none was pleaded in any event).
17 Jeremy Finn, Stephen Todd and Matthew Barber The Law of Contract in New Zealand, (6th ed, LexisNexis, Wellington, 2018) at [3.2.1].
18 At [3.3.1].
comprehensive contractual arrangement prevented a shorter-term ad hoc contractual arrangement coming into effect between them. I will refer to this arrangement as the “Ad Hoc Contract”.
[87] I am not satisfied, however, that the Ad Hoc Contract included any terms as to the success fee. It is simply not possible to infer from the parties’ communications or conduct just what the agreement on a success fee would have been. Further, significant matters such as that were plainly contemplated as being the subject of a written, formal agreement. In addition, given Taharoa’s termination of the Final Agreement and its clearly communicated position from October 2012 that it considered that agreement to have come to an end, it cannot be the case that a contractual arrangement which mirrored the Final Agreement came into force as of 18 October 2012.19 While Triastra’s present claim does not relate to the success fee, whether the Ad Hoc Contract contained terms relating to the success fee is relevant to the basis upon which that contract could be terminated.
[88] I accordingly turn to the next question for determination, namely whether the Ad Hoc Contract was terminable on reasonable notice, and if so, what period of notice was reasonable.
Termination of the Ad Hoc Contract
Should a term be implied that the Ad Hoc Contract was terminable on reasonable notice?
[89] There was no suggestion by either party that whatever contractual arrangement was in place from 18 October 2012 was not terminable on reasonable notice. Rather, the key issue was what period of notice was reasonable in all the circumstances.
[90] I agree that a term is properly implied into the Ad Hoc Contract that it could be terminated upon the giving of a reasonable period of notice. Particularly given the ongoing correspondence and communications regarding a longer-term formal contract, it would be quite wrong to impress upon the parties a mutual intention that
19 See Transpower New Zealand Ltd v Meridian Energy Ltd [2001] 3 NZLR 700 (HC) (and in particular, at [42], [43], [50]) in which a similar scenario arose).
the Ad Hoc Contract would continue indefinitely, terminable only upon repudiation by the other party.20 The implication of a provision for termination on reasonable notice is also consistent with the contractual arrangements between the parties to that point, which all contained provisions for termination on the giving of a certain period of notice.
What was a reasonable notice period?
[91] It is well settled that the length of the notice period is to be determined in light of the circumstances existing at the time notice of termination is given, rather than at the time the contract was entered into.21 The leading New Zealand decision on how a court should approach the determination of a reasonable notice period is the Supreme Court’s decision in Paper Reclaim Ltd v Aotearoa International Ltd.22
[92] In Paper Reclaim, the parties had been in a contractual relationship for some 16 years, at which point one party attempted to terminate it. The High Court held that the contract was terminable on eight years’ notice. The Court of Appeal reduced this to 12 months. The Supreme Court agreed with the Court of Appeal. In doing so, Blanchard J (delivering the judgment of the Court), noted that a reasonable period of notice does not need to be sufficient for the recipient to be able to build up a business comparable to that which it enjoyed under the contract or before the contract was entered into. His Honour stated:23
If that was what had been desired, Aotearoa should have taken steps at the outset to obtain express contractual protection by the stipulation of a fixed term or a fixed period of notice. Instead, by making an informal arrangement of a kind which can only sensibly be understood as being terminable on reasonable notice, it took the risk that it might be disadvantaged to some extent when and if notice were given. It is, in the words of McHugh JA in Crawford Fitting Co v Sydney Valve & Fitting Pty Ltd, quoted by the Court of Appeal, a risk which someone who enters into an agreement terminable at any time “inevitably runs”. The courts do not effectively rewrite such contracts by requiring an extended period of notice merely because the recipient of the notice may be deprived of the advantages it was enjoying under the terminable contract.
20 Contract and Commercial Law Act 2017, s 36.
21 Australian Blue Metal Ltd v Hughes [1963] AC 74 at 99.
22 Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [2007] 3 NZLR 169.
23 At [8], footnotes omitted.
[93] The Supreme Court also adopted and applied the following summary from McHugh JA’s judgment in Crawford as to the principles applicable to determining a reasonable period of notice:24
The chief purpose of a notice for a reasonable period, therefore, is to enable the parties to bring to an end in an orderly way a relationship which, ex hypothesi, has existed for a reasonable period so that they will have a reasonable opportunity to enter into alternative arrangements and to wind up matters which arise out of their relationship. Matters to be wound up will include carrying out existing commitments, bringing current negotiations to fruition, and, where appropriate, obtaining the fruits of any extraordinary expenditure or effort carried out within the scope of the agreement. The line between ordinary recurrent expenditure and effort and extraordinary expenditure and effort will not always be easy to draw. But in general it will be determined by what the parties would reasonably have contemplated was extraordinary effort or expenditure.
[94]On the facts before the Supreme Court, Blanchard J concluded as follows:25
In our opinion, a period of 12 months would have given Aotearoa sufficient breathing space in which to take stock of its situation, complete ongoing work under the contract and to explore any opportunities which might exist for it in the waste paper market or another line of business. For its part, Paper Reclaim was entitled to bring the contract to an end after such a period of notice, thereby making a clean break from an arrangement that was no longer satisfactory to it. It could not be expected to have to remain in the relationship for a longer period simply because Aotearoa might be disadvantaged by its termination.
[95] I was taken by counsel to several other authorities in which a reasonable period of notice has been considered.26 I have not found those other authorities of any real guidance; other than the principles set out by the Supreme Court in Paper Reclaim Ltd, it is clear that each case will be extremely fact specific.
[96] The parties in this case had been in a long-term relationship; Triastra had been working with Taharoa on a possible wind farm for some eight years, since 2005. Despite that longevity, however, they had agreed (in the Final Agreement) that arrangements between them could come to an end on the giving of three months’
24 Crawford Fitting Co v Sydney Valve & Fitting Pty Ltd (1988) 14 NSWLR 438 at 448 (CA).
25 Paper Reclaim Ltd v Aotearoa International Ltd, above n 22, at [11].
26 Including Andrews v Parceline Express Ltd [1994] 2 ERNZ 385; Corporate Transport Ltd v Fletcher Challenge Forests Ltd HC Auckland CP358/98, 20 November 1998; Silhouette International Gesellschaft mbH v OHL Corporation HC Auckland CP1090/90, 27 June 1991; Mercurius Ventures Ltd v Waitakere City Council [1996] 2 NZLR 495.
notice. On an objective basis, the parties must have considered this a reasonable period within which to bring their relationship to an end.
[97] What then, was the position by the time notice of termination was given in May 2013? At that point, the Final Agreement had come to an end several months earlier, and the parties were operating under the Ad Hoc Contract – being an unwritten, informal arrangement. Both parties must, or ought, to have recognised the risks in that context. In the absence of a formal, longer-term written contract, something less than three months’ notice must be considered reasonable in the circumstances.
[98] Also by that time, the main wind farm project was on hold (given the Goldwind issues), and Taharoa was just starting to investigate a scaled down version of it. This, in my view, represented a significant “re-set” of the parties’ relationship. Nor was there any evidence of Triastra having invested heavily in any capital outlay or extraordinary expenditure in reliance on its contractual arrangements. And while Triastra may have been relatively dependent on work from Taharoa (in recent years having devoted four days per week to the project), both parties contemplated that Triastra’s involvement would reduce quite markedly after the end of 2012 (even assuming the main project had gone ahead). Finally, but importantly, Triastra had been forewarned as of July 2012 that its long-term contractual arrangements were not guaranteed to continue.
[99] In all the circumstances, I am satisfied a relatively short notice period was reasonable. But in the context of the parties’ long-term relationship and the possibility of a scaled down wind farm project continuing, two weeks’ notice was too short. In my view, a period of about a month would have been sufficient to give Triastra sufficient time to “take stock”, consider other opportunities in the market, and perhaps engage on the scaled down project to a sufficient degree to try to persuade Taharoa that it was viable, and Triastra should be involved on an ongoing basis. I also take into account Taharoa’s own proposal of a one month notice period in the draft (short term) contract it provided to Triastra in October 2012.27
27 See [39] above.
[100] It follows that the two weeks’ notice given by Taharoa in May 2013 was inadequate. But the Supreme Court’s judgment in Paper Reclaim makes it clear that where a party gives notice of an intention to bring a contractual arrangement to an end, but does not give what the Court subsequently determines to have been the appropriate period of notice, damages for that breach will be assessed on the assumption the terminating party would have determined the contract at the earliest date at which it could properly do so.28 In Paper Reclaim, where 12 months’ notice was required, Blanchard J explained the application of this principle as follows:29
So Paper Reclaim could have met its contractual obligations, and thereby fully performed the contract, by giving Aotearoa 12 months’ notice of termination and continuing to abide by its contract with Aotearoa during that time. In accordance with principle, therefore, damages for Paper Reclaim’s repudiatory breach of contract should be assessed on the assumption that, if it had adhered to the contract, it would have chosen to give 12 months’ notice on 2 February 2001, and that the contract would have terminated upon expiry of that period.
[101] Damages for Taharoa’s repudiatory breach of the Ad Hoc Contract are accordingly to be calculated on the basis of an assumption that, if it had adhered to the terms of the contract, it would have chosen to give one month’s notice on 26 May 2013, such that the contract would have terminated on 26 June 2013. As Taharoa purported to bring the Ad Hoc Contract to an end on 4 June 2013, Triastra is entitled to damages for the period 5 June 2013 to 26 June 2013 (a period of a little under three weeks). Triastra’s damages will therefore be relatively minor, being in the region of a little over $8,000 (plus GST), plus a proportionate share of service charges.
[102] Triastra’s contractual claims for payment of $99,268 (fees for work it claims to have performed from June 2013 to December 2013), and $55,200 for three months consultancy services from 3 December 2013 to 3 March 2014, are accordingly dismissed.
28 Paper Reclaim Ltd v Aotearoa International Ltd, above n 22, at [22]-[24], citing Gunton v Richmond-upon-Thames London Borough Council [1981] Ch 448 at 469.
29 Paper Reclaim Ltd v Aotearoa International Ltd, above n 22, at [25].
Triastra’s estoppel claim
Legal principles
[103] There was no dispute between the parties as to the applicable legal principles. As the Court of Appeal stated in Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd, to successfully claim in estoppel, a plaintiff will need to demonstrate:30
(a)the creation or encouragement of a belief or expectation (almost always by way of a written or verbal representation);
(b)reasonable reliance by it on that representation;
(c)detriment suffered by it as a result of that reliance; and
(d)that it would be unconscionable in all the circumstances for the party against whom the estoppel is alleged to go back on its word.
Discussion
[104] I am wholly unpersuaded that Triastra has made out its claim on this cause of action. It has failed to demonstrate any written or verbal representations after June 2013 to the effect that it should keep working on the project (and, inherent in its claim, that it would get paid its usual rates for doing so), or that it was reasonable for it to rely on any such representations in any event.
[105] Mr Poulopoulos gave evidence of what he said were many discussions and telephone calls between himself and certain members of Taharoa’s CoM, which he says gave him the “green light” to continue work on the (scaled down) wind farm project. His evidence was, however, lacking in any detail or specificity as to the actual instructions given, or, importantly, that it was made clear to him by those giving the instructions that Triastra could be expected to be paid $16,000 per month plus GST for doing so.
30 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [44].
[106] Triastra’s statement of claim alleges that the instructions given were to continue to work in Auckland, providing consultancy service to produce a scaled down version of the wind farm project, and to try and locate a new investor or purchaser for the wind farm. It is alleged that such instructions came from Peter Bowker, Pet Martin and John Forbes.
[107] As noted earlier, both Mr Bowker and Ms Martin are deceased. For the reasons set out at [14] above, I am not prepared to rely on Mr Poulopoulos’ evidence alone as to what he says they told him. Further, Mr Forbes strongly denied giving Mr Poulopoulos any such instructions. He accepted he had encountered Mr Poulopoulos from time-to-time after June 2013, and that Mr Poulopoulos raised with him the issue of the wind farm project. Mr Forbes said that “it was [Mr Poulopoulos’] passion, of course he bought that subject up whenever he could, of course”. He also acknowledged meeting with Mr Poulopoulos during 2013 and discussing the wind farm project. But I consider it wrong for Mr Poulopoulos to seek to characterise that as some kind of formal meeting in which Mr Forbes instructed Mr Poulopoulos on behalf of Taharoa to continue work on the wind farm project. Mr Forbes said the following in relation to that meeting:
Q.Mr Poulopoulos has given evidence, and this is at 8(d), that there was a face to face meeting between you, him, and Peter Bowker.
A. That’s correct.
Q. Do you recall that?
A. Yes I do. I was in Peter – I had a meeting with Peter Bowker on a personal matter, personal matter that involved myself, nothing to do with C Block, it was actually a personal request I asked of Peter to do for me which as a family member, a family friend, he did. And while I was in the office, he invited, he asked if he can invite Adam in, I couldn’t see anything wrong with that at that stage.
Q. And that was because – was Adam at that stage still working in the office of Peter Bowker?
A. Well he was at the office, at that stage. Whether he was, what he was doing I’m not too sure but he was at the office and I know that he was still pursuing the ones of the wind farm to do with that second, investigating that second option. Not the Goldwind one, the Goldwind one was down the road.
Q. So he was still investigating the second option?
A.I guess he was, ‘cos I think that is why Peter asked him to come in ‘cos he was, ‘cos they were trying, he was trying to drum up interest with us on the Committee, the board, individually.
Q. So did you have – you discussed the second option?
A. Well I can’t remember exactly what was said, obviously it was, you know, it was about that subject. But what was said, I really don’t know, I can’t remember.
[108] I have no reason to doubt Mr Forbes’ evidence, or his characterisation of the steps being taken by Mr Poulopoulos for Triastra in the second half of 2013. It has the ring of truth about it. I also have no reason to doubt that Mr Poulopoulos was in contact from time-to-time with members of the CoM in the second half of 2013. But my clear impression from the evidence is that Mr Poulopoulos was indeed trying to “drum up” support from CoM members to continue the wind farm project, and that Triastra should be involved going forward. This is also consistent with Mr Poulopoulos’ own evidence that some CoM members told him in the second half of 2013 to “be patient”, while the CoM decided on the scale and future of the wind farm. Mr Poulopoulos no doubt hoped that when a new CEO was appointed, he would be able to persuade him or her to pick up the wind farm project again, with Triastra’s assistance. But as noted at [62] above, on the new CEO’s recommendation, the CoM resolved in September 2013 to abandon the wind farm project altogether.
[109] Accordingly, while there was nothing wrong with Triastra proactively taking steps in the second half of 2013 to seek to preserve its position, the evidence falls well short of demonstrating representations made to it to continue working on the project, and that it would continue to be paid for any work it might have done. In the circumstances then existing, it would have been wholly unreasonable for Triastra to have believed it would continue to be paid $16,000 plus GST per month by Taharoa after June 2013.
[110] Nor do I consider Triastra genuinely believed that at the time in any event. Triastra had clearly taken care to invoice Taharoa for its services on a regular twice- monthly basis. But from 4 June to 6 November 2013, Triastra did not issue any invoices to Taharoa. Mr Poulopoulos’ explanation for this (because he was not at Taharoa’s Hamilton offices, and thus not a position to hand deliver the invoices, which
was necessary to ensure prompt payment) was unconvincing. Obviously without delivering an invoice, there was no basis upon which to be paid, promptly or otherwise.
[111] Further, I am far from satisfied Triastra carried out any significant work on the wind farm project in the second half of 2013 in any event. There was no clear documentary evidence of the work Triastra is said to have done during this period. In addition, Mr Poulopoulos was a prolific note-taker of his engagements on the wind farm project. His diary notes were produced in evidence, and showed that from at least 2010, he had created about a page of diary notes per working day each year. Yet after June 2013, there are only two very brief notes connected to the wind farm project. Again, Mr Poulopoulos’ explanation for this was unconvincing. He said that while he did take notes, this was only in relation to relevant matters, and some stages of the project gave rise to more notes than others. But for a prolific note-taker such as Mr Poulopoulos, the almost complete absence of any notes after June 2013 is inconsistent with Triastra having carried out substantial work on the project during that period.
[112]For these reasons, Triastra’s estoppel claim must also fail.
Result and next steps
[113] I have found that Taharoa breached the Ad Hoc Contract by giving two weeks’ notice of termination in May 2013, rather than one month’s notice. While damages for that breach will obviously be minimal, Triastra is nevertheless entitled to damages.
[114]I have dismissed Triastra’s claim in estoppel.
[115] I do not propose to calculate in this judgment the damages arising on Triastra’s contract claim. The parties ought to be given the opportunity first to calculate the amount, based on those principles set out at [100]-[101] above. With input from senior and responsible counsel, the amount should be able to be readily agreed. Further, given the limited amount in issue, and the need to avoid further unnecessary legal costs being incurred, the parties will no doubt take a pragmatic approach to doing so.
[116] Should, however, the parties be unable to agree on the quantification of damages, Triastra may file a memorandum setting out its approach and quantification within 20 working days of the date of this judgment. Taharoa may then file a memorandum in response within a further 10 working days. Unless either party requests a hearing, I will then proceed to finalise the quantum of damages on the papers.
Costs
[117] There is also the question of costs. The parties are encouraged to seek to agree costs. At least on the basis of the materials presently before the Court, and in light of the principles set out in decisions such as Water Guard NZ Ltd v Midgen Enterprises Ltd, an initial and non-binding view is that an appropriate outcome may be that costs are to lie where they fall.31
[118] If the parties cannot agree costs, then the above memoranda are also to address each party’s position on costs.
[119] No memorandum on damages and/or costs is to be longer than 10 pages in length.
Fitzgerald J
31 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36.
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