IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY

CIV 2002-404-001607

JUDGMENT (No 2) OF RODNEY HANSEN J

Solicitors:
Daniel Overton & Goulding, P O Box 13017, Onehunga for Plaintiff
Dennis J Gates, P O Box 222, Whangaparaoa for Defendant

Introduction

[1] The plaintiff (Mr MacKenzie) claims to be remunerated by the defendant (Mrs Thompson) for assisting her with the subdivision of land she owned. In my judgment, delivered on 16 December 2003, I rejected his claim to share in the profits of the development under a joint venture agreement. I ruled no agreement had been concluded. However, I determined that he was entitled to be remunerated on a quantum meruit. This judgment follows a further hearing convened for the purpose of fixing the amount of that remuneration.

The services

[2] Mr MacKenzie is a commercial mortgage broker. After qualifying as an accountant, he spent many years working in the business sector before setting up on his own account as a commercial mortgage broker in 1998. It was in that capacity that he met Mrs Thompson in 1999. She had been trying to subdivide her land at Wainui, north of Auckland, for seven years. She had run into problems with neighbours, the local council (Rodney District Council) and had become dissatisfied with the services of various consultants she had retained.

[3] Initially Mr MacKenzie looked to find a suitable joint venture partner for Mrs Thompson, someone who could provide the capital and expertise she lacked. When his introductions came to nothing, he put himself forward for consideration as a partner in the development. As recounted in my first judgment, he and Mrs MacKenzie came close to finalising an agreement but, in the end, did not become contractually bound. However, Mr MacKenzie provided services contemplated by the joint venture and worked closely with Mrs Thompson to obtain the necessary consents to the subdivision. That had been achieved when, to use Mr MacKenzie's words, he ceased to be Mrs Thompson's right hand man and became her left right out man.

[4] There was no challenge to Mr MacKenzie's account of the services he provided over the period from 14 March 2000 to 24 October 2001 when he was told his services were no longer required. He said he brought discipline to the organisation. Over much of the period he was responsible for organising meetings with consultants, Council officers and others involved. He prepared agendas, minutes and action lists. He attended meetings as Mrs Thompson's adviser or, when she was not present, as her representative. He corresponded on her behalf. He acted as her confidante, especially on financing and strategic planning issues.

[5] As noted in my first judgment, Mr MacKenzie also played a key role in raising finance for the development. He arranged for a loan to Mrs Thompson of $50,000 and guaranteed it as contemplated by the draft joint venture agreement. He did not charge a fee, which would normally be of the order of 1-1.5%, because of his expectation of a benefit under the joint venture. Mr MacKenzie also advanced Mrs Thompson $41,375 to enable her to buy a digger and meet other expenses associated with the subdivision. Again, this was one of his designated responsibilities in the draft agreement.

[6] At the first hearing Mrs Thompson questioned the value of Mr MacKenzie's contribution, suggesting that, financing aside, it was largely clerical in nature. It was said the real credit for obtaining the resource management consents for the project lay with the consultants.

[7] In my opinion, that is not a fair appraisal. I consider Mr MacKenzie was indeed Mrs Thompson's right hand man. He brought his considerable organisational skills and commercial experience to bear on the project. He was an integral part of the team. He was clearly relied on by Mrs Thompson both as an adviser and to implement decisions. He was, for example, asked on more than one occasion to terminate the services of a consultant. I am in no doubt that Mrs Thompson well recognised the value of his contribution.

Right to relief

[8] Although at the first hearing Mr Henry conceded that in the absence of a concluded contract Mr MacKenzie was entitled to recover on a quantum meruit, he argued at the resumed hearing that no relief should be ordered because Mr MacKenzie's services did not result in an enrichment to Mrs Thompson. That submission rested on the proposition that the absence of an enrichment is fatal to the existence of a restitutionary claim: Halsbury's Law of England (4th ed) vol 40(2) para 1311.

[9] I do not accept that there was no enrichment in this case. It is true that the grant of consents by the local authority did not translate immediately into a completed subdivision and produce the profits which would flow from it. But it cleared the major barrier to completing the development and that undoubtedly represented a valuable (and a realisable) benefit to Mrs Thompson.

[10] That said, I do not agree that the claim in this case is one which depends on proof of an enrichment. The services were performed by Mr MacKenzie in the belief that he would be contractually entitled to remuneration. It is not a case which depends on the gain to Mrs Thompson but one which gives rise to an implied obligation to pay reasonable remuneration for services rendered. In such cases, as Grantham and Rickett suggest in Enrichment and Restitution in New Zealand (2000) 258-259, the law, in reality, can be said to respond to an express understanding or agreement between the parties which falls short of a contractual obligation; it does not respond to unjust enrichment. This is reflected by the fact that recovery is in the nature of compensation or remuneration, as opposed to restitution of a valuable gain. See also Blanchard, Civil Remedies in New Zealand, at para 8.2.1 and Batis Maritime Corporation v Petroleos del Mediterraneo SA [1990] 1 Lloyd's Rep 345 at 353.

[11] Where work is carried out by one party in anticipation of a contract, the law imposes an obligation on the other party to pay reasonable remuneration for that work. The nature of the obligation was described in Craven-Ellis v Canons Limited [1936] 2 KB 403 at 412 by Greer LJ:

In my judgment, the obligation to pay reasonable remuneration for the work done when there is no binding contract between the parties is imposed by a rule of law, and not by an inference of fact arising from the acceptance of services or goods. It is one of the cases referred to in books on contracts as obligations arising quasi ex contractu, of which a well-known instance is a claim based on money had and received.

In British Steel Corp v Cleveland Bridge & Engineering Co Limited [1984] 1 All ER 504 at 511, Robert Goff J (as he then was) explained the obligation by reference to the emergent doctrine of restitution:

... if, contrary to [the expectations of the parties], no contract was entered into, then the performance of the work is not referable to any contract the terms of which can be ascertained, and the law simply imposes an obligation on the party who made the request to pay a reasonable sum for such work as has been done pursuant to that request, such an obligation sounding in quasi contract, or as we now say, in restitution.

[12] The New Zealand courts have taken the same approach. See, for example, Dickson Elliott Lonergan Limited v Plumbing World Limited [1988] 2 NZLR 608 where the plaintiff had carried out the work “not in the mere hope that a contract would eventuate but in the expectation, then shared by the defendant, that a contract would be concluded” (at 613).

[13] I am satisfied that in the circumstances of this case an obligation arises in the absence of a concluded contract, by which Mrs Thompson must pay Mr MacKenzie's reasonable remuneration for the services he rendered.

Quantum

[14] Mr MacKenzie did not keep time records. However, his estimate of the time spent on the project over the eighty-four week period he was involved was not challenged. It amounted in all to 840 hours.

[15] Mr Parmenter argued for an hourly rate of between $180 and $200, based on evidence that was the prevailing charge-out rate for a partner in a small to medium sized accounting firm. It was submitted that Mr MacKenzie's skills and experience could justify an hourly rate at that level, notwithstanding the lower overheads of his home office. I consider an hourly rate of $200 to be fair in the circumstances. That would produce a time-based fee of $168,000.

[16] I consider Mr MacKenzie should receive additional recompense for his role in obtaining the loan finance. I see no reason why he should not receive commission at the usual rate of 1-1.5%. I am satisfied he should also be compensated for guaranteeing the loan. That must have produced a significant benefit for Mrs Thompson. Loan finance obtained later when a guarantee was not available, was at a considerably higher interest rate.

[17] Doing the best I can with the available information, I would conservatively assess the value of Mr MacKenzie's services in arranging and guaranteeing the loan at 3% or $15,000. To this should be added an allowance for interest on the loan of $41,375 which Mr MacKenzie made in April 2000.

[18] Taking all matters into account, I consider a reasonable level of remuneration for Mr MacKenzie's on the subdivision is $185,000.

Result

[19] Mr MacKenzie is entitled to judgment in the sum of $185,000 and interest from the date of filing of the proceeding, 11 April 2002. Mrs Thompson must pay costs on a Category 2 Band B basis.